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The drivers of both the tractor and the metallic-silver luxury car were 45-year-old women , but any similarity between them ended there : the former was a peasant , the latter the wife of a wealthy businessman . After a confrontation between the two , the wealthy wife drove her BMW into the growing crowd of spectators on the roadside , killing the peasant woman and injuring 12 others . The case went to the local court , where the judge ruled it an " accidental traffic disturbance " and gave the driver a two-year suspended sentence . The judge 's ruling spurred rumors that he went easy on her because her hus band was related to senior provincial officials . It quickly became a story of " rich versus poor , " widely cited as an example of high-level corruption . Over the next few months , newspapers and television stations ran with the story as it snowballed into a national obsession . Alarmed by the public reaction , the Harbin magistrate ordered the case reopened , only to have the suspended sentence confirmed when the case was closed this March . The big BMW story of late 2003 resurfaced quietly , before being buried again forever . That same month , a lottery scandal threw the BMW brand into the limelight once again . Lottery officials in Shaanxi province rejected a winning ticket , calling it a fake and denying its bearer , a 17-year-old security guard named Liu Liang , the grand prize of a $58,000 BMW and 120,000 yuan ( $14,510 ) in cash . Liu became so angry about being accused of fraud and denied the car that he climbed atop a high advertising billboard and threatened to jump as a show of innocence . But the story did n't end when police officers managed to talk him down . News broadcasts covered his continued insistence that he did not forge his ticket , along with the lottery center 's claims that their rejection of the ticket was legitimate . The police finally stepped in and , after a careful investigation , announced that they had found the true criminal : Yang Yongming , a private businessman whom the local lottery administration had contracted to organize ticket sales . Yang had conspired with the government officials directing the lottery , who were arrested for malfeasance , to fraudulently obtain the top prizes . In June Liu Liang finally got what he deserved - a BMW-325i sedan and a sincere apology from the lottery center . If the first scandal was a tragedy , the second was more like a farce . But both offer keys to understanding contemporary Chinese psychology . The outcry after the first BMW case was not really about the light sentence given t o a rich woman , but about the lack of confidence ordinary people have in China 's judicial system . In China , power , money , and connections trump the law . Even as they are becoming ever more litigious , many Chinese believe that they have no hope of securing justice against the powerful . The apathetic response of the dead peasant woman 's husband to the $10,000 in compensation he received was telling . " I do n't care about the verdict and whether it is justice or not , " he said . The most harmful consequence is the public 's loss of trust in the system . Social trust is not something you can buy with money . If an entire society believes that you cannot depend on legal rights for protection - that one must instead rely on a web of relationships with those who have power and influence - questions about whether such a society is livable or desirable will remain . Similarly , in the second BMW case , people did n't blame a corrupt businessman ; they ascribed culpability to the lottery center , a government body . So instead of mistrusting one person , they grew suspicious of an institution - even of government itself . When a stubborn teenager went up against the mighty lottery authority with its army of auditors and inspectors and initial alibis , this individual , not the system , was the clear winner of the public 's admiration . Liu Liang may have been just a working-class kid , but there was wisdom in his words that there is still a " silent majority " who can affect the workings of China 's fragile society . He refused to settle privately , because he believed that if he let corrupt government officials off the hook , " they 'll keep scamming the public . " Thanks to his perseverance and the media 's investigation , the fraud was laid bare . Power corrupts everywhere , but individuals in China such as Liu have come to form a countervailing force . Even so , such marginal forces do not yet constitute a system for redressing grievances . While pop mus ic fans in China can listen to whatever they like , including Madonna singing " I 'm gonna shake up the system , " ordinary Chinese need courage to speak such messages aloud . As one saying goes , " There is not want of conscience in Chinese , but there is want of courage . " </text> +<text id="syndicate/china-and-a-new-balance-of-power"> +China and a New Balance of Power SHANGHAI â The last rival superpower to the United States , the Soviet Union , collapsed in 1991. But , apart from its military strength , the USSR was never really powerful enough to counterbalance US influence . In the late 1980âs , Japan seemed capable of challenging Americaâs industrial leadership , but by the 1990âs it lost its competitive edge . China might itself wish to be a major force in a multi-polar world , but has been plagued by its lack of overall strength . Given these realities , China sees the expanding European Union as a likely counterweight to unchecked US power . In terms of economic output , todayâs EU is on par with the US . But it has yet to build a strong defense system that can respond effectively either to regional contingencies or to global needs . What would be the strength of such a system if and when it is developed , and how will it compare with that of the US ? In assessing Americaâs strength , China foll ows US debates on the merits of a uni-polar or a multi-polar world with keen interest . Some Americans favor a uni-polar system in which the US dominates . Such a Pax Americana would cost the country less to sustain , but the world would worry if America adopts a wrong policy , as has been the case in Iraq . The US certainly has a right to curb terrorists like those who staged the attack on September 11 , 2001. But the â war on terror â did not warrant the decision to attack a sovereign state and topple its government on the flawed presumption that it housed weapons of mass destruction and was linked to the 2001 attacks . The US went to war despite strong opposition from France , Germany , Russia , China , and other United Nations Security Council members . France and Germany have since sought to restore good relations with the US , but continue to disapprove of the war . The Middle East , always a region of concern for Europe , has become even less stable as a result of the war . American leadership has been one of the warâs casualties . In China , the concept of an independent European defense â embodied in the European Security and Defense Policy ( ESDP ) , as well as the EUâs Rapid Reaction Force ( RRF ) and various police missions â is thus generally seen as necessary and effective in a multi-polar world system . China observes that on most security matters , the ESDP will ( for now ) mimic American security interests , because the EU and US share fundamental values of human rights and democracy . Moreover , many EU members have simultaneously pledged their defense capabilities to NATO , which has been led by the US since its creation . But the ESDP , once fully developed , will not necessarily follow Americaâs lead unconditionally , especially if American policy continues to deviate from the norm of international law , as in Iraq . As a result of acquiring a pan-European defense capacity , the Europeans are likely to play a more independent role than at present in managing intra-European security relations and carrying out global missions . China welcomes this expanded security role for the EU . Although it remains wary of international intervention by the EU , the substance and pattern of ESDP operations are likely to win Chinaâs respect for several reasons . First , Chinaâs leaders note that the ESDP gives priority to the legitimacy of its missions . So far , all ESDP missions have respected international law and governmental arrangements among disputing parties . Most of its military or police missions have been based on UN Security Council resolutions , and ESDP missions outside Europe have been at the invitation of local authorities . Of course , ESDP security missions , even those in accordance with Security Council resolutions , may not operate within the UN system â the EU prefers its own independent leadership . The ESDP does not necessarily require Security Council authorization as a condition for its missions , and it retains an independent role in executing them . However , when compared with the US , the ESDP ( in Chinese eyes ) cares far more about international legitimacy , backed by the authority of the UN . Second , the ESDP is concerned with good governance and institution building . The EU is keen to restore or establish human rights , stability , and prosperity . Outside Europe , the ESDP acts to enhance governance rather than promote regime change , and the EU has often assisted governments â efforts to improve security conditions . Third , the ESDP is open to international cooperation . The EU works with either non-EU states , such as NATO members like Canada , Norway , and Turkey , or applicants for EU membership . The ESDP cooperates with the UN and other regional organizations , such as the African Union and ASEAN . When the EU reaches out , it tends to play a leading role in these collaborations . There are good reasons to expect that China will continue to acce pt an independent European security mechanism . There is little concern , if any , about the ESDP intervening in internal Chinese affairs , such as Taiwan . Indeed , China wants a strong and independent Europe , and from that vantage point it is not too early for China to envisage a truly multi-polar global system . </text> +<text id="syndicate/china-and-russia-in-the-new-world-disorder"> +China and Russia in the New World Disorder Can Kosovo achieve independence without the tacit consent of Russia , and can there be a humanitarian and political solution to the tragedy in Darfur without the active goodwill of China ? The two crises have nothing in common , but their resolution will depend in large part on whether these two permanent members of the United Nations Security Council use their veto power . Comparing the respective abilities of Russia and China to block key international initiatives makes no sense in itself , but it does constitute a useful tool for understanding the transformation of the international system that is now taking place as a direct consequence of the relative decline of Americaâs global power . From that standpoint , the deepening of chaos in the Middle East poses both opportunities and risks for Russia and China , which may force them to define the roles they want to play and the images they want to project in the world . The key question i s this : Is Russia taking giant steps in the â wrong direction â while China is taking â minuscule â steps in the â right direction â ? Superficially , Russia and China may give the impression that they are pursuing the same path when they both proclaim with pride that they are â back â on the world stage . But this boast means different things for each country . For China , a deeply self-confident country , to be â back â simply means regaining the countryâs historical centrality in the world after an absence of more than two centuries . After all , at the end of the eighteenth century , China became the worldâs first producer of manufactured goods , and it perceives itself as a center of civilization unequalled by any other in Asia , if not the world . Chinaâs renewed self-confidence is based on its remarkable economic prowess , which is derived not from natural resources , but from productivity and creativity . Whatever the huge political , social , and economic tensions may exist , there is a â feel good â factor in China , a sense of progress , with the 2008 Olympics in Beijing figuring as the symbolic moment that will proclaim to the world the scale of the countryâs achievements . Above all , with the exception of the Taiwan issue , China is a satisfied status quo power when it comes to the evolution of the international system â a patient actor that finds it perfectly legitimate to behave and to be seen as the worldâs number two power . By contrast , the Russians remain insecure about their status in the world . Russiaâs explosive â revisionist â behavior on the eve of the recent G8 summit is an indication of the Kremlinâs â unsatisfied â nature . Because they know they are less potent , particularly in demographic and economic terms , Russians feel they have to do â more . â For them , to say â Russia is back â means that the humiliating Yeltsin years are over , and that they now must be treated a s equals , particularly by the United States . Russians are nostalgic not for the Cold War as such , but for the international status they lost when it ended . Now that America is no longer a â hyperpower â with no strategic challengers , Russia has reasserted its status as a â superpower , â a claim that is not necessarily supported by reality . Unlike the Chinese , the Russians do not create economic wealth , but merely exploit their energy and mineral resources . Moreover , unlike the Chinese , they have not always been confident of their position in the world . Torn between Europe and Asia in cultural and political terms , victimized by a dark , narcissistic instinct that pervades their reading of their past and their visions of the future , it should surprise no one that Russia is now behaving like a â revisionist â power . Unsatisfied with their inner identity , it is only natural that Russians should demand changes that make them feel more secure and proud . Less than 20 years ago , the Czech Republic and Poland were part of their sphere of influence , so Russians understandably cannot accept the US unilaterally implanting its security system there . Of course , in their respective judgments on Russia and China , the West â and Europeans in particular â may be demonstrating selective emotions . â We â tend to be less demanding of China than of Russia , because we tend to see Russia as â European â ( at least culturally ) . As a result , the culture of physical violence and verbal provocation that is gaining ground in Putinâs Russia is deeply disturbing , whereas we tend to judge Chinese misdeeds with a greater sense of distance , if not indifference . But the differences between Russia and China today may prove to be less significant tomorrow if the deterioration in the Middle East imposes a sense of collective responsibility on all five permanent members of the UN Security Council . It is one thing for Russia and China to expl oit Americaâs growing difficulties from Gaza to Kabul ; but it is quite another if the situation deteriorates to the point of general destabilization in the region . Indeed , the Middle Eastâs deepening problems may impose a sense of restraint in Russia and China by forcing them to calculate not in terms of their global â nuisance value â vis-à -vis the West , but in terms of their ability to make a positive and stabilizing contribution to the world order . </text> +<text id="syndicate/china-japan-protests-islands-by-liah-greenfeld"> +The Roots of Chinese/Japanese Rivalry BOSTON â The anti-Japan protests that continue to roil China are just another indication of the rise of a potent Chinese nationalism . After a century slowly fomenting among Chinese intellectuals , national sentiment has captured and redefined the consciousness of the Chinese people during the last two decades of Chinaâs economic boom . This mass national consciousness launched the Chinese colossus into global competition to achieve an international status commensurate with the countryâs vast capacities and the Chinese peopleâs conception of their countryâs rightful place in the world . Rapidly , visibly , and inevitably , China has risen . Indeed , our era will likely be remembered as the time when a new global order , with China at the helm , was born . Competitive national consciousness â the consciousness that oneâs individual dignity is inseparably tied to the prestige of oneâs â people â â worked its way into the mind s of Chinaâs best and brightest between 1895 and 1905. In 1895 , China was defeated by Japan , a tiny aggressor whom the Chinese dismissively called wa ( the dwarf ) . China was already accustomed to rapacious Western powers squabbling over its riches , but had remained self-confident in the knowledge of these powers â irrelevance . However , the assault from Japan , a speck of dust in its own backyard , shattered this self-assurance and was experienced as a shocking and intolerable humiliation . Japanâs triumph in 1905 over â the Great White Power , â Russia , repaired the damage to Chinaâs sense of dignity . From the Chinese point of view , Russia was a formidable European power , one feared by other Western powers . Its defeat , therefore , was seen as a successful Asian challenge to the West , in which China , its intellectuals felt , was represented by Japan . Japan thus became the focus of Chinese attention . Gentlemen-scholars , who would reform and staff the Chin ese army and civil service in the early decades of the twentieth century , went to study in Japan . The Revolution of 1911 was inspired by the example of Japanâs Meiji Restoration ; and , because early-twentieth-century Japan was stridently nationalistic , the new China that emerged from its image was constructed on nationalist principles as well . Thus Japan became the significant â other â for China , the model that was imitated and the anti-model that was resented . Chinese nationalism borrowed from Japan its concept of the nation , including the very word by which it was expressed ( kuoming , from the Japanese kokumin ) . The Kuomintang ( the Chinese Nationalist Movement ) was explicitly inspired by Japan and fueled by repeated Japanese aggression . Paradoxically , but not unexpectedly , Mao Zedongâs struggle against the Kuomintang was inspired by anti-Japanese nationalism as well . As was the case virtually everywhere else , communism in China was nationalism incarnate . Maoâs speech on the establishment of the Peopleâs Republic plainly expressed the nationalist agenda behind it . Calling the nation â communist â assured the new Peopleâs Republic of China of the Soviet Unionâs support , which was viewed by Mao as more reliable than that of the United States . But neither the Russian nor the Chinese Communists were ever unclear about the nationalist nature of their respective projects . The upper echelons of the bureaucracy and intelligentsia in Russia and China were self-consciously nationalist and , throughout Communist rule , shrewdly pursued the supreme nationalist goal : prestige â the power , naked and otherwise , to impose the nationâs will on others . But national consciousness , particularly in China , was limited to a narrow elite , leaving the masses almost untouched . This changed dramatically with the Chinese governmentâs restoration of a capitalist economy . Much like in Germany in the 1840âs , when the appeal to p rivate enterprise converted the entire middle class to nationalism , the explicit definition of economic power as the central pillar of Chinaâs greatness awakened ordinary Chinese to nationalismâs appeal . Hundreds of millions now see themselves as sharing in the nationâs dignity , and are eager to contribute to it , as well as to defend it from insult . Competition for prestige , even when the contest is economic , is not a purely rational undertaking . So it should be no surprise that old injuries are likely to resurface . Some Chinese , especially those who are not economically successful , harp bitterly on Japanâs past depredations . Despite Chinaâs embrace of capitalism and Japanese investment , Japan remains Chinaâs reviled other . Indeed , a professor in Beijing told me not long ago , â Two in every ten Chinese dislike the US , but nine in every ten hate Japan . â For the West , there is a silver lining in this nationalist rivalry : neither China nor Japan is a rogue state , and , so long as their quarrels do not lead to the use of unconventional weapons , we may treat the friction between them as an internal Asian quarrel . Japan , moreover , is likely to let todayâs passions over disputed islands in the East China Sea cool down , despite the anti-Japanese outbursts in Chinese cities . But the West â and the US in particular â is new to dignity games à la Chinois . If it gets carried away and presumes to talk down to the 5,000-year-old culture of the Sages , the West could become the next object of Chinaâs nationalist resentment . </text> +<text id="syndicate/china-s-cyber-warriors"> +Chinaâs Cyber-Warriors NEW DELHI â The world now accepts that protecting our atmosphere , hydrosphere , lithosphere , and biosphere â the â global commons â â is the responsibility of all countries . The same norm must apply to cyberspace , which is critical to our everyday life , economic well-being , and security . At a time when cyber attacks are increasing worldwide , US Secretary of State Hillary Clinton was right to declare that an attack on one nationâs computer networks â can be an attack on all . â Indeed , the attacks are a reminder that , as a new part of the global commons , cyberspace already has come under threat . Cyberspace must be treated , along with outer space , international waters , and international airspace , as property held in common for the good of all . And , like ocean piracy and airplane hijacking , cyber-crime cannot be allowed to go unpunished if we are to safeguard our common assets and collective interests . Naming China among a ha ndful of countries that have stepped up Internet censorship , Clinton warned that â a new information curtain is descending across much of the world . â Her statement , with its allusion to the Cold War-era Iron Curtain , amounted to an implicit admission that the central assumption guiding US policy on China since the 1990âs â that assisting Chinaâs economic rise would usher in greater political openness there â has gone awry . The strategy of using market forces and the Internet to open up a closed political system simply is not working . Indeed , the more economic power China has accumulated , the more adept it has become in extending censorship to cyberspace . If anything , China has proven that a country can blend control , coercion , and patronage to stymie the Internetâs politically liberalizing elements . Through discreet but tough controls , Beijing pursues a policy of wai song , nei jin â relaxed on the outside , vigilant internally . Google is now crying f oul over â a highly sophisticated and targeted attack on our corporate infrastructure originating from China . â But , despite its corporate motto â â Donât be evil â â Google itself was instrumental in aiding online censorship in China , having custom-built a search engine that purges all references and Web sites that the Chinese government considers inappropriate . Now Google itself has become a victim of Chinaâs growing cyber prowess , in the same way that appeasement of Hitler boomeranged onto France and Britain . China deploys tens of thousands of â cyber police â to block Web sites , patrol cyber-cafes , monitor the use of cellular telephones , and track down Internet activists . But the threat to the new global commons comes not from what China does domestically . Rather , it comes from the way in which the know-how that China has gained in fashioning domestic cyber oversight is proving invaluable to it in its efforts to engage in cyber intrusion across it s frontiers . Canadian researchers have discovered a vast Chinese surveillance system called â GhostNet , â which can compromise computers in organizations abroad through booby-trapped e-mail messages that automatically scan and transfer documents to a digital storage facility in China . This is what happened when computers of the Tibetan government-in-exile in Dharamsala , India , were attacked last year . Indiaâs national security adviser recently complained that his office was targeted yet again by hackers . â People seem to be fairly sure it was the Chinese , â he said . Officials in Germany , Britain , and the US have acknowledged that hackers believed to be from China also have broken into their government and military networks . The state-sponsored transnational cyber threat is at two levels . The first is national , with the hackers largely interested in two objectives . One is to steal secrets and gain an asymmetrical advantage over another country . Cyber intrusi on in peacetime allows the prowler to read the content and understand the relative importance of different computer networks so that it knows what to disable in a conflict situation . The other objective is commercial : to pilfer intellectual property . The second level of cyber threat is against chosen individuals . The most common type of intrusion is an attempt to hack into e-mail accounts . The targets also can face Trojan-horse attacks by e-mail intended to breach their computers and allow the infiltrators to corrupt or transfer files remotely . To be sure , if a cyber attack is camouflaged , it is not easy to identify the country from which it originated . Through the use of so-called â false-flag espionage â and other methods , attacks can be routed through the computers of a third country . Just as some Chinese pharmaceutical firms exported to Africa spurious medicines with â Made in India â labels â a fact admitted by the Chinese government â some Chinese hacker s are known to have routed their cyber intrusion through computers in Russia , Iran , Cuba , and other countries . But , like their comrades in the pharmaceutical industry , such hackers tend to leave telltale signs . Then there are many cases in which the attacks have originated directly from China . It seems unlikely that these hackers , especially those engaged in cyber espionage , pilferage , and intimidation , are private individuals with no links to the Chinese government . It is more likely that they are tied to the Peopleâs Liberation Army . In war , this irregular contingent of hackers would become the vanguard behind which the PLA takes on the enemy . Systematic cyber attacks constitute a new frontier of asymmetrical warfare at a time when the world already confronts other unconventional threats , including transnational terrorism . With national security and prosperity now dependent on the safekeeping of cyberspace , cybercrime must be effectively countered as an intern ational priority . If not , cyberspace will become the new global-commons battlefield . </text> +<text id="syndicate/china-s-gift-to-europe"> +Chinaâs Gift to Europe Europeans are wrong to be angry with China because its currency peg to the US dollar has boosted the euro against most currencies on foreign exchange markets . On the contrary , they should view the currency peg as a valuable gift . In New York and other American cities , European shoppers are on a spree . Theyâre enjoying first hand the euroâs enhanced purchasing power abroad . The currency peg has also helped make the euro into an important reserve currency , rivaling the dollar . Investments from all over the world are flowing into Europe as a result . It was predictable that Chinaâs currency peg would have this effect . It forced China to accumulate huge amounts of dollars to stabilize its currency and gave the euro an extra boost as the dollar depreciated . To protect itself from the declining greenback , China and other countries are converting a portion of their accumulated dollar reserves into euros . The International Monetary Fund estimates t hat the euroâs share of foreign exchange reserves rose to 26.4 percent in third quarter of 2007 from 25.5 percent in the second quarter of 2007 , and 24.4 percent in the third quarter of 2006. The euroâs becoming a major reserve currency bestows important economic advantages on the euro-zone economy . Europeans should thank the Chinese currency peg for the part it is playing in this . Of course , with an augmented supply of euros , China can be expected to make substantial investments in Europe , which also is a good thing , especially since , in the United States at least , China has demonstrated a preference for investments in financial institutions rocked by the sub-prime crisis . Europe has plenty of those . So far , Chinaâs biggest European investment has been in the Belgian financial company , Fortis N. V. , where Ping An Insurance recently acquired a 4.2 % stake , making it the largest shareholder in the company . China Development Bank also made an investment in Barcla ys to bolster its bid for ABN AMRO which , though it failed , helped the Dutch bank get the full value for its assets . This is only a start . Merrill Lynch predicts that , as currency reserves climb in countries like China , state-run investment funds will grow to $7.9 trillion , from $1.9 trillion now . Chinaâs currency peg has also come in handy for Europe in its fight to keep inflation in check , while its monetary policy remains constrained by the sub-prime crisis . Experts estimate that , in terms of guarding against inflation , the euroâs appreciation has been equivalent to about 35 basis points rise in the interest rate . The strong euro has helped insulate Europe from skyrocketing oil and commodity prices , which are priced in dollars on the world markets . The big downside of the currency peg for Europe is supposed to be exports . Thatâs what sent French President Nicolas Sarkozy and other high-level European officials scurrying off to China last Novemberâand why m any ordinary Europeans continue to think of the Chinese as not playing by the rules . This is protectionist thinking par excellence . What makes exports so special ? Why are they more important than cheap imports or the bargains that European shoppers get in New York ? Should Europe give up all the advantages of the currency peg just because it makes European exports more expensive ? Of course not ! Note that it was French President Sarkozy who went to China to protest the currency peg , not German Chancellor Angela Merkel . German exports are not being substantially damaged by the strong euroâindeed , German costs are so competitive that exporters are confident they can cope with the euro at 1.50 dollars and even higher . This is not true for France-- but the answer is obvious : reduce costs and France too will be able to cope with the strong euro . In the final analysis , cutting costs is all the Europeans can do if they want to preserve the competitiveness of their exports . Th e Chinese are not going to change their exchange rate regime , which has strategic as well as economic motivations , just because the Europeans are unhappy with the currency peg . China has given the Europeans a gift . They should be grateful , rather than foolishly insist that China take it back . </text> +<text id="syndicate/china-s-threat-to-russia"> +Chinaâs Threat to Russia Last week , Russia and China held joint military maneuvers in the presence of both Russian President Vladimir Putin and Chinese President Hu Jintao . But a new strategic alliance between the two countries is not likely , as it is China that poses the greatest strategic threat to Russia , although many in the Kremlin seem blind to this as they rattle sabers at America and the West . Indeed , China officially considers several regions in Russiaâs Far East to be only â alienated â from it . Chinaâs territorial claims on Russia are often noted in Chinese grade school geography textbooks , which include a number of Russian Far Eastern regions within Chinaâs borders . This is consistent with the Chinese strategic concept of â vital space , â which includes all spheres of a stateâs strategic activities , on land , at sea , under water , in the air , and in space . The dimensions of â vital space â are determined by a countryâs economic , sci entific , technical , social , and military capabilities â in essence , its â total power . â According to Chinese theorists , the â vital space â of great powers extends far beyond a stateâs borders , whereas the â vital space â of weak countries is limited to strategic boundaries that do not always correspond to the borders of their national territory . Today , China has territorial claims against 11 of its 24 neighbors , including India , Japan , Vietnam , and the Philippines , in addition to Russia . In Chinaâs relations with all of them , the potential use of