If this year was one of continuing war in Iraq and Afghanistan, petrifying conflict between Israelis and Palestinians, the growing nuclear threat posed by Iran and North Korea, and stalled progress on climate change, could 2010 be any worse? Yes, because tensions over China's deliberately undervalued currency are likely to come to a head.
So you thought this year was bad!
2009 began with the flattening of Gaza. Unemployment is surging in many countries, even though we can detect the first signs of recovery from the recession. Many bankers, meanwhile, are back to the trough as though nothing had happened. Greed was just taking a temporary break.
Pakistan is hit hard by a wave of monstrous Taleban attacks, and in Afghanistan NATO troops die and are terribly injured in large numbers. The “Peace Process” in the Middle East becomes ever more clearly the great oxymoron in international relations.
Preparations for the climate change conference in Copenhagen are dominated by charges and recriminations. Even President Barack Obama, of whom miracles were expected, turns out to be no more than a very talented mortal. He receives the Nobel Peace Prize in the hope that maybe he can make next year better. He’ll certainly have his work cut out.
Will 2010 see a recovery shaped like a “V” or a “W,” or will there simply be an anemic tilt towards a very distant prospect of better times? I suspect the latter, with unemployment and cuts in public spending – certainly in much of Europe and the United States – constraining economic confidence. That will make the politics of dealing with global imbalances all the more difficult.
Let’s be clear about what is happening. The deliberate undervaluation of China’s currency, and the fall in the dollar, are both putting a squeeze on the export prospects of the European Union members and other countries like Canada and Mexico, and China’s covert and not so covert export subsidies and import barriers exacerbate the problem. American exasperation has probably been curbed by its need to borrow so much money – much of it from China. But Obama’s recent tariffs on tire imports may be a sign of things to come.
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Chinese behavior will put increasing political pressure on those of us in Europe and the US who are delighted about China’s economic success and who argue for free trade. Weaker economies will also feel the pinch. I hope that China’s sophisticated economic managers understand that either their country’s behavior will have to change, or we are likely to face a massive trade conflict and disruption of global commerce. The patience even of free traders will wear thin in 2010.
Rows about the short-term costs of dealing with climate change won’t make it any easier to keep markets open. But failure to act now will only raise the price of delayed action at some moment in the future. While the most hopeful outcome of the Copenhagen summit – a global pact limiting carbon emissions – has now been all but ruled out, the second-best outcome – negotiations on specific measures continue within a framework of general goodwill – would not be a disaster. Anything short of that would be very bad news.
In either of these two more optimistic scenarios, one consequence will be the transfer – actual or putative – of considerable sums of money from developed to emerging or developing countries to cover some of their costs for emissions abatement and environmental protection. Now just imagine the problems that legislators in developed democracies will face when they must explain why billions of dollars and euros should be handed over to China, whose deliberately undervalued currency is costing their constituents their jobs.
Obama’s commitment to substantial nuclear disarmament bodes well for the Nuclear Non-Proliferation Treaty Renewal Conference in 2010. But, even with progress there, the problems created by the threat of nuclear weapons development in North Korea and Iran will remain.
American and European diplomatic engagement with Iran is welcome. But what happens if this brings either no Iranian commitment to refrain from weaponizing nuclear power, or no acceptance of tough monitoring of such a pledge? China and Russia seem unlikely to support any further sanctions against Iran if diplomacy fails. China’s energy relationship with Iran grows ever stronger, and Russia continues to see its mission internationally as making trouble wherever it can.
This is just a little of what 2010 perhaps has in store – and no mention yet of Israeli settlement building on the West Bank, Pakistan’s struggle against murderous extremists, and NATO’s bloody difficulties in propping up a discredited and corrupt Afghan regime in order to prevent the country from falling back into the hands of the Taliban and Al-Qaeda.
Still, however gloomy the outlook, we do stagger on – the flowers still bloom, the breeze stirs the trees, the birds sing, and children laugh. The rest of us can enjoy life while Obama does the heavy lifting.
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Many countries’ recent experiences show that boosting manufacturing employment is like chasing a fast-receding target. Automation and skill-biased technology have made it extremely unlikely that manufacturing can be the labor-absorbing activity it once was, which means that the future of “good jobs” must be created in services.
shows why policies to boost employment in the twenty-first century ultimately must focus on services.
