Niall Ferguson - West less good at being West

Niall Ferguson: 'West less good at being West' (CNN)

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(CNN) -- The speed at which the global economy has pivoted from the West to emerging economies like China is astounding, says author Niall Ferguson.

"If you think back to 1978 when I was a teenager, the average American was 22 times richer than the average Chinese. And today it's less than five times," said Ferguson, a Harvard history professor and a former adviser to 2008 Republican Party presidential candidate John McCain. "That's an amazing reduction in the global imbalance and it's happen in the space really of 30 years."

"The West is at a different phase of development -- economically, demographically -- and it's also at a different place culturally from these countries that are emerging from various forms of economic control -- whether the bureaucratic system of post-Raj India or the communist system that was gradually dismantled economically in China after 1978," he said. This is bringing back one of the most remarkable shifts in the global balance of economic power."

Ferguson sat down last week with CNN's Andrew Stevens in detailed talk on the global economy.

What are the underlying reasons for the decline of the West?

In our lifetime Western ascendancy is coming to an end, after 500 years, when the story was the great divergence -- when the west got much richer than everybody else. And it's extraordinary that really since the 1970s, this historical tide has turned.
New age of U.S. prosperity?
Are central banks doing enough?
Niall Ferguson: The West and the Rest
Sharing the wealth of ideas

I think there are two processes at work here. One is the rest of the world -- led by China -- have been downloading our killer applications. They have been imitating the things that work well in the West, particularly in the realm of business. And this is to be celebrated. It's great to see countries like China and India lifting hundreds of millions of people out of poverty by essentially copying Western ways of doing things.

But I think there is another process at work, which is in some ways independent -- the West is becoming less good at being the West. The things that worked well in the West for over half a millennia don't work so well now. And one way of looking at it is to say: Why is it that the Western economies have malfunctioned? It's not just that there ways a financial crisis and bankers are terrible people. It's much more profound than that.

Why are Western economies performing so badly?

One way of thinking about this is to ask why so many economies, most of them Western -- Japan is the exception -- are currently crushed by debt, which in some cases exceed 100% of GDP? And these debts are forecast to rise even further in the U.S. The simple answer is to say there is a terrible problem of government extravagancy, but I don't think that's the right answer. One way of thinking about this is to say that debt represents a tax on the future. And the big accumulation of debt that we've seen over the last 20 or 30 years in the Western world reflects a breach of contract between the current generation and the next generations. And these debts represent a big burden on the future. And that is one reason I think we've seen a slowdown in the Western world because these burdens of debt act as a major check on economic dynamism.

Why has this generation decided to ignore future generations? Why have we become so selfish?

At some level I think it's a cultural shift. We've moved a long way from our ideals of self-sacrifice for the future that characterized the West during its hay days of industrialization, overseas expansion -- not to mention large-scale warfare. So there's partly been a cultural shift towards the 'me generation' -- consume now, live in the present. But I think it's slightly more than that.

I think what happened after World War II was that it was decided in most Western countries to create pretty generous welfare states that were going to exist to transfer resources from the rich to the poor. And that worked pretty well. It did reduce inequality in those countries when these systems were introduced. But over time the welfare state has become dysfunctional in a surprising way. But in a way it became a victim of its own success: It became so successful at prolonging life, that it becomes financially unsustainable, unless you make major changes to things like retirement ages. And everywhere you see the same basic story, whether you're looking at northern Europe, southern Europe, or north America -- welfare states become harder and harder to finance, and structural budget deficits emerge.

That's to say deficits that are there even when the economy is growing well. And I think these are symptoms of a more profound problem that is causing the Western slowdown. Contrast that with the story in Asia, where welfare states, let's say in China, are much less well developed.

Is it going to take something like a fiscal cliff -- a sovereign debt crisis -- to bring this period to an end?

