World Scientific Development in 2010

"Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor encourage the formation of larger units of production at the expense of smaller ones. The result of these developments is an oligarchy of private capital the enormous power of which cannot be effectively checked even by a democratically organized political society."
- Albert Einstein, May 1949

Scientific and technological advancement have always been the throttle for human knowledge creation and social development. According to a report in the New Scientist, nations in the Third World are beginning to crack the supremacy of Europe and America in the field of modern science and technology--- yet another ominous sign of decline in the Global North.

Out of all of the world's regions, only "North American scientific output has grown 'considerably slower' than the world as a whole." Europe was able to avoid this through greater cross-collaboration with Asia. For its part, "Asia is becoming the world leader in science". And, in the midst of a public relations campaign to isolate Iran as a Islamic fundamentalist dictatorship, Iran is showing the fastest rate of scientific development of any country in the world.

One great way to measure the trajectory of any society in the 21st century is by its ability to make significant advances in the sciences. The U.S. is beginning to lag behind, which is not good for a global economy largely dependent on the American political-economic system to prosper. However, the problem of scientific advancement in America is part of a much larger political, social, and ecological crisis. These crises can be summarized as the crisis of private capital that I discussed in my last post, and one of the great scientists of all time Albert Einstein argued in this famous piece.

U.S. Defense Spending and the Battle of Ideas

"History has shown that where the Great Powers cannot colonize, they balkanize. This is what they did to the Austro-Hungarian Empire and this is what they have done and are doing in Africa. If we allow ourselves to be balkanized, we shall be re-colonized and be picked off one after the other...."-Kwame Nkrumah

My mother says in a verbal debate the one who throws the first punch has conceded the argument to the other side. At the bequest of the "invisible government", the Obama administration wants to increase war spending to record highs and has made clear that America has given up trying to persuade the world to accept its role as the supreme hegemon and instead has chosen to impose its self.

The overwhelming reliance on violence by the American government is obviously a response to declining ideological legitimacy around the world. The recession has eroded the mythology of neo-liberal economics. The attempts by the U.S. to impose its version of liberal democracy in Iraq and Afghanistan are extremely unpopular and along with the Israeli occupation of Palestine are radicalizing millions of young muslims in opposition. In Latin America a legion of left-wing political and social movements are directly challenging the historical dominance of the U.S. The American government finds its self increasingly marginalized, supporting a right-wing coup regime in Honduras and ignoring human rights violations against the poor in Colombia. Accordingly, the U.S.-lead "War on Drugs" in Latin America has been almost as tragic a failure there as in the ghettos of the U.S.

The waning influence of American ideological hegemony is being overcome by an anti-democratic attempt to force our "national interests" on the third world. This is the reason why in the first month of 2010, the U.S. has sold millions of dollars in weapons to Taiwan to threaten China, to authoritarian proxies in the middle-east and why the latest budget request from the Obama administration asked Congress to approve a record $708bn in defense spending for fiscal year 2011. The budget calls for a 3.4 per cent increase in the Pentagon's base budget to $549bn not including the occupations in Iraq, Afghanistan and Pakistan.

The "national interests" the U.S. is seeking to achieve around the world clearly do not include the interests of poor and working-class families in America. At the same time the Obama administration spends a greater amount of money on so called defense than ever before, it has announced a spending freeze on all Federal social programs. The recession has hit many American states hard and massive budget cuts have eroded the minimal safety-nets which existed before the financial crisis. Meanwhile, the American people who need help the most are being forced to pay for endless war and occupation in foreign lands.

The U.S. is clearly loosing the battle of ideas on environmental protection, socio-economic justice, and committment to a multi-polar world. The only way to stop their irrational rampage for market access and influence is for a united global justice movement to challenge the militarization of social problems and propose real solutions to the crises which affect us all.

Player Hatin' on the People's Republic of China

In an article about China's remarkable economic resilience the New York Times writes,

"China once could wave off complaints about its currency
policies, arguing that it was a developing nation entitled to a bit of
slack from its Western customers. But with the world’s fastest-growing economy —
and more than $2 trillion in foreign reserves — that argument looks
increasingly untenable."

Wait. When did China stop being a developing nation? There is no one measure of a country's level of development but for the most part the classification "developing" is based on Gross National Income (GNI) per capita. Another measure which is somewhat less 'economistic' is the human development index (HDI) that measures social development in general.

