To secure credit, Europe finds global financial markets no longer attuned to Western interests

Joergen Oerstroem Moeller 

The eurozone crisis has not only raised questions about the viability of the common currency, but could also jeopardize an economic model that has so far reigned supreme. The course taken to resolve the crisis in Europe will have long-term impact on the most vibrant parts of the world – from Asia to Latin America.

In developed countries of the West, debtors have run up a high debt ratio to gross domestic product, even while economic growth was high – overspending when they should have saved. They borrowed to spend more, demonstrating a disastrous failure to grasp basic economic principles as well as flaws in moral behaviour and ethical judgment. Among these borrowers are established heavyweights – the United States, most European nations and Japan. The United States, one of the wealthiest countries, became an importer of capital instead of exporting capital, registering its last balance vis-à-vis the rest of the world in 1991.

After accumulating savings over several decades through prudent and cautious policies, the creditors sit on a large pile of reserves with low domestic debt and government deficits. These reserves are largely held by emerging countries with China at the forefront. As a paradox, the emerging economies have taken it upon themselves to lend to the richer countries – exporting capital almost as vendor’s credit. Indeed, this reversal of roles is one explanation for the global financial crisis. The global monetary system is not geared to function under such circumstances.

This development was framed by the so-called Washington Consensus of the 1980s – a neoliberal formula that spurred globalisation by promoting liberalization of trade, interest rates and foreign direct investment; privatisation and deregulation; as well as competitive exchange rates and fiscal discipline. Fundamental flaws were exposed, raising the question about which economic model might replace it.

There are two possibilities in this competition: One strategy is from the United States and a group of Democrats who suggest that more short-term borrowing and spending could lead to growth, tax revenues and exit from recession – even if the debt grows and deficits become permanent. A breakthrough by the US Congressional super-committee to make substantial cuts over the next 10 years won’t fundamentally change this stance, merely reducing rather than eliminating the deficit. The Europeans have taken the opposite view: They advocate starting the recovery by reducing deficits and debt even if that seems counterproductive for economic growth in the short run. The Europeans are also raising taxes across the board, regarded as indispensable for restoring balance in government budgets.

The results of either plan won’t be known for a few years. Chances are, however, that the European policy will carry the day for the simple reason that creditors call the tune. It’s highly unlikely that creditors favour continued reliance on deficits as the inevitable consequence will be inflation, eroding the purchasing power of their reserves. Indeed, the Chinese rating agency Dagong has announced that it may cut the US sovereign rating for the second time since August if the US conducts a third round of quantitative easing.

Early in the crisis, as Europe set up a stabilizing bailout fund, there were rumours in the market that China, Russia and Japan might rescue of the euro, either by buying European bonds or going through the International Monetary Fund. It’s unclear how China wants to proceed with such an undertaking, but Russia and Japan have allegedly acted to do that through the International Monetary Fund or by buying European bonds.

Countries with surpluses do not dream of rescuing the euro; they act in their own interest. Economically they prefer the European fiscal discipline, reasoning that American prodigality will shift much burden of adjustment onto them. They may dread being left with the US dollar as the only major international currency, forcing them to endure, at times, whimsical policy decisions by the Federal Reserve System, the US Treasury Department or US Congress. The euro and the European Union are seen, and indeed needed, as a counterweight. The EU may look weak, but it’s a respectable global partner, offering the euro as an alternative to the dollar and serving as a major player in trade negotiations and the debate about global warming, just to mention a few examples.

It can be expected that other nations will step forward to support the euro. But at what price? What conditions, if any, will be put on the table and will the Europeans consent? A case can be made that, as creditors undertake investments to help the euro, they actually help themselves, and there are no reasons why the eurozone should pay any price. We can expect a game of hardball, in which nerves matters, and who gives what to whom may not be clear at all.

Another question has arisen about who decides and who is in charge. The G20 meeting in Cannes revealed a growing consensus to stop the financial houses amassing and subsequently abusing power. If the global financial system is big enough to force Italy into a default-like situation, many countries are surely asking whether they’ll be next. The big financial houses are viewed by many as irresponsible stakeholders, if stakeholders at all. Consider, the US government is suing 18 banks for selling US$ 200 billion in toxic mortgage-backed securities to government-sponsored firms, the Federal National Mortgage Association and the Federal Home Mortgage Corporation, known as Fannie Mae and Freddie Mac. In April 2011 the European Commission initiated investigations into activities of 16 banks suspected of collusion or abuse of possible collective dominance in a segment of the market for financial derivatives.

