Hugo Chávez's Bolivarian Revolution was supposed to offer ordinary Venezuelans political power and social services. On some of these counts, it has at least partially succeeded. On others -- such as the provision of toilet paper -- not so much.
On Tuesday, Alejandro Fleming, the country's commerce minister, announced that the government would make the equivalent of a frantic grocery store run to pick up some rolls. "The revolution will bring the country the equivalent of 50 million rolls of toilet paper," he told the state news agency AVN. "We are going to saturate the market so that our people calm down." (Not that long ago, the "revolution" was promising to provide housing and health care but hey, Marx said something about the importance of toilet paper, right?)
"This is the last straw," Manuel Fagundes, a shopper trying to track down some toilet paper in Caracas, told the Associated Press. "I'm 71 years old and this is the first time I've seen this."
Though the lack of toilet paper represents a new low for Venezuela's reeling economy, this isn't the first time the country has been hit by goods shortages. Staples like cooking oil, sugar, and flour are often missing from supermarkets. Because the government has imposed strict capital controls, Venezuelan companies say they lack the foreign reserves to buy the goods they need on the international market, leaving shelves bare and consumers furious.
These debilitating shortages, which seem like a throwback to the Soviet era, don't bode well for Nicolás Maduro, who won a narrow victory in presidential elections in April. Opposition figures have wasted little time in making hay out of the government's troubles. Responding to this week's toilet-paper proclamation, for example, the opposition academic Alex Capriles quipped on Twitter, "50 million rolls of toilet paper come out to 1.75 rolls per person. These are the great revolutionary solutions." And writing for the paper El Universal, Diego Bautista Urbaneja described the shortages as the central problem facing the Maduro government:
If [Maduro does not possess], as Chávez did, a great ability to shape popular understandings of the country's problems, they will be imposed on the collective imagination more forcefully the more the government fails to interpret the problems correctly, as the result of years of misguided economic policies.
But the government doesn't appear to be taking this latest shortage as an indication that economic reforms are necessary. Look no further than Fleming, the commerce minister, who blamed the toilet-paper shortage on "a media campaign that has been generated to disrupt the country."
Speaking collectively for the media here, I only want to ask Fagundes one question: How'd you know?!
LEO RAMIREZ/AFP/Getty Images
The world of anti-austerians is abuzz (and maybe somewhat gleeful?) this afternoon about news that a paper by Carmen Reinhart and Kenneth Rogoff -- the paper for those policymakers looking for serious academic work to back up their proposals for debt-slashing cutbacks -- has some serious issues (Josh Keating summarizes those problems on his War of Ideas blog here)
Why is this causing such a stir? One of the conclusions of the paper is that when countries hit a debt-to-GDP ratio of 90 percent, they reach a tipping point after which they'll start experiencing serious growth slowdowns. It's a conclusion that many have found either important or useful, depending on your level of cynicism.
Take a look at some of the ways Reinhart and Rogoff -- and their conclusions -- have been marshaled in the austerity vs. Keynesianism debate that has dominated much of the post-financial crisis discussion about fiscal policy:
This House Budget Committee response to President Obama's budget proposal from just a few days ago cites R&R by name before going on:
Instead of taking steps to reduce the excessive burden of debt, the President's budget, even if fully implemented, never reduces gross federal debt below the important 90 percent threshold.
Olli Rehn, European Commission vice president on Economic and Monetary Affairs and the Euro (and noted austerity champion) pulls out the R&R 90-percent rule in this February call for continued "fiscal consolidation":
It is widely acknowledged, based on serious academic research, that when public debt levels rise above 90% they tend to have a negative impact on economic dynamism, which translates into low growth for many years.
Sen. Tom Coburn (R-OK), in this excerpt from his book, rhapsodizes about a briefing Reinhart and Rogoff gave before a group of forty senators:
"Reinhart echoed Conrad's point and explained that countries rarely pass the 90 percent debt-to-GDP tipping point precisely because it is dangerous to let that much debt accumulate. She said, "If it was not risky to hit the 90 percent threshold, we would expect a higher incidence."
"Thank you for your depressing presentation," Senator Dick Durbin, D-Ill., said in closing, to self-conscious laughter around the room."
These are just a few examples that turned up from a quick search in English -- who knows what a search in Italian, Greek, or German would yield.
When, in 2012, New York Times columnist Paul Krugman chose to title a blog post about Estonia's less-than-stellar economic recovery "Estonian Rhapsody," we should have known that this was no run-of-the-mill fiscal commentary -- but rather an omen of far more dramatic things to come. The slew of angry tweets that the post elicited from Estonian President Toomas Hendrik Ilves included the phrase "Nostra culpa" and provoked mixed responses in the international press, with some glorifying the president and others lambasting his rashness.
Conflict, rhapsodies, Latin -- in retrospect, it's easy to understand why Estonia-based writer Scott Diel and U.K.-based composer Eugene Birman thought this bizarre online feud had the makings of an opera. Their much-anticipated 16-minute production, Nostra Culpa, is set to premier on Sunday at the Estonian Music Days festival.
So how exactly does one go about turning six tweets and a blog post into opera? Foreign Policy caught up with Birman to find out what we can expect.
The opera will be divided into two acts, according to Birman, with the first detailing Krugman's philosophy and the second Ilves's tweets. "I thought the most powerful thing would be to take those things verbatim and oppose them -- not to put them into conversation because there was no conversation," Birman told FP. The two acts are fairly different in style, with Krugman's movement set to loud and fast music and the Estonian president's sung against a more varied and slower score.
For Birman, the decision to separate the exchange into two acts using a single female soloist, Iris Oja, underscores the problems with communication in today's world. "The nature of Twitter for example, or writing an article is that there's no real discussion," he said. "You can respond to something but it's not really a discussion format. They're speaking at each other instead of to each other." In the digital age, where everything is mediated through our computer screens, having one voice speaking directly to the audience does seem fitting.
Diel and Birman hope the opera will stimulate deeper discussion in Estonia about the political and economic issues behind the spat. "Estonia became independent through music," Birman tells FP, referencing the mass singing demonstrations, known as the Singing Revolution, that helped the country peacefully overthrow the Soviet government. "There is something Estonian about this -- that we're using music to have a discussion about what the political policy of Estonia should be," he says.
But more than anything, the opera's purpose is to highlight the absurdity of all the squabbling over economic recovery -- and in particular the terms so often thrown about by pundits. Librettist Scott Diel achieves this by transforming Krugman's 70-word blog post into a series of almost tweet-like phrases imploring the Estonians to follow his advice. "There's this line in the libretto that says stimulate over and over again and it becomes almost sexual," Birman says. "The words when you take them out of their context become really strange."
