From Foreign Policy:

Asia is nowhere near closing its economic and military gap with the West. The region produces roughly 30 percent of global economic output, but because of its huge population, its per capita gdp is only $5,800, compared with $48,000 in the United States. Asian countries are furiously upgrading their militaries, but their combined military spending in 2008 was still only a third that of the United States. Even at current torrid rates of growth, it will take the average Asian 77 years to reach the income of the average American. The Chinese need 47 years. For Indians, the figure is 123 years. And Asia’s combined military budget won’t equal that of the United States for 72 years.

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Those who think Asia’s gains in hard power will inevitably lead to its geopolitical dominance might also want to look at another crucial ingredient of clout: ideas. Pax Americana was made possible not only by the overwhelming economic and military might of the United States but also by a set of visionary ideas: free trade, Wilsonian liberalism, and multilateral institutions. Although Asia today may have the world’s most dynamic economies, it does not seem to play an equally inspiring role as a thought leader. The big idea animating Asians now is empowerment; Asians rightly feel proud that they are making a new industrial revolution. But self-confidence is not an ideology, and the much-touted Asian model of development does not seem to be an exportable product.

We have 50 years before Chinese people turn into typical Americans, oh dear.

The rest here: Minxin Pei – Think Again: Asia’s Rise

Part 2 of the interview from Democracy Now. If you haven’t seen it, be sure to check out the first part.

University of the Philippines professor Walden Bello writes:

Not surprisingly, the swift unraveling of the global economy combined with the ascent to the U.S. presidency of an African-American liberal has left millions anticipating that the world is on the threshold of a new era. Some of President-elect Barack Obama’s new appointees — in particular ex-Treasury Secretary Larry Summers to lead the National Economic Council, New York Federal Reserve Board chief Tim Geithner to head Treasury, and former Dallas Mayor Ron Kirk to serve as trade representative — have certainly elicited some skepticism. But the sense that the old neoliberal formulas are thoroughly discredited have convinced many that the new Democratic leadership in the world’s biggest economy will break with the market fundamentalist policies that have reigned since the early 1980s.

One important question, of course, is how decisive and definitive the break with neoliberalism will be. Other questions, however, go to the heart of capitalism itself. Will government ownership, intervention, and control be exercised simply to stabilize capitalism, after which control will be given back to the corporate elites? Are we going to see a second round of Keynesian capitalism, where the state and corporate elites along with labor work out a partnership based on industrial policy, growth, and high wages — though with a green dimension this time around? Or will we witness the beginnings of fundamental shifts in the ownership and control of the economy in a more popular direction? There are limits to reform in the system of global capitalism, but at no other time in the last half century have those limits seemed more fluid.

From Alternet.

We must add another field to the list of those in need of rescuing—economics itself.

The financial crisis has killed the claim that economics deserves to be treated as a science. The measure of a science is its capacity to explain, predict, and prescribe. And most economists not only failed to anticipate the nature and evolution of the catastrophe, but their conflicting recommendations on how to stabilize the situation exposed the unreliability of their knowledge. As much as Wall Street and Main Street, the economics profession needs a bailout of its own.

Policy gyrations and faulty calls have revealed that economics itself is in crisis: The experts simply have no idea what to do. No less an expert than U.S. Federal Reserve Chairman Ben Bernanke repeatedly declared the worst was over, only to admit with chagrin much later that “I and others were mistaken early on in saying that the subprime crisis would be contained.” As recently as mid-November, Bernanke told the U.S. Congress that he thought the measures that had been taken “appeared to stabilize the situation,” a pronouncement that proved wrong almost as soon as it was made. The fault lies less with Bernanke for trying to calm the markets than with the accumulated body of economic knowledge that failed miserably to equip him and other policymakers with more reliable tools to anticipate and navigate the crisis.

So, along with banks and brokerages, mortgage holders and emerging markets, it’s time to add another rescue effort to the list—for economics itself. This intellectual bailout will force economists to revise the models and methods unquestioned during the boom years. It will force them to produce new tools suited to a new era and reinvigorate their thinking by borrowing more intensively from other disciplines, such as psychology and political science.

from Foreign Policy.

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“An article by Massimo Guidolin and Elizabeth A. La Jeunesse published a year ago in the Review of the St. Louis Federal Reserve Bank noted that the personal savings rate of Americans had actually turned negative, meaning that people were spending more than they were earning. And now such savings as people had, being heavily invested in the stock market, have become depleted by the drop in the stock market. As a result of their inadequate savings, people who lose their jobs or cannot sell the houses they no longer can afford are limited in their ability to reallocate savings to consumption, as they had done in previous, milder depressions. So consumption has fallen steeply, precipitating layoffs that have further reduced consumption (because the unemployed have lower incomes), creating the downward spiral that the economy finds itself in at this writing. And the timing could not be worse: during a presidential transition, with the lame-duck President seeming uninterested in and uninformed about economic matters, with economic officials whose stumbling responses to the gathering financial crisis have undermined their credibility, and with the crisis accelerating during the Christmas shopping system, which normally accounts for as much as 40 percent of annual retail sales. The buying binge financed by the heavy borrowing during the bubble have left consumers awash in consumer durables, so it is easy for them to postpone buying. Moreover, consumer durables are more durable than they used to be, so that replacement can be deferred longer than used to be possible.

If this diagnosis is correct, then the public-works expenditure program that President-elect Obama is proposing, though anathema to economic libertarians, resisted by the Bush Administration, and bound to be wasteful, as all such programs are, may be the most sensible response to the depression and one clearly superior to a tax cut. A tax cut or rebate, like the bank bailout, is unlikely, unless very large or credibly promised to be permanent, to stimulate consumption greatly; most of the money is likely to be used to rebuild savings or, in the case of the banks, to rebuild their equity cushion so that they can make loans, bound to be risky in a depressed economy, without courting bankruptcy. In other words, to stimulate economic activity the government will have to step in and “consume,” in lieu of reluctant or impoverished consumers by spending money on road repair and other public goods. A critical variable, however, is the length of time it will take for public-works projects actually to be begun. American government tends to be extremely sluggish.”

More here.