military force was and remains an important factor . In September 2006 , Chinaâs Peopleâs Liberation Army ( PLA ) conducted an unprecedentedly large 10-day exercise , involving the Shenyang and Beijing military districts , the two most powerful of Chinaâs seven military districts . Shenyang abuts the Russian Armed Forces â Far Eastern District , and the Beijing district shares a border with Russia âs Siberian Military District . During the exercises , Shenyang units advanced 1,000 kilometers into the Beijing district , where they engaged in joint war games . To military observers , the Beijing/Shenyang exercises seemed to be practice for a possible offensive operation against Russia , because exercises on such a scale are undertaken only at the final stage of a multi-year program to train troops to enact specific strategic and operational plans . The geography of the exercises , and the offensive nature of the tasks undertaken , leaves little doubt that Russia was cast in the role of â potential adversary . â Such a show of force is an ancient , traditional Chinese political technique . Paradoxically , these exercises were undertaken during a period when bilateral political and economic ties appeared on the surface to be at their highest point . Russia has an important place in Chinese geopolitical calculations , as a supplier of both modern weaponry and energy resource s needed to continue its modernization . Therefore , the Chinese are doing everything possible to strengthen their economic and political position in Russia , and to draw Russia into their sphere of influence . And China is succeeding , most importantly by consistently reinforcing Putinâs anti-American and anti-Western agenda . While Beijing/Shenyang exercise should have indicated to Russian leaders that Chinaâs intentions toward Russia may not always be benign , Russiaâs political and military leadership seem not to sense any threat ; on the contrary , they continue to sell the Chinese advanced weapons . Russiaâs current diplomatic tilt , indeed , is clearly against its own long-term national security interests . China will never be interested in Russiaâs economic and political modernization , for it prefers Russia to remain a source of mineral and energy resources and a vast â strategic rear â in its looming challenge with the United States . Likewise , the Shanghai Cooperation Organization ( SCO ) , which just concluded its annual meeting , is in Chinaâs eyes a tool of regional policy that helps strengthen Chinaâs influence and control over Central Asiaâs natural resources at the expense of Russia . No nation threatens Chinaâs land borders . China can solve its domestic problems , such as separatism , by itself . China is militarily self-sufficient and needs military cooperation under the SCO framework only in order to free its hands if any conflict should arise that affects its interests . In fact , conflict between Russia and China is possible precisely in Central Asia , given the clear differences in the two countries â economic and political interests in that region . Aside from control of the regionâs energy supplies , water has become a potential source of conflict , given Chinaâs serious shortages . Yet , while the Chinese clearly understand these contingencies and are preparing themselves to deal with them diplomatically and militarily , the Kremlin remains myopically obsessed with the phantom threat of America . Thus , as the Kremlin dreams of re-establishing its domination over what Russians refer to as the â near abroad â ( Ukraine , Belarus , the Baltic countries , and the other post-Soviet states ) , China is increasingly looking at Russia as its own â near abroad . â Will the Kremlin finally wake up to this ? Thirty-six years ago , Richard Nixon and Mao Zedong turned world politics upside down , as both America and China realized that it was the Soviet Union , and not each other , that posed the greater threat . Vladimir Putin needs his own â Nixon moment . â Alienating the West is a foolish strategy when the greatest long term threat to Russia comes from the East . </text> +<text id="syndicate/europe-s-vital-french-connection-by-kemal-dervi"> +Europeâs Vital French Connection PARIS â In the debates raging over the future of the European Union and the eurozone , Germany always takes center stage . It has the largest economy , accounting for 28 % of eurozone GDP and 25 % of the eurozoneâs population . It is running a current-account surplus that is now larger than Chinaâs â indeed , the largest in the world in absolute value . And , while weighted majorities can overrule it on some issues , everyone acknowledges that little can be done in the eurozone unless Germany agrees . But the emphasis on Germany , though justified , should not lead to an underestimation of Franceâs critical role . France not only accounts for roughly 22 % of eurozone GDP and 20 % of its population â behind only Germany â but also has the healthiest demography in the eurozone , whereas the German population is projected to decline over the next decade . At the same time , Franceâs critical role reflects more than its size . Indeed , in terms of influencing outcomes in Europe , France is as important as Germany , for three reasons . First , France is an indispensable link between southern and northern Europe at a time of growing economic and financial division between creditors and debtors ( a fissure that has begun to assume a cultural dimension ) . An active France can play a bridging role , leveraging its strong relationship with Germany ( a friendship that is a pillar of the EU ) and its proximity and cultural affinities to the Mediterranean . France is â southern â in its current-account deficit , but â northern â in its borrowing costs ( slightly above Germanyâs ) , owing partly to inflows of capital fleeing the south , as well as to modest but positive economic growth . Moreover , there is no perceived â re-denomination â risk affecting French assets , given markets â confidence that France will retain the euro . So , while France faces huge economic challenges , its northern and southern features permit it to play a proactive role in the European projectâs survival . French President François Hollande has already given a rather successful preview of this role , meeting German Chancellor Angela Merkel in Berlin on his first day in office , and , a month later , participating in a high-profile meeting with the Italian and Spanish prime ministers in Rome . Indeed , he took the lead in adding a â growth pact â to the â stability pact â that had been negotiated under Merkelâs leadership . Second , France , under its new center-left government , must demonstrate that the â European model â of a market economy coupled with strong social solidarity can be reformed and strengthened , rather than abandoned â not just in Europeâs more pragmatic north , but also in its more ideological south . French Socialists will not renounce their traditional commitments ; nor should they . But they now have the opportunity to contribute to the European modelâs renewa l . Under Hollande , Franceâs Socialists favor achieving that renewal through a process of social dialogue that convinces rather than imposes , that focuses both on revenue measures and on boosting government efficiency , and that may adopt some of northern Europeâs more successful â flexicurity â policies , which combine greater labor-market flexibility with strong social protection . The reforms should also introduce much greater individual choice , permitting solutions to retirement , education , health , and lifestyle issues that can be more easily tailored to citizens â specific circumstances and needs . The government of Hollande and Prime Minister Jean-Marc Ayrault has strong majorities at all executive and legislative levels , giving it a rare opportunity to act . If it can renew the European model at home , it will be able to project that success much more widely , particularly in southern Europe , in turn reinforcing confidence and belief in the EU , particularly among the young generation . The French center-left must lead in conceiving a vision for Europe in which solidarity and equity reinforce long-term economic strength . Finally , along with the United Kingdom among European countries , France retains more of a global role than Germany has yet acquired . While the United Nations Security Council is outdated in its structure , it still plays a crucial legitimizing role ; and France , not Germany , is a member . In many other international organizations as well , France punches above its weight . Similarly , while France exports much less than Germany outside the EU , many large French enterprises rival Germanyâs in global reach and technical know-how . And French is still a global language . In other words , France not only is a link between Europeâs north and south , but also contributes substantially to linking Europe to the rest of the world . Europe needs a renewed vision and effective policies to realize that vision . Franceâ s Socialist-Green government can play a critical unifying role as Europeans confront their biggest challenge in decades . Its success will be highly consequential â not least for the political debate that will inform the outcome of Germanyâs elections in 2013. </text> +<text id="syndicate/exchange-rate-disorder"> +Exchange Rate Disorder NEW YORK â Two troubling features of the ongoing economic recovery are the depressed nature of world trade and the early revival of international global payment imbalances . Estimates by the International Monetary Fund and the United Nations indicate that the volume of international trade in 2010 will still be 7 % to 8 % below its 2008 peak , while many or most countries , including industrial nations , are seeking to boost their current accounts . Indeed , if we believe the IMFâs projections , the world economyâs accumulated current-account surpluses would increase by almost $1 trillion between 2009 and 2012 ! This is , of course , impossible , as surpluses and deficits must be in balance for the world economy as a whole . It simply reflects the recessionary ( or deflationary ) force of weak global demand hanging over the world economy . Under these conditions , export-led growth by major economies is a threat to the world economy . This is true for Chi na , Germany ( as French Finance Minister Christine Lagarde has consistently reminded her neighbor ) , Japan , and the United States . Countries running surpluses must adopt expansionary policies and appreciate their currencies . More broadly , to the extent that major emerging-market countries will continue to lead the global recovery , they should reduce their current-account surpluses or even generate deficits to help , through increased imports , spread the benefits of their growth worldwide . But , while that implies that emerging-market currencies must strengthen , disorderly appreciations would do more harm than good . To use an American saying , it might mean throwing out the baby ( economic growth ) with the bathwater ( exchange rate appreciation ) . Consider China , which accounts for the largest share by far of world trade among emerging economies . Real appreciation of the renminbi is necessary for a balanced world economic recovery . But disorderly appreciation may seri ously affect Chinaâs economic growth by disrupting its export industries , which would generate major adverse effects on all of East Asia . China needs a major internal restructuring from exports and investments , its two engines of growth in past decades , to personal and government consumption ( education , health , and social protection in the latter case ) . But this restructuring will tend to reduce , not increase , import demand , as exports and investment are much more import-intensive than consumption . Moreover , a sharp appreciation of the renminbi could risk domestic deflation and a financial crisis . Chinese authorities certainly seem to have that interpretation of the roots of Japanâs malaise in mind as they seek to avoid rapid revaluation . The only desirable scenario , therefore , is a Chinese economy that transmits its stimulus to the rest of the world mainly through rising imports generated by rapid economic growth ( i. e. , the income effect on import demand ) , rather than by exchange-rate appreciation ( the substitution effect ) . This requires maintaining rapid growth while undertaking a major but necessarily gradual domestic restructuring , for which a smooth appreciation is much better suited . Now consider other major emerging markets . Here currency appreciation is already taking place , pushed by massive capital inflows since the second quarter of 2009 , and in some cases it can already be said to be excessive ( for example , in Brazil ) . These countries can , of course , resist upward pressure on their currencies by accumulating foreign-exchange reserves , like they did before the global financial crisis . The result is , of course , paradoxical : private funds that flow into these countries are recycled into US Treasury securities via investment of accumulated reserves . Why should emerging-market countries â central banks undertake this peculiar financial intermediation , which represents a major cost , as the yield of priva te funds is higher than that of reserves ? The implication here is that relying on free movement of capital to achieve exchange-rate appreciation and current-account deficits may generate a myriad of problems , including slower economic growth and the threat of asset bubbles and financial crises of their own . So , a more orderly way to induce current-account deficits without risking disruption of emerging economies â growth should be considered . One solution ( already advocated by some , including me , and adopted to some extent by a few countries ) is broader use of capital-account regulations . Surprisingly , however , this issue has been entirely absent from current global debates on financial reform . Fortunately , the IMF opened the door to discussion of this issue in a recent staff position paper . Equally important , a desirable global scenario is possibly one in which most developing countries run current-account deficits . But this requires major reforms in the global f inancial system to reduce the vulnerabilities that such deficits generated in the past , and that were reflected in major financial crises in the developing world . These past crises gave rise to a form of â self-insurance â among developing countries through reserve accumulation . This helped many of them weather the recent storm , but it also contributed to global payments imbalances . Recent IMF reforms are just a step in the direction of trying to create better financial instruments to help these countries . It is essential , in particular , to create reliable large-scale financing for developing countries during crises , through a mix of counter-cyclical issuance of SDRs and emergency financing without onerous conditions . </text> +<text id="syndicate/france-and-germany-must-act-in-iraq"> +France and Germany Must Act in Iraq Next week , President Bush , President Chirac , and Chancellor Schroeder will meet on the cliffs of Normandy to mark the 60th anniversary of the D-Day invasions that led to the liberation of Europe . They should also seize the moment to liberate themselves from the bitterness that has divided the Atlantic Alliance over the Iraq War , argue Pierre Lellouche and Christoph Bertram . When the United States launched the war against Saddam Hussein 's Iraq , France and Germany rightly warned that the invasion could well end up worsening instability in the Middle East and increase the threat of radical Islamic terror . But now that America and its coalition have proven themselves to be incapable of bringing stability to Iraq on their own , the French and German governments can no longer rest and smugly say , " I told you so , " as the situation deteriorates even further . Both governments must now become seriously and fully engaged in what must now be a u nited Western effort . Of course , it would be best for everyone - France and Germany included - if the current US-led coalition were to succeed and Iraq could turn into a pillar of Middle East stability and modernization . Yet , however desirable this outcome , it is no longer likely ( if it ever was ) . Internal stability and economic recovery continue to be elusive , with the specter of civil war hovering ever closer . A divided Iraq at war with itself would be a disaster for the region , for America 's international credibility and authority , and for transatlantic relations . In an already fragile region , a major Arab country like Iraq would most likely prompt interventions by its nervous neighbors - of which there is no shortage - if it turns into a failed state . Instead of the rule of law , there would be the law of the mafia , of terrorist groups , and of tribal militias . Many of them are already in place . Instead of moving toward modernization and development , the regi on would be confirmed as a cockpit for conflict , a threat to itself and to the world beyond . Were the US forced to withdraw in failure , Islamic terrorist groups would claim a historic victory , promising more bloodshed for the West . Moreover , America might also once again retreat bitterly into isolationism , blaming her failure on the UN and on disloyal European allies . So the stakes are high in Iraq , for Europeans no less than for Americans . That is why it is time that even those who have been most skeptical about US policy in Iraq start to do something about it . Both Jacques Chirac and Gerhard Schroeder have repeatedly pronounced that what happens in Iraq is a strategic challenge to their countries . Yet their actions in response to this insight have been modest . The recent turmoil in Iraq has , on the contrary , strengthened those in both capitals who argue that there is now even less reason to get involved on the ground . At the very least , France and Germany are dema nding that the Bush administration openly admit to its failure and the need for help . Yet not only is such a demand naïve , with the Bush team battling for re-election , it is not at all certain that most of America 's European allies would heed a US call for solidarity if one were issued . Confronting the threat that an unsettled Iraq poses to Europe and to the transatlantic relationship implies stopping these tactical games . The passing of authority in Iraq from the US-led coalition to an Iraqi government and the need for a much stronger UN role now offers the chance and imposes the need for everyone to stop posturing and get serious . For their part , EU governments should provide the UN - on whose involvement in Iraq they have long insisted - with the protective force it needs to prepare nation-wide elections in Iraq later in the year , and ask others to join . A UN staff protected by US marines simply cannot do that job . With the consent of both the US and Iraq 's new leade rship , EU governments should also offer to organize an international conference uniting all those with a stake in Iraqi stability , including Iraq 's neighbors , to work out a strategy and commit resources in order to save Iraq from slipping into protracted turmoil . If Europe is to act , France and Germany must lead . Precisely because they opposed the war , they are now the only countries that can restore Europe 's unity of action in promoting stability . France professes to bearing a special responsibility for international order , but so does Germany ; only a few weeks ago , Chancellor Schroeder based his claim to a permanent German seat in the UN Security Council on Germany 's readiness to shoulder such responsibilities . Of all the crisis regions in the world today , instability in Iraq constitutes the greatest challenge to international order . But France and Germany can also block European responsibility for international order and for solidarity with a US facing possible d efeat in Iraq . The decision is theirs . It is time for both to realize that the consequences of inaction will be no less severe for the region than for the Atlantic relationship . </text> +<text id="syndicate/france-s-fourth-moment"> +Franceâs Fourth Moment KYIV â Since World War IIâs end , France has consistently risen to the challenge of restructuring Europe in times of crisis . In doing so , France became the catalyst not only for building European unity , but also for creating the prosperity that marked Europeâs post-war decades â a prosperity now under threat because of the global financial and economic crisis . If we are to see a stronger Europe emerge from todayâs challenges , visionary French leadership is needed again . The first moment when decisive French leadership began to unify Europe came when Robert Schuman and Konrad Adenauer created the European Coal and Steel Community . By rooting the then West Germany in the political , economic , and social fabric of the West , that step heralded the start of Germanyâs rebirth and economic miracle . The second time that France consolidated Europeâs internal architecture came in 1983 , during the debates over the stationing of American cruise and Pershing missiles in Germany to counter the deployment of SS20 missiles by the Soviet Union . Franceâs resolve to stand with Germany helped prevent Germany from drifting into a dangerous neutrality that would have shaken the European community to its core . The third moment came after the Berlin Wall fell , and it was feared that an enlarged Germany might destabilize Europe . After initially trying to delay reunification , France embraced it , in exchange for Germanyâs reaffirming its commitment to European unity and Franco-German leadership of the European community . As a result , Germany bound itself to the idea of â ever closer union â even more definitively by pledging to join the common European currency , the euro . It is now urgent