Genuine Progress Indicator (GPI)

I stumbled upon this metric in the economy named the genuine progress index (GPI). I explored a little bit to see how it was constructed and what sort of domains it covers. 

The formula to calculate GPI is below, along with a brief explanation of what each component means.

GPI = Cadj + G + W - D - S - E - N

• Cadj = personal consumption with income distribution adjustments
• G = capital growth
• W = unconventional contributions to welfare, such as volunteerism
• D = defensive private spending
• S = activities that negatively impact social capital
• E = costs associated with the deterioration of the environment
• N = activities that negatively impact natural capital

It's important to note that assigning monetary values to non-market goods and services and assessing the impact of social and environmental factors involves a degree of subjectivity. Therefore it is possible that there are some intersubjective variations in GPI calculations.

Assigning Monetary Values in GPI Calculations

Determining the monetary values for non-market goods and services in GPI can be tough. The calculations can be a bit of a puzzle, and economists use several methods to crack it. One way is through market price estimation where economists look at the prices of similar market goods as stand-ins for non-market ones. In cases where there's a direct substitute (or similar good), this is typically the most ideal case.

Economists could also go straight to the source, asking people directly about their preferences or observing consumer behavior in surveys and revealed preference methods. Surveys can often reveal consumer sentiment about the value additions and deductions from any given good.

Another approach to assigning monetary value involves shadow pricing. Shadow pricing happens when we estimate the economic value of non-market goods by looking at the costs or benefits associated with their use or depletion. For instance, think about the cost of environmental degradation or the loss of biodiversity. Even though there may not be a direct economic cost there that contributes to a good, there is still value lost that can be at least tracked, if not measured one way or another.

Last, economists may choose to layer on assumptions when looking at market transactions. They may choose to analyze a price from the lens of what that good's price or cost could be due to non-market factors or how a price is derived from a hedonic pricing angle. For instance, the price of a home may be based on the size of the home, age of the home, or neighborhood. Understanding these factors may attribute value to other comparables, and this strategy can be used across different types of goods.

GPI vs. GDP

GDP increases twice when pollution is created – once upon creation (as a side-effect of some valuable process) and again when the pollution is cleaned up. By contrast, GPI counts the initial pollution as a loss rather than a gain, generally equal to the amount it will cost to clean up later plus the cost of any negative impact the pollution will have in the meantime. Quantifying the costs and benefits of these environmental and social externalities is a difficult task.

By accounting for the costs borne by society as a whole to repair or control pollution and poverty, GPI balances GDP spending against external costs. GPI advocates claim that it can more reliably measure economic progress as it distinguishes between the overall "shift in the 'value basis' of a product, adding its ecological impacts into the equation." 

The relationship between GDP and GPI mimics the relationship between the gross profit and net profit of a company. The net profit is the gross profit minus the costs incurred, while the GPI is the GDP (value of all goods and services produced) minus the environmental and social costs. Accordingly, the GPI will be zero if the financial costs of poverty and pollution equal the financial gains from the production of goods and services, all other factors being constant. The following is from the website investopedia.com

Advantages and Disadvantages of GPI

Genuine Progress Indicator (GPI) measures the economy holistically by considering economic indicators that the GDP doesn't. For example, it accounts for negative externalities, such as pollution and crime, and other social breakdowns that compromise the economy and the welfare of the people it serves. These events create large societal costs from the resulting damages.

Benefits to society, such as volunteerism, housework, and higher education are significant contributions to society but were largely ignored because they were difficult to quantify.
 And as no consideration is given in exchange for these types of services, they are not included in the GDP. However, to account for their impact on the economy, the GPI prescribes values to each.

Accounting for these activities and events that ordinarily have no assigned values can be problematic. Including them requires values to be assigned, and these values can differ based on who is ascribing them. This level of subjectivity can make it difficult to compare GPIs.

Also, the broad definition of GPI allows for different interpretations and calculations. These inconsistencies can make it difficult to get an accurate accounting of factors and compare GPIs. They also make it difficult for GPI to be adopted as the economic standard of measurement.

Pros

• Includes environmental and social factors not considered in the GDP

• Assigns values to societal contributions, such as volunteering

• Quantifies an overall impact in a single, simple number that may be easier to compare over time

Cons

• Makes it difficult to compare GPIs due to subjectivity

• Allows for different interpretations and calculations due to broad definition

• May result in assumptions (at least for the non-monetary variables)

• 
  

c'est l'amour

Michael Haneke, right, with (from left) Jean-Louis Trintignant, Adrien Brody and Emmanuelle Riva after Amour won the Palme d'Or at Cannes. Photograph: Yves Herman/Reuters

The 65th Cannes film festival drew to a close with the director Michael Haneke being awarded the Palme d'Or for Amour.