One of the stranger moments comes in the second movement, when in adapting Ilves' sarcastic tweet "Let's sh*t on East Europeans," the singer will make a high-pitched whistling sound with her voice in place of the asterisk.
While Birman concedes the content is amusing, he cautions "in the end there's nothing really funny about what they're discussing. If you think about it, if you look at the words and you look at the argument, then it's pretty ridiculous. But that makes good theater." We won't argue with that.
Here's the libretto in full, as written by Scott Diel:
RAIGO PAJULA/AFP/Getty Images
A day after President Obama announced that he will give back five percent of his salary this year in solidarity with federal workers facing furloughs, skimming $20,000 from his $400,000 annual wage, other U.S. political figures are following suit. On Thursday, Secretary of State John Kerry pledged to donate five percent of his salary to charity. Attorney General Eric Holder, meanwhile, was a bit more tepid, offering to give back a portion of his salary if the Department of Justice faces furloughs.
While Obama -- who himself was following in the footsteps of Defense Secretary Chuck Hagel -- may be at the forefront of the current trend in the United States, he's hardly the first world leader to stomach a self-imposed pay reduction during tough economic times, and his voluntary cutback is certainly not the most dramatic.
In 2010, for instance, British Prime Minister David Cameron agreed to trim his earnings by £7,500 (roughly $11,400) when his coalition took over. While this also amounted to about five percent of his salary -- that salary was significantly lower than Obama's at £150,000 (around $230,000). And rather than a one-off pay cut, Cameron's belt-tightening was part of a long-term, government-wide move toward austerity.
Two years later, Lee Hsien Loong, the prime minister of Singapore, accepted a 36-percent cut in annual income, which seems pretty drastic until you consider that the reduction still left him earning a comfortable $1.7 million a year. While the Singaporean government has long held the belief that inflated salaries curb corruption and draw talented people to public service, they ultimately caved to pressure from voters and adjusted wages for all of the country's top leaders. Even with the pay cut, however, the prime minister remains the highest-paid elected head of state.
Still, there's no more radical example of personal sacrifice among world leaders than José Mujica, the notoriously low-maintenance president of Uruguay, who donates 90 percent of the roughly $144,000 he earns a year to charity. Mujica shuns the typical presidential perks, living on a farm with his wife and tending the land themselves. Barack and Michelle might not be up for that lifestyle. But as far as symbolic gestures go, it definitely makes the president's five-percent cut look a bit paltry.
Alex Wong/Getty Images
After his appearance on a BBC radio program Monday, British Work and Pensions Secretary Iain Duncan Smith probably wishes he could eat his words -- because now he may not be eating much of anything for a year. Smith said in the interview that he could survive on £53 ($80) a week -- the amount one welfare recipient complained he was forced to survive on after his housing stipend was cut -- and now Britons are asking him to prove it. As of Wednesday morning, roughly 350,000 people had signed a petition on Change.org urging the secretary to make good on his pledge.
The petition calls on Smith to stick to the budget for "at least one year," thereby helping to "realise the conservative party's current mantra that 'We are all in this together.'" Doing so would require him to take a 97-percent salary cut while living in London, one of the world's most expensive cities.
Smith has been less than enthusiastic about the petition, which he called a "complete stunt" in an interview with the Wanstead & Woodford Guardian. The demand "distracts attention from the welfare reforms which are much more important and which I have been working hard to get done," he said.
If he warms to the idea, however, Smith won't be the first politician to take a trial run on the dole. In 2012, Jagrup Brar, a member of British Columbia's Legislative Assembly, spent a month living on $610, the province's welfare rate for a single, unemployed adult. After the last night of the month, which he spent "couch surfing," Brar was 26 pounds lighter and $7 in debt -- even after selling his backpack to buy a train ticket home.
Cory Booker, mayor of Newark, N.J. pulled a similar stunt several months later, living on the equivalent of food stamps for a week. The mayor was forced to cut caffeine out of his diet, eat "singed" yams for lunch, and consider "making a meal out of mayonnaise and salsa."
As appealing as it sounds, Smith may not be interested in the politics of empathy, having already gone through two real periods of unemployment in the 1980s. As he said in an interview Tuesday, "I know what it is like to live on the breadline."
We here at Foreign Policy had been preparing for the day Cyprus's banks reopened by collecting pictures of bank runs from around the world -- on the chance that this morning we'd wake up to long lines of frantic depositors.
But with headlines like "Euro Rises Amid Cyprus Calm" and "All Is Calm as Cyprus Banks Re-Open After 12 Days," that idea has sort of fizzled out. (Come back to this space next time there really is a bank run, though, for some great pictures!)
So instead, we present you with this: a Cyprus so calm that a man feels comfortable standing in front of a bank with a parrot on his head.
Yiannis Kourtoglou/AFP/Getty Images
Last month, we posted interviews with the authors of the books nominated for the 2013 Gelber Prize, a literary award for the year's best non-fiction book in English on foreign affairs sponsored by the Munk School of Global Affairs at the University of Toronto in cooperation with Foreign Policy. The panel of five jurors -- William Thorsell, Gaynor Lilian Johnson, Walter Russell Meade, Margaret Wente, and FP's own Dan Drezner -- reviewed books on topics as varied as nuclear politics, the rise of the Soviet Union, and the legacy of the British empire.
Today, Patricia Rubin, president of the Lionel Gelber Prize Board, announced that the 2013 Gelber Prize will go to Chrystia Freeland for her book Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else. Thorsell, the jury chair, explained the decision, saying, "Plutocrats took the prize for its immediacy and authority about the future -- the world that we must comprehend and hope to manage in radically new circumstances." Here's the full jury's citation:
In Plutocrats, Chrystia Freeland describes the evolution of a new global elite of unprecedented economic, social and political power. This mobile, denaturalized community affects the lives of billions as its wealth and values distance it from even the wealthiest of societies. Freeland explores consequent issues of equity and accountability with fluency and intimacy, capturing the human dimension of a powerful and disturbing phenomenon.
Egyptian President Mohamed Morsy has spent the past three days in India on his first state visit to the country. Before heading to New Delhi, though, he floated an odd -- and more than a little ambitious -- idea.
"I am hoping BRICS would one day become E-BRICS where E stands for Egypt," he told India's The Hindu in an interview in Cairo published this week.
It's a bold proposal. The Kremlin has acknowledged the comments but didn't seem particularly enthused about the idea, and it's unclear whether Morsy broached the subject in his meetings with Indian Prime Minister Manmohan Singh. The BRICS -- that's Brazil, Russia, India, China, and South Africa -- are an economic alliance of top-tier rising powers, the crème de la crème of the developing world. Egypt? Not so much.
