After a night spent debating the Ukraine crisis with the Russian President, German Chancellor Angela Merkel came out more determined than ever to push the Kremlin out of Eastern Europe
Vladimir Putin has long had a soft spot for Germany. As an officer of the KGB in the late 1980s, he was stationed in the East German city of Dresden, where he developed a love of the language and, according to his memoirs, for the enormous steins of pilsner he drank at a beer hall in the town of Radeberg with friends.
As President, Putin’s foreign and economic policies have always looked to Germany as a pivotal ally, a vital partner in trade and a sympathetic ear for Russian interests. He seemed to feel that no matter what political headwinds came his way, the German sense of pragmatism would prevail in keeping Berlin on his side. That illusion has just been shattered.
During a speech on Monday, German Chancellor Angela Merkel predicted a drawn-out confrontation with Moscow. Breaking from her normally subdued political style, she even invoked the worst years of the 20th century in describing the West’s conflict with Russia over Ukraine. “After the horrors of two world wars and the end of the Cold War, this challenges the peaceful order in Europe,” she said, referring to what she called Putin’s “old-thinking” view of Eastern Europe as Russia’s stomping ground. “I am convinced this won’t succeed,” she said. In the end, the West would win out against the challenge emanating from Russia, “even if the path will be long and hard and full of setbacks,” Merkel told a conference in Brisbane, Australia.
It was in many ways the low point for Putin’s deepening estrangement from the West. During the G20 summit of world leaders held in Brisbane over the weekend, the Russian leader was broadly ostracized by the most powerful figures at the table, and some of them were far less diplomatic toward Putin than Merkel has been. In greeting Putin on Saturday, Canadian Prime Minister Stephen Harper reportedly said, “I guess I’ll shake your hand, but I have only one thing to say to you: you need to get out of Ukraine.”
Later that day, Merkel came to the Hilton Hotel in central Brisbane for an unscheduled meeting with Putin that reportedly lasted almost six hours, running well into Sunday morning. The subject was the conflict in Ukraine, and according to the Kremlin, Putin did his best to “clarify in detail the Russian approach to this situation.” But his efforts to win Merkel’s sympathy – or at least her understanding – appear to have done the opposite. He emerged from their encounter apparently so exhausted that he decided to leave the summit early, saying he needed to get some sleep.
The letdown seemed all the more painful considering his recent attempt to reach out to the German public. A few days before the G20 summit began, Putin decided to give a rare one-on-one interview to the national German television network ARD, whose correspondent grilled him on Russia’s support for separatist rebels in eastern Ukraine. Putin tried to sound conciliatory. “Of course we expect the situation to change for the better,” he said. “Of course we expect the Ukrainian crisis to end. Of course we want to have normal relations with our partners, including in the United States and Europe.”
Particularly for Germany, he argued, it is important to work things out with Russia, because their economies are so closely intertwined. Trade with Russia accounts for as many as 300,000 German jobs, Putin said, and by going along with the sanctions that the West has imposed on Russia, Berlin risks hurting its own economic growth. “Sooner or later,” he said, “it will begin to affect you as much as us.”
The warning, more plaintive than defiant in its tone, was aimed as much at the political elites in Germany as its powerful business interests, which rely on Russia for natural resources and a huge consumer market. Last year the trade between the two countries was worth more than $100 billion, compared to less than $40 billion between the U.S. and Russia. To fuel its energy-intensive industrial base, Germany also gets a third of its oil and gas from Russia, and 14% of everything that Russia imports is made in Germany.
But Putin, for all his appeals to German pragmatism, was wrong to hope that Russia’s isolation could boomerang back on the German economy, or on Merkel’s popularity. Even as the sanctions war choked off trade between Russia and the West, Germany’s total exports reached an all-time high in September. At the same time, Russia’s reputation among the German public has been scraping bottom. In a nationwide survey conducted in August, a German pollster reportedly found that 82% of Germans do not believe that Russia can be trusted, while 70% called for tougher sanctions against the Russian economy.
“So it seems clear that Putin has miscalculated,” says Joerg Forbrig, an expert on Eastern Europe at the German Marshall Fund in Berlin. “Certainly when it comes to Germany.”
This is a costly mistake. In trying to sway Berlin, Putin pursued his best, and perhaps only, chance of breaking the West’s resolve against him. The business lobby in Germany is both more powerful and more sympathetic toward Russia than any major European state, and the German electorate has generally favored a neutral stance on foreign policy.
