Kampuchea Crossings

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how China sees Africa: We get commodities, you get infrastructure. Cool?

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H/T Paul Kedrosky!

On the shopping list for my next civilisation run is the latest bestseller “The Ascent of Money: The Financial History of the World” of Niall Ferguson, a Scottish intellectual gifted with breaking down history, finance and politics into simple understandable language. Here he talks about China and Africa in an interview:

Q Is China’s rise to power a bad thing?

A It is not a bad thing that the most populous country in the world is emerging from grinding poverty and hundreds of thousands of people who were in subsistence agriculture now have better paying jobs. That can’t be a bad thing. The problem is that in the realm of politics, China’s [position] is not necessarily benign. They [do not] remotely share our ambitions to improve the quality of governance in Africa. They couldn’t care less. And they have a very different political model, which is neither democratic nor based on law in our sense, and if you want to know what Chinese power is about, ask any Tibetan.

Q How does Africa fit into all this?

A In the eyes of the Chinese, it is a place with a lot of commodities and very poor infrastructure, and the Chinese have figured out they can access the commodities if they provide the infrastructure. So, they have a pretty instrumental view of Africa. Given the West has a sentimental view of Africa, which is they want to [help with] water, give it aid, help Africans by giving them free malaria meds. And China, of course, thinks that’s absurd. They want to come in and buy stuff, give them highways in return. And right now that model is working better.

Q Working better for China or Africa?

A Working better for Africa. Just look at the growth rate. Africa is enjoying … rapid growth, and it is mostly on the back of sales of commodities and the improvement of infrastructure. By comparison, we’ve had 50 years of development aid and achieved less. So [it is] not pretty in the sense that what China does is bolster regimes in Sudan. They aren’t really concerned about people being authoritarian. They are authoritarian, why should they worry about governance in Africa? It is not their vision of what matters, and if they can deliver economic growth and raise African living standards, you can’t really blame the Africans for saying: ‘OK, these people ask less of us [than] the aid agencies of the West and governments in the West.’

another blow to the New Orleans economy

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Earth Day 2010 ironically kicked off with a blazing bonfire at the Deepwater Horizon drilling rig, 66km off the Louisiana coastline. The rig was contracted to a BP plc unit (who faces the brunt of bad PR), but it was owned and operated by Transocean Ltd, the world’s biggest offshore drilling contractor. After the initial explosion the platform burned for two days, then it sank into the Gulf of Mexico. WattsUpWithThat explains the drilling technology and below is a graphic from the Times-Picayune showing how difficult it is to shut off the leak. Images, like the one above, can be found on the boston.com site.

Full-scale investigations are under way to determine the cause of this accident, with all parties using the event to advance their political agendas, particularly with the climate policy negotiations currently raging on the Hill. Notwithstanding repercussions across the entire US ecology and economy, a quick note about the industry and technology:

There are over three thousand oil rigs in the Gulf extracting and moving crude petroleum to production. There has not been (that I’m aware of!) a blowout/spill in 30 years (since Ixtoc I in 1979). These platforms are amazing marvels of technology. Have you seen the National Geographic Megastructures on oil rigs? Their extreme technologies are alternately alarming and awe-inspiring with their attendant high risks and lessons which can only be learned the hard way. That said, accidents are bound to occur. Their use extends beyond extractive industries, and holds a lot of promise for geologic research.

Economically: Louisiana’s only natural defense against Gulf hurricanes (like 2005’s Katrina) is the vast marshlands of the Mississippi Delta. But given the engineering modifications of the Mississippi River and mismanaged agricultural technologies, this rapidly eroding coastal ecosystem today boasts the world’s largest and most notorious dead zone (the geographically larger Baltic Sea area having been a dead zone for millenia, but reversing since the dissolution of the Soviet Union and the collapse of demand on expensive fertilisers, among many things). Rapid coastal erosion removes this buffer zone and exposes to the storm surges 1) the city of New Orleans, 2) the state’s vital oil and gas infrastructure, and 3) its energy distribution infrastructure upon which the entire country relies upon. It is the natural nursery ground for 40% of the country’s seafood. It is the natural habitat for over five million waterfowl and migratory birds, which is a significant tourism draw throughout the year. This watershed disaster will be calamitous for an already besieged economy.

Cleanup: Satellite data analysis boosts the initial crude oil leak estimates up (from an initially announced 1000, then 5000 just days ago) to a *whopping* 25,000 barrels a day, putting us less than two weeks away from eclipsing the Exxon Valdez catastrophe which drained 270,000 barrels into Alaska’s Prince William Sound in 1989. The Sound was a challenge to clean up. How do you correct an environmental disaster of this magnitude in impenetrable swamps?

oh New Orleans… screwed. time and again.

David Frum on bailouts

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David Frum explains bailouts:

Senate Minority Leader Mitch McConnell has accused the Obama administration, Sen. Chris Dodd, and, by implication, most other Democrats of plotting for permanent bailouts of the financial system.  He’s right. But Democrats can rightly point out that McConnell, every other member of Congress, and, indeed, just about every American citizen, want the same thing.

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A bailout, of course, is what happens when the government keeps an explicit or implicit promise to stop an institution from failing or a financial instrument from loosing its value.  And these guarantees are very common: many widely owned products—savings accounts, certificates of deposit, pensions, retail brokerage accounts, and admitted market homeowners insurance—all have attached guarantees.  In many cases, people even use different names for guaranteed and non-guaranteed products: a CD without a government guarantee is called a bond, property insurance without a guarantee is called an excess and surplus lines policy. One expects that these guarantees will eventually be needed: there wouldn’t be a point in offering them if they weren’t. So, as long as the government guarantees any financial instrument, in short, it will engage in bailouts. The only true “no more bailouts” policy would involve abolishing the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation, more than 50 state insurance guarantee funds, the Pension Benefit Guarantee Corporation, the National Credit Union Share Insurance Fund and at least a half dozen other entities.

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Even if this were a good idea, it probably wouldn’t get a single vote in Congress.  Among other things, abolishing all public-sector guarantees would upend the business model of nearly every financial services firm in the country, lead some families to financial ruin, and end the sale of certain products. In short, while proposing an end to all guarantees may make good fodder for dorm-room bull sessions, it will never go anywhere.

Any practical look at policy towards bailouts should focus on how to limit them.

This means the government should get out of some guarantee businesses altogether, avoid entering new ones, and enforce regulations to minimize the need for those guarantees that can’t go away.