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Post #10 (November 24, 2019) - Lebanon's Financial Crisis 

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Post #10 (November 24, 2019) - Lebanon's Financial Crisis 

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Lebanon's financial crisis worsens and it is prominent with the fact that salaries are being cut by about half or more. As stated in the article, the only noticeable industry doing well in the country is the safe industry. This is due to the increasing need to keep one's personal cash at home. Lebanon has one of the highest debtb ratios in the world, which is at around eighty-six billion dollars. Then the flow of hard currency into the country dropped starting in 2016, in large because falling oil prices reduced remittances from Lebanese in Arab Gulf nations.
This article is relevant because remittances are able to affect the health of the economy. Remittances have a positive effect on the health of the economy and if it is non-existent, then it would be extremely difficult for a country to be able to find the solution necessary for improvement.

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BEIRUT - On one of Beirut's main commercial streets, store owners are cutting salaries by half or considering shutting down. Shops advertise sales, but still can't draw in customers. The only place doing a thriving business: the store that sells safes, as Lebanese increasingly stash their cash at home.

It's a sign Lebanese fear their country's financial crisis, which has been worsening for months, could tip over into disaster.

Banks have clamped limits on withdrawals of U.S. dollars. The Central Bank's sources for dollars are waning. Politicians are paralyzed, struggling to form a new government in the face of tens of thousands of protesters in the streets for the past month in an unprecedented uprising demanding the entire leadership go.

"People are scared," said Khalil Chehab, owner of Shehab Security, a store selling safes on Beirut's Hamra Street. "Since the middle of last month, business rose about 30%." As he spoke to The Associated Press, three customers were in his shop. Clients of all economic levels have been coming, he said - and the shop has safes for any budget, with prices from $35 to $15,000.

A jewelry shop nearby has also seen a bump in business from people in need of cash coming in to sell their valuables, said its owner, who asked to be identified only by his first name, Nabil.

Businesses and households have been thrown into disarray. Residents say they don't know how they will come up with dollar payments needed to pay for tuition, health insurance and housing loans. Companies are struggling to transfer salaries to staff, others have cut salaries or are simply laying off employees.

Lebanon has one of the highest debt ratios in the world, at around $86 billion or 150% of GDP. Much of the government's budget is sucked up by salaries in the sprawling public sector, while infrastructure has gone undeveloped for years. Struggling with the broken economy, the government began hiking taxes and taking other measures, prompting small protests early in the year.

But the protests exploded across the country on Oct. 17 in response to a new round of proposed taxes and evolved into a revolt against the country's entire political elite. Protesters blame the politicians for decades of systematic corruption and mismanagement that brought the country into its dire economic straits. The prime minister stepped down on Oct. 29, but political parties have been unable to agree on a government since.

One of Lebanon's biggest problems is that it has a dollarized economy. Since a crash in the Lebanese pound in the early 1990s, the currency has been pegged to the dollar. As a result, many things - from rents to cars to insurance premiums - are priced in dollars. Most Lebanese get their salaries in local currency, however.

Since 1997, the Central Bank has kept the pound stable at 1,507 to the dollar thanks to heavy borrowing at high interest rates. That encouraged the large diaspora of hundreds of thousands of Lebanese around the world to pump in hard currency, sending it to their families, buying property or depositing in local banks, keeping the local market liquid.

The economy boomed for three years starting in 2008, with annual growth of about 8%. Then came a series of blows. First, the war in neighboring Syria sent more than 1 million refugees to Lebanon since 2011, straining the country's capacities.

Then the flow of hard currency into the country dropped starting in 2016, in large because falling oil prices reduced remittances from Lebanese in Arab Gulf nations. Salameh, the central bank's chief, responded with a program of so-called "financial engineering," encouraging local banks to get dollars from their branches abroad by paying high interest rates.

According to government officials, economic growth in Lebanon next year will be zero. The World Bank said the economy will likely contract by 1% in 2020. The crunch in U.S. dollars has created a black market in currency for the first time in years, with the dollar reaching 1,900 pounds this week.

Multiple dangers stalk the economy now. The government is trying to avoid any sort of default or a rush on banks. Consumers fear a collapse in the currency will wreck the value of their savings.

Banks have been largely closed since the protests began. They opened for a week starting Nov. 1, but then bankers went on strike, complaining of insults and threats from clients upset about capital controls. The strike ended Tuesday and banks reopened, with a limit of $1,000 a week on withdrawals from dollar accounts. Transfers abroad have been restricted except for emergency cases.

"The situation in the banks is totally unacceptable," said Hassan Abadeh, a merchant who imports mobile phone accessories, after he tried withdrawing as much as he wanted from his dollar account. "When I told them this is my money, they said 'We can't do anything.'"

On once busy Hamra Street, many stores go for an entire day without selling anything.

One shoe shop proclaiming discounts of up to 70% was empty of customers. One employee, Kamal Amhaz, said sales were a quarter of what they were months ago. He and his colleagues have received only half their salaries since October, he said.

"I have no other choice, because if I leave this place I won't be able to find a job," Amhaz said.

Abdul-Ghani Mouwaqit, 59, used to come with his wife everyday to work in their lingerie shop but now with nearly no sales he is seriously thinking of closing down the shop as it is hard for him to pay rent.

Antoine Farah, who heads the business section of Lebanon's Al-Joumhouria newspaper, said the banks have lent the private sector worth more than $50 billion and the slowdown in that sector will gradually endanger repayment.

"The percentage of bad debt will begin to rise because the private sector is frozen," he said. "It will become a bigger problem if the private sector becomes unable to pay back its debt."

A big test will come on Nov. 28, when eurobonds worth $1.5 billion mature, raising the question whether Lebanon, which has always paid its debt on schedule, will continue to do so or default for the first time.

"We are passing through a very critical time, and we might enter the period of default," Farah warned.

