Economic Conditions Archive - United States Diplomatic Mission to South Africa

Economic Affairs

Economic Conditions Archive

WHY CHINA MAY STUMBLE.
Council on Foreign Relations. Steven Dunaway. October 13, 2009.
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China's continued impressive growth is by no means assured, writes the author. Without basic changes to its economic model, including rule of law reforms, it could face considerable struggles, he says.

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Yunus, Muhammad ECONOMIC SECURITY FOR A WORLD IN CRISIS (World Policy Journal, vol. 26, no. 2, Summer 2009, pp. 5-12)
Link to PDF Full Text

Yunus, founder of Bangladesh’s Grameen Bank, notes that the optimism about global prosperity that prevailed at the beginning of the millennium has been soured by the financial collapse that began in 2008. He predicts that we are in the beginning stages of a long and painful period, in which the combined effects of the intertwined financial, food, energy and environmental crises will have a disproportionate effect on the world’s poorest people. Capitalism is in crisis, says Yunus, because the basic purpose of the financial system and credit markets have been fundamentally distorted by the obsession with paper profits instead of serving human needs. He argues that capitalism is a “half-built structure” -- most efforts have been focused on the profit-making framework of the free-market system that was conceived by Adam Smith 250 years ago, yet we have paid little attention to Smith’s equally-important writings on the moral dimension. Yunus believes that the current economic crisis offers an unparalleled opportunity to reintroduce the disregarded aspects of Adam Smith’s message by developing what Yunus calls “social businesses”, whose primary function is not to make profits, but to promote the public welfare.

THE ECONOMIC IMPACT OF THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009: FIRST QUARTERLY REPORT.
Executive Office of the President. September 10, 2009.
Full Text [PDF format, 48 pages]

The Council of Economic Advisers was charged with providing to Congress quarterly reports on the effects of the Recovery Act on overall economic activity, and on employment in particular. It provides an assessment of the effects of the Act in its first six months. The multi-faceted analysis suggests that the ARRA has had a substantial positive impact on the growth of real gross domestic product (GDP) and on employment in the second and third quarters of 2009. That various approaches yield similar estimates increases the confidence one can have in the results, says the report.

THE GLOBAL ECONOMIC CRISIS: IMPACT ON SUB-SAHARAN AFRICA AND GLOBAL POLICY RESPONSES.
Alexis Arieff, Martin A. Weiss, Vivian C. Jones, Congressional Research Service, Library of Congress. August 25, 2009.
Full Text [PDF format, 30 pages]

“Many analysts were initially optimistic that the impact of the global financial crisis on Sub-Saharan Africa would be negligible. Many African economies are among the least exposed to the global financial system, and African banks hold few of the “toxic assets” that helped spark the crisis. However, as the financial crisis has deepened into a global recession, most agree that Africa will be strongly affected. The International Monetary Fund (IMF) estimates that average economic growth in Africa will slow from an average of over 6% per year over the past five years to 1.5% in 2009. As a region, Sub-Saharan Africa is not projected to undergo a recession in 2009. However, most African countries are thought to require high rates of economic growth in order to outpace population growth and make progress in alleviating poverty.” – From the Summary.

ECONOMIC SURVEY OF LATIN AMERICA AND THE CARIBBEAN 2008-2009.
United Nations. Web posted August 2009.
Full Text [PDF format, 96 pages]

A growth phase that the region’s recent history cannot equal in nature and duration has come to an end and output is contracting, according to the report. The first part of this edition of the Economic Survey looks at the channels through which the crisis is affecting the economies of the region and its impact on variables such as economic growth, employment and external-sector indicators. It also discusses the strengths and weaknesses of the countries in dealing with the fallout from the global crisis and the economic policies they have deployed to this end.

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METROMONITOR: TRACKING ECONOMIC RECESSION AND RECOVERY IN AMERICA’S 100 LARGEST METROPOLITAN AREAS.
Brookings Institution. June 2009.
Full Text [PDF format, 21 pages]

Beneath the constant drumbeat of headline numbers emanating from Washington on U.S. jobs, national unemployment, GDP, and home prices lies a complex, diverse set of 366 metropolitan economies. While no metro area has been immune from the current economic downturn, the pain is unevenly distributed. Some have felt only modest effects, and a few show early signs of recovery, while others are undergoing a wrenching restructuring that may fundamentally alter their economic trajectory.

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THE LAUDER GLOBAL BUSINESS INSIGHT REPORT 2009: FIRST-HAND PERSPECTIVES ON THE GLOBAL ECONOMY.
Joseph H. Lauder Institute of Management & International Studies. May 2009.
Full Text [PDF format, 51 pages]

The study reports on companies and industries analyzed during a summer immersion program by the Institute’s students in 12 countries around the world. It provides a window into the changing global economy, including the rise of Chinese and Egyptian companies in the telecommunications sector, the promise of Brazilian technology in the field of organic plastics, the challenges of the hostile takeover market in Russia, the continuing reluctance of the Japanese government to welcome foreign investment, and the dilemmas facing the Mexican oil industry.

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Fukuyama, Francis A SENSE OF UNREALITY (American Interest, May-June 2009)
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The author writes that there is a “pervasive sense of unreality” in Washington about the scale of the economic crisis facing the U.S. and the rest of the world. The current administration’s economic policy team seems to be operating, says Fukuyama, on the assumption that the problem facing the financial system is one of illiquidity and not of insolvency, and that their task is to prop up the banks until their toxic assets can be fairly valued. The problems run deeper than that, says Fukuyama, resulting from years of Americans consuming and spending more than they were saving or producing, and trillions of dollars from abroad fueling the rapid increase of debt. He points out that this is a non-partisan crisis – both Republicans and Democrats were complicit in the deregulation of the financial sector that enabled the explosion of the shadow banking economy. The crisis is primarily a failure of U.S. public policy, writes Fukuyama, and “now that the public sector is cleaning up behind them, we need to move from astonishment to a different model of capitalism if we are to fix our own economy and regain a shred of credibility on the world stage.”

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Mahbubani, Kishore CAN AMERICA FAIL? (Wilson Quarterly, vol. 33, no. 2, Spring 2009, 48-54)
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The author, dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, believes that the massive crises that the U.S. is now experiencing are partly the product of three systemic failures. First, American society is afflicted with “groupthink,” having accepted the proclamations of economic gurus such as Alan Greenspan and Robert Rubin that unregulated financial markets would naturally deliver economic growth and serve the public good. Second is the erosion of the notion of individual responsibility, as Americans cannot see how their individual actions have undermined, rather than strengthened, their society. Third is the inability of American society to see how the abuse of power has created many of the problems the U.S. now confronts abroad. The author sees the American people losing confidence in their ability to compete with Chinese and Indian workers. At the moment of their country's greatest economic vulnerability in many decades, few Americans dare to speak the truth and say that the U.S. cannot retreat from globalization; both the American people and the world would be worse off. However, as globalization and global capitalism create new forces of "creative destruction," America will have to restructure its economy and society in order to compete.

ESTIMATES OF JOB CREATION FROM THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009.
Executive Office of the President of the United States. May 11, 2009.
Full Text [PDF format, 12 pages]

The report details how the Administration will measure progress creating and saving jobs under the Recovery Act. Work began on the methodology in the earliest days of the Administration and within days of the Recovery Act being signed into law, Chairman Romer met with top economists from numerous agencies to develop a simple, conservative and accurate model for measuring progress. The model pairs a macro approach based on projected and actual spending with direct reporting by recipients to improve the level of accuracy.

