Transnational Law Blog

In the Darkening Shadow of California Budget Crisis

A few days ago, I received some updated news from our Chancellor at UC Hastings regarding Governor Arnold Schwarzenegger’s proposal to cut 100% state funding for the law school. With $24 billion deficit, the governor was searching for further cuts to make up the remaining $5.5 billion and UC Hastings' 10.3 million public fund, equivalent to approximately 25% of the school budget, was proposed to be taken away all together except for $7,000, which is the nominal amount required from the state by the bequest of the founder, S.C. Hastings. The proposal provoked deep distress within Hastings community since it would amount to $8,175 increase in tuition for Hastings' 1260 student population. The problem is further complicated by the fact that Hastings' 2009-2010 tuition has already set for the new school year. Other alternatives are much less feasible such as admitting more students to Hastings over-crowded facilities or letting go highly qualified faculties which would in turn damage the law school's teaching quality and overall rankings. Otherwise, should UC Hastings, supposedly an arm of the UC system, convert into private law school? I will leave this debate to BLT's readers.

Here is the good news from our Chancellor:

Dear Students,
 
We are pleased to announce that on Friday, June 5th the budget conference committee voted unanimously to substantially restore UC Hastings' state funding, which will put reductions made to the law school’s budget in substantial parity with cuts applied to the UC system.  If this decision stands, we will still receive a budget cut, but nothing as extensive as 100 percent of our state support, as recommended by the Governor.  CFO David Seward reported that several members of the committee spoke about the calls and emails they had received, about UC Hastings' unique history as California's oldest law school, and the inequity of singling the law school out for disparate treatment.

California’s budget crisis is not over, however, and difficult choices remain to be made.  The conference committee stated they might have to revisit the higher education budget later in their deliberations, including support for UC Hastings.  In addition, even if the legislature continues to support the restoration of UC Hastings' state funding, the Governor can countermand, or “blue pencil” the legislative recommendation.  So it is important that we not relax our vigilance.  We will continue our work on educating the legislature and the Governor's office.

People talk about the long-term benefit of education as a type of secured and high turnout investment for the future. Yet, at the time of crisis and financial difficulty, the value of education almost always faces challenges and skepticism and funding for public education is often on the top the reconsidered list. What appeared as signs of unequal treatment among public universities for higher education is the reality that the funding cuts for all UC Universities are at roughly 20% while Hastings faced nearly 100% withdrawal from the state. With the recent establishment of UC-Irvine law school, one may also rightly ask, as Senator Denise Ducheny, D-San Diego did: "Why would we start a new law school when we've had Hastings around for more than 100 years, and it has a great reputation?"

I was deeply concerned with public reaction and was distressed over the result of California’s deficit-reducing ballot initiative last month. The result convinced me that misinformed exercise of democratic power through special voting can be much more damaging than non-action itself. Yet, the long-term effect of a possible alternative such as having no voting incentive seems entirely unjustified and unacceptable. This is the case where I suspect that the communication between our governor office the people had failed allowing information disparity gave rise to hostile sentiments toward a possible solution for California budget crisis. My direct experience with the state's budget crisis through Hastings community also reminds me that the harmful effects of these deepening cuts could be much worse for other institutions that are more dependable on public fund. Thankfully, about 75% of Hastings budget are raised through other sources.

The glorious celebration of California's dot-come and asset booms has been long gone. How Californians cope with this financial calamity and budget tightening remains to be seen in days ahead. What I do know for certain is that public service will be drastically reduced, income inequality will rise, hence, lowering quality of life. Lastly, it is the poor and various under-represented groups that will suffer the hardest hits among us all.

As the Dong Falls, Vietnam Faces a Harder Test at the Time of Global Crisis

The Financial Times recently reported that the Vietnam's dong is depreciating steadily as budget deficit and account imbalance grows with "chronic current account deficit that reached $8.4bn, or 9.3 per cent of gross domestic product, in 2008". Vietnamese government is facing the threat of not gathering enough money for its $80bn fiscal stimulus package as bonds and other commercial tools are falling flat. Investors are holding onto foreign currency due to the uncertainty of the dongs mostly credits to growing trade imbalances and insufficient foreign reserves.

This is a predictable test that most developing countries face at this stage of development, and is what economists considered as the "original sin," for which domestic currency is not used for foreign loans and on long term domestic loan contracts. Reliance on foreign currency for domestic exchange and long term loans make the country highly vulnerable to exchange shock and speculative attack which were the major drivers of the 97-98 Asian financial crisis. The Vietnamese government has little choice, and each option carries relative cost. Raising more reserves will temporary slow down growth, but this must to be done to boost investor's confidence on domestic market and to provide a stable macro economic framework for further development. Vietnamese government must find the outlet to do this- better now than later.

China's Rising Power and the Hope for a Multi-Polar World

Recently David Pilling of the Financial Times published a thought-provoking article under the title: “Asia Pays Tribute to Its New Superpower,” which discusses how the rise of China during the time of economic crisis has been perceived within the region and beyond. I found the true nature of this article troubling. David Pilling said it right: there is a sense of “trepidation at the rise of China’s power.” Such idea fuels much of my thoughts the past couple of days. Pilling opened his article by a contemplation of a potential multi-polar world.

There has been much chatter about the “G2” lately. But the idea that the US and China can together, and semi-exclusively, take on the world’s biggest problems is overdone. That day may come. For the moment, though, there are limits to how much an authoritarian government presiding over a relatively poor country can contribute to global problem-solving. For now, the rise of China and the relative decline of the US are more likely to mean a multi-polar than a bipolar world.

The article lists some indicative examples to demonstrate how the world has changed its grasp diplomatically toward China. By owning roughly $1,400bn of the U.S. asset, Chinese government had quieted Hillary Clinton on issue related to human rights, Taiwan and Tibet during her visit early this year. During the G20 gathering in London, France’s president, Nicolas Sarkozy, expressed his withdrawal from supporting Tibetan independence. Smaller countries have provided greater service. Vietnam’s prime minister, Nguyen Tan Dung recently spent one week touring China in anxious mode to close the $11 billion trade gap between the two countries. The South Korean warning of the “Beijing Consensus” reported to leave its Korean diplomats in Beijing apprehensive. What’s more? Taiwan is likely to allow China’s Mobile to purchase 12 percent of the Far East Tone, a Taiwanese mobile operator. Such commitment arguably was arranged to earn Beijing’s agreement toward the Taiwanese’s presence at the WHO’s annual meeting. In just a few days, the news was sufficient to boost Taiwanese stock market up nearly 15%  after Beijing announced its consent. 

I sometimes wonder how the political and economic landscape of the world be transformed if China grows to be the second largest economy in the world taking over Japan and the European Union. That day may not be postponed that much further. Nonetheless, despite an impressive rapid growth in the past two decades, at $7,600 per capita, China’s per capita GDP still ranks 107th in the world. The country itself is also facing various internal problems namely food and resource shortage, raising unemployment, social and regional marginalization, as well as a degrading environment that together raise serious question of Chinese economic sustainability. There are much awaiting this nation in the post-crisis period to resolve its internal issue. For now, the idea of a multi-polar world offers me much greater comfort.

 

*Nations with highest GDP (in 2006, trillions of U.S. dollars), figure taken from the Hoover Institue.

Recommended Reading: The Faculty Lounge

I have been highly benefited from The Faculty Lounge Blog recently and thought that I should share this blog with TLB readers. At the Faculty Lounge, bloggers are mostly law professors who post commentaries and analysis of legal issues and other on-going debates that are either academic-like or accassionally with a more casual tone as they probably often do while chit-chatting at the school's faculty lounge. One of my favorite Hastings professors, Calvin Massey, also blogs here, although with less frequentcy. There are a wide range of subjects covered at this forum ranging from the creditability of US News rankings, Obama' options for the Superiour Court vacancy, book reviews, legal art to faculty tactics in grading final exams. The blog is an informative forum where one could also gain insights as to what concerns our law professors and how they think through issues that often relevant to our understanding of the law. I found this blog a compensation for the missing gap of knowledge that mainstream media is often lacking. I hope you will enjoy it as well.

