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23 juillet 2006 7 23 /07 /juillet /2006 22:39

It depends on what battle over...



Employers are not the villains in the battle over immigration
by David Frost

The publicity surrounding the launch of the government’s proposals on asylum and immigration, due tomorrow, has focused heavily on punishing British businesses for employing illegal migrants.

As far as business is concerned this is a complete diversion. The real issue is the fact that UK companies are increasing their use of legal migrant labour at an enormous rate. ... Businesses tell me that the single biggest problem they face is finding the skilled people they need to drive their businesses. They are solving the problem by employing migrant labour.

At the root of this, our school system is not providing significant numbers of our young people with the foundation in essential skills they need for the workplace. Only 44 per cent of school-leavers gain five GCSEs at grade A to C including English and maths. The Department for Education and Skills views this standard as the very minimum employability skills for basic productivity. In addition, there are up to 8m adults lacking the very lowest level of literacy and numeracy needed for the world of modern work.

The response of the business community to the poor quality of young people entering the labour market is to look increasingly to migrant labour, particularly from central Europe and specifically Poland. Employers tell me the reasons for this are simple and twofold: migrants have higher-level skills and a far better attitude to work than local people. They are enthusiastic and committed. ... Indeed, I met the owner of an electronics company in the east of England this month who has now given up recruiting through local newspapers. He finds it more cost effective to send his human resources manager out to Poland to recruit directly.

While business needs continued managed migration, we have to question whether this is the panacea for the UK’s skills shortages. We could be storing up significant social problems, especially in urban areas, if we assign the large number of young people with no qualifications and no work ethic to the scrap heap. Overall numbers in the labour market are rising, but so are the numbers of unemployed. It will not be a cohesive society if we have increasing numbers of migrants employed but at the same time the indigenous population is unable to find jobs.

The government must, therefore, ensure that the education system is fit for purpose. ... The current focus ... within our schools is divisive and elitist. The education system must engage all young people, whatever their talent or ability, and inspire them to learn and succeed. Our businesses and economy need skilled young people...

In addition, the government must ensure that the tax and benefits system acts as an incentive to get people into work. It is clear, particularly in the case of hourly-paid employees, that it does not currently provide a strong enough incentive... Until these issues are dealt with, migration will continue to play an ever growing role in addressing the needs of British business.

The British Chambers of Commerce will never support employers who flout the law and employ illegal immigrants. Indeed, ... employers who knowingly take on illegal immigrants [must be] punished accordingly. However, the overwhelming majority of employers are keen to ensure that they are operating within the constraints of the law. What business needs is an immigration process that is simple, clear and transparent...

But the employment of illegal migrants is a minor part of the issue and it is disingenuous to imply otherwise. The government should concentrate on solving the problems that are making our economy dependent on migration instead of shifting the blame for the failure of its complex and bungled immigration policy on to business.
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13 juillet 2006 4 13 /07 /juillet /2006 17:41

Nach dem Spiel ist vor dem Spiel (Sepp Herberger oder Sisyphos?)




Der Ball ist rund – Eine Zwischenbilanz der Fußball-WM in Deutschland
Joschka Fischer


Die Vorrunde der Fußball Weltmeisterschaft ist vorüber, die Achtel- und Viertelfinalspiele sind am Laufen. Es bietet sich also eine gute Gelegenheit für eine Zwischenbilanz. Diese WM hat, anders als ihre Vorgängerin 2002 in Japan und Südkorea, in der Vorrunde keine echten Favoritenstürze gesehen. Die Schweiz und Australien haben mit ihrem Einzug ins Viertelfinale überrascht, die asiatischen und afrikanischen Mannschaften eher enttäuscht. Ghana allein hat das Viertelfinale erreicht. Hässliche Spiele voller Fouls, hinterhältigen Tritten und schweren Tätlichkeiten mit zahlreichen gelben, rot-gelben und roten Karten gab es bisher lediglich zwei, nämlich Italien gegen die USA und Portugal gegen die Niederlande. Ansonsten erleben wir sportlich und atmosphärisch eine zauberhafte WM in Deutschland.

