In truth, Chinese workers were never as docile as the popular caricature suggested. But the recent strikes have been unusual in their frequency (Guangdong province on China’s south coast suffered at least 36 strikes in the space of 48 days), their longevity and their targets: foreign multinationals.

China’s ruling Communist Party has swiftly quashed previous bouts of labour unrest. This one drew a more relaxed reaction. Goons from the government-controlled trade union roughed up some Honda strikers, but they were quickly called off. The strikes were widely, if briefly, covered in the state-supervised press. And the ringleaders have not so far heard any midnight knocks at the door.

This suggests three things. First, China is reluctant to get heavy-handed with workers in big-brand firms that attract global media attention. But, second, China is becoming more relaxed about spooking foreign investors. Indeed, if workers are upset, better that they blame foreign bosses than local ones.

In the wake of the financial crisis, the party has concluded, correctly, that foreign investors need China more than it needs them. Third, and most important, the government may believe that the new bolshiness of its workers is in keeping with its professed aim of “rebalancing” the economy.

And it would be right. China’s economy relies too much on investment and too little on consumer spending. That is mostly because workers get such a small slice of the national cake: 53% in 2007, down from 61% in 1990 (and compared with about two-thirds in America). Letting wages rise at the expense of profits would allow workers to enjoy more of the fruits of their labour.

…

In the wake of the financial crisis, things are different. Deflation is now a bigger threat than inflation. And with 47m workers unemployed in the OECD alone, labour is not holding back the global economy. What the world lacks is willing customers, not willing workers. Higher Chinese wages will have a similar effect to the stronger exchange rate that America has been calling for, shrinking China’s trade surplus and boosting its spending.

This will help foreign companies and the workers they have idled. A 20% rise in Chinese consumption might well lead to an extra $25 billion of American exports. That could create over 200,000 American jobs.

…

Mr Obama complained that technology was putting “new pressures on our country and on our democracy”. But iPods, iPads and suchlike are not to blame for the crazy theories—about, for instance, politicians’ birth certificates—that circulate in the blogosphere.

People have always traded gossip: the internet just makes it easier and quicker. The culprit is human nature, not technology. And new communications technologies tend to strengthen democracy, not weaken it, as revolutionaries have known ever since Thomas Paine and others used the printing press to argue for American independence.

At least Mr Obama got one thing right: the idea that educating people is the best way to enable them to adapt to technological change, and use it for good. But technology is not an alternative to education and empowerment; it can, in fact, help deliver them. America’s first web-savvy president should understand that.

The Economist – The science of climate change: The clouds of unknowing

For a planet at a constant temperature, the amount of energy absorbed as sunlight and the amount emitted back to space in the longer wavelengths of the infra-red must be the same. In the case of the Earth, the amount of sunlight absorbed is 239 watts per square metre. According to the laws of thermodynamics, a simple body emitting energy at that rate should have a temperature of about –18ºC.

You do not need a comprehensive set of surface-temperature data to notice that this is not the average temperature at which humanity goes about its business. The discrepancy is due to greenhouse gases in the atmosphere, which absorb and re-emit infra-red radiation, and thus keep the lower atmosphere, and the surface, warm (see the diagram below). The radiation that gets out to the cosmos comes mostly from above the bulk of the greenhouse gases, where the air temperature is indeed around –18ºC.

Adding to those greenhouse gases in the atmosphere makes it harder still for the energy to get out. As a result, the surface and the lower atmosphere warm up. This changes the average temperature, the way energy moves from the planet’s surface to the atmosphere above it and the way that energy flows from equator to poles, thus changing the patterns of the weather.

No one doubts that carbon dioxide is a greenhouse gas, good at absorbing infra-red radiation. It is also well established that human activity is putting more of it into the atmosphere than natural processes can currently remove. Measurements made since the 1950s show the level of carbon dioxide rising year on year, from 316 parts per million (ppm) in 1959 to 387ppm in 2009. Less direct records show that the rise began about 1750, and that the level was stable at around 280ppm for about 10,000 years before that.