An American Life Story

The Washington Post today offers a heartfelt portrait of Justice Souter that invokes much of my admiration and inspiration for the Superior Court Judge- a simple life fills with unwavering public service and modesty.

Justice Souter recently announced his retirement from the Highest Court leaving this June when the Court will recess for the year. At the age of 69, he would have then served in the bench of the Superior Court for 19 years. Souter's legal legacy in the heart of the liberals will never be forgotten, but the life that he led depicted in "Quiet N.H. Home Is Where Souter's Heart Has Always Been" humbles many of its readers.

"He never unpacked," said Thomas Rath, one of Souter's closest friends. "A few years ago, he said, 'I figured I'd take the pictures out of the boxes and hang them up, but I figured in a few years I'd be coming back to New Hampshire and I'd have to pack them back up, so I might as well leave them in the boxes.' "

At the relatively young age of 69, Souter is giving up what he once called "the world's best job in the world's worst city" for a life of simple solitude in Weare. It is a rural hamlet that fascinates him so much, he has told neighbors he may someday write a history of the town.

When he departs this summer in his Volkswagen sedan -- he dislikes flying and always drives himself to and from Washington, leaving at odd hours to game the traffic -- Souter will cross the Piscataquog River, drive past country stands selling maple syrup and fresh eggs, and turn down a narrow, unmarked dirt road.

**David H. Souter's house in Weare, N.H., a rural town where the Supreme Court justice has said he finds "restoration." He will return there this summer as he retires from the bench. Photo by Philip Rucker of The Washington Post.

Reaching Out to Sri Lanka

I have been regularly following up with the news from Sri Lanka. Images and news from this civil war brought me solemn concern and uneasiness. Here in London, I caught this scene one weekend early this month. A sense of helplessness arrived soon after I stepped deep into the scene seeing men, children, elders and women yelling out loud their urging need and asking for international intervention. They were right, Sri Lanka is facing a humantarian criris; although, the Tigers themselves also committed the type of war crime that they are pledging against Sri Lankan government. There can never be a right reason for war and violence. Yet, at times people involved seem to put on a convincing case with the Tamil Tiger for their own justice (or injustice).

Last Thursday, Sri Lanka's President, Mahinda Rajapaksa, rejected advice from European high-level delegations to proceed a temporary ceasefire and told the representatives to stop lecturing him.

 “The government is not ready to enter into any kind of cease-fire with the terrorists. It is my duty to protect the people of this country. I don’t need lectures from Western representatives,” said the President in a speech distributed by his office, the New York Times reports.

According to the United Nation, 6,500 civilian have died and twice have been wounded since late January. At the moment, there are still 50,000 civilians are trapped in the combat zone with very little humanitarian supports. The refuge camps are reported to be "overcrowding, malnourishment, dehydration and limited medical facilities." Despite growing tension with foreign governments, the Sri Lanka government has been unwilling to openly allow international support-groups to enter further into the war zone.

Last March, Sri Lanka reported its slowest economic growth rate in five years last year, at 6% underlining the need for the government to push ahead with talks on a bail-out from the International Monetary Fund. However, due to the government's resistance, the United States had decided to delay a $1.9 billion International Monetary Fund bailout for Sri Lanka’s central bank to pressure the government to do more to help trapped civilians.

Such intervention seems to do little to change the Sri Lankan government's attitude toward cooperation and helping displaced civilians from boths ethinic groups. International governments and agencies must continue to pressure Mahinda Rajapaksa's government to allow international humanitarian groups to rescue and provide basic aids to the war victims.

Over the Worst Yet, Japan?

We don't know for sure, but at least Japan is showing signs of stabilization. Despite growing deflation and addition contraction at 3.3% this year, the Financial Times today reported some stabilizing signs from the second largest economy in the world giving hope that the worst of the recession may be almost over.

So far, industrial production in March rose at twice the expected pace, climbing 1.6 percent month-on-month. In addition, factory output rose for the first time in six months. The Royal Bank of Scotland in Tokyo also reported: "factory production appears to be getting close to the bottom." That was March, industrial production is expected to continue rising further this month, as well as May due to manufacturers trying to make up for their previous inventory reductions.

Japan predicted stabilization sheds lights and a glimpse of hope for the Asia Pacific region; even though, recovery is probably still far from the horizon. Toyota is expecting its "worst slump in memory" (for almost six decades) and Normura recently revealed a record of $7.2bn net loss. Earlier this week, the Japanese government announced additional issuance of $175 in bonds as tax revenue shortfalls is becoming inescapable this coming fiscal year. However, it remains unclear if the central bank will strike for any further recovering measures. It is keeping overnight lending rate at 0.1 per cent at the moment.

We can't expect good news on global recovery just yet, but stabilization is a real good sign regardless.

Global Internet Rights and Censorship

The Internet has changed the way information is spread around the world. Internet usage has become ubiquitous in developed countries and it is still growing in less developed countries. The ability of populations to get information through the Internet is treated differently by various countries.

Some countries have codified the right to Internet access in law. Witness, for instance, Estonia’s 2000 law declaring Internet access to be a fundamental human right. Internet censorship is a big issue for freedom of information and civil right's groups. Human Rights Watch told the U.S. Congress last year that

Human Rights Watch believes that the Internet is a transformative force that can help open closed societies and provide the near-instantaneous flow of information to inform the public, mobilize for change, and ultimately hold institutions accountable. We have warned, however, that there is a real danger of a Virtual Curtain dividing the Internet, much as the Iron Curtain did during the Cold War, because some governments fear the potential of the Internet, want to control it and the companies that provide the services and products tied to it; and users fear the consequences of using it as a medium for openness and accountability.

This warning was timely because there are some worrying signs that governmental censorship is on the rise around the world. Australian lawmakers have recently proposed a controversial law that would institute a mandatory Internet filtering scheme. This is following a 2007 law that gave Federal police power to block access to any website.

Designed for the laudable goal of blocking access to pornography for children, the plan also has the potential to block websites discussing controversial topics such as euthanasia and anorexia. Citizens would not be allowed to opt out of the filtering (the original version of the bill would have let people contact their Internet service providers to opt out of the filtering.) Not surprisingly, advocates for freedom of information and rights groups have been extremely critical of the plan. One commentator even noted that a list of websites that would be blocked by the Australian law has been leaked, and it "has, in effect, given every 15-year-old in Australia a guide to porn online."

For a discussion of the proposed Australian law, including a defense of the law from a member of the Parliament, click here.

___

The country that gets the most attention of Internet censorship is China. China already had the most sophisticated Internet censorship system in the world before last week's news that China has again blocked YouTube because of a video purporting to show Chinese police fatally beating a Tibetan protester. This is not the first time China has blocked access to YouTube; they do so from time to time when there are videos criticizing the Chinese Government.

Other recent Internet censorship acts by China include restricting access to international reporters covering the Beijing Olympics and China pushing the United Nations to curb Internet anonymity by drawing up surveillance and monitoring technical standards. Regarding the anonymity issue, a U.N. document leaked to Columbia computer engineering professor Steve Bollovin stated justifications for the China-drafted Internet standards:

A political opponent to a government publishes articles putting the government in an unfavorable light. The government, having a law against any opposition, tries to identify the source of the negative articles but the articles having been published via a proxy server, is unable to do so protecting the anonymity of the author.

According to a new study by the OpenNet Initiative, state-sponsored Internet censorship is on the rise. Other recent offenders include Burma, Bangladesh, and Turkey. According to Harvard Law Professor John Palfrey, "In five years we have gone from a couple of states doing state-mandated net filtering to 25."

If you are interested in combating the rise in censorship of the Internet, there are a number of groups you could join, including Human Rights Watch, Reporters Without Borders, and the OpenNet Initiative.