Just a few weeks after Russia invaded and annexed the Ukrainian region of Crimea in March, nearly half of Germans said that their government should not take sides in the conflict, while 35% urged their leaders to seek an understanding with Moscow. This core of German Russophiles now looks to have evaporated, and with it Putin loses the only Western partner that could have stopped the isolation of his country.
Many in Moscow have watched that turn in German feelings with surprise. “Even during the Cold War, we were laying [oil and gas] pipelines to Germany,” says Leonid Kalashnikov, vice chairman of the foreign affairs committee in Russia’s lower house of parliament. “Back then nobody seemed to mind.”
Under Putin, those energy links have been vastly expanded. In 2011, he launched the Nord Stream natural gas pipeline to pump fuel from Russia to Germany under the Baltic Sea. (In a sign of just how well-connected Putin was in Berlin at the time, Merkel’s predecessor, Gerhard Schroeder, took a job as chairman of that pipeline project after his term as chancellor ran out in 2005.) But at the end of September, Merkel said the European Union may need to break its addiction to Russian fuel in the long term, especially if the Kremlin’s expansionist policies continue to violate “basic principles.”
But even the threat of losing the European market – disastrous as that would be for the Russian economy – is not likely to make the Kremlin yield. “There’s one thing the West just doesn’t understand,” says Kalashnikov. “They can use sanctions to coerce a small country. But Russia is not one of them. We will not get on our knees and do as we’re told.”
Thanks largely to his own anti-Western bluster, Putin’s support in Russia now relies more than ever on his defiance toward the West, and he will sooner accept the role of a pariah abroad than weakling at home. “We’re just not going to chastise him into changing his tune,” says Matthew Rojansky, a Russia expert at the Wilson Center in Washington.
Much more likely, the West’s ostracism will “foreclose” any remaining channels for swaying Putin through dialogue, adds Rojansky. But if Putin was searching for such a channel during his night of debating with Merkel, he has come up empty-handed. It’s not clear if he has anywhere else in the West to turn.
Study authors say nearly 2.5 million American children experienced homelessness last year
The number of homeless children in the United States surged by 8% in 2013 to nearly 2.5 million, according to a new study that attributes the record-breaking figure to a shortage of affordable housing and the lingering effects of a jobless economic recovery.
The report published Monday by the National Center on Family Homelessness combined the U.S. Department of Education’s existing estimate of homelessness among school-age children, 1.5 million, with independent tallies for younger children not yet at school. The revised total suggests that one in every 30 children in the U.S. experienced homelessness in 2013.
The study authors attribute the elevated rates of homelessness to a sluggish economic recovery, compounded by a housing market that has priced out unemployed and low income families. California, in particular, was hard hit with 527,000 homeless children, accounting for one-fifth of the national total.
An unexpected contraction in quarterly GDP shows that Prime Minister Shinzo Abe’s radical economic program is badly broken
If anyone is still holding out hope that Abenomics — the unorthodox slate of economic policies named after their inspiration, Japanese Prime Minister Shinzo Abe — could rescue Japan from its two-decade slump, the news on Monday should dash it. The troubled economy surprised analysts by (once again) tumbling into recession. GDP in the quarter ended September shrank by an annualized 1.6% — far, far worse than the consensus forecasts. That followed a disastrous 7.3% contraction in the previous quarter. Speculation in Japan is that the bad results will push Abe to call a snap election only two years after taking office.
What’s going on in Japan is important for all of us. Since the economy is still the world’s third largest (after the U.S. and China), a healthy Japan could provide a much needed pillar to growth in a struggling global economy.
The current downturn is being blamed on a hike in the consumption tax, implemented in April to try to stabilize the government’s feeble finances, which slammed consumer spending. It is now expected that Abe will delay a further increase in that tax scheduled for next October. But the real causes lie much deeper — in the failings of Abe’s economic agenda.
The idea behind Abenomics was to boost the economy with massive stimulus from the Bank of Japan (BOJ) and the government combined with structural reform of the economy, or what has been called the third arrow. The problem is that we got the first two arrows, but not the third. While the BOJ kept its printing presses rolling, dramatically weakening the value of the yen, badly needed deregulation and market-opening has come extremely slowly. Some critical changes, like a loosening of labor laws, seem to be off the menu entirely. The result is that the actual potential of the economy has not been enhanced. Meanwhile, the welfare of the average Japanese family hasn’t improved either. Wages haven’t advanced much, while prices have increased.
