2011 was year for the protester


This image released by Time Magazine shows the Person of the Year issue featuring “The Protester.” The magazine on Wednesday, Dec. 14, 2011 cited dissent across the Middle East that has spread to Europe and the United States, and says these protesters are reshaping global politics. (AP Photo/Time Magazine) >>

Year that was for the protester

The silly season is already on us and no doubt will be a fractious and prolonged one going into 2012.

 MUSINGS By MARINA MAHATHIR

IT’S the end of the year and, like everyone else, I’m going to try and summarise what made it an interesting year indeed.

Time magazine named The Protester as its Person of the Year in 2011.

I couldn’t agree more, because really few people have made an impact on society than protesters this year.

From the protesters in Tunisia, Egypt, Bahrain, Libya and Syria to the Occupy Wall Street protesters and its many offshoots, these largely peaceful protests have forced things to change in their societies.

In the Middle East, corrupt and authoritarian leaders have been forced to step down. In some, it’s still an ongoing battle.

Of course, these steps towards democracy are not perfect. Nor are the results. But that’s democracy for you.

Just because people don’t know what they want is no reason to dismiss democracy.

It is the fact that they finally have choices is the triumph, after so many years of not having any.

For those who insist on equating the London riots with the Arab Spring, do get your facts right.

The former was not about changing an authoritarian government for a more democratic one, nor was it meant to be peaceful.

The latter was a peaceful demand for change; the violence came from the government response.

If you want to equate the London riots with the Syrian government’s response, perhaps it would be more accurate.

Time magazine has mostly recognised the Arab, Spanish and American protesters in their essay.

But perhaps they should have also looked eastwards.

I think the Bersih rally goers, protesting peacefully for clean and fair elections, are also deserving of the award.

For the first time, ordinary Malaysians went out to demand what should be their right, to be able to vote fairly.

Young and old of all races and religions, Malaysians marched to protect this basic human right. And were demonised because of it.

While the Government responded to the Bersih demands by establishing the Parliamentary Special Committee on electoral reforms, at the same time the so-called Peaceful Assembly Act – aimed at curbing any other rallies like Bersih – was passed.

In any case, it is delusional to think that curbing protests will curb rebellious thoughts. These will continue to thrive in 2012, that’s for sure.

Perhaps 2011 was also the year of the Strong Woman.

On the international scene, not one but three women won the Nobel Peace Prize this year: President Ellen Johnson Sirleaf of Liberia, Leymah Gbowee, also of Liberia, and Tawakkol Karman of Yemen, the youngest-ever recipient.

It’s interesting that all of these women are rebellious women, who refused to accept the established, and patriarchal, way of doing things.

Instead, they found their own way, and worked for peace in their countries.

Malaysia, too, has its share of strong women. Datuk Ambiga Sreenevasan is the prime example of someone who has had to withstand personal attacks from all quarters like no other person has had to in our country, yet still carries on with her strong principles.

Let it never be said that she lacks courage.

For women to get ahead, it really is imperative that they have the sort of integrity and display the sort of ethical behaviour that we often find lacking in men.

This year is, of course, also the year of the Obedient Wives Club, hardly a great leap forward for womankind.

Nevertheless, the OWC knew exactly how to get publicity for their causes.

And, I suspect, despite the sniggers over their sex manual, there are many who actually agree with their basic premise, that a good wife is one who blindly obeys her husband even when she doesn’t feel like it.

Finally, this year has been a bad year for justice and equality.

Children born less than six months after their parents married are considered illegitimate, thus forcing them to bear the sins of their parents.

Even if legitimate, children can be married off at even 10 years old, surely a blight on our society if we are to consider ourselves progressive.

Muslim women still don’t have the same rights as their non-Muslim sisters when it comes to marriage, property and inheritance.

And people of different sexual orientations are not regarded as full citizens.

I’d like to be optimistic about 2012 but that does not look likely.

The silly season is already on us and no doubt will be a fractious and prolonged one.

Merry Christmas and Happy New Year, folks!

The Exchange Rate Delusion of US Trade Deficit !


Michael Spence: The Exchange-Rate Delusion

A 100 yuan banknote (R) is placed next to a US$100 banknote. — PHOTO : REUTERS >>

If one looks at the trade patterns of the global economy’s two biggest players, two facts leap out.

One is that, while the United States runs a trade deficit with almost everyone, including Canada, Mexico, China, Germany, France, Japan, South Korea, and Taiwan, not to mention the oil-exporting countries, the largest deficit is with China.