Let's put this in perspective. The average GDP of the BRICS countries in 2011 (in current U.S. dollars, according to the World Bank) was $2.78 trillion dollars. Egypt? $230 billion. The country's development isn't exactly in high gear, either. The instability of the revolution has dealt a blow to Egypt's economy, and its estimated growth rate for 2012 is a meager 2 percent, which places it behind four of five BRICS countries. Even as Morsy was meeting with Singh, he was sharing the front page of Egyptian dailies with the news that BMW, Mercedes-Benz, and Hyundai are planning to withdraw from the Egyptian market as new customs laws take effect.
Morsy knows this, and clarified that he hopes "the E-BRICS would emerge when we start moving the economy." So it's something of a longer-term goal. Perhaps Morsy might consider one of these starter coalitions instead? Then again, the MIKT (Mexico, Indonesia, South Korea, Turkey) countries, which are moving beyond "emerging market" territory, have an average GDP of $973 billion, so it might still be a stretch. In the same interview with The Hindu, Morsy expressed a desire to be more active in the Non-Aligned Movement. It's probably a good place to start; the NAM is far less discriminatory.
PRAKASH SINGH/AFP/Getty Images
Just when it seemed the crisis in the eurozone might be heading toward some kind of resolution, European financial regulators have managed to drag the continent back into doom and gloom. This time, the culprit is Cyprus, whose rickety banking system is heavily exposed to nasty things like Greek debt. Intense negotiations over the weekend produced the latest bailout agreement, which will raid the bank accounts of ordinary Cypriots in order to finance the bad behavior of Cypriot bankers. As David Bosco tweeted last night, "were the Eurozone ministers and IMF reps drinking during the 10-hour meeting that produced the Cyprus levy?"
Furious at the prospect of financing another bailout out of their own pocket, the Germans -- and their henchmen at the IMF and the European Central Bank -- made an offer to Cypriot President Nicos Anastasiades that he couldn't refuse. Here's how the Wall Street Journal says it all happened:
Just after 5 p.m., finance ministers, IMF Managing Director Christine Lagarde, ECB executive board member Jörg Asmussen and the EU's economic-affairs commissioner, Olli Rehn, filed into a meeting room on the fifth floor of Brussels's Justus Lipsius, which houses the EU's ministerial meetings and summits. Cyprus's newly elected President Nicos Anastasiades stayed behind in the country's delegation room on the seventh floor, ready to approve or reject any potential deals.
Mr. Rehn was the first to make a specific proposal. To raise funds, Cyprus should impose a special levy on deposits, taxing accounts of less than €100,000 at 3%, those up to €500,000 at 5% and those above at 7%. Such a "solidarity levy "-the brainchild of Thomas Wieser, an Austrian who chairs technical discussion among euro-zone finance officials, and Mr. Asmussen- could avoid a straight "haircut" on deposits, which they feared could be too destabilizing for Cyprus and the rest of Europe. The tax would be applied to all Cypriot banks, not just the two in deep trouble.
But Ms. Lagarde had something else in mind. The IMF chief presented a much more radical plan, in which deposits above €100,000 in Laiki and Bank of Cyprus would have been cut by between 30% and 40%. The owners of senior bonds in the two banks would also have faced losses-a step that was ultimately rejected. That plan would have limited the international bailout to €10 billion and raise some €7.5 billion from depositors.
Take a moment and consider those figures. According to the Journal, Christine Lagarde -- apparently with a straight face -- asked for a 30 to 40 percent reduction in large deposits to finance the misadventures of Cypriot banks.
After some more squabbling back and forth during which Anastasiades rejected IMF demands, the financial officials decided to play hardball with the newly minted president. The following exchange, as reported by the Journal, might serve as a case study for how to stick up a bank in the year 2013:
At that point, around 1 a.m. a small group-including Ms. Lagarde, Mr. Rehn, Mr. Sarris, Mr. Schäuble, France's Pierre Moscovici, Mr. Asmussen and Mr. Dijsselbloem broke off into a separate room. It was then -- as other ministers snoozed or played on their iPads -- that Mr. Asmussen told Mr. Anastasiades that without a deal, Cyprus's two big banks faced insolvency, since they would have no prospect of European funds to repair their battered capital buffers, said people who were present. In that case, the ECB would no longer be willing to fund the banks with central-bank emergency liquidity, Mr. Asmussen said, these people said. The implication: The island's biggest banks might be unable to reopen after Monday's bank holiday.
Mr. Asmussen backed up the warning by calling ECB President Mario Draghi and letting him know the central bank might have to deal with the collapse of Cyprus's banks.
After managing to secure a concession that no deposit be taxed at a rate above 10 percent, Anastasiades signed the agreement.
It's worth noting that the arrangement foisted upon Cyprus by regulators is also completely unprecedented in the history of the meandering European response to the financial crisis. While so-called "haircuts" have been imposed in the past -- notably on holders of Greek bonds -- European financial authorities have never had the temerity to pull money straight out of individual bank accounts in order to rescue banks.
Beyond the unprecedented nature of the move, the decision to impose a one-time tax on deposits now threatens the broader European financial system. In an effort to reduce their exposure to the tax, Cypriots flocked en masse to the country's ATMs over the weekend -- to the extent that many machines ran out of cash. With fears that Italy and Spain may also require bailout packages, depositors in those countries have to be wondering whether they too should begin moving money out of their local banks to avoid a similar tax. That may very well result in a run on banks in the two countries least equipped to handle it.
The wrinkle in the Cypriot bailout is what might be called the Russian connection. As Dylan Matthews explains, the Cypriot government has gotten in bed with the Russian government to offer a less-than-above-board financial haven to Russians looking for a friendly locale to park their money. Facing a revolt at home, Anastasiades is now trying to renegotiate the terms of the bailout. If he is able to increase rates for large deposits and lower the rate for smaller holdings, Russian oligarchs could be footing a sizable portion of the bill for the Cypriot bailout.
The question for Anastasiades now is this: Whom can he afford to infuriate more -- mom-and-pop Cypriot depositors or the Russian mob?
Yiannis Kourtoglou/AFP/Getty Images
For the fourth time in one month, a Bulgarian citizen has self-immolated in an apparent protest against economic hardship and political corruption. The BBC reports:
The man, 52, threw petrol over himself outside the presidential palace in Sofia, police said. Security guards extinguished the flames and he was taken to hospital with severe burns where an official said his life was in danger.