GNI-per capita (PPP)
U.S.A. (46,970)
China ($6,020 per capita)
HDI ranking out of 182-
U.S.A. (13)
China (92)

According to the World Bank both middle- income and low-income countries are designated as "developing". With a GNI-per capita (PPP) of 6,020 China not only is a middle-income developing country it is still considerably less wealthy per capita than the U.S.A. And with an HDI ranking of 92 China again falls into the medium human development category, significantly lower than the U.S.A.

When the New York Times and other Western media outlets are finish hating on the People's Republic of China, they should take 5 minutes to look at the development statistics on google like I did. Beyond the numbers there are still rural regions of China like Nanliang, Shaanxi Province where extreme poverty persists and prosperity has not yet spread. If the Chinese Communist Party stopped providing opportunities for higher-living standards today, they would still be a developing country with a big economy and a lot of disillusioned poor people. The fact is, China has a right to play loose with their currency because it is still developing and the United States continues to be the richest, most wasteful country in world history.

Import Substitution in Modern China

I have been fascinated the last few days with a timely IMF working paper that argues rebalancing economic development in China will mean rapidly stimulating domestic demand and entering new non-tradable industries, even requiring some degree import- substitution. The paper is an ironic testament of these desperate economic times, considering the pervasive but wrong assertion among liberal economists that import-substitution failed in the 20th century. Besides ignoring the near complete decimation of important sectors within several developing national economies, the apologists for unfettered external export continue to pretend countries pursuing variations of import-substitution performed horribly. They didn't.

A blog post by Harvard economist, Dani Rodrik could not make this point much clearer. ISI "had a more-than-respectable productivity record" in the middle of the 20th century. So what are the prospects of the industrialization strategy making a comeback in the 21st? They could be greater than many care to admit.

China's New Statistical Conundrum

Many investors are betting on the continuation of China's remarkable economic growth despite the near complete decimation of the emerging economy's export-oriented development frenzy. Early signs show that the Chinese government will actually retain its extraordinarily high annual growth rate this year, defying cynics who doubted the resilience of the export-oriented industrialization paradigm--- except for one small problem. The economics statistics coming from the Chinese Communist Party don't exactly add- up. The lack of reliable economic statistics coming from China only serve to further complicate efforts at avoiding deeper crises in the real economy.

According to a dispatch in Foreign Policy magazine, local-level Chinese government officials are fudging data on everything from economic growth, unemployment, to retail sales. The reason? Local Chinese officials are under intense scrutiny to meet routine targets and therefore have powerful incentives to cut corners and/or manipulate the harsh realities on the ground to save face. Jordan Calinoff writes for example that,

A look at GDP growth also raises serious questions. China's economy grew at an annualized 6.1 percent rate in the first quarter, and 7.9 percent in the second. Yet electricity usage, a key indicator in industrial growth and a harder metric to manipulate, declined 2.2 percent in the first six months of the year. How could an economy largely dependent on manufacturing grow while its industrial sector shrank? It couldn't; the numbers don't add up.

If China's main export markets in the 'triad' US, Europe, and Japan fail to recover as expected, the nation will undoubtedly face greater unemployment and social unrest among the working- class. The overly optimistic economic forecasts coming from China may obscure the reality that a model champion of export-led industrialization may soon see its reign come to an end; with bang, rather than a whimper.

US Recovery is Anybody's Guess

Most developing countries are rightly criticizing the US for triggering the global recession---or what some are calling the Great Depression Part Two. Regardless, emerging and least developed economies are depending on a rebound in the US economy to continue the pre-crisis flows of aid-assistance and US consumption driven growth they became accustomed to when times were good.

You can imagine, a progress report from the infamous Larry Summers, Director of the National Economic Council would probably gain the up most attention for anyone hoping for so called "green shoots" in the economy that could finally signal the bottom of the recession. The only problem is that many progressive economists aren't buying Summers' optimistic forecast about the future. Read this emotional post by Robert Kuttner in the Huffington Post that practical considers the Obama Administration's predictions semi-delusional.

Corporations are reaping enormous profits this quarter in the US and many consider it yet another sign that the recession is on its way out. But think again, the profit margins this quarter for a few corporations are matched with a trend toward a generally uneven scenario. The Federal Reserve has suggested that the the economic recovery could be coupled with increasingly high unemployment.

Asian countries may be showing signs that their level of dependency on a US recovery may be weakening. While the rest of the world watches for a speedy recovery in the US economy they will likely hedge against the dreaded "W" shaped recovery warned of by skeptical economists. Prime Minister Wen Jiabao, has announced China's intentions to spend money from its foreign exchange reserves in order to purchase companies struggling during the economic crisis---not America's troubled financial assets.