This fits with human history: in the middle of the 18th century people started to burn fossil fuels in order to power industrial machinery. Analysis of carbon isotopes, among other things, shows that the carbon dioxide from industry accounts for most of the build-up in the atmosphere.

The serious disagreements start when discussion turns to the level of warming associated with that rise in carbon dioxide. For various reasons, scientists would not expect temperatures simply to rise in step with the carbon dioxide (and other greenhouse gases). The climate is a noisy thing, with ups and downs of its own that can make trends hard to detect.

What’s more, the oceans can absorb a great deal of heat—and there is evidence that they have done so—and in storing heat away, they add inertia to the system. This means that the atmosphere will warm more slowly than a given level of greenhouse gas would lead you to expect.

The Iceland rebellion

In many countries, taxpayers are rightly cranky over the idea that their governments are bailing out banks and others — including their own regulators and central bankers — who helped create the 2008 global financial meltdown. Iceland appears to be setting a new standard of taxpayer response that politicians everywhere might want to note.

Under pressure from voters and taxpayers, Iceland’s President, Olafur Ragnar Grimsson, this week refused to sign a bill to reimburse almost $6-billion to Britain and Holland for money paid to depositors who put money into two high-flying Icelandic banks that failed in 2008. The president was responding to taxpayers who are essentially rebelling against being forced to pick up the tab for a financial bailout of depositors, regulators, foreign governments and even their own government and politicians.

It is only a bit of an exaggeration to say that the people of Iceland are refusing to pay for all the schemes of private bankers and public officials who, over the course of the last decade, drove the whole of Iceland into bankruptcy.

…

The Iceland rebellion has been characterized as foolish. Fitch, the credit rating agency, warned of “a renewed wave of domestic political, economic and financial uncertainty” for Iceland and downgraded the country’s main sovereign rating to junk status. Paul Rawkins, senior director in Fitch’s Sovereign ratings team, told a news agency that the standoff “represents a significant setback to Iceland’s efforts to restore normal financial relations with the rest of the world.”

…

The immediate focus of the current Icelandic revolt tells much of the story. Icelanders are being asked to repay money that was deposited in Icelandic banks by mostly British and Dutch residents during a frenzy of fund-raising by Landesbanki, one of Iceland’s hot-shot banks. In 2006, Iceland’s financial condition began to deteriorate, risking a drain on bank funds and a currency run. Rogers Boyes, in his book, Meltdown Iceland, describes how “the Icelandic government … needed the banks to appear more stable.

So a scheme was hatched to set up competitive online banking services that would lure cash from Britain, from the Dutch, and from Germans.” The scheme, a brilliant marketing move, was called Icesave.

Icesave became a cash machine for Landesbanki. “The only thing I have to do is look each day and see how much money came in. Fifty million pounds came in, just last Friday,” said Landesbanki CEO Sigurjon Arnason in 2006. Offering rates of up to 6%, within five months Icesave accounts attracted $10-billion in British deposits from 300,000 people — equal to the entire population of Iceland. These deposits were marketed as if they carried deposit insurance from Iceland. Another Iceland bank also raised money using the same technique.

When the banks collapsed, however, there was no deposit insurance available. Deposit insurance is normally structured to cover the failure of some institutions by taking pooled money from the surviving institutions. But in a systemic failure, when all banks our essentially out of business, who pays the depositors?

Renouncing Islamism: To the brink and back again

As children and teenagers, the ex-jihadis felt Britain was a valueless vacuum, where they were floating free of any identity.

Ed Husain, a former leader of HT, says: “On a basic level, we didn’t know who we were. People need a sense of feeling part of a group – but who was our group?” They were lost in liberalism, beached between two unreachable identities – their parents’, and their country’s. They knew nothing of Pakistan or Saudi Arabia or the other places they were constantly told to “go home” to by racists.

Yet they felt equally shut out of British or democratic identity. From the right, there was the brutal nativist cry of “Go back where you came from!” But from the left, there was its mirror-image: a gooey multicultural sense that immigrants didn’t want liberal democratic values and should be exempted from them. Again and again, they described how at school they were treated as “the funny foreign child”, and told to “explain their customs” to the class. It patronised them into alienation.

