Kampuchea Crossings

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David Frum on bailouts

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David Frum explains bailouts:

Senate Minority Leader Mitch McConnell has accused the Obama administration, Sen. Chris Dodd, and, by implication, most other Democrats of plotting for permanent bailouts of the financial system.  He’s right. But Democrats can rightly point out that McConnell, every other member of Congress, and, indeed, just about every American citizen, want the same thing.

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A bailout, of course, is what happens when the government keeps an explicit or implicit promise to stop an institution from failing or a financial instrument from loosing its value.  And these guarantees are very common: many widely owned products—savings accounts, certificates of deposit, pensions, retail brokerage accounts, and admitted market homeowners insurance—all have attached guarantees.  In many cases, people even use different names for guaranteed and non-guaranteed products: a CD without a government guarantee is called a bond, property insurance without a guarantee is called an excess and surplus lines policy. One expects that these guarantees will eventually be needed: there wouldn’t be a point in offering them if they weren’t. So, as long as the government guarantees any financial instrument, in short, it will engage in bailouts. The only true “no more bailouts” policy would involve abolishing the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation, more than 50 state insurance guarantee funds, the Pension Benefit Guarantee Corporation, the National Credit Union Share Insurance Fund and at least a half dozen other entities.

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Even if this were a good idea, it probably wouldn’t get a single vote in Congress.  Among other things, abolishing all public-sector guarantees would upend the business model of nearly every financial services firm in the country, lead some families to financial ruin, and end the sale of certain products. In short, while proposing an end to all guarantees may make good fodder for dorm-room bull sessions, it will never go anywhere.

Any practical look at policy towards bailouts should focus on how to limit them.

This means the government should get out of some guarantee businesses altogether, avoid entering new ones, and enforce regulations to minimize the need for those guarantees that can’t go away.

the end of the “Third World”

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World Bank president Robert Zoellick states the obvious. But the economic crash only highlighted this geo-economic shift, it did not precipitate it.

“If 1989 saw the end of the ‘Second World’ with Communism’s demise, then 2009 saw the end of what was known as the ‘Third World’. We are now in a new, fast-evolving multi-polar world economy in which some developing countries are emerging as economic powers, others are moving towards becoming additional poles of growth, and some are struggling to attain their potential within this new system – where North and South, East and West, are now points on a compass, not economic destinies.”

“If it is no longer possible to solve big international issues without developing and transition country involvement, it is also no longer possible to presume that their biggest members, the so-called BRICs – Brazil, Russia, India, and China – will represent all,” he said.

The more interesting part:

Asia’s stock markets now account for 32% of global market capitalization, ahead of both the US and the European Union, and that its share of the global economy in purchasing power parity (PPP) terms has risen from 7% 30 years ago to 21% in 2008.

The developing world as a whole has increased its share of global GDP in PPP terms from 33.7% in 1980 to 43.4%, according to Zoellick, who said sub-Saharan Africa and South Asia could grow by over 6% over the next five years.

ASEAN trade barriers fall, but will political barriers follow?

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The new regional free trade agreement across ASEAN-China is off to a strong start:

To date, about 99 percent of tariffs have been removed, with exemptions awarded to rice, tobacco and alcohol, along with scores of other sensitive items. Customs procedures are being harmonized and common standards applied.

The regional economic integration across ASEAN has many observers comparing it to the EU. ASEAN countries have vast disparities developmentally, culturally, economically, and politically. Signatories will be absorbed at staggered dates, with the least developed countries like Cambodia, Laos, Vietnam and Burma to sign on 2015.

Many investors are optimistic about tapping the potential high growth this particular FTA will bring, especially since other regions’ economies are still struggling to recover. What is worrying is the expectation that “international issues such as education, medical research and climate change will be governed increasingly from a trade perspective”.

This bodes not so good for countries like Cambodia..

The New Idealist Social Network

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The New Idealist Social Network, from the kid who co-founded Facebook and got Barrack Obama into the White House: a new social venture for connecting volunteers with their causes, Jumo.

