Monday, November 26, 2018

Google Cloud’s New Chief Faces Growth Challenge

Apparently Nerds are not enough!  Aivars Lode

Good day, CIOs. Google Cloud struggles to keep up with market leaders Amazon Web Services and Microsoft Corp. in the market for corporate cloud computing. Google, owned by Alphabet Inc., has great technology, but prowess in artificial intelligence isn’t enough. Now Google Cloud CEO Diane Greene, a Silicon Valley luminary who co-founded VMware, is stepping down and relinquishing her role to former Oracle Corp. president of product development, Thomas Kurian.
The smartest-kids syndrome. “Google has great technology, but it’s mostly built by the smartest people for the smartest people,” Brian Hopkins, principal analyst at Forrester Research, tells CIO Journal in an email. The problem is that being the smartest kid in class didn’t necessarily ensure popularity in high school. The business world is a lot more like high school than graduate school. Charisma and likeability count for a lot.
The best vs. the best selling. “Google’s whole value proposition is that they are selling as cloud services the same technologies they use themselves,” Mr. Hopkins writes. “The problem is that most prospective customers have a hard time identifying with Google, so the ‘If it’s good enough for Google, customers should love it …’ argument is falling on deaf ears.”
By Steve Rosenbush - WSJ

Thursday, November 15, 2018

Dow Falls 600 Points as Tech Rout Hits Stocks

No real surprise.  Aivars Lode

The Dow Jones Industrial Average tumbled more than 600 points Monday as anxiety over the health of technology behemoths sparked a broad retreat from the stock market. 
Monday’s selling began in the technology sector, then morphed into a rout that dragged lower everything from oil conglomerates to manufacturers to entertainment firms. It was the latest setback for the stock market, which has struggled to break out to new highs since the S&P 500 capped off its worst month in more than seven years.

Friday, October 26, 2018

Tech Worries Pressure Stocks

Is this the beginning? Have we reached the high of the markets? Aivars Lode

A slump in technology and internet stocks accelerated Friday, putting the S&P 500 in danger of joining the Nasdaq Composite in correction territory, as investors continued an October retreat from risky assets.

Tuesday, October 23, 2018

Managers see increased credit defaults in next 12 months, survey finds

More news on issues with Bonds, Credit Defaults and Retirement Funds not being able to fund. When do we reach the tipping point?   Aivars Lode

Credit portfolio managers forecast rising credit defaults in the next 12 months and are split as to whether credit spreads will widen or remain the same over the next three months, said a third-quarter survey from the International Association of Credit Portfolio Managers.
In the survey, 58% of credit portfolio managers forecast that average corporate credit default rates will go up during the next 12 months, while 34% said they will remain unchanged and 8% said defaults will go down.
When asked whether North American credit spreads will widen or tighten over the next three months, only 8% of respondents said they expected spreads to tighten, but the result was split otherwise, with 47% believing spreads will not change and 44% believe spreads with widen.

Monday, October 22, 2018

Debt Likely To Be ‘Ground Zero’ In Next Financial Crisis, Says Oaktree's Marks

Over-leveraged deals and PE returns that will not be there .... both likely to be Ground Zero as previously discussed. Aivars Lode

Now is the time to adopt a cautious investment strategy as the market cycle ages, though there aren’t signs of an impending U.S. recession, according to Oaktree Capital Group LLC’s Howard Marks.
The world’s largest economy is still doing “very well,” Marks, chairman and co-founder of one of the world’s largest alternative and distressed investment firms, told Bloomberg TV in Sydney on Monday. Despite a lack of bargains in many markets, strategies should focus on remaining invested and position defensively, without piling into cash, he said.

“Our economy is still doing very well,” said Marks. “In a few months it will become the longest recovery in history. I don’t believe there are signs of recession anytime soon."
Marks has warned his investors previously that debt is likely to be “ground zero” in the next financial crisis, with too much money on the hunt for too few deals. The leveraged loan market, which has overtaken high-yield bonds as the go-to-financing source for speculative grade companies, is a particular source of concern for both Marks and central bankers.
The billionaire investor said it’s impossible to predict how long the economic expansion and the bull run in U.S. stocks will last, though he believes the market is in the tail end of a cycle.
“Nothing is cheap in our markets and most things are between the high side of fair or the beginning of rich,” he said. However, there are no risks comparable in scale to those on the eve of the financial crisis, he said.
Right now, holding a defensive positioning, while not bailing out of investments completely, is the best approach, he suggested. “We are endeavoring to be fully invested, but we are doing it with caution,” Marks said. “We are not going to cash.”
Marks co-founded Los Angeles-based Oaktree in 1995. The firm had $122 billion in assets under management as of June 30.
This article was provided by Bloomberg News.

Sunday, July 29, 2018

Energy for the Future?