The market has muscled its way in as judge about whether a country’s political system or economic policy are good enough. But the market is neither a single institution nor a broad, balanced mix of diverse players. It’s become a small group of large financial institutions, the power of which overwhelm what even big countries can muster: 147 institutions directly or indirectly control 40 percent of global revenue among private corporations. A sore point is that they pursue profits without concern over implications for countries and societies. Rather than let measures work, these financiers force the issue here and now, even as they speculate against efforts, many admittedly delayed and inadequate, to resolve debt crises. Financial institutions holding sovereign bonds that could default insure themselves by buying a credit default swaps. What seems like prudent corporate governance becomes a shell game as these obligations are traded among financial institutions, some of which don’t hold sovereign bonds in their portfolios – all of which heightens interest in forcing default.

The temptation to roll back economic globalisation inter alia by breaking up the eurozone or restricting capital movements has been resisted. Economic globalisation is holding firm.

Creditor countries can set the course on future economic policies – likely highlighting fiscal discipline. While the West had vested interest in the big financial houses, the incoming paymasters do not, and they can be expected to increase their control over investment patterns. This can be done either by setting up own financial houses or buying into Western financial institutions as was the case in the slipstream of the 2008 global debt crisis.

The global financial market is changing course, away from looking after Western interests and acting in accordance with corporate governance as defined by the West toward a more global outlook guided by the interests of new group of creditors.

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Joergen Oerstroem Moeller is a visiting senior research fellow, Institute of Southeast Asian Studies, Singapore, and adjunct professor, Singapore Management University and Copenhagen Business School.

Criticism of Schumacher - if you curtail growth, living standards drop

Schumacher was no radical – if you curtail growth, living standards drop

By suggesting it's better to be economically poorer and spiritually richer, Schumacher ignores links between growth and wellbeing

• 
• • Daniel Ben-Ami
  • guardian.co.uk, Wednesday 16 November 2011 11.30 GMT
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Consumer revolution … a customer inspects washing machines at a supermarket in Wuhan, China. Photograph: Darley Shen/Reuters

EF Schumacher's Small is Beautiful is widely viewed as a humanistic and radical tract. Nothing could be further from the truth. Viewed in its proper context it is both profoundly anti-human and deeply conservative.
The central idea in Schumacher's text is that there is a natural limit to economic growth. As he put it: "Economic growth, which viewed from the point of view of economics, physics, chemistry and technology, has no discernible limit, must necessarily run into decisive bottlenecks when viewed from the point of view of the environmental sciences."

Schumacher objected to organising the economy on a large scale precisely because he believed that more prosperity would damage the environment. He correctly understood that small-scale communities cannot produce nearly as much as those operating on a regional or global scale. A modern car, for example, typically relies on components, raw materials and know-how from around the globe. From the perspective of Schumacher's "Buddhist economics", it is better for people to be poorer in economic terms if they can be spiritually richer.

This argument flies against a huge weight of evidence showing that material advance is closely bound up with progress more generally. The past two centuries of modern economic growth have seen huge advances in human welfare along with technological innovation and social advance. Perhaps the most striking single indicator of this improvement is the increase in human life expectancy from about 30 in 1800 to nearly 70 today. Note that this is a global average, so it includes the billions of people who live in poor countries as well as the minority who live in rich ones.

Almost every other measure of wellbeing has increased hugely over the long term, including infant mortality, food consumption and level of education. Most of humanity, even in the developing world, has access to services our ancestors could only have dreamt of, including electricity, clean water, sanitation and mobile phones.

None of the arguments used by Schumacher's followers to counter this narrative of progress are convincing. Greens often side-step the broader case for growth by deriding the accumulation of consumer goods and services. Environmentalist arguments have more than a tinge of elitism, with comfortably middle-class greens scoffing at the masses for wanting flat-screen televisions and foreign holidays. It should also be remembered that some consumer goods, such as washing machines, have directly led to huge improvements in human welfare.

Anti-consumerism reveals more about the narrowness of the green vision than it does about economic growth. Viewing rising prosperity simply in terms of consumer goods is incredibly blinkered. Growth provides the resources for much else including airports, art galleries, hospitals, museums, power stations, railways, roads, schools and universities. Popular prosperity provides the bedrock for much that we value in contemporary society.

Another common green rebuttal to the benefits of growth is to point to the existence of inequality. Of course it is true that there are huge disparities both within countries as well as between the developed and developing world. The key question, however, is how best to tackle the problem. From Schumacher's perspective it is desirable to reduce the living standards of everyone except the poorest of the poor. His is a narrative of shared sacrifice and lower living standards for almost all. The alternative vision, the traditional position of the left, was to argue for plenty for everyone.

