For more What in the World watch Sundays at 10 a.m. & 1 p.m. ET on CNN
By Global Public Square staff
If there's one country in the world that looks like a utopia, its name must be Switzerland. This is a country that has it all. The average income is $82,000 a year – 65 percent more than the average American income. Everyone has great healthcare, childcare, and education. The unemployment rate is 3 percent. There is almost no corruption. According to the OECD, of 34 developed countries surveyed, the Swiss have the greatest degree of trust in their government. And, of course, it is a spectacular country with great traditions of skiing, cheese, chocolate, and wine.
What could possibly go wrong? Well, quite a lot, actually.
The Swiss are furious about income inequality. The story is a familiar one. According to Reuters, in 1984 top earners in Swiss firms made 6 times as much as the bottom earners. Today, they make 43-times what bottom earners make. At some banks and firms, CEOs make 200-times the salary of the lowest-paid employee.
For more What in the World watch Sundays at 10 a.m. & 1 p.m. ET on CNN
By Global Public Square staff
Some startling images caught our eye this week. A shopping free-for-all at a major electronics chain, the equivalent of America's Best Buy. People making off with flat-screen TVs…refrigerators…and more…all at bargain basement prices. No, it’s not the holidays yet. This is what happened when the government of Venezuela decided to play Robin Hood: the army took over the privately owned chain and slashed prices.
The incident got us thinking. We often talk about best practices for economies. Perhaps there should also be a list of things to avoid – a checklist titled ‘How to ruin your economy.’ Well, it so happens this isn't just a theoretical list, because Venezuela is actually ticking each of those boxes in practice.
By Kishore Mahbubani
Editor’s note: Kishore Mahbubani is Dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore and a member of the World Economic Forum’s Global Agenda Council on China. This essay is adapted from WEF’s new report, Outlook on the Global Agenda. The views expressed are his own.
The explosion of Asia’s middle class, which was named this week by the World Economic Forum’s Global Agenda Councils as one of the ten most significant trends for 2014, is stunning. The size of this group currently stands at 500 million and will mushroom to 1.75 billion by 2020 – more than a threefold increase in just seven years. The world has never seen anything like this before; it’s probably one of the biggest seismic shifts in history. It’s little wonder that people all across Asia expect a bright future for their children – according to Pew data, a massive 82 percent of Chinese respondents expect today’s children to grow up to be better off financially than their parents.
The reason these Asian societies are now succeeding in this way is because they have finally begun to understand, absorb and implement important reforms: free-market economics; mastery of science and technology; a culture of pragmatism; meritocracy; a culture of peace; the rule of law; plus, of course, education.
This week saw the start of budget negotiations between the House of Representatives and Senate. But as Republicans and Democrats sit down together less than a month after a government shutdown, will the two sides be able to find common ground? Global Public Square asked 12 commentators, analysts and policy makers for their take on what Congress should be discussing – and what an agreement should include. All views expressed are the writers’ own.
Create a national infrastructure bank – Fareed Zakaria, CNN
If Republicans and Democrats could stop posturing, they would find that they could support a simple, powerful program that would reduce unemployment, make America competitive, privatize an important realm of economic activity, and get rid of earmarks. It is a national infrastructure bank to rebuild America's decaying infrastructure.
America's infrastructure is in a shambles. Just a decade ago, we ranked sixth in infrastructure in the world according to the World Economic Forum. Today we rank 23rd and dropping.
Currently, the United States government funds and operates almost all American infrastructure. It’s a quasi-socialist approach.
By Heather Gautney, Special to CNN
Editor’s note: Heather Gautney is an associate professor of sociology at Fordham University. The views expressed are her own.
This past month, our nation’s caregivers got something of a pay increase. The U.S. Department of Labor passed a rule requiring that wage and overtime benefits under the Fair Labor Standards Act be extended to direct care workers. Some two million home care attendants, many of whom have been surviving on public assistance and poverty-level wages, will finally, as of 2015, be covered by basic minimum wage and overtime protections.
Yet this is a depressing contrast with the almost exponential pay curve of our country’s CEOs.
Over a little more than three decades, CEO compensation has increased some 875 percent – more than double the country's stock market growth over that same period – while the real wages of the average U.S. worker have actually declined, according to the Economic Policy Institute. In 1965, corporate executives made twenty times more than the average worker. By 2012, they made over 354 times. The same year, home care attendants made just over $20,000 per year, according to Think Progress. Not even a living wage.