His victory was greeted with acclaim but an understandable lack of surprise: Amour had been hotly tipped ever since it unspooled on the fifth day of the festival.

The jury, presided over by former Palme d'Or winner Nanni Moretti, gave the chief award to Haneke, saying the jury was not unanimous on any of the awards, but that many of the contending films were "more in love with their style than their characters"; this, presumably, was where Haneke differed.

Amour, which stars French veterans Jean-Louis Trintignant and Emmanuelle Riva as well as Isabelle Huppert, describes the relationship between an elderly married couple when one of them is incapacitated by a stroke.

The Palme d'Or is Haneke's second; his last was only three years ago for The White Ribbon. In this he joins a select company, including Emir Kusturica and the Dardenne brothers.

The Austrian director accepted the award in his characteristically low-key way, saying: "It's a harsh thing to have to contend with. It's something I had to contend with in my own family, and that's why I started to make this film."

Haneke also mentioned his own wife: "This film is an illustration of the promise we made to each other, if either one of us finds ourselves in the situation that is described in the film."

The Grand Jury prize, Cannes' second most prestigious award, was given to Matteo Garrone, the Italian director whose film Reality explored the effect of reality TV. Garrone's award was genuinely unexpected, perhaps reflecting the common cultural ground between him and the jury president.

British cinema scored a pleasant surprise as the bronze-medal Jury Prize went to Ken Loach's The Angels' Share, a whisky heist comedy set in Scotland. Loach, who is held in high esteem on the European festival circuit, took the opportunity to affirm his opposition to Europe-wide austerity economic policies when accepting his award; he elaborated on the issue afterwards in the winners' press conference.

"The characters in the film have no work, and the world tells them they have no worth," Loach said. "We are reminded of the situation in Europe where people are told they have to stay out of work, and stay of no value. So we are in solidarity with those against austerity – another world is possible."

A rare moment of levity was provided by Mexican director Carlos Reygadas, whose best director award was probably the biggest surprise of the night, after a string of negative reviews for his film Post Tenebras Lux. Reygadas bounced into the winners' press conference, punching the air, and stood balancing his award certificate on his head. British jury member Andrea Arnold had earlier defended his film to the hilt, saying it had "dared to fail".

Probably the most disappointed director on the night was Leos Carax, whose Holy Motors looked likely to scoop at least one award. Moretti said: "Opinions were divided within the jury over several films; some won awards, some did not."

But one popular winner was the young American, Benh Zeitlin, whose surreal coming of age film Beasts of the Southern Wild won the Camera d'Or for best first film. Zeitlin, the only American to win a major prize, explained that nearly all his cast and crew were first-timers too: "We were a lot of inexperienced people running fast into the unknown."

Former Bond villain Mads Mikkelsen also drew loud cheers when his best actor award was announced for the child-abuse-accusation drama The Hunt. Jury member Ewan McGregor said: "The wonder was in the subtlety."

@Guardian

My Author of The Month (November 2011)

I finished "The Buddenbrooks" in november and i dedicate this post to its great creator Thomas Mann. The drama is a twisted epic about the decline of a family. It conveys many dimensions which can be analyzed and studied. I attached an article from Ian Sansom, explaining the term "the Buddenbrooks effect", an extension of Mann's novel to fields like economics, history, etc. He intends to formulate a great dynasty through this. pedram 

Historians and economists sometimes refer to the Buddenbrooks effect. The term derives from Thomas Mann's 1901 novel, Buddenbrooks, in which he depicted the decline of a bourgeois family (which rather resembled Mann's own). The Buddenbrooks effect refers to the tendency among family businesses to decline over a period of about three generations. All good things, in other words, must come to an end. And all good columns also.