“Nobody ever said – you’re equal to us, you’re one of us, and we’ll hold you to the same standards,” says Husain. “Nobody had the courage to stand up for liberal democracy without qualms. When people like us at [Newham] College were holding events against women and against gay people, where were our college principals and teachers, challenging us?”

Without an identity, they created their own. It was fierce and pure and violent, and it admitted no doubt.

To my surprise, the ex-jihadis said their rage about Western foreign policy – which was real, and burning – emerged only after their identity crises, and as a result of it. They identified with the story of oppressed Muslims abroad because it seemed to mirror the oppressive disorientation they felt in their own minds.

Usman Raja, a bluff, buff boxer who begged to become a suicide bomber in the mid-1990s, tells me: “Your inner life is chaotic and you feel under threat the whole time. And then you’re told by Islamists that life for Muslims everywhere is chaotic and under threat. It becomes bigger than you. It’s about the world – and that’s an amazing relief. The answer isn’t inside your confused self. It’s out there in the world.”

…

Many of the ex-Islamists discovered they couldn’t ignore the fact that whenever Islamists won a military victory, they didn’t build a paradise, but hell.

At the same time, they began to balk at the mechanistic nature of Wahabism. Usman says he had become a “papier-mâché Muslim”, defining his faith entirely by his actions, while being empty inside. “Wahabis are great at painting themselves [an Islamic] green on the outside, but when it comes to that internal aspect, it’s not there. You pray five times a day, but why? Because God’s told you to pray five times a day. You pay your charity – why? Because God’s told you to pay your charity. This God of yours is telling you a lot. And why does he tell you to do that? Because if you don’t do it, you’ll end up in a fire. It’s all based on being frightened. There’s nothing to nourish you.”

An economic colossus, born in blood

Since 1978, [China's] annual economic growth rate has been a formidable 8% to 9%; and since 1990, per capita annual income has risen from $350 to $3,000. There are the predictable claims of imminent Chinese world economic supremacy, but we have heard all that before from the Nazis, Soviets, and Japanese, and they should be received with caution.

There are still at least 800 million Chinese peasants who live much as they did thousands of years ago. There is a population control plan that will raise the average age by one year every two years for at least two decades, and reduce the worker-to-retiree ratio from 3-to-1 to 2-to-1 in the next 20 years. There are acute shortages of land and water, and most social services.

Government spending on health and education has declined from 25% to 35% in 20 years. The private sector has taken up a lot of this, but about half the population receives no medical care at all. The percentage of middle school students going on to high school has actually declined by a third in the last 20 years.

The state still owns the country’s banks, natural resources, heavy industry and telecommunications, and controls about 35% of all production. Ecological damage is very serious and costly, affecting three quarters of the country’s water courses and most of its air. Distinguished China specialist James Fallows reckons that China suffers 250 deaths in mining accidents every day.

Corruption and arbitrariness in government are pandemic. The state has liberalized, but within limits that were dramatically underlined by the needless massacre in Tianenmen Square 20 years ago (the crowd could have been dispersed bloodlessly with fire hoses and rubber bullets, as they would have been in Western capitals).

The sense of the inexorable rise of China has been heightened by the inexplicable blunders of the United States in the last 15 years, of borrowing trillions of dollars from China and Japan to buy trillions of dollars of non-essential goods from China and Japan, and admitting millions of low-paid undocumented immigrants, while outsourcing millions of low-paid jobs (largely to China), and forcing the private sector to waste trillions more on unsound residential mortgages.

It is not clear that China can persuade its domestic economy to absorb much of the exports that have been lost to the recession and a belated reawakening of thrift in the U. S. But it has played its financial cards cleverly. China is shortening the maturities on its U. S. treasuries; 25% are now short-term. China will not sit with mountains of 3%-yield U. S. bonds, and appears to be preparing to buy large quantities of tangible U. S. assets, probably in the technology sector.

The Chinese cannot be counted upon to overpay wildly as the Arabs and the Japanese did when they squandered the bonanzas that burned holes in their pockets 20 and 30 years ago.

This will soon become a political issue in the United States.