There is little public conversation about real energy solutions that will truly provide clean energy. Instead in the public discourse we are driving capital into inefficient power generation capabilities.....Aivars Lode

Harnessing the energy of the sun and stars to meet the Earth’s energy needs has been a scientific and engineering challenge for decades. A self-sustaining fusion burn has been achieved for brief periods under experimental conditions, but the amount of energy that went into creating it was greater than the amount of energy it generated.
What’s needed next, for fusion energy to supply a continuous stream of electricity, is energy gain. The National Ignition Facility intends to be the first fusion facility to demonstrate ignition and gain. NIF’s fusion targets are potentially capable of releasing 10 to 100 times more energy than the amount of laser energy required to initiate the fusion reaction.
The nuclear power plants in use around the world today use fission, or the splitting of heavy atoms such as uranium, to release energy for electricity. A fusion power plant, on the other hand, will generate energy by fusing atoms of deuterium and tritium, two isotopes of hydrogen—the lightest element. Deuterium is extracted from abundant seawater, and tritium is produced by the transmutation of lithium, a common element in the Earth’s crust and oceans.
When the hydrogen nuclei fuse under the intense temperatures and pressures in the NIF target capsule, a helium nucleus is formed and a small amount of mass lost in the reaction is converted to a large amount of energy according to Einstein’s famous formula E=mc2.
A fusion power plant would produce no greenhouse gas or other noxious emissions, operate continuously to meet demand, and would not require geological disposal of radioactive waste. A fusion power plant would also present no danger of a meltdown.

Because nuclear fusion offers the potential for virtually unlimited safe and environmentally benign energy, the U.S. Department of Energy (DOE) has made fusion a key element in the nation’s long-term energy plans, with investments into magnetic fusion energy and with the ability to leverage the investments from the National Nuclear Security Administration’s defense programs that support NIF.
By the Lawrence Livermore National Laboratory 

Thursday, July 26, 2018

Swiss government warns of fire sale to fund first pillar payouts

Is this a precurser for other funds as well?  Will this be the trigger to the next downturn?   Aivars Lode

Switzerland’s first-pillar pension fund could be forced to sell off millions in assets per month to finance pensions if no long-term funding solution is found, the country’s government has warned.
The Swiss first pillar fund AHV/AVS is expected to amass a CHF43bn (€37.2bn) deficit by 2030, in a ‘worst-case’ scenario assuming no return on investments.
To ensure all pension payouts are met by then, the fund needs CHF53bn, the government said in a press release about a consultation on first-pillar reforms.
“Successful measures to ensure the stability of the AHV/AVS fund are urgently necessary,” the government stated. “Without them the fund would have to sell of assets worth CHF100m per month to be able to meet the pension payments.”

Wednesday, June 6, 2018

How To Make A Mint: The Cryptography of Anonymous Electronic Cash

I am currently reading the book “The Pentagons Brain, An Uncensored History of DARPA" based upon the things that DARPA and ARPA created and how the developments came to light 20 years later. It is entirely possible that the US government created crypto currencies to pay for nefarious activities by the CIA in foreign countries. I have not been able to validate the following paper and I leave it up to you to make your own assessment. .....Aivars 


Wednesday, May 23, 2018

Roundup formula is far more toxic than glyphosate in isolation

I have observed in Europe, where Roundup use is prohibited, that Americans who claim intolerance to gluten are able to eat the bread without any side effects. I wonder if this is actually poisoning of Americans by the farmers using Round Up as opposed to Gluten intolerance? On a personal trip to Italy the mayor of a city in Piedmonte told me that cancer rates were through the roof 20 years ago and they assumed a direct link with Roundup. They banned the use and went back to traditional methods of weed control such as ploughing the weeds back into the soil. Not surprisingly there is a study being promoted in Italy to study the cancerous effect of round up..... Aivars.

Story at-a-glance 

  • Government researchers warn the Roundup formula is far more toxic than glyphosate in isolation, due to synergistic interactions between various chemicals
  • Testing by the U.S. National Toxicology Program reveals glyphosate formulations such as Roundup “significantly altered” the viability of human cells by disrupting the functionality of cell membranes
  • The Ramazzini Institute in Italy is raising public funds to perform a comprehensive, independent, global glyphosate study. Stage 1 will investigate the chemical’s carcinogenicity and chronic toxicity potential

By Dr. Mercola
In recent years, concerns over the health effects of glyphosate — the active ingredient in Roundup and other weed killer formulations — has risen exponentially. Researchers have discovered it not only may be carcinogenic,1 but may also affect your body’s ability to produce fully functioning proteins, inhibit the shikimate pathway (found in gut bacteria) and interfere with the function of cytochrome P450 enzymes(required for activation of vitamin D and the creation of nitric oxide and cholesterol sulfate).