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Fear, Turmoil in Lebanon as Its Financial Crisis Worsens

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On one of Beirut's main commercial streets, store owners are cutting salaries by half or considering shutting down. Shops advertise sales, but still can't draw in customers. The only place doing a thriving business: the store that sells safes, as Lebanese increasingly stash their cash at home.

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Post #9 (November 21, 2019) - Myanmar Genocide Lawsuit

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Post #9 (November 21, 2019) - Myanmar Genocide Lawsuit

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Gambia, on behalf of Rohingya Muslims, filed a lawsuit accusing Myanmar of genocide. They summoned the case before the United Nations' highest court to attempt to open a legal path against the country's authorities. Also, Gambia requested that the International Court of Justice issue an urgent temporary injunction ordering Myanmar to halt all actions that could aggravate or expand the existing situation.
This article is relevant because international countries being able to cooperate with other countries creates the unification needed to sustain the health of the economy. Genocide, and all other unjust actions, with other countries would hinder the success of the country.

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Post #8 (November 17, 2019) - Mexico Remittances

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Post #8 (November 17, 2019) - Mexico Remittances

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Andres Manuel Lopez Obrador, the Mexican president,  stated that the Spanish bank Santander will stop charging commissions on remittances sent by migrants to their relatives in Mexico. Additionally, he considered the commission charges on remittances as abusive. Getting rid of the commission charge and the implementation of a very competitive exchange rate would assist in Mexico's economy.
This article is relevant because Financial remittances can be beneficial for emergencies, potential security concerns and economic benefits for developing countries. A commission charge would persuade the individual who is sending money to not undergo the transaction.

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MEXICO CITY - Mexican President Andres Manuel Lopez Obrador said on Monday Spanish bank Santander will stop charging commissions as of Tuesday on remittances sent by migrants to their relatives in Mexico.

Santander Executive Chairman Ana Botin "promised us this year that the bank would not charge commissions on remittances that our citizens in the United States send to their families," Lopez Obrador said, sitting alongside Botin.

Lopez Obrador described the commissions charged for remittances as "abusive."

Total remittances to Mexico, mostly coming from U.S.-based Mexican workers, amounted to nearly $27 billion in January to September, according to central bank data.

"We're committed to launching this program tomorrow at Santander's U.S.-based branches to any bank in Mexico, with no commissions and using a very competitive exchange rate," said Botin, in a video posted by Lopez Obrador on Twitter.

(Reporting by Diego Ore; Writing by Anthony Esposito; Editing by Tom Brown)

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Santander to Stop Charging Commissions on Remittances to Mexico

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MEXICO CITY - Mexican President Andres Manuel Lopez Obrador said on Monday Spanish bank Santander will stop charging commissions as of Tuesday on remittances sent by migrants to their relatives in Mexico. Santander Executive Chairman Ana Botin "promised us this year that the bank would not charge commissions on remittances that our citizens in the United States send to their families," Lopez Obrador said, sitting alongside Botin.

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Post #7 (November 11, 2019) - Tariff Exemptions

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Post #7 (November 11, 2019) - Tariff Exemptions

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President Trump stated that China was not able to secure a trade deal with the United States and suggested that he might exempt Apple from an upcoming round of tariffs. This is due to Trump's dissatisfaction with the numerous deals brought onto him. There was a deal that was brought up, but no confirmation or signage has been scheduled.
This article is relevant because many of the imports that come from external countries are unattainable without the assistance from other countries. Apple's products, which are manufactured in Asia, are able to be obtained through globalization.

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Trump Floats Tariff Exclusions for Apple at Texas Manufacturing Plant

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The president suggested that a trade deal with China remains some distance off, but said he would "look into" Apple receiving exemptions from more tariffs. WASHINGTON - President Trump said on Wednesday that China had not yet made enough concessions to secure a trade deal with the United States and suggested that he might exempt Apple from an upcoming round of tariffs as he toured a Texas plant that assembles Mac Pro computers.

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Post #6 (November 7, 2019) - Hong Kong Recession

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Post #6 (November 7, 2019) - Hong Kong Recession

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For the first time in about a decade, Hong Kong has been considered to be in a recession. The country's economy has shrank by about three percent from July to September. There has been no confirmation on whether or not the decline is subject to improvement any time soon. The tariff war between Washington  and Beijing initiated the decline about five months ago.
This article is relevant because it signifies the importance of globalization with other countries. Trade is essential in sustaining the health of the economy. Without international trade in one country, the well-being of that same country would diminish due to the lack of diverse resources.

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HONG KONG - Hong Kong is expected to confirm on Friday it plunged into recession for the first time in a decade, amid concerns the economy could be in even worse shape than feared as months of anti-government protests take a heavy toll.

Preliminary figures in October showed the Chinese-ruled city's economy shrank by 3.2% in July-September from the preceding period, contracting for a second straight quarter and meeting the technical definition of a recession.

With no end to the increasingly violent protests in sight, analysts say the slump could be long and deep, with gross domestic product seen shrinking further this quarter and well into next year.

The financial and trade center was already under strong pressure from the prolonged tariff war between Washington and Beijing, but the increasingly violent demonstrations, which have gone on for more than five months, have delivered a decisive blow.

"We assume the violent protests will continue for the whole year in 2020 unless the Hong Kong government will do something really special (to end the conflict), which it seems to be avoiding," said Iris Pang, Greater China economist at ING, who expects the economy to shrink by 2.2% in 2019 and 5.3% in 2020.

Frequent transport disruptions, violent clashes between police and protesters and the use of tear gas have battered the retail sector and scared off tourists, especially from mainland China, who made up around 80% of the 65.1 million visitors to the city in 2018.

August retail sales were the worst on record - down 23% from a year earlier - while September's plunged 18.3%.

Shops, restaurants and other businesses across the Chinese-ruled city increasingly close early as protests spring up, at times daily, and often with little or no notice. Some smaller businesses have had to close for good.

Shopping malls near the heart of the financial center that house some of the world's biggest luxury brands have shuttered early most days this week as the unrest escalated, with tear gas smoke billowing between skyscrapers, at times during lunch hour.