Überhaupt Deutschland und die Deutschen. Wer hätte das gedacht, dass man sein eigenes Land und seine Leute kaum wieder erkennt? Doch fangen wir zuerst mit den höheren Mächten an, denn pünktlich zur WM stellte sich in Deutschland nach einem furchtbar langen Winter und einem nicht vorhandenen Frühling der Sommer ein. Seit dem ersten Anpfiff dieser WM, quasi über Nacht, zeigt sich Deutschland von seiner sonnigsten und wonnigsten Seite. Das Wetter ist mediterran und die Leute sind es plötzlich auch. Klar, wir könnten jetzt auch beim Wetter (in Deutschland ein Dauerthema) auf die sprichwörtlichen deutschen Tugenden, wie Präzision, Pünktlichkeit und Organisation verweisen, aber wir wollen nicht übertreiben. Obwohl, Franz Beckenbauer, der Kaiser, ist Vorsitzender des nationalen Organisationskomitees und entsprechend kaiserlich ist das Wetter…

Die Organisation funktioniert hervorragend (was zu erwarten war), die Sonne scheint (was vielleicht zu erwarten war), ganz Deutschland feiert seit zwei Wochen mit den Gästen aus aller Welt eine nie endende Party (was nicht zu erwarten war) und die deutsche Mannschaft spielt einen mitreißenden, modernen Angriffsfußball, der sie bis jetzt ins Viertelfinale gebracht hat (was überhaupt nicht zu erwarten war!).

Nicht nur im Fußballspiel der deutschen Mannschaft, sondern auch im gesamten Land zeigt sich ein junges, ein cooles, ein lockeres, ein heiteres Deutschland – weltoffen, freundlich und gutgelaunt (alles andere als die bekannten deutschen Tugenden). Die Jahre einer medialen Negativpropaganda scheinen an den Deutschen spurlos vorübergegangen zu sein. Die Ärzte streiken, die Regierung erhöht die Steuern, die Parteien in der Regierung traktieren sich gegenseitig mit der Blutgrätsche, die Kanzlerin erklärt ihr eigenes Land zum Sanierungsfall – und die Deutschen feiern davon völlig unberührt einfach weiter, ein großes Fußballfest mit Freunden aus aller Welt.

Schwarz-Rot-Gold, die Farben der deutschen Trikolore, wehen und flattern im ganzen Land wie noch nie, aber kaum irgendwo findet man nationalistische Untertöne. Überall wimpelt es in den Landesfarben, und zwar nicht nur den deutschen. In Berlin, wie in anderen deutschen Großstädten, sieht man die Taxis mit den jeweiligen Landesfarben geschmückt – von Angola bis Saudi-Arabien. Überhaupt die Nationalfarben – alle Fans schmücken sich mit ihrer Flagge und fantastischen Kostümen in ihren Landesfarben. Die Fahnen wehen im Jubel des Sieges und taugen auch zum trocknen der Tränen in der Niederlage. Die Polizei leistet hervorragende Arbeit, Hooligans hatten deshalb bisher kaum eine Chance und hoffentlich bleibt dies so bis zum Finale. Kurz gesagt, Deutschland erinnert heute, frei nach Shakespeare, fast an einen Sommernachtstraum und etwas Woodstock dazu. Öffentliches Fernsehen – public viewing – ist zum großen Fanereignis jenseits der Stadien geworden..

Und der Fußball? Drei sportliche Entwicklungen fallen in dieser WM bisher auf. Erstens dominieren Europa und Südamerika mehr als vor vier Jahren und bleiben die ungefährdeten Großmächte des Weltfußballs. Es ist daher nur zu hoffen, dass die WM 2010 in Südafrika hier endlich eine neue Entwicklung einleiten wird. Zweitens steht der Weltfußball vor einem Generationenwechsel. Spanien, Argentinien, Deutschland, um nur einige unter vielen zu nennen, sind mit sehr jungen Teams angetreten und machen einen hervorragenden Eindruck. Im französischen, im englischen und auch im portugiesischen Team- trotz Zidane, Beckham und Figo – drängen ebenfalls die jungen Spieler nach vorne. Und auch die brasilianische Mannschaft wirkt mit Robinho und Juninho wesentlich aggressiver und torgefährlicher, als mit ihren alt gewordenen Weltmeistern von 2002.