Federal and California State Tax: One Step Forward, Two Steps Back

 

If you would like to find out the tax aspects of Obama's stimulus package which seizes about 36% of the stimulus, as well as how the State of California mends its budget crisis through various tax increases, there was a recent discussion on federal and state tax issues given by professor Heather Field and professor Darien Shanske, two respected tax professors at UC Hastings. The discussion was recorded in mp3 format and is now posted here.[mp3]

Other than the applicable nature of the subject discussed, the discussion offered some insights of how CA tax increases will negate many parts of our federal tax credits and how our state’s constitutional setting makes it difficult to avoid similar budget crisis in the future.

In the first section, professor Field opened  by explaining the need for a stimulus package and why the tax system plays an important role in stimulating economic activities. Professor Field then discussed the various implementations of the tax aspect which include non-repayment credit for first time homebuyers, educational tax credit for students, and sales tax reduction for new vehicle. The lecture ended with a thought provoking discussion as to weather the stimulus will work as well as the short term and long term nature of these tax provisions. It is appeared that President Obama is seeking to keep some of these tax provisions permanent despite growing concern over our budget deficit. Here, professor Field nicely instigated the debate over the role of our tax system as a tool for income redistribution.

I thoroughly enjoy the professor's subjective approach toward controversial issues such as the role of our tax system and whether Obama’s tax cuts will sufficiently motivate economic activities in the short run. Field posited the question as to why the tax credits only applies for a “limited window,” and what would be the consequence of extending these provisions permanently.

Other than issues related to fairness and wealth distribution, economists have been concerned over inflation and potential negative impact on monetary system through tax instrument. We are injecting a huge amount of capital inflow to the economy, in the long run, it will take some painful interest hike to restrain these capital surplus, tame down inflation and pay off the budget deficit. Furthermore, at some point, consumers may stop responding to tax cuts as an effort to stimulate economic activities. Behavioral economics tells us that consumer behaviors are often altered by short term and long term expectations of the consumer’s future income.

The discussion quickly moved on to Darien Shanke discussion on California budget crisis and how California state has used tax system to mitigate budget problem in the time of overall global crisis. If California were an independent state, it would have been the tenth largest economy in the world. Here, professor Shanske introduced the not-so-obvious paradox: if California hasn’t overspent, why does a State which arguably has  the highest income and sale tax in the country constantly finds ways to bail itself out of budget crisis over the past couple decades?

The key problems rest in property tax and the fact that California doesn’t have a standard sale tax system. At ¼ of the country’s average property tax, the State imposes the lowest property tax rate in the nation. Because income tax is less sufficient and stable than property tax, our State budget has always been much more vulnerable in the time of crisis as it is now. For these reasons, our state is now seeing itself going through massive lay offs (10.5% unemployment rates in February), budget cuts on education, double fee on car registration and general income tax increases.

Professor Shanske then questioned how did end up here? Why can’t we simply increase property tax to balance the budget?  California is the only State in the country that requires 2/3 majority to pass the budget. Shanske reasoned that having super majority requirement is not too "insane", but if the State were to make it very difficult to change the budget and tax structure, it should have had a good initial arrangement. Here, our State legislators happened to choose the worse possible arrangement by adopting a highly unstable tax system, and making it very strenuous to change it. Given the State's distressing institutional constrains, professor Shanske left his audience empty of any probable solution. He is not to blame.

The lectures are immensely informative and thought provoking. Nevertheless, they do not require any tax background from its listeners to appreciate the on going changes and debates in the federal and state tax system. "The Tax Aspect of the Stimulus Package"[mp3] is a highly recommended tune.

Economic Advice From Jim Rogers

Rethinking the Washington Consensus on Trade Liberalization

"‘Stabilize, privatize, and liberalize’ became the mantra of a generation of technocrats who cut their teeth in the developing world and of the political leaders they counseled"- Dani Rodrik, Professor of International Political Economy, Harvard University

Across legal and economic disciplines, there have been many arguments regarding the benefits of free trade on developing countries. At the heart of such discussion is the controversial result of the Washington Consensus “describe[ed] a set of ten specific economic policy prescriptions that … constitute a "standard" reform package promoted for crisis-wracked developing countries by Washington D.C based institutions such as the International Monetary Fund (IMF), World Bank and the U.S. Treasury Department.” (Wikipedia).  According to Dani Rodrik (2006) the ten commandments of Washington consensus were:

1. Fiscal discipline
2. Reorientation of public expenditures
3. Tax reform
4. Financial liberalization
5. Unified and competitive exchange rates
6. Trade liberalization
7. Openness to FDI
8. Privatization
9. Deregulation
10.Secure Property Rights

In an assessment of the literature on the theory and empirical research relating to the benefits of trade liberalization, Deraniyagala and Fine (2001) found that much of the works were flawed, and concluded that the extent to which free trade benefits economic development is unknown. As the result, the past three decades since 1980s found many political economists arguing for a better approach toward trade liberalization in order to minimize its negative impacts of economic backwardness as in the case of Latin American or income distribution and regional polarization as the case of China.

Mexico is an example of a failed economy that followed the conventional wisdom of trade liberalization rigidly. Here, we find that more than one lesson could be learned. The country started its economic reform in 1985. Under tremendous pressure from the U.S. and the IMF, Mexico radically opened up its economy to the world market without sufficient institutional reform to accommodate the economic adjustment. “Import penetration increase from an average of 11.3 percent in 1080-85 to 14.5 in 1986-90. By 1990, import penetration had already reached 17 percent.” (Dornbusch, 1992). The sharp rise in imports, which was not accompanied by immediate gain in exports and foreign direct investments damaged Mexico’s domestic market and defy many infant industries. (Dornbusch, 1992). It is argued that Mexico, as well as Latin America as a whole, did worse than its pre-1980s period, when import substitution, protectionism and macroeconomics populism were enforced. (Rodrik 2007). As Rodrik asserts: “That the region did better with these discredited policies than it has been under open-market policies is a fact that is quite hard to digest within the conventional paradigm.” Such paradox reinforces the importance of a new approach to trade liberalization where country’s institutional and historical background are all too significant to be ignored and total trade liberalization alone may not generate the growth that its creator promised. Here, the role of the government and some forms of targeted protectionism at the beginning of the reform may be useful. South Korea and China offered excellent case studies for its usage of the new trade theory to their economic benefits.

Korea did not play by the orthodox wisdom (nor it has ever accepted the Washington Consensus to be therapeutic during the Asian crisis) when it started to integrate into the world economy. In contrast, the country successful economic reform involves two major key strategies- market orientation coupled with central planning in developing and protecting infant industries while strategically opened up other industries to the world market. During the reform, Korean government, indeed, acted as an entrepreneur to induce desirable private investments toward targeted industries. Korean trade liberalization, therefore, was a selective process instead of being driven solely by global marketization. Many major sectors were deliberately protected and excluded from trade. By using selective export strategy and heavy government intervention, Korea was able to develop many highly competitive manufacturing industries such as automobile, electrical appliances and shipping which respectively hold their own names in the world market.

China started its reform by first rejecting the conventional wisdom of global liberalization and calling its reform “Socialism with Chinese Characteristic.”  Unlike Latin America, Chinese government moved cautiously from central planning to gradual adoption of institutional and mechanism of market economy. Rodrik (2004) argues that China reformed its incentives in a “two-track manner” by grafting a market system on top of a central-planned system, rather than abandoning the latter altogether. The country also underplayed private property rights and relied instead on township-and-village enterprises owned by local governments as well as opened up to the world partially by establishing special economic zones. (Rodrik, 2004). Without following the Washington consensus blindly, the result of Chinese economic progress has been impressive. China’s GDP performance has been consistently stayed at 8-10% growth rate in the past 20 years. Here, China’s success challenged the conventional wisdom total trade liberalization and market orientation.

