Project Syndicate: “Sources of Chinese Conduct” by Yan Xuetong

BEIJING – Six decades ago, the American diplomat George Kennan wrote an article, “The Sources of Soviet Conduct,” that galvanized American and world opinion, which soon hardened into the rigid postures of the Cold War. Today, given China’s decisive influence on the global economy, and its increasing ability to project military power, understanding the sources of Chinese conduct has become a central issue in international relations. Indeed, better understanding of China’s foreign policy motivations may help prevent relations between China and the United States from hardening into rigid and antagonistic postures.

Since 2008, discussions among Chinese scholars and strategists on the nature of their country’s foreign policy have focused on two issues: its ideological foundations, and China’s international appeal and standing – its “soft power.”

Mainstream thinking, known as the Chinese School, insists, with the government, on “Marxism with Chinese characteristics” as the bedrock principle of China’s foreign policy. But a minority school argues that China should rely instead on the country’s traditional political thought, emphasizing the universal value of traditional Chinese philosophy. While People’s Daily, the Chinese Communist Party’s official newspaper, consistently attacks that position, the Party itself has been rehabilitating Confucius, the central figure in Chinese traditional thought, going so far as to erect a statue of him in Tiananmen Square.

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Yan Xuetong is professor of political science and director of the Institute of International Studies at Tsinghua University in Beijing. His many books include International Politics and China, American Hegemony and China’s Security and Ancient Chinese Thought, Modern Chinese Power.

Project Syndicate: “Targeting the Targeters” by Brigitte Granville

Speaking in the happier economic times of 2005, Mervyn King – then, as now, Governor of the Bank of England – stressed the importance of entrenching public expectations of stable, low inflation. He warned that, “if you let inflation expectations drift too far away from the target, you can end up in quite serious difficulty with a costly process to bring them back again.” King must now be a worried man.

The Bank of England’s own commissioned quarterly surveys of public attitudes reveal that the credibility of its Monetary Policy Committee (MPC) has now been impaired. For the last 15 months, the 2% inflation target, which is set by the government and is supposed to be enforced by the Bank of England, has been exceeded by more than a full percentage point. For most of this period, the British public expected inflation in the coming year to be lower than in the previous year, thanks to the MPC’s strong track record on price stability. That confidence has now dissipated: inflation expectations have caught up with the actual inflation rate of 4%.

There is no mystery about what is going on. The price-stability mandate has been trumped by concerns about growth. The fear is that tightening monetary policy to bear down on inflation could snuff out the faltering economic recovery.

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Bridgette Granville is Professor of International Economics and Economic Policy at Queen Mary College, University of London, and the author of Remembering Inflation, forthcoming from Princeton University Press.

Project Syndicate: “Europe’s Inevitable Haircut” by Barry Eichengreen

What once could be dismissed as simply a Greek crisis, or simply a Greek and Irish crisis, is now clearly a eurozone crisis. Resolving that crisis is both easier and more difficult than is commonly supposed.

The economics is really quite simple. Greece has a budget problem. Ireland has a banking problem. Portugal has a private-debt problem. Spain has a combination of all three. But, while the specifics differ, the implications are the same: all must now endure excruciatingly painful spending cuts.

The standard way to buffer the effects of austerity is to marry domestic cuts to devaluation of the currency. Devaluation renders exports more competitive, thus substituting external demand for the domestic demand that is being compressed.

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Barry Eichengreen is George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley. His books include Golden Fetters: The Gold Standard and the Great Depression, 1919-1939, and two Princeton books: The European Economy since 1945: Coordinated Capitalism and Beyond and Globalizing Capital: A History of the International Monetary System.

Project Syndicate: “Doing Poorly by Doing Good” by Raghuram Rajan

The new catchphrase in business seems to be “do well by doing good.” In other words, undertaking socially responsible activities boosts profits. For example, Pepsi bolsters its bottom line by shifting to more nutritious, healthier food.

Yet, in much of the world, doing well still implies that you must be up to no good, especially if you are dealing with the poor. A recent case in point is the imbroglio in Andhra Pradesh in India, where the administration has moved to curb microfinance.

Microfinance has become the darling of development enthusiasts. After all, who could be against an activity that produces uplifting stories like the cell phone ladies of Bangladesh, who lift themselves out of poverty by obtaining loans to buy phones and then selling minutes to others in the village.

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Raghuram Rajan is Professor of Finance at the Booth School of Business, University of Chicago, and author of Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton), which was recently awarded The Financial Times/Goldman Sachs Business Book of the Year Award.