Und dieser Generationenwechsel wird wiederum durch die dritte sportliche Entwicklung beschleunigt. Der Fußball in der Weltspitze ist noch schneller und athletischer und die Räume sind daher noch enger geworden. Ein Team, das nicht in der Lage ist, neunzig (oder mehr) Minuten volles Tempo zu gehen, mit der ganzen Mannschaft schnell von Verteidigung auf Angriff umzuschalten, mit perfekter Technik den Ball auf engstem Raum zu kontrollieren und dann auch zu punkten, hat in der Weltspitze kaum noch eine Chance. Hier ist im Fußball durchaus eine gewisse Parallele mit den Bedingungen der globalisierten Märkte festzustellen, die ähnliche Umstellungen von den nationalen Volkswirtschaften erzwingen. Gespannt darf man sein, ob sich am Ende dieser moderne Offensivfußball erfolgreich durchsetzen kann. Dem Fußballsport und den Fans würde dies mehr als gut tun.

Wie gesagt, es ist dies eine WM, die sowohl auf dem Fußballplatz und als auch auf den Straßen und Plätzen von einer neuen, einer jungen Generation geprägt wird – unbeschwert, packend und einfach nur schön. Wenn am 9. Juli das Endspiel in Berlin abgepfiffen wird, dann wird uns Deutschen hoffentlich möglichst viel von dieser Stimmung erhalten bleiben. Gerade wir in Deutschland werden diesen Optimismus sehr gut gebrauchen können. Denn leider werden auch in Zukunft zwei Grundsätze unverändert fort gelten: Erstens, der nächste Winter kommt bestimmt. Und zweitens, der Ball ist rund und das nächste Spiel ist das schwerste.
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30 avril 2006 7 30 /04 /avril /2006 22:22

Tel pere, tel fils...(Hmmm edition)




Thank you, President Hu
China's inaction is the best America can hope for.
James K Galbraith and Warren Mosler


The US trade deficit just hit $686 billion (annual rate), prompting yet another round of hand-wringing, especially about American indebtedness to China. In a recent comment, economist Thomas Palley blamed the trade deficit for the alleged weakness of American economic growth, and China specifically for fueling the housing bubble by keeping US long-term interest rates low. Echoing this view, President Bush implored President Hu to do something. Mercifully, Hu promised no particular action.

Suppose (let's say) China decided NOT to sell us the $200-odd billion in goods they sold us last year. What would happen? Immediately, inflation would escalate, as exactly that many billions of dollars sought goods no longer for sale. Our Federal Reserve would respond with higher interest rates, and Congress might cut spending and raise taxes. We'd be out the goods, and China out the money. Would anyone be better off? Of course not.

Or suppose China decided to spend its dollar hoard, said to be nearing a trillion dollars, on oil, wheat, machinery and the good life. Inflation would then ignite as a boom in world prices for whatever China decided to buy. Once again, American living standards would fall - and our policy makers would again react quickly, making matters worse.

The conclusion is obvious. China does America a huge favor by shipping goods and hoarding the securities we hold for them in return. This has real costs for China, even though the Chinese do it for their own good reasons - it helps them manage their massive ongoing urbanization. But however you count it, the benefit to America and Americans is enormous.

Ah, but might it all come to a crashing end? Well, yes, it might. And some day the sun will explode and the universe collapse under the weight of the cold dark matter. But that's no reason to bring on the apocalypse if it can be postponed. So long as China wishes to sell goods and accumulate assets, why not accommodate and enjoy? Nothing stops them from giving or us from receiving, in mutual agreement.

Especially, in contrast to much rhetoric, there is no limit to the amount China can lend us, because in fact they aren't 'lending' at all. When a US consumer buys a cell phone with a credit card, for instance, she borrows the funds from a domestic bank. That credit creation provides the dollars that are paid to (say) Motorola (China). China then may exchange the dollars for a Treasury bond. That's purely an American portfolio shift. No 'foreign capital' is involved.