THE RETURN OF THE STATE: THE NEW INVESTMENT PARADIGM.
Levy Economics Institute of Bard College. Marshall Auerback. May 2009.
Full Text [PDF format, 15 pages]

To save America and the global economy as a whole, the private/public sector balance has to shift, and the neoliberal economic model on which the country has been based for the past 25 years has to be modified. In the working paper, Marshall Auerback details why the role of the state needs to be reemphasized.

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STRONG DOLLAR HAS LITTLE EFFECT ON SMALL RETAILERS, LARGER EFFECT ON WHOLESALERS.
Office of Advocacy, U.S. Small Business Administration. May 1, 2009.
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A strong dollar, making imports cheaper and exporting more difficult, appears to have little effect on the survival rate of small retailers, according to the study. The study covers 15 years of data, from 1990 through 2005, from the U.S. Census Bureau’s Statistics of U.S. Businesses and other sources. On the other hand, the study’s authors found that real exchange rate appreciation lead to increased rates of small firm exit in the wholesale sector. In wholesale firms with more than 10 employees, a 10 percent real dollar appreciation leads to a roughly 20 percent increase in firm closures. This finding suggests that wholesalers are closely tied to domestic manufacturers, and find it hard to switch suppliers to take advantage of falling import prices.

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Brown, Lester COULD FOOD SHORTAGES BRING DOWN CIVILIZATION? (Scientific American, May 2009)
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The author, president of the Earth Policy Institute, writes that the biggest threat to global stability is the potential for food crises in poor countries to cause government collapse. Food scarcity and the resulting higher food prices are pushing poor countries into chaos. Such “failed states” can export disease, terrorism, illicit drugs, weapons and refugees. Water shortages, soil erosion and rising temperatures from global warming are placing severe limits on food production. Without massive and rapid intervention to address these three environmental factors, the author argues, a series of government collapses could threaten the world order.

TIME OF TROUBLES: THE YEN AND JAPAN’S ECONOMY, 1985-2008.
National Bureau of Economic Research. Maurice Obstfeld. March 2009.
Full Text [PDF format, 91 pages]

The paper explores the links between macroeconomic developments, especially monetary policy, and the exchange rate during the period of Japan's bubble economy and subsequent stagnation. It emphasizes the interaction of short-term developments driven by monetary factors and the long-term determinants of the real exchange rate's equilibrium path. Since the mid-1990s, the yen's real exchange rate has generally followed a depreciating trend and Japan's comprehensive terms of trade have deteriorated, according to the paper.

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Fallows, James INTERESTING TIMES (Atlantic, April 2009, pp. 54-63)
Full Text [HTML format; online title: “China’s Way Forward”]

The signs of depression are everywhere in China, says the author, an Atlantic national correspondent. As a world’s primary exporter, it stands to be worse hit by the current economic crisis than the rest of the world, just as America was during the Great Depression. Although it has a $2 trillion war chest in foreign holdings, its reliance on foreign customers is a serious vulnerability. Fallows writes that the modern counterpart to the Smoot-Hawley act could come from Beijing, not Washington, in the form of export subsidies, downward pressure on the currency value and other measures. Although there are signs of such policies, the writer says that China’s economy has more tools and resources in reserve than others to deal with the crisis without resorting to protectionism. He cites examples of Chinese companies that use the disruption to try to move into higher-value work and introduce their own advanced products rather than serve strictly as subcontractors. If the transformation process is adeptly managed, Fallows suggests that China’s economy, instead of backsliding, may emerge from the crisis in a more improved state.

WHITE HOUSE RELEASES STATE BY STATE NUMBERS; AMERICAN RECOVERY AND REINVESTMENT ACT TO SAVE OR CREATE 3.5 MILLION JOBS.
The White House. February 17, 2009.
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The White House releases state-specific details on the local impact of the American Recovery and Reinvestment Act. The American Recovery and Reinvestment Act is a nationwide effort to create jobs, jumpstart growth and transform our economy to compete in the 21st century.

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Leonhardt, David THE BIG FIX (New York Times Magazine, February 1, 2009, pp. 22-29, 48//51)
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The author, an economics columnist for The New York Times, discusses the biggest challenge for the Obama administration in bringing the economy back to life. The economy will recover, but it is likely to get significantly worse over the course of 2009, no matter what President Obama and the Congress do. Washington will not merely be given the task of pulling the economy out of the crisis, but in putting in on a more sustainable path. Leonhardt notes that private-sector investment in research and infrastructure hasn’t changed much since the 1950s, and investment by government has even dropped. Effective stimulus, the center of the present debate in Congress now, means simply spending money quickly. The author notes that “pork”, favored projects by legislators for their home districts, will not transform the economy; what will accomplish that is education, which helps a society multiply every other investment it makes, be it in medicine, transportation or alternative energy. Leonhardt notes that the U.S. has significant capacity to expand and sell Treasury debt; without that, the economy would be in even more dire straits. He notes that the norms of the last two decades -- consume before investing, worry about the short term more than the long term -- have been detrimental to our economic standing.

CONNECTING THE DOTS: MANAGING RISK IN AN ENVIRONMENT OF UNPRECEDENTED UNCERTAINTY.
Commonfund. Bill Martin. Web posted January 28, 2009.
Full Text [PDF format, 8 pages]

The level of uncertainty and unpredictability created by current events, according to the report, has undermined confidence in the risk management techniques built for normal market environments and for stress and scenario analyses that are related to historical experience.

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PERFORMANCE 2009: PRODUCTIVITY, EMPLOYMENT, AND GROWTH IN THE WORLD’S ECONOMIES.
The Conference Board. January 22, 2009.
Full Text [PDF format, 20 pages]

Despite a slowdown in world productivity in 2008, output per hour worked in the United States increased slightly by 1.7 percent, up from 1.5 percent in 2007, according to the latest annual. The most recent productivity advances have been realized, however, through rapid layoffs, suggesting that the productivity of remaining workers and firms is actually strengthening.

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WORLD ECONOMIC SITUATION AND PROSPECTS 2009.
Department of Economic and Social Affairs, United Nations. January 2009.
Full Text [PDF format, 188 pages]

The world economy is mired in the worst financial crisis since the Great Depression. What started as a sub-prime mortgage crack in the United States housing market began widening into deeper fissures across the global financial landscape and ended with the collapse of major banking institutions, precipitous falls on stock markets across the world and a credit freeze. In the baseline scenario of the United Nations forecast, world gross product growth is expected to slow to a meager 1.0 per cent in 2009, a sharp deceleration from the 2.5 per cent growth estimated for 2008 and well below the more robust growth of previous years.

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ECONOMIC REPORT OF THE PRESIDENT.
Council of Economic Advisors. January 2009.
Full Text [PDF format, 419 pages]

The report contains current/foreseeable trends and annual numerical goals concerning topics such as employment, production, real income, and Federal budget outlays.