that the insights that have animated Franco-German relations be applied to all of Central and Eastern Europe . Only by securing the European identity of this entire region , and by anchoring the growing Russo-German relationship in a E uropean context , can the European Union continue on its path of stability and prosperity . Only by reinforcing open trading and financial relations across Europe can we hope to subdue todayâs crisis . For it is in no European countryâs interest , or in the interest of the EU as a whole , that Central and Eastern Europe feel that they have been cast adrift or that Germany and Russia fixate on each other in this time of crisis . As with Germany in the 1950âs , the nature of Russiaâs links with its immediate neighbors is turning out to be the defining factor in shaping the countryâs international image . Many observers regard these relations as a signal not just to the region , but to the rest of the world , of the sort of power that Russia wishes to be . The issue is partly one of â internationalism â itself . In contrast to Europe â with its close-knit network of multilateral organizations through which states formulate and conduct much of their foreign policies â Russia is not accustomed to intensively cooperative international procedures . But keeping Russia at armâs length from Europe has only strengthened the sense of isolation that many Russians feel , tempting them to define the countryâs interests in ways that are irreconcilable with those of Europe . It has also heightened Russiaâs desire to construct a special , bilateral Russo-German relationship heedless of the context of the EU . European history during the past 60 years makes clear that the most promising approach to meeting the challenge of national reconciliation and stability is not to focus on specific contingencies , but to establish procedures that encourage orderly change . A singular vision has always animated this process : animosity between neighbors must not be allowed to fester , and the rule of law must reign not just within countries , but also between them . To believe that such a vision can work for Russia , Ukraine , and Europe is not wishful thinking , but rests on the successful experience of France and Germany in promoting amity . Indeed , the existence or absence of a framework of cooperation often determines whether a dispute mutates into a crisis . Such cooperative frameworks seek to reconcile national independence with regional interdependence , focusing political leaders â minds on prosperity for their people rather than on gaining unilateral advantages that ultimately impoverish and unsettle everyone . The first lesson of European unity is that times of crisis must draw the continent closer together , not divide it through protectionism , competitive devaluations , and expulsions of immigrants . Similarly , the euro must not be allowed to become an Iron Curtain that consigns non-members to a high-risk zone where investors dare not venture . For Ukraine , Europe can help by embracing the free-trade agreement that we are now negotiating . Coupled with our successful membership in the World Trade Organization , Ukraine would s tand to benefit when world and European trade begins to recover . Europe can also consider using various stabilization funds to help our economy through the crisis that we are all enduring . I do not ask for these things out of a narrow concern for my countryâs health . Just as the US Federal Reserve has engaged in credit and currency swaps with Brazil , Mexico , Singapore , and South Korea and other countries to ease their access to the dollars they need , the European Central Bank must offer such swap arrangements to Europeâs non-euro countries in order for trade and production processes to continue . Yes , these are dark times , and all politicians want to protect their voters . But Europeâs greatest postwar leaders understood that keeping the wider view of Europe in mind is the best way to achieve this goal . As at so many times before , now â with all of our economies in peril â is a moment for decisive French leadership . </text> +<text id="syndicate/fran-ois-hollande-s-wrong-idea-of-france-by-brigitte-granville"> +François Hollandeâs Wrong Idea of France LONDON â Franceâs new president , François Hollande , has achieved a remarkable series of political victories â at home and in Europe â since his election in May . Unfortunately , his streak of success will inevitably call forth an economic reckoning that will shock Franceâs apparently unsuspecting citizens and doom the French eliteâs approach to the â construction of Europe . â Since winning the presidency , Hollande has won a parliamentary majority and pushed Germany toward accepting joint liability for eurozone countries â debts . But forebodings of crisis have become widespread in French business and economic circles . But the real danger â which even Hollandeâs sternest critics may be underestimating â is not so much his individual policy failings ( serious though they may be ) as his approach to the twin challenges posed by Franceâs economic imbalances and the eurozone crisis . On each front separately , he might manage to muddle through ; together , they look likely to cement Franceâs loss of competitiveness . Declining competitiveness is best captured in a single indicator : unit labor costs , which measure the average cost of labor per unit of output . In a monetary union , discrepancies in wage growth relative to productivity gains â that is , unit labor costs â will result in a chronic accumulation of trade surpluses or deficits . Since the euroâs introduction , unit labor costs have risen dramatically faster in France than they have in Germany . According to Eurostat data published in April 2011 , the hourly labor cost in France was â¬34.2 , compared to â¬30.1 in Germany â and nearly 20 % higher than the eurozone average of â¬27.6 . Franceâs current-account deficit has risen to more than 2 % of GDP , even as its economic growth has ground to a halt . The high cost of employing workers in France is due not so much to wages and benefits as it is to payroll taxes lev ied on employers . The entire French political class has long delighted in taxing labor to finance the countryâs generous welfare provisions , thus avoiding excessively high taxation of individuals â income and consumption â though that is about to come to an end as Hollande intends to slap a 75 % tax on incomes above â¬1 million . This is a version of the fallacy that taxing companies ( â capital â ) spares ordinary people ( â workers â ) . Of course , such taxes on firms are always passed on to households â usually through straightforward price hikes , and , in France , also through unemployment . High tax rates on labor â together with rigid regulation of hiring and firing â make employers extremely reluctant to recruit workers . As a result , France has had chronic long-term unemployment â forecast to reach 10.5 % by 2013 â for many years . Hollandeâs predecessor , Nicolas Sarkozy , tried to address this problem . He exempted voluntary overtime pay fro m employment tax and shifted some of the burden of labor taxation onto consumption ( via a hike in VAT ) . But Hollande quickly reversed both of these reforms . The repeal of the tax break on overtime reflects another economic fallacy to which French Socialist politicians are deeply attached : the â lump of labor â notion that underlay the most disastrous of their economic policies â the 35-hour workweek , introduced in 2000. The idea behind the policy is that demand for labor is a constant , and that this fixed number of aggregate working hours required by employers to meet final demand can be spread more evenly among workers to reduce unemployment . Such measures , designed to create jobs by freeing up work hours , are futile at best , and are often detrimental . French Socialists should recall their school physics lesson about communicating vessels : when a homogeneous liquid is poured into a set of connected containers , it settles at the same level in all of them , regard less of their shape and volume . Generating more â liquid â ( jobs ) requires not discouraging the entrepreneurs on whose activities sustainable job creation ultimately depends . The effect of fiscal and regulatory pressure on employment is to encourage French firms to invest and hire outside France . Hollandeâs apologists praise his gradualist and consensual approach to addressing the economyâs structural distortions . They argue that his penchant for setting up consultative commissions is the best way to forge the consensus required for structural reform , whereas Sarkozyâs combative style was counterproductive . Even banishing skepticism and assuming that Hollande could over time persuade his supporters to embrace competitiveness-boosting policies , the eurozone crisis is denying France the time that such gradualism requires . A simple , effective way to buy time would be to abandon the euro and restore competitiveness through a devalued national currency . But this exp edient is incompatible with mainstream French politicians â devotion to the â European project , â which amounts to a projection of French soft power ; indeed , building Europe lies at the heart of the French establishmentâs version of what Charles de Gaulle used to call â a certain idea of France . â For mainstream French politicians , renouncing the European project to buy the time required to restore competitiveness is as unthinkable as is the logical alternative : an all-out push for full European political union . This would reestablish monetary sovereignty and create a normal central bank ( like the Federal Reserve or the Bank of England ) at the European level . But it would also mean abandoning Franceâs republic in favor of a federal European government â anathema to that â certain idea of France . â The combination of gradualism ( on the most generous interpretation ) in domestic economic reform and the paralyzing effect of the eurozone crisis will lead to a massive shock . Remaining in a currency union with the much more competitive German economy will require wrenching and rapid reforms , for which Hollandeâs tepid approach will fail to prepare the complacent French . The result will be even more support than was seen in last Aprilâs presidential election for extremist political parties that reject both Europe and competitive market capitalism . </text> +<text id="syndicate/hollywood-s-favorite-villains"> +Hollywoodâs Favorite Villains Once upon a time , Cold War enemies , white supremacists , and evil geniuses reigned supreme as Hollywoodâs favorite bad guys . No more . Today , it is multinational corporations that are increasingly being cast as the über-villains of our globalized world . For all their subliminal paid promotions and subtle product placements , corporations are getting drubbed in the main story lines of our popular culture . This treatment goes far beyond documentaries like Michael Mooreâs