If Japan’s situation proves anything, it is the limits of central bank policy to fix economies. Despite a torrent of cash infused into the economy through the BOJ’s “quantitative easing” or QE, Japan’s economy remains mired in slow growth and stagnant household welfare. That’s why it is hard to imagine that the BOJ’s October decision to increase its QE program will make a major difference. So that’s the takeaway for policymakers in the U.S. and especially a stumbling Europe: If you’re going to rely too much on central bankers to revive growth, you’re going to fail.
The question facing Abe is whether he can press ahead more quickly with important reforms, either in his current administration or after a fresh election, which his party will still mostly likely win. Based on his recent track record, we don’t have reason to be confident. But maybe one day Japan will give us a surprise — in a good way.
Analysis shows increase in the percentage of teenagers and twenty-somethings outside the labor force
Nearly 40% of people in the United States ages 16 to 24 say that they don’t want a job, accounting for a sizable portion of the 92 million Americans who are currently outside the labor force, according to a new analysis of labor statistics.
The figures do not include young people who aren’t working, but are actively seeking employment. About 10% of Americans aged 20 to 24 and 19% of those aged 16 to 19 are considered unemployed, which means they are actively seeking work.
According to Pew Research Center analysis of Bureau of Labor Statistics data, 39.4% of men and women aged 16 to 24 are outside the labor force over the first 10 months of 2014. That’s up from 29.5% in 2000, the steepest rise of any age group and one that pre-dates the recent financial crisis.
The U.S. unemployment hit 5.8% last month, the lowest number since 2008.
Detroit tops the list
Poverty—like the creation of wealth—is a fact of city life.
Here at FindTheBest, we recently examined the most current Five-Year American Community Survey (ACS) data released by the U.S. Census Bureau in 2013 to find the wealthiest cities in America. To fill out the picture of many of these cities, we picked apart the same data set and turned our lens on the places with the highest percentages of households making less than $25,000 a year.
Listed in descending order by the percentage of households with annual incomes below $25,000, here are how the 34 American cities with more than 500,000 residents compare. You can explore each city in greater detail by clicking into the table:
As of 2012—the last year considered in the most recent five-year ACS data—the poverty threshold for a four-person household was $23,492. This amount is a weighted average based on the range of income increases each additional related child necessitates (for a household of four, that’s a maximum of three children). This is according to data from the U.S. Census Bureau.
In the six major U.S. cities with the highest percentages of poverty, at least one in three households make less than $25,000 per year. In Milwaukee and Philadelphia, the proportion is higher at 37.8 percent and 37.6 percent, respectively, and in Detroit, it approaches one in two (49.2 percent). The average across all 34 cities is 28.6 percent.
What’s remarkable is that San Jose is the only city profiled where less than 20 percent of households have a yearly income below $25,000 (in San Jose, 15.6 percent of households make less than $25,000). San Diego and Seattle come close at 20.2 percent each. Put another way: in 33 of America’s 34 biggest cities, at least one in five households makes less than $25,000 per year.
Taking a step back, Detroit—which is getting ready to emerge from the largest municipal bankruptcy in U.S. history—has by far the highest percentage of households earning less than $25,000 per year (49.2 percent).
Moving down the list, cities in the west tend to have fewer households under this $25,000 threshold compared with cities in the midwest and east. Four of the five cities with the lowest percentages of households making under $25,000 per year are on the west coast.
One potential reason for this geographic split could be the role public transportation plays in bringing poorer people to city centers, which is exactly what Edward Glaeser, Matthew Kahn, and Jordan Rappaport argued in 2000 in a working paper for the National Bureau of Economic Research. (the paper was later published in The Journal of Urban Economics in January 2008.) In their view, it isn’t the city itself that creates poverty. Rather, increased levels of mobility and opportunity provided by the central city encourage poorer people to congregate there. Cities in the east and midwest tend to have more public transit options, whereas the car is a central part of sprawling cities in the west — a situation that could lead more poorer people to eastern cities than their western counterparts. More favorable city governments also could play a role.
Municipal management aside, once again, it’s also hard to discount the role of education in creating wealth through information spillovers. While Boston’s 30.8 percent clearly complicates this notion, given that it has solid bachelor’s and graduate degree metrics, the observation remains largely the same — cities situated near world-class research institutions or else with larger numbers of bachelor’s or graduate degree holders tend to fare better.
This article was written for TIME by Ryan Chiles of FindTheBest. More from FindTheBest:
Highest quitting rate since 2008 is a key indicator of rosier economic times
In good news for the U.S. economy, the Labor Department reported that 2.8 million workers, or 2% of U.S. employees, voluntarily left their jobs in September — the fastest rate since 2008.