Tuesday, May 22, 2018

Aboriginal settlement in Australia was planned migration: study

Hang on what did they say? In this article it talks about how the sea level was 210 feet lower 60,000 years ago allowing aborigines to migrate to Australia easily! How many cars were there then? Why did the sea level rise?   Aivars

Aboriginal settlement in Australia was no accident but the result of large-scale migration by skilled maritime explorers, research shows.
Experts have made the finding using wind and ocean current modelling, similar to that deployed in the search for missing Malaysia Airlines flight MH370.
The process was designed to simulate likely routes between the islands of Timor and Roti and more than 100 now-submerged islands off the Kimberley coast.
"There's always been a lot of speculation about how Aboriginal people made it to Australia and a lot of people have argued that people might have made it here by accident," study co-author and James Cook University archaeology Professor Sean Ulm said.
"What this study has shown ... is that it's so absolutely improbable that you can explain any of those lines of evidence with accidental voyaging.
"It has to be purposeful, it has to be co-ordinated and it has to be fairly large-scale to explain the patterns we see."
The study – published in the Quaternary Science Reviews – estimated migration to the bridge of islands off north-west Australia occurred between about 50,000 and 65,000 years ago.
Prof Ulm said the sea was 75 metres lower and the islands visible from the parts of Timor and Roti.
The hundreds of routes modelled would have taken between four and seven days and spanned up to 150 kilometres.
"If you had the technology to make it there, it was really easy to make it to Australia," the professor said.
"We're talking 60,000 years ago here. So that is an incredible time stamp to how complex the first Australians were from the moment they first saw Australia."
The study – a collaboration between experts from the CSIRO and various universities – also used genetic information to show hundreds of people, not just a few, likely made the voyage.
"This is very significant because it was very early in modern human dispersals across the globe," Professor Ulm said.
"We're talking multiple boats, not just one boat blowing off course ... reflecting the population in the mainland South-East Asian area."
By the Sydney Morning Herald

Monday, May 21, 2018

Steve Eisman of ‘The Big Short’ Bashes Cryptocurrency: ‘I Don’t See the Purpose of It’

He bet against it, I wrote about it - the collapse of CDO’s. We are both in agreement about crypto currencies. The underlying blockchain and the use of tokens for electronic contracts is where the merit lies. Eliminating rafts of unnecessary brokers, processes and providing transparency and visibility in originating transactions is where value will be created....... Aivars

HONG KONG—Steve Eisman, the money manager who earned celebrity status for correctly betting against subprime mortgages a decade ago, isn’t such a fan of the investing craze around cryptocurrencies.
Digital currencies like bitcoin have increased in popularity for only two reasons: speculation and money laundering, he said on stage at the CFA Institute’s annual conference here on Monday. Mr. Eisman, a managing director at Neuberger Berman, also questioned the reasoning behind why such currencies even exist. 
“I don’t see the purpose of it,” he said on stage in front of roughly 1,500 attendees. “What value does cryptocurrency actually add? No one’s been able to answer that question for me.” 

Mr. Eisman rose to fame when his prescient predictions about the 2008 financial crisis made him millions of dollars and earned him a lead role in author Michael Lewis’ bestseller about the crash, called “The Big Short.” The character based on Mr. Eisman was later played by actor Steve Carell in a 2015 movie based on the book.
Mr. Eisman now joins a growing chorus of prominent market participants, including Warren Buffett of Berkshire Hathaway and Jamie Dimon of J.P. Morgan Chase , who have been openly critical of digital currencies. Mr. Buffett said earlier this month that bitcoin is “probably rat poison squared’ and predicted that cryptocurrencies “almost certainly...will come to a bad ending.”
In a panel discussion and subsequent interview that ranged from current economic conditions to the moment he knew the U.S. housing market would collapse—May 8, 2006, when Wachovia Corp. made a $26 billion bet on the mortgage market—Mr. Eisman said he has never bought or sold any cryptocurrencies. 
“I don’t touch it,” he said. “I don’t know what I’m looking at...I have no interest”
He emphasized that he isn’t an expert on the subject and never invests in traditional currency markets, let alone cryptocurrencies. He also wondered why governments haven’t put proper investor controls in place to protect cryptocurrency investors. 
“I don’t understand why regulators haven’t regulated it more heavily,” he said.
Bitcoin recently traded at around $8,400, according to Coindesk. Its price was at around $1,000 at the beginning of last year and surged to nearly $20,000 in December before falling back. 
Mr. Eisman added that he doesn’t see a U.S. recession imminent. He stressed that there don’t appear to be risks in the global economy rivaling what took place prior to the 2008 crisis. 
“I see risks but I don’t see systemic risks,” he said. 
One of his chief concerns lands far, indeed, from the crypto market: Canadian property.
“There’s a housing bubble in Canada which is starting to break,” he said, adding that he’s shorting, or betting against, seven publicly-traded Canadian financial stocks. 
Mr. Eisman, who said he has 8,000 comic books on his iPad, also stressed that he had almost no involvement in the making of “The Big Short” movie— though he did meet for breakfast once with Mr. Carell,and saw him twice on set. 
“People who have known me a long time have all said the same thing,” he added. “He got me right.”
By  Steven Russolillo - Wall Street Journal

Sustainable, Affordable, Healthy Food: Not An Oxymoron for Long?