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Eberstadt, Nicholas THE POVERTY OF THE OFFICIAL POVERTY RATE (Milken Institute Review, vol. 10, no. 4, Fourth Quarter 2008, pp. 40-49)
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Eberstadt, scholar of political economy at the American Enterprise Institute, argues that the reason the official poverty rate fails to quantify the steady improvement in the living standards of America's poor lies in a mistake built into the poverty measure -- that a household's annual spending cannot exceed its annual income. The nation's poverty indicator first emerged in 1965, when the Johnson administration launched the War on Poverty. This measure determined a family's poverty status by comparing its annual income to a federal "poverty threshold" -- set at about three times the cost of a nutritionally adequate food budget and tailored to a family's size. The percentage of people falling below that threshold was deemed the "poverty rate." The threshold is adjusted each year to take into account changing prices. However, those who are counted as poor today have dramatically higher living standards than their counterparts in the 1960s, when the poverty rate was originally devised. The gap between reported income and reported spending has grown over the years, and this phenomenon is not reflected in the official poverty rate, largely due to assistance programs, such as food stamps and the earned income tax credit. Income variability, the swings between periods of unemployment, has grown, and low-income households have become more likely to use credit to maintain their living standards in between periods of employment. Eberstadt notes that this apparent increase in living standards in no way obscures the challenges of low-income households in America -– problems of family dissolution and crime are as great as ever. He notes that there is a growing consensus across the political spectrum of the need to change the existing poverty indicators to reflect present-day realities.

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Nocera, Joe RISK MISMANAGEMENT (New York Times Magazine, January 4, 2009, pp. 24//51)
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Nocera notes that stabilizing the U.S. economy is probably the most important issue the Obama administration will face; the risks taken by the U.S. and European investment firms have threatened to bring down the entire financial system. Many have suggested that the cause of the catastrophe was the widespread institutional reliance on a value-at-risk (VaR) financial model that did not take into account the biggest risk of all -- the possibility of a financial meltdown. This was one of Alan Greenspan's primary excuses when he testified about the financial crisis before Congress in 2008. The late 1980s and the early 1990s were a time when many firms were trying to devise more sophisticated risk models because the world was changing around them. Banks, whose primary role was assessing credit risk, were merging with investment banks, which traded stocks and bonds. Derivatives and securitizations -- pools of mortgages or credit-card loans that were bundled by investment firms and sold to investors -- were becoming an important component of Wall Street activity, but were very difficult to value. Nocera notes that at the height of the bubble, there was so much money to be made that any firm that turned away deals because of misgivings about the risk would miss out on huge short-term gains to less-cautious rivals; all the incentives were on the side of taking on more risk. The fact that VaR didn't measure the possibility of an extreme event was a relief to the heads of investment firms, making such a possibility easy to ignore.

PROSPECTS FOR THE U.S. AND THE WORLD: A CRISIS THAT CONVENTIONAL REMEDIES CANNOT RESOLVE.
Levy Economics Institute of Bard College. Wynne Godley et al. December 2008.
Full Text [PDF format, 11 pages]

The economic recovery plans currently under consideration by the United States and many other countries seem to be concentrated on the possibility of using expansionary fiscal and monetary policies alone. The Levy Institute’s Macro-Modeling Team argues that, however well coordinated, this approach will not be sufficient; what’s required, they say, is a worldwide recovery of output, combined with sustainable balances in international trade.

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2008 STATE OF AMERICA’S CITIES: ANNUAL OPINION SURVEY OF MUNICIPAL OFFICIALS.
National League of Cities. December 22, 2008.
Full Text [PDF format, 6 pages]

A record number of municipal officials expressed their growing pessimism for the nation’s direction, according to a survey. The Survey demonstrates the widespread nature of the current economic crisis is having on cities’ bottom lines. It shows that at mid-recession, more than six out of 10 city officials are pessimistic about the nation’s future.

The second issue cited most frequently for the new administration is deteriorating transportation infrastructure. Almost seven in ten say the quality of roads, bridges, and airports are problems for their city, with 29% saying the conditions worsened in the past year. The survey also found that two in five city officials responding say the worsening relationship between city and federal governmental bodies is posing a problem for their city; 50% report that city-state relations are posing a problem.

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ECONOMIC GLOBALISATION: A CHALLENGE FOR OFFICIAL STATISTICS.
United Nations Economic Commission for Europe. Web posted December 7, 2008.
Full Text [PDF format, 247 pages]

The seminar provided national statistical offices with a forum to share ideas and discuss approaches to cope with the distortions caused by the activities of multinational enterprises on the production of statistics. The seminar addressed globalization in the context of national accounts and the effect on gross domestic product, gross national income and other parts of the accounts. Presentations at the seminar were provided by the Organisation for Economic Co-operation and Development (OECD), Eurostat, UNECE, Canada, Ireland, Netherlands, Norway, Slovenia, Switzerland, Ukraine and United Kingdom.

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GLOBAL TRENDS 2025: A TRANSFORMED WORLD.
National Intelligence Council. November 2008.
Full Text [PDF format, 120 pages]

The report takes a long-term view of the future. It offers a look at how key global trends might develop over the next 15 years to influence world events. It offers a range of possibilities and potential discontinuities. Some of the highlights include the revolution of the whole international system, that includes new players, Brazil, Russia, India and China, the transfer of wealth roughly from West to East, unprecedented economic growth, coupled with 1.5 billion more people, and the potential for conflict increasing due to political turbulence in parts of the greater Middle East.

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THE OUTLOOK FOR HOUSING STARTS, 2009 TO 2012.
Congressional Budget Office. November 2008.
Full Text [PDF format, 36 pages]

Over the past two years, starts of new homes have fallen sharply, and the resulting decline in real residential construction over that period subtracted an average of 1.0 percentage point from the growth rate of real gross domestic product. Looking forward, several alternative paths for residential construction are possible, ranging from a fairly quick turnaround to a severe slump that lasts several years. Background paper examines the various factors that have determined the number of housing starts in the United States in the past and will continue to determine it in the future. Those factors include the underlying demand for new housing units, especially the role of demographics; cyclical and financial conditions, such as unemployment rates and lending standards; and the number of excess vacant units.

HOW TO SUCCESSFULLY STIMULATE THE ECONOMY.
Heritage Foundation. William W. Beach. October 24, 2008.
Full Text [PDF format, 3 pages]

When the economy is struggling, Congress has a tendency to invoke the same tried and failed policies of the past. Typically, these policies promise hundreds of billions of dollars in government spending while doing little to actually revitalize economic activity. According to Beach, the test for distinguishing good stimulus ideas from bad ones should be this: Is the proposal likely to raise the economy to a sustained, higher level of growth?

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GLOBAL COMPETITIVENESS REPORT 2008-2009.
World Economic Forum. Michael E. Porter and Klaus Schwab. Web posted October 9, 2008.
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The United States tops the overall ranking in report. Switzerland is in second position followed by Denmark, Sweden and Singapore. European economies continue to prevail in the top 10 with Finland, Germany and the Netherlands following suit. A number of countries in the Middle East and North Africa region are in the upper half of the rankings, led by Israel, Qatar, Saudi Arabia, United Arab Emirates, Kuwait and Tunisia, with particular improvements noted in the Gulf States since last year. In sub-Saharan Africa, South Africa, Botswana and Mauritius feature in the top half of the rankings, with several countries from the region measurably improving their competitiveness.

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ASIA PACIFIC ECONOMIC OUTLOOK.
Deloitte. September 2008.
Full Text [PDF format, 8 pages]

The report covers the near-term outlook for Australia, India, Indonesia, and Japan. In Australia, the economy has become a bit soft after 16 straight years of expansion. The economy of India has been having an inflation epidemic and GDP growth rates have fallen from record highs. The country of Indonesia is facing record consumer and wholesale price inflation numbers. Japan also faces record inflation rates as well as an economic slowdown.