The protests have presented the city - one of the world's most important financial hubs with total banking, fund and wealth management assets worth more than $6 trillion - with its biggest political crisis in decades.

Business activity in the private sector fell to its weakest in 21 years in October, according to IHS Markit, while demand from mainland China declined at the sharpest pace in the survey's history - which started in July 1998.

The government has rolled out stimulus measures since August, but since it is forced to keep a high level of reserves by its Hong Kong dollar peg to the U.S. greenback, the packages have been relatively small.

Analysts also doubt the effectiveness of handouts, since the uncertainty prevents businesses and consumers from spending and investing, and store closures will lead to job losses.

"Given how poor sentiment is, we do not expect the stimulus to have a meaningful impact until the political unrest comes to a halt," said Tommy Wu, senior economist at Oxford Economics, who predicts a 1.5% contraction in GDP for 2019 and "another decline" in 2020.

"But we do expect more stimulus to be rolled out in the future."

(Reporting by Anne Marie Roantree and Marius Zaharia; Editing by Marius Zaharia & Kim Coghill)

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Hong Kong to Unveil Depth of Recession Amid Protests, Trade War

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Hong Kong is expected to confirm on Friday it plunged into recession for the first time in a decade, amid concerns the economy could be in even worse shape than feared as months of anti-government protests take a heavy toll.

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Post #1 (August 30, 2019) - Trade Tensions

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Post #1 (August 30, 2019) - Trade Tensions

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The world's poorest countries are having difficulty in escaping poverty mainly due to the trade conflicts between major countries. Moreover, the World Bank states that trade conflicts are impeding supply chains and triggering manufacturers to setback investment decisions to avoid getting involved in the trade war.
This article is relevant because it proves that the economy's output of goods and services are in correlation with the demand, or health, of the economy. As stated by John Maynard Keynes in the article "Keynesian Economics," the Great Depression was caused by a failure of aggregate demand. Mongolia, a developing country, is affected from the trade war.

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WASHINGTON - Rising trade tensions are threatening to block a path out of poverty for the world's poorest countries: their ability to manufacture low-cost parts for multinational corporations.

In a report out Tuesday, the World Bank warns that trade conflicts between major countries - specifically the United States and China - are disrupting supply chains and causing manufacturers to delay investment decisions to avoid getting caught in a trade-war crossfire.

For years, poor countries have been able to "export their way out of poverty" by feeding multinational companies with components, said World Bank economist Aaditya Mattoo, who co-directed the study.

But rising protectionism "could stymie" that progress. In a worst-case scenario, the bank says, more than 30 million people around the world could be pushed into poverty (incomes below $5.50 a day) around the world if the trade conflict worsens.

President Donald Trump has reversed decades of U.S. support for ever-freer trade. In a drive to reduce America's vast trade deficits, he has slapped tariffs on foreign steel and other products and pursued a trade war with China over U.S. allegations that the Chinese steal technology and pressure foreign companies to hand over trade secrets.

But the damage in trade conflicts isn't limited to the combatants, Mattoo notes. For example, Mongolia sells metals to Chinese factories; so what hurts China, hurts Mongolia too.

The World Bank said developing countries could offset some of the damage by enacting reforms that improve efficiency - by speeding up customs processing and reducing border delays, for instance, and by modernizing ports, roads and railways.

The World Bank's report did deliver some good news for developing countries. It downplayed the notion that new technologies such as 3D printing would reduce trade and hurt poor exporting countries. The danger for developing countries was that automation would allow rich nations to bring manufacturing home. That is because the machines would reduce the reliance on high-wage labor that had encouraged them to move factories overseas in the first place.

Instead, the bank found, "these technologies have contributed to higher productivity and larger scale of production" and have actually increased the demand for imports from developing countries.

"We're a little bit more optimistic on the role of technology in promoting trade," said Caroline Freund, the World Bank's global director of trade, investment and competitiveness, who directed the study with Mattoo.

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World Bank: Trade Tensions Could Block Path Out of Poverty

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WASHINGTON - Rising trade tensions are threatening to block a path out of poverty for the world's poorest countries: their ability to manufacture low-cost parts for multinational corporations. In a report out Tuesday, the World Bank warns that trade conflicts between major countries - specifically the United States and China - are disrupting supply chains and causing manufacturers to delay investment decisions to avoid getting caught in a trade-war crossfire.

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Post #3 (September 14, 2019) - Slow Growth

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Post #3 (September 14, 2019) - Slow Growth

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The growth from any country in the world has declined since the financial crisis in 2008. The world economy has been suffering from globalization of trade, depopulation due to the shrinkage of labor force, declining productivity and a debt burden as high now as it was before the crisis. Rather than measuring the health of the economy through the size of the country's labor force, we should instead look at the per capita income growth.
This article is relevant because it relates to the "invisible hand." The economy's health should be measured through multiple factors, such as the per capita income growth, that measure the well-being of the country.

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The problem goes much deeper than Trump or tariffs.

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Credit Credit Nicholas Konrad

Global markets were seized by fear last week that trade wars were slowing growth in Germany, China and the United States. But the story here is bigger than President Trump and his tariffs.

The postwar miracle is over. Since the financial crisis of 2008, the world economy has been struggling against four headwinds: deglobalization of trade, depopulation as labor forces shrink, declining productivity and a debt burden as high now as it was right before the crisis.

No major economy is growing as fast as it was before 2008. Not one is growing faster than 10 percent, the rate experienced by the Asian "miracle economies" before the crisis. In almost every country, the national discussion focuses on what must be done to revive growth and ignores the fact that the slowdown is driven by forces beyond any one government's control. Instead of dooming ourselves to serial disappointment and fruitless stimulus campaigns, we need to redefine economic success and failure.

Germany is one of at least five major economies on the verge of a recession, which is typically defined as two consecutive quarters of negative growth. But the real issue is whether that definition still makes sense in a country with a shrinking labor force like Germany's.