About time that people are focusing on quality of food vs the farmer like Gargiulo who creates tasteless products. He focuses on benefiting his own bottom line having created tasteless non nutritious products that look fantastic and do not bruise, consequently educating whole generations of bland palettes..... Aivars

Science is already bringing us more sustainable, flavorful cuisine in the form of engineered seeds, plant-based proteins and electronically traceable seafood. But producers, chefs and restaurateurs are still struggling with how to bring these novel—and often pricey—foods to Americans who live outside coastal cities.
Instead of the industry working to convince the average consumer to forgo meat, food experts at the Future of Everything Festival offered another solution: make affordable, healthy, delicious and convenient alternatives.
“Animals as a food production system are the most destructive food technology on earth,” said Patrick Brown, founder and CEO of Impossible Foods, maker of a plant-protein burger designed to taste (and bleed) like beef. “The only way to solve the problem is by beating that technology in the marketplace.”
To that end, the Impossible Burger will soon be available at the Cheesecake Factory , which has 214 locations across the U.S. and Canada, according to its website, as well as at about 400 White Castle locations nationwide, up from 140 last month, Mr. Brown said.
To that end, the Impossible Burger will soon be available at all 199 U.S. locations of the Cheesecake Factory, Mr. Brown said. The burger is also served at 140 White Castle locations nationwide, and the company hopes to eventually expand into all 400 White Castles.
Others are tackling the issue at seed level. At Row7 Seed Company, chef Dan Barber and breeder Michael Mazourek are deploying plant genealogy, computer modeling and field sensors to create flavor-packed vegetables served beyond the white-cloth-covered tables of Blue Hill at Stone Barns, Mr. Barber’s restaurant in Pocantico Hills, N.Y.
Even as more eaters demand quality food, “stores will charge a bit more for whole wheat pasta [because] whoever’s buying it will pay a premium,” said Sam Kass, former White House chef and founder of Trove, an advisory firm.
For restaurateur Kimbal Musk, the goal is to serve “real food” at a price point competitive with Chili’s or Applebee’s. He is working with local farmers and using automation to keep costs down, he said. A tech-enabled oven, for example, can sear and braise pork, enabling cooks with much less training to make the dish.
By Wall Street Journal Tech

Tuesday, May 8, 2018

Pension Funds Still Making Promises They Probably Can’t Keep

I have been talking about potential unfunded pension liabilities for some time now. I have watched unsustainable acquisitions being made by many different entities over the last 5 years. Multiples of up to 20 times EBITDA are being paid with high multiples of debt, all at a time when a significant number of industries are under attack from new business models such as Amazon. When will these pension funds have to become liquid in order to pay their retirees and will that cause the next stock market crash?   ...Aivars

Public pension fund projections don’t always match actual experience

The value of investments by public pension funds declined last quarter, widening the gap between what these funds say they will earn and what they actually earn.
Pension funds across the U.S. must each year estimate how much they expect to earn on investments—a projection that determines the amount the government that is affiliated with the pension fund must pay into it. Robust returns reduce the need for government support.
But forecasts don’t always square with funds’ actual experience. Retirement plans across the country still project their investments will grow at a median rate of 7.25%, according to Wilshire Consulting, an adviser to pension funds. Yearly returns on public pension plans have returned a median 6.79% over the past decade and 6.49% over the past 20 years, according to Wilshire Trust Universe Comparison Service, a database.
Unlike corporations, public pensions have wide latitude in projecting investment returns.
In the first quarter, public plans lost a median 0.23%, according to Wilshire Trust Universe Comparison Service. Such a lackluster return will serve as a stark reminder to the public officials who manage billions of dollars in pensions for America’s firefighters, police and other public workers of the daunting shortfalls many funds face.
“With all of the major asset classes falling it was pretty tough for investors to have any positive returns. They didn’t have much of a chance to make money,” said Robert J. Waid, managing director at Wilshire Associates.
Public retirement systems had an average 72% of assets they need to pay for retirement promises in 2016, according to the latest data available in the Public Plans Database, which tracks about 170 pension funds. The figure a decade earlier was 85%.
Before the first quarter, pension plans had experienced nine quarters of positive returns. That rise had brightened the picture for public retirement systems and closed some of the gap between expectations and reality.