Finally, there is the argument about the environment itself. The most popular variant of the idea of a natural limit nowadays is that growth inevitably means runaway climate change. However, there is plenty of evidence to the contrary. There are many forms of energy, including nuclear, that do not emit greenhouse gases. There are also ways to adapt to global warming such as building higher sea walls. Since such measures are expensive it will take more resources to pay for them; which means more economic growth rather than less. If anything the green drive to curb prosperity is likely to undermine our capacity to tackle climate change.
Schumacher's fundamentally conservative argument chimes well with those who want to reconcile us to austerity. It suits those in power for the mass of the population to accept the need to make do with less. Under such circumstances it is no surprise that David Cameron, like his international peers, is keen for us to focus on individual contentment rather than material prosperity.

It is hard to imagine a more anti-human outlook than one advocating a sharp fall in living standards for the bulk of the world's population.

Pigeonholing protesters as anti capitalist will only allow those who are against reform to avoid the issue

• 
• • Ha-Joon Chang
  • guardian.co.uk, Tuesday 15 November 2011 21.00 GMT
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In Singapore 'a staggering 22% of national output is produced by state-owned enterprises'. Photograph: Luis Enrique Ascui/Reuters

The Occupy London movement is marking its first month this week. It is routinely described as anti-capitalist, but this label is highly misleading. As I found out when I gave a lecture at its Tent City University last weekend, many of its participants are not against capitalism. They just want it better regulated so that it benefits the greatest possible majority.

But even accepting that the label accurately describes some participants in the movement, what does being anti-capitalist actually mean?

Many Americans, for example, consider countries like France and Sweden to be socialist or anti-capitalist – yet, were their 19th-century ancestors able to time-travel to today, they would almost certainly have called today's US socialist. They would have been shocked to find that their beloved country had decided to punish industry and enterprise with a progressive income tax. To their horror, they would also see that children had been deprived of the freedom to work and adults "the liberty of working as long as [they] wished", as the US supreme court put it in 1905 when ruling unconstitutional a New York state act limiting the working hours of bakers to 10 hours a day. What is capitalist, and thus anti-capitalist, it seems, depends on who you are.

Many institutions that most of us regard as the foundation stones of capitalism were not introduced until the mid-19th century, because they had been seen as undermining capitalism. Adam Smith opposed limited liability companies and Herbert Spencer objected to the central bank, both on the grounds that these institutions dulled market incentives by putting upper limits to investment risk. The same argument was made against the bankruptcy law.

Since the mid-19th century, many measures that were widely regarded as anti-capitalist when first introduced – such as the progressive income tax, the welfare state, child labour regulation and the eight-hour day – have become integral parts of capitalism today.

Capitalism has also evolved in very different ways across countries. They may all be capitalist in that they are predominantly run on the basis of private property and profit motives, but beyond that they are organised very differently.

In Japan interlocking share ownership among friendly enterprises, which once accounted for over 50% of all listed shares and still accounts for around 30%, makes hostile takeover very difficult. This has enabled Japanese companies to invest with a much longer time horizon than their British or American counterparts.
Japanese companies provide lifetime employment for their core workers (accounting for about a third of the workforce), thereby creating strong worker loyalty. They also give the workers a relatively large say in the management of the production process, thus tapping their creative powers. There are heavy regulations in the agricultural and retail sectors against large firms, which complement the weak welfare state by preserving small shops and farms.

German capitalism is as different from the American or British version as Japanese capitalism, but in other ways. Like Japan, Germany gives a relatively big input to workers in the running of a company, but in a collectivist way through the co-determination system, in which worker representation on the supervisory board allows them to have a say in key corporate matters (such as plant closure and takeovers), rather than giving a greater stake in the company to workers as individuals, as in the Japanese system.

Thus, while Japanese companies are protected from hostile takeovers by friendly companies (through interlocking shareholding), German companies are protected by their workers (through co-determination).
Even supposedly similar varieties of capitalism, for example Swedish and German, have important differences. German workers are represented through the co-determination system and through industry-level trade unions, while Swedish workers are represented by a centralised trade union (the Swedish Trade Union Confederation), which engages in centralised wage bargaining with the centralised employers' association (the Confederation of Swedish Enterprise).

Unlike in Germany, where concentrated corporate ownership has been deliberately destroyed, Sweden has arguably the most concentrated corporate ownership in the world. One family – the Wallenbergs – possesses controlling stakes (usually defined as over 20% of voting shares) in most of the key companies in the Swedish economy, including ABB, Ericsson, Electrolux, Saab, SEB and SKF. Some estimate that the Wallenberg companies produce a third of Swedish national output. Despite this, Sweden has built one of the most egalitarian societies in the world because of its large, and largely effective, welfare state.

