LOSING CONTROL (32 page)

19.
Milton Friedman,
A Theory of the Consumption Function
(Princeton University Press, Princeton, 1957).

20.
See, for example, Ian Walker and Yu Zhu,
The College Wage Premium and the Expansion of Higher Education in the UK
, UCD Geary Institute Discussion Paper July 2008.

21.
Remarks by President Obama on international tax policy reform, the White House, Washington DC, 4 May 2009.

1.
Not all of these funds reside in emerging nations and not all of them are controlled by nation states.
Norway and Alaska, for example, both have sizeable funds.

2.
The difference in inflation rates is a token gesture towards the Balassa–Samuelson condition outlined in Chapter 5.

3.
Household savings ratios – the ratios of the gap between income and consumption, divided by income, in any one year – in the developed world were generally much higher in the 1960s than they are today.

4.
Source: Bloomberg.

5.
Manchester City was previously owned by Thaksin Shinawatra, the former prime minister of Thailand, who was deposed in a coup while out of the country and then sentenced
in absentia
to two years in jail.

6.
Many of the Premiership club purchases were funded through short-term debt, an unfortunate process given the arrival of the credit crunch shortly afterwards.
These leveraged deals leave the ownership of clubs in doubt and also raise questions about the motivations of the billionaires regarding the purchase of these clubs: in some cases, it’s not the love of soccer that is driving the deal but, instead, the desire to curry favour and to shift assets across borders.

7.
In a chance conversation with a real-estate agent who specialized in sales in Cap Ferrat, one of the most exclusive areas in the Côte d’Azur, I was reliably told, ‘The English can no longer afford properties here: it’s all Russians and Turks.’

8.
For a detailed description of the aims, objectives and risks associated with SWFs, see
Sovereign Wealth Funds – A Work Agenda
by the IMF, Washington DC, 29 February 2008.

9.
IMF.
Sovereign Wealth Funds – A Work Agenda
, Washington DC, 2008.

10.
All figures quoted in this section come from the
BP Statistical Review of World Energy
, June 2009.

11.
South Stream’s competitor project, Nabucco, was favoured by the European Union but may not be able to guarantee sufficient gas supplies running through its network.
The Russian leadership may still be able to adopt a ‘divide and rule’ approach to supplying energy to Western European powers: indeed, although Turkey signed up for Nabucco in July 2009, causing much EU rejoicing, Vladimir Putin was still able to get Turkey to agree on South Stream in August, helped along by promises regarding oil pipelines and nuclear power.

12.
Gazprom bought Pennine Natural Gas in 2006, its first UK acquisition.
At the time, Vitaly Vasiliev, chief executive of Gazprom’s UK arm Gazprom Marketing & Trading (GMT), said: ‘Gazprom has always intended to enter the UK gas supply market and this deal offers us an excellent base from which to grow our supply business.’
(Source:
Daily Telegraph
, 23 June 2006)

13.
Remarks made at St Petersburg Economic Forum, June 2009.

14.
Alan Beattie, Stephanie Kirchgaessner and Raphael Minder, ‘Left in the cold: foreign bidders find themselves out of favour’, FT.com, 24 April 2008.
It’s unclear whether
Frank’s comments were an attack on Islam: if they were, they were remarkably ill-informed given that around 60 per cent of Malaysia’s population is Muslim.

15.
The US Department of Agriculture publishes a wealth of detail on food production and trade around the world.
‘Food wars’ are, in fact, ‘water wars’ because, in effect, the export of grain is, indirectly, the export of water: grains cannot grow without water.
Climate change will lead to further disruptions in this area.

1.
Slavery was abolished in the UK and its empire through the Acts of 1807 and 1833.
Slavery remained in force in parts of the US until the addition of the Thirteenth Amendment to the US Constitution in 1865.
Nazi Germany and the Soviet Union used slavery.
Saudi Arabia only abolished slavery in 1962.
Today, although slavery is illegal more or less everywhere, the practice hasn’t stopped.
A common modern-day version is human trafficking.

2.
For individual countries and regions, net migration rates are a very important influence to be discussed later in the chapter.

3.
I have to admit that the ‘surge in optimism’ argument is rather unconvincing; to my mind, it sounds like an
ex post
rationalization.
The study of demographics seems to be rather full of these kinds of arguments.

4.
See, for example, David E Bloom, David Canning and Jaypee Sevilla,
Economic Growth and the Demographic Transition
(National Bureau of Economic Research, Cambridge, MA, 2001).

5.
There are, of course, exceptions to this general rule.
Birth rates in Russia, Belarus, the Ukraine and Georgia are remarkably low: their populations are ageing through an absence of youth rather than a huge increase in the elderly.

6.
For those familiar with simple monetary economics, the increase in spending represents an increase in the velocity of money supply.

7.
Source: US Department of Health and Human Services.

8.
Source: Deutsche Bundesbank.

9.
Source: Jeffrey G.
Williamson, ‘Global migration’,
Finance & Development
, 43.3 (2006), IMF, Washington DC.

10.
The Immigration and Nationality Act of 1965 was proposed by Emanuel Celler and co-sponsored by Philip Hart.
It got rid of the national-origin quotas that had been in operation following the 1924 Immigration Act.
A limitation of 170,000 visas was established for immigrants from countries from the Eastern Hemisphere.
No more than 20,000 could come from any one country.
By 1968, the annual limitation from the Western Hemisphere was set at 120,000 immigrants.
Visas were given out on a first-come first-served basis.
The number of family reunification visas was unlimited.