In our discussion of family dynasties we have covered princes and politicians, kings, queens and emperors, movie stars, musicians, writers, artists and wrestlers. We never quite got round to the Capetians, the Merovingians or the Carolingians. Many families of dictators got away, including the Gaddafis and the Kabilas. As for banking and business families, there were just too many: the Barings never got a look in, or the Fords, or the Gettys.
We barely mentioned the French – the Mitterrands, the Le Pens, the De Gaulles – let alone the Swiss Bernoulli family of mathematicians, or the English Knott family of lighthouse keepers. Among the fictional families, the Simpsons got a mention, but Tolkein's Tooks and JD Salinger's Glass family failed to make the cut.
For some of the families we surveyed, as well as many whose stories are untold, the Buddenbrooks effect certainly seems to apply. The classic Buddenbrooks downcurve looks like this. There is a founder of the dynasty. They achieve great success: they build a better mousetrap. Their son or daughter then struggles to achieve similar or greater success: there are only so many amazing things one family can do with a mousetrap. Then along come the grandchildren, who turn out to be nogoodniks who squander the inheritance, sully the family name, and sell the mousetrap business. And so back to square one.
This pattern applies particularly to family business dynasties: capitalism triumphs over hearth and home. But for others, the Buddenbrooks effect is only the beginning of a much longer and more complicated story, or simply does not apply at all. The Mughals, for example, ruled for generations, demonstrating, if anything, a kind of double Buddenbrooks effect. And there were dozens of Bachs who excelled as musicians from the 16th to the 19th century. The great Khan squash dynasty were more like a sprawling clan than a family. And the Holy Family abide by rules entirely of their own.
In his book Dynasties: Fortunes and Misfortunes of the World's Great Family Businesses (2006), economist David S Landes quotes from a set of rules drawn up by Robert Peugeot, scion of the French car manufacturing dynasty. Peugeot sought to secure the family future and fortune by insisting that "Shares in the enterprise would be passed only to sons, never to daughters or sons-in-law" and that "Black sheep had to be put aside, where they could make no trouble". It is one way of avoiding the Buddenbrooks effect. There are others.
Stephen R Covey, in his book The Seven Habits of Highly Effective Families (1998), suggests that families write their own mission statement, which may be worth considering, though try explaining your Latin motto – Virtus Repulsae Nescia, say, or Nec pluribus impar – to your Xbox-addicted teen. Versions of the Covey approach can be found in Matthew Kelly's Building Better Families: A Practical Guide to Raising Amazing Children (2008) and Steve Stephens' 20 Surprisingly Simple Rules and Tools for a Great Family (2006), where the first rule is simply, "Plan ahead".
Other ways to ward off the Buddenbrooks effect include: not having children; not allowing your children to have children; or simply ensuring that any children you do have inherit only your good humour, tolerance and a capacity to muddle through.

 by: Ian Sansom

WikiLeaks cables: Saudi Arabia cannot pump enough oil to keep a lid on prices

by : John Vidal
The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.
The revelation comes as the oil price has soared in recent weeks to more than $100 a barrel on global demand and tensions in the Middle East. Many analysts expect that the Saudis and their Opec cartel partners would pump more oil if rising prices threatened to choke off demand.
However, Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, met the US consul general in Riyadh in November 2007 and told the US diplomat that Aramco's 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached.
According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil production would have hit its highest point. This crunch point is known as "peak oil".
Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He argued that Aramco had badly underestimated the time needed to bring new oil on tap.
One cable said: "According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray."
It went on: "In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716bn barrels of total reserves, of which 51% are recoverable, and that in 20 years Aramco will have 900bn barrels of reserves.
"Al-Husseini disagrees with this analysis, believing Aramco's reserves are overstated by as much as 300bn barrels. In his view once 50% of original proven reserves has been reached … a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output."
The US consul then told Washington: "While al-Husseini fundamentally contradicts the Aramco company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered."
Seven months later, the US embassy in Riyadh went further in two more cables. "Our mission now questions how much the Saudis can now substantively influence the crude markets over the long term. Clearly they can drive prices up, but we question whether they any longer have the power to drive prices down for a prolonged period."
A fourth cable, in October 2009, claimed that escalating electricity demand by Saudi Arabia may further constrain Saudi oil exports. "Demand [for electricity] is expected to grow 10% a year over the next decade as a result of population and economic growth. As a result it will need to double its generation capacity to 68,000MW in 2018," it said.
It also reported major project delays and accidents as "evidence that the Saudi Aramco is having to run harder to stay in place – to replace the decline in existing production." While fears of premature "peak oil" and Saudi production problems had been expressed before, no US official has come close to saying this in public.
In the last two years, other senior energy analysts have backed Husseini. Fatih Birol, chief economist to the International Energy Agency, told the Guardian last year that conventional crude output could plateau in 2020, a development that was "not good news" for a world still heavily dependent on petroleum.
Jeremy Leggett, convenor of the UK Industry Taskforce on Peak Oil and Energy Security, said: "We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse."