The net result: we do not depend on foreign savings to fund our trade deficit. As a matter of accounting and not theory, domestic credit funds foreign savings. The foreign sector depends on the US consumer's sustained ability to borrow, so that she can continue to purchase the goods they wish to sell to us, in exchange for the financial assets we hold for them. The only resources committed from China are the labor and components which built the phone in the first place.

And if some day they have two trillion in U.S. securities instead of one trillion, how exactly will that change the relationship between our countries, from what it is now? If some day China chooses to stop exporting above its imports, that will be because it needs the goods at home - not because it has more US securities than it wants.

What about national security? Those who fret over lost capacity in strategic sectors overlook a simple solution. Why can't the US government buy strategic goods from home producers, paying the premium necessary to maintain the desired domestic facilities? This is far less destructive than imposing inflationary tariffs or quotas, to keep out cheaper foreign products (such as steel) used by domestic manufacturers (such as of automobiles).

Finally, do imports cost American jobs? Yes they do, and those hurt by expanding trade should get help. But any failure to replace jobs lost to trade with better jobs is also entirely domestic. It lies in our failure to fund the new jobs we need for Americans willing and able to work. These can be private or public: that's a political choice. The US needs up-dated infrastructure, public spaces, cultural centers open and affordable to all; it needs better schools and the possibility for ordinary working people to live decent lives while working shorter hours; it needs stronger prevention and better preparation for disasters like Hurricane Katrina. China's willingness to furnish toys and TVs and cell phones at low cost makes it easier, not harder, to meet all of these needs. And if we fail to rise to that challenge, we have only ourselves to blame.

The 'innocent fraud' of 'borrowing from abroad' to fund our trade deficit diverts attention from real problems to false ones. And should one day those false problems disappear, then the real problems would become much worse. So, let's hope they don't, and in the meanwhile, we might say a word of thanks to the Chinese, instead of blaming them for what they do.







According to the IMF and OECD definitions, direct investment reflects the aim of obtaining
a lasting interest by a resident entity of one economy (direct investor) in an enterprise that is
resident in another economy (the direct investment enterprise). The “lasting interest” implies
the existence of a long-term relationship between the direct investor and the direct
investment enterprise and a significant degree of influence on the management of the latter.
Direct investment involves both the initial transaction establishing the relationship between
the investor and the enterprise and all subsequent capital transactions between them and
among affiliated enterprises4, both incorporated and unincorporated. It should be noted that
capital transactions which do not give rise to any settlement, e.g. an interchange of shares among affiliated companies, must also be recorded in the Balance of Payments and in the
IIP.

The fifth Edition of the IMF’s Balance of Payment Manual defines the owner of 10% or
more of a company’s capital as a direct investor. This guideline is not a fast rule, as it
acknowledges that smaller percentage may entail a controlling interest in the company
(and, conversely, that a share of more than 10% may not signify control). But the IMF
recommends using this percentage as the basic dividing line between direct investment and portfolio investment in the form of shareholdings.

Thus, when a non-resident who previously had no equity in a resident enterprise purchases 10% or more of the shares of that enterprise from a resident, the price of equity holdings acquired should be recorded as direct investment. From this moment, any further capital transactions between these two companies should be recorded as a direct investment. When a non-resident holds less than 10% of the shares of an enterprise as portfolio investment, and subsequently acquires additional shares resulting in a direct investment (10% of more), only the purchase of additional shares is recorded as direct investment in the Balance of Payments.

 The holdings that were acquired previously should not be reclassified from portfolio to direct investment in the Balance of Payments but the total holdings should be reclassified in the IIP.

Concerning the terms direct investor and direct investment enterprise, the IMF and the
OECD define them as follows. A direct investor may be an individual, an incorporated or
unincorporated private or public enterprise, a government, a group of related individuals, or a group of related incorporated and/or unincorporated enterprises which have a direct
investment enterprise, operating in a country other than the country of residence of the
direct investor. A direct investment enterprise is an incorporated or unincorporated
enterprise in which a foreign investor owns 10% or more of the ordinary shares or voting
power of an incorporated enterprise or the equivalent of an unincorporated enterprise.