polemical Fahrenheit 9/11 or The Corporation , an earnest if somewhat paranoid portrayal of multinational companies â role in globalization . It extends to mainstream hits like The Constant Gardener , in which the idealistic protagonists do battle with a malicious global pharmaceutical company that is bent on exploiting Africaâs misery to test experimental drugs . To be sure , sociopathic corporations have populated books and films for more than a century . But corporate villains , typically multinational companies , have never been so ubiquitous as today . Is it unfair ? Most corporations , after all , are merely convenient mechanisms for ensuring that scarce global capital is used at maximum efficiency , to the benefit of all . Are famously liberal Hollywood film directors spending too much time going to anti-globalization rallies ? Perhaps . But I would submit that Hollywoodâs misgivings , however untutored , represent only the tip of a growing iceberg of resentment against the perceived injustices of globalization . The simple truth is that corporations represent capital , and capital â in the form of factories , equipment , machines , money , and even houses â has been the single biggest winner in the modern era of globalization . Corporate profits are bursting at the seams of investors â expectations in virtually every corner of the world . Even in moribund economies like Germany and Italy , where employment security is vanishing , cor porations are swimming in cash . This phenomenon comes as no surprise to economists . Add two billion Indian and Chinese workers to the global labor force , and the value of other means of production â particularly capital and commodities ( for example , gold and oil ) â is bound to go up . And so it has , with capitalists everywhere gaining an ever larger share of the economic pie . ( In theory , capitalists in labor-abundant China and India could end up as losers , but in practice they , too , have benefited thanks to their governments â success in simultaneously liberalizing and globalizing . ) Many policymakers seem to be under the impression that surging profits are a purely cyclical phenomenon , as economies continue to grow out from the depths of the 2001 recession . Wait a bit , they predict , and wages will fully catch up later in the cycle . Not likely . Capitalâs piece of the pie has been getting bigger for more than 20 years , and the trend looks set to continue . Indeed , corporations â growing share of income has been a major driver behind the long , if uneven , bull market in stocks that began in the early 1990âs . At the same time , inflation-adjusted wages for rich-country unskilled workers have barely budged over the last two decades . Some of these trends also have to do with the nature of modern technological change , which seems to favor capital and skilled workers disproportionately . But , regardless of their cause , rapidly growing inequalities are a powerful force for instability everywhere , from wealthy America to rapidly growing China to reform-challenged Europe . â A rising tide lifts all boats , â conservatives like to say . Fine , but what happens to people , like the poor of hurricane-struck New Orleans , who donât own boats ? Growing inequality would not be such a problem if governments could simply raise taxes on the rich and strengthen subsidies to the poor . Unfortunately , any country that taxes capital to o aggressively will only succeed in chasing it to regions where the tax burden is lighter . In a globalized world , national governments â ability to tax potentially mobile factors of production is sharply circumscribed . The same mechanism that pours profits into the pockets of global corporations also prevents governments from claiming a larger share of the spoils . Unfortunately , the long-term trend towards ever-lower income shares for unskilled workers is likely to continue over the coming decades , as modern technology permeates the globe , and as emerging markets like China , India , Brazil , and Eastern Europe continue to integrate into global production . This is not to say that unskilled workers are actually being made worse off by globalization in absolute terms ; the vast majority are actually breaking even or better . But unskilled workers â incomes are not keeping pace with overall economic growth , and the resulting social strains are a ticking bomb . If so , then Hollywoodâs cartoon-like caricatures of evil multinational corporations may some day seize mainstream consciousness , leading to political upheavals that shatter todayâs social contract . That wonât be good for profits , or for the poor . Governments â and corporations â must find better ways to provide equal opportunity through improved education , broader financial markets , and other channels . Otherwise , globalizationâs storyline may not proceed according to the script . </text> +<text id="syndicate/japanese-lessons-for-china-s-currency"> +Japanese Lessons for Chinaâs Currency SHANGHAI â The question of how much Chinaâs currency should appreciate to rebalance its trade has become a global hot-button issue . But the answers have been all over the map , with some finding that the yuan is not undervalued at all , while others argue that it should appreciate against the dollar by more than 30 % . Clearly , there must be major differences in the macroeconomic models used to produce such a wide range of estimates . But the one thing about which everyone seems to agree is the theoretically and empirically unjustified assumption that an equilibrium exchange rate actually exists . The theoretical problem is simple : a countryâs trade balance depends on a lot more than the value of its currency in the foreign exchange markets . Interest rates , employment , aggregate demand , and technological and institutional innovation all play a role . As the economist Joan Robinson pointed out in 1947 , just about any exchange rate will be the equilibrium value for some combination of these other variables . The equilibrium exchange rate , she famously argued , is a chimera . Not surprisingly , the empirical evidence that trade imbalances can be resolved through exchange rate changes alone is unconvincing . In the case of China , the most useful precedent is probably that of Japan in the period from the end of the Bretton Woods fixed exchange-rate regime in August , 1971 , to the collapse of its â bubble economy â in 1990. During that period , the yenâs value more than doubled against the dollar , rising from its original fixed rate of 360 to 144 at the end of 1989. Yet , even as Japanâs exports became much more expensive in dollar terms and its imports much cheaper in yen , its trade surplus rose from $6 billion in 1971 to $80 billion in 1989. For two decades , expectations that an appreciating yen would restore external balance were repeatedly disappointed . At the time of the December 1971 Smithson ian Agreement , 308 yen to the dollar was supposed to do the trick . Fourteen years later , during the Plaza Accord negotiations , the Japanese argued for an eventual level of 200-210 , while some US Treasury officials thought the final target should be as high as 165-170 . At the end of the 1980âs , some analysts thought rates as high as 120 might finally produce the long-sought equilibrium . Yet , as Japan entered the â lost decade â of the 1990âs , its exports continued to grow faster than its imports . Japanâs trade surplus peaked only in 1994 , at $144 billion , just a few months before the yenâs April 1995 all-time high of 79.75 . In retrospect , it is easy to see why none of these supposed equilibrium exchange rates delivered external balance . As the yen appreciated , Japan responded not by exporting less but by improving productivity and quality control through plant and equipment investment and innovations in factory management , making possible rapid growth in exports of high-value-added products . Exchange-rate equilibrium calculations from the 1970âs and 1980âs , which could only have been based on the export sectorâs contemporary structure , naturally would have little relevance subsequently . The same is true of calculations at the beginning of the 1990âs , which would have forecast Japanese import growth based on extrapolations from the high GDP growth rates of the previous 40 years rather than on the decade of stagnation that ensued . In China , changes in the export sectorâs structure similar to those observed in Japan are now taking place . These changes are likely to make todayâs attempts to find an equilibrium yuan-dollar exchange rate seem just as chimerical in hindsight as previous calculations of the yen-dollar equilibrium rate . For the 30 years since the beginning of Chinaâs economic reforms , Chinese industry has achieved impressive efficiency gains by adopting new technologies and realizing economies of sca le , leading to a huge expansion in locally made products suitable for export . While an appreciating currency might eventually drive labor-intensive manufacturers out of business , if Japanâs economic history is any guide , they are likely to be replaced by producers of things like ships , machine tools , semiconductors , and doubtless new products yet to be invented . The equilibrium yuan-dollar rate is a chimera not because Chinaâs trade could never be balanced , but because the exchange rate alone does not determine equilibrium . The structure of the entire economy matters , too . As this is constantly evolving in unpredictable ways , there is no reason to expect that the assumptions underlying any particular macroeconomic model will ever remain valid long enough for its steady-state solution to be achieved in practice . </text> +<text id="syndicate/kennedy--khrushchev--the-cuban-missile-crisis-and-nuclear-deterrence-from-cuba-to-iran-by-joseph-s--nye"> +The Cuban Missile Crisis at 50 CAMBRIDGE â This month marks the 50th anniversary of the Cuban missile crisis â those 13 days in October 1962 that were probably the closest the world has come to a major nuclear war . President John F. Kennedy had publicly warned the Soviet Union [ 178]not to introduce offensive missiles into Cuba . But Soviet leader Nikita Khrushchev decided to cross Kennedyâs red line surreptitiously and confront the Americans with a fait accompli . When an American surveillance plane discovered the missiles , the crisis erupted . Some of Kennedyâs advisers urged an air strike and invasion to destroy the missiles . Kennedy mobilized troops , but also bought time by [ 179]announcing a naval blockade of Cuba . The crisis subsided when Soviet ships carrying additional missiles turned back , and Khrushchev agreed to remove the existing missiles from the island . As then US Secretary of State Dean Rusk put it : â We were eyeball to eyeball , and I think the oth er fellow just blinked . â At first glance , this was a rational and predictable outcome . The United States had a 17-to-1 advantage in nuclear weaponry . The Soviets were simply outgunned . And yet the US did not preemptively attack Soviet missile sites , which were relatively vulnerable , because the risk that even one or two of the Soviet missiles would be fired at an American city was enough to deter a first strike . In addition , both Kennedy and Khrushchev feared that rational strategies and careful calculation might spin out of control . Khrushchev offered a vivid metaphor in one of his letters to Kennedy : [ 180]âWe and you ought not now to pull on the ends of the rope in which you have tied the knot of war . â In 1987 , I was part of a group of scholars that met at Harvard University with Kennedyâs surviving advisers to study the crisis . Robert McNamara , Kennedyâs secretary of defense , said he became more cautious as the crisis unfolded . At the time , he thoug ht that the probability of nuclear war resulting from the crisis might have been one in 50 ( though he rated the risk much higher after he learned in the 1990âs that the Soviets had already delivered nuclear weapons to Cuba ) . Douglas Dillon , Kennedyâs treasury secretary , said he thought that the risk of nuclear war had been about zero . He did not see how the situation could possibly have escalated to nuclear war , and thus had been willing to push the Soviets harder and to take more risks than McNamara was . General Maxwell Taylor , the chairman of the Joint Chiefs of Staff , also believed that the risk of nuclear war was low , and he complained that the US let the Soviet Union off too easily . He felt that the Americans should have removed the Castro regime . But the risks of losing control of the situation weighed heavily on Kennedy , too , which is why he took a more prudent position than some of his advisers would have liked . The moral of the story is that a little nuc lear deterrence goes a long way . Nonetheless , there are still ambiguities about the missile crisis that make it difficult to attribute the outcome entirely to the nuclear component . The public consensus was that the US won . But how much the US won , and why it won , is hard to determine . There are at least two possible explanations of the outcome , in addition to Soviet acquiescence to Americaâs superior nuclear firepower . One focuses on the importance of the two superpowers â relative stakes in the crisis : the US not only had a greater stake in neighboring Cuba than the Soviets did , but could also bring conventional forces to bear . The naval blockade and the possibility of a US invasion strengthened the credibility of American deterrence , placing the psychological burden on the Soviets . The other explanation questions the very premise that the Cuban missile crisis was an outright US victory . The Americans had three options : a â shoot-out â ( bomb the missile si tes ) ; a â squeeze out â ( blockade Cuba to convince the Soviets to withdraw the missiles ) ; and a â buyout â ( give the Soviets something they want ) . For a long time , the participants said little about the buyout aspects of the solution . But subsequent evidence suggests that a quiet US promise to remove its obsolete missiles from Turkey and Italy was probably more important than was thought at the time ( the US also gave a public assurance that it would not invade Cuba ) . We can conclude that nuclear deterrence mattered in the crisis , and that the nuclear dimension certainly figured in Kennedyâs thinking . But it was not the ratio of nuclear weapons that mattered so much as the fear that even a few nuclear weapons would wreak intolerable devastation . How real were these risks ? On October 27 , 1962 , just after Soviet forces in Cuba shot down a US surveillance plane ( killing the pilot ) , a similar plane taking routine air samples near Alaska inadvertently viola ted Soviet air space in Siberia . Fortunately , it was not shot down . But , even more serious , unbeknownst to the Americans , Soviet forces in Cuba had been instructed to repel a US invasion , and had been authorized to use their tactical nuclear weapons to do so . It is hard to imagine that such a nuclear attack would have remained merely tactical . Kenneth Waltz , an American scholar , recently published an article entitled [ 181]âWhy Iran Should Get the Bomb . â In a rational , predictable world , such an outcome might produce stability . In the real world , the Cuban missile crisis suggests that it might not . As McNamara put it , â We lucked out . â </text> +<text id="syndicate/merkel-in-china-by-sanjaya-baru"> +Merkel in China NEW DELHI â German Chancellor Angela Merkelâs second visit to China in a year comes against the backdrop of dire forecasts of a difficult September for the eurozone . Mindful of such concerns and persistent pessimism in global financial markets , Merkel is now taking bold political initiatives at home and overseas . Indeed , her China trip should be seen as an effort to assert leadership across the eurozone . At home , Merkel recently sent out a clear message to her critics that Germany must pay a price for eurozone leadership . She cautioned her colleagues against loose talk about a â Grexit â â Greeceâs exit from the eurozone â and assured visiting Greek Prime Minister Antonis Samaras that Germany remained committed to his countryâs membership of the eurozone . While it required courage to take such a tough stance , doing so helped to bolster her position at home and throughout the eurozone . There is now no doubt that Merkel is willing to commit Ge rmany to the cause of preserving both the European Union and the eurozone , and that she will work to achieve that goal . If she succeeds , she will emerge as the first great European leader of the twenty-first century . This stance suggests that Merkel appreciates the essence of the argument that François Heisbourg , the chairman of the council of the International Institute for Strategic Studies ( IISS ) , advanced in a [ 179]recent essay : a federal arrangement does not fall apart because of problems at the periphery but because of â failure at the heart of the system . â Merkel has come to terms with Germanyâs position â and that it must act to preserve the unity of the whole . The eurozone ( and probably the EU ) cannot be saved in Greece or Finland if it cannot be saved in Germany . Committing Germany to that objective is precisely what Merkel has defined as her political goal for the rest of her term in office . Within hours of declaring her leadership at home , Merk el announced her visit to Beijing . The timing was highly significant : Merkel goes to China , the emerging global power , after declaring her own commitment to strengthening the eurozone , if not the EU as a whole , as a credible pole of an emerging multipolar world . In recognition of Germanyâs growing significance , Chinese Prime Minister Wen Jiabao welcomed a delegation of German business leaders to Beijing this May with the words : â Stronger Chinese-German cooperation is good for the two countries , good for China-EU relations , and good for world prosperity and stability . The strategic dimension of Chinese-German relations , therefore , can only be strengthened , not weakened . â There are several dimensions to the bilateral relationship . Germany needs both Chinaâs markets and the funds that its government can deploy to purchase German and European bonds . It also has more than 7,500 enterprises operating in China , with gross investment totaling $18.5 billion . Mor eover , Germany has sold $15 billion worth of technology to China , and bilateral trade hit a high of $169 billion in 2011 , accounting for 30 % of total China-EU trade . The two countries have set a bilateral trade target of $280 billion for 2015. Trade , however , is not the only immediate concern . Far more important , especially for Germany , is to get China to invest in and hold its bonds . In mid-August , at the First IISS Oberoi Lecture in Mumbai , Klaus Regling , the CEO of the European Financial Stability Facility , underscored the importance of Chinese demand for EFSF bonds and Chinaâs role in stabilizing the eurozone . Regling also revealed that there is now increased and frequent coordination between monetary authorities in the United States , Germany , and China , drawing attention to the fact that the â old Triad â of the dollar , euro , and yen may now have been replaced by a â new Triad â of the dollar , euro , and Chinese renminbi . While Regling spoke of an emerging â multipolar monetary system , â his remarks clearly indicated the functioning of a â tripolar â system . Lying at two ends of that monetary triangle , the eurozone and China have acquired a geopolitical stake in helping each other . [ 180]Hans Kundnani and Jonas Parello-Plesner of the European Council on Foreign Relations view the China-Germany relationship as one that will shape the overall China-EU relationship . Like many strategic analysts , they worry whether Germany , in pursuit of purely short-term economic interests , might forsake long-term strategic interests and concerns about human rights , environmental problems , press freedoms , and other political and geopolitical issues . It is significant , therefore , that German political parties have emphasized the need for Merkel to raise such matters in her talks with Chinese leaders . However , Merkelâs focus may well remain on trade , investment , and currency flows . After all , unless she can turn ar ound the eurozone , her rising profile at home and in Europe could easily wither . What this means is that to secure German leadership of Europe , and her own leadership of Germany , Merkel has to â walk on two legs , â so to speak . She needs to balance both geo-economic and geopolitical factors â both interests and values â in advancing Germanyâs relations with China . </text> +<text id="syndicate/ms--europe-or-frau-germania-"> +Ms. Europe or Frau Germania ? BERLIN â Just what is the matter with Angela Merkel ? Only a short while ago , she was celebrated as â Ms. Europe â ; now , she increasingly gives the impression of being Frau Germania . Instead of providing resolute leadership in the global financial and economic crisis , the European Unionâs largest economy is withdrawing into its shell . Germany has always been the motor of European integration , in accordance with its political and economic interests . Every post-World War II government has always been willing to harness Germanyâs financial strength to further that aim , i. e. , to foot the bill for Europe . The motto was simple : Germany gives and profits in turn . Should Germany spurn the first part of this formula , the European project would suffer serious damage â and so will German national interests . Yet this is the direction in which Chancellor Merkel seems to be heading . Indeed , in the wake of the Greek crisis , Merkel spoke publicly of the need to be able to exclude eurozone members that do not play by the rules . Does she seriously believe that the euro and the EU would survive such punitive action ?
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