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ECONOMIC IMPACTS OF IMMIGRATION: A SURVEY.
Harvard Business School. Sari Pekkala Kerr and William R. Kerr. Web posted September 2, 2008.
Full Text [PDF format, 37 pages]

The paper surveys recent empirical studies on the economic impacts of immigration. Particular emphasis is given to the experiences of Northern Europe and Scandinavia. The survey first examines the magnitude of immigration as an economic phenomenon in various host countries. The second part deals with the assimilation of immigrant workers in host-country labor markets and the use of social benefits by immigrants. The survey then considers the effect of immigration on the labor market outcomes of natives. The paper concludes with studies of immigration’s impact for the public sector of host countries.

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THE EFFECTS OF AVIAN INFLUENZA NEWS ON CONSUMER PURCHASING BEHAVIOR: A CASE STUDY OF ITALIAN CONSUMERS’ RETAIL PURCHASES.
Economic Research Service, U.S. Department of Agriculture. Robert H. Beach et al. Web posted September 5, 2008.
Full Text [PDF format, 31 pages]

To better understand how information about potential health hazards influences food demand, the case study examines consumers’ responses to newspaper articles on avian influenza, also referred to as bird flu. The focus is on the response to bird flu information in Italy as news unfolded in the period October 2004 through October 2006, beginning after reports of the first outbreaks in Southeast Asia, and extending beyond the point at which outbreaks were reported in Western Europe. Estimated poultry demand, as influenced by the volume of newspaper reports on bird flu, reveals the magnitude and duration of newspaper articles’ impacts on consumers’ food choices. Larger numbers of bird flu news reports led to larger reductions in poultry purchases. Most impacts were of limited duration, and all began to diminish within 5 weeks.

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Conger, Darius ECONOMICS AND THE AMERICAN FAMILY: A REVIEW OF RECENT LITERATURE (Choice, vol. 46, no. 1, September 2008, pp. 33-34, 36-45)
Full Text available from your nearest American Library

As Americans head into another presidential election in November, one of the most important issues facing the voter will be the economic situation of the average family. This essay focuses on the recent literature that addresses the economic decisions and outcomes of American families, a growth occupation for academic scholars and policymakers. The author breaks down his categories into history of the family; economic theory and the family; law and the family; families with children; work; child outcomes, or societal concern such as welfare reform for families at the bottom of the income distribution; and family reconfiguration, such as divorce, retirement and death. Such variety in employment studies and family research now requires a good background in demographics and population trends which was not the case even twenty years ago. One reason has been the impact of the working mother, as the beginning of the 21st century has seen increasingly vital positions in the corporate world held by women with children. The cost to employers of losing these key employees has started to impact employment policy thinking in ways that were previously not considered.

DEPOLITICIZING ZIMBABWE’S ECONOMY: SOLUTION FOR TWO MILLION PERCENT.
United States Institute of Peace. Raymond Gilpin. Web posted August 27, 2008.
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Although Zimbabwe’s deep-seated economic malaise has robbed citizens of their savings, rendered incomes practically worthless and undermined domestic productivity, experts believe that an effort to reform the country's political corruption and irresponsible monetary policies will be central to establishing social and economic stability in the long run.

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RISING INCOME INEQUALITY IN CHINA: A RACE TO THE TOP.
World Bank. Xubei Luo and Nong Zhu. Web posted August 27, 2008.
Full Text [pdf format, 26 pages]

Income inequality in China has risen rapidly in the past decades across regions, between rural and urban sectors, and within provinces. The dynamics of divergence across these sub-national areas have taken the form of a “race to the top.” An analysis based on household income determination shows that the increase in returns to education explains two-thirds of income changes in urban areas and one-sixth in rural areas. The widening income gaps are the consequence of higher growth in leading urban and coastal areas and that the skilled population has benefited more from the economic reforms carried out during the last 25 years.

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NEW WORLD ORDER (National Interest, no. 96, July-August 2008, pp. 8-40)
Full text available from your nearest American Library

A special series of articles in this issue of National Interest is devoted to the unprecedented challenges facing humanity in the decades ahead. In the introductory article A USER’S GUIDE TO THE CENTURY, Jeffrey D. Sachs believes that this is now a time of shared prosperity and also the risk of global conflict. Population growth, the emergence of the global economy and growing consumption are placing growing strain on the biosphere and natural resources, and are resulting in growing inequalities of wealth and power. Sachs believes that it is urgent to control population growth, introduce sustainable technologies to reduce the consumption of non-renewable resources, protect biodiversity, reduce greenhouse gas emissions, reduce grinding poverty in vulnerable developing countries, and a new method of governance to address these problems. Daniel Altman in MO' MONEY, MO' PROBLEMS notes that rising incomes have resulted in large increases in food, energy and commodity prices worldwide. In FEEDING FRENZY, Javier Blas writes that the global food crisis has the potential for serious political instability. In PANDEMIC PANDEMONIUM, Josh Ruxin notes that infectious diseases are a continuing threat, due to pressing public-health problems in many parts of the world, porous borders and the unprecedented amount of global travel. Finally, Neil Howe and Richard Jackson in BATTLE OF THE (YOUTH) BULGE look at long-term demographic pressures in the developing world and industrialized countries.

SLOW-MOTION RECESSION: WHAT CONGRESS CAN DO TO HELP.
Center for Economic and Policy Research. Eileen Appelbaum et al. July 2008.
Full Text [pdf format, 14 pages]

The report presents several proposals designed to address the nation’s current economic slowdown. The authors suggest a second stimulus package, which includes an expanded tax credit for homes and businesses to make energy conserving renovations, subsidies for state and local governments to reduce fares on public transportation, and additional payments to low- and moderate-income households through programs such as Food Stamps, School Lunches and the Low Income Heating and Energy Assistance Program to make it easier for families to cope with rising food and energy prices.

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WORLD ECONOMIC AND SOCIAL SURVEY 2008: OVERCOMING ECONOMIC INSECURITY.
Department of Economic and Social Affairs, United Nations. Web posted July 4, 2008.
Full Text [pdf format, 234 pages]

According to the report, economic insecurity arises from the exposure of individuals, communities and countries to adverse events, and from their inability to cope with and recover from the downside losses. The risk and threats vary from community to community; in advanced countries, they have been associated with a significant rise in inequality, a hollowing out of middle-class lifestyles and reduced welfare protection. Elsewhere, economic shocks and premature deindustrialization have raised fears of an insufficiency of the formal sector jobs needed to accommodate an expanding urban population. In still other places, food insecurity has given rise to political discontent and increased levels of personal insecurity.