The European experience suggests nothing gets done until there is a crisis. And this crisis has begun in countries like Spain, Greece, Ireland, and I think soon it will spread to France, as people begin to realize that the French position is actually no better than the other Latin European countries. At some point one can imagine a crisis like that happening in the most developed Asian economy, Japan. And I think sooner or later it may end up happening in the U.S. Although I must say I'm becoming less and less sure that will happen soon. There are things happening in the U.S. that make it quite different, in the sense for example that the demographics are not so bad -- partly because of immigration -- and also interestingly the U.S. is about to have the most amazing free lunch on the back of shale gas and shale oil. The US economy is going to get a really big shot in the arm.

What then is the restructuring that needs to happen at an economic level in the West?

Well, I think the most important thing to recognize is that it's not just about taxing and spending. If you define this too narrowly in fiscal terms then you end up in the mess that southern Europe is in -- trying to balance the budget, even as your economy is shrinking. It's better I think to ask questions of a more profound nature about the institutional framework within which society operates. To me one of the most profound contrasts between the West and the rest is that things like the rule of law -- regulation, bureaucracy -- are becoming more burdensome in Western countries, even as they are becoming less burdensome in emerging markets.

You mean they are getting in the way of development?

They really are. I mean one of the main arguments that I make in my new book, "The Great Degeneration," is that the rule of law in the US is becoming the rule of lawyers. The legal profession has become a very major source of cost for business. You have very complex regulation and a very parasitic legal profession, and it battens off the private sector. It's almost impossible for any major organization to function without a huge compliance department and teams of lawyers. And that is all just dead cost. It doesn't really add to the productivity of the economy.

And I think that's one of the things that I am trying to focus on: Why is our regulation so over-complicated? Why does the tax code occupy shelves, rather than just a few pages? And why is it that if you want to regulate the financial sector, you need a bill that is 2000-plus pages long? If we could aspire for greater simplicity and transparency in the tax code and most regulation, I think there would be real benefits.

As China cherry picks the best of the West, do you think they may also fall into Western excesses as well: Is this an evolutionary likelihood?

It's possible. They have some way to go. Short-term, I think the biggest problem facing the Chinese is the rule of law question. It's not the democracy question. It's more -- can China transition to a system in which the rule of law really works? That matters a lot for China's rapidly growing middle class. They want security for their property. They do not want to feel that they could have their property confiscated by an all powerful party at the drop of a hat.

It's not difficult to see what China needs to do, but whether it can do it politically, whether it can override the vested interests, or not, I really don't know.

If you think about it China is acquiring this huge middle class that's one of the direct consequences of rapid growth. And historically if you look at the Western experience it's the middle class that starts to push for rule of law and representative government and freedom of the press -- those are middle class things to want. You really don't worry about those things if you're a peasant or an industrial worker. It's inevitable I think that as this class grows in China, it will start to behave in the ways that middle classes always behave. And the Communist Party is not well set-up to meet those demands.
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Tony Blair's 10 dos and don'ts for religion and democracy

Tony Blair, CNN.com Belief Blog, 2011-11-11

1. DO have democracy-friendly religion and religion-friendly democracies.

2. DON’T think you understand democracy if you think it’s only about elections: it’s about a culture and mindset which includes freedom of thought, freedom of expression, political and religious pluralism, and human rights.

3. DO maintain equality of treatment for different religions within the law as a core element of the secular state.

4. DON’T duck difficult conflicts involving religious and secular ideas: discuss them openly.

5. DON’T rush to legislation to solve religious conflict; instead seek first to resolve it by discussion and accommodations.

6. DON’T allow religious schools to opt out of the same national standards and core curriculum that you expect of everyone else.

7. DO listen to religious voices on social, political and economic issues, and allow people to justify their views on explicitly religious grounds if they want.

8. DO insist on religious leaders making their case by reasoned argument not by bald assertion or authoritarian claims. Insist on that for atheists and secular leaders too.

9. DO NOT allow religious voices to have dominance in the public sphere if they cannot achieve majority support through democratic means.