Minxin Pei
doubts China’s government is willing to do what is needed to restore growth, describes the low-tech approaches taken by the country’s vast security apparatus, considers the Chinese social-credit system’s repressive potential, and more.
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So you thought this year was bad!
2009 began with the flattening of Gaza. Unemployment is surging in many countries, even though we can detect the first signs of recovery from the recession. Many bankers, meanwhile, are back to the trough as though nothing had happened. Greed was just taking a temporary break.
Pakistan is hit hard by a wave of monstrous Taleban attacks, and in Afghanistan NATO troops die and are terribly injured in large numbers. The “Peace Process” in the Middle East becomes ever more clearly the great oxymoron in international relations.
Preparations for the climate change conference in Copenhagen are dominated by charges and recriminations. Even President Barack Obama, of whom miracles were expected, turns out to be no more than a very talented mortal. He receives the Nobel Peace Prize in the hope that maybe he can make next year better. He’ll certainly have his work cut out.
Will 2010 see a recovery shaped like a “V” or a “W,” or will there simply be an anemic tilt towards a very distant prospect of better times? I suspect the latter, with unemployment and cuts in public spending – certainly in much of Europe and the United States – constraining economic confidence. That will make the politics of dealing with global imbalances all the more difficult.
Let’s be clear about what is happening. The deliberate undervaluation of China’s currency, and the fall in the dollar, are both putting a squeeze on the export prospects of the European Union members and other countries like Canada and Mexico, and China’s covert and not so covert export subsidies and import barriers exacerbate the problem. American exasperation has probably been curbed by its need to borrow so much money – much of it from China. But Obama’s recent tariffs on tire imports may be a sign of things to come.
Subscribe to PS Digital
Access every new PS commentary, our entire On Point suite of subscriber-exclusive content – including Longer Reads, Insider Interviews, Big Picture/Big Question, and Say More – and the full PS archive.
Subscribe Now
Chinese behavior will put increasing political pressure on those of us in Europe and the US who are delighted about China’s economic success and who argue for free trade. Weaker economies will also feel the pinch. I hope that China’s sophisticated economic managers understand that either their country’s behavior will have to change, or we are likely to face a massive trade conflict and disruption of global commerce. The patience even of free traders will wear thin in 2010.
Rows about the short-term costs of dealing with climate change won’t make it any easier to keep markets open. But failure to act now will only raise the price of delayed action at some moment in the future. While the most hopeful outcome of the Copenhagen summit – a global pact limiting carbon emissions – has now been all but ruled out, the second-best outcome – negotiations on specific measures continue within a framework of general goodwill – would not be a disaster. Anything short of that would be very bad news.
In either of these two more optimistic scenarios, one consequence will be the transfer – actual or putative – of considerable sums of money from developed to emerging or developing countries to cover some of their costs for emissions abatement and environmental protection. Now just imagine the problems that legislators in developed democracies will face when they must explain why billions of dollars and euros should be handed over to China, whose deliberately undervalued currency is costing their constituents their jobs.
Obama’s commitment to substantial nuclear disarmament bodes well for the Nuclear Non-Proliferation Treaty Renewal Conference in 2010. But, even with progress there, the problems created by the threat of nuclear weapons development in North Korea and Iran will remain.
American and European diplomatic engagement with Iran is welcome. But what happens if this brings either no Iranian commitment to refrain from weaponizing nuclear power, or no acceptance of tough monitoring of such a pledge? China and Russia seem unlikely to support any further sanctions against Iran if diplomacy fails. China’s energy relationship with Iran grows ever stronger, and Russia continues to see its mission internationally as making trouble wherever it can.
This is just a little of what 2010 perhaps has in store – and no mention yet of Israeli settlement building on the West Bank, Pakistan’s struggle against murderous extremists, and NATO’s bloody difficulties in propping up a discredited and corrupt Afghan regime in order to prevent the country from falling back into the hands of the Taliban and Al-Qaeda.
Still, however gloomy the outlook, we do stagger on – the flowers still bloom, the breeze stirs the trees, the birds sing, and children laugh. The rest of us can enjoy life while Obama does the heavy lifting.