It might sound strange, but Janet Yellen, Federal Reserve Chair, has zeroed in on the quits rate as a progress marker for returning to a healthy labor market, reports Reuters.
The 2007-09 recessions saw a decrease in the quits rate, with most workers not optimistic enough about the economy to seek opportunities elsewhere. Analysts feared that this had created wage stagnation.
Although joblessness has been decreasing, the lack of worker turnover meant employers had no reason to increase salaries. But according to this latest report, hiring rates are now increasing, giving people more employment options.
The report also highlighted that the job openings rate has fallen, but still remained above pre-recession levels. In the first week of November, the Labor Department reported 278,000 claims for unemployment benefits from the state.
However, “this increase is nothing to worry about,” Ian Shepherdson, a Pantheon Macroeconomic economist, told Reuters, explaining that the claim figure has remained under 300,000 for nine consecutive weeks.
Shinzo Abe is desperate to rescue his failing economic program, but he still hasn't done what's necessary
Tokyo is abuzz with speculation that Prime Minister Shinzo Abe is about to dissolve the Diet, as the country’s legislature is known, and call a snap election.
He by no means has to take such action. It has only been two years since his Liberal Democratic Party, or LDP, swept to power in a massive landslide, and the opposition is in such disarray that there is little doubt Abe would be returned to office in a new election. Nevertheless, Abe apparently feels the need for another vote of confidence from the public, likely in part to bolster support for his radical program to revive Japan’s economy, nicknamed Abenomics.
The problem is that it could already be too late. Abenomics is a failure, and Abe isn’t likely to fix it, no matter how many seats his party holds in parliament.
When Abe first introduced Abenomics, many economists — most notably, Nobel laureate Paul Krugman — believed the unconventional program would finally end the economy’s two-decade slump. The plan: the Bank of Japan (BOJ), the country’s central bank, would churn out yen on a biblical scale to smash through the economy’s endemic and destructive cycle of deflation, while Abe’s government would pump up fiscal spending and implement long-overdue reforms to the structure of the economy. Advocates argued that Abenomics was just the sort of bold action to jump-start growth and fix a broken Japan, and we all had reason to hope that it would work. Japan is still the world’s third largest economy, and a revival there would add another much-needed pillar to hold up sagging global economic growth.
However, I had my concerns from the very beginning. In my view, Japan’s economy doesn’t grow because there is a lack of demand. Pumping more cash into the economy, therefore, will not restart growth. Only deep reform to raise the potential of the economy can do that — by improving productivity and unleashing new economic energies. Unless Abe changed the way Japan’s economy works — and I doubted he would — all of the largesse from the BOJ would at best come to nothing. In a worst-case scenario, Abe’s program could turn Japan into an even bigger economic mess than it already is.
So far, Abenomics has disappointed. GDP shrank a hope-dashing annualized 7.1% in the quarter ending June. Inflation, meanwhile, is nowhere near the BOJ target of 2%, and is slowing. Nor has Abenomics brought significant benefits to the general populace. Job creation and wage increases are sluggish and, with prices increases, the welfare of the average salaried worker has suffered. Meanwhile, an increase in consumption tax earlier this year — made necessary by the need to shore up the government’s shaky finances — further burdened Japanese households and led to a drastic decline in consumer spending.
The response of policymakers has been to double down on Abenomics. On Oct. 31, the BOJ surprised markets by greatly expanding its unorthodox stimulus program, known as quantitative easing, or QE. As part of that, the BOJ will increase its annual purchases of Japanese government bonds by 60% to a staggering $700 billion. More of the same, however, will just have the same result: a short-term boost to sentiment with little lasting effect. In fact, the program is only perpetuating Japan’s bad habits. The extra BOJ cash is weakening the yen — the Japanese currency has tumbled by nearly 7% against the dollar just since the bank’s announcement — which hands Japan Inc. companies more competitiveness without forcing them to undertake any actual improvements.
The problem with Abenomics, therefore, remains the same. More yen printed by the BOJ can’t fix Japan on its own, and can’t replace the fundamental changes necessary to raise the economy’s potential growth. If anything, the BOJ’s latest action only buys Abe a bit more time to implement his pledged reform program, known at the “third arrow” of Abenomics.