And then there are hybrids that defy definition: China, with its large socialist legacy, is an obvious case, but Singapore is another, even more interesting, example. Singapore is usually touted as the model student of free-market capitalism, given its free-trade policy and welcoming attitude towards multinational companies. Yet in other ways it is a very socialist country. All land is owned by the government, 85% of housing is supplied by the government-owned housing corporation, and a staggering 22% of national output is produced by state-owned enterprises. (The international average is around 10%.) Would you say that Singapore is capitalist or socialist?

When it is so diverse, criticising capitalism is not very meaningful. What you have to change to improve the Swedish or the Japanese capitalist systems is very different from what you should do for the British one.
In Britain, as already physically identified by the Occupy movement, it is clear the key reforms should be made in the City of London. The fact that the Occupy movement does not have an agreed list of reforms should not be used as an excuse not to engage with it. I'm told there is an economics committee working on it and, more importantly, there are already many financial reform proposals floating around, often supported by very "establishment" figures like Adair Turner, the Financial Services Authority chairman, George Soros, the Open Society Foundations chairman, and Andy Haldane, the Bank of England's executive director for financial stability.

By labelling the Occupy movement "anti-capitalist", those who do not want reforms have been able to avoid the real debate. This has to stop. It is time we use the Occupy movement as the catalyst for a serious debate on alternative institutional arrangements that will make British (or for that matter, any other) capitalism better for the majority of people.

Germany has benefitted from the Euro and should protect it.

There is only one alternative to the euro's survival: catastrophe

Little Englanders – and blinkered Germans – need to wake up to the implications of a fractured eurozone

• 
• • Will Hutton
  • The Observer, Sunday 13 November 2011
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It is hard not to have the gravest of forebodings about the European and British economies, and about the future of Europe itself. Nobody would start from here – an ill-designed single currency interacting with an insupportable burden of private debt created by oversized, undercapitalised banks. And it's as much a problem in the US and China as in Europe. There are only least bad ways forward: none good. This is a crisis in contemporary capitalism as much as a crisis of Europe's monetary regime and governance. It needs to be seen in those terms.

But so saturated is British commentary in jingoistic Euro-scepticism that Europe's travails are portrayed as proof positive that it is European visionary delusions rather than contemporary capitalism that is at fault. Greece, and indeed Ireland and even Italy, are urged to get out of the euro, for the euro to be smashed and for the entire EU project to be abandoned. This is the route to prosperity and wellbeing – with no trace of self knowledge as British trade performance deteriorates even after a monumental devaluation while our economy is still years away from recovering to 2008 levels of peak output. That is Europe's fault, or so runs the line – not the fault of our dysfunctional economic structures and policies.

However, Britain's interest is unambiguous: it lies in the survival of the euro. There is too much easy talk about countries leaving. Last week, financial policy committee member Robert Jenkins spelled out the consequences for Britain and for Europe of Greece now quitting the euro. There would be seismic bank runs in Ireland, Portugal, Spain and even Italy as citizens and companies, fearing the same could happen to them, moved their cash out of their countries. Weaker banks, tottering from losses in Greece, would fold. The European Central Bank would be overwhelmed. The European economy would slump – and Britain with it.
Greece's fight is our own. But what is being asked of Greece's new interim prime minister, Lucas Papademos, is impossible. Unemployment is 18.4%. The schedule of its foreign loan repayments over the next five years beggars belief. On the other hand, Greek capitalism, a network of family oligarchs rigging Greek markets and leading a society in which tax evasion is morally and socially acceptable, is in acute need of reform. Europe could have been organised around floating exchange rates rather than a single currency, but the vast overhang of private debt alongside crocked banks demands similar medicine.

And while staying in the euro is in the interest of Greece – and Italy – it is in the rest of Europe's interest too. But there has to be a quid pro quo for all the pain that such severe austerity involves. Private and public debt needs to be radically lowered; and in a world of little growth there are only two routes. Either it has to be forgiven by their creditors, or there has to be inflation. If the eurozone can deliver neither, its future is in question.

In July and, again, in October, the EU signalled it understood what needed to be done and moved towards it – a combination of decisive debt forgiveness, the creation of a European Monetary Fund, substantially financed by Germany and which could bail out stricken banks and even governments, and the empowerment of the European Central Bank to go beyond supplying emergency cash on crisis terms. Instead, it could act as a lender of last resort everywhere in the eurozone.