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Kaplan, Jeffrey THE GOSPEL OF CONSUMPTION (Orion, May/June 2008)
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"Keep the Consumer Dissatisfied," wrote Charles Kettering, director of General Motors Research in 1929. Kettering's article appeared at a time that the industrial leaders of the U.S. feared that the industrial capacity for turning out goods was outpacing people's sense of need for them. Two years earlier, U.S. Labor Secretary James J. Davis framed the problem in figures: the U.S. textile mills could produce all the cloth needed in six months' operation each year and 14 percent of U.S. shoe factories could make a year's supply of shoes. Kaplan traces how the U.S. decided as a society to pursue higher productivity, not the reduction of labor, with the imperative to consume everything that can be produced. In a philosophical counterpoint, the Kellogg Company, the world's leading producer of ready-to-eat cereal, made a strategic decision in 1930 to operate its plants with four six-hour shifts instead of three eight-hour shifts. The move was hugely popular with the company's workers, but anathema to the National Association of Manufacturers. Association president John E. Edgerton declared, "I am for everything that will make work happier but against everything that will further subordinate its importance. The emphasis should be on work -- more work and better work. Nothing breeds radicalism more than unhappiness unless it is leisure." The Kellogg owners sold the company and the new owners erased the six-hour day. Kaplan writes that Americans would be well served if they could opt for fewer material goods, fewer work hours and more time for themselves, their families and communities.

Wallerstein, Immanuel WHERE IS THE WORLD HEADED? (YaleGlobal, 10 July 2008)
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As the world heads into the next decade, there are two arenas where we can anticipate great turbulence - the geopolitical arena and the world-economy, with the relative decline of US geopolitical power…

AN ANALYSIS OF THE CABLE INDUSTRY’S IMPACT ON THE U.S. ECONOMY.
Bortz Media & Sports Group, Inc. Web posted June 13, 2008.
Full Text [pdf format, 54 pages]

The U.S. cable industry accounts for 1.5 million jobs in all 50 states representing almost $62 billion in personal income and a gross economic output of nearly $227 billion, according to study. In addition, it concludes that between 2002 – 2007, direct and indirect employment attributable to the cable industry increased by almost 367,000 jobs, which amounts to nearly five percent of all net new jobs created by the U.S. economy during that five-year period. A major source of the industry’s job growth and economic impact can be attributed its aggressive re-investment of capital, $130 billion since 1996, to develop the nation’s most widely available broadband infrastructure.

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GLOBAL ECONOMIC GLOOM – CHINA AND INDIA NOTABLE EXCEPTIONS.
Pew Research Center. Andrew Kohut et al. June 12, 2008.
Full Text [pdf format, 150 pages]

The survey of more than 24,000 people in 24 countries reveals that slumping economic conditions is a major concern for the people around the world. Most people in 18 of the 24 countries surveyed describe current economic conditions in their country as bad. Assessments have worsened over the past year among countries surveyed in both this year and 2007. The median percentage rating their national economy as bad rose from 50% in 2007 to 61% in the current poll. The proportion of respondents expressing a positive view of their nation’s economy has declined in 14 of the 22 countries since last year.

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AFRICA@RISK.
World Economic Forum. June 2008.
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The report has been prepared for the World Economic Forum on Africa, Cape Town, South Africa, on June 4-6, 2008. The latest insights into trends, potential impacts and mitigation relevant to four key risks facing Africa are identified and explored: food and freshwater security, geopolitical instability, economic shocks and climate change.

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WORLD ECONOMIC AND SOCIAL SURVEY 2008: OVERCOMING ECONOMIC INSECURITY.
Economic and Social Council, United Nations. Web posted May 2008.
Full Text [pdf format, 22 pages]

Economic insecurity arises from the exposure of individuals, communities, and countries to adverse events, and from their inability to cope with and recover from the downside losses. The attention brought to the presence of heightened economic risks and compounded threats has often been met with the response that the forces behind them are autonomous and irresistible, and beyond our collective political control. The survey shows that a strong “social contract” is needed to secure the spaces within which individuals, households and communities can pursue their day-to-day activities with a reasonable degree of predictability and stability, and with due regard for the aims and interests of others.

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EVALUATING THE POTENTIAL FOR A RECESSION IN 2008.
Congressional Research Service, RL34484, Library of Congress. Marc Labonte. May 13, 2008.
Full Text [pdf format, 24 pages]

The U.S. economy has faced some bad news lately. The housing boom has come to an abrupt halt, and housing sales and house building have been falling at double digit rates. Financial institutions have written off large losses because of falling asset values, particularly for mortgage-backed securities. It is therefore not surprising that consumer confidence is at a five-year low. A look at the available data suggests that economic growth has slowed considerably, but it is too soon to tell if the economy has entered a recession. Recessions are defined as prolonged and sustained declines in economic activity, so by definition, a persistent downturn cannot be identified until it has persisted. Given the lags between policy changes and their effects on the economy, the economy has not yet felt the full impact of the stimulus package and the Federal Reserve’s actions. Therefore, it is still too early to tell.

AN ANALYSIS OF THE CABLE INDUSTRY’S IMPACT ON THE U.S. ECONOMY.
Bortz Media & Sports Group, Inc. Web posted June 13, 2008.
Full Text [pdf format, 54 pages]

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GLOBAL ECONOMIC GLOOM – CHINA AND INDIA NOTABLE EXCEPTIONS.
Pew Research Center. Andrew Kohut et al. June 12, 2008.
Full Text [pdf format, 150 pages]

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AFRICA@RISK.
World Economic Forum. June 2008.
Full Text [pdf format, 20 pages]

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WORLD ECONOMIC AND SOCIAL SURVEY 2008: OVERCOMING ECONOMIC INSECURITY.
Economic and Social Council, United Nations. Web posted May 2008.
Full Text [pdf format, 22 pages]

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EVALUATING THE POTENTIAL FOR A RECESSION IN 2008.
Congressional Research Service, RL34484, Library of Congress. Marc Labonte. May 13, 2008.
Full Text [pdf format, 24 pages]

UNDERSTANDING STAGFLATION AND THE RISK OF ITS RECURRENCE.
Congressional Research Service, RL34428, Library of Congress. Brian W. Cashell and Marc Labonte. Web posted April 28, 2008.
Full Text [pdf format, 17 pages]

The slowing of economic growth and the rising rate of inflation have given rise to concerns that the U.S. economy is at risk of an episode of stagflation. Stagflation describes an economy that is characterized by high rates of both unemployment and inflation. The term came into popular use in the 1970s to describe the economy at that time. Even though recent unemployment and inflation rates are not nearly as high as they were in the 1970s, some economists fear that the recent expansion in monetary and fiscal policy at a time when unemployment is low but rising and energy prices are rising, could lead to a new bout of stagflation in the near future.

A DECADE OF SUFFERING IN ZIMBABWE.
Center for Global Liberty & Prosperity, CATO Institute. David Coltart. March 24, 2008.
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Just days before the Zimbabwe’s presidential and parliamentary elections, Coltart looks at Mugabe’s rule in the past decade. He finds Mugabe and his supporters responsible for an economic meltdown that has turned one of Africa’s most prosperous countries into a country with one of the lowest life expectancies in the world. He believes half a million Zimbabweans may have died already due to HIV/AIDS, poverty and malnutrition. In addition, there is no freedom of speech or assembly and the state has used violence to eliminate its opponents. Coltart hopes for a new government that would work to heal Zimbabwe and her people.

VENEZUELA FORUM: CONCLUSIONS AND FUTURE IMPLICATIONS.
Center for Strategic and International Studies (CSIS). Peter DeShazo. Web posted April 14, 2008.
Full Text [pdf format, 16 pages]

This is the conclusion of the five panel presentations under the title “Venezuela Forum” between July 2007 and March 2008 by the Americas Program of the Center for Strategic and International Studies. The panel presenters consisted of leading Venezuelan experts as well as several U.S. academicians. The project examined developments in key areas: politics, the economy, energy, social conditions, foreign relations, and civil-military relations in Venezuela since 1999.