These pension funds have also steadily narrowed this gap on their own. Three quarters of the 129 state pension plans monitored by the National Association of State Retirement Administrators have reduced their investment return assumption since fiscal year 2014.
But government officials seeking to make their investment targets more conservative have a powerful disincentive: High returns assumptions appeal to elected leaders because they reduce the amount governments need to set aside to cover pension promises. For some, pensions have already caused budget pressure.
Companies don’t have the same flexibility to set return expectations on their pension plans. Pension plans sponsored by S&P 1500 companies have an average 87% of assets needed to cover their pensions promises, according to Mercer, a consultancy.
California and its school districts will have to pay a projected $15 billion or more into the state’s public worker pension plan over the next 20 years after the plan, known as Calpers, in 2016 decided to reduce its investment target to 7% from 7.5% over a three-year period.
Other governments—loathe to cut services or increase taxes—have made a riskier choice, putting more of their money into riskier investments with higher expected returns, such as real estate, commodities, hedge funds and private-equity holdings.
These so-called alternative investments rose to 26% of holdings at about 150 of the biggest U.S. funds in 2016, according to the Public Plans Database, compared with 7% more than a decade earlier.
“They’re taking a lot risk in their plans with high allocations to equity and other return seeking assets,” said Ed Bartholomew, a consultant. “Someone is bearing that risk and the question should always be ‘who is bearing that risk?’”
Birmingham, Alabama, even raised its target rate on one of its pension funds to 7.5% from 7% in 2016 after moving some of the money out of fixed-income investments and into equities. The move made the city’s annual contribution to the Retirement and Relief System less costly than it otherwise would have been.
“Why Birmingham changed the investment rate return…is a bit questionable,” said Richard Ciccarone, president and chief executive of Merritt Research Services LLC, a research firm.
A city finance official said in an email that the state had reduced the amount of fixed-income investments the fund was required to hold and now “allows greater flexibility for investment management.” He said the change was made with the advice of an actuary and an investment consultant.
But Tom Aaron, senior analyst, Moody’s Investors Service said the temporary budget relief comes at a price.
“You’re supplanting a budgetary contribution with increased risk taking. If those (investment) assumptions don’t pan out that’s going to result in higher than expected budgetary contributions down the road.”
By Heather Gillers - Wall Street Journal

Monday, May 7, 2018

Former HSBC Executive Sentenced to Two Years Following ‘Front-Running’ Conviction

So the trader gets the blame.  High frequency trading in effect does the same and yet that is legal.  That seems to me like hypocrisy.  Aivars

Mark Johnson was convicted of misusing confidential information about a client’s $3.5 billion currency trade to make millions for the bank

A former high-ranking HSBC Holdings PLC executive was sentenced Thursday to two years in federal prison, following his conviction last fall on charges that he misused confidential information about a client’s $3.5 billion currency trade to make millions of dollars for the bank.
Mark Johnson, HSBC’s former global head of foreign-exchange cash trading, was the first banker to face criminal charges stemming from a U.S. Justice Department probe into foreign exchange rate manipulations.
In October, a Brooklyn jury found Mr. Johnson guilty on one count of wire-fraud conspiracy and eight counts of wire fraud, He was acquitted on a ninth wire fraud count. The wire fraud counts each carried a maximum sentence of 20 years in prison.
Prosecutors had sought a seven-year prison term, saying the scheme led to financial loss for the client—an energy company—and undermined the integrity of foreign exchange markets.
Mr. Johnson’s lawyers had asked for no prison time, citing his “long and unblemished record of honest, law-abiding conduct,” in a court filing.
A lawyer for Mr. Johnson, who left HSBC in 2017, said they plan to appeal the verdict.
Mr. Johnson wasn’t accused of rigging exchange rates, the main focus of the broader Justice Department probe. Instead, he and a colleague were charged in connection with a practice known as front-running, in which someone with advance knowledge of a major market order buys for their own account and then earns a profit when the larger transaction drives up the price.
Mr. Johnson’s colleague, Stuart Scott, left HSBC in 2014. He is in the U.K. fighting extradition, and wasn’t tried alongside Mr. Johnson. A lawyer for Mr. Scott couldn’t immediately be reached for comment.
The charges stemmed from a 2011 deal to handle the conversion of $3.5 billion worth of dollars into British pounds on behalf of Cairn Energy PLC, a Scotland-based oil-and-gas company. In the days and hours leading up to the transaction, prosecutors said at trial, HSBC traders in London and New York—working at Mr. Johnson’s direction—stockpiled millions of pounds in HSBC accounts.
When the transaction went through, on Dec. 7, 2011, Messrs. Johnson and Scott executed it in a way that drove up the price of the pound, prosecutors alleged, allowing them to sell HSBC’s stockpiled currency at a higher price, while Cairn’s proceeds from the exchange shrunk. The scheme netted $3 million in trading profits and $5 million in fees for HSBC, prosecutors said.
During the four-week trial last fall, lawyers for Mr. Johnson argued that he had acted in the client’s best interest, saying prosecutors were trying to criminalize normal currency trading activity and had twisted Mr. Johnson’s words to suggest a conspiracy.
By Rebecca Davis O’Brien - Wall Street Journal

Tuesday, May 1, 2018

China’s Challenge to Democracy

I remember a conversation with the ex head of the Tata Group India when I lived in Hong Kong in the middle of the 90’s. I thought democracy would make India grow quicker than China. He said “NO” it is democracy that will hold India back and that China will thrive because of authoritarianism and sure enough time has proven him to be correct!  Aivars

The democratic cause is on the defensive today, and China’s pragmatic authoritarianism now offers a serious rival model, based on economic progress and national dignity.