Its working population has been declining for years and is expected to fall to 47 million from 54 million by 2039. And it's not alone in this. Forty-six countries around the world - including major powers like Japan, Russia and China - now have shrinking populations.

Demographics are usually the main driver of economic growth, so it is basically inevitable that these countries will now grow at a much slower pace. And we are not talking about minor population declines. Projections for 2040 show China's working-age population falling by 114 million, Japan's by 14 million. With a shrinking labor force, these economies will inevitably slow and, at times, contract. To keep calling two negative quarters in a row a "recession" implies that this outcome is somehow abnormal or unhealthy. That will no longer be the case.

To avoid overreacting, the discussion about economic health needs to shift to measures that better capture satisfaction and contentment, like per capita income growth. In countries with shrinking populations, per capita incomes can continue to grow so long as the economy is shrinking less rapidly than the population. This helps explain why, for example, Japan isn't facing more social unrest. Its economy has grown much more slowly than that of the United States in this decade, but because the population is shrinking its per capita income has grown just as fast as America's - around 1.5 percent per year.

Shrinking populations also help explain why unemployment is at or near multi-decade lows, even in countries with serious growth worries, like Germany and Japan. Gainfully employed Germans and Japanese won't really feel as if their countries are in a slump until per capita G.D.P. growth turns negative - which may prove to be a more useful way to think about recessions in this new era.

The definition of success also needs to change. Many emerging countries still aspire to the double-digit growth rates experienced by what were known as the "Asian miracle economies" from the mid-1960s to the early 1990s, when populations and trade were booming. But no economy had grown so fast before then, and as population and trade surges recede, it's unlikely any country can repeat those feats.

As growth downshifts, even little miracles are disappearing. Before the 2010s, it was common for one in every five economies to be growing at 7 percent or more annually. Now, among the world's 200 economies, just eight, or one in 25, are on track to grow 7 percent this year. Most of those are small economies in Africa.

When the news emerged that China's economy had slowed to just 6 percent, a new low, many investors and analysts rang the alarm bells. But the reality is that economies rarely grow as fast as 6 percent if the population is not booming too. Not only did China's working-age population growth turn negative in 2016, but it is one of the countries hardest hit by slumping trade, declining productivity and heavy debts. If the Chinese economy really were growing at 6 percent in this environment, it would be cause for celebration, not alarm.

The benchmark for rapid growth should come down to 5 percent for emerging countries, to between and 3 and 4 percent for middle-income countries like China, and to between 1 and 2 percent for developed economies like the United States, Germany and Japan. And that should just be the start to how economists and investors redefine economic success.

This rethink is overdue. The number of countries with shrinking populations is expected to rise to 67 from 46 by 2040, and the decline in productivity growth is in many ways reinforced by heavy debt burdens and rising trade barriers. Redefining the standard of economic success could help cure many countries of irrational anxieties about "slow" growth, and make the world a calmer place.

Ruchir Sharma, author of "The Rise and Fall of Nations: Forces of Change in the Post-Crisis World," is the chief global strategist at Morgan Stanley Investment Management and a contributing Opinion writer.
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A version of this article appears in print on , Section SR, Page 11 of the New York edition with the headline: Let's Say Goodbye to Growth. Order Reprints | Today's Paper | Subscribe

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Opinion | Our Irrational Anxiety About 'Slow' Growth

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The problem goes much deeper than Trump or tariffs. Global markets were seized by fear last week that trade wars were slowing growth in Germany, China and the United States. But the story here is bigger than President Trump and his tariffs. The postwar miracle is over.

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Post #2 (September 19, 2019) - Middle-Income Countries

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Post #2 (September 19, 2019) - Middle-Income Countries

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The poor, primarily from the middle-income countries, are not able to receive aid because the governments of these countries never received enough or have outgrown eligibility. Countries such as India and Nigeria obtained the least amount of aid, whereas the low-income countries received substantially higher amounts of aid.
This article is relevant because it relates to neoliberalism discussed in "Neoliberalism" by Johanna Bockman. The governments from the middle-income countries exhibit neoliberalism because they constantly deliver ineffectiveness, corruption, and repression due to the fact that they are slow to redistribute income to the poor.

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Aid doesn't reach the majority of the poor.

By Rohini Pande, Vestal McIntyre and

Ms. Pande is a co-director of the Evidence for Policy Design initiative at Harvard, where Mr. McIntyre is a staff writer. Ms. Page is a doctoral student at the Massachusetts Institute of Technology.

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Canoes abandoned by fishermen in Lagos, Nigeria. Residents are complaining following demolition of their shanty slum and sand filling of waterfront to reclaim the land. Credit Credit Florian Plaucheur/Agence France-Presse - Getty Images

The share of the world's population in extreme poverty - subsisting on less than $1.90 a day, adjusted for inflation and cost of living across countries - has plummeted from 42 percent in 1981 to 10 percent in 2015. Poverty fell not only proportionally but in absolute terms as well: The number of people in extreme poverty fell by 1.17 billion between 1981 and 2015, even as the global population grew by almost three billion. The reduction was driven in large part by the fast-growing economies of Asia, in particular, China and India.

But decline of poverty in those countries has fed an erroneous belief in the West that economies rising into middle-income status are on track to end extreme poverty and no longer need assistance - and that major donors need to focus on the fragile and conflict-ridden countries left behind.

This redirection of global aid risks neglecting the hundreds of millions who may never escape poverty despite living in countries that are becoming relatively rich.

Bill and Melinda Gates, whose yearly contributions to international development exceed the aid budgets of countries like Canada and Norway, have argued that "as extreme poverty disappears from many places, including China and India and, increasingly, many countries in Africa, it gets more and more concentrated in the most challenging places in the world" - mainly in sub-Saharan Africa.

Britain in 2015 committed to devoting 50 percent of its aid to " fragile states and regions." And the 2017 replenishment of the International Development Association, the World Bank's fund for least-developed countries, doubled the bank's financing for such countries to $14 billion over three years.