As austerity measures make life increasingly difficult in the beleaguered country, the extreme response from Bulgarians has left the country's leaders reeling, prompting the resignation of a mayor in the city of Varna and, before that, the fall of Prime Minister Boiko Borisov's center-right government.
As an act of political resistance, suicide protest is largely associated with Tibetan monks and Dalit women in India. But while the current outbreak of self-immolations in Bulgaria is shocking, it's not exactly surprising. The country has a history of grievance driven self-immolation -- more than many European countries.
According to a literature review of deliberate self-burning (DSB) over a 20-year period, conducted by Medecins Sans Frontiers in 2003, Bulgaria had an average of 7.4 cases per year (between 1983-2002) and a total number of cases that was only surpassed among European countries studied by the Netherlands. The report, which draws a distinction between psychiatric illness and political motivation as a causal factor, notes that Bulgaria had the lowest correlation to mental illness among European countries studied, with only a third of immolations stemming from clinical psychiatric disorders.
Eastern Europe more generally has a history of self-immolation as a form of political resistance, largely in opposition to Soviet rule. In 2011, Foreign Policy's Christian Caryl discussed the most famous case, when the Czech student Jan Palach set himself on fire in 1969 and caused "a profound 'moral shock' to the nation that haunted it for decades to come." The recent Bulgarian cases are similarly haunting, proving once again that self-immolation -- while harrowing -- is often an effective way of getting the government's attention.
Economic arguments have a particular resonance during periods of sluggish growth, and that logic even seems to extend these days to the hot-button issue of abortion. In Switzerland, a new, very literally named initiative --"Protect life to remedy the loss of billions" - is calling for a referendum to ban abortion in the country for economic reasons. The initiative committe is led by politician Heinz Hürzeler, a member of the country's Social Liberal Movement, and maintains that in Switzerland, where 12 percent of pregnancies end in abortion, the practice represents a huge blow to the economy (comparatively speaking, Switzerland has one of the lowest abortion rates in the world, with only 6.4 abortions for every 1,000 women between the ages of 15 and 44). As AFP reports:
It calculates that if the more than 100,000 foetuses aborted in Switzerland over the past decade had been born, grown up and worked for 45 years, they would have contributed nearly 334 billion Swiss francs ($359 billion, 274 billion euros) to the country's GDP.
And, as consumers, the same 100,000 people would over 80 years pump more than 324 billion francs into the country's economy, it says.
Economic arguments abound in favor of abortion (and contraception more generally), and they tend to focus on the burden and welfare demands posed by unsupported children on both the individual and societal levels. Freakonomics has even weighed in on the debate, linking abortion to decreased crime rates in places like Romania, Canada, and Australia.
Perhaps less well known are the economic arguments for banning the practice. Like the Swiss initiative, these tend to rely on what pro-life author Larry Burkett has called "the George Bailey Affect" after the main character in It's a Wonderful Life: How the world would look, if, for each abortion, we substituted a consumer child who would grow up to become a productive member of society.
As for the campaign in Switzerland, the initiative has until August 2014 to garner 100,000 signatures, at which point the abortion ban will be put to a national referendum. Abortion was only decriminalized in Switzerland in 2002, also by national referendum.
As climate talks continue to grind along in Doha, food security would seem to be a major concern (especially as the U.N. issues warnings about the increasingly desperate food situation in Syria). However, the question of how farmers will feed the world's booming population while adjusting to changing weather patterns appears to have been sidelined even as this year's crippling drought in the U.S. sent grain prices to record highs.
That doesn't mean, however, that the race for food security hasn't already begun. As the authors of the recently released book The Global Farms Race argue, cash-rich but resource-poor governments have been quietly making controversial bids for the arable fields of foreign lands to shore up their own food security. Since the 2008 global food crisis, these "land grabs" -- considered an economic lifeline by supporters and neocolonialism by critics -- have been booming. The editors of the book note a 2011 Oxfam study that claimed nearly 230 million hectares of land have been sold or leased since 2001, mostly after 2008 (that's about the size of Western Europe). In one of the most publicized deals, the South Korean company Daewoo Logistics leased 3.2 million acres in Madagascar in 2008 to grow corn and palm oil so that the company could "ensure our food security." The deal, which was eventually canceled, was so unpopular domestically that it contributed to an uprising that helped to oust Madagascar's President Marc Ravalomanana.
While that deal fell apart, countless others have gone through, sparking debates over the economic, environmental, and political implications of exporting crops from food-insecure countries. As Michael Kugelman, co-editor of the book with Susan L. Levenstein, said at a book launch event at the Wilson Center on Tuesday, this development marks "a new phase of the global food crisis" -- one that may help countries importing food, but has grave implications for the countries hosting the crops. One of the disaster scenarios of these large-scale investments is that they will recreate scenes straight out of the Irish Potato Famine, during which crops were shipped out of the starving nation to feed wealthy foreigners. But equally urgent are the day-to-day economic, environmental, and political ramifications of the deals, from the effects of clearing forest to make way for new farmland to the implications of replacing food crops with biofuels.
Defenders of this type of direct foreign investment often tout the willingness of investors to share technology -- such as seeds for drought-resistant plants and satellite monitoring for crops -- with the host nation. However, corrupt governments willing to offer deals that don't benefit their own populations compromise these promises of development. (Unlike the land-grabs of yore, host governments solicit many of these deals. According to Kugelman, Pakistan offered a 100,000-strong security detail to protect the property of foreign investors and other countries have offered "fire sales" on land in the form of tax write-offs).
As the book acknowledges, these deals are most likely here to stay, so the focus is on minimizing the potential conflict over the contentious real estate. Many of the policy recommendations provided by the book lean toward community supported agriculture programs: Wealthy nations contracting directly with small-scale farmers to meet food needs while also providing them with the technology and capital to improve their yields. While that's all well and good, the willingness and ability of foreign investors to abide by these recommendations seems doubtful, especially given the difficulty of enforcing even well-established international economic rules.
The inability of the current multilateral climate talks to make meaningful headway on even a single key issue highlights the inherent problem with these arrangements. "You can have all the rules and regulations for land rights," contributor Derek Byerlee, the World Bank's former Rural Strategy advisor, said on Tuesday, "But you have to be able to implement them."
In a press statement released this morning, WikiLeaks announced the creation of a new fundraising scheme to circumvent the international embargo imposed last fall by international credit-card processors. Empowered by a recent legal victory against VISA Iceland, the organization aims to exploit a technical loophole in the international credit card system:
The French credit card system, Carte Bleue, is coupled with the VISA/Mastercard system globally. VISA and Mastercard are contractually barred from directly cutting off merchants through the Carte Bleue system. The French non-profit FDNN (Fund for the Defense of Net Neutrality- Fonds de Défense de la Net Neutralité), has set up a Carte Bleue fund for WikiLeaks.
