How the West can help
A MAN goes bankrupt, Ernest Hemingway wrote, gradually, then suddenly. Autocrats lose office the same way, as the fate of Viktor Yanukovych, Ukraine’s deposed president, dramatically illustrates.
Lessons from Orange revolution
- vital that the presidential election in May is clean (20024: an event that seemed to herald a democratic future, but instead merely reshuffled an entrenched elite);
- will need help and not just the financial kind – without a proper underpinning, emerging democracies can slip back into misrule;
Putin: he will doubtless do his best to stop the country becoming an independent democracy.
The February revolution
The revolution was not just about getting rid of one kleptocrat
- the post-Soviet order which prevailed in Ukraine has not been uprooted;
- the Maidan was not the only player in the revolution;
- worrying civil order and economic abyss;
- the two parts (east and south) complicates the future and the successive government failed to find a vision or narrative with which to unite the country;
- Putin’s take in Crimea;
But although Mr Yanukovych provided oligarchs and Maidan with a common enemy in the run up to the revolution, the allies could well turn into adversaries in the aftermath. The oligarchs and their political place-men are creatures of the dysfunctional state that Maiden rejects; some will surely seek to use the revolution to regain their lost interests and restore the pre-Yanukovych status quo.
A memo to Obama
America not a mobile place: a child born in the poorest fifth of society has only a 9% chance of making it to the top fifth;
The solutions: to incentivise work in other ways
- (Marco Rubio) wage subsidy, a reverse payroll tax that would strengthen the connection to work;
- minimum wage would cost around 500,000 jobs, can be counteracted through the EITC;
- intensive counselling and training to the long-term umemployed (as Britain experimented);
- Disability Insurance become more generous (number of beneficiaries from 1.5m in 1970 to 8.9m in 2013), key is to persuade them not to apply;
- spent only 0.1% of GDP on “active” labour-market programmes, compared to OECD average 0.6%;
- Better to concentrate the money on the smaller, younger, truly disadvantaged group of children.
One way no more
China’s currency has long been a source of controversy, but it is rarely a source of uncertainty;
“Carry trade”: speculators borrowed cheaply in dollars, then lent in yuan, eluding China’s capital controls in the hope of benefiting both from higher Chinese interest rates and the yuan’s appreciation;
These fundamentals (export earnings and foreign-direct investment) both suggest the yuan should rise again. But by wrongfooting the speculators, the authorities hope that the expectation of appreciation will not remain a cause of that appreciation.
Foe or frenemy?
online funds that are offering returns that are 15 times higher than conventional deposit accounts;
China’s cap on deposit rates is causing money to flood into shadow-banking products such as those offered by “trust;”
Alibaba launched Yu’e Bao, then Baidu and Tencent entered the fray;
Impact:
- indeed hurting the banks: sucking away money – bank deposits fell by one trillion yuan in January;
- Not possible to lead to massive disruption of the sector: even if a tenth of bank deposits flee to online products (a heroic assumption), it might cut the net interest margin at banks by just 0.1%.
Government coughers
The prevalence of smoking is greater in countries like Austria and Russia;
starting to take notice of the problem – Mao Zedong smoked like a chimney but it is rare to see a senior leader smoking in public now;
restrictions on smoking in indoor public places – has hardly kicked the habit
- In fact, the revenues of the Chinese cigarette-manufacturing industry shot up from 285 billion yuan in 2005, to 757 billion yuan in 2012;
The most powerful measure is tax
- this approach works in both South Africa and France;
- Chinese cigarettes are taxed so lightly (cheapest pack in rural areas sell for just two yuan, five yuan in cities);
Another great obstacle is tobacco lobby
- In 2012, the tobacco industry turned in 6% of official revenue – as big in Beijing politics as petroleum and property;
Now or Naver
almost 80% of Korean search market, making the country one of just three where Google is not top (the other two are Russia and China);
still rising – online advertising sales grew by 7.7% last year;
has began to exhibit some of the least attractive traits of the chaebol (industrial conglomerate)
- buying up smaller potential rivals;
- using its market power to stop other portals getting access to content;
South Koreans now spent more on KakaoTalk than they do on Naver;
real strength abroad – its decade of experience in the portal business
- “doing everything” from games to shopping to online newspapers;
- Line: makes 70% of money from games and electronic “stickers”
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