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China's new leadership and potential new strategies forward

Comments on Sheryn Lee “Taiwan–China relations under the new Chinese leadership”, 19/12/2012, http://www.eastasiaforum.org/2012/12/13/taiwan-china-relations-under-the-new-chinese-leadership/

While it is true that China now is faced with many challenges, arguably there are also positive factors that may allow it to better overcome key challenges.

Inequality in income distribution: the transition from labour surplus to shortage would mean wages are likely to rise more rapidly than in the past and that will be conducive to reducing inequality.

Corruption: the new leadership could make a new and fresh start in fighting corruptions using a new approach. They could first draw a line in time from then any new corruptions will be dealt with severely and at the same time to let the past be past. This way will mean much less resistance than the past approach and is likely to be more effective. Of course, a lot of work must be done and public relations must be managed to create an environment so such a policy can be introduced.

Dispute with other regional countries: China should realistically assess the costs and benefits of possible worsening relationships with those countries and the implications for its own interests as a whole. It is not too difficult to come to the realisation that peaceful resolutions are the way to go and compromises will have to be made from all sides including China. I would say it should use examples of land border settlements with some countries in the past couple of decades or so and use that experience to settle disputes in the seas.

Taiwan unification: China could learn from its experience in the one country and two systems that have applied to HK and possibly think more boldly along the line of a confederation. Even keeping the current status quo will be working in China's favour as the two sides will get closer in many ways, such as a gradual and more liberalised China and stronger and closer economic integration.

I think the next 10 years should be a test for China and the new leadership, but the key strategy should still be peace and development. Every effort should be made to achieve this overarching objective.

Adverse selection in choosing schools

Comments on KEVIN DONNELLY “Schools forced to dance to Canberra's centralist tune”, 19/12/2012, http://www.theaustralian.com.au/national-affairs/opinion/schools-forced-to-dance-to-canberras-centralist-tune/story-e6frgd0x-1226539986534

Let's accept the argument that Australia's Catholic and private schools have performed well internationally and this is not the case for government schools.

Apart from differences in freedom in areas of decision making by schools mentioned in the article, another possible reason could be the so called adverse selection problem, in which wealth and family backgrounds may play a role in selecting going to government or non-government schools.

This should only need to be interpreted as on average, rather than a rule applies to all individual cases.

'New normal' for China growth?

Comments on Yiping Huang “The ‘new normal’ of Chinese growth”, 19/10/2012, http://www.businessspectator.com.au/bs.nsf/Article/Central-banks-US-England-BoE-monetary-fiscal-polic-pd20121219-34SAC?OpenDocument&src=sph&src=rot

China's high economic growth will come down to lower growth sometime in the future, although the timing may be complicated by the GFC and its continuous effects given that the world is still struggling to get out of it and the once in a decade leadership transition in China.

Yiping's assessment may be indicative for the likely growth of the Chinese in the coming two decades.

A factor needs to be considered very carefully is that the Chinese income level is still around $5000 while the income levels in the advanced countries could be 10 times of that. Even assuming a growth differential of 7.2% per annum on the per capita terms, it would still mean more than 30 years for China to catch up with the developed levels.

A growth differential of 7.2% per annum would require 9 to 10 per cent real growth on China's part.

I would interpret the current calm or "policy paralysis" by government as a practical response to the combination of the leadership transition and the deteriorating external economic environment with continued threat of euro zone meltdown and painfully slow economic recovery in the US. Setting a low growth expectation will be undoubtedly good for the coming leadership: if the growth is low, then it will have been expected, but if they can make the growth higher it will make the new leaders look better.

America and power games in Asia

Comments on Yang Razali Kassim “East Asia Summit 2012: Asia’s power game unfolds”, 12/12/2012, http://www.eastasiaforum.org/2012/12/12/east-asia-summit-2012-asias-power-game-unfolds/

It appears that the third layer game has far reaching implications for the power play in East Asia, given it is out of the desire of ASEAN for its centrality purpose. RCEP seems to suggest that it will be difficult for any power to unilaterally act to attempt to purposefully exclude any important regional players. This is particularly noteworthy given the proceedings of other economic negotiations, particularly with some exclusivity.

The regional economic links and further integration is likely to be a central feature of future development in the region that will shape the eventual regional institutions and the attitudes of individual countries towards some difficult issues, including disputes among countries.

Funding policy for education in Australia

Comments on Kevin Donnelly “Writing is on the wall as standards trend down”, 14/12/2012, http://www.theaustralian.com.au/opinion/writing-is-on-the-wall-as-standards-trend-down/story-e6frg6zo-1226536451971

There should be some distinctions between government funding for government and non-government schools, given that government schools are open to all without requiring to pay (the purpose of government schools to provide education for all).

However, a modified vouchers system may work, though.

There should be 3 types of vouchers - for government, Catholic and private schools students respectively.

Firstly, give vouchers to students who go to government schools at the average level of funding for government students, so they can choose among government schools.