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HOW LARGE IS CHINA'S ECONOMY? DOES IT MATTER?
Congressional Research Service, RS22808, Library of Congress. Wayne M. Morrison, et. al. Web posted February 15, 2008.
Full Text [pdf format, 6 pages]

Since embarking on a road of free market reforms nearly three decades ago, China has been one of the world’s fastest growing economies. Some analysts have contended that China could soon overtake the United States to become the world’s largest economy. However, in December 2007, the World Bank issued a study that lowered its previous estimate of the size of China’s economy by 40%. The new data could have an impact on U.S. and international perceptions over other aspects of China’s economy, including its living standards, poverty levels, and government expenditures, such as on the military.

RUSSIA’S VIRTUAL ECONOMY.
Brookings Institution. Clifford Gaddy. February 21, 2008.
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The virtual economy was the system of informal rent-distribution that arose in post-Soviet Russia in the 1990s as nonviable Soviet-era manufacturing industries sought to protect themselves from the discipline of the market. Enterprise directors and their allies throughout the economy (including government officials) colluded to use nonmarket prices and various forms of nonmonetary exchange such as barter to transfer value from resource sectors to manufacturing industry. The article discusses the system’s historical roots, describes some of its characteristic phenomena, and outlines a model for behavior of enterprises.

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GETTING AHEAD OR LOSING GROUND: ECONOMIC MOBILITY IN AMERICA.
[Pew Charitable Trust/Brookings Institution]. Julia B. Isaacs, et. al. Web posted February 20, 2008.
Full Text [pdf format, 120 pages]

This study, conducted by Brookings scholars for the Pew Charitable Trust, interprets a variety of statistics and other information on wealth, education, and other factors in order to evaluate the current state of economic mobility and opportunity in the United States.

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CHINA’S ECONOMIC FLUCTUATIONS AND THEIR IMPLICATIONS FOR ITS RURAL ECONOMY: FINAL REPORT.
Carnegie Endowment for International Peace. Albert Keidel. Web posted January 11, 2008.
Full Text [pdf format, 110 pages]

Despite a series of fluctuations between periods of fast and slow growth, China’s economic growth has averaged over 10% since 1990. These cycles seem to have disadvantaged the rural economy, however. By 2006, the gap in per capita consumption between rural and urban areas was back at its 1978 levels.

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AA08072
Rodriguez, Francisco AN EMPTY REVOLUTION: THE UNFULFILLED PROMISES OF HUGO CHAVEZ (Foreign Affairs, Vol. 87, No. 2, March-April 2008)
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According to Rodríguez, former chief economist of the Venezuelan National Assembly and now an assistant professor at Wesleyan University, the facts show that President Hugo Chavez has accomplished no more than previous Venezuelan governments in reducing poverty yet has managed to wreck the economy. While surging oil prices have kept Venezuela's economy and tax revenue expanding, inflation has accelerated and delivery of basic foodstuffs and public services is failing. Under Chavez, the government has increased spending sharply, nationalized key sectors, regulated prices and wages, and eroded private property rights. Meanwhile, it has replaced previous social programs with high-profile initiatives aimed at specific problems in poor neighborhoods. Yet official statistics show no improvement in Venezuelans' well-being and, in fact, a higher proportion of underweight babies, households lacking running water, and families living in dwellings with earthen floors. Independent research shows negligible improvement in literacy, rebutting the government's claim. Reckless government spending and expansion of the money supply coupled with falling oil output resulting from gross mismanagement foretell far worse economic and political conditions for Venezuela.

AA08078
Draut, Tamara et al. MOBILIZING MILLENNIALS (American Prospect, Special Report, vol. 19, no. 3, March 2008, pp. A1-A23)
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Today’s young adults are the first generation whose living standards may decline from their parents’. There is abundant evidence of declining economic opportunity and growing insecurity, with widespread debt and the shrinking number of jobs paying decent wages for most without advanced degrees. Most political campaign rhetoric has been aimed at middle-aged and retired voters, while the concerns of the young are largely confined to the margins. However, there is growing political activism, with 43 percent of young people ages 18-29 having voted this year, and an increasing interest in trade unionism. In this special series, eight authors appraise the gloomy outlook for today’s young people, and call for a sustained commitment to improve their economic horizons.

WORLD ECONOMIC SITUATION AND PROSPECTS 2008.
Department of Economic and Social Affairs, UNCTAD, United Nations. January 9, 2008.
Full Text [pdf format, 194 pages]

The growth of the world economy moderated somewhat from 3.9 per cent in 2006 to a nonetheless robust 3.7 per cent during 2007. The baseline forecast of the United Nations for 2008 is for growth of the world economy to slow further to 3.4 per cent. This report claims that “the major drag on the world economy is coming from a slowdown in the United States, driven by the slump in the housing sector.” The report looks at inflation, investment rates, and other factors affecting economies around the world.

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ECONOMIC OUTLOOK: ECONOMIC GROWTH TO SLOW ON CREDIT MARKET UNCERTAINTY AND HOUSING CONTRACTION, PICK UP PACE IN SECOND HALF.
Securities Industry and Financial Markets Association (SIFMA). December 10, 2007.
Full Text [pdf format, 6 pages]

Members of SIFMA expect the pace of the U.S. economy to slow in the first half of 2008 but pick up in the latter part of the year. Based on a survey of SIFMA members conducted during the week of November 27-December 3, the respondents also project the Gross Domestic Product to grow at 2.1 percent next year.

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GLOBAL ECONOMIC PROSPECTS 2008: TECHNOLOGY DIFFUSION IN THE DEVELOPING WORLD.
World Bank. January 9, 2008
Table of Contents [html format]

Full Report [pdf format, 224 pages]

“This edition of Global Economic Prospects is being released during a period of increased uncertainty following four years of record growth in developing countries. In addition to examining economic prospects over the near and longer term, it takes an in-depth look at the current level of and recent trends in technological achievement and the main factors that determine the extent to which developing countries succeed in implementing foreign technologies.” – From the Overview

VENEZUELA: POLITICAL CONDITIONS AND U.S. POLICY. Mark P. Sullivan and Nelson Olhero. Congressional Research Service (CRS), Library of Congress. Updated June 8, 2007.
Full Text [pdf format, 46 pages]

Under President Hugh Chávez, Venezuela has gone through enormous changes such as a new constitution, a unicameral legislature, and even a new name. In the past, the U.S. has had a close relationship with Venezuela (the fourth major supplier of foreign oil to the U.S.), but U.S. officials are concerned about Chávez’s arms purchases, his relations with Cuba and Iran, and his efforts to export populism to other Latin American countries. Additionally, the U.S. and some human rights organizations are concerned about the deterioration of democratic institutions and threats to freedom in Venezuela.

Congress has also expressed concerns about human rights and political conditions in Venezuela. This report provides an overview of legislation that has been introduced in the 110th Congress concerning the status of our bilateral relations with Venezuela.

GROSS DOMESTIC PRODUCT (GDP) BY STATE, 2006. Bureau of Economic Analysis, U.S. Department of Commerce. Web posted June 7, 2007.
Full Text [pdf format, 11 pages]

This report provides information on the U.S. growth in real Gross Domestic Product (GDP). The report shows that growth in the private services sector was strong in most states. Four of the fastest growing states were Arizona, Idaho, Utah, and Washington; and Delaware had the highest per capita real GDP.