Direct investment enterprises may be subsidiaries, associates or branches. A subsidiary is
an incorporated enterprise in which the foreign investor controls directly or indirectly
(through another subsidiary) more than 50% of the shareholders’ voting power. An
associate is an enterprise where the direct investor and its subsidiaries control between
10% and 50% of the voting shares. A branch is a wholly or jointly owned unincorporated
enterprise.
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15 avril 2006 6 15 /04 /avril /2006 15:27

The Law Of Least Resistance...




Extrait d'un article sur le blog de Becker-Posner qui resume assez bien une petite partie d'un debat vieux de .....x siecles...




'Culture is similar. The way in which people speak (including pronunciation, grammar, syntax, and vocabulary), gesture, hold their bodies, grimace, use knife and fork, greet one another, behave toward members of the opposite sex, and otherwise conduct themselves in their basic social interactions is to a high degree habitual, most of that behavioral repetoire having been learned and mastered in early childhood--when learning costs (notably of language) are low. To change one's cultural identity as an adult requires incurring heavy time costs, often with limited results--a foreigner is unlikely ever to lose all traces of foreignness. This is one reason why there are many different languages, even though it would be more efficient (costs of change aside) if everybody in the world spoke the same language.'




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29 décembre 2005 4 29 /12 /décembre /2005 10:29

Bob donne raison à Paolo



THE NEW RICH - RICH GAP

THE WEALTHY CLASS IS SPLITTING INTO TWO ELITES, ONE NATIONAL AND THREATENED BY OUTSOURCING, THE OTHER INTERNATIONAL AND PROFITING WILDLY FROM GLOBALIZATION.

BY ROBERT B. REICH


ALMOST 15 YEARS AGO, IN '"The Work of Nations," I described a three-tiered work force found in most advanced economies. At the bottom were workers who offer personal service, mainly in retail outlets, restaurants, hotels and hospitals. In the middle were production workers in factories or offices, performing simple, repetitive tasks. At the top were "symbolic analysts," like engineers or lawyers, who manipulate information to solve problems. Educated to think critically, almost all have university degrees. They were the knowledge workers of the new economy.

I predicted that advances in technology, and globalization, would widen the gaps in income and opportunity between these tiers. I was, sadly, prescient. In recent years, the top fifth of American workers has held 85 percent of the country's wealth. What I didn't predict was that the three tiers would change shape so dramatically. The top and bottom tiers are growing, and the middle shrinking, much faster than I expected. Symbolic analysts now make up more than a fifth of all jobs in advanced economies, up from about 15 percent 15 years ago. Their incomes in developing economies are soaring, relative to other workers'. In China, the wealthiest 5 percent now control half of all bank deposits. India's symbolic analysts are becoming a new national elite.

Two different groups of symbolic analysts are emerging: national and global. Most symbolic analysts still work within a national economy, manipulating various kinds of symbols with the aid of computers. They're at the core of their nations' middle class — accountants, engineers, lawyers, journalists and other university-trained professionals.

Yet a new group is emerging at the very top. They're CEOs and CFOs of global corporations, and partners and executives in global investment banks, law firms and consultancies. Unlike most national symbolic analysts, these global symbolic analysts conduct almost all their work in English, and share with one another an increasingly similar cosmopolitan culture.

Most global symbolic analysts have been educated at the same elite institutions— America's Ivy League universities, Oxford, Cambridge, the London School of Economics or the University of California, Berkeley. They work in similar environments — in glass-and-steel office towers in the world's largest cities, in jet planes and international-meeting resorts. And they feel as comfortable in New York, London or Geneva as they do in Hong Kong, Shanghai or Sydney. When they're not working — and they tend to work very hard — they live comfortably, and enjoy golf and first-class hotels. Their income and wealth far surpass those of national symbolic analysts.