The system could potentially be put in place fast; the right sentiments have been uttered – but after each summit Germany has consistently blocked making the money flow. It has said no to the European Central Bank operating as a lender of last resort across the eurozone; no to creating a genuine European Monetary Fund on the scale needed; no to the creation of single euro bonds. Ireland, Greece and Italy are all doing their part. Germany must now do its – or the euro will buckle.

Germany's phobias are well-known – inflation and then slump led to Hitler. What's more, the German constitutional court has ruled that the EU is a Staatenbund (a group of states). This means that Germany can only constitutionally make fiscal transfers to other members if each one is agreed by the German parliament. But phobias and constitutional courts cannot trump the agonising choice facing Germany and Europe.
Germany profits richly from the way the eurozone is organised. It is the only country in Europe whose share of world trade has risen over the past 10 years. But it enjoys the same exchange rate as much weaker exporters such as Greece or Spain – a huge boon. Even Britain, with our much vaunted floating exchange rate, has seen our share of world trade fall by a third over the same period.

Germany now has to accept its part of the bargain. The choice must be confronted. One option to secure the euro's future is via widespread debt forgiveness and fiscal transfers backed by Germany; the only other route out is inflation.

Here I make a modest proposal. Instead of delivering purposeless lectures from the sidelines about the need for action while he prepares to blame Europe for the ongoing British stagnation, for which he is primarily responsible, David Cameron should make the intervention of his life. He should travel to Germany and make a speech in German – however embarrassing – spelling out the choices. If Germany is unprepared to accept them, he should argue that the least bad option is not for Greece to leave the euro – but for Germany, whose economy is strong enough to take the shock, to do so.

He should say that while it was right for Britain not to join the single currency as it was previously constructed, if Germany were to act responsibly, Britain would peg sterling to a reformed euro and in the long run even consider joining the regime. Moreover, Britain would do this either way, he could argue – eventually joining a single currency in which Germany accepted its responsibilities or a single currency without Germany.

Such a speech – which, of course, will never be made – would create turmoil in Germany. It fears isolation in Europe even more than it fears inflation. It prizes the undervaluation of its exports priced in euro. It would force its leadership to recognise that there are other potential ways of organising our continent other than around German preoccupations – and perhaps trigger the change in German policy that is needed. It would change the rules of the game at a stroke, and show that Britain is a European force with which to be reckoned. But Cameron is trapped into Little England isolationism. And Little Englanders, along with moralistic and blinkered Germans, threaten to sink both the idea of Europe – and its economy.

China's richest keep firm eye on exit door

By Olivia Chung

HONG KONG - "Get rich - then get out" is the life message being grasped by China's wealthiest citizens two decades after former leader Deng Xiaoping supposedly declared that "to get rich is glorious".

About 60% of rich Chinese people intend to migrate from China, according to a report jointly released by the Hurun Report, which also publishes an annual China rich list, and the Bank of China. A separate study by US-based Bain & Company and China Merchants Bank in April of 2,600 high-net worth individuals - those who hold more than 10 million yuan (US$1.6 million) in individual investable assets (excluding primary residences and assets of poor liquidity) - found that about 60% of those interviewed had completed immigration applications to other countries or had plans to do so.

About 14% of the rich Chinese people, each of whom has a net asset of more than 60 million yuan, said they had either already moved overseas or applied to do so, according to the Hurun findings, which were based on one-on-one interviews with 980 rich Chinese people in 18 mainland cities from May to September.

Another 46% said they planned to emigrate within three years, variously citing higher-quality education available for their children overseas, better healthcare, concerns about the security of their assets on the mainland and hopes for a better life in retirement.

The most favorable destinations by rich Chinese is the US, with 40% of respondents claiming it was their first choice, followed by Canada and Singapore. Encouraging them in their quest, the United States continues to lower its threshold for businesspersons’ immigration.

Some 70% of the 4,218 visas issued under the US Immigrant Investor Program, known as EB-5 visas, issued in 2009 were applicants from China, data from the US Department of State show. In 2010, more than 70,000 Chinese applicants obtained permanent residency in the US, accounting for 7% of total applicants, placing second behind only Mexican applicants, according to the US Department of Homeland Security.

Canada allocated more than 1,000 of its targeted 2,055 immigrant investors to Chinese people in 2009 and last year, 2,020 Chinese applicants obtained permanent residency in Canada through investment, accounting for 62.6% of the total immigrant investors to Canada, data from Citizenship and Immigration Canada showed.

Kathy Cheng, an investment immigration consultant based in Shenzhen, next to Hong Kong, attributed the popularity of the US to it not having a cap on its investment visa program. The minimum amount required for investment immigration to the US is $500,000, and among all destinations that offer investment immigration, the US is alone in not imposing a quota.