By Saadia Zahidi, Special to CNN
Editor’s note: Saadia Zahidi heads the Women Leaders and Gender Parity Program at the World Economic Forum and is founder and co-author of the annual Global Gender Gap Report, released October 25. The views expressed are the writer’s own.
Gender inequality is good economics. Yes, you read that correctly. While we know that individuals, economies and societies would benefit from gender parity in the long term, gender inequality is often a perfectly rational choice for individuals in the short term.
Gender imbalances, and their resulting economic consequences, are still startlingly visible everywhere, from the developed world to emerging markets. In Brazil, more women attend university than men, but women earn only a third of what men make for the same job. In the United Arab Emirates, three times as many women go to university as men, but half as many women participate in the labor force. Across Europe, women outperform men academically and enter the workforce in similar numbers, but occupy less than 15 percent of board positions. In Pakistan, where I grew up, a girl has only a 29 percent chance of making it into secondary school, compared to 38 percent for a boy.
There is irrefutable evidence on the economic contribution that women can make, from the familial and community level, to research showing that companies get a diversity dividend, to the World Economic Forum’s own global data on the correlations between gender and competitiveness, released this month. By some estimates, gender parity in employment could raise the GDP of countries such as the United Arab Emirates by 12 percent, Japan by 9 percent and the United States by 5 percent. While many institutions are constantly pointing to these potential collective gains, progress remains dismally slow. So what’s holding us back?
Watch Fareed’s interview with Wolf and Minton Beddoes on GPS this Sunday on CNN at 10 a.m. and 1 p.m. ET
GPS Digital Producer Jason Miks sits down with Zanny Minton Beddoes, economics editor of The Economist, and the Financial Times chief economics commentator, Martin Wolf, to discuss the recent government shutdown, politics in Washington, and why the debt ceiling is “absurd.”
Congress managed to agree to a last minute deal over the debt ceiling and government shutdown. But how would a debt default have affected average Americans, or how could it if this comes up again in the future?
Minton Beddoes: October 17 was the day on which the Treasury Department said it was going to run out of capacity to juggle its finances such that it could continue borrowing. And that means that from October 17 it would have had no more borrowing authority, and it essentially would have had to go to a cash budget overnight. It could then only spend what tax revenue was coming in, which is the equivalent of about 65 percent of spending. That means the government would not have been able to pay all its bills. Something would have had to give: that could mean stop paying interest on the debt, or stop sending social security checks out, or stop paying other obligations, whether to soldiers or suppliers.
There was one practical question and a lot of legal ones. The practical one was whether the Treasury, which pays millions of people every day, would find it practical to prioritize certain payments – could they actually do that, legally and practically.
And secondly, if they could, what would they prioritize? The rest of the world was worried most that they would fail to pay the interest on their bonds, so that would be a technical default. If they were unable to send out social security checks, it would be equally breaking the law, because it would be breaking a promise that they had made. But that would have a very different impact – it might not have paralyzed global financial markets, but it would have had a very big political impact as millions and millions of senior citizens didn’t get their social security checks.
The U.S. Senate is reportedly set to vote on a deal to raise the debt ceiling and end the government shutdown. But how damaging would a default really be? How much damage has the crisis done to the U.S. image abroad and what should the two sides be focusing on moving forward?
Zanny Minton-Beddoes, the economics editor of The Economist, will be in New York and answering readers’ questions on these and other issues tomorrow. Please leave your questions in the comments section below.
By James Pach, Special to CNN
Editor’s note: James Pach is the Tokyo-based editor of The Diplomat, an online magazine focusing on the Asia-Pacific. The views expressed are his own.
“Americans can always be counted on to do the right thing, after they have exhausted all other possibilities.” That Churchillian quote is a useful one to trot out as Washington fumbles in its uniquely Washingtonian way towards what those of us in the rest of the free world (yes...we’re still here) would consider common sense.
It’s also quite patronizing. With his stature and his American mother, Churchill could probably get away with it. For everyone else though, it presupposes that political dysfunction only happens in America. And for all the Schadenfreude-tinged harrumphing in foreign capitals, that’s clearly not true.