There's a good economic reason that this group of global symbolic analysts emerged. Global commerce is now occurring on a scale and with a complexity that no commercial contract can adequately cover and no single legal system can sufficientiy enforce. Hence, global dealmakers must rely to an ever greater extent on an extended network of people whom they trust.
This sort of trust depends on personal connections — on "relational capital" that draws on accumulated good will, and on confidence that anvone within that trusted circle can be relied on to draw in outers equally trustworthy. Global symbolic analysts within a trusted circle share a kind of brand-name franchise that opens doors and consummates deals. They spend a lot of working time in front of computers and on the phone, but also devote significant time to face-to-face meetings, all over die world.

The growing number of symbolic analysts is also helping fuel the growth in the lowest tier, the personal-service workers. It used to be that about a third of the work forces in advanced economies were in person-to-person jobs; now, close to half are. Today, more Americans work in laundries and dry cleaners than in steel mills; more in hospitals and nursing homes than in banks and insurance companies. More work for Wal-Mart than for the entire U.S. automobile industry.

This is happening because busy households are "outsourcing" more housework, because populations of advanced economies are aging, raising demand for elder care, and because the richest 10th have so much discretionary income they can afford lots of pampering. They're hiring coaches, masseurs, drivers, gardeners, cooks and therapists of all kinds. Yet the supply of service workers is increasing faster than demand, due (also) to a flood of new immigrants, and of workers no longer needed in routine production. As a result, the pay for these jobs is low and falling.

Meanwhile, die ranks of production workers have fallen, from about a third of advanced-economy work forces 15 years ago to one quarter. Analysts at Alliance Capital Management in New York, in a study of 20 major economies, found that between 1995 and 2002 more than 22 million factor}' jobs vanished. The United States wasn't even the biggest loser. America lost about 11 percent of its manufacturing jobs, while Japan lost 16 percent and Brazil lost 20 percent. The biggest surprise: China, which is fast becoming the manufacturing capital of the w-orld, lost 15 percent of its manufacturingjobs.

What's going on? In two words: higher productivity. Factories are becoming more efficient, with new equipment and technology, and in nations like China, market reforms are replacing old state-run plans with modern ones. As a result, even as China produces more manufactured goods than ever before, millions of its factory workers have been laid off.

Routine office jobs are disappearing almost as fast as routine factory jobs. Almost any office task—claims adjusting, mortgage processing—can be done more cheaply and accurately these days by specialized software. Jobs that can't be turned into software are heading to low-wage countries as fast as telecom systems can reach them. Not only are call centers, tech support and routine computer coding going abroad, but so are jobs involved in patent applications, divorce papers and certain domains of research. This trend portends a growing clash of interests at the top, between national and global symbolic analysts.

More of the jobs of national symbolic analysts in advanced economies — including software programmers and engineers, designers and researchers — are heading to national symbolic analysts in China, India and locations in Southeast Asia. But the trend is undeniable. Already Siemens, Nokia and General Electric are conducting manufacturing-related R&D in China. As a result, professionals in advanced economies are becoming worried about their job security, and less enamored of free trade and open capital markets. Global symbolic analysts, on the other hand, have a huge and growing stake in globalization. Their relational capital is far less transferable to Asia. Hence, as globalization intensifies, their skills are in ever greater demand.

The fears of national symbolic analysts are premature. The demand for their skills is still rising, notwithstanding the new competition. The earnings of university graduates in the United States and most advanced economies continue to outpace the earnings of those with only secondary-school diplomas, and the earnings of people with graduate and professional degrees are rising even faster. If demand for symbolic analysts were dropping, we would expect the opposite.

Yet unless the advanced economies invest more in education and basic R&D, they could lose their global lead in science, engineering and high-value-added production within a few decades. China and India are now graduating more engineers and computer scientists than are emerging from American and European universities. At some point, national symbolic analysts in advanced economies will lose ground. Their global brethren, meanwhile, will continue to dominate global commerce. The income and wealth gap between them will widen into a chasm. They will live, literally, in different cultures.
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28 décembre 2005 3 28 /12 /décembre /2005 22:46

Prévenir vaut mieux que guérir..., d'après Adam Posen (AFFALER n'est pas AFFOLER)









ADAM POSEN






People complain about the weather all the time, but no one does anything about it. So it goes with the potential economic storm that will be generated by the inevitable adjustment of global imbalances.