“Recently, the US is trying to overhaul the immigration laws to attract rich or high-skilled foreigners. The moves have attracted the attention of some wealthy Chinese, who can afford to live elsewhere," she said to Asia Times Online by telephone.

Two US senators, Democratic Chuck Schumer and Republican Mike Lee, last month introduced a bill that would give residence visas to foreigners who spend at least US$500,000 to buy houses in the country. The proposal would allow foreigners immigrating to the United States to bring a spouse and any children under the age of 18. The provision would create visas that are separate from current programs so as to not displace anyone waiting for other visas.

The US Ambassador to China, Gary Locke, the former US commerce secretary who took on his latest post in August, said the US will make its investment and commercial environment as open and appealing as possible to increase Chinese investment in the US to create more jobs for Americans, which is the foremost priority of the Barack Obama administration.

"We will help Chinese companies and entrepreneurs better understand the benefits and ease of investing in the US by establishing factories, facilities, operations and offices," Locke told US business leaders in Beijing in September.

In May, President Obama said the US needs to overhaul its immigration laws to secure high-tech foreign talent to address a shortages of scientists and experts in the high-technology sector. In the same month, the Obama administration extended the Optional Practical Training program to allow students graduating in fields that include soil microbiology, pharmaceuticals and medical informatics, to be able to find a job or work in the US for up to 29 months (instead of 12) after graduation.

New York City Mayor Michael Bloomberg said recently at a Council on Foreign Relations event in Washington, that to spur job growth, the US should allow foreign graduates from US universities to obtain green cards (permanent residency), ending caps on visas for highly skilled workers, and setting green-card limits based on the country's economic needs not an immigrant's family ties.

Of the 980 people interviewed by Hurun Report and the BOC, about 35% said they have assets overseas, which on an average accounted for 19% of their total assets; 32% of those surveyed said they have invested overseas with a view to emigrate and half said they did so mainly for the sake of their children's education.

A mainlander who has manganese mines in his home province of Guangxi said he was applying to emigrate to Canada from his home region in southeast Guangxi, mainly due to take advantage of better education overseas for his two-year-old son.

"An increasing number of parents in China prefer their children to receive education overseas instead of with the examination-oriented education system in China," said the mine owner, who asked not to be identified.

However, a source close to him said the mine owner had assets worth millions of dollars and "underground" businesses; given changeable government policies, emigration was the best way of protecting some of this wealth.

"Despite Beijing's currency rules, the wealthy have many ways to move their money out of the country. Besides, part of his money comes from smuggling, though his business is far smaller than Lai Changxing," said the source.

Lai Changxing was extradited to China from Canada in July after a 12-year exile there. He is expected to face charges for smuggling to a value of US$10 billion, bribery and tax evasion.

Under Beijing's capital rules, anyone leaving China can carry with them a maximum of 20,000 yuan (US$3,100) or the equivalent of US$5,000 in foreign currency. However, it is commonly known that wealthy Chinese are free to leave the country with briefcases full of cash.

Ye Tan, an independent economist and commentator in Beijing, said the growing gap between the rich and the poor in the mainland, which has aroused discontent among the less well off, has made some of the wealthy feel uncomfortable.

"The lack of security sense about the safety of their assets among Chinese wealthy is like a huge black cloud hanging over their heads," Ye was quoted as saying in the Hurun survey report.
China has 960,000 "yuan millionaires" with personal wealth of 10 million yuan (US$1.5 million) or more, according to the GroupM Knowledge - Hurun Wealth Report 2011. The figure is up 9.7% from a year earlier. China has 60,000 "super rich' with 100 million yuan or more, up 9% on a year earlier.

Average monthly income in China is only about 2,000 yuan, despite double-digit economic growth for about the past three decades.

China's Gini coefficient, a commonly used measure of wealth inequality, reached 0.47 in China last year, according to the National Development and Reform Commission, above the international warning level of 0.4, which is considered to be the level that could trigger social unrest.

Creativity and curiosity: Do we make stuff up or find it out?

By Prof. Colin Lawson in The Independent

The world of music has much to contribute to debate around the nexus between discovery and invention. Igor Stravinsky memorably once wrote of his ballet The Rite of Spring; ‘I heard and I wrote what I heard. I am the vessel through which the Rite passed’. He felt that he had in effect ‘discovered’ rather than invented it. These days we’re all too eager to accept such an explanation. The Rite’s achievement seems indeed to be that it just exists, a gargantuan presence, arousing the same feelings of wonder as the most remarkable works of nature. However much one seeks to explain it, the Rite seems inexplicable. Yet it’s important to note that Stravinsky’s rationale for the Rite’s composition appeared in print almost half a century after its riotous première in May 1913. At the time of its gestation Stravinsky had described composing the Rite as ‘a long and difficult task’, a claim supported by the surviving sketchbooks. It’s not altogether unexpected that the Rite has also been remade by successive generations of performers. It wasn’t composed as a cornerstone of twentieth century music comprising a series of tableaux, but as a piece of theatre. Innovation and revolution go hand in hand with techniques in which Stravinsky was brought up and trained.

