A rough equivalent of a slide I use in the brief

EDITORIAL: "Britain's Debt Omen," Wall Street Journal, 22 May 2009.

Federal debt held by the public as a share of GDP, 1950-2011.

It was about 100% at the end of WWI. By 1950 it's down to 80%, then down to less than 50% by 1960 and less than 30% by 1970. It remains flat, amazingly enough, across the tough 70s.

Then Reagan comes on and it explodes to roughly 50% by the end of Bush the Elder's term. Clinton brings it back down to about 33% by the end of his eight years (that tax-and-spender!) and then Bush the Younger pulls it back up to the high 30s by 2008 and leaves Obama to clean up the mess, so that now the numbers project back up to about 70%.

The slide I use doesn't track the amount held by the public but takes the entire debt relative to GDP. My numbers go from roughly 90% at Truman's start down to about 30% at Carter's end, then back to 65-66% at the end of Reagan-Bush, down to 57-58% at end of Clinton, and then back up to almost 70% as Obama's splurge kicks in through 2010.

Here's the difference between the two measures, as captured by Wikipedia:

Debt held by the public is all federal debt held by states, corporations, individuals, and foreign governments, but does not include intragovernmental debt obligations or debt held in the Social Security Trust Fund.

So I guess my chart captures the hidden costs of an aging demographic structure better.

One reason why I believe in Nigeria as a regional pillar for West Africa

MOVIES: "Nollywood Babylon: Nigeria's movie industry is winning global attention, but DVD piracy may bring it down," by Will Connors, Wall Street Journal, 22 May 2009.

Despite the warning here, Nollywood, as Nigeria's thriving movie industry is known, is doing relatively well--just not in a manner we would recognize.

Nollywood cranks 900 movies a year--all straight to video. That puts it #2 behind Bollywood (Mumbai, India) and makes it twice as prolific as Hollywood.

Nollywood films are popular throughout Africa and in African enclaves worldwide.

The hitch in this giddy-up is that Nollywood only makes $250m off this production, largely because piracy steals so much (still, in a world where films are made for $15-25k on average, the business remains hopping).

The limits here are structural: poor IP laws and a non-existent distribution system. The latter can't arise so long as the former continues in its absence--rules driving connectivity instead of the other way around (our norm).

The more immediate problem: Nigeria's government gets about 95% of its revenue from oil, so no incentive to protect the movie industry.

Tom around the web

+ Space Politics linked How NASA Can Keep Up with Star Trek (and China) in Space.
+ Power From Space reprinted the whole thing.
+ innumerable worlds also linked it.

+ Democracy Arsenal linked Why Obama Should Let Iran's 'Red-State' Regime Die on Its Own.
+ Danger Room linked Drones and the Re-symmetricized Battlefield.
+ Marketing Shift quoted Tom on Iran.
+ The Opinionator(a NY Times weblog) linked Trying to catch up on events in Iran -- from China.
+ And linked Ahmadinejad aftermath.
+ Kimberly thinks Tom is brilliant and recommends PNM.
+ zenpundit linked Chimerica--great while it lasted(?).
+ Smitten Eagle spends a lot of Tom talking about Tom's work and cross-posted it on Chicago Boyz.

+ Airforce Amazons linked The adaptive capabilities of the Chinese Capitalist Party, as sung (lips firmly attached to ass) by Banyan, Chief Suck-Up Officer for the Economist.
+ Peter Hodge disagreed with Australia's sticking to its guns, and it's 20th-century mindset.
+ Super Punch linked Swine fl(u/ight) precautions.
+ China at our Gates quotes Tom.
+ WHAT YOU MUST READ linked Impressive correction.
+ Josh Xiong linked The Good, the Bad, and the Ugly: How Obama's Cairo Rhetoric Could Really Unfold.
+ Littlebangtheories's Blog quoted Jeffersonian India doesn't do cities well.
+ İşte Türkiye! mentions Tom (and, apart from that, I can't make much out of it).
+ Brigadier at Pakistan Defence Forums says read Mao to understand insurgency and anything by Tom.
+ VideoSurf linked the TED video.

Matching Up Priorities in a Globalized Age

China's global priorities might not match up that well with those of your average American policymaker. But they do match up quite well with President Obama's agenda. That's the sense I got after spending last week in Shanghai with a bevy of China's top foreign affairs academics. Although the workshop I attended was focused on U.S.-Chinese relations, there was no shortage of side conversation on the post-election meltdown unfolding in Iran. And nothing I heard in terms of the Chinese sense of priorities bore any resemblance to what you see these days in American newspaper headlines.

Continue reading Tom's New Rules column at WPR.

Editor's Note: the Iran posts

I publish three post by Tom on Iran today. Obviously this is a rapidly changing situation. Please note the order of the posts, the same order in which Tom wrote them. That means, the way our weblog publishes them, if you just read down the page you will read them in reverse order.

Tom says: Reality is that Sean was overseas the past ten days and I was in Shanghai for much of last week, so keeping things running on the blog was fairly tricky. .

Now the real crackdown begins ...