Despite how countries have been benefiting from trade, there exist multiple issues created by export growth strategy itself such as income inequality and regional polarization. According to Ocampo and Taylor (1998), globalization has intensified the income gap and income distribution especially in countries with comparative advantage in skill-intensive products. The authors offer examples of African economies whose comparative advantage in peasant production has worsened income distribution. Similarly, despite China’s conservative approach toward trade liberalization in accordance with government intervention, the country has been facing serious issues regarding income inequality and regional polarization. Prior to the eruption of the global financial crisis, labor migration had moved rapidly to export processing zone set up mostly along the West coast region of the countries. As the result, wage labor and prosperity appeared to increase drastically faster than the interior regions in which agriculture remained to be the dominant means of production and income creation. Here trade liberalization on its own cannot effectively solve social problems created by export-oriented strategy.

Don’t get me wrong. I am not against free trade or market liberalization. I am wholeheartedly against the IMF’s “one size fit all” formula and see the importance of a thorough understanding of country’s historical and political background before any economic policy is prescribed. Market failures are deeply embedded in economic system, which can’t plainly and ignorantly be corrected by Washington’s 10 commandments.

One may then ask: “So, what is the IMF doing these days given our ongoing financial crisis? Has there been a “new” Washington Consensus?” My next entry on this topic will follow.

*Bibliography with attached pdf files on hyperlinks

Deraniyagala, Sonali, and Fine, Ben, “New Trade Theory Versus Old Trade Policy: a Continuing Enigma,” Cambridge Journal of Economics, Vol. 25, pp. 809-825, November 2001.

Dornbusch, Rudiger, “The Case for Trade Liberalization in Developing Countries,” Journal of Economic Perspectives, Vol. 6, issue 1, pp. 69-85, 1992.

Ocampo, Jose and Taylor, Lance, “Trade Liberalization in Developing Economies: Modest Benefits but Problems with Productivity Growth, Macro Prices, and Income Distribution,” Economic Journal, Vol. 108, pp.1523-46, September 1998.

Rodrik, Dani, “How to Save Globalization From Its Cheerleaders,” KSG Working Paper No. RWP07-38, September 2007.

Rodrik, Dani, “Rethinking Economic Growth in Developing Countries,” John F. Kennedy School of Government, Harvard University, October 2004.

Rodrik, Dani, "Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank's Economic Growth in the 1990s: Learning from a Decade of Reform," Journal of Economic Literature, 44(4): 973–987, December 2006.

Saving the Dragon

In the process of learning about China’s economic development, I often wonder if it was the right policy for China to cut its domestic spending on public services to suppress its currency while exporting most of its capital surplus to the West. Even in pure economic term, shouldn't economic growth equivalent with improvement of social welfare and income distribution? The answer is obvious- there is no promise of such upgrading even in an economy that has been growing at a rapid rate like China. After the Asian financial crisis in the late 90s, the Chinese government together with the rest of the Asia Pacific decided to protect its economy by maintaining a huge amount of reserves in foreign currency and bonds which ended up injecting an enormous capital inflows toward the US and Europe market causing an unprecedented equity bubbles. Ironically, together they became the partial cause of the current global financial crisis.

Last Thursday, Premier Wen Jiabao announced that China expects to meet it goal of 8% growth rate this year despite their declining economic performance. What did he have in mind to secure such ambitious growth rate?

To supplement for the fast decline in exports, the government has allocated $585bn (almost equivalent to 3% GDP) toward domestic spending and investment for the next 2 years. A big portion of this stimulus package will be spent on improving China deteriorating infrastructure especially on the national railway network. “Many economists believe such heavy infrastructure investment will delay the much-needed shift in China’s growth model towards domestic consumption and services, which would be more sustainable in both economic and environmental terms,” said Geoff Dyer of the Financial Times. I have some disagreements with this opinion.

While improving infrastructure will not give Chinese economy a quick boost in domestic consumption, it is of crucial advantage for China long-term growth. On one hand, the plan will enhance long-term development and improvement in the public service by providing transporting access to the remote regions of the country. Investment in heavy infrastructure will also lay a firm foundation to boost domestic consumption in the long term once local economy picks up. Next, improved infrastructure could further attract more foreign direct investment into the interior regions of the country where labor is still abundantly cheap. This will in turn further help to bridge the gap of regional and social differentiation rooted deeply in China's experimenting economic strategy.

Besides, the stimulus bill doesn’t disregard the need to stimulate domestic consumption all together. Some parts of the $585bn are expected to add an additional 24% to education, 38% to health care and 171% in investment for low-income housing this year.

With increasing lay offs from the country’s export processing zones, slumping economy and the tradition of holding high saving rate, it is challenging for the Chinese government to boost domestic consumption in a short term. By allocating money to infrastructure, the government will at least mitigate a portion of workers to construction industry and offset some parts of the growing unemployed labor force. More importantly, improvements of infrastructure and public services are particularly vital for China’s sustainable and long-term development. With much criticism, a part of this stimulus plan appears to hold credible value.

*Image from the Financial Times

On Law and Facebook

With the rise of web-based social networking services such as Facebook and Myspace, the massive collection of personal information collected by these sites has brought up some interesting legal issues around the world. The most common legal issues surrounding sites like Facebook involve questions about 1) privacy issues, and 2) what is the role of a person's personal pages in legal proceedings?

Is the information actually private?

While much has been made about Facebook trying to change its terms of service, and then backing down in the face of a large grass-roots opposition by its users, there have been legal and media challenges as well. Back in May, 2008, for instance, The Canadian Law Clinic filed a complaint alleging that Facebook's terms of service violated Canada's privacy laws. Similarly, news outlets have been warning people about the lack of privacy on sites like Facebook and Myspace for a while now.

On a more personal level, the lack of privacy of the information on personal Facebook pages has affected a few of my friends. When I was still in law school, the school's career office sent out warnings to the students that employers had been looking at Facebook and Myspace pages:

Dear Students:

We know that blogs and social networking websites such as Friendster,
MySpace.com, and Facebook are getting to be a fact of life, but
employers have become quite savvy in their research of potential
candidates. You should operate under the assumption that anything on
the web written by or about you will be discovered by a potential
employer. All of this is information that can be factored into an
employer's hiring decision. Quite a number of employers have told us
that they are now using these sources as a device to screen
candidates.

A student who uses a racy picture or a byline of "Party with your
pants off!"* or who describes him/herself as a "semi-stoner"* might
face questions from a more traditional employer. Even comments from
friends posted to your site can factor into the equation. If you are
going to post, we encourage you to keep your material as "clean" as
possible and consider using any privacy protection that the site
offers.

*We found this material in a very quick search on MySpace.

It turned out that a few students had even had their employment offers from firms rescinded due to inappropriate information on their social networking pages.  Always looking out for its student, my law school proceeded to actually review every student's pages and then gave specific warnings to anybody who posted anything "objectionable."

It appears that feelings about privacy are still in the process of adapting to the enormous increase in relatively available personal information posted on the web, and it will be interesting to see how this all shakes out in the future.

How can the information on social networking sites be used in legal proceedings?

A less "sexy" issue, but one that is increasingly relevant in today's world, are questions about the role of the information contained on social networking sites. There have recently been a number of cases testing the limits of using personal information as evidence and whether the contents of social networking pages are discoverable.

For example, in TV v. Union Township Board of Education, the defendant in the emotional distress case tried to get the court to order the plaintiff to give the defendant access to the plaintiff's Myspace and Facebook pages, with the expectation that comments posted on the pages would show that the plaintiff was not emotionally distressed. The Union County, New Jersey Superior Court Judge made a preliminary ruling that personal social networking pages are only discoverable if there is a particularized showing that the information is relevant, due to privacy concerns.

On the other hand, the Ontario, Canada case Leduc v. Roman, goes the other way and finds the contents of Facebook pages discoverable. This is because:

a court can infer from the social networking purpose of Facebook, and the applications it offers to users such as the posting of photographs, that users intend to take advantage of Facebook’s applications to make personal information available to others.  From the general evidence about Facebook filed on this motion it is clear that Facebook is not used as a means by which account holders carry on monologues with themselves; it is a device by which users share with others information about who they are, what they like, what they do, and where they go, in varying degrees of detail.  Facebook profiles are not designed to function as diaries; they enable users to construct personal networks or communities of “friends” with whom they can share information about themselves, and on which “friends” can post information about the user.