Project Syndicate: “The Last Line of Decency” by Ian Buruma

Every Friday afternoon for more than a year, hundreds of Israeli Jews have gathered on a dusty little square in the middle of Arab East Jerusalem. There are some Palestinians there, too, including a couple of boys selling fresh orange juice. The people gather there, in the Sheikh Jarrah neighborhood, to protest the eviction of Palestinian families from their homes to make way for Israeli settlers.

These evictions are humiliating, sometimes violent, and frightening to other Palestinian families – who are in danger of losing their homes as well. Israeli students were the first to organize a protest, known as the Sheikh Jarrah Solidarity Movement. They were followed by distinguished professors, famous novelists, and a former attorney general, among others.

At first, the Israeli police used force against the protesters, even though such demonstrations are perfectly legal in Israel. This provoked such bad publicity that the police backed off, while still blocking the road to the new settlements. All the demonstrators can do is hold up signs, bang drums, chant slogans, and show solidarity just by turning up.

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Ian Buruma is the Henry R. Luce Professor of Democracy, Human Rights, and Journalism at Bard College. His latest book is Taming the Gods: Religion and Democracy on Three Continents (Princeton). He is a regular contributor to many publications, including the New York Review of Books, the New Yorker, the Guardian, and the Financial Times.

Another from Project Syndicate: “The Euro at Mid-Crisis” by Kenneth Rogoff

Now that the European Union and the International Monetary Fund have committed €67.5 billion to rescue Ireland’s troubled banks, is the eurozone’s debt crisis finally nearing a conclusion?

Unfortunately, no. In fact, we are probably only at the mid-point of the crisis. To be sure, a huge, sustained burst of growth could still cure all of Europe’s debt problems – as it would anyone’s. But that halcyon scenario looks increasingly improbable. The endgame is far more likely to entail a wave of debt write-downs, similar to the one that finally wound up the Latin American debt crisis of the 1980’s.

For starters, there are more bailouts to come, with Portugal at the top of the list. With an average growth rate of less than 1% over the past decade, and arguably the most sclerotic labor market in Europe, it is hard to see how Portugal can grow out of its massive debt burden.

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Kenneth S. Rogoff is the Thomas D. Cabot Professor of Public Policy and professor of economics at Harvard University, was formerly chief economist at the IMF. He is the coauthor of This Time is Different: Eight Centuries of Financial Folly (Princeton), Foundations of International Macroeconomics, and a frequent commentator for NPR, the Wall Street Journal, and the Financial Times.

From Project Syndicate: “Europe’s Time to Learn” by Harold James

Crises are a chance to learn. For the past 200 years, with the exception of the Great Depression, major financial crises originated in poor and unstable countries, which then needed major policy adjustments. Today’s crisis started in rich industrial countries – not only with sub-prime mortgages in the United States, but also with mismanagement of banks and public debt in Europe. So what will Europe learn, and what relevance will those lessons have for the rest of the world?

Europe’s contemporary problems offer striking parallels with previous problems on the periphery of the world economy. In successive waves of painful crisis – in Latin America in the 1980’s, and in East Asia after 1997 – countries learned a better approach to economic policy and developed a more sustainable framework for managing public-sector debt. Today it is Europe’s turn.

The European crisis is coming full circle. Initially a financial crisis, it morphed into a classic public-debt crisis after governments stepped in to guarantee banks obligations. That, in turn, has created a new set of worries for banks that are over-exposed to supposedly secure government debt. Sovereign debt no longer looks stable.

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Harold James is Professor of History and International Affairs at Princeton University and Marie Curie Professor of History at the European University Institute, Florence. His books include The Roman Predicament: How the Rules of International Order Create the Politics of Empire (Princeton), A German Identity, International Monetary Cooperation since Bretton Woods, and The End of Globalization: Lessons from the Great Depression.

Project Syndicate: “India or China?” by Jagdish Bhagwati

“When US President Barack Obama visited India in November and complimented its leaders on the growing success and prowess of their economy, a tacit question returned to center stage: Will China grow faster than India indefinitely, or will India shortly overtake it?

In fact, this contest dates back to 1947, when India gained independence and democracy became the country’s defining feature, while China turned to Communism with the success of Mao Zedong after the Long March. Both countries, the “sleeping giants,” were expected to awaken at some point from their slumber. But, since the growth model in vogue at the time laid principal emphasis on capital accumulation, China was widely held to have the advantage, because it could raise its investment rate higher than India, where democracy limited the extent to which the population could be taxed to increase domestic savings.

As it happened, however, both giants slept on – until the 1980’s in China and the early 1990’s in India – mainly because both countries embraced a counter-productive policy framework that crippled the productivity of their investment efforts.”


Jagdish Bhagwati, Professor of Economics and Law at Columbia University and Senior Fellow in International Economics at the Council on Foreign Relations, is the author of Termites in the Trading System: How Preferential Trade Agreements Undermine Free Trade, and two Princeton books: Free Trade Today and The World Trading System at Risk.

