Author Archives: Karl Reiner

A few interesting economic and other titbits

The ramifications of the wealth inequality problem so troubling to Western economists and policy makers is also affecting China. A new research paper by five authors, including Piketty and Saez, reveals that in 1978 the highest earning Chinese 10% took home about 25% of national income before taxes. By 2015, the take of the top 10% had risen to two-fifths of total income. The richest 10% now control about 70% of private wealth in China, up from 40% in 1995. The inequality issue was somewhat mitigated by China’s rapid economic growth. Between 1978 and 2015, the income level of the poorer half of the Chinese population quintupled. During the same time period in the United States, the income level of the bottom half of the population declined by 1%.

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The gloomy conditions in Afghanistan

Democracy is said to be in decline around the world. According to a report by Freedom House, only 45% of the world’s countries are considered to be fully free and the percentage is trending downward. The volatile situation in Afghanistan is proof that a functioning democracy is a tough thing to create. The invasion by U.S. and NATO forces in December 2001 quickly drove the Taliban and their al-Qaida allies from power. After more than 15 years of nation building effort by NATO, the UN reported that almost 3,500 civilians were killed and 7,900 injured in the Afghan conflict during 2016. It was the highest number of civilian casualties since the UN began keeping records in 2009.

The American plan to replace Taliban rule with a democratically elected government ran into many problems. The flood of foreign cash that followed the demise of the Taliban regime in 2001 often undermined the new government or was wasted on uncoordinated projects. Well-meaning foreign aid agencies paid salaries 20 times higher than the Afghan civil service pay rate, many Afghan officials quit and went to work for the external agencies. As fighting the Taliban insurgency continues, NATO forces have dropped from a peak of 132,000 in 2011 to approximately 13,000 today. The U.S. and NATO mission in Afghanistan is estimated to have cost nearly $1 trillion between 2001 and 2014.

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The lingering legacy of 1917

The world changing events brought on by World War I continued to unfold at a rapid pace in 1917. The United States declared war on Germany in April 1917, the first U.S. troops arrived in France in June. Mutiny became a problem that vexed the struggling French Army. In the Middle East, British forces captured Baghdad. Large battles were fought on the Western Front, including Arras, the Neville offensive, Messines Ridge, the third battle of Ypres. In the south, fighting raged in Northern Italy. The belligerents who found it so easy to glide into war in 1914, found themselves trapped in endless combat with high casualties, growing economic hardship and for some, the waning support of their populations.

In the east, Russia, a vast and backward country, was a participant in the Allied war effort. It was also the first of the belligerents to fracture apart under the terrible strains imposed by the war. In March 1917, the riots and strikes that began in Petrograd (St. Petersburg) toppled the government and resulted in the abdication of Tsar Nicolas II. A Provisional Government headed by Alexander Kerensky replaced the failed Tsarist regime. The Kerensky government decided to keep Russia active in the war, fighting on the side of the Allied powers.

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Economic uncertainty on the Arizona border

According to U.S. Department of Commerce data, Arizona’s exports to world markets totaled $22.7 billion in 2015. The Phoenix region accounted for $13.8 billion of the total, the Tucson area provided $2.5 billion. The number of exporting Arizona firms was 7,566, their export efforts supported 101,579 jobs in the state. At $9.1 billion, Mexico was Arizona’s largest export destination. Though September 2016, Arizona’s exports to Mexico stood at $6.3 billion, somewhat lower than the $7.0 billion recorded for the same period in 2015. Given the growing uncertainty generated by President Trump’s Mexican policy, Arizona’s 2017 exports to Mexico are not expected to set any records for growth.

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The rise of the Islamic State in Iraq

Mosul is located in northern Iraq and is one of Iraq’s larger cities. In June 2014, Iraqi and American officials were stunned when a small force belonging mostly to the Islamic State in Iraq and al-Sham (ISIS) quickly overran large chunks ofIraq Map Iraqi territory and captured the city. The Iraqi security forces, trained and supplied by the United States at great expense, simply dissolved in the face of the ISIS attack. During the military fiasco, an estimated 25,000 to 30,000 Iraqi troops fled the area. The swift capture of the city by ISIS shook the unstable central government in Baghdad to its very core and raised serious questions regarding the worth of the American military aid program. The sporadic urban fighting now underway to liberate the city from ISIS control is expected to continue until sometime in April.

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Mr. Putin’s economic legacy

The shattering breakup of the Soviet Union’s political, social and economic order added 15 countries to the map of the world. When the Soviet Union fell apart 25 years ago, optimists thought Russia was on the road to becoming a free-marketrussia-4 democracy. Many in the country wanted Russia to become a nation state similar to those found in Europe. They were to be sadly disappointed. Under Putin’s rule, the hope for Western style economic and political modernization has disappeared. In retrospect, the problems Russia faced after 74 years of Soviet rule and several hundred years of rule by the Tsars were underestimated. It may have been unrealistic to think that Russia could build new, unfamiliar governing institutions and adapt to them quickly.

At the time of the Soviet collapse, Vladimir Putin worked for the comparatively liberal mayor of St. Petersburg. When Putin came to power in 2000, he was thought to have democratic leanings and was not considered to be anti-Western. Over time Putin’s policies moved in the opposite direction, he promoted state nationalism, promoting the concept that Russia was a besieged country. Borrowing from the history of the Tsars, orthodoxy, nationalism, and autocracy became his guiding principles.

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