Data released by the World Bank in September shows that the rate of extreme-poverty reduction is slowing down, from an average of one percentage point per year from 1981 to 2013 to 0.6 percentage points per year between 2013 and 2015 and below half a percentage point per year since.

China, India, Nigeria and several other countries still have huge populations of poor people and have become more unequal as they have grown. This has created two concentrations of poverty in the world.

In 1987, nine out of 10 extremely poor people generally lived in low-income countries. But by 2015 only four out of 10 lived in low-income countries, while the rest lived in middle-income countries, over half of them in India, Nigeria, Bangladesh, Indonesia, Kenya, Yemen, South Africa, China, Pakistan and Zambia.

Bangla.

Mozam.

Conflict, inequality and weak institutions may cause growth to reverse, as in Yemen, which since 2015 has slipped from the ranks of middle-income countries. But poverty reduction propelled by economic growth, as in China, may also be running out of steam. This growth was rooted in low-skilled laborers moving out of agriculture and into manufacturing industries bolstered by high global demand and trade.

Now, manufacturing is on the decline and automation is spreading in rich and poor countries. From 2013 to 2015, total employment in India, for instance, shrank by seven million, more than Illinois's entire civilian labor force of 6.5 million.

Aid doesn't reach the majority of the poor because the middle-income countries they live in either never received much or have outgrown eligibility.

India and Nigeria, the countries with the two largest populations of extreme poor in the world, received nearly the lowest net aid per poor person among all aid-receiving countries in 2016. India got about $15.25 per poor person; Nigeria, $28.90. But the average low-income country containing more than 1 percent of the world's poor in 2015 got $107.80 per poor person. China, which has 10 million extremely poor residents, and Indonesia, with its 19 million, were net aid donors.

This confluence of factors has created a large, and largely invisible, poor population spread across low- and middle-income countries, out of the reach of growth and, often, aid.

The end of aid in high-poverty middle-income countries would not be a problem if these countries could take care of their citizens. But these governments are often slow to redistribute income to the poor for two main reasons: problems of capacity and problems of will.

A country must tax if it is to redistribute resources to the poor. But the tax-collecting abilities of high-poverty middle-income countries are not keeping pace with their overall economic growth and remain at about the level of low-income countries. Government size, measured by final government consumption spending as a share of gross domestic product, is loweron average in high-poverty middle-income countries than in low-income countries, mostly because the latter still receive high levels of aid.

Rich countries have solved a lot of the problems that undermine tax capacity. A goal for donors who aim to end poverty should be not only to help victims of war and famine but also to increase the tax and redistribution abilities of high-poverty middle-income countries by working with governments to increase data capacity, train staff members and put in place mechanisms to minimize graft. That could be the most effective way to reach the people who endure life at subsistence level.

Problems of will may be even harder to solve. Often politicians spend resources on projects that seem frivolous given the high rate of poverty in their country and that could be justified only through complex, trickle-down reasoning. The Indian government's space program is one example; Rwanda's nearly $40 million sponsorship of the Arsenal soccer club last year is another.

Problems of will also arise when leaders are more responsive to certain groups of citizensthan others. Our analysis of Indian data shows that growth benefits upper-caste Hindus before others: From 1987 to 2011, the share of India's extremely poor people who were Muslim or lower-caste Hindus rose to 55 percent, from 46 percent. Indian Muslims also benefit less, on average, than other socioreligious groups from the broadening access to education.

In Brazil and South Africa - two other middle-income countries with large poor populations - there is evidence that growth is as unequal along racial lines as it is along caste and religious lines in India. And the problem of unequal distribution is, of course, by no means confined to high-poverty middle-income countries: Research shows that when aid arrives in low-income countries, it often reaches elite groups first.

The temptation for donors is to focus on the poor in the most wretched, conflict-ridden countries and reach them directly through philanthropic and nongovernmental organizations, bypassing messy, corrupt governments. This practice is appropriate in some cases - for instance, when delivering humanitarian aid. But that type of aid will not create systems for the invisible poor to have a voice in their countries in the long term.

Solving problems of will requires giving the poorest citizens information and the political heft to hold their leaders accountable. That is best accomplished by strengthening democratic institutions. Poverty is political: Solving problems of will, like problems of capacity, requires rolling up our sleeves and working with the governments in the countries where the poor live to redistribute not only income, but also power.

Rohini Pande is a professor of public policy and a co-director of the Evidence for Policy Design initiative at Harvard, for which Vestal McIntyre is a staff writer. Lucy Page is a doctoral student at the Massachusetts Institute of Technology.
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Opinion | A New Home for Extreme Poverty: Middle-Income Countries

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Aid doesn't reach the majority of the poor. By Rohini Pande, Vestal McIntyre and Ms. Pande is a co-director of the Evidence for Policy Design initiative at Harvard, where Mr. McIntyre is a staff writer. Ms. Page is a doctoral student at the Massachusetts Institute of Technology.

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Post #5 (October 10, 2019) - Global Economic Shutdown

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Post #5 (October 10, 2019) - Global Economic Shutdown

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Even without the occurence of the trade war, the economy's growth would still be in a decline. Other countries, such as China, Germany, and Australia, have been hindered to the trade war. President Trump believes that the trade tariffs have nothing to do with the world economy's decline in growth, but economists believe otherwise.
This article is relevant because the reasoning for the decline in the world economy's growth is partly due to the trade tariffs. As stated in "The Washington Concensus," the key to development is deregulation and fiscal discipline. The trade tariffs are rendered worthless for the economy if it disrupts international trade.

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President Trump's trade war with China and other partners is exacerbating a global economic slowdown. Credit Credit Reuters

WASHINGTON - President Trump's trade war is chilling business investment, confidence and trade flows across the world, a development that foreign leaders and business executives say is worsening a global economic slowdown that was already underway.

Recent softening in Europe, Australia and other parts of the world coincides with Mr. Trump's intensified trade fight with China and other partners. Economists warn that further escalation by Mr. Trump - like tariffs on more Chinese goods or levies on foreign autos - could slow global growth to a crawl.