China has more problems than the United States, and is not as rich or well-organized a country. Beijing is not about to overtake Washington, but its growth has been astounding and will continue. The first 30 years of the Chinese Revolution were a sanguinary version of The Gong Show. The last 30 have changed the world, for the better.

Leaner times ahead for Mayor

Ralph Lean, the chairman of the Cassels Brock law firm, has a long list of grievances against his Mayor, David Miller. Yesterday, he took time off from golfing in the Justin Eves Foundation charity tournament in Milton to spell those out in detail.

He is upset at Mr. Miller for overspending, for failing to freeze councillors’ salaries, for narrowing Jarvis Street, for fighting with Porter Airlines (“I’m a big supporter of Porter”) and for refusing to examine outsourcing some city functions.

Mr. Miller could shrug this off, except that Mr. Lean is not just any old disgruntled voter: one of the city’s most influential fundraisers, he co-chaired the team that funded Mr. Miller’s runaway victory in the 2006 municipal election. And now Mr. Lean is walking away.

“I quite like David Miller,” Mr. Lean said. But, he adds, “He’s gotten off track. He’s made a lot of mistakes. His supporters on council have pushed him in directions I don’t agree with.”

“Everybody I talked to, 100% of the people, have stopped supporting the Mayor,” he said. “I’ve never seen anything like it in my political career.”

Mr. Lean now says he will support either Mr. Tory or George Smitherman, the deputy premier, in a mayoral bid.

“I guarantee you one of those two will run,” Mr. Lean says, adding, “Both of them told me, ‘Only one of us is going to run.’ ”

Mr. Crombie is also declining to work on another Miller bid for the mayoralty, although he took pains to say he is not opposing the Mayor. He says he signed on in 2006 because it was a multi-party effort with Mr. Peterson and Mr. Miller, to make Toronto better.

A genius wearing a fool’s mask

Abdel Basset al-Megrahi, having served about eight years of a life-sentence imposed on him in 2001 for his role in bombing Pan Am Flight 103 that exploded over Lockerbie, Scotland, in 1988, killing 259 crew and passengers and 11 people on the ground, was set free last month as an act of executive clemency by Scottish Justice Minister Kenny MacAskill.

Well, why did Scotland release him? Those who know the West have a better question. Why did Scotland jail him in the first place?

The crime was heinous; the investigation slipshod, even corrupt. The evidence against the two Libyan suspects, Megrahi and Al-Amin Khalifa Fhimah, was so flimsy it left the Scottish judges no choice but to acquit Fhimah.

The crime was heinous; the investigation slipshod, even corrupt. The evidence against the two Libyan suspects, Megrahi and Al-Amin Khalifa Fhimah, was so flimsy it left the Scottish judges no choice but to acquit Fhimah.

They did convict Megrahi, but defensively, as if they were performing a patriotic rather than a judicial duty. The case against the Libyan rested on the evidence of a single witness, a Maltese shopkeeper named Tony Gauci. If he was mistaken, Megrahi had no tie to the atrocity.

If the trial proved anything, it was that Lockerbie wasn’t Megrahi and Fhimah’s idea. They didn’t order or finance it. At most, they were extras in a horror movie. For the investigators to put two minnows in the dock for a Moby Dick of a crime was itself a mockery.

The initial assumption was that the Pan Am jet was sabotaged by order of the Ayatollah Ruhollah Khomeini. Still the leader of Iran in 1988, the Ayatollah had promised the skies would “rain blood” after a missile from the USS Vincennes mistakenly shot down an Iran Air passenger flight with a loss of 290 lives a few months before.

The focus shifted to Libya later. A theory that Col. Gaddafi wished to get back at the U.S. and Britain for the 1986 bombing of his country seemed feasible. It also suited three U. S. administrations seeking to mend fences with Iran and Syria to build a coalition against Iraq’s Saddam Hussein.

Pan Am Flight 103 – Investigation

The clothes were traced to a Maltese merchant, Tony Gauci, who became a key prosecution witness, testifying that he sold the clothes to a man of Libyan appearance, whom he later identified as Abdelbaset Ali Mohmed Al Megrahi.