These first few cases are serving as test cases for the inevitable adaptation of the law to the times, and the law WILL adapt. Witness that lawyers in Canberra, Australia can now serve process on defendants via Facebook. I guess the steady march of progress continues on. 

A Capitalist Crisis?

Having born and brought up in a communist country as well as reading Marxism over the years in both social and economic disciplines, I can’t help asking myself the question: “How would Marx respond to this financial crisis?” The question lingered for weeks. Yesterday, I finally did a quick search on this subject. Unsurprisingly, there has been a revival of interest in Marx ever since the crisis started. Das Kapital, one of Marx’s most known analyses on the economy of capitalism have once again become the best seller all over the world. Last year, Phillip Collins of the UK Times published an article under “Karl Marx: did he get it all right?”. After a quick scan through Marx’s Ten Steps to Communism, the author gave Marx 3.5 over 10 for his assumed prophetic ability in predicting our financial crisis. Collin stated the obvious: Mark was right about the nature of crisis embodied in capitalism, but not much more.

I found the article a fun read with good review of Marxism, as well as was amused with Collins' British sense of humor. But it did not satisfy my curiosity. What is more? What do our American Marxists think about this issue? Robert Brenner, a Marxist and economic historian of UCLA, seems to offer a solid yet provocative perspective through his interview with Seoul’s economist, Jeong Seong-ji titled "A Way out of the Global Economic Crisis?"

Back in December 2007, Brenner was almost prophetic about the upcoming financial crisis while at least half of the world was still relatively optimistic about economic downturn. By late December 2008, Brenner once again stressed that the crisis is much more substantial than most people expected.

According to the Marxian professor: “The basic source of today’s crisis is the declining vitality of the advanced economies since 1973, and, especially, since 2000.” Brenner contends that capitalists solved the problem of slowing capital accumulation by calling forth to the ever greater levels of borrowing to sustain stability. Thus, our economic system requires the crisis that has so long been postponed since “it’s by way of crisis that, historically, capitalism has restored the rate of profit and established the necessary conditions for more dynamic capital accumulations” said the Marxian historian.

The interview covers controversy issues such as the role of the US’s hegemony in maintaining the world order, Keynes monetary policies as a solution for the crisis, the depth of the Chinese crisis and its role in financing the our debts over the past decades.

In addition, the professor also made a comparison between Obama’s future performance as with Roosevelt’s and how our country can only change the system under a class struggle namely revolving pressure from the workers and unions. He asserts: “like Roosevelt, Obama can be expected to take decisive action in defense of working people only if he is pushed by way of organized direct action from below.”

In responding to Jeong’s question on Korea, Brenner maintains that as deep and troublesome the Chinese crisis is revealing, China may be able to contain the crisis better than Korea due to its low-cost labor force and large domestic consumption. This is due to both Korea and China reliance on globalization for their growth, which turn out to be a weakness at the moment. “It’s not necessarily because Korea is doing the wrong thing,” the author continues, “it’s because I don’t think there’s going to be an easy way out for any part of what has become a truly global, interdependent capitalist system.”

For Brenner, the only way for countries to reestablish healthy capitalism appropriate for growth and further capital accumulation is through strengthening the movement of labor organization. The class struggle promises to balance the distribution of power necessary for readjustment.

“So, again, the top priority for progressives -- for any left activists -- where they should be active is in trying to revive the organizations of working people. Without the re-creation of working class power, little progress will be possible, and the only way to recreate that power is by way of mobilization for direct action. Only through working people taking action, collectively and en masse, will they be able to create the organization and amass the power necessary to provide the social basis, so to speak, for a transformation of their own consciousness, for political radicalization.”

I wonder if one could find a more Marxian solution to our financial crisis than what Brenner contends. On the other hand, this approach has never been so out of reach given the current feeble and fragmented state of our labor unions and the worker’s strength in taking the action necessary to protect their long-term interest.

Robert P. Brenner and Jeong Seong-jin. Photo provided by The Hankyoreh
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Below are a few additional quotes that I also found particularly thought-provoking.

Disputing Keynes monetary policy in effectively changing the landscape of our crisis
"But there is reason to doubt that Keynesianism, in the sense of huge government deficits and easy credit to pump up demand, can have the impact that many expect. After all, during the past seven years, thanks to the borrowing and spending encouraged by the Federal Reserve’s housing bubble and the Bush administration’s budget deficits, we witnessed what was, in effect, probably the greatest Keynesian economic stimulus in peacetime history. Yet we got the weakest business cycle in the postwar epoch."

China and East Asia as the US’s largest creditors
"To have a significant effect on the economy, the Obama administration will likely have to contemplate a huge wave of direct or indirect government investment, in effect a form of state capitalism. To actually accomplish this, however, would require overcoming enormous political and economic obstacles. The U.S. political culture is enormously hostile to state enterprise. At the same time, the level of expenditure and state indebtedness that would be required could threaten the dollar. Until now, East Asian governments have been happy to fund U.S. external and government deficits, in order to sustain U.S. consumption and their own exports. But, with the crisis overtaking even China, these governments may lose the capacity to finance U.S. deficits, especially as they grow to unprecedented size. The truly terrifying prospect of a run on the dollar looms in the background."

The US hegemonic role in maintaining the world order
"I see the elites of the world, especially the elites of the capitalist core, broadly conceived as being very happy with U.S. hegemony, because what it means for them is that the U.S. assumes the role and the cost of world policeman."

Future possibility for the working class to influence our political environment
"The problem is that there is very little organization of working people, let alone any political expression. So, one can say there is this very big opportunity created by the change in the political environment, or the ideological climate, but that by itself is not going to provide a progressive outcome."

Following note: Just as Brenner stresses the capitalist exploitation of labor and social resources as well as insists on  importance of worker's union in order to improve our political and economic landscape. Look at what have just happened here (pdf).

A Response to the Hysteria about Modernizing American Health Care

Some commentators have been ringing the alarm bells about the health care provisions in the recently enacted American Recovery and Reinvestment Act (The Stimulus). As I discussed in a previous post, this started with an opinion piece in Bloomberg, which has since been discredited by CNN and others. Among other things, the author misquoted the language in the bill to make it look more "sinister" and she indicated that it was creating a new administrative body to make health decisions for patients when, in fact, that administrative body already existed and doesn't do that.  Now NBC News claims that there is a leaked letter sent from the author of the hit piece to the large drug companies, saying that she would help them shape public opinion for a fee, through the Big Pharma-funded Hudson Foundation.

This debunking has not stopped the manufactured controversy, however, as seen in a recent TLB post. To go along with the alarmist language like "Socialism!", there are some substantive points made in the post that I would like to respond to:

Assertion: 

President Obama has future plans to dictate what treatments patients can get.

Response:

 First of all, there seems to be a backing-off of the original claim that the provisions in the Stimulus Bill dealing with health care gave the government power to mandate that patients receive certain treatments. I assume that means that there is an acknowledgment that the Bloomberg article was either outright trying to mislead people or perhaps merely grossly negligent in their journalism. Instead, now the argument is moving to future dangers that are, of course, what the "sinister" lefties are certainly going to do. 

The problem with this is that we don't know what is going to be proposed. The previous post links to a vaguely-worded plan on the Obama campaign website, which says that health providers that participate in the plan will need to use "proven disease management programs." That is about as vague as it can be, but it certainly is a big jump from that to"the government will make tell a patient what treatment to get."

In fact, I'm not sure that the government deciding to disallow certain kinds of treatments would even be a big departure from how things are already done, since the government makes decisions about lots of health care issues. For instance, the government makes decisions and enforces things like sanitary conditions in hospitals and what medications are safe and legal (see, the FDA). I suppose that could also be considered governmental intervention into private choices, just like ANY regulation.

____

Assertion:

It is coercion for the government to require health care facilities to provide records if they want to receive Federal funds.