"With these trade tensions, the global economy, in a sense, is getting close to a crossroads," said Ayhan Kose, the director of the World Bank's Prospects Group.

Weakness in China, driven in part by fallout from the trade war, has spread to Germany, Australia and other nations, raising supply chain costs, chilling exports and worrying political and economic leaders.

On Tuesday, Mario Draghi, the president of the European Central Bank, said the bank was prepared to inject more stimulus into the eurozone economy to combat the economic slowdown.

The effects of Mr. Trump's trade war have been particularly hard on Germany, Europe's largest economy, which has been bracing for a decision about whether the United States will impose tariffs on auto imports. Trade anxiety has led to a decline in business sentiment and spending: Overall German industrial production contracted sharply in April, falling 1.9 percent on the month versus the 0.5 percent analysts expected.

"The risks that have been prominent throughout the past year, in particular geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets, have not dissipated," Mr. Draghi said in a speech on Tuesday. "The prolongation of risks has weighed on exports and in particular on manufacturing."

Mr. Trump lashed out at Mr. Draghi by name on Twitter, accusing him of trying to weaken Europe's currency to get a leg up in global trade by making its goods cheaper to buy overseas.

"Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA," Mr. Trump wrote on Twitter. "They have been getting away with this for years, along with China and others."

[Read more about the growing recession fears in Europe.]
The president's aggressive approach to trading partners comes as developed and developing nations are already pulling back on the rapid globalization that dominated two decades of economic policymaking. Global flows of foreign direct investment fell by 13 percent last year, to their lowest level since the financial crisis, the United Nations Conference on Trade and Development reported last week.

It was the third consecutive annual decline, which officials blamed on multinational corporations bringing cash back to the United States after Mr. Trump's 2017 tax overhaul. Officials warned that trade tensions posed a "downward risk" for a rebound in investment growth this year.

Mr. Trump has made steady use of tariffs to punish trading partners, like China, Europe, Canada and Mexico, that he says have destroyed American jobs by flooding the United States with cheap products and erecting unfair economic barriers at home. The president and his top officials insist that the trade war is lifting the American economy and that any slowdown in global growth is not related to the administration's trade policies.

Treasury Secretary Steven Mnuchin said in an interview this month that he did not "think in any way that the slowdowns you're seeing in parts of the world are a result of trade tensions at the moment." He noted that growth in Asia and Europe had been tapering off before trade talks between the United States and China broke down in early May.

Mr. Trump has repeatedly cited China's slowdown as proof that his trade war is working, telling reporters last week that the United States has "picked up $14 trillion in net worth of the United States."

"And China has gone down probably by $20 trillion," he continued. "There's a tremendous gap."

But a slowdown in the world's second-largest economy - one that's deeply enmeshed in global trade networks - affects other economies.

"China is the biggest trading nation in the world," said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington. "The idea that you could slow down the global growth engine and not affect other countries is just not credible."

Multinational companies are already shifting supply chains and delaying capital spending in response to Mr. Trump's tariffs on Chinese goods and foreign metals.

Tom Linebarger, the chairman and chief executive of diesel engine manufacturer Cummins, said last week that his company had lost business for part of its operation in China as a result of the trade war. The Indiana company is changing its sourcing practices to minimize exposure to China, and Mr. Linebarger said its costs from tariffs now exceeded the benefits from the corporate tax cuts Mr. Trump signed in 2017.

"The tariffs that are in place now, and which may be in place for some time, are a significant burden on U.S. businesses and farms," Mr. Linebarger said.

Data increasingly suggest trade tensions are weighing on economic confidence, globally and in the United States.

A Federal Reserve Bank of New York manufacturing survey registered its worst drop ever on Monday, which many economists blamed on Mr. Trump's threats this month to impose tariffs on Mexican imports as punishment for failing to curb illegal immigration. While those tariffs were averted, the chance that Mr. Trump could make a similar move against another trading partner has caught the attention of global companies and foreign leaders.

The trade war is having "a much bigger impact" on business hiring and investment in the United States than most analysts think, Deutsche Bank wrote in a research note on Monday. Several measures of policy uncertainty, compiled by economists Scott R. Baker of Northwestern University, Nicholas Bloom of Stanford University and Steven J. Davis of the University of Chicago, have spiked with the increased tensions.

On Tuesday, Mr. Trump said on Twitter that he had spoken by phone to President Xi Jinping of China and that the two leaders would have an "extended" meeting next week at the Group of 20 summit in Japan. Those comments could help calm global trade fears, which had risen after the United States accused China of breaking a trade deal last month and Mr. Trump raised tariffs on $200 billion worth of Chinese goods as punishment.

But no agreement is guaranteed, and Mr. Trump has threatened to impose tariffs on an additional $300 billion of Chinese goods if Mr. Xi does not agree to the original deal. The president has already placed import taxes on $250 billion worth of products from China and has hit trading partners with steel and aluminum tariffs and threatened tariffs on foreign autos from Europe and Japan.

[What American businesses claim will hurt them (and you) if new tariffs take effect.]

The World Bank cut its forecast for global growth by 0.3 percentage points for this year in response to unexpected weakness in trade and manufacturing across advanced and developing economies. Global trade growth has slowed to its lowest rate since the 2008 financial crisis as exports from Europe and Japan have plummeted, particularly to China.

The bank noted that heightened policy uncertainty, including trade tensions, had been accompanied by slowing global investment and weakening confidence. It warned in a report this month that risks to its outlook were "firmly on the downside, in part reflecting the possibility of destabilizing policy developments, including a further escalation of trade tensions between major economies."

International Monetary Fund economists estimate that if Mr. Trump follows through on his threat to broaden the Chinese trade spat, tariffs added this year alone will subtract 0.3 percent off global gross domestic product in 2020, with an additional 0.2 percent drag coming from tariffs the administration put in place last year.