In his 1992 book “The End of History and the Last Man,” Francis Fukuyama famously declared the triumph of liberal democracy as the model of governance toward which all of humankind was heading. It was a victory on two fronts. The Western democracies held the clear advantage over their ideological rivals in material terms, thanks to their proven ability to deliver general prosperity and a rising standard of living for most citizens. At the same time, to live in a modern democracy was to be given certain guarantees that you would be respected as a person. Everyone got to have a say, so democracy delivered personal dignity as well.
Results plus respect is a formidable political mix. The word “dignity” appears 118 times in “The End of History,” slightly more often than the words “peace” and “prosperity” combined. For Mr. Fukuyama, that is what made democracy unassailable: Only it could meet the basic human need for material comfort and the basic human desire for what he called “recognition” (a concept borrowed from Hegel, emphasizing the social dimension of respect and dignity). Set against the lumbering, oppressive, impoverished regimes of the Soviet era, it was no contest.
Yet today, barely two decades into the 21st century, the contest has been renewed. It is no longer a clash of ideologies, as during the Cold War. Western democracy is now confronted by a form of authoritarianism that is far more pragmatic than its communist predecessors. A new generation of autocrats, most notably in China, have sought to learn the lessons of the 20th century just like everyone else. They too are in the business of trying to offer results plus respect. It is the familiar package, only now it comes in a nondemocratic form.
Since the 1980s, the Chinese regime has had remarkable success in raising the material condition of its population. Over that period, nondemocratic China has made strikingly greater progress in reducing poverty and increasing life expectancy than democratic India: People in China live on average nearly a decade longer than their Indian counterparts and per capita GDP is four times higher. The poverty rate in China is now well below 10% and still falling fast, whereas in India it remains at around 20%. The benefits of rapid economic growth have been made tangible for many hundreds of millions of Chinese citizens, and the regime understands that its survival depends on the economic success story continuing.

But China’s rise has been underpinned by more than just improved living standards. There has been a simultaneous drive for greater dignity for the Chinese people. This is not, however, the dignity of the individual citizen as we’ve come to know it in the West. It is collective national dignity, and it comes in the form of demanding greater respect for China itself: Make China great again! The self-assertion of the nation, not the individual, is what completes the other half of the pragmatic authoritarian package.
Chinese citizens do not have the same opportunities for democratic self-expression as do citizens in the West or India. Personal political dignity is hard to come by in a society that stifles freedom of speech and allows for the arbitrary exercise of power. Nationalism is offered as some compensation, but this only works for individuals who are Han Chinese, the majority national group. It does not help in Tibet or among Muslim Uighurs in Xinjiang.

Democracies, because they give everyone a say, are bound to be fickle.