Response:

Yes it is. In fact, there are two main ways the Federal Government gets states, private actors, or any other entity to do or to not do things. One is to directly mandating it, i.e. making it illegal to do something. The second, and less coercive way, is to tie federal money to compliance.

Every single law or regulation enacted by the Federal Government uses one or both of those forms of coercion. As the government is using the less coercive of the two forms of regulation, I fail to see why this is an issue at all, unless one has the opinion that all regulations are bad or improper (a view that few people would agree with).

____

Assertion:

The health care provisions were "hidden" in the Stimulus Bill, and when right-wing talk show hosts started talking about it, they were "hushed."

Response:

The provisions were in the many different iterations of the Stimulus Bill, and those different versions of the bill, such as the House and Senate bill were available on-line for weeks. That alone means that there has been MORE transparency about the bill than just about any other large spending bill to come out of Congress that I can think of, at least ones that are more than single-project bills. Yes, the bill is long, and yes, it contains many different subjects. However, there is no reason to think that the health care provisions were any more "hidden" than any other omnibus-type spending bill. It strikes me as a bit of selective outrage to single this one out despite the increased transparency compared to the normal process.

As for the right-wing talking heads being hushed, I would like to see some evidence for that, as I can find none. There has been fact-checking, but I don't agree that fact-checking counts as being "hushed." At the very least, Rush Limbaugh alone has 20 million listeners a day, and the falsehoods were also spread throughout other parts of the media such as Fox News and even CNN (before they actually went to the trouble of fact-checking it). So the falsehoods spread to plenty of people, hushed or not. 

____

Assertion:

Not a single Republican voted for the bill in the House, and only three voted for it in the Senate, therefore it was a bad bill.

Response:

There is a simple alternative explanation to the Republicans not voting for it - they did so for political reasons.

As Nate Silver reasoned over at fiverthirtyeight, the Republicans had few tactical reasons for voting for it.

Then there is the fact that the Republican leadership issued a statement telling Republicans to vote against it right BEFORE meeting with Obama about it.

"House Majority Leader Steny Hoyer (D-Md.) had told CNSNews.com on Tuesday: “Mr. Boehner and Mr. Cantor have already told their members to vote against it. They issued that before even discussing it with the president of the United States. They have taken a political stance: ‘Our party is going to oppose it.’  I think that’s unfortunate because it takes two groups to be bipartisan.”

Then there are the statements by Republican Senator Arlen Spector, one of the three Republican Senators to vote for it, saying that at least some of the other Republicans voted against it due to pressure from the Right-wing:

"When I came back to the cloak room after coming to the agreement a week ago today," said Specter, "one of my colleagues said, 'Arlen, I'm proud of you.' My Republican colleague said, 'Arlen, I'm proud of you.' I said, 'Are you going to vote with me?' And he said, 'No, I might have a primary.' And I said, 'Well, you know very well I'm going to have a primary.'"

"I think there are a lot of people in the Republican caucus who are glad to see this action taken without their fingerprints, without their participation," he said.

Specter was asked, How many of your colleagues?

"I think a sizable number," he said. "I think a good part of the caucus agrees with the person I quoted, but I wouldn't want to begin to speculate on numbers."

Listen to the audio

Then there is the fact that Republicans wanted tax cuts, so Obama included tax cuts. Then they wanted more tax cuts, so he included more tax cuts. Then they had an issue with money to fix up the National Mall, so that was taken out. Then they had problems with family planning money, so that was taken out. Then the Dem's made still more concessions during the senate negotiations, such as reducing the size of the spending, taking out money for schools and states like the Republicans wanted, and so on. None of those things changed a single Republican vote.

Add that all up, mix in mostly the exact same republicans voting for even larger and less-necessary things like the giant medicare-Big Pharma giveaway during Bush's term.

Or how about all 211 House Republicans voting for Bush's tax cut during less perilous times than the current situation that cost 70% more than this Stimulus ($1.35 Trillion)?

 It's pretty clear that some, if not many, Republicans voted against the Stimulus because they saw a political advantage to voting against it, NOT because they are opposed to deficits. 

Three is Company: How Obama is Coming Between You and Your Doctor

Obama will sign the Stimulus Bill tomorrow and take his first small step toward socialized healthcare and one giant leap toward socializing America. A previous post on TLB warned against blindly listening to Right-Wing Talking Points, but it should be noted that the right-wing talking points are not off the mark in this instance. 445 pages of the 1500 page stimulus bill concern healthcare reform and it all starts with cost-effective monitoring of medical treatments.

Obama lays out his plan step-by-step (see the PDF here). First, the plan drops billions of dollars for electronic health information technology systems. This means no more paper records. If a health facility or provider wants federal money, it has to make its health records electronically available. It's true, as the previous TLB post says, the establishment of an electronic records system will give doctors complete, accurate information about their patients "to help guide medical decisions at the time and place of care." However, the previous TLB post did not address the next step of the Obama plan, viz., disease management programs. The stimulus bill introduces the framework for creating disease management programs by establishing the Federal Coordinating Council for Comparative Effectiveness Research (FCCCER). 

According to the Obama plan (again, see the PDF): "Over seventy-five percent of total health care dollars are spent on patients with one or more chronic conditions, such as diabetes, heart disease, and high blood pressure. Many patients with chronic diseases benefit greatly from disease management programs, which help patients manage their condition and get the care they need. Barack Obama and Joe Biden will require that plans that participate in the new public plan, Medicare or the Federal Employee Health Benefits Program (FEHBP) utilize proven disease management programs."

Well, that's a mouthful, but what does it mean? The previous TLB post said there is nothing in the healthcare provisions of the stimulus bill that would require doctors to do what the Federal government deems appropriate. That is, there is nothing in the bill that says, "Once we have access to all of the health records throughout the entire nation, the federal government will next assume a very paternalistic and omniscient power position between you and your doctor and decide what is the proper treatment." What it does say is that healthcare is expensive; it says healthcare costs can be reduced through comparative effectiveness research, which will analyze the soon-to-be-available electronic records to determine what is the most cost-effective way to treat illnesses. In other words, if a healthcare facility accepts federal funds, then it must provide its records through electronic technology and it must accept the federal government's determinations as to the most cost-effective way of treating an illness. That's how right-wing talk show hosts like Rush Limbaugh or Betsy McCaughey come to the conclusion that Obama's healthcare plan, hidden within the stimulus bill, will put the federal government between you and your doctor (see here). 

But that is the funny thing about socialism: the government will only come between you and your doctor if your healthcare provider accepts federal funds. Do our healthcare providers need money from the federal government? Probably not. But maybe the corporation that owns your healthcare provider does. Do they have to accept money from the federal government? No, but they probably will. Unlike USSR communism, which is forced on the masses, people accept socialism out of fear and a reluctance to do something else. The reason the country is in this quagmire is government interference and control (see here), and the best answer we can come up with is more government control and interference? That's like a man dying of arsenic poisoning consuming more arsenic.

What bothers me about it? Why do I waste my time explicating the finer points of the healthcare aspect of the stimulus bill? Because what happened to the voice of the American people?! Obama pushed it through before there could be any debate about it. When the right-wing talk show hosts and bloggers started shouting about it before the Bill was passed, they were hushed. Now it's all over and suddenly NPR and the AP and the NY Times and the cowardly republicans are talking about it. Well, it's too late now! 

Didn't anyone think it was strange that not a single Republican voted for the Bill in the House and only three did in the Senate? The one thing I'll always agree with about Obama is he is VERY intelligent. Clinton's healthcare reforms failed because his administration took its time presenting its plan. Obama (and Tom Daschle) knew better than to wait and let controversy build. His first act in power was to pass his healthcare reforms! And he did it under the guise of a stimulus bill! And our representatives let him do it because we cowered when we heard the thunderclap of "economic crisis"! Using the fear of economic collapse to reform healthcare and socialize America is more abhorrent than the court-packing plan used by the great socialist reformer president, FDR. But what can we do now except broaden our minds and accept the fact that a visit with the doctor will now be a three-way with the federal government.   