The embargo, which caused a temporary publication halt in October 2011, has hit the organization hard. As donations dropped to a total of $40,2013 in the first half of 2012 -- a mere 21% of operating costs -- WikiLeaks cash reserves plummeted from $983,6000 in December 2010 to barely $120,000 at the end of June. The press statement could not hide the organization's desperation: "reserve funds will expire at the current austere rate of expenditure within a few months. In order to effectively continue its mission, WikiLeaks must raise a minimum of EUR 1M immediately."
Despite the financial trouble (and significant personal legal woes), WikiLeaks founder Julian Assange remained defiant in his statement to the press. "We beat them in Iceland and, by god, we'll beat them in France as well. Let them shut it down. Let them demonstrate to the world once again their corrupt pandering to Washington." Julian Assange announced from his perch in the Ecuadorian embassy in London, "We're waiting. Our lawyers are waiting. The whole world is waiting. Do it."
Despite the heated rhetoric over inequality in the United States and elsewhere, today more people on average believe that the rich "deserve their wealth," according to a 23-country survey released by Globe Scan last week.
The survey, which asked over 12,000 people whether they agreed with the statement "most rich people in my country deserve their wealth," found that this year nearly 15 percent strongly agreed and 28 percent agreed versus 12 percent and 27 percent respectively in 2008. The slight increase was driven by improved perceptions of deserved wealth in Australia and Indonesia, with an eight and 11 percent increase of "agree" statements respectively. In the United States, ground zero for the Occupy movement, 58 percent believed the rich deserved their wealth.
The study found that in 6 of the 23 countries surveyed-- Australia, the United States, Canada, China, and Indonesia and India -- the majority of respondents believe that the rich deserve their wealth.
This group represents almost half of the world's population and includes the world's three largest democracies, India, the United States and Indonesia. Perhaps unsurprisingly, among the countries with pro-wealthy perceptions are the two largest economies, the U.S. and China, and countries in the upper tiers of fastest growing economies -- China, Indonesia, and India.
However, the countries in this group run the gamut in terms of prosperity levels: India and the United States occupy opposite ends of the GDP-per-capita spectrum. Also notable is the absence of any European or Latin American state in the pro-rich category. Six European states, five of which are in the OECD, and five Latin American countries all pooh-poohed their country's wealthy. The only African countries surveyed, Kenya and Ghana, showed unfavorable views of the rich and their wealth, though there was a significant jump in approval in Kenya from 2008.
Below is a side-by-side comparison between each country's GINI coefficients-a commonly-used measure of inequality-- and their attitudes towards the rich.
*CIA World Factbook Figures (higher numbers indicate greater inequality)
On the eve of his country's first anniversary of independence, prominent South Sudanese human rights activist Deng Athuai was found brutally beaten and tied in a bag by the side of the road in Juba, the capital. According to local sources:
A military intelligence source told [the] Sudan Tribune that Athuai was found "crying inside [a] sack along the road side" between Kabur-tit and Gumba forest by the South Sudan security services.
Athuai had been reported missing on July 4, after he disappeared from his hotel in Juba. He is now in a coma at Juba Teaching Hospital, according to the Sudan Tribune.
Athuai is the chairsperson of South Sudan's Civil Society Alliance - the country's first non-profit umbrella network and a partner of the U.S.-based think tank Freedom House. He recently participated in a protest march demanding that South Sudan's parliament release the names of 75 government officials known to have embezzled $4 billion in public funds since 2005.
Athuai's colleagues refuse to speculate as to the identity of his assailants.
That year marks the juncture when South Sudan gained autonomy (a precursor to independence in 2011) from the north after decades of war, and began receiving $2 billion a year in oil revenues. For a country in which 71 percent of GDP comes from oil exports, and oil production accounts for 98 percent of all government revenues, this is a serious chunk of cash. The auditor-general's office reported that $1.5 billion went missing in the 2005-2006 fiscal year alone.
When the scandal was revealed in June, President Salva Kiir sent a letter to officials asking that the funds be returned:
"Many people in South Sudan are suffering and yet some government officials simply care about themselves.
We fought for freedom, justice and equality. Many of our friends died to achieve these objectives. Yet once we got to power, we forgot what we fought for and began to enrich ourselves at the expense of our people."
The letter was sent to approximately 75 officials -- the same ones whose names Athuai demanded should be made public. However, in the letter Kiir had promised amnesty and confidentiality to those who returned the funds.
Despite this event, as well as the country's dire economic situation since it shut off oil production in January, celebrations for the anniversary of independence began at midnight and will continue throughout the day.
"We have fought for our right to be counted among the community of the free nations and we have earned it," President Kiir told the gathered crowds. "To the extent that we still depend on others, our liberty today is incomplete. We must be more than liberated, we have to be independent economically."
President Omar al-Bashir of Sudan apparently turned down an invitation to attend the celebrations.
Paula Bronstein/Getty Images
Protests against government austerity measures have been spreading rapidly throughout Khartoum today, with Reuters reporting at least seven separate demonstrations in the Sudanese capital throughout the day. The number of protesters have grown substantially since yesterday, when Egyptian journalist Salma Elwardany reported a crowd of about 200 outside the University of Khartoum. 400 to 500 protesters took to the streets after Friday prayers in one suburb alone.
Elwardany was detained by security forces, as was activist Maha El-Senosy (who has been tweeting under the handle @MimzicalMimz) of the youth movement Girifna (@Girifna), or "Fed Up." Both have since been released. IRIN News reported that at least 100 people had been arrested in connection with the demonstrations as of June 20.
According to Reuters:
"The police fired tear gas and then used batons as they clashed with the protesters, who threw rocks. Witnesses said men in civilian clothes also attacked the demonstrators."
Rumors that Internet will be cut off have been circulating among the protesters via Twitter, under the hashtag #SudanRevolts, as activists attempt to circulate instructions for accessing social media via mobile phone. Other protesters have uploaded pictures that appear to show protesters blocking the streets with burning tires. Reuters reported that smaller protests have also broken out in Bahri, a suburb of Khartoum, but that they were quickly dispersed by heavy security presence.
Sudan currently has a budget deficit of about $2.4 billion, and inflation reached nearly 80 percent in May. Bashir's austerity measures include devaluing the Sudanese pound by nearly 50 percent, removing fuel subsidies and cutting back government by up to 50 percent. Austerity measures were implemented in order to cope with the loss of 75 percent of Sudan's oil production after South Sudan seceded in July 2011, taking the majority of the region's oil fields with it.
