- China’s Complexity Problem
The Project Syndicate AUG 25, 2015 13
NEW HAVEN – There are many moving parts in China’s daunting transition to what its leaders call a moderately well-off society. Tectonic shifts are occurring simultaneously on several fronts – the economy, financial markets, geopolitical strategy, and social policy. The ultimate test may well lie in managing the exceedingly complex interplay among these developments. Is China’s leadership up to the task, or has it bitten off too much at once?
Most Western commentators continue to over-simplify this debate, framing it in terms of the proverbial China hard-landing scenarios that have been off the mark for 20 years. In the wake of this summer’s stock-market plunge and surprising devaluation of the renminbi, the same thing is happening again. I suspect, however, that fears of an outright recession in China are vastly overblown.
While the debate about China’s near-term outlook should hardly be trivialized, the far bigger story is its economy’s solid progress on the road to rebalancing – namely, a structural shift away from manufacturing and construction activity toward services. In 2014, the services share of Chinese GDP hit 48.2%, well in excess of the combined 42.6% share of manufacturing and construction. And the gap is continuing to widen – services activity grew 8.4% year on year in the first half of 2015, far outstripping the 6.1% growth in manufacturing and construction.
Services are in many respects the infrastructure of a consumer society – in China’s case, providing the basic utilities, communications, retail outlets, health care, and finance that its emerging middle class is increasingly demanding. They are also labor-intensive: in China, services require about 30% more jobs per unit of output than do capital-intensive manufacturing and construction.
Largely for that reason, China’s employment trends have held up much better than might be expected in the face of an economic slowdown. Urban job growth averaged slightly more than 13 million in 2013-14 – well above the ten million targeted by the government. Moreover, the data from early 2015 suggest that urban hiring remains near the impressive pace of recent years – hardly the labor-market stress normally associated with economic hard landings or recessions.
Services are also the ingredient that makes China’s urbanization strategy so effective. Today, approximately 55% of China’s population lives in cities, compared to less than 20% in 1978. And the share should rise to 65-70% over the next 15 years. New and expanding cities sustain growth through services-based employment, which in turn boosts consumer purchasing power by trebling per capita income relative to that earned in the countryside.
So, despite all the handwringing over a Chinese crash, the rapid shift toward a services-based economy is tempering downside pressures in the old manufacturing-based economy. The International Monetary Fund stressed the same conclusion in its recent Article IV consultation with China, noting that labor income is now expanding as a share of GDP, and that consumption contributed slightly more than investment to GDP growth in 2014. That may seem like marginal progress, but it is actually quite rapid relative to the normally glacial pace of structural change – a process that began in China only in 2011 with the enactment of the 12th Five-Year Plan.
Alas, there is an important catch. While progress on economic rebalancing is encouraging, China has put far more on its plate: simultaneous plans to modernize the financial system, reform the currency, and address excesses in equity, debt, and property markets. Meanwhile, the authorities are also pursuing an aggressive anti-corruption campaign, a more muscular foreign policy, and a nationalistic revival couched in terms of the “China Dream.”
- This migration crisis could test the European project to destruction
Angela Merkel knows that open borders and national immigration policies are simply unsustainable
The Telegraph 26 Aug 2015
As Europe struggles with its worst migration crisis in more than half a century, all eyes are once again on Angela Merkel. The German Chancellor took a huge political gamble this week by tearing up the EU’s rulebook, while also demanding a new deal that would force Britain to accept hundreds of thousands of refugees.
Faced with a human flood, Mrs Merkel has abandoned the Dublin Convention that requires asylum-seekers to be processed in their country of arrival. Berlin’s new policy will allow Syrian refugees to apply for asylum in Germany, rather than in their first port of call.
Deciding to do such a thing without the approval of Brussels will surely encourage other EU countries to pursue their own migration policies, too. But this is the last thing Mrs Merkel wants. She and President Hollande of France have just called for a new, binding European agreement to share the asylum burden.
Her proposals, however, were greeted with incredulity by other member states, their inherent flaw being that they would give millions more migrants an added incentive to come to Europe. Mr Cameron, along with other leaders, is resisting Mrs Merkel’s move, despite moral blackmail from EU and UN officials.
Mrs Merkel may not like it but many Germans, who are expecting a record 800,000 asylum-seekers this year, feel that they have already taken more than their fair share. They blame their coalition government for being a soft touch and street protests are reaching a crescendo. On Thursday, Mrs Merkel was greeted by angry protests and shouts of “traitor” as she visited an embattled refugee hostel near Dresden. Solving this crisis is proving to be the greatest challenge of her career.
The consensus in Berlin is that Europe’s combination of open borders and different national immigration policies is unsustainable. The present uncontrolled influx is not how the system is designed to work – but the scale of the exodus from the Muslim world means that rules are being flouted as each country protects its own interest.
Meanwhile, the lack of border controls within Europe is allowing migrants to make for countries with generous rules on asylum and welfare, especially Germany and the UK. Britain, with a strong economy, is a powerful draw for migrants but we are outside the borderless Schengen area and Theresa May is determined to keep asylum seekers out of the UK. Unsurprisingly, the German media is portraying the Tory government as selfish.
The blame game is, however, as pointless as it is undemocratic. The British public will not accept an EU policy that imposes quotas of migrants without our consent. Nor will most other countries – including Germany. So the EU’s asylum system is buckling and everywhere support is surging for extremist parties of Left and Right.