Back to the Same Starting Point

It is that time of my life once again, where I return to my root and start working on Vietnam's economic reform. Not that I have never attempted to escape from this subject to gain more breadth on other regions. Yet, this time I found myself coming back to that same initial starting point from my undergraduate years to look closer into Vietnam’s economic performance and its shortcomings. Why don't I want to work on China, India etc? Why Vietnam again?

In my senior year at UC Santa Cruz, I wrote a senior thesis on trade relationship between Vietnam and China and how these two trade regimes complement and compete with each other in the world market (US and Europe). Although this first experience with academic research was extremely influential and rewarding, I have never reread the paper since it was finished. For some seasons, it isn’t something that I feel particularly proud of other than the fact that I was the first student who ever wrote a senior thesis in the Economic Department at UCSC and was invited to give a lecture on the paper in the very class that I had sat on just a year before then. I guess part of the reason for such attitude is the fact that I further understand how complex and significant the problem is in understanding the reform structure and trade relationship that Vietnam sustains within the regional and global economy. My gaining knowledge made me become ever humble with the unknown and unlearned phenomenon of Vietnam’s developing process.

Some time last week, I decided to write my Master thesis on Vietnam's economic reform again. While searching for data and literature, I was bombarded with so much information that I hadn’t exposed to in quite a few years. There is this bittersweet flavor in digging through the economic literature of Vietnam's trade reform, WTO benefits, FDI and institutional framework of the country. It's sweet because I am working toward a set goal with challenging and applicable subject matter, but bitter from seeing how much more that the country needs to catch up and yet, the institutional and legal framework is too lacking to bridge any major economic gap in the near future. For now, here are a few issues:

1. What are the market failures and advancements created from government subsidies in major sectors?

Political economist, Mushtaq Khan, identifies four major market failures in Vietnamese economy: failures in capital markets, labor markets, land markets and knowledge (information) markets. Given our limited knowledge of how these limitations were addressed by Vietnamese government historically, it’s still the matter of further studies to prioritize and strategies how Vietnamese government should undertake these limitations. For instance, what makes the country’s state owned enterprises profitable- a paradoxical phenomenon for most emerging markets.

2. How Vietnam’s export led growth strategies prevents technological catch up necessary for industrialization? What are the roles of FDI and government subsidies in Vietnam long-term economic development?

It is unquestionable that FDI and trade agreements in the past two decades have driven the country's economic growth. Yet, there is one major concern within this growth format namely the existence of significant constraints in technological acquisition.  So far, major exporting sectors such as garments and agriculture not only require minimal skilled workers but also import limited technological transfer. The NICs (newly industrialized countries) all went through similar starting point but later managed to move up the ladders through technological advancement. Korea, Singapore, Taiwan and Hong Kong all are currently manufacturers of high-tech electronic and computer components. The Vietnamese government needs to focus its policies to reinvest and to lure FDI into industries that could provide higher skill training and importing technology, but that seems easier said than done.

3. Two years after Vietnam’s access to the WTO, what are the benefits and barriers to country’s development process?

Jan 11, 2007 marked a major hallmark in Vietnam's trade regime for its official access to the World Trade Organization (WTO). According to the STAR-Vietnam: “Overall exports to U.S. grew at about 20% in 2007. Exports of primary products declined by 4% largely due to a 33% decline in petroleum exports. Clothing exports posted a 28% growth – 10% increase from 2006’s.” The economy as a whole grew 8.4% in 2007 and approximately 7% in 2008.” Having said that, couple with high inflation (26.7 at its peak) in 2008, the real estate bubble and the global credit crisis later in the year, it is extremely complicated to single out how Vietnam’s access to the WTO enhances the country’s growth rate in 2008. One interesting aspect of these numbers is the correlation between WTO access and global demand for food, raw materials and cheap labor of the past two years. It is questionable if WTO’s access is in fact the main driver of Vietnam’s trade. In addition, WTO access may further create barriers for the government to effectively use subsidies and rents to further its industrialization process.

Source: Star-VN

4. What are the standing of Vietnam’s institutional reform in enhancing property rights and enforcing commercial contracts? Being far from the standard of other developed countries, what can be done to speed up institutional reform in Vietnam? Are there lessons from China’s legal reforms?

 The country's legal reform has seen itself drastically transformed since 2001. Yet, the country still needs to bridge a considerable gap to effectively offer a stable legal framework to lure foreign investors as well as to improve banking and financial sectors. The reform process was indeeded has been closely replicated China's given China started its economic reform 12 years ahead in 1978. However, policy makers should not forget there remains considerable difference between the two economies.

Hopefully, my research will paint a clearer picture than where it appears to be at the moment. For this reason, lots of entries on this topic are forthcoming.

Beware of Right-Wing Talking Points

While I fully support efforts to keep an eye on what is in the massive Stimulus Bill, there is a new lie coming out of the right-wing echo chamber about a electronic medical record-keeping provision that has made it into usually reliable news outlets like Bloomberg, as highlighted in a recent post on this blog.

Long-time health care reform critic Betsy McCaughey wrote an opinion piece in Bloomberg saying that there is a hidden provision in the Stimulus Bill that allows the Federal Government to set a broad range of regulations determining what medical care patients should receive.  In fact, the provision says the OPPOSITE. It says:

"(b) Purpose-- The National Coordinator shall perform the duties under subsection (c) in a manner consistent with the development of a nationwide health information technology infrastructure that allows for the electronic use and exchange of information and that--

"(4) provides appropriate information to help guide medical decisions at the time and place of care;

Nowhere (that I can find) in the Stimulus Bill is there any provision for the Federal Government to make the decisions, as the opinion piece in Bloomberg claims. Instead, it provides information for doctors to use at the hospital at the time of treatment. Note also  that the bill also has provisions about ensuring patient privacy.

Finally, Betsy McCaughey hinted that the Stimulus creates a new bureaucracy, but see this:

The National Coordinator of Health Information Technology is not a new bureaucracy created in the stimulus. Bush signed it into office in 2004. it has a web site, a director, and, presumably, a phone line, which could have been used by McCaughey or Bloomberg to check the next fact: That it will "monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective."

As it turns out, this is nothing new for McCaughey. She actually has a very long history of lying about attempts at health care reform, and helped to sink the Clinton attempts at fixing things in the 1990's.

So, how did such a falsehood get spread so far and wide?

From Media Matters:

"Limbaugh repeats health IT falsehood from Bloomberg "commentary" on House recovery bill

On February 9, Rush Limbaugh repeated a falsehood from a Bloomberg "commentary" by Betsy McCaughey, headlined "Ruin Your Health With the Obama Stimulus Plan." In the commentary, McCaughey falsely claimed that under provisions in the economic recovery bill passed by House Democrats, "[o]ne new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. The goal is to reduce costs and 'guide' your doctor's decisions." In fact, the language in the House bill that McCaughey, a former lieutenant governor of New York, referenced does not establish authority to "monitor treatments" or restrict what "your doctor is doing" with regard to patient care, but rather addresses establishing an electronic records system such that doctors would have complete, accurate information about their patients "to help guide medical decisions at the time and place of care."

On the February 9 broadcast of Premiere Radio Networks' The Rush Limbaugh Show, Limbaugh repeated McCaughey's falsehood, saying:

LIMBAUGH: Betsy McCaughey has written a column at Bloomberg detailing some of the most onerous provisions in this stimulus bill on health care. And there's a new bureaucracy created, the national coordinator of health information technology. Now, listen to this. The national coordinator of health information technology will monitor treatments that your doctor gives you to make sure your doctor is doing what the federal government deems appropriate and cost-effective.

On the conservative blog Wizbang, Kim Priestap also referenced the commentary in a February 9 post:

Read all of Betsy's article and then pass it on to everyone you know. Rush has been all over this today to bring it to people's attention. Call your senators and representatives. Currently, phone calls to Capitol Hill are 100 to 1 against the bill. We need to do more. This is why Barack Obama is going all over the country scaring the American people into believing that our economy could collapse if the bill isn't passed. He wants this made into law before anyone knows that nationalized -- and rationed -- health care will be the result. If you have a loved one with a serious medical condition, this will be detrimental to his or her life. [Emphases in original.]