Despite calls by opposition groups for an uprising, Sudan has avoided the kind of demonstrations seen in neighboring Egypt and Libya last year.... so far.
Russian President Vladimir Putin doesn't choose his foreign visits lightly. On May 31, Putin makes his first trip abroad since being inaugurated for a third term as president on May 7, to neighboring Belarus. The visit is highly symbolic of Russia's desire to be the leader in the post-Soviet space, as well as Putin's continued support for the authoritarian president of Belarus, Alexander Lukashenko (also known as "Europe's Last Dictator"). Afterwards, Putin will head to Germany and France, Russia's major trading partners in the EU. After the European visits, Putin will fly to speak with Uzbek ruler Islam Karimov in Tashkent, to Beijing, and finally to Astana, Kazakhstan, to meet with long-time ruler Nursultan Kazarbayev; countries central to Putin's vision of a Eurasian Union.
Earlier in the month, Putin suddenly declined to attend the G8 Summit in Camp David, under pretext that he was too busy forming a new Cabinet of Ministers, sending instead Prime Minister Medvedev. The move was widely seen as a snub to President Obama, as Putin avoided a meeting with the president, and sidestepped making the U.S. his first foreign visit. A few days later, Obama announced he would not be able to attend the Asia-Pacific Economic Cooperation conference in Vladivostok this September, because it conflicted with the Democratic Party convention.
Putin has now also taken the opportunity to snub the UK, by announcing he will not attend the opening of the London 2012 Olympics, even though the 2014 Winter Olympics will be held on Russian territory in Sochi. Likely, Medvedev will once again be sent in his stead. Russian-British relations have been tense since the 2006 poisoning of ex-KGB agent Alexander Litvinenko in London. Moreover the West has been pressuring Russian officials over the 2009 death of anti-corruption lawyer Sergei Magnitsky while he was detained in prison. Putin's foreign trip destinations are by no means accidental.
Two years ago today, British Petroleum's Deepwater Horizon offshore drilling rig exploded, causing the largest oil spill in U.S. history. Though BP reached an "estimated multibillion-dollar settlement" with lawyers representing individual and business plaintiffs in the 2010 Gulf of Mexico oil spill, the Gulf Coast is strill struggling to recover from the disaster. Fish are dying, Louisiana's seafood industry is reeling, and Gulf Coast residents and cleanup workers continue to experience health problems tied to the spill.
After taking measures such as sacking then-CEO Tony Hayward, running an aggressive advertising campaign throughout the region, and settling on the multibillion-dollar payout, BP continues to shower the Gulf Coast with goodwill. According to Mike Utsler, president of BP's Gulf Coast Restoration Organization, the company is still spending "millions of dollars" on the cleanup operation, and even offering guided tours of the recovery efforts.
Millions of dollars, of course, is just a drop in the bucket for BP, which Forbes recently called "one of the greatest corporate survival stories in history":
"Since last year BP has risen a remarkable 379 spots to 11th place in The Forbes Global 2000 survey. Key to the climb is a return to profitability in a big way. In 2010 BP took a $41 billion charge against earnings, giving shareholders their financial whipping all at once rather than dribbling it out over years. In 2011 BP reversed the previous year's $3.3 billion net loss, posting $26 billion in income, with promises of a further profit surge in the years ahead, thanks to high gasoline prices and a new slate of projects coming online."
One of the 15 new projects that BP plans to bring online by 2015 is its first post-spill well, Kaskida, located 250 miles southwest of New Orleans. If anything goes wrong, one hopes CEO Bob Dudley won't be as insensitive as his predecessor.
BEN STANSALL/AFP/Getty Images
With Greece's national parliamentary election set for May 6, the crisis-ridden country may have a new threat to worry about: the extremist fringe vote. Due to popular frustration with the country's current economic situation, it is "thought likely" that left- and right-wing political fringe parties will make gains among voters at the expense of mainstream political parties like the conservative New Democracy party and the socialist Pasok party.
But as the New York Times reported yesterday, the Greek ultranationalist group Golden Dawn, a neo-Nazi group that has broadened its appeal by "capitalizing on fears that illegal immigration has grown out of control at a time when the economy is bleeding jobs," may very well receive more than the 3 percent of votes needed to enter Parliament. This is bad news for Greek society, which University of Athens political scientist Nicos Demertzis calls a "a laboratory of extreme-right-wing evolution." Though no Golden Party member has ever held national office, party leader Nikos Michaloliakos was elected to the Athens City Council in 2010.
Golden Dawn joins the ranks of dozens of nationalist-populist fringe parties all over Europe whose enflamed euroskeptic reactions to the "cuts to wages and pensions imposed in order to secure aid from the EU and the IMF" have resulted in political shakeups. The Dutch Party for Freedom (PVV) , led by Geert Wilders, won 24 of the 150 parliamentary seats in the 2010 general election, and came in second in the Netherlands in the 2009 European Parliament elections.
Golden Dawn also espouses a particularly anti-German sentiment:
''It's right to hate Germany, because it is still the leader of the banksters and the European Union,'' Mr. Michaloliakos, the group's leader, said, using a derogatory term for bankers.
Of course, Golden Dawn is still transitioning from a street-fighting group into a political party, but it remains to be seen whether it can become a well-oiled machine like France's National Front, whose leader, Marine Le Pen, is still campaigning for the presidency. Even so, its increasing popularity is evidence of a dangerous trend that only promises to worsen. At least we have Greek left-wing anarchist groups like the Cosnpiracy of Fire Nuclei, Nikola Tesla Commandos, and Immediate Intervention Hood-wearers to keep us properly entertained.
LOUISA GOULIAMAKI/AFP/Getty Images
Swedish furniture giant IKEA has begun work on a 26-acre self-contained neighborhood in Stratford, East London - just in time for the 2012 Olympics.
The town will be called Strand East and will contain 1,200 new homes, 480,000 square feet of office space, and a 350 bedroom hotel. The development's canal side location -- nicknamed "mini Venice" -- will feature a water-taxi service and floating cocktail bar. It is the first major development for LandProp, which owns the intellectual assets of the furniture company. The development group already operates in Holland, Lithuania, Poland, and Latvia, according to the Daily Globe and Mail.
The announcement comes shortly after the British government's agreement last month to slim down urban planning laws in order to encourage more sustainable projects, like this one. In what was a bitter dispute with countryside campaigners, the reforms represent a huge step along the way to reviving Britain's struggling rural economy.