Manufacturing, which is especially vulnerable to trade, is slowing across advanced economies even as service industries hold up. Factory gauges have dipped lower across Europe and are wavering in Japan. In the United States, the Institute for Supply Management's factory index dropped to its lowest reading of Mr. Trump's presidency in May.

Trade policies aren't the only culprit behind slowing production. A continuing, structural slowdown in Chinese growth and tensions from Britain's attempted exit from the European Union are among other factors.

China posted its weakest economic growth in 28 years in 2018, a pullback that analysts blame partly on structural reforms and long-running trends and partly on the trade spat. Analysts at Moody's Investors Service expect a further slowdown in 2019, to 6.2 percent from 6.6 percent, amid continued trade uncertainty.

Europe, where the I.M.F. estimates 70 percent of exports are links in global supply chains, is particularly sensitive to trade disputes. And Germany highlights how the trade war between the United States and China can spill over.

The nation's car industry is the backbone of its economy and is dependent on China for growth. As trade tensions exacerbate China's economic weakening, manufacturers in Germany pay the price.

Volkswagen, the world's largest carmaker, said last week that sales in China fell 7 percent from January through May, to about 1.2 million vehicles. Largely because of China, Volkswagen's global sales fell 5 percent during the same period.

"We are experiencing the biggest decline in the world auto market in 20 years," Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen, said in a report. If Mr. Trump follows through on threats to impose further tariffs on China, Mr. Dudenhöffer said, "there is danger of a global auto crisis."

Germany's central bank has slashed its forecast for growth this year to 0.6 percent from 1.6 percent. That bleak change was "mainly due to the downturn in industry, where lackluster export growth is taking a toll."

"The fear factor, the uncertainty, is denting willingness to spend, willingness to invest,'' said Carsten Brzeski, chief economist for Germany and Austria at ING in Frankfurt. "It's therefore undermining growth in the eurozone."

And in Australia, where an almost 28-year-old expansion is looking less secure and the central bank recently cut rates for the first time since 2016, economic officials are watching trade wars warily. The governor of the Reserve Bank of Australia, Philip Lowe, called international trade disputes "the main downside risk" in a recent news conference.

If coming trade negotiations don't end in a resolution, the United States and its companies could also pay a price, leaders of the Business Roundtable, a corporate lobbying group in Washington, warned last week.

"The biggest self-inflicted risk to growth today would be trade going south," said Jamie Dimon, chief executive at JPMorgan Chase.

Jeanna Smialek and Jim Tankersley reported from Washington, and Jack Ewing from Frankfurt. Alan Rappeport contributed reporting from Washington.

A version of this article appears in print on , Section B, Page 1 of the New York edition with the headline: Trump's War Is Making A Slowdown Even Worse. Order Reprints | Today's Paper | Subscribe

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Global Economic Growth Is Already Slowing. The U.S. Trade War Is Making It Worse.

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WASHINGTON - President Trump's trade war is chilling business investment, confidence and trade flows across the world, a development that foreign leaders and business executives say is worsening a global economic slowdown that was already underway. Recent softening in Europe, Australia and other parts of the world coincides with Mr. Trump's intensified trade fight with China and other partners.

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Post #4 (September 26, 2019) - World Trading System

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Post #4 (September 26, 2019) - World Trading System

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President Trump released trade hostilities with China,  set trade tariffs on steel made by allies like Europe and Japan, and confined India's access to the American market. He initiated the trade war in order to return the "stolen" factory jobs from China to the United States. Economists believe that the trade war is more harm than good because it has lowered paychecks from factory workers that rely on imported goods and increased the price of manufactured goods.
This article is relevant because it relates to opportunity cost. Trade tariffs restrict the potential progress that can occur through international trade.

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Credit Credit Delcan & Company

LONDON - If globalization were ever going to unravel, the beginning would probably feel something like this.

President Trump, the leader of the country that built the world trading system, continues to disrupt international commerce as a weapon wielded in pursuit of national aims. He has unleashed trade hostilities with China, placed tariffs on steel made by allies like Europe and Japan, and restricted India's access to the American market. He vowed to hit Mexico with tariffs mere months after he agreed to a new version of a deal liberalizing trade across North America.

But globalization has become such an elemental feature of life that it is probably irreversible. The process of making modern goods, from airplanes to medical devices, has become so mind-bendingly complex, involving components drawn from multiple continents, that a few unexpected tariffs will not prompt companies to swiftly close factories in China and Mexico and replace them with plants in Ohio and Indiana.

What does appear to be ending is the post-World War II era in which the United States championed global trade as immunization against future conflict, selling the idea that the free exchange of goods was a pathway toward a more stable world order.

American administrations forged rules governing disputes, enabling countries to trade with diminished fear of capricious political intervention. In ceding this role, Mr. Trump has weakened the rules-based trading system while removing a counterweight to China, whose transactional approach to trade places scant value on transparency and human rights.

"One thing is really clear: There has got to be a reset in the world trading system," said Swati Dhingra, an economist at the London School of Economics. "It's all breaking at the seams at this point."

The trade war unleashed by Mr. Trump has injected higher costs and confusion into the global economy, forcing businesses to anticipate the next venue for hostilities. American retailers and manufacturers voiced that complaint on Monday in testimony to the Office of the United States Trade Representative, ahead of Mr. Trump's plans to put tariffs on a further $300 billion worth of Chinese imports.

"This is now the post-American world economy, one in which globalization is much more spotty," said Adam S. Posen, president of the Peterson Institute for International Economics in Washington. "The world is a riskier place, where access to markets is a lot less sure."

In the Trump framing, the United States is best served by the unsentimental exploitation of its position as the world's largest economy. It must brandish threats of limiting access to its market to force other countries to capitulate to its demands.

But the rest of the planet is increasingly refusing to play along, instead seeking alternatives to trade with a suddenly mercurial United States. This year, Europe and Japan set in motion a mammoth trade deal that generates fresh opportunities for their companies, while leaving American players at a disadvantage.