By 10:40 p.m. ET, the Drudge Report linked to McCaughey's commentary using the headline " 'National Coordinator of Health Information Technology' Slipped in to Stimulus...":

More from Washington Monthly

"So, the opinion piece Bloomberg ran was wrong. Ordinarily, that's hardly worth getting excited about; news outlets run misleading opinion pieces every day. But what's interesting about this particular story is they way in which it spread.

Step One: Rush Limbaugh told his minions audience on Monday about McCaughey's piece, insisting that a "national coordinator of health information technology will monitor treatments that your doctor gives you to make sure your doctor is doing what the federal government deems appropriate and cost-effective."

Step Two: By late Monday, Drudge was trumpeting McCaughey's mistake with this headline: "'National Coordinator of Health Information Technology' Slipped in to Stimulus..."

Step Three: Fox News and members of the Wall Street Journal editorial board got in on the act on Tuesday morning, arguing that the government will "essentially dictate treatments," thanks to the "secret" provisions in the stimulus bill. FNC's Megan Kelly said the non-existent language "sounds dangerously like socialized medicine," while FNC's Bill Hemmer said the recovery plan includes "new rules guiding decisions your doctor can make about your health care." All of this, of course, is patently and demonstrably false.

Step Four: Limbaugh took a bow yesterday, taking credit for the misinformation campaign, and telling listeners that his show "uncovered" all of this. "I found it," Limbaugh said. "I detailed it for you, and now it's all over mainstream media."

In other words, Beware of Right-Wing Talking Points, as they can infiltrate usually reliable segments of the mainstream media, like Bloomberg, and they can then spread all over the web, and even on cable news. 

__

On a side note, is a national electronic system for medical records a good idea? I think so, with proper privacy protections, for the following reasons:

First, at a time when the US spends more per capita on medical care than other countries with advanced economies while having a large portion of the population lacking health insurance, and at a time when 54% of chronically ill Americans skip necessary medical care due to its high cost (Source, Commonwealth Fund), decreasing the costs of keeping records is a very important goal.

Second, only around 20% of Hospitals keep their own records, and it mostly outsourced already. 

Third, centralized, easily-available records WILL save lives. Say a person goes to an emergency room in a different area for something really bad. With centralized records, doctors could almost instantly see whether he is allergic to any medications, or have heart problems that conflict with some of the medications that could treat the current emergency situation, etc.

Obama is Bush in Sheep's Clothing - Do You See it Yet?

It wasn't GTMO or the promise to bring troops home from Iraq and send them right back to Afghanistan that made it clear. It was simply the Obama fear factor. The reason for rushing the stimulus package is "A failure to act, and act now, will turn crisis into a catastrophe." I've learned acting impetuously often invites unforeseen and unwanted consequences! And I think Camille Paglia said it best: "Surely common sense would dictate that when Congress is doling out fat dollops of taxpayers' money, due time should be delegated for sober consideration and debate. The administration's coercive rush toward instant action, accompanied by apocalyptic pronouncements of imminent catastrophe, has put its own credibility on the line."

Should we really be surprised to find hidden provisions in the stimulus package? Bloomberg posted a rather frightening account of the hidden Healthcare provisions in the Bill:

Tragically, no one from either party is objecting to the health provisions slipped in without discussion. These provisions reflect the handiwork of Tom Daschle, until recently the nominee to head the Health and Human Services Department.

  
Senators should read these provisions and vote against them because they are dangerous to your health. (Page numbers refer to H.R. 1 EH, pdf version). 

The bill’s health rules will affect “every individual in the United States” (445, 454, 479). Your medical treatments will be tracked electronically by a federal system. Having electronic medical records at your fingertips, easily transferred to a hospital, is beneficial. It will help avoid duplicate tests and errors. 

But the bill goes further. One new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. The goal is to reduce costs and “guide” your doctor’s decisions (442, 446). These provisions in the stimulus bill are virtually identical to what Daschle prescribed in his 2008 book, “Critical: What We Can Do About the Health-Care Crisis.” According to Daschle, doctors have to give up autonomy and “learn to operate less like solo practitioners.”

***

In his book, Daschle proposed an appointed body with vast powers to make the “tough” decisions elected politicians won’t make.

The stimulus bill does that, and calls it the Federal Coordinating Council for Comparative Effectiveness Research (190-192). The goal, Daschle’s book explained, is to slow the development and use of new medications and technologies because they are driving up costs. He praises Europeans for being more willing to accept “hopeless diagnoses” and “forgo experimental treatments,” and he chastises Americans for expecting too much from the health-care system.

The Bloomberg article goes on to illustrate how the elderly will suffer more from this Bill than the young. The Healthcare agenda passed in this Bill simply concludes it will not be cost-effective to treat the elderly for illnesses that naturally occur as a result of growing old. Ironically, Arlen Specter is one of the three republicans in the Senate who helped passed the Bill. A post on Hot Air points out when Specter was asked why he would support a Bill that requires doctors to get federal approval before treating a patient, he said he never read it!

According to Bloomberg, the Bill is modeled after a UK health board described in Daschle's book. The Bloomberg article states a U.K. health board decreed in 2006 that elderly patients with macular degeneration had to wait until they went blind in one eye before they could get a costly new drug to save the other eye. It took almost three years of public protests before the board reversed its decision. And Specter, a senior citizen and recent cancer survivor, voted for it-- Call me a cynic, but I doubt he didn't know what was in it.

The truly sinister liberals I know-- and I lived in San Francisco for a number of years and so I know quite a few sinister liberals-- think Obama is just doing what needs to be done for the good of the nation and to counter right wing politics. But how are these tactics any different from the previous administration? When are we going to be done with the two-party double-talk and insist on something that can bring us some genuine hope?

Legal Barriers to Responding to the Global Economic Crisis

As the global economic slowdown worsens, the world’s major economic powers seem to agree that the key to fixing things (or lessen the damage) is massive spending. At the time of this post, at least thirty-four countries have announced ambitious stimulus plans. The plans vary in size and scope, and this is at least partially influenced by the differing legal constraints each country faces.

The European Union serves as a key example of how legal pressures can restrict or change the costs of using certain economic strategies, because of the complex agreements the EU countries have entered into regarding management of their respective economies. First and foremost, the EU countries face large penalties for running large budget deficits (defined as more than 3% GDP) under the Stability and Growth Pact. Some countries have been in trouble over this before, such as Portugal in 2002.

However, the EU is now wrestling with this issue because the world consensus is that massive spending is greatly needed in the current crises. The results so far are EU countries with stimulus packages that many economists think are too small, with most of them coming in at 1% - 2% of GDP. These spending packages are getting bigger by the day, however, at the same time that many of the EU countries are seeing their deficits rise above the magic 3% mark. In fact, there are currently sixteen EU countries that are in serious danger of large penalties for breaking the 3% rule, and disciplinary proceedings have already started against some, such as Ireland which is projecting its deficit to be at 11% and 13% for the next two years, respectively.

Compare this with China’s situation. The estimates of China’s stimulus package are upwards of 6% of their GDP, and there have been estimates that it will reach twice that before it is all over. Obviously, China has more legal freedom to spend more without being blocked by its own internal rules, and I find it unlikely to be a coincidence that the stimulus package is many times the size of the packages proposed by governments with less freedom to use the tools in their toolboxes. Yes, there are certainly other factors involved, such as China’s position as a net creditor nation instead of a net debtor. Still, the point is that China does not have the legal barriers to spending that some other countries have, should China find itself in a financial position to enact massive spending.

Finally, it will be interesting to see how countries respond to the legal infrastructure in place that gets in the way of responding to the crises. The EU has shown some signs of flexibility before, such as extending deadlines in 2002, for instance. We shall see whether the financial crises causes countries to bend rules, or actually break them.