11.
Source: European Commission EURES website.
The specific page is
http://ec.europa.eu/eures/main.jsp?acro=free&lang=en&countryId=UK&fromCountryId=RO&accessing=0&content=1&restrictions=1&step=2
.

12.
The relevant article can be found at
http://www.ukba.homeoffice.gov.uk/sitecontent/ newsarticles/Government-keeps-work-restrict
.

13.
L.
Barbone, M.
Bontch-Osmolovsky and S.
Zaidi,
The Foreign-born Population in the European Union and its Contribution to National Tax and Benefit Systems
, World Bank, Washington, DC, April 2009.

14.
OECD
Economic Outlook Interim Report
, March 2009.

15.
Higher remittances will tend to lift the exchange rate of the receiving country, thereby limiting other areas of economic endeavour.
Overall, though, remittances probably exert a positive economic impact.

16.
For an entertaining, if sobering, history of the UK from the perspective of immigration, read Robert Winder’s
Bloody Foreigners: The Story of Immigration to Britain
(Little Brown, London, 2004).

1.
Fiscal and Generational Imbalances: New Budget Measures for New Budget Priorities
, Policy Discussion Paper No.
5, Federal Reserve Bank of Cleveland, OH, 2003.

2.
In the UK, this would be the equivalent of a doubling of National Insurance contributions for both employers and employees.

3.
Fiscal surpluses would likely lead to lower interest rates, possibly increasing household and corporate borrowing.
The rise in the fiscal surplus would have to more than offset any increase in private-sector borrowing to ensure an overall increase in national saving, which, in turn, would facilitate a move into balance of payments current account surplus.

4.
Source: OECD
Economic Outlook
, June 2009.

5.
At a White House press conference on 16 September 2001, President Bush said, ‘This crusade, this war on terrorism is going to take a while.’
See
http://georgewbush-whitehouse.archives.gov/news/releases/2001/09/20010916-2.html
.

6.
Argentina fell into this trap: it devalued and defaulted to its foreign creditors in 2001.

7.
At the time of writing, Google was attempting to do exactly that.

8.
Source: Office of the Russian Prime Minister.

9.
The Washington Consensus was a view driven by the idea that ‘the market knows best’ and was often imposed by the IMF and others on unsuspecting economies that simply couldn’t cope with liberalized markets and small government.
Most obviously, it demanded aggressive fiscal consolidation.
Funnily enough, this particular stricture has now been forgotten in the light of the huge increases in budget deficits which followed the 2007/8 credit crunch.

10.
‘Sterling’s Past, Dollar’s Future: Historical Perspectives on Reserve Currency Competition’, Tawney Lecture delivered to the Economic History Society, Leicester, 10 April 2005.

1.
Not having a currency does not create a free lunch: governments would have to be more fiscally conservative because the printing press option – creating inflation to defraud government creditors – would no longer exist.

2.
I could go even further: to limit the risk to future British and American taxpayers of having large international financial institutions based in London and New York, why not turn London and New York into international cities, supported by the taxpayers of all nations?
They could then become financial equivalents of the Vatican City: after all, their love of money is sometimes almost religious in its zeal.

3.
A single currency does not, of course, guarantee a free lunch.
Strains within the euro area began to emerge at the end of 2009 as countries with weak fiscal positions were faced with the prospect of years of miserable austerity, threatening political instability.
At the time of writing, it was unclear whether the appetite to take tough fiscal medicine was really there, leading to nervousness in sovereign debt markets.

4.
‘A return to 1815 is the way forward for Europe’,
The Times
, 2 September 2008.

5.
Samuel Huntingdon’s influential – and controversial – take on the world’s political, social, ethnic and religious divisions.

6.
For a detailed discussion of the dangers associated with the narrow-minded labelling of people according to their national, ethnic or religious background, see Amartya Sen’s
Identity and Violence: The Illusion of Destiny
(Allen Lane, London, 2006).

7.
Paul Kennedy’s
The Rise and Fall of the Great Powers
(Random House, New York, 1988) ties together both economic and military influences in explaining shifts in great power tectonics over the centuries.

1.
The classic modern-day texts on these issues include John Rawls,
A Theory of Justice
(Harvard University Press, Cambridge, MA, 1971) and Robert Nozick,
Anarchy, State and Utopia
(Basic Books, New York, 1974).

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, World Bank, Washington, DC, April 2009

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and Schramm, C.,
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———,
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and Sevilla, J.,
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———,
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———,
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, Tawney Lecture, Economic History Society, Leicester, April 2005

———,
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———,
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Friedman, M.,
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———,
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and Smetters, K.,
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, Policy Discussion Paper No.
5, Federal Reserve Bank of Cleveland, OH, 2003

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———,
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“
Of National Characters
” in “Hume: Political Essays”, ed.
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, Washington DC, September 2006

———,
Sovereign Wealth Funds – A Work Agenda
, Washington DC, 2008

———,
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and Shah, S., ‘The distribution of household income 1977 to 2006/07’, Office for National Statistics,
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, 2.12 (2008), pp.
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and Rauh, J.,
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———,
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and Green, S.,
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———,
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———,
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