Source : Guardian
Photo : Saudi oil refinery. WikiLeaks cables suggest the amount of oil that can be retrieved has been overestimated. Photograph: George Steinmetz/Corbis

Turkey Figure

Prime Minister Recep Tayyip Erdogan of Turkey seems on a path to win his third election in a row, having effectively neutered a once-all-powerful military.
Arriving at a template that effectively integrates Islam, democracy and vibrant economics has been a near-impossible dream for Middle East reformers stretching back decades. To a large extent, Egypt’s inability to accommodate these three themes lies at the root of its current plight.
But no country in the region has come closer to accomplishing this trick, warts and all, than Turkey. As a result, diplomats and analysts have begun to present the still-incomplete Turkish experiment as a possible road map for Egypt.
“Turkey is the envy of the Arab world,” said Hugh Pope, project director for the Turkish office of the International Crisis Group. “It has moved to a robust democracy, has a genuinely elected leader who seems to speak for the popular mood, has products that are popular from Afghanistan to Morocco — including dozens of sitcoms dubbed into Arabic that are on TV sets everywhere — and an economy that is worth about half of the whole Arab world put together.”
The idea is not new. President Obama’s first trip as president to a Muslim country was to Turkey in April 2009, and he hailed its progress as a Middle East model. (His visit there preceded his better-remembered speech in Cairo by two months.)
Since then, the already wide distance separating these countries has grown. Turkey’s economy and its internationally competitive companies are expanding at a relentless pace. Meanwhile, its mildly Islamist prime minister, Recep Tayyip Erdogan, seems on a path to win his third election in a row, having effectively neutered a once-all-powerful military apparatus long seen as the guardian of secularism in the country.
It has not always been this way.
Indeed, when Hosni Mubarak came to power in Egypt in October 1981, after the assassination of President Anwar el-Sadat, Turkey was still being governed by its army, which one year earlier intervened to impose a sense of order on the country’s fractious political scene.
But while Mr. Mubarak, a military man himself, banked upon authoritarian rule, paying only lip service to democratic institutions and running rigged elections, the general behind the Turkish coup, Kenan Evren, moved to withdraw from politics. The constitution he imposed left the military considerable scope to meddle in political affairs, but it allowed civilian institutions to bloom.
On the economic front Egypt maintained state control, with many restrictions on foreign trade and domestic competition. By contrast, Turkey, which hopes to join the European Union, has opened up its economy and unleashed a dynamic private sector.
Today, with similarly sized populations of about 80 million, Turkey has an economy that is nearly four times the size of Egypt’s.
Its recent growth spurt has been driven by Mr. Erdogan, who came to power in 2003 and focused first on reducing deficits and bringing down inflation. Only after he demonstrated success in raising living standards did he feel confident enough to overcome opposition from the determinedly secular army and the cosmopolitan elite in Istanbul by introducing elements of Islam into Turkish public life.
He has been rewarded with broad popular support at home — demonstrated in September when Mr. Erdogan easily won a referendum that further diluted the military’s powers — and growing influence abroad.
In responding to the Egypt crisis, President Obama telephoned Prime Minister Erdogan twice in six days to discuss the unfolding events, and administration officials say they have been keeping in close contact with their Turkish counterparts at all levels.
“There’s no question that Turkey can play a role,” one administration official said. The official, speaking on grounds of anonymity, noted that Mr. Erdogan and Turkish leaders had publicly called for Mr. Mubarak to listen to what the protesters on the streets of Cairo had been saying — words that might have heartened democracy advocates in the Muslim world.
Turkey’s ability to thrive as a predominantly Muslim country that maintains diplomatic relations — though chilly — with Israel is one that American officials would like to see other Muslim nations develop.
But it is also true that actions taken by the Erdogan government against the Turkish news media have been a cause for some concern, a point made recently by the new American ambassador to Turkey, Francis J. Ricciardone Jr., who was ambassador to Egypt from 2005 to 2008.
With the Egyptian military likely to play the role of political guarantor in any transition from Mr. Mubarak’s rule, analysts suggest that Turkey might serve as a model for introducing new political parties, writing a constitution from scratch and ultimately stepping aside and letting the democratic process play out (as uncomfortable as that might be) — all of which the Turkish military has done since the 1980 coup.
“The military did not overplay its hand in Turkey,” said Soner Cagaptay, an analyst at the Washington Institute for Near East Policy. Mr. Cagaptay also said that even though Mr. Erdogan had made gains in pushing his Islamist agenda, the military served as an effective restraint.
“The relative moderation of Islamic parties in Turkey is due to the military,” he said.
There are still substantial differences between the countries. For the Turkish military, its organizing philosophy has always been preserving the secularist traditions that Turkey’s post-World War I founder, Kemal Ataturk, set in place. In Egypt, while the Muslim Brotherhood has been officially banned, the army has been seen more as the defender of the authoritarian status quo rather than secularism itself.
How the military in Egypt deals with the Muslim Brotherhood — by far the most powerful civic force in the country — will be crucial in determining the country’s political future.
Can it, as was the case in Turkey, encourage the formation of competing political parties? And can it encourage the moderate elements of the Muslim Brotherhood to come to the fore rather than its more militant factions?
Turkey may have a more direct role to play on that front. Mr. Erdogan’s party has already established ties to the Muslim Brotherhood — a result of Mr. Erdogan’s long and successful campaign to present himself as a dominant and increasingly anti-Israeli voice in the Middle East.
According to research by Dore Gold at the Jerusalem Center for Public Affairs, three members of the Muslim Brotherhood — two of whom serve in the Egyptian Parliament — were on the Turkish-sponsored ship that was attacked by Israeli forces on its way to deliver aid to the Gaza Strip in May.
“There is a great deal of ideological compatibility between the A.K.P. and the Muslim Brotherhood,” said Mr. Gold, a former top adviser to Prime Minister Benjamin Netanyahu of Israel, referring to Mr. Erdogan’s Justice and Development Party. “This is something to watch carefully.”
Perhaps, but in the end that could be a plus rather than a minus.
For all his Islamist sympathies, Mr. Erdogan is at root a pragmatist. As a young firebrand he was jailed for his antisecular rhetoric but now, after working within Turkey’s democratic framework rather than outside it, he is recognized as perhaps the Middle East’s most influential figure.