Under the Trans-Pacific Partnership, a separate trade deal forged by 11 countries, Japan agreed to open its heavily protected market to agricultural imports, handing American farmers a lucrative opportunity. Days into his presidency, Mr. Trump closed that window by renouncing American participation in the deal. Now, European farmers have secured their own broadened access to the Japanese market.

China has responded to Mr. Trump's tariffs with levies on American goods, including soybeans, wood products, and machinery. At the same time, China has lowered tariffs on imports from countries like Germany and Canada, lifting the fortunes of American competitors in those nations, according to an analysis by Chad P. Bown at the Peterson Institute.

For example, China doubled duties on American agricultural and fish products to an average of 42 percent from 21 percent, Mr. Bown found. At the same time, China lowered average tariffs on the same wares from the rest of the world to 19 percent.

Mr. Trump has sold his trade war as a means of returning jobs to a forsaken American heartland. In his version, naïve presidents allowed other nations, especially China, to steal factory jobs from the United States. His tariffs will pressure multinational companies to bring those jobs back.

But if that story makes for rewarding politics, it rests on antiquated economic assumptions about the global marketplace.

Mr. Trump's trade war will probably not increase the number of American jobs, although it has imperiled paychecks at auto plants and other factories that rely on imported components. What it will bring is higher prices for manufactured goods, economists say, along with uncertainty over the terms of trade. It is sapping vitality from an already weakening world economy.

Entire supply chains - expansive linkages of parts for factory goods - have formed across Asia, Latin America and Europe. The United States could recreate those supply chains at home, but at a far higher cost. In the meantime, American industries would be severely constrained.

The largest manufacturers use China as a base to sell products to the world, limiting their exposure to American levies. Caterpillar, the agricultural and construction equipment company, operates factories in China, but sells many of its finished products within Asia.

Companies that are inclined to leave China are more likely to move production to other low-cost nations like Vietnam rather than bring work back to the United States. Hasbro, the toy company, is considering shifting production to the United States, but GoPro, the maker of mobile cameras, is looking at Mexico.

A poll last month by the American Chamber of Commerce in China found that 40 percent of its member companies had moved factory operations out of China or were considering doing so. Among those leaving, fewer than 6 percent were going to the United States, while more than a third were focused on Southeast Asia or Mexico.

Companies that do resume making goods in American factories are likely to buy robots and other machinery, rather than hiring large numbers of Americans.

The calculus of technology and geography - never simple - has been rendered more complicated by Mr. Trump's trade war. Canary, an oil field services company based in Denver, has been seeking to shift purchases of equipment from Chinese to Mexican suppliers to avoid American tariffs, its chief executive recently asserted.

Yet in refusing to rule out across-the-board tariffs on Mexican goods, Mr. Trump left the corporate world guessing about the commercial map. Where can a company invest without worrying about a fresh outbreak of trade hostilities? That question hangs over the world economy even after the president relented on threats to impose tariffs on Mexican goods.

"It's not so much you don't know where to go," Mr. Posen said. "There is no place to go. In a world in which there is arbitrary use of commercial regulation by the United States, no cross-border investment looks to be as safe and useful as it used to."

Companies are mostly hesitating, limiting orders and holding off on investments in the hope that time will bring clarity. A similar worry now discourages commerce in Britain, as it remains stuck in its Brexit quagmire. With no inkling on the rules that will govern future dealings between Britain and the rest of the European Union, investment is slowing.

But Brexit is a regional affair. Mr. Trump's trade war is downgrading expectations for growth worldwide.

Globalization did not happen by government design, and it will not be dismantled by political predilections. Businesses will continue to tap world markets and trade across borders - a wealth-enhancing formula, even as many major economies have failed to equitably distribute the bounty, leaving communities vulnerable to job losses.

Still, the risks are considerable. Mr. Trump's relentless focus on factory jobs has produced an unhelpfully nostalgic view of the American economy, Mr. Posen said, obscuring the reality that 80 percent of the country's output comes from so-called services industries. China's retaliation to Mr. Trump's tariffs makes it harder for American accounting, legal services and engineering companies to crack the Chinese market.

The escalating trade war has dealt a potentially grievous blow to the workings of the global commercial system, and especially to its de facto referee, the World Trade Organization.

Many of Mr. Trump's tariffs have come with the credibility-straining legal justification that they are required for national security. Trade experts have derided his approach as an existential assault on the concept of a rules-based trading system.

The dispute with Mexico elevates the fear. The Trump administration cited a domestic law created to enable presidents to cut off finance to rogue regimes, deploying a remedy for unfair trade - tariffs - as a cudgel in an unrelated dispute over immigration policy.

"This set of tariffs against Mexico is completely outside the W.T.O.," said Meredith Crowley, an international trade expert at the University of Cambridge in England. "It's just a big punch in the nose to the W.T.O."

Among the institution's members, the sense is deepening that its rules need updating. The organization was not built to address the disruptive force of China, a colossal economy that has subsidized key industries while pursuing a vast collection of global infrastructure projects known as the Belt and Road Initiative.

Beijing has lavished credit around the world in exchange for promises that recipient governments use the cash to hire Chinese construction companies, willingly doing business with authoritarian regimes from Egypt to Iran.

In conducting his trade war outside the W.T.O. framework, Mr. Trump has ironically bolstered China's mode of operation - one in which bottom-line concerns take precedence over labor and environmental standards, while national interests eclipse general principles.

"This is openly violating the rules of game," said Ms. Dhingra, the economist.

A version of this article appears in print on , Section A, Page 14 of the New York edition with the headline: Globalization Finds Safe Place as U.S. Wages a Trade War. Order Reprints | Today's Paper | Subscribe

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Globalization Is Moving Past the U.S. and Its Vision of World Order

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LONDON - If globalization were ever going to unravel, the beginning would probably feel something like this. President Trump, the leader of the country that built the world trading system, continues to disrupt international commerce as a weapon wielded in pursuit of national aims. He has unleashed trade hostilities with China, placed tariffs on steel made by allies like Europe and Japan, and restricted India's access to the American market.