THE REMARKABLE AMERICAN CONSUMER. John H. Makin. Economic Outlook, American Enterprise Institute for Public Policy Research. May 30, 2007.
Full Text [pdf format, 4 pages]

“The American consumer is a very persistent spending machine.” Consumption growth is running higher than 4 per cent annually and has kept the economy out of a recession for the past six months. American consumption is also immensely important to the world economy because it creates a “reliable and persistent source of demand growth that accounts for over 70 percent of the U.S. GDP growth. . .” and a significant portion of the rising demand for exports. This report looks at the American consumer and consumption growth over the past several decades.

OVERVIEW OF THE ECONOMIC AND SOCIAL CONDITIONS IN AFRICA: 2007. Economic and Social Council, UN Pulse, United Nations. April 18, 2007.
Full Text [pdf format, 23 pages]

“This report reviews the economic and social conditions in Arica for 2006 and presents an outlook for medium-term developments and prospects for growth in 2007.” The report shows an economic growth of 5.7 per cent. These positive results can be attributed to higher prices of primary commodities, debt relief, increased capital flows, and an improved political climate.

However, the improvements in social development are significantly behind economic performance. The report concludes with recommendations to reduce poverty and achieve the Millennium Development Goals.

AA07196
Kunstler, James Howard MAKING OTHER ARRANGEMENTS: A WAKE-UP CALL TO A CITIZENRY IN THE SHADOW OF OIL SCARCITY (Orion, January/February 2007)
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Kunstler, a journalist, author and provocative public speaker, notes that America is “sleepwalking into a permanent energy crisis”. The entire U.S. economic infrastructure was built when petroleum was cheap and plentiful -- Kunstler argues that American suburbia, with its “far-flung housing subdivisions, commercial highway strips, big-box stores, and all the other furnishings and accessories of extreme car dependence ... represents the greatest misallocation of resources in the history of the world, and will function poorly, if at all, in an oil-scarce future.” Most of the efforts currently underway to reduce U.S. dependence on imported oil revolve around keeping the existing infrastructure running, Kunstler writes, but “we are not going to run Wal-Mart, Walt Disney World, Monsanto, and the Interstate Highway System on any combination of solar or wind energy, hydrogen, ethanol, tar sands, oil shale, methane hydrates, nuclear power, [or] thermal depolymerization ... we will desperately use many of these things in many ways, but we are likely to be disappointed in what they can actually do for us.” He argues that Americans “have to make other arrangements for the basic activities of everyday life”, including rehabilitation of the nationwide passenger rail network, electrifying local mass transit, localizing food production and manufacturing, changing commuting and work patterns, moving back to small towns, and rethinking the health-care and educational systems.

GLOBAL ECONOMIC PROSPECTS 2007/2008: SLOWING TO SUSTAINABLE GROWTH.
Michael Mussa. Peterson Institute. April 4, 2007.
Full Text [pdf format, 18 pages]

This paper was presented at the semiannual meeting on Global Economic Prospects. The author projects a significant slowdown in the U.S. economy during the coming year, “and with most of the rest of the world economy operating at near, or even somewhat above, potential, some slackening in the pace of global economic advance—down to about 4 ½ percent—is now virtually certain for 2007 and 2008.”

ANNUAL ENERGY OUTLOOK 2007: WITH PROJECTIONS TO 2030.
Office of Integrated Analysis and Forecasting, Energy Information Administration, U.S. Department of Energy. February 2007.
Full Text [pdf format, 242 pages]

This report presents a long-term projection of energy supply, demand, and prices through 2030. It provides a summary of referenced cases; discusses evolving legislation and regulation issues including an update of key provisions of the Energy Policy Act of 2005 (EPACT2005); and supplies a summary of sunset provisions in selected fuel taxes and tax credits.

AA07067
Phelps, Edmund S. ENTREPRENEURIAL CULTURE
(Wall Street Journal, February 12, 2007, p. A15)
Full text available from your nearest American Library

A Nobel Laureate in economics, Phelps analyzes the reasons behind why European economies, primarily the Big Three (Germany, France, and Italy), are doing poorly compared with the United States. Phelps identifies the lack of “economic dynamism,” the ability to come up with innovative business ideas, as a primary factor. Phelps attributes this to differences in goals that workers seek in their jobs. For example, when asked the importance of “jobs offering opportunities for achievement”, 42 percent of French respondents ranked it a high priority, versus 73 percent of American respondents. He also notes that there is a sense of anti-commercialism in Europe, as compared to America, where the “man of action ... [is encouraged] to grasp the chance of moment,” applying a quote by Tocqueville.

WORLD ECONOMIC SITUATION AND PROSPECTS 2007. Department of Economic and Social Affairs (DESA), The United Nations. January 2007.
Full Text [pdf format, 177 pages]

The Global outlook:

Slower economic growth in 2007: moderating to 3.2 per cent, down from the estimated 3.8 per cent in 2006.
Continued growth in developing counties: 5.9 percent for developing countries and 6.5 per cent for economies in transition which is down slightly from 2006 of 6.5 and 7.2 per cent respectively;
Insufficient employment growth: unemployment dipped slightly in developed economies in 2006, but the developing world did not have growth strong enough to reduce unemployment rates; and
Benign inflation outlook: higher oil prices caused higher inflation in most economies during 2006, but only moderate inflationary pressures are expected in 2007 due to a slowdown in the global economic growth and tighter monetary policies.

CHINA: GRAPPLING WITH RAPID ENERGY DEMAND GROWTH.
Erica Downs. The Brookings Foreign Policy Studies, Energy Security Series, The Brookings Institution. Web posted December 26, 2006.
Full Text [pdf format 67 pages]

China has become the second largest consumer and third largest producer of primary energy. China’s energy consumption rose by 60% in the past five years. It can meet its energy needs with domestic supply coal reserves and coal-based economy. It imports almost half of its oil needs.

“This monograph examines China’s approach to energy security. It focuses on oil because it is presently the only fuel that China imports in substantial quantities…” The key findings are as follows:

The Energy Leading Group established in 2005 indicates that China’s leadership is dissatisfied with the present policymaking apparatus
An imbalance between the use of administrative adjustments and market mechanisms in the energy sector will continue
Demand moderation will be emphasized
The relationship between the government and China’s national oil companies (NOCs) will continue to deteriorate—the NOCs will continue to see greater autonomy
The relationship between foreign investments of China’s NOCs and the country’s energy security will continue to cause concern with many Chinese analysts
Domestic energy security is linked to international energy security
China’s oil interests will continue to shape its broader foreign policy

INDIA.
Foreign Policy Studies Energy Security Series. Brookings Institute. November 2006.
Full Text [pdf format, 98 pages]

“Growth demands energy. India—with an economy expected to grow at over 5 percent a year for the next twenty-five years—has developed a ravenous appetite for energy. India is the world’s fifth largest consumer of energy, and by 2030 it is expected to become the third largest, overtaking Japan and Russia.” If consumption follows the current trajectory, India is projected to run out of coal in forty years.

As India’s import dependence grows, concerns for reliable, affordable energy intensifies. Importation of sources of energy is complicated by several factors: (1) oil suppliers are in unstable regions; (2) oil prices are high; (3) geopolitical uncertainty could disrupt oil prices; (4) slow market reform has limited investment; and (5) there are few or no viable energy alternatives.