ARTICLE: 4 members of Iranian cleric's family are freed, By Borzou Daragahi and Jeffrey Fleishman, Los Angeles Times, June 21, 2009

At first, the Supreme Leader defends Rafsanjani in an attempt to placate him regarding Ahmadinejad's election-battle criticisms.

But now the knives come out and the score settling begins.

The mullahs are afraid

ARTICLE: Iran's Top Leader Endorses Election, By Thomas Erdbrink and William Branigin, Washington Post, June 20, 2009

You knew this would eventually be the charge and so you didn't want to give the Supreme Leader any unnecessary ammo. Why? Because when the charge was inevitably made, it would seem that much more laughable to outsiders and insulting to those who protest within Iran.

Not a strong move short of the full investigation. It signals serious fear on the part of the Supreme Leader. He's afraid of things unraveling and wants to end this thing now with a strong statement.

As I have indicated before, I don't think the opposition is nearly organized nor mobilized enough at this point to win (one can always be pleasantly surprised). The key will be the staying power and new growth in the months ahead.

How is Iran changing?

ARTICLE: Police Unleash Force On Rally in Tehran, By Thomas Erdbrink and William Branigin, Washington Post, June 21, 2009

Sad to say, this is how I expected the unrest to unfold: increasingly amounts of repression and intransigence from the authorities, wearing down the people.

I never had much expectation of a rapid fall.

The question for me has been, what do the Iranian people take from this experience? Either it mobilizes for the longer struggle, where some real potential exists, or it demoralizes further.

Either way, Iran's leadership is incentivized--more than ever--to push ahead on the bomb. A near-death experience for the regime will not dissuade it but make it bolder. Now, more than ever, Tehran wants to prove itself immune from regime-changing pressure from outside.

Israeli companies have no choice but to go global

SMALL BUSINESS: "Entrepreneurial Edge: Israeli Companies Seek Global Profile," by James Flanagan, New York Times, 21 May 2009.

Israel, like Taiwan, is tumultuously entrepreneurial and democratic. The two seem to go hand-in-hand in small-island market states.

In Israel, any company with any ambition thinks global, because the local market (hemmed in as it is) is too small. That doesn't mean Israelis don't market regionally, because they're all over the dial. They just have to use a lot of misdirection to appease local sensibilities.

That sort of work-around mentality has benefited Israel's companies, who are anything but timid in marketing, alliance-building, etc.

What this piece says it that Israeli business wants to move beyond being the small incubator of all sorts of new products and thinking and start fielding large national brand companies that build on that ingenuity and entrepreneurial edge to become global players.

Here's the bit that caught my eye, from an Israeli venture capitalist:

"America is the queen of content," Mr. Margalit said, "but it is still in the broadcast era, while China and Korea are in the interactive age." He said Israel's "creative hub" would focus on participation in those new markets.

Opinions?

Wow! Putting jihadists in detention works 85% of the time!

FRONT PAGE: "1 In 7 Detainees Rejoin Jihadists, Pentagon Finds: A Return to Terrorism; Guantanamo Findings Still 'Under Review,' Military Says," by Elisabeth Bumiller, New York Times, 21 May 2009.

I say, give it up to Gitmo if spending some time there means 85% of the detainees don't return to terrorism.

Good God! Compare that to the recidivism rate for common criminals in the U.S. penitentiary system.

Nice piece that echoes a favorite argument of mine on the middle class

OP-ED: "What You Don't Know Makes You Nervous," by Daniel Gilbert, New York Times, 21 May 2009.

I argue just about every chance that I get that the poor want protection from their circumstances and the rich want protection from the poor. But the middle class? What they want from their government is more complex: protection from uncertainty.

This piece nicely argues that it's not the loss in income that matters to most Americans (we can adjust) but the loss of certainty. We can always belt-tighten and money only makes you so happy (no rise in happiness above $20k per capita per year--the world over), but this sense that we don't know what's coming next in the economy is truly paralyzing.

A nervous middle class is an unhappy middle class, and an unhappy middle class is an unstable polity.

Great line: "An uncertain future leaves us stranded in an unhappy present with nothing to do but wait."

Everybody loves to anticipate. Nobody loves to wait.

The Green Dam is "repaired"

INTERNATIONAL: "China Orders Fixes in Censoring Software," by Edward Wong, New York Times, 16 June 2009.

I'm sure that will end the controversy . . .

Bolton's breakdown on Israeli strikes--a green light subtly lit

OPINION: "What If Israel Strikes Iran?" by John R. Bolton, Wall Street Journal, 11 June 2009.

The gist appears in the call-out text: "The mullahs would retaliate. But things would be much worse if they had the bomb."

Iran won't close the Straits of Hormuz, nor cut its own exports to raise global prices, nor directly attacks U.S. forces in either Iraq or Afghanistan, nor launch missiles against Israel. It will unleash Hamas and Hezbollah and that's about it.

Then Bolton tries to sell with contrary logic: "This brief survey demonstrates why Israel's military option against Iran's nuclear program is so unattractive, but also why failing to act is even worse."

The deuce you say.

Plus, Israel's strikes might just turn the population against the regime.