Whether the non-profit sector is ready to embrace a new social networking platform remains to be seen, especially given these organizations’ often-limited staff time and lack of familiarity with cutting edge technology. And there’s competition—Ning, for instance, allows non-profits to build their own branded social networking websites using pre-fabricated tools. But the most formidable rivals are [Chris] Hughes’ old friends at Facebook, which already offers the application Causes, on which users can donate money and promote non-profits to friends. Hundreds of thousands of non-profits are members of Causes, and in the application’s first two years, 25 million Facebook users “joined” at least one of the causes. But according to a Washington Post report, the majority of Causes non-profits have never received a single donation through the application.

triangulating information

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Nobody has the time for lengthy research into every aspect of an issue. We all rely on public representatives in politics, in the media, whose job it is to delve into the gritty details and summarise the pertinent points for us.

I usually do this by reading opposing views on a topic. But headlines are increasingly hijacked by rabid partisan politics and monied interests (especially given the recent Supreme Court ruling overturning corporate spending limits). The news is like an entertainment industry anymore (eg talk show radio). It’s insidiously not limited to their viewership, diverting the national attention and precious energy away from constructive dialogue, which the country so badly needs.

Being outside the country probably makes it easier to find rationale reasoned scholarship; I’m amazed at the poor quality of dialogue on the mainstream media outlets when I was in the US for six weeks at the end of last year, not to mention the numerous paid infomercials dominating the airwaves. I’m so grateful to twitter and the blogosphere for triangulating the news these days.

One thing I find interesting is the purge among the GOP of many of its bright minds who refuse to be blinded by rigid ideological purity. This religion of “American exceptionalism” needs dialogue, but that seems not forthcoming. Dissent is un-American according to the GOP. With such appalling characters in the public eye (eg Palin), I wonder why there aren’t any conservative comedians?

So these days the following moderate conservatives are on my reading list, many of whom I suppose have been rejected by their party: Andrew Sullivan, Clive Crook, David Frum, Julian Sanchez, Megan McArdle, David Brooks, Bruce Bartlett, Tyler Cowen. Who else should I read that isn’t frothing at the mouth resentful, angry-at-the-world, raving fanatics?

Thailand’s state of emergency

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Sociologist Dr Pasuk Phongpaichit was quoted in the Bangkok Post saying that the gap between the richest and poorest families in Thailand is 13 times, higher than any other country in the ASEAN region, a record I didn’t realise Thailand held. For about four weeks now, the Red Shirts (the disenfranchised poor or The National United Front of Democracy Against Dictatorship (UDD), supporters of Thaksin Shinawatra, ousted in 2006) have been marching from the provinces into Bangkok and are agitating for fresh elections. They’re still gathering strength and they’ve hardened their negotiating stance.

Below are some links for keeping up with what’s happening:

Here’s a good collection of stills, maps and footage of the carnage this past weekend, on Media140, where the death toll has today risen to 23.

@nkoleszar has a great twitter list to watch for Thailand developments.

At least overall it seems armed repressions are in check, with a more solid consensus for non-violence. Both sides seem to have distanced themselves from the weekend’s clashes, with many observers now reporting a deeply divided military, unwilling any longer to take drastic measures to protect its military-installed Abhisit government.

The monarchy’s inability to reign in the situation, as it has successfully done so in previous political turmoils, seems to contribute to significantly diminishing its position. The Economist had a great backgrounder on the monarchy in Dec 2008, A Right Royal Mess (downloadable pdf as you need a subscription to access the archives). Severe lèse-majesté laws ensures that critical dialogue of the monarchy is restricted. So this radical call for monarchy reform by Thailand’s FM Kasit while on his trip to Washington DC for a landmark nuclear summit has surprised all observers (he being a PAD yellow shirt supporter, normally associated with the elites). Needless to say there is little coverage of this bombshell announcement by Kasit in the Thai presses.

Commercial interests are currently taking a hit, especially the crucial tourism industry, which makes up 7 percent of GDP. The SET index dropped 6.5% since the government declared a state of emergency last Wednesday, and more than 40 countries have issued advisories against traveling to Thailand. The protestors have largely kept away from the tourist-populated sites like commercial districts, shopping malls, the sky train. But these are the main hubs for demonstrations, as seen in these maps.