However, an official report providing information not available during the original trial stated that Gauci had seen a picture of al-Megrahi in a magazine which connected al-Megrahi to the bombing, a fact which could have distorted his judgment.

A circuit board fragment, allegedly found embedded in a piece of charred material, was identified as part of an electronic timer similar to that found on a Libyan intelligence agent who had been arrested 10 months previously, carrying materials for a Semtex bomb. The timer allegedly was traced through its Swiss manufacturer, Mebo, to the Libyan military, and Mebo employee Ulrich Lumpert identified the fragment at al-Megrahi’s trial.

Mebo’s owner, Edwin Bollier, later revealed that in 1991 he had declined an offer from the FBI of $4 million to testify that the timer fragment was part of a Mebo MST-13 timer supplied to Libya. On 18 July 2007, Ulrich Lumpert admitted he had lied at the trial.

In a sworn affidavit before a Zurich notary public, Lumpert stated that he had stolen a prototype MST-13 timer printed circuit board from Mebo and gave it without permission on 22 June 1989, to “an official person investigating the Lockerbie case”.

Dr Hans Köchler, UN observer at the Lockerbie trial, who was sent a copy of Lumpert’s affidavit, said: “The Scottish authorities are now obliged to investigate this situation. Not only has Mr Lumpert admitted to stealing a sample of the timer, but to the fact he gave it to an official and then lied in court”.

The scam we call ‘Employment Insurance’

What EI really is, is a regional wealth-transfer scheme taking money from workers in low-unemployment regions and transferring it to workers in high-unemployment areas so the latter are not forced to move to find work.

Not coincidentally, it also ends up taking money from workers in provinces and regions — such as Alberta — where few Liberals are elected and giving it to workers in regions such as rural Quebec and Atlantic Canada, where Liberals have historically won lots of House of Commons seats.

Back to Basics: Restoring Equity and Efficiency in the EI Program (PDF)

Currently, EI benefit eligibility and duration vary according to the unemployment rate in each of Canada’s 58 EI regions. The higher the regional unemployment rate, the easier it is to access the program and the longer the benefit periods; correspondingly, the lower the regional unemployment rate, the harder it is to access the program, and the shorter the benefit periods.

Therefore, where benefits are less generous and less accessible, Canadians who lose their jobs are treated unfairly. This is especially true in the current recessionary environment, when one may argue that job prospects are depressed in almost every region of the country.

What is further troubling about regionally extended benefits is the persistence of regional variations in unemployment rates. While the national unemployment rate decreased over the 1990s, dispersion among regions has increased and persistent pockets of unemployment remain (Busby 2008).

Regionally extended benefits provide incentives that work against labour mobility among high and low unemployment regions, and may in fact help sustain the persistence of unemployment in affected regions (Forget Commission 1986).

The implication is that regionally differentiated income support contributes to a vicious circle of subsidized seasonal employment patterns and is the source of most EI inequities. One resolution is to take regional differentiation out of the EI program, with social supports instead to be made available through other types of targeted income transfers, financed through general revenues.

The Panic of 1825

Writing in December 1825 to her friend Hannah More, [Marianne Thornton] said: “There is just now a great pressure in the mercantile world, in the consequence of the breaking of so many of these scheming stock company bubbles.”

Sound familiar? These were not bubbles in high-tech stocks or in mortgage lending and house prices, however, but bubbles in shipping lines, canals, and textile-spinning factories.

And, of course, the bank of which young Henry Thornton had been a partner for only four months had gotten itself badly undercapitalized. The managing partner “had been inexcusably imprudent in not keeping more cash in the House, but relying on [the bank's] credit . . . which would enable them to borrow whenever they pleased.”

Except, of course, that in 1825 just as in 2009, no bank can borrow cash on the one day it really needs to, for every other bank really needs it on that same day. Which is why there came a “dreadful Saturday I shall never forget,” when a run on the bank was made, with “one old steady customer” withdrawing, without warning, his entire £30,000, leaving the bank vault “literally empty.”

“Never, [Henry] says, shall he forget watching the clock to see when five would strike, and end their immediate terror. . . . The clock did strike . . . as Henry heard the door locked, and the shutters put up, he felt [Pole, Thornton] would not open again but would be forcibly liquidated Monday morning.”