This is sounding better and better.

Plus, says Bolton, most Arab regimes will welcome the strikes.

Finally, Bolton reminds us, Obama has turned against Israel, so what the hell?

Actually, a pretty accurate op-ed.

The local debt build-up in China--yet another hidden deficit?

WORLD NEWS: "Concerns About Cost of China's Stimulus Grow," by Andrew Batson, Wall Street Journal, 10 June 2009.

The hidden cost of China's stimulus effort: matching funds from local governments raised by debt.

Key bit:

The spending spree has helped steady China's economy while other major nations remained mired in the global downturn. It is one of the largest stimulus programs adopted by any government in the world--yet China plans to hold its budget deficit to just 3% of gross domestic product this year. That's about where the U.S. hopes its deficit can end up in a few years after it scales back its stimulus spending.

In fact, China's formal budget is paying for only about a quarter of the two-year, four trillion yuan ($585 billion) investment program. Stimulus projects typically get fast approval and a partial financial contribution from the central government, with local authorities left to come up with the majority of the funds. But they don't have much money, as China's tax system channels most revenue to Beijing.

China's debt structure beats most advanced countries still, but it's not quite the gold standard that it seemed.

In general, a lot of Chinese debt is off the books: environmental, demographic, etc.

Obama not wrong on North Korea

ARTICLE: Obama lights North Korea's fuse, By Donald Kirk, Asia Times Online, Jun 18, 2009

Silly piece that I couldn't disagree with more.

Obama is dead right on this one. Well done.

(Thanks: Craig Nordin)

Netanyahu's refusable offer

ARTICLE: Netanyahu Backs 2-State Goal, By Howard Schneider, Washington Post, June 15, 2009

The usual clever offer from Netanyahu: demanding an up-front disarm tells me this offer is pure show.

Israel want to offer to come clean on its nukes while we're at it?

This is a move designed to elicit no counter moves, but merely stasis.

No promise to halt settlements also effectively sidelines the Arab League.

Consider decks cleared.

Down with capitalism! (sort of)

WORLD NEWS: "Across Europe, Left-Leaning Parties See Clout Faltering," by David Gauthier-Villars and Marcus Walker, Wall Street Journal, 6-7 June 2009.

Yet again we find evidence that the current global economic crisis hasn't resulted in political swings against markets.

The economic recession should have meant easy votes for Europe's left-wing movements, longtime critics of unchecked capitalism.

Yet as Europe goes to the polls, left-leaning parties across the continent are looking likely to falter. That's true both for those in government, such as in the U.K. and Spain, and in the opposition--such as France, Germany and Italy.

Part of it is shrewd politicking by the Right, which swiftly moved leftward when the crisis struck (like Germany's Angela Merkel).

But here's the better, broader explanation:

In the past, there was a clear fault line between Europe's left-wind and right-wing parties. The left called for more social welfare programs and public spending. The right wanted the state not to interfere in market forces.

Globalization helped change that. With nations and companies vying on a global scale, it has become difficult for a country to separate the effects of public spending and budget deficits from its labor costs and capacity to compete in export markets. The key moment came as far back as 1994, some political analysts say, when the World Trade Organization was created and much of the world began shifting to a more free-market economy.

"The WTO marked the triumph of the market economy," says Dominique Reynie, head of Paris-based Foundation for Political Innovation. "Since then, the left has been unable to propose another route."

And it's still unable.

The danger?

If the left can't propose and lead a progressive agenda and the right's equally unable, then today's populism may shift into regressive nationalism.

Cool when "black swans" can be predicted so far in advance that entire hedge funds can be set up in advance to take advantage!

INVESTING: "Black Swan Fund Makes A Big Bet On Inflation," by Scott Patterson, Wall Street Journal, 1 June 2009.

I don't know what else to write.

There's just no way I could have seen this coming! Governments print money and inflation results? That's just weird, like a white dachshund or something.

The military aid we waste in Afghanistan is different than the aid we waste in Pakistan, but the sum effect is scary

FRONT PAGE: "Arms Sent By U.S. May Be Ending Up In Taliban Hands: Signs of a Supply Leak; Captured Ammunition Is the Kind Provided to Afghan Forces," by C.J. Chivers, New York Times, 20 May 2009.

The aid we send to Pakistan gets diverted to its big-war force and its nuke production, and the aid we send to Afghanistan gets siphoned off to the Taliban.

End result? Taliban more threatening to Pakistan and we end up fearing for lost nukes.

Talk about funding both sides!

Let the talking begin, and the missile defense shield lag

INTERNATIONAL: "U.S. and Russia Begin Arms Talks With a December Deadline," by Ellen Barry, New York Times, 20 May 2009.

As I argued in the recent Esquire piece, I have no problem with more arms reductions with Russia, especially if it gives us a good out on that idiotic missile shield program (which a recent EastWest Institute study noted was insufficient on any Iranian threat anyway). I just see no utility in going to zero.

This is good and useful work that revives the sort of strategic cooperation which Bush let fall to the wayside in his preference for missile defense. The deal will likely resemble the one Bush and Putin sketched out in 2002.