10. DO ensure, whether the overwhelming democratic choice is either an atheist state or one dominant religion, that the voices of religious minorities and those who have no faith are protected.

Remember that none of us are qualified to state with certainty the will of God – so humility, openness to others, and interfaith dialogue are all essential for a healthy society.

Federations and confederations

A federation is a type of sovereign state characterized by a union of partially self-governing states or regions united by a central (federal) government. In a federation, the self-governing status of the component states is typically constitutionally entrenched and may not be altered by a unilateral decision of the central government.

A confederation is an association of sovereign member states that, by treaty, have delegated certain of their competences (or powers) to common institutions, in order to coordinate their policies in a number of areas, without constituting a new state on top of the member states. Under international law a confederation respects the sovereignty of its members and its constituting treaty can only be changed by unanimous agreement.

By definition the difference between a confederation and a federation is that the many memberships of the member states in a confederation are voluntary, while the membership in a federation is not. A confederation is most likely to feature these differences over a federation:
(1) No real direct powers: many confederal decisions are externalised by member-state legislation.
(2) Decisions on day-to-day matters are not taken by simple majority but by special majorities or even by consensus or unanimity (veto for every member).
(3) Changes of the constitution, usually a treaty, require unanimity.

Reference: Federation, Confederation

Greek Tragedy

What is the solution? One possibility is to recognize that the current euro zone might not make sense. This is not a decision that anyone will take this week, but it may well be the fast-approaching reality.

Full article: Wall Street Journal by Simon Johnson and Peter Boone

Recommended by Ed Schuster.

Resultados das eleições / Election results

O vencedor é o PS com maioria relativa.

The winner is PS with relative majority.

Fonte/Source: RTP

Eu vou votar PSD / I will vote for PSD

Eu vou votar PSD nas eleições legislativas deste Domingo. / I will vote for PSD in the Parliament elections this Sunday.

Bens essenciais / Essential goods

Ricardo Araújo Pereira: Se o "Soutôr" for Primeiro Ministro, este fato continua a ser meu ou o senhor "disprivatiza-mo"? (...)

Francisco Louçã: Esse fato cai-lhe muito bem... é muito bonito... mas devo confessar, não é um bem público essencial.

A questão essencial para mim é: Quem define o que é um bem público essencial? Parece-me que (quase) tudo pode caber na definição...

/ This post is bilingual: Portuguese (Portugal) and English (U.S.) /

Ricardo Araújo Pereira (Portuguese comediant): If you are elected Prime Minister, is this suit still mine or will you "unprivatize" it? (...)

Francisco Louçã (Portuguese neo-communist politician): That suit looks good on you... it is very nice... but I must confess, it is not an essential public good.

The essential question for me is: Who defines what is an essential public good? It think that (almost) anything can fit the definition...

PSD vs PS

As Eleições Legislativas de 2009 já estão no horizonte. Aqui estão duas nuvens de palavras geradas por computador para ter uma ideia das palavras usadas nos programas eleitorais do PSD e PS, respectivamente.





/ This post is bilingual: Portuguese (Portugal) and English (U.S.) /

The 2009 Portuguese Elections are coming. For those too busy to read the electoral programs here is a computer-generated word cloud for PSD and PS, respectively.

Fonte/Source: José Manuel Fernandes

The Second Great Depression

I've been following Ed Schuster's analysis of the financial crisis and, unfortunately, I must agree with him that we are in the midst of the Second Great Depression.

Beyond fiscal stimulus, spending money to ease the banking crisis is also a major priority. Overall, the banking crisis is becoming worse. I really do not think most Americans understand just of serious of a situation we are experiencing. It might be that the American and global economy will experience 5 years of sluggish growth. I think it seems clear that we are entering the Second Great Depression.

Edmund W. Schuster

Human Work

Work is the expression of our being. Work (...) must assist and be in function of the truth and happiness to which everyone personally aspires. (...) The aim of work is not the work itself, rather it is man.

To sustain his "heart" in face of society, man needs a company, a belonging.

