LyrArc Article Gist
Hernando De Soto, a prominent economist, heads the Institute for Liberty and Democracy. He has an intimate knowledge of the workings of the Egyptian economy, and describes the socio-economic marginalization of large parts of Egyptian society as Economic Apartheid. Simply put Egypt has fallen behind the times, way behind the economic progress in large developing countries.The Institute was hired by the Egyptian government in 1997, with the financial support of the US Agency for International Development, to look into what reforms were needed. It presented its 1000 page report in 2004- after years of work involving 120 Egyptian and Peruvian technicians, participation of 300 local leaders and interviews with thousands of ordinary people- to the Egyptian cabinet. The then Finance Minister Hassanein supported it and the cabinet approved it. What followed was a cabinet shakeup, and blocking of any reforms by hidden interests wanting to protect the status quo. De Soto's objective was to find out how many people were marginalized in Egypt, and how much of the economy operated outside the legal system- small business that did not have the protection of property rights or access to normal business tools and credit, that makes businesses grow. He found that 9.6 million people were employed in this sector operating "extralegally" with no protections. This being the largest sector of employment in Egypt. His action plan was intended to remove the legal impediments to these people and businesses urban and rural, so that they could grow. He says the value of these businesses outside legal protections is $248 billion or 30 times larger than the total value on the Cairo stock exchange, and 55 times greater than all the foreign direct investment in Egypt since 1800 including Suez Canal and Aswan Dam. De Soto says that because of burdensome, discriminatory and bad laws it takes 500 days to open a small bakery, getting a legal title on a vacant piece of land would take 10 years of red tape. This barrier of bad laws, poorly trained bureaucrats, inertia of the status quo, prevents people from legalizing their property and business. As a result whereas one of these types of small businesses is now India's largest company called Reliance Industries, and another Infosys is the second largest software company, most Egyptian enterprises are stuck being small and relatively poor, and do not generate jobs for the demographic surge of young people. De Soto's point is that Egypt will need good leadership to pull off this task of legal reform, and democracy alone will not be enough. Empowering the large majority of the Egyptian people operating outside the legal protections will mean giving property rights for $400 billion of assets, De Soto says. And this would unlock an amount of capital hundreds of times larger than what foreign direct investment and aid has brought to the country....

LyrArc Article Gist
A new report, "China: 2030," by the World Bank and the Development Research Center (DRC), has major implications for the course of action taken by new Chinese leaders. The limits to China's economic model with the dominant role of state owned companies has been pointed out in the past. It has now reached a point where China must choose to move to a modified model or face the "middle income trap" of countries like Brazil and Mexico, where income levels and growth reaches a certain level and then decelerates suddenly with little warning. The report makes some major recommendations that would modify the current system. It says the state owned companies should be supervised by asset management firms focussed on commercializing these companies, and not supervised by the State-owned Assets Supervision and Administration Commission (SASAC). The asset management firms would restrict the state owned companies on what areas they participate and sell off businesses to make it possible for private companies to compete. Zoellick says- "China needs to restrict the role of the state-owned companies, break up monopolies, diversify ownership and lower entry barriers to private firms." The state owned companies would be required to pay sharply higher dividends to the government which could then be used for social programs. Currently state owned companies invest in land which is sold by local governments for revenue helping fuel the real estate bubble. Significantly, the report had its origins when it was proposed by Mr. Zoellick, head of the World Bank, during a visit to Beijing in Sept 2010. It was supported by Li Keqiang, then vice premier, and now expected to be the new prime minister of China. The World Bank is widely respected by Chinese leaders because of its assistance during the early stages of reform in the 1980's. The DRC reports to China's State Council, a top governmental institution, and the No. 2 person at DRC, Liu He, is a senior advisor to the Politburo Standing Committee. He helped draft the current five year plan and is close to Li and Xi Jinping, the next president of China. The SASAC has opposed these ideas, especially any shift in its personnel selection of management at the state owned companies, which it shares with the Communist party's personnel department. Respected China economists say China faces large risks of a sudden sharp slowdown because the the state owned companies have largely copied foreign technology and have not generated enough technological advances, which will be needed for the next stage of growth. Lower growth rates could worsen problems in China's banking system leading to a crisis. The Conference Board, estimates China's growth at 8% for 2012, slowing to an average annual growth rate of 6.6% from 2013 to 2016. Barry Eichengreen of UC Berkeley, Donghyun Park of the Asian Development Bank, and Kwanho Shin of Korea University, say the annual growth rate will drop by at least 2 percentage points by 2015....