Secondly, give vouchers to those who go to Catholic schools at a certain level, so they can choose which Catholic schools to go to.

Thirdly give vouchers to those who go to private schools another certain level, so they can choose to which school they go.

Such a funding system is more likely to result in better choices and better education outcomes for all students, whichever types of schools they choose to go.

If the levels of funding for the 3 types of schools are designed properly, such a system will work better than the current one.

More global coordinations in economic policy requried

Comments on Stephen Grenville “Central banks have run out of answers”, 19/12/2012, http://www.businessspectator.com.au/bs.nsf/Article/Central-banks-US-England-BoE-monetary-fiscal-polic-pd20121219-34SAC?OpenDocument&src=sph&src=rot

It is more likely for monetary policy, such as the various forms of QEs adopted now by big central banks, to work if there is only one big ones to do it and most others didn't do it.

When all central banks are doing the same QEs all at once, then the effects in one country is offset by others in terms of lowering its exchange rates and raising its international competitiveness.

While at the moment this hasn't translated into global inflation, sooner or later it will occur, along with it, a possible race by central banks to rein in monetary policies to combat inflation and generate stagnant economies that will be a repeat of the stagflation in the 1970s following the first oil shock.

In a sense, the current situation has demonstrated that monetary policies have done more than they can do to achieve meaningful objectives and more than they should do. That is more than the limit of zero interest rate or the liquidity trap when only one faced that situation.

Given the current fiscal malaises in many advanced countries and the near zero effects of monetary policy and the longer term inflationary effects, now an even taller order is required of the global leaders and economic managers, that is, they must coordinate both monetary and fiscal policies and act just as the global is the one economy and they are managing that one economy as opposed to many individual and separate economies and competing against each other.

This requires that all major countries should have work together and design both fiscal and monetary policies together. It will be extremely difficult if not impossible outright. Otherwise, the global economy will be in doldrums for a long time to come.


'Japan's decline' in world context

Comments on Gerald L. Curtis “‘Japan’s decline’: an unhelpful diversion?” 10/12/2012, http://theconversation.edu.au/face-value-where-to-look-when-you-want-to-read-someone-11219

A very interesting article.

Given the GFC that has shown some similarity to the Japanese case in the early 1990s, the interest on the Japanese economy since the early 1990s has probably and largely shifted to the general economic concerns with the US economy in recent times.

Western economists didn't show much interest in understanding and solving the economic issues that Japan had from the early 1990s until probably the late of the first decade in the 21st century.

Those who had supported the Japanese economic model were having troubles with the new reality, while those who had argued against that model took the pride when the very model economy was in trouble. Those who had had little interests continued their indifferences.

Now part of the problem that Japan has had has been with the world largest economy, so economists have to show some interests one way or another. It is no longer ignorable anymore and become a serious challenge to many economists.


Should Australia junk Kyoto and the carbon tax?

Comments on Tim Wilson “Junk Kyoto and the carbon tax”, 10/12/2012, http://www.theaustralian.com.au/national-affairs/opinion/junk-kyoto-and-the-carbon-tax/comments-e6frgd0x-1226533235739

This is a disappointing piece of analysis or opinion, to say the least. The following statements reflect part of the disappointment: "That leaves only a core group of countries, including Australia, the EU, Norway and Switzerland, still flying the Kyoto flag from next year to 2020. Combined, these countries represent a mere 15 per cent of global emissions and don't include any of the major growing emitters in the developing world." While some of the content is of some value, like finding alternative ways to get climate change agenda going, the overall call for Australia to abandon both the Kyoto Protocol and its carbon tax is clearly a wrong call, wrong strategy and pointing to a wrong direction. Australia should not abandon either of them. Instead Australians should abandon listening to both such a shallow opinion and such a short foresight.

Of course, Australia needs to and must take into account what is going on in the UN climate change negotiations and make necessary changes to optimise its climate change policies. For example, its carbon tax should make some border adjustment to deal with differential climate policies across different countries so Australian businesses won't be unfairly affected in their international competitiveness. Or its level of carbon tax should be reflective of the world's climate change trend and policies. But that is not to say that Australia should abandon the carbon tax that is a more efficient climate policy than most other climate policies.

What the following statements mean is that the author is scared to mention the main spoiler in international climate change negotiations, that is, the US, instead he is saying major emitters in developing countries: "That leaves only a core group of countries, including Australia, the EU, Norway and Switzerland, still flying the Kyoto flag from next year to 2020. Combined, these countries represent a mere 15 per cent of global emissions and don't include any of the major growing emitters in the developing world." It has been the US that didn't ratify the Kyoto. That also led to the few countries running away from it. The author should point that out, as opposed to blaming developing countries.


Government must have a budget constraint

Comments on David Uren "No doubt about it, taxes will have to rise", 6/12/2012, http://www.theaustralian.com.au/business/opinion/no-doubt-about-it-taxes-will-have-to-rise/story-e6frg9qo-1226530770321

I think government should establish a law similar to the California's but with a in-build flexibility, that is, to set a maximum percentage of all revenue to GDP, say 30%.