On the material side of the equation, China’s pragmatic authoritarians have certain advantages. They can target and manage the benefits of breakneck growth to ensure that they are relatively widely shared. Like other developed economies, China is experiencing rising inequality between the very richest and the rest. But the rest are never far from their rulers’ minds. The Chinese middle class is continuing to expand at a dramatic pace. In the West, by contrast, it is the middle class, whose wages and standard of living have been squeezed in recent decades, who feel like they are being left behind.
The material benefits of democracy are much more haphazardly distributed. At any given moment, plenty of people feel excluded from them, and the constant changing of course in democratic politics—“We zig and we zag,” as Barack Obama said after Donald Trump’s victory—is a reflection of these persistent frustrations. Democracies, because they give everyone a say, are bound to be fickle. Pragmatic authoritarianism has shown itself more capable of planning for the long-term.
This is revealed not only by the massive recent Chinese investment in infrastructure projects—in transport, in industrial production, in new cities that spring up seemingly from nowhere—but also by the growing concern of China’s rulers with environmental sustainability. China is now the world’s leading greenhouse gas emitter, but it is also at the forefront of attempts to tackle the issue. Only in China would it be possible to double solar capacity in a single year, as happened in 2016.
Western visitors often come back from China astonished by the pace of change and the lack of obstacles in its path. Things appear to get done almost overnight. That is what happens when you don’t have to worry about the democratic dignity of anyone who might stand in the way.
Beijing’s reliance on the continuation of rapid economic growth comes with significant risks. The great long-term strength of modern democracies is precisely their ability to change course when things go wrong. They are flexible. The danger of the pragmatic authoritarian alternative is that when the immediate benefits start to dry up, it may be difficult to find another basis for political legitimacy. Pragmatism may not be enough. Nor, in the end, will national self-assertion, if it increases the dangers of geopolitical instability.
The central political contests of the 20th century were between rival and bitterly opposed worldviews. In the 21st century, the contest is between competing versions of the same fundamental underlying goals. Both sides promise economic growth and widespread prosperity—tangible results in terms of material well-being. But they differ on the question of dignity: The West offers it to individual citizens, while China offers it more diffusely, to the nation as a whole.
The remarkable rise of China shows that this constitutes a genuine alternative. But is it a genuine rival in the West? Might democratic voters be tempted by this offer?
One of the striking features of the last century’s battle of ideologies was that the rivals to liberal democracy always had their vocal supporters within democratic states. Marxism-Leninism had its fellow-travelers right to the bitter end, and such people can still be found in Western politics ( Jeremy Corbyn and John McDonnell, potentially the next prime minister and finance minister of the United Kingdom, have never given up the struggle). By contrast, the Chinese approach has almost no one in the West actively advocating its merits. That does not mean, however, that it is without appeal.
Mr. Trump’s electoral pitch in 2016 came straight out of the pragmatic authoritarian playbook. He promised to deliver collective dignity, at least for the majority group of white Americans: Make America great again! Stop letting other people push us around! At the same time, he promised to use the state much more directly and forcefully to improve the material circumstances of his supporters. He would bring the jobs back, triple the growth rate and protect everyone’s welfare benefits. What Mr. Trump did not offer was much by way of personal dignity: not in his own conduct, not in his treatment of the people around him, and not in his contemptuous attitude toward the basic democratic values of tolerance and respect.
But there are serious limits in the West to the appeal of the Chinese model. First, unlike his counterparts in Beijing, Mr. Trump has shown little capacity to deliver real benefits to the Americans who elected him. He is hamstrung by his own lack of pragmatism and impulse control. He has also been constrained by the checks and balances that democratic politics puts in his way. For now, he looks more like a familiar type of democratic huckster than a harbinger of future authoritarianism in the U.S.: He has over-promised and under-delivered.
More fundamentally, it is still very hard to imagine the citizens of Western democracies acquiescing in the loss of personal dignity that would come with abandoning their rights of democratic dissent. We are far too attached to our continuing capacity to throw the scoundrels out of office when we get the chance. Voters in Europe and the U.S. have been attracted lately by novel-sounding promises to kick over the traces of mainstream democracy, but they have not endorsed anyone threatening to take away their democratic rights. The authoritarian reflex has been limited to threats to take away the rights of others—people who supposedly “don’t belong.”
All of these movements in the West are populist distortions of democracy, not alternatives to it. Democratic authoritarians like the recently re-elected Viktor Orban in Hungary, who describes himself as an “illiberal democrat,” take their inspiration from Vladimir Putin rather than from the Chinese Communist Party. Pragmatism in countries like Hungary and Russia comes a distant second place to scapegoating and elaborate conspiracy theories. Democracy is still talked up, but stripped of its commitment to democratic rights. Elections take place, but the choice is often an empty one.
Chinese politics is far from immune to scapegoating and conspiracy theories. Its leaders pose as strongmen, and Xi Jinping has recently cemented his tight hold on power by being installed as leader for life. But as a viable alternative to democracy, Beijing has something to offer that Moscow and Budapest, to say nothing of today’s Washington, can only gesture toward: Consistent, practical results for the majority.
The ongoing appeal of the Chinese model will vary from place to place. It may just stretch to include the edges of our own politics, though it will struggle to reach its heart. It is more immediately appealing in those parts of Africa and Asia where breakneck economic growth is both a realistic prospect and a pressing need. Rapid economic development, coupled with national self-assertion, has an obvious attraction for states that need to deliver results in a relatively short period of time. In these places, democracy often looks like the riskier bet.

The triumph of liberal democracy appears a lot more contingent than it did three decades ago.

In Western societies, the Chinese alternative is unlikely to capture voters’ imaginations, even as it shows them what they might be missing. Still, the triumph of liberal democracy appears a lot more contingent than it did three decades ago. The temptations to try something different are real, even if the most successful current alternative remains a distant prospect for most voters.
There’s reason to worry about the weaknesses of our democracies. The kind of respect they provide may prove insufficient for 21st-century citizens. The premium that democracy places on personal dignity has traditionally been expressed through extensions of the franchise. Giving people the vote is the best way to let them know that they count. But when almost all adults are able to vote—in theory, if not in practice—citizens inevitably look for fresh ways to secure greater respect.
The rise of identity politics in the West is an indication that the right to take part in elections is not enough anymore. Individuals seek the dignity that comes with being recognized for who they are. They don’t just want to be listened to; they want to be heard. Social networks have provided a new forum through which these demands can be voiced. Democracies are struggling to work out how to meet them.
Elected politicians increasingly tiptoe around the minefield of identity politics, unsure which way to turn, terrified of giving offense, except when they deliberately court it. At the same time, they have grown dependent on technical knowledge—from bankers, scientists, doctors, software engineers—to deliver continuing practical benefits. As citizens find less personal dignity in politics and politicians become less able to manage prosperity, the attraction that has held democracy together for so long will start to dissipate. Respect plus results is a formidable combination. When they come apart, democracy loses its unique advantage.
The Chinese model faces serious challenges, too. There, personal dignity remains the unrealized option, and the untried temptation is to extend rights of political expression and choice. The use by the Chinese state of social networks to manage and monitor its citizens represents a concerted attempt to resist the pull of democratic dignity and to hold fast to the appeal of pragmatic authoritarian control. Just as the strains in the Western trade-off between dignity and material benefits may not be sustainable over time, the same is true of the Chinese version.
That sweet spot, where the two come together, which Mr. Fukuyama identified as the end of history, looks increasingly remote. No one has the monopoly on respect plus results any more.
David Runciman is a professor of politics at Cambridge University. This essay is adapted from his new book, “How Democracy Ends,” which will be published in early June by Basic Books.
Appeared in the April 28, 2018, print edition as 'China’s Challenge To Democracy.'