LyrArc Article Gist
In 1980 Jeb Bush 27, was looking for a place where he could make a fresh start away from the Bush name in Washington and Texas. His father was making a run for president that year. Miami with its bustling Cuban American community seemed a perfect place for Bush with his fluency in Spanish and his Mexican born wife Columba. The co-chairman of the Bush campaign in Florida was a Cuban American, Armando Codina. He set up Bush Realty, making Jeb Bush a partner with a 40% stake in the firm. In this period 1980-1992, Bush's gross income averaged 107,000 for the 6 years before the elder Bush was elected president to $1.6 million in 1990 half way during the elder Bush's term as president, according to a WSJ analysis of tax returns. This was also a period when Jeb Bush while engaging in business deals, was also running for office- first as Commerce secretary for 2 years in 1987, making a unsuccessful run for governor in 1994, and a successful run in 1998, 2002. He helped boost the Republican party in the Miami area, bringing together Republicans and the Cuban American exile community, during the anti-communist mood of the Reagan period. As Miami-Dade county Republican party chairman he helped boost voter rolls for the party, which had a 2 to 1 Democratic party advantage in earlier years. Stewart and Reinhard document the situations in which the Bush connections at the White House helped Jeb Bush in his real estate business....

LyrArc Article Gist
About 1.17 million jobs were lost in 2008 according to the Labor Department, with half of these job losses in the last 3 months, as unemployment reached 6.5%. Bu the the labor underutilization rate is the one to watch, the measure of total unemployment including parttime workers who seek full time employment but can't get it. This hit 11.8% in October up from 11% a year earlier. This is what happened in Japan where companies began using parttime workers to reduce costs and not to have to pay benefits, a trend that has already started in the US. See link to trend. Over a long period like 5-10 years this can lead to depressed consumer spending as workers see an uncertain future, as ocurred and is still the case in Japan. Also note that the unemployment rate reached 10.8% in the 1981-82 recession and this is shaping up to be something bigger, and half of the 1.2 million job losses ocurring in the last 3 months so this is accelerating. The economy is expected to shrink at an annual rate of 4% in the 4th quarter, and could see these kinds of declines or worse in 2009 and beyond....