If trade data were re-calculated to reflect the country of origin of various components of value-added, the general picture would not change, but the relative magnitudes would: higher US deficits with Germany, South Korea, Taiwan, and Japan, and a dramatically lower deficit with China.

The second fact is that Japan, South Korea, and Taiwan – all relatively high-income economies – have a large trade surplus with China. Germany has relatively balanced trade with China, even recording a modest bilateral surplus in the post-crisis period.

The US has a persistent overall trade deficit that fluctuates in the range of 3-6 per cent of GDP. But, while the total reflects bilateral deficits with just about everyone, the US Congress is obsessed with China, and appears convinced that the primary cause of the problem lies in Chinese manipulation of the renminbi’s exchange rate.

One problem with this view is that it cannot account for the stark differences between the US and Japan, Germany, and South Korea. Moreover, the real (inflation-adjusted) value of the renminbi is now rising quickly, owing to inflation differentials and Chinese wage growth, particularly in the country’s export sectors. That will shift the Chinese economy’s structure and trade patterns quite dramatically over time.

The final-assembly links of global-value added chains will leave China for countries at earlier stages of economic development, such as Bangladesh, where incomes are lower (though without producing much change in the balance with the US).

A somewhat more sensible concern might be that the dollar’s reserve-currency status causes it to be ‘over-valued’ with respect to every currency, not just the renminbi. That could create additional pressure on the tradable part of the US economy, and thus might help to explain why the US tradable sector has not generated net employment for two decades.

But, in order to explain performance relative to Japan and Germany, one would have to argue that the euro and the yen have been undervalued, which makes no sense.

In fact, the employment generated by the tradable sector has been in services at the upper end of the distributions of value-added per person, education, and income. As a result, growth and employment in the tradable sector have gone separate ways, with healthy growth and stagnant employment. In Germany, by contrast, the tradable sector is an employment engine. The same is true of Japan.

The US economy’s distinctive features for at least a decade prior to the crisis that began in 2008 were an unsustainably high level of consumption, owing to an illusory wealth effect, under-investment (including in the public sector), and savings that fell short of the investment deficiency. That excess household and government consumption fueled the domestic economy – and much of the global economy as well.

In several European countries that now confront fiscal and growth challenges, the pattern was somewhat different: most of the excess consumption and employment was on the government side. But the effect was similar: an unsustainable pattern of income and employment generation, and lower productivity and competitiveness in these economies’ tradable sectors, leading to trade deficits, stunted GDP, and weak job creation.

One could argue that the euro has been and still is overvalued, and that this has hindered many eurozone economies’ productivity relative to non-eurozone countries. But the relative productivity deficiencies within the eurozone are more important for growth, and have nothing to do with the exchange rate.

Excessive Focus on currencies

The focus on currencies as a cause of the West’s economic woes, while not entirely misplaced, has been excessive. Developing countries have learned over time that real income growth and employment expansion are driven by productivity gains, not exchange-rate movements. This, in turn, requires public and private investment in tangible assets, physical and telecommunications infrastructure, human capital and skills, and the knowledge and technology base of the economy.

Of course, it is possible for a country’s terms of trade to get out of line with income and productivity levels, requiring a rebalancing. But resetting the terms of trade is no substitute for tackling the structural underpinnings of productivity.

None of this is peculiar to developing countries. Underinvestment has long-term costs and consequences everywhere. Excess consumption merely hides these costs temporarily.

In the US, productivity deficiencies have led to a pattern of disconnection from global supply chains. So the challenge for America is not only to restore productivity, but also to restore its links to the main currents of world trade.

China’s growth – and, more generally, that of the major emerging economies – provides a substantial potential tailwind. That is certainly true nowadays for Germany, Japan, and South Korea. The US and others can take advantage of it as well, but only if productivity relative to income levels in specific areas of potential competitiveness begin to rise.

As long as America economic policy remains focused primarily on deficits, domestic demand, exchange rates, and backsliding on trade openness, its investment deficiencies will remain unaddressed. That means that its employment and income-distribution problems will remain unaddressed as well.

The good news is that, at a deep level, incentives across advanced and developing countries are aligned. The emerging economies would like nothing more than the restoration of sustainable patterns of growth in the advanced economies, and are prepared to be cooperative players in that process. But focusing on these countries’ exchange rates is not the right way to go about it.

Michael Spence, a Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, and Senior Fellow at the Hoover Institution, Stanford University. His latest book is The Next Convergence – The Future of Economic Growth in a Multispeed World (www.thenextconvergence.com).

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