John Paul II said that "the aim of the Church is to construct a civilization of truth and love." Jesus said "He who follows me will have eternal life and one hundredfold here below."

The right of free association is among the fundamental human rights. (...) In an association, freedom finds more space and security. (...) Just how democratic a society is, is measured by its respect for this freedom that permits a place to work to spring from the heart and be sustained in association.

Father Luigi Giussani

Weak privacy or dust for the eyes / Privacidade fraca ou poeira para os olhos

The Portuguese government has legislated that all motor vehicles now must have a built-in identification chip. In the law it is claimed that the chip poses no privacy problems because only a "code" is communicated and access range is local.

This statement is not true. By always transmitting the same code, all that it takes is to know a vehicle's code - and to know who uses the vehicle - to have a key to for track and trace data.

I recommend the following paper for a better understanding of privacy:
A. Juels and S. Weis. Defining Strong Privacy for RFID. 2006.

/ This post is bilingual: English (U.S.) and Portuguese (Portugal) /

A salvaguarda do direito à privacidade dos proprietários e/ou condutores e a protecção dos respectivos dados pessoais não são postas em causa com este sistema, uma vez que o DEM apenas transmite um código e não qualquer elemento de identidade dos proprietários e/ou condutores. Por seu turno, os equipamentos de detecção electrónica de veículos são dotados de um alcance meramente local, não permitindo um acompanhamento permanente dos veículos em circulação.

Decreto-Lei que, no uso da autorização legislativa concedida pela Lei n.º 60/2008, de 16 de Setembro, procede à segunda alteração do Decreto-Lei n.º 54/2005, de 3 de Março

Esta afirmação não é verdadeira. Ao transmitir sempre o mesmo código basta saber qual o código de um dado veículo - e saber quem é a pessoa que usa o veículo - para ter a chave que dará acesso a todo um rastro de dados.

Recomendo a leitura do seguinte artigo sobre privacidade (em inglês):
A. Juels and S. Weis. Defining Strong Privacy for RFID. 2006.

Change

As the President changes, so does his web site.


I'm curious to see how Obama will use the Internet during his presidency. It was instrumental in his campaign.

Photo credits: http://bits.blogs.nytimes.com/2009/01/20/obama-renovates-whitehousegov/

Live politics / A política em directo

The New Year message of the President of Portugal is on-line at his web site (in portuguese).

It's very important to be able to hear from the politicians directly, without filtering from the press, that so many times reduces these addresses to sound bytes.

P.S. - For me it's always an emotion to hear the Portuguese National Anthem!


/ This post is bilingual: English (U.S.) and Portuguese (Portugal) /

A mensagem de Ano Novo do Presidente Português está disponível no seu sítio.

É muito importante podermos ouvir os políticos directamente, sem a filtragem da imprensa, que tantas vezes reduz os discursos a excertos sonantes.

P.S. - Para mim é sempre uma emoção ouvir o Hino de Portugal!

President Barack Obama / Presidente Barack Obama

The elections are finally over. Barack Obama has won and will be the 44th President of the United States of America.

I wish the best of luck for the new President, because there are several dark clouds in the horizon of the Free World.

Photo credits: AP Photo/Alex Brandon

/ This post is bilingual: English (U.S.) and Portuguese (Portugal) /

As eleições chegaram finalmente ao fim. Barack Obama venceu e será o 44º Presidente dos Estados Unidos da América.

Desejo muito boa sorte ao novo Presidente, porque existem muitas nuvens carregadas no horizonte do Mundo Livre.

Today is US Election day

McCain/Palin vs Obama/Biden - May the best team win!

My view of the candidates in one word:
McCain - honor
Obama - hope


Photo credits: A sand sculpture of US presidential candidates John McCain (L) and Barack Obama (R), created by Indian sand artist Sudarsan Pattnaik, is seen at a beach in Puri on November 2, 2008. SANJIB MUKHERJEE/AFP/Getty Images, in Business Week.