LyrArc Article Gist
Michael Powell of the NYT shows what is wrong about the Olympics model of the IOC having host cities build costly facilities just for a two week period. Cities that have suffered paying for the Olympics in recent memory are most strikingly Athens, Greece, and some observers say the Greece crisis started about the time the Olympics were held there. In Greece as in Rio, corruption, and mismanagement, are major issues. In the case of Rio the Olympics were held following a time of widespread protests as the economy hit a recession, and corruption scandal at Petrobras and in the government led to public anger. Most striking is the fact widely reported that the Rio government does not have enough money to pay salaries and much of the investment in Olympic infrastructure is not going to be available to the working class, middle class, at a time when basic public services such as clean water, good bus services, environmental pollution, significant shortages in affordable housing remain unaddressed. Bolsa Familia program of the socialist Workers Party helped the poor, yet the middle and working class have suffered with misspent funds, and mismanagement of the economy. Powell does well to show how things could be done better than they are now. He says he applauded the Bloomberg plan to build swimming pools and kayak routes in different parts of the city, in city parks further away where the middle and working class could use these facilities. This did not happen at the Rio Olympics. It also shows that the IOC could also get into this instead of being some distant organization, that simply hands out this gift called the Olympics and stringent requirements. What if the IOC also says it wants to see ways in which the facilities will be later available to the broad public, so that swimming pools and other athletic facilities, including housing and transportation systems are then available to the people in different parts of the city. Rio de Janeiro University has seen large cuts in pay and services. It took Montreal decades to pay for the Montreal Olympics. Sochi facilities will not be used for the large part by the Russian public, more painful because of the Russian deep recession similar to the Brazilian deep recession. Olympic host cities should be required by the IOC to show that the facilities built will be usable to the maximum degree by the broad mass of the public, finances are stress tested for recession in a country. At this time citizens of cities such as Boston and Oslo have taken up these things- as the IOC takes no responsibility and host governments are giddy about showing off their country- and pulled out. Least valid of all is the notion that the developing countries are being discriminated against. Look at all the empy stadiums in the far north of the country of Brazil in the World Cup, and you realize there are better ways to take pride in a country- how about matching your transportation infrastructure with that of China, some bullet trains, some new subways in large and midtier cities, done so as to give broad access to the public at affordable prices for transportation? India is a large and now forward looking developing country, a young population with tech and infrastructure dreams and 4 medals in all in the Olympics. Does it make more sense to match China's success in transportation infrastructure with bullet trains, new subways and road building programs, and to build athletic facilities in every high school and college in the country matching the U.S. and Britain,  especially for girls, or to seek pride in putting up an application for a gift from the IOC? ...

LyrArc Article Gist
Martin Feldstein says China is gaining control of three problems it faces of shrinking export markets, the effects from a large stimulus in response to the 2008 financial crisis, and inflation especially high real estate prices. The economy is shifting to higher role for services and less dependence on exports under the new five year plan. The real estate prices are levelling off after steep increases. And inflation is under control. New investment will go into infrastucture needs such as power development and low income housing. As the economic problems are being tackled, the political problems remain. China faces an aging population under its one child policy, and it will have to support an increasing number of retired people in the future. Inequality and corruption are two problems that continue to grow and present challenges to the new leadership taking over in 2013.

LyrArc Article Gist
Krugman questions whether the assumptions behind the austerity policies are true- that they would inspire confidence in economic recovery, or that in the absence of austerity policies borrowing costs would go through the roof. The recent events in Holland with the collapse of the government in the Netherlands- when a party leader supporting the government said he did not want to hurt pensioners in the Netherlands just to satisfy German opinion- and the mood in France with economic anxiety vote going to Marie Le Pen and Francois Hollande in the first round of presidential elections, shows that very little confidence has been created. High unemployment and economic anxiety are leading to a reappraisal of austerity cuts that depress the economy and reduce tax revenues, but Krugman says no changes are taking place to correct these policies. This is true for Spain with its high unemployment, and Britain which now has two quarters of negative growth.

LyrArc Article Gist
The tense atmosphere in the talks between the Obama White House and Congressional leaders to achieve deficit reduction and raise the U.S. debt ceiling.

LyrArc Article Gist
Senate Minority Leader Mitch McConnell offered a way out of the stalemate in talks between the Obama White House and Republican leaders Boehner and Cantor. McConnell's proposal designed to meet the August 2nd 2011 deadlinefor raising the U.S. debt limit is to give the President new authority to raise the federal debt limit. It would place the entire responsibility for raising the debt limit on the President. Under this proposal Republicans would not have to vote to raise the debt limit. Republicans can then shift the effort for large spending cuts to the congressional appropriations process.

LyrArc Article Gist
U.S. President Lyndon Baines Johnson was committed to spending on a war overseas and domestic priorties for the Great Society program at home. Johnson struggled with Congress to meet the costs of both. He even suggested a 10% tax surcharge to pay for the war and domestic programs. Dallek says 79% of American opposed a tax increase in 1968. Republican Richard Nixon was elected U.S. president that year.