There were, however, other characters in motion. Robert Banks Jenkinson, Second Earl of Liverpool, First Lord of the Treasury and Prime Minister of His Majesty George IV, had been having whispered conversations with Bank of England Governor Cornelius Buller and his deputy John Baker Richards. Liverpool said that it was of vital importance that the banking system of London not collapse under the weight of speculation and the popping of all those stock company bubbles.

Liverpool claimed he could not get Parliament to appopriate money to save the banks or to prop up asset prices: Parliament was populated by tax-paying landlords who did not especially trust the stock-jobbing financiers of London. Liverpool had spent much of the past year warning bankers that if their “overtrading” were followed by “revulsion” and “discredit,” that he would not spend Treasury money to rescue them.

However, Liverpool told Buller, the Bank of England might. The Bank of England had a peculiar semi-private status with enormous autonomy. And everyone knew it was too big to fail—it was, after all, the Bank for the entire British Empire, and the Empire would stand behind it.

So the Bank of England could save the situation even if the government could not. Moreover, it seems Lord Liverpool said to Buller, if it becomes necessary I want you to print up banknotes in excess of the legal limit, and to lend out your gold reserves even though the Bank’s charter requires you to keep them in your vaults.

The following morning, Sunday, at 8:00 AM, Bank of England Governor Cornelius Buller, Deputy Governor John Baker Richards, along with every member of the Court of the Bank of England who was in London, were assembled to meet John Smith and the twenty-five year old Henry Thornton.

Marianne Thornton picks up the story: “John Smith began by saying that the failure of [Pole, Thornton] would occasion so much ruin that he should really regard it as a national misfortune,” and he also praised Henry Thornton beyond all reason, saying “what he had seen of the conduct of one of the partners . . . had convinced him that could [the bank] be saved for the moment,” the crisis would pass. Smith “then turned to Henry and said, ‘I think you give your word the House is solvent?’ Henry said he could . . . [and] had brought the books.

“’Well then’, said the Governor and the Deputy Governor of the Bank, ‘you shall have four hundred thousand pounds by eight tomorrow morning, which will I think float you’. Henry said he could scarcely believe what he had heard.”

Henry Thornton arrived at his own bank before opening with £400,000 in cash. The run on bank funds then recommenced. But “rumours that the Bank of England had taken them under its wing soon spread, and people brought back money [on Monday] as fast as they had taken it out on Saturday.”

This was the birth of central banking as we know it.

The Bank of England had accepted the role of maintaining orderly markets and financial stability in a crisis. Why? Because the prices of financial assets are too important to be left to the market when it is panicked and when letting prices reach market levels will mean unemployment for hundreds of thousands in 1825, or tens of millions today.

Ben Bernanke’s Public Private Investment Partnerships—the vehicles for purchasing banks’ toxic assets—are a natural development, even a Burkean development, of policy that has been pursued for 184 years now.

When politicians wash their hands of a financial system in crisis and fail to intervene on a large scale, things do not turn out well. The most notable example was 1929-1933, when, at least according to Herbert Hoover, Treasury Secretary Andrew Mellon persuaded Hoover that “even a panic is not altogether a bad thing” because “it will purge the rottenness out of the system.”

Did 1825 turn out better? We think so. George IV was not executed on Tower Green. Lord Liverpool’s head was not carried about London on a pike. The spinning of cotton into thread in Britain in 1826 was 11 percent lower than in 1825—the first serious industrial recession—but it bounced back and grew 30 percent from 1826 to 1827.

And the bank of Pole, Thornton? Alas, Henry Thornton was irrationally exuberant when he swore that the bank was solvent. The bank was eventually closed. The partners lost their capital shares. The Bank of England had to wait years before getting its emergency loan back. (They did not care much; they were too big to fail, and Lord Liverpool thought they had done well.)

Henry’s career prospered thereafter. Even though the financial ship that he had seized command of as a junior partner foundered, the consensus was that he had displayed great energy, good judgment, a cool head, and a facility with figures that made him worth backing in the future.