Another from Project Syndicate: “Shorting Fiscal Consolidation” by Robert J. Shiller

Real long-term interest rates – that is, interest rates on inflation-protected bonds – have fallen to historic lows in much of the world. This is an economic fact of fundamental significance, for the real long-term interest rate is a direct measure of the cost of borrowing to conduct business, launch new enterprises, or expand existing ones – and its levels now fly in the face of all the talk about the need to slash government deficits.

Nominal interest rates – quoted in terms of dollars, euros, renminbi, etc. – are difficult to interpret, since the real cost of borrowing at these rates depends on the future course of inflation, which is always unknown. If I borrow euros at 4% for ten years, I know that I will have to pay back 4% of the principal owed as interest in euros every year, but I don’t know what this amounts to.

If inflation is also 4% per year, I can borrow for free – and for less than nothing if annual inflation turns out to be higher. But, if there is no inflation over the next ten years, I will pay a hefty real price for borrowing. One just doesn’t know.


Robert J. Shiller is the Arthur M. Okun Professor of Economics at Yale University and author of Irrational Exuberance, The New Financial Order: Risk in the 21st Century, and The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It (all Princeton books).

From Project Syndicate: “Clarity about Diamonds” by Peter Singer

Diamonds have an image of purity and light. They are given as a pledge of love and worn as a symbol of commitment. Yet diamonds have led to gruesome murders, as well as widespread rapes and amputations.

Charles Taylor, a former president of Liberia currently facing war crimes charges at a special court in The Hague, is alleged to have used diamonds to fund rebels in Sierra Leone’s civil war.  The case against Taylor represents only one of several examples in which diamonds have facilitated widespread human rights violations.

When diamonds’ role in fueling violent conflict in Africa gained worldwide attention, the diamond industry established the Kimberley Process in order to keep ‘blood diamonds’ out of international trade. The initiative has met with some success, although it has not completely halted trade in diamonds from conflict-torn countries like the Democratic Republic of Congo.

Read more at Project Syndicate.


Peter Singer is the Ira W. DeCamp Professor of Bioethics in the University Center for Human Values at Princeton University and Laureate Professor at the University of Melbourne. He is also the author of The Expanding Circle: Ethics, Evolution, and Moral Progress. A new edition of this book, with an afterword by Singer, will be available from PUP in June 2011.

New at Project Syndicate: “Don’t Count on Global Governance” by Dani Rodrik

Everybody agrees that the world economy is ill, but the diagnosis apparently depends on which corner of it you happen to inhabit.

In Washington, accusing fingers point to China, blaming its currency policy for causing large trade imbalances and “destroying jobs” in the United States. Go to Seoul or Brasilia, and you will hear complaints about the US Federal Reserve’s hyper-expansionary monetary policies, which are leaving emerging markets awash in hot money and raising the specter of asset bubbles. Ask in Berlin, and you will get an earful about the absence of fiscal probity and structural reforms elsewhere in Europe or in the US.

Self-serving as it may seem, this viewpoint is not without some merit. As economies become intertwined, decisions taken in one part of the world reverberate in other parts, often producing unintended consequences.

Read the rest of the article at Project Syndicate.


Dani Rodrik is Professor of Political Economy at Harvard University’s John F. Kennedy School of Government and the author of One Economics, Many Recipes: Globalization, Institutions, and Economic Growth.

New at Project Syndicate: “The Big Blink” by Raghuram Rajan

World growth is likely to remain subdued over the next few years, with industrial countries struggling to repair household and government balance sheets, and emerging markets weaning themselves off of industrial-country demand. As this clean-up from the Great Recession continues, one thing is clear: the source of global demand in the future will be the billions of consumers in Africa, China, and India. But it will take time to activate that demand, for what is now being produced around the world for industrial-country consumers cannot simply be shipped to emerging-market consumers, especially the poorer ones among them.

If we want to talk about billions of new consumers, rather than the tens of millions who have incomes similar to the middle classes in industrial countries, we must recognize that many emerging-market consumers have much lower incomes than industrial-country consumers, and live in vastly different conditions. Their needs are different, and producers around the world have, until recently, largely ignored them.

But times are changing. Increasingly, producers are focusing on people who, if not at the bottom of the income pyramid, comprise the vast numbers nearer the base.

Read the rest of the article at Project Syndicate.


Raghuram Rajan is Professor of Finance at the Booth School of Business, University of Chicago, and author of Fault Lines: How Hidden Fractures Still Threaten the World Economy, which was recently awarded The Financial Times/Goldman Sachs Business Book of the Year Award.