Mrs Merkel, European figurehead, has the experience and authority to restore order to the anarchy. And Mr Cameron has hitherto enjoyed the best relationship with the chancellor of any European leader. He has, moreover, a direct interest in reforming the EU’s migration regime as it is bound to loom large in the coming referendum.
So will the British and German governments make common cause? They should, but they face very different challenges. Mr Cameron wants to restore national control over migration from inside the EU, while Mrs Merkel wants European control of migration from outside Europe.
Their first priority must be to stabilise the crisis that began with the fallout from the Syrian civil war. That would require the EU to impose much stricter external border controls, while helping Mediterranean countries, the first ports of call, to accommodate asylum-seekers and process their applications. Mrs Merkel has promised to do more to help Greece and Italy cope, and today she will attend a summit in Vienna, where Balkan countries will also demand aid, especially Macedonia, which has declared a state of emergency.
The next step would be to restore a measure of national sovereignty to the larger question of economic migration. Mrs Merkel refuses to compromise on the principle of free movement, but she could show more flexibility by allowing each country to interpret that principle in its own way.
- Growing Up Trump
Time Aug. 11, 2015
Richard Drew—APJune 16, 2015. From left are: son Eric Trump, with his wife Lara Yunaska; Donald Trump's son Barron Trump, wife Melania Trump; Vanessa Haydon and her husband Donald Trump Jr.; daughter Ivanka Trump with her husband Jared Kushner; daughter Tiffany Trump. In the front row are Kai Trump and Donald Trump III, children of Donald Trump Jr.
Will Donald’s campaign risk his children’s good fortune?
Twenty-five years ago, Donald Trump had already achieved no small measure of success. His unmistakable buildings speckled the sprawls of Manhattan and Atlantic City. He owned an airline. He vacationed on a 282-foot yacht, the Trump Princess. He was likely worth $1 billion. Maybe $3 billion.
So what did the high-flying dealmaker think of his kids’ prospects for the future? “Statistically, my children have a very bad shot,” Trump toldPlayboy in 1990. “Children of successful people are generally very, very troubled, not successful. They don’t have the right shtick.”
Presidential campaigns aren’t just a test for candidates but for families too. Just ask Bill Clinton or Columba Bush. As Trump’s “right shtick” has vaulted the reality-television host to the tops of early Republican primary polls, a new challenge faces a clan that’s already seen its fair share of them.
After surviving their parents’ divorce, endless tabloid attention and what they have described themselves as an absentee father, the Trump children have entered the latest chapter of what has been an upbringing unlike any other. Now in this summer of Trump, their father’s campaign-trail antics are testing their peculiar inheritance like little before.
DEAL MAKERS Given their father’s reputation for bluster and braggadocio, the three adult Trump scions—Donald Jr., age 37; Ivanka, age 33; Eric, age 31—have a habit of surprising people. People who know them say they can be down-to-earth and easy-going, descriptors that would not apply to their father unless he was trying to close a deal. They lack his hunger for publicity for its own sake and his flair for the outrageous.
They work for their father as executive vice presidents of development and acquisition. (Trump also has two younger children, one each by his second and third wives.) As for their specializations: Don Jr. manages the existing property portfolio, Ivanka oversees the family’s hotels, and Eric manages the family’s golf assets. The Trump Organization has a reported 22,000 employees, with nine luxury hotels, 17 golf courses and 18 luxury residential properties worldwide. The company also makes millions fromextensive licensing deals on real-estate developments it does not own or manage.
“To be honest,” says Richard Huckestein, a principal in T&G Constructors’ Miami office who served as a project executive on the Trump renovation of the Doral Golf Resort and Spa, as though preparing to break bad news, “I really like Eric. I didn’t know anything about the family other than what I read about them beforehand. But they were straight shooters and honest.”
“Ivanka is very smart and meticulous. She’d be successful anywhere in New York,” says Michael Ashner, whose Winthrop Realty Trust sold the Trumps Doral for $170 million in 2011. “In a room full of testosterone, she can keep her cool.”
People who have worked with Trump’s children say that they handle the details of many of the company’s deals and projects. (A representative for the Trump organization declined on behalf of the children to participate in this story.) The Trumps—both this generation and their father—are said to be more hands-on than many developers, weighing in on design and construction matters that others might delegate.
“As negotiators, the boys are very fair, very ethical. They make a deal on a handshake and they stick to it,” says Jeff Lichtenberg, an executive vice president at Cushman and Wakefield who works as a leasing agent for the Trumps and is especially close with Don and Eric.
RAISING THEMSELVES Growing up a Trump was tumultuous even by the standards of the truly wealthy. Donald and Ivana’s marriage had fascinated the tabloids even when it was intact. (To wit: Her broken-English coinage “the Donald” has outlasted much of the so-called popular culture of the 1980s.)
“I look at my brothers and myself and I’m, like, really proud of the fact that nobody’s, like, totally f–ked-up,” Ivanka told an interviewer in 2007. “Nobody’s a drug addict, nobody’s driving around chasing women, snorting coke. There’s something amazing about that. And you know, this isn’t to pat myself on the back, but I could be a lot worse.”
Neither parent was especially present. The kids grew up in the close company of nannies and security guards who worked for the family. Ivana’s parents lived with them when they were young; the boys’ interest in hunting and fishing came from grandfather Milos. (In 2011, Donald and Eric went trophy hunting in Zimbabwe, killing an elephant and cheetah among other large animals and facing scorn from the press upon the photos’ surfacing.)
“My father is a very hardworking guy, and that’s his focus in life, so I got a lot of the paternal attention that a boy wants and needs from my grandfather,” Donald Jr. told a reporter in 2004