The current political landscape is unfair, with the ALP increasing spending and the size of government with no limit, while when the opposite political party is in government they reduce spending reduce debts.

It will be a fair game for political parties to have a hard budget constraint and it should be the same for both political sides.

If any party wants to go over that limit, it needs a referendum. If any party break the rules, the ministers and the caucus must pay from their own income and assets.

Only in that way, will political parties focus on creativity and innovation in policy to generate the maximum benefit to the nation for the given constraint.

Working families have to live within their means. Government should also live within its means. AND its means should only be a proportion of the size of the economy.


Key to global deal for limate change - a fair deal on per capita basis

Comments on Pep Canadell "The widening gap between present emissions and the two-degree target", 4/12/2012, https://theconversation.edu.au/the-widening-gap-between-present-emissions-and-the-two-degree-target-11101

The author states "Perhaps the most immediate critical challenge to meet the 2°C target is the need to curb global fossil fuel emissions within the next ten years. This would require annual emission mitigation rates to around 3%. Some integrated assessment models show that this is possible globally without causing economic damage."

I would argue that those so called integarted assessment models are clearly unrealistic, given the annual growth in emissions over the past decade is 3% and to turn that into a reduction of 3% is a clearly acdemic excercise!

What it means is it is unrealistic and impossible to achieve the 2 degree limit (assuming the modellings for that 2 degree limits are correct) and the world has to learn to adapt to a warmer world more than 2 degree.

The first realistic step is to reduce the growth in emission to 0 for normal world economic conditions. After achieving that target, then the next step is to reduce emmissions.

The current difficulties in reaching an international binding agreement can only be overcome if a deal is fair and effective that requires per capita emissions have to be used as the basis for a deal. Failing to do that is unlikely to advance the cause very far.

A per capita deal is not aimed at achieving equal per capita consumption or emissions, it is to use per capita emissions as a key variable in determining which countries should pay to the international community and by how much for each and which countries should be paid and by how much for each.

This approach will focus on the current consumptions/emissions and will not look back at histories of emissions.

It should be based on the user pay concept on a global scale.

Theories and practices of economics with innovation in between

Comments on Shaun Vahey "Academics v practitioners: split views within the Shadow Board", 4/12/2012, https://theconversation.edu.au/academics-v-practitioners-split-views-within-the-shadow-board-11110

The views of both practioning and academic economists are "should be", though they may have different perspectives in their thinking.

The academic economists there may have a too theoretic focused and may be a little too rigid and inflexible. In their mind, it is all theories that matter. If it is not in accordance to the theories, they cannot be. But the Fed has operated on a non conventional basis for quite sometime and that points out the potential shortcomings with the academic macroeconomists (their thinking).

Practitioning economists may be too affected by the markets.


Australia should never become an America in population or military

Comments on Cassanddra Wilkinson "Less welfare, more immigrants and an Australian century", 3/12/2012, http://www.theaustralian.com.au/national-affairs/opinion/less-welfare-more-immigrants-and-an-australian-century/

While the idea to reform the welfare state and encourage citizens to work should be done as an urgency, there are few signs that the politicians are willing to take real steps and there are influential interest groups that will oppose to reforms in that regard. Secondly, the American historical example will not and should not be followed by Australia because there are fast differences between the two countries and the timing cannot be any more different too. Australia has struggled to cope with its won natural environment, mainly the dry climate and the lack of rain water. As a dry continent, its soil is poor. The struggle with the Murray Darling Basin water plan is an example of water scarcity in Australia. It is an indication that Australia will struggle more to sustain a large population. In timingwise, now there is no need to become a populous nation to enjoy wealth and freedom. In terms of military and defence, Australia seldom has been under threat of invasions by other nations. Of course interest groups will argue that Australia needs a stronger and larger military force to defend itself. But the question is to defend from who? Its all imaginary.
So forget steretypes and old style thinking, folks. The world is increasingly becoming one. There will not be serious threat to Australia's security in the next hundred years. And, don't ever think that Australia needs a larger population to survive!

Kyoto is both a success and a failure

Comments on Tim Wilson "Failure to extend Kyoto agenda will mean pain at home", 3/12/2012, http://www.theaustralian.com.au/national-affairs/opinion/failure-to-extend-kyoto-agenda-will-mean-pain-at-home/comments-e6frgd0x-1226528457765

The Kyoto Protocol is both a failure and success. That it is a failre is not because 'The journal, Nature, recently argued: "In practice, the 1997 treaty did little to curb emissions of greenhouse gases". The failure came mainly because of the US did not keep its government bargained for and did not do its part. Without the US to demonstrate its committment as the largest emitter at the time, it would always doomed to be a failure. How can the US ask other countries to commit given its per capita emissions is still among the highest and is much higher than those in developing countries including large developing countries such as China and India. That it is a success is because many industrialised countries participated and made a real committment. Rich and high per capita emission countries must demonstrate any deal must be fair on per capita basis.