ECONOMIC FREEDOM OF THE WORLD.
James Gwartney and Robert Lawson (authors), with William Easterly (contributor) Cato Institute; Fraser Institute. Web-posted September 7, 2006.
Table of Contents [pdf format, various pagings]

Economic Freedom of the World measures the degree to which the policies and institutions of countries support economic freedom. The report identifies the cornerstones of economic freedom as personal choice, voluntary exchange, freedom to compete, and security of privately owned property.

In this year's index, Hong Kong once again has the highest rating for economic freedom, followed by Singapore, New Zealand, Switzerland, and the United States. The rest of the top ten are the United Kingdom, Ireland, Canada, Iceland and Luxembourg. Chile has the highest-ranking economy in Latin America, while Botswana ranks first in Africa.

According to this report, nations that have made substantial gains in economic freedom since 1985 are Hungary, Iceland, El Salvador, Zambia, Poland, Bolivia, Israel, Ghana, Uganda, Peru, and Nicaragua. Nations that have registered significant losses in economic freedom since 1985 are Myanmar, Venezuela, and Zimbabwe. The bottom ten nations listed are Central African Republic, Rwanda, Burundi, Algeria, Guinea-Bissau, Venezuela, Democratic Republic of Congo, Republic of Congo, Myanmar, and Zimbabwe.

THE ECONOMIC EFFECTS OF RECENT INCREASES IN ENERGY PRICES.
Congressional Budget Office (CBO). July 2006.
Download [pdf format, 36 pages]

In the past, large increases in oil prices coincided with major macroeconomic problems: recessions and higher inflation. The jump in oil prices that began in late 1973 occurred at the same time as an increase in consumer price inflation and just before the 1973-1975 recession. Likewise, the oil price increases of the 1979-1980 period coincided with higher inflation and the 1980 recession. The price hikes of 1990 and 1999 also appear to have been related to recessions and some increases in inflation. Given that history, this Congressional Budget Office (CBO) report examines why the economic impacts of this latest period of steep increases in oil prices have been relatively mild.

The report suggests that the current milder effects of rising energy costs include the following interrelated factors:

U.S. and many foreign economies were at robust points in the business cycle when energy prices began to rise.
The Federal Reserve has established a strong record of successful monetary policy.
The U.S. economy has changed over the past 25 years in ways that have increased its underlying flexibility and stability.

AA06263
Ferguson, Niall REASONS TO WORRY
(New York Times Magazine, June 11, 2006, pp. 46-48, 50)
View article on ProQuest (password required)

The author asks whether the United States is capable of evolving out of its present excessive indebtedness, or could a drastic change in the global economic environment threaten, if not a collapse, at least a decline relative to smaller, more dynamic economies. Ferguson analyzes a chain effect from the collapse of household savings, the rise in home mortgage debt, a large and growing trade deficit, and the fact that Asian countries hold so many U.S. treasuries. He notes that one analyst has half-seriously calculated that the last U.S. treasury held by an American will be purchased by the People's Bank of China on February 9, 2012. Since becoming president, George W. Bush has presided over one of the steepest peacetime rises ever in the federal debt, which now exceeds $8.3 trillion. Projections from the Congressional Budget Office expect this to be $12.8 trillion within a decade. American consumption has been the principle source of global economic growth over the past decade, says Ferguson. However, this same readiness of American households and politicians to borrow has led to another corollary: the United States has become the world's biggest debtor. This has further resulted in a widening annual gap between American exports and imports and a remarkable accumulation of foreign debt, with foreigners making large claims on the future output of the United States.

AA06166
Crook, Clive FIXING THE WORLD ECONOMY, PART 97 (National Journal, vol. 38, no. 17, April 29, 2006)
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The author, senior writer for National Journal, discusses the recent agreement to enlarge the role of the International Monetary Fund (IMF) and to equip it to "help resolve global 'economic imbalances.'" He contends that the deal was not the transformation of the institution that many claimed. The international imbalances, principally the U.S. current-account deficit and China's surplus, have been around for several years, and economists have warned of impending disaster, which has not happened. The author warns against being reassured by the familiarity of the issue, asserting, "imbalances in global trade and finances are exposing the United States and the world to some serious economic hazards" and pointing out that "the willingness of foreigners to continue to lend to America is visibility under strain..." He points out that the upcoming IMF report will advise the United States to increase its domestic savings and China to allow its currency to appreciate, but expresses doubt that either will take place because of a lack of political will.

ENERGY PRICES AND THE ECONOMY.
Joint Economic Committee. United States Congress. January 2006.
Download the document [pdf format, 20 pages]

This paper explores why today's U.S. economy is less vulnerable to energy price increases, compared to its performance during previous "oil shock" episodes in the 1970s and 1980s. The following factors are considered:

The U.S. economy is now more energy efficient.
The U.S. economy is now less energy intensive as the service sector has grown.
The share of the household budget devoted to energy expenditures has fallen.
Oil and gas prices after adjustment for inflation remain below historical highs.

The paper's first section focuses on how higher energy prices might affect production - or the supply side of the economy. The second section looks at the expected effects of higher petroleum and natural gas prices on consumer spending - including consumers' automobile purchases. The third section reviews how economic models forecast the effect of high oil prices on economic growth, and why those attempting to make use of the forecasts need to be wary. The fourth section discusses the effect of the 2005 hurricanes on energy prices. The underlying causes of the high oil prices are analyzed in the final section.

2006 INDEX OF ECONOMIC FREEDOM.
Marc A. Miles, Kim R. Holmes, and Mary Anastasia O'Grady, editors. Heritage Foundation; Wall Street Journal. Web-posted January 2006.
Full Report: [pdf format, 440 pages]

This 12th edition of the Index documents the correlation between freedom and prosperity. Countries that improve their scores in 10 categories of economic freedom -- trade policy, fiscal burden of government, government intervention in the economy, monetary policy, capital flows and foreign investment, banking and finance, wages and prices, property rights, regulation and informal (or black) market activity -- tend to see their standards of living and per capita incomes rise.

Data gathered for the 2006 Index show a net increase in global economic freedom. Of the 157 countries analyzed, 99 scored better this year than last year, and five had unchanged scores. The scores of 51 countries were worse than last year. Overall, 20 countries are classified as having "free" economies, 52 as "mostly free," 73 as "mostly unfree," and 12 as "repressed."

Countries ranked as the most free are: Hong Kong (1st); Singapore (2nd); Ireland (3rd); Luxembourg (4th); Iceland (5th); United Kingdom (5th); Estonia (7th); Denmark (8th); Australia (9th); New Zealand (9th); United States (9th); Canada (12th); Finland (12th); and Chile (14th). (Note: Countries with identical total scores receive the same numerical ranking.)

Those countries ranked as the least free are: Nigeria (146th); Haiti (147th); Turkmenistan (148th); Laos (149th); Cuba (150th); Belarus (151st); Venezuela (152nd); Libya (152nd); Zimbabwe (154th); Burma (155th); Iran (156th); and North Korea (157th). (Note: Countries with identical total scores receive the same numerical ranking.)

In addition, the report highlights notable efforts of people around the world to overcome the barriers they face. These anecdotes describe:

The entrepreneurial talents of people in Africa and Asia who have created non-government-sanctioned private schools that deliver a superior level of education.
Entrepreneurs in India who have managed to circumvent pervasive restrictions and create markets where there might have been none.
Informal banking institutions in Chinese provinces that provide accessible funding to individuals that the state-run banks cannot serve.

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