Our own desire to seek explanation, even of subject matter that is fundamentally ‘beyond text’, has become inflected by a cult of celebrity that was unknown in earlier times. Our vocabulary carries a new set of overtones, with words such as classical, serious, musical, genius and masterpiece that would have meant little at a time when music was more closely woven into the fabric of society. When we encounter exceptional achievement we rapidly reach for that vocabulary.

Important evidence for the relationship of creativity and curiosity is provided by the life and posthumous reception history of Mozart.  These days an over-exploited and over-exposed Mozart has almost come to represent western classical music itself. The great man is invoked to sell confectionery, cheese, spirits and tobacco. You can have a Mozart ski holiday or attend a ‘meet Amadeus’ event. Mozart’s credentials as a timeless genius were established immediately after his death. He was soon transformed from mere composer to inspired artist to meet the needs of the age that followed him. In the first biography just six years after his death Mozart was made to observe from his deathbed: ‘Now I must leave my Art just as I had freed myself from the slavery of fashion, had broken the bonds of speculators, and won the privilege of following my own feelings and composing freely and independently whatever my heart prompted.’ During Mozart’s recent 250^th anniversary, Nicholas Kenyon remarked that this apocryphal statement sums up everything the Romantics wanted a composer to be and Mozart was not. Whether or not Mozart would have understood the concept of ‘composing freely’, he wanted to be needed and appreciated and to make the most of performing opportunities; whilst he was conscious of the musical value of his compositions, there’s no evidence that he ever wrote for some far-distant future. Further recent research into Mozart’s compositional method has conclusively exposed as a myth the notion that Mozart carried all his music in his head, awaiting only space in his schedule to scribble it all down.

The usage of words such as ‘creative’ in connection with the production of musical works of art illustrates our tendency to mythologize. The idea of composers as creators or musical artists in a categorical sense is really a feature of the modern era; as Kenyon observes, Mozart doesn’t indicate anywhere that he regards himself as a genius or creator, whilst recognizing that he has genius, a superior talent for making music. In reality, Mozart’s pragmatism is evident in many facets of his professional life, since he worked within the conventions of his time, stretching them to their limits. It’s clear that Mozart’s principal focus was to address specific situations, such as commissions, concerts and dedications. At the same time he contrived to produce a stream of sublime music. But the situations and people directly influenced both his completed compositions and the many fragments that somehow never came to fruition. Perhaps in the case of both Stravinsky and Mozart, it’s the distinction between making stuff up and finding it out that is problematic.

A Eurosceptic hero alongside sainted Maggie? It's got to be Gordon Brown

The judgments for which Gordon Brown was mocked look rather different now we've seen David Cameron in action

• 
• • Jonathan Freedland
  • guardian.co.uk, Tuesday 8 November 2011 21.00 GMT
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Gordon Brown and his wife Sarah say farewell to the German chancellor, Angela Merkel, at a meeting at No 10 on the eve of the 2009 G20 summit. Photograph: Dan Kitwood/Getty Images

Few arguments are more unfashionable than the one I am about to make: the case for Gordon Brown. Unfashionable because, 18 months after he left office having led Labour to its second worst result since 1918, Brown still arouses intense loathing. At the Conservative party conference I saw otherwise calm Tories foam with anger at the mention of the former prime minister, furiously tearing away at his every trait, personal and political. That hatred is outdone in some corners of the Labour forest by diehard Blairites still seething at the memory of how Brown thwarted their hero in Downing Street before chasing him out of it.
Illustration by Belle Mellor
With enemies on both sides, that leaves few defenders in the press, a fact compounded by the ex-PM's near-total invisibility, his appearances in the Commons rare. The torrent of memoirs from colleagues, Alistair Darling's the latest, have only damaged his reputation still further.

Not many would attempt to push aside the mountain of anecdotes detailing Brown's impossible behaviour as both colleague and boss. Even his most ardent admirers now accept that Gordon Brown was temperamentally unsuited to the job of prime minister.

And yet posterity's judgment of leaders does not rest solely in their hands. The conduct of their successors matters too: Clinton looked better after George W. History may yet have similar second thoughts about Brown, reviewing his record in the light of what has followed.