Thursday, March 22, 2018

Immigration the cheap and nasty way to grow the economy

In order to grow GDP countries look at immigration however if you bring in people that have a different belief system this potentially puts your nation at risk. The need to drive GDP is what should be questioned. Is it right to use GDP to measure the success of a nation or should we have other metrics in an advanced economy other than GDP growth?  ....Aivars Lode

The ABC-TV's temerity in hosting a debate about the merits of high population growth has drawn predictable ripostes from the economic establishment. Shades of the legendary note in the margin of a politician's speech: "shout here - argument weak".

There are at least four counts against the advocates of high immigration. First, their refusal to engage with the academic environmentalists arguing that we've exceeded the "carrying capacity" of our old and fragile land. Scientists? What would they know?
Second, they keep asserting high immigration's great economic benefits, blithely ignoring the lack of evidence. Whenever the Productivity Commission has examined the issue carefully it's found only small net effects, one way or the other. Its latest modelling found only a "negligible" overall impact.
Third, the advocates not only decline to admit the high social and economic costs that go with high rates of immigration, they decline to accept their share of the tab, doing all they can to shift it to the young, the poor and those on the geographic outer, including many of the migrants.
You rarely hear pro-immigration economists acknowledging the clearest message economic theory gives us on the topic: more population requires more spending on additional public and private infrastructure if material living conditions aren't to deteriorate.
The more we invest in such "capital widening" to stop the ratio of capital to labour declining, the less scope for investment in "capital deepening" to keep the ratio increasing, and so improving the productivity of our labour.
When we fail to invest sufficiently in capital widening – which we have – the decline in living conditions is manifest in overcrowding, traffic congestion and long commuting times.
Why have we failed to invest sufficiently? Partly because a high proportion of the promoters of high immigration are also promoters of Smaller Government, never acknowledging the two are incompatible.
A bigger population requires a bigger government, with more debt, not less. When you persist with high population growth, but put the clamps on government, you end up with overcrowding, congestion and the rest.
Another truth the high immigration advocates refuse to acknowledge is that a much bigger population must lead to much bigger cities and higher-density living in those cities.
The Reserve Bank's estimates of the huge addition to Melbourne and Sydney house prices caused by state governments' acquiescence to resistance to higher density in inner and middle-ring suburbs, are partly a consequence of successful attempts to shift the spatial cost of high immigration onto the less well-placed.
The fourth criticism of high immigration is that it's the cheapest and nastiest way to pursue economic growth. You get a bigger economy, but not the promised benefits. The studies repeatedly fail to show high immigration leads to a significant increase in real income per person.
Of course, the business lobby has no reason to care whether high immigration yields economy-wide benefits. All they're after is a bigger domestic market, allowing them to sell more widgets, make a higher profit and justify a bigger salary package.
Few economists can see this is a cop-out. An escape hatch. As a way of achieving corporate growth, it's even easier than taking over your competitors. And it sure beats the hard graft of trying to increase profits by being more efficient and contributing to national productivity improvement.
As we've seen, high immigration probably comes at the expense of productivity-enhancing (capital-deepening) business investment and public infrastructure. To the extent that inadequate capital-widening leads to overcrowding and congestion, it worsens productivity.
In principle, one productivity-enhancing effect of high immigration is that you get greater human capital on the cheap by pinching it from other (mainly poor) countries.
After foreign students have come here and paid full freight for Australian qualifications, you let them stay and work. You select permanent immigrants on the basis of their skills, or you let skilled workers on temporary visas stay on.
But as Dr Bob Birrell, of the Australian Population Research Institute, has shown, there's a big gap between the claims made for our skilled migration program and the reality. We let in people whose skills aren't in high demand, and plenty of them end up driving taxis because the local professions' gatekeepers refuse to recognise their qualifications.
So it's not clear the benefits of our skill-pinching program exceed the cost of discouraging businesses from incurring bother and cost training enough of our own young people, when you can always get the government to let you bring in someone ready-trained.
High immigration may suit our rent-seeking business people, but it's a hell of a way to pursue the professed benefits of economic growth.
by Ross Gittins - Sydney Morning Herald's economics editor.