So far, though, the third arrow has remained in his quiver. In June, Abe unveiled the latest elements of the plan, which included everything from lowering the corporate-tax rate to spur investment, to enlisting more women into the male-dominated workforce, and bringing further change to an unproductive and outdated agricultural sector. It would be unfair to say that Abe has made no progress on his promises. The number of working women, for instance, has been on the rise under his administration. But many important reforms remain stalled. Abe had announced the formation of “special economic zones,” which would be crucibles of experimentation with the deep deregulation necessary to spark entrepreneurship and investment, but their implementation has crept along at a glacial pace. Serious reform of the country’s distorted labor market seems to have slipped off the table. Abe is also foot-dragging on opening the economy to more competition by holding up the completion of the U.S.-sponsored Trans-Pacific Partnership free-trade pact over an unwillingness to expose Japan’s overly protected farmers to imports.
The big question is whether another election will somehow lead to faster reform. In theory, a fresh mandate could give Abe the added political clout he needs to press ahead more boldly. However, Abe already controls both houses of the Diet, so if he wanted to move more quickly on reform, he could. That has left some analysts wondering what difference an election may make. “A snap election could have the virtue of giving the government a stronger mandate as it struggles to push ahead with structural reform,” commented Mark Williams and Marcel Thieliant of research outfit Capital Economics. But since Abe’s party has already been in a strong position, “an election would not make much practical difference to his ability to get things done.”
Abe continues to insist he is a reformer and will follow through on his grand pronouncements. “Make no mistake, Japan will emerge from economic contraction and advance into new fields and engage in fresh challenges,” Abe recently wrote in the Wall Street Journal. “There is no reason for alarm.”
Alarm bells should be ringing in Tokyo, however. Even if Abe gets the “third arrow” in the air, it could still miss its target. Many of the reforms Japan needs will take years to implement. Meanwhile, the other two arrows of Abenomics may already be running their course. There was opposition within the BOJ to its latest decision to boost QE — an indication that the bank can’t be counted upon to keep the printing presses rolling forever. Nor can Abe dodge the need to stabilize the government’s debt and deficits indefinitely. The government’s debt is 240% of the country’s GDP — the largest among major advanced economies. He’s right now weighing whether or not to hike the consumption tax yet again. Imposing it could deal another blow to growth; postponing it would undermine what little credibility Abe had as a fixer of the nation’s finances.
In the end, repairing Japan requires more political will than Abe has shown. Maybe a new election will help him find it. But don’t hold your breath.
"Responsibility for the poor and the marginalized must therefore be an essential element of any political decision"
Pope Francis warned heads of states attending the annual G20 meeting in Australia about the effects of “unbridled consumerism” and called on them to take concrete steps to alleviate unemployment.
In a letter addressed to Australia Prime Minister Tony Abbott, who is chairing this year’s G20 Leaders’ Summit which begins Sunday, the Pontiff called for its participants to consider that “many lives are at stake.”
“It would indeed be regrettable if such discussions were to remain purely on the level of declarations of principle,” Pope Francis wrote in the letter.
Pope Francis, who has made a habit of addressing the leaders of the G20 meetings, has often raised his concerns with the global economy. Last year, in lengthy report airing the views of the Vatican, he criticized the “idolatry of money” and denounced the unfettered free market as the “new tyranny.”
In the letter published Tuesday, he said that, like attacks on human rights in the Middle East, abuses in the financial system are among the “forms of aggression that are less evident but equally real and serious.”
“Responsibility for the poor and the marginalized must therefore be an essential element of any political decision, whether on the national or the international level,” he wrote.
A debt cancellation twice as large was approved by the IMF for Haiti in 2010
The Feds proposed Tuesday that the International Monetary Fund (IMF) cancel roughly $100 million in debt owed by Liberia, Sierra Leone and Guinea, which have been hit hardest in the current Ebola outbreak.
Collectively, the three countries owe $372 million to the IMF. U.S. Treasury Secretary Jack Lew said in a statement to Reuters that eliminating $100 million of that would strengthen the nations’ economies as they struggle to recover from the devastating effects of the virus, which has killed thousands.
“The International Monetary Fund has already played a critical role as a first responder, providing economic support to countries hardest hit by Ebola,” Lew wrote. “Today we are asking the IMF to expand that support by providing debt relief for Sierra Leone, Liberia, and Guinea.”
Treasury officials said the $100 million may be drawn from the IMF’s natural disaster debt relief fund. The fund was first used to cancel Haiti’s outstanding $268 million of debt owed to the IMF after the 2010 Haitian earthquake, the IMF said.
Without significant intervention in the Ebola outbreak, West Africa could lose up to 4% of annual growth and $25.2 billion of GDP by 2015, according to the World Bank.