Andrew Cobden, a spokesman for the project, also described a 40-meter illuminated tower that will be visible across the East London skyline - meant to emulate the Olympic torch. Like all things IKEA, the tower will be made from relatively "simple" materials, a wooden lattice of 72 diagonal laths, 16 horizontal steel rings, and held together by 32,000 trusty steel bolts.
The development will accommodate residents at a range of income levels. IKEA's first pre-fabricated home debuted last month in Portland, at an all-inclusive price of just $86,000. You might need more than a tiny Allen wrench to build this one.
Although the Arab Spring hasn't won Israel many friends in the Middle East, Haaretz reported yesterday that its navy "recently strengthened its cooperation with the Lebanese Navy in the Mediterranean." The partnership, Israel hopes, will prevent provocations in the form of possible pro-Palestinian flotillas to Gaza on May 15, or Nakba Day, which commemorates "the displacement of Palestinians following the establishment of Israel in 1948, and on Naksa Day, which takes place in June and commemorates the displacement of Palestinians after the 1967 war."
It's no surprise that Israel would turn to regional multilateralism in order to avoid a repeat of the Gaza flotilla incident of 2010. According to the Intelligence and Terrorism Information Center, "pro-Palestinian activists from Sweden [have] announced their intent to organize another Gaza flotilla this year, saying they have already bought the ship."
Whether this friendly strategic cooperation will last, though, is an entirely different question. Israel and Lebanon may soon be engaged in nasty disputes over natural gas fields in the Levant Basin, which as Robin M. Mills reported for FP last year "spans not only Israel's offshore but also that of Lebanon, Cyprus, and Syria." In 2009, U.S. exploration company Noble Energy found Tamar, a deepwater field that holds 8.5 trillion cubic feet (Tcf) of natural gas. Noble discovered Leviathan, which has an aerial area of 125 square miles and contains a potential 20 Tcf, in early 2010. As Mills noted, the U.S. Geological Survey estimates that the entire basin "could contain 120 Tcf of gas, equivalent to almost half of U.S. reserves."
With Tamar set to come online in April 2013, and Leviathan expected to begin production by 2016, what is for now just a dispute over maritime borders could soon turn into a regional conflict over natural gas.
Uriel Sinai/Getty Images
Just days after announcing that it would back deputy leader Khairat El-Shater as a presidential candidate in Egypt's upcoming election, the Muslim Brotherhood's Freedom and Justice Party made a pit stop at Georgetown University on Wednesday as part of a "charm offensive." FJP representatives repeatedly emphasized the Islamist party's commitment to fulfilling "the demands of the young people who revolted in Tahrir Square" through promoting democracy, justice, freedom, and human dignity, and insisted that they intend to be "as inclusive as possible."
"With the new Egypt, it doesn't matter anymore what the party wants," said businessman and FJP adviser Hussein El-Kazzaz. "Our compass is not a movement that's internally inward-looking, our compass is now with the revolution.... Our distinct belief is that the country cannot be be run by one faction."
That's why, he explained, the Muslim Brotherhood flip-flopped on its decision to field a presidential candidate:
"We didn't want to nominate someone ... because we didn't want to be monopolizing positions of power at that time..... It's a very different reality now than it was 10 months ago."
Even though the FJP holds over 47 percent of the seats in Egypt's parliament, Member of Parliament Abdul Mawgoud Dardery from Luxor acknowledges that the parliament itself hasn't exactly been smooth sailing:
"It's very tough [to negotiate].... All of a sudden now we are expected to decide ... the fate of our country through a very, very democratic process from which traditions and figureheads are and history and so on are being created as we go."
He added that the members have tried to do "traditional things," like holding meetings and using mediators, but that it's not working "100 percent."
El-Kazzaz also argued that the Freedom and Justice Party seeks to take a "middle ground" when it comes to the existential struggle between secular liberalism and traditionalism:
"We have a tradition that needs to be respected ... but we cannot ignore human civilization ... Europe has great things to offer, the United States has great things to offer, let's look at them and choose what we like, leave what we don't like."
If only it were that easy. Unfortunately for the FJP's philosophies of inclusion and finding a middle ground, it appears that Islamists are set to dominate Egypt's constitutional committee, a crisis that's already alienating the country's minority groups.
KHALED ELFIQI/AFP/Getty Images
The Kauffman Foundation yesterday released its 2011 national Index of Entrepreneurial Activity, showing a 5.9 percent drop in U.S. startup activity from 2010. Not so in Tunisia, according to Mondher Khanfir, an entrepreneur in Tunis who recently co-launched Wiki Start Up, the country's first startup incubator:
"After the revolution, my friends and I wanted to work on innovation, so we built an incubator to create seed funds to make projects happen ... We launched last summer, and right now we have 15 startups and a portfolio of $20 million, but our capacity is 30 startups and we're looking to raise funds here in Tunisia and internationally."
Most of Wiki Start Up's entrepreneurs, he added, are young locals.
"We have two coming from the Diaspora, from Europe and the U.S., but the other 13 were started by Tunisians based in Tunisia, and they're all under 40."
The impressive list of sectors that Wiki Start Up represents includes energy, biotechnology, agribusiness, audiovisual engineering, and other knowledge-based fields. Khanfir says he is optimistic about the future and does not expect the political climate to effect entrepreneurial growth in Tunisia.
"The question is not the stability of the country or the region because we want to work more in the international marketplace. Things are getting more and more stable in Tunisia, and our early-stage startups are not affected by whatever turbulence and volatility there is now because we're working for the future. Tunisians are very entrepreneurial."
So who best embodies the Tunisian spirit of entrepreneurship?
"Mohamed Bouazizi was an entrepreneur, and he set himself on fire because he was not respected as one. He was a small entrepreneur, and he didn't have written permission from the Ministry of Commerce to act as a merchant, but what we need to do is take people who operate in the black economy and put them in the white one. For the last 20 years, the regime failed to promote innovation."
The U.S. State Department is already getting in on the entrepreneurial activity in Tunisia through its partners for a New Beginning program: the U.S.-North Africa Partnership for Economic Opportunity (NAPEO). In early November 2011, PNB-NAPEO brought a group of U.S. entrepreneurs and early-stage investors to Tunisia to "foster and deepen relationships ... and showcase local talent." It seems that the Kauffman Foundation is also keen on investing in Tunisia's entrepreneurial future: In late November, it sponsored a Global Entrepreneurship Week in Tunis.
Tunisia may have only just begun to build its post-revolution economy, but it's already on track to become a regional startup nation.
JASON REED/AFP/Getty Images
Above, German Chancellor Angela Merkel, who will give the keynote address at Davos tomorrow, receives an effigy of a golden goose during Germany's annual carnival season. What you can't see is the crowd of Greek pensioners hovering in the background, plotting to steal the goose in the hopes of extracting magical golden eggs from within it.