We are told repeatedly that the US current account deficit is unsustainable, that the US housing bubble and government deficits bring the day of reckoning closer and that underlying protectionist pressures imperil the Doha round of trade negotiations, if not the entire trading system. The recommended policy responses are limited to those that would simply bring on the adjustment  contraction of US domestic demand, direct political conflict with agricultural interests, a sharp dollar decline, rising interest rates - a little bit earlier and perhaps only a little less severely.
Yet, we can at least prepare for bad weather before it hits. Imagine if knowing that New Orleans was likely someday to be hit by a powerful hurricane had actually induced reasonable preparations. Levees could have been built more strongly, evacuation plans drawn up, early warning systems made credible to suspicious citizens. No one could have prevented Katrina, but the damage from it could have been significantly reduced.

Similarly, there are policy steps that should be taken to batten down the global economy ahead of a potentially severe shock from renewed trade protectionism or dollar adjustment. Little has been done to prepare, however, because policymakers have little incentive to plan ahead. Trade negotiators and the special interests trying to constrain them benefit from pursuing a strategy of brinkmanship and so will do nothing to reduce the chances or costs of a Doha crack-up. The US and Chinese finance officials have not yet gone to the brink over revaluing the renminbi, but they are sufficiently tempted to draw lines in the sand that they, too, have little interest in lowering the stakes of economic conflict.

If the governments of the big economies wanted to learn from Katrina, though, they would take action to limit the damage that resolving the current global imbalances could bring.
First, they should strengthen economic linkages. Foreign direct investment and capital flows link economies even when trade barriers constrain commerce. The US, the European Union and Japan (Mundell!) could reverse the effect of their recent decisions to block cross-border mergers by simplifying the process in three ways: agreeing on a narrow definition of what constitutes a "national security" exception; bringing accounting standards negotiations to a close, which would remove uncertainty for prospective investors; and publicly repudiating the often-invoked image of foreign investors as "vultures" who prey on employees. All this would help protect the ties between economies, encouraging continued cross-border integration of production as well as flows of capital, whatever happens with the trade round.

Second, they should enhance financial stability. Financial fragility is the primary means by which limited shocks get escalated into macroeconomic crises. Right now, with interest rate spreads at historic lows, any international adjustment that pushed up interest rates and reversed current account surpluses outside the US could lead to sharp declines in asset values and therefore in financial sector capital. Bank supervisors in the big economies should be tightening their scrutiny and encouraging increased provisioning by banks. Financial regulators should be warning householders of the risks presented by investments that have appeared stable in recent years.
Where crisis response infrastructure is lacking - as arguably the decentralised system in the EU is - now would be a good time to rationalise.

Third, they must commit to macro-economic stabilisation. Central banks and budgetary officials could reassure the public that they will respond strongly to swings in growth (thereby avoiding the mistakes of Japanese officials in the 1990s and EU officials in recent years). In fact, if they credibly commit to stabilisation policy, private-sector expectations may limit overshooting of exchange rates and investment levels. For the US Federal Reserve, the Bank of Japan and the European Central Bank, this is a matter of adopting inflation targets that would oblige monetary policy to offset excessive movements in prices up or down; for the budgetary authorities, this means giving automatic stabilisers full room to work (for example, by the EU reworking the stability and growth pact) or authorising sufficient unemployment benefits in the US and Japan. There are constructive measures that governments can and should take to prepare for the adjustment process, independent of their present politically determined approaches to trade negotiations or exchange rate policy. They probably have time to do so before the storm arrives.

The US practice of selling off assets to fund a consumption boom today may be a lousy idea for anyone who cares about future American income, but that does not make it immediately unsustainable. As 2005, 2004 and 2003 have shown, there is plenty of foreign appetite for US assets and thus room for the current account deficit to continue to expand. Given growth differentials and liquidity of investment assets, both still favouring the US over other markets, 2006 will probably show more of the same. Instead of wondering why the hurricane has not yet hit, let us take advantage of that fact to prepare for when it comes.
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