Take last week's fiasco of a G20 meeting in Cannes, which did little to solve the crises in Greece and Italy, and whose most enduring legacy may prove to be off-mic comments made by the host, Nicolas Sarkozy. Contrast that with the meeting of the same group chaired by Brown in London in April 2009, which agreed a $5tn stimulus to the world economy and was duly hailed for preventing a global recession tipping over into a global depression. A year later the highly respected Brookings Institution predicted "that in coming years, the London G20 summit will be seen as the most successful summit in history".

Part of that was good fortune on Brown's part: in 2009 the US and Germany were in broad agreement on what needed to be done. But much of it was down to Brown's own actions as chair. The very attributes that infuriated his domestic colleagues were put to their best use: he worked around the clock preparing for that summit, hectoring, manoeuvring and bullying his fellow world leaders until they had buckled to his will. These were the same behind-the-scenes methods he had used a decade earlier as he pushed fellow finance ministers to relieve developing countries' debts. It wasn't pretty, it wasn't telegenic, but it was effective.

How very different it is today. It was ironic to hear George Osborne castigate his European counterparts for simply "waiting on developments", since that's exactly what he and David Cameron do at these international powwows. One veteran of the summit circuit says that the two Brits regularly turn up with no agenda of their own, so unlike Brown and, to be fair, Tony Blair, who almost always arrived with a plan, ensuring, in the tired phrase, that Britain punched above its weight. (I'm told that, rather poignantly, Brown is still the man with a plan: he was ready with detailed proposals on jobs and global finance had Osborne not blocked him for the top post at the IMF.)

What is even harder for the Tories to stomach is that it was Brown who delivered what they themselves long insisted was the critical policy goal of the past two decades: keeping Britain out of the euro. It was Brown and his legendary five, impossible-to-meet tests that restrained the gung-ho Blair and ensured Britain stayed out of the single currency. Absurdly, Osborne has tried to give the credit for that to William Hague and his save the pound campaign, which rather forgets that both Hague and his campaign were crushed in 2001. If Eurosceptics want to have a hero whose picture they can put on the wall alongside the sainted Margaret, I'm afraid that it's got to be Gordon. That they can't is testament to a visceral hatred not only of Brown but of his chief lieutenant at the time, whose opposition to the euro was total and decisive: Ed Balls.

Least fashionable of all is the case that Brown was right on the deficit. The coalition's entire programme is predicated on the notion that Brown was incontinent with the nation's money, running up colossal debts. But the rise in borrowing from some £40bn to £170bn was not the result of a crazed spending spree. It was the consequence of the crash of 2008 and the subsequent collapse in economic activity, consisting mostly of increased welfare payments – including the dole for those thrown out of work – and declining tax revenues caused by fewer people earning wages. This was a deficit created by crisis, not by profligacy.

If Brown was not the source of the disease, what about his remedy? His preferred approach – over which he fought with, and lost to, Darling among others – was to secure the recovery first, get the economy ticking over nicely, and only then start attacking the deficit. If the economy were growing, shrinking the deficit would be less painful; tackling it too early risked sucking out demand, choking off the recovery and so, paradoxically, increasing the deficit.

Well, guess who called it right. The last quarter with Brown in charge saw growth of just over 1.1%, surpassing all expectations, with unemployment coming down. The economy appeared to be getting back on its feet. But then the deficit fetishists of the coalition took over and the economy stalled, with more growth in that last Brown quarter than in the next four Cameron quarters combined. Suddenly Brown's insistence that growth had to come first looks prescient and wise.

Indeed, there are judgments big and small for which Brown was mocked at the time but which look rather different now. As PM, he overruled Darling, preferring to increase national insurance rather than VAT. Now, thanks to Osborne, we've seen the calamitous impact of a VAT rise on both inflation and demand. More crucially, Brown realised at the start that the economy had to be central, refusing to be diverted to other projects, however worthy, including promised constitutional reform. Barack Obama may well wish he had made the same call, putting healthcare to one side and focusing exclusively on jobs.

Of course, there was much that Brown got badly wrong. Hailing the end of boom and bust was absurd; relying on City and house price bubbles to raise cash was fatal; failing to run a surplus during the good times foolhardy.

But what's intriguing is that these were mistakes made as chancellor, on which Brown's standing remains high. Perhaps a revision is in order, downgrading his record in No 11 but upgrading his performance in No 10. The Conservatives won't ever undertake such an act of revision, the historians might not do it for decades to come. But Labour, whose future prospects partly depend on knowing what to say about its recent past, should do it much sooner.