Photo by Sean Gallup/Getty Images
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.
BERTRAND GUAY/AFP/Getty Images
It's been almost two weeks since Foreign Policy released its Top 100 Global Thinkers of 2011, and while the year is nearly up, many members of the list are continuing to make headlines.
Russian anti-corruption blogger Alexey Navalny was arrested on Monday, the day after Vladimir Putin's United Russia -- which Navalny has famously dubbed "the party of crooks and thieves" -- saw losses in an election widely thought to have been less than free and fair.
In a historic trip to Myanmar last week, U.S. Secretary of State Hillary Clinton met with Aung San Suu Kyi, whose opposition movement recently announced it will reenter the political system, paving the way for her possible candidacy for parliament.
Pakistan lawmaker Sherry Rehman has been selected as her country's new ambassador to the United States. The move followed the controversial departure of Husain Haqqani, who resigned in connection with a memo sent to former chairman of the Joint Chiefs of Staff, Admiral Mike Mullen.
Syrian political cartoonist Ali Ferzat, who was seized and attacked by security forces in August, has been named one of two recipients of the 2011 Press Freedom Prize, awarded by Reporters Without Borders and Le Monde. Fellow Syrian activist Razan Zaitouneh recorded a video message for Foreign Policy, speaking from hiding in Damascus.
Democracy activist Mohamed ElBaradei has expressed concern about religious extremism in Egypt, following the results of the country's November parliamentary elections. ElBaradei is scheduled to give a speech about Egypt and the Arab Spring on Saturday, Dec. 10, at the Cisco Public Services Summit in Oslo.
In other media coverage, Brazilian president Dilma Rousseff and Harvard psychologist Steven Pinker both recently got the big profile treatment, in the New Yorker and the New York Times, respectively. Reuters has also filmed video interviews with several Global Thinkers, including economist Esther Duflo, former Al Jazeera director-general Wadah Khanfar, and social media guru Clay Shirky.
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.
Europeans know a thing or two about down-to-the-wire debt deals, but with time running out in Washington to reach an agreement before a catastrophic default that could have devastating spillover effects around the globe, European leaders are sweating. On Tuesday, Christine Lagarde, the managing director of the International Monetary Fund and former finance minister of France, warned the United States that the issue needed to be "resolved immediately." Today, she told the PBS NewsHour that there would be dire consequences for the world economy if there wasn't resolution.
There's quite a lot of concern out there. The global economy is clearly highly dependent on the U.S. economy, because the U.S. economy is the first in the world and it's a major power in many respects. So to have the lead economy uncertain about its debt ceiling is quite worrisome.
In a separate interview with Fareed Zakaria on CNN, she said the solution would be to raise the debt ceiling now and address fiscal consolidation issues in the medium term.
Today, the German Finance Minister Wolfgang Schäuble also warned Washington to act.
Everyone in the US should be aware of their responsibility for the global financial markets.
He added, "The core of [the U.S.'s] difficulties is exorbitant debt and the economic prospects. Americans have to find long-term solutions to create solid fiscal and growth policies."
Schäuble and Lagarde were downright tame compared to Vince Cable, Britain's secretary of state for business, who told the BBC earlier this week that "the biggest threat to the world financial system comes from a few rightwing nutters in the American Congress rather than the euro zone."
Perhaps, the most sobering analysis of all comes from Germany's Der Spiegel:
Even if the worst is avoided, US finances are still a mess. Total debt is approaching 100 percent of gross domestic product, putting it in the same league as Italy, Portugal and Ireland, three of the euro-zone's famous PIIGS states. America's budget deficit is well over a trillion dollars -- more than 10 percent of GDP. Were Washington to apply to become a member of the European common currency zone, it would be rejected out of hand.
We'd be rejected by the euro zone? This euro zone?
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 21st 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.
YASUYOSHI CHIBA/AFP/Getty Images
When your country is on the ropes amid widespread fears that the economy is headed in the same direction as Greece, it's probably not the wisest time to intensify a feud with your finance minister -- the man many economists believe is the only thing standing between the Italian financial system and disaster. Yet that's exactly what the irascible Italian prime minister, Silvio Berlusconi, is doing. On Friday, he called Giulio Tremonti "the only minister who is not a team player" and added "he thinks he's a genius and everyone else is stupid."
"I put up with him because I've known him for a long time and one has to accept the way he is," Berlusconi told the Italian paper La Repubblica (ironically, one of the few not owned by him).
There is widespread speculation that Tremonti could be forced out of office. He backs a tough fiscal line -- largely unpopular with voters and other cabinet members -- and last week, was able to push through a €47 billion austerity program that Parliament is debating this week. Berlusconi said he would fight to change the package before parliament passes it -- which he derisively called, "Tremonti's plan." The prime minister wants to make it more attractive to the electorate rather than markets, he told La Repubblica.
But the possibility that Tremonti might be forced out is making rating agencies and markets nervous, analysts say.
Not that anyone argues that Tremonti isn't a bit of a pain in the rear. The former tax lawyer is reported to be uncompromising, aggressive, and hard to get along with -- he has said of himself that he's the only advisor willing to say no to the prime minister. In the past, Tremonti been quick to threaten resignation when he doesn't get his way (and has actually resigned before, only to come back). He also plays politics, of a sort, leveraging support among economists and fiscal conservatives to get others to compromise. And he's certainly cultivated the image that he alone is the man who can save the economy -- listen to him or face disaster. No wonder Berlusconi isn't a fan.
It also probably doesn't help that commentators keep referring to Tremonti as a potential successor to the prime minister, should his many scandals force him to resign.
But Tremonti now has a scandal of his own. The finance minister is under investigation for allegedly taking an apartment worth €8,000 per month for free from one of his closest allies in Parliament.
The controversy has been stoked by Berlusconi's media empire. "Tremonti's free flat," read the front page headline of Il Giornale. The paper also said Tremonti's position is weaker than it has been in years and called him a die-hard "socialist," who has repeatedly blocked Berlusconi's attempts to implement tax cuts.
What comes next depends largely on Parliament. Tremonti today said the austerity measure under debate will be passed by Friday. That would be a major coup for the finance minister -- though his battle with Berlusconi won't go away. The prime minister is stuck between a scary economic outlook and an angered electorate. Continuing to attack Giulio Tremonti may be his most convenient escape for now -- regardless of what it does to the economy.
Passport, FP’s flagship blog, brings you news and hidden angles on the biggest stories of the day, as well as insights and under-the-radar gems from around the world.