Take Japan, with seven prime ministers in seven years, public debt climbing past 230 percent of GDP, and a sizeable chunk of one prefecture uninhabitable for the foreseeable future. Too easy? Then try China, where despite runaway, credit-fueled growth, an estimated 500 mass protests take place each day as the population grapples with rampant corruption, choking pollution, food safety scandals and a diabetes epidemic. Or look at Australia, the Organization for Economic Cooperation and Development’s star performer. After six years of Labor government, Canberra has earned a reputation as the world’s coup capital. America’s post-racial moment may not have made it out of Grant Park, but Australia’s post-misogyny moment never happened at all. Europe? Euro.
By Jim Manley, Special to CNN
Editor’s note: Jim Manley is senior director at QGA Public Affairs in Washington, DC. He was previously a senior staff member in the offices of Senators Harry Reid and Ted Kennedy. The views expressed are his own.
It was shortly after midnight last night, as I was checking the Blackberry one last time before going off to sleep, that I saw a remarkable story pop up courtesy of my friends at Roll Call. It said that – with just a couple of days to go before we reach the October 17 deadline to extend the debt limit – Senator Ted Cruz was spotted at a place on the Hill called Tortilla Coast. According to Roll Call, he was with, among others, Congressmen Louie Gohmert and Steve King. In other words, three quarters of what I call the Four Horseman of the House Apocalypse.
A couple of things struck me.
First of all, no self-respecting Texan (even one born in Canada, as the junior senator was) should be caught eating the Tex-Mex at this place. But, more importantly, the very idea that these guys (and perhaps 15 or so house members) would be “stratgerizering” at this late stage in the game should give everyone reason to pause.
Fareed spoke recently with Lloyd Blankfein, CEO and chairman of Goldman Sachs, about the stalemate in Washington. Watch the full interview on "Fareed Zakaria GPS," this Sunday at 10 a.m. and 1 p.m. ET
What do you think the economic impact of what is happening in the Senate, the position of the House Republicans is, on markets and people’s understanding of the American economy?
Well, I say the confrontation and the way that confrontation is being carried out is, I think, a very bad impact on the markets and it's totally foreseeable.
Wherever you stand on the content, on the specific issues of what's trying to be accomplished, the idea of engaging away from the substantive argument after it's already been decided, and saying, you know, something will blow up the credit rating unless you accede to us, is just a poor policy and, I think, a poor demonstration. And, I think, a poor example of the American political process.
Are you actually worried that we will default?
I think it's very unlikely, because in this situation, sensibility normally prevails. But it's not an on-off switch. We’re already making people insecure. The markets are already responding. And some of the adverse consequences are already being felt. And it will continue to reverberate even if there's an acquiescence.
So it's already bad. If we actually went into a position of default…that would be very, very negative. But we're already getting some negative aspects at the moment.
By Jason Miks
As the U.S. government shutdown enters its second week, it is not just Americans wondering when the stalemate will be over – around the world, politicians and commentators have been weighing in with their take on how the U.S. got here, what happens next, and whether their own countries should be worried. GPS Digital Producer Jason Miks selects some of the highlights.
U.S. has been living far beyond its tax base
“For a generation or so, the American government has been living far beyond its tax base, with deficits since 1970 in all but four years. In 2010, it spent $1,900 billion more than it collected in tax – borrowing more than the entire GDP of Canada or India just to pay the bills. If the federal deficit has come down since then, total public debt is now well over 100 per cent of GDP, compared to less than 60 percent in the early noughties,” writes British Member of Parliament Douglas Carswell in The Telegraph.
“…Is it manageable? Perhaps. Maybe. Just about. Now imagine that interest rates return even half way towards their post-war historic average? Wipe out. The barely manageable will become completely unmanageable. Something is going to give. And I don’t mean in a philanthropic sort of way.”
China: We’re concerned
“China, the U.S. government's largest creditor, is ‘naturally concerned about developments in the U.S. fiscal cliff,” Vice Finance Minister Zhu Guangyao said in the Chinese government's first public response to the October 17 deadline in the United States for raising the debt ceiling,” Reuters reports.
“‘The United States is totally clear about China's concerns about the fiscal cliff,’ Zhu told reporters in Beijing, adding that Washington and Beijing had been in touch over the issue. ‘We ask that the United States earnestly takes steps to resolve in a timely way before October 17 the political (issues) around the debt ceiling and prevent a U.S. debt default to ensure safety of Chinese investments in the United States and the global economic recovery…This is the United States’ responsibility.’