by : Landon Thomas Jr.

Homeless Billionaire

As I walk into the lavish dining room of the Carlyle Hotel in New York, I notice a figure who looks vaguely like an elf. He is hunched on a very low red stool, partly behind a door, so close to the floor that his frame seems diminutive, with a slightly pointed face and watchful, intense manner. Is that Nicolas Berggruen, I wonder?
If I am unsure of what to expect, it is no surprise. Berggruen, 47, has spent most of his life in the shadows. The Paris-born investor is reportedly one of the world’s wealthiest, having conjured a $2.2bn-plus fortune buying real estate and stakes in companies such as Karstadt, the German retailing group, and Prisa, the Spanish media conglomerate that publishes El País and owns Le Monde. Normally, this kind of success comes with lavish houses, cars and paintings – maybe even a football club. And, until recently, Berggruen did own such toys, including plenty of art (a passion instilled by his father, Heinz, a renowned German Jewish art dealer who fled the Nazis and later became a friend of Pablo Picasso). But a few years ago, he apparently tired of what billions can buy. So he gave his art to museums, on long-term loans, sold his homes in New York and Florida along with most of his possessions. Except, that is, for a jet that now spirits him around the world, a “homeless billionaire” moving from hotel to hotel – or so the urban legend goes.
Berggruen (for it is he) springs to his feet, up to a normal height, and we are quietly ushered to the only free table in his current temporary “home”, in an annexe full of tapestries, cushions and mosaics. It is quite different from the austere sea of white marble found in the Carlyle’s main restaurant and feels like a slightly whimsical, magical place. Is it really true, I ask, that you don’t live anywhere.

“That’s the truth,” he replies, in an accent that is not entirely French or American or German (German is his family’s first language). “I spend time in London, New York, California and in, let us say, ‘standard’ places and much less standard places.” These, it transpires, include destinations ranging from Japan to the Congo.
So where does he keep his clothes? Today he is decked out in an understated but clearly expensive dark blazer and open-necked shirt. “Luckily, as a man you don’t need much,” he says, pointedly eyeing my dress. “I have very few possessions ... a few papers, a couple of books, and a few shirts, jackets, sweaters. It fits in a little thing, in a paper bag, so it’s very easy.”
My mind boggles; I cannot conceive of a 21st-century billionaire nomad carting his possessions about in a paper bag. Even on a private jet. “You seem very stern ... very disturbed by this,” he observes, searching my face with intense blue-grey eyes. “You are funny.”
I’m the funny one, I wonder indignantly; his Teutonic style of delivery is such that I cannot tell whether he is jesting, needling, or flirting.
“I don’t recommend this lifestyle for others,” he continues, explaining that he first started to turn “nomadic” 10 years ago. “I have always spent a lot of time in hotels, so it started to seem easier to do this, I feel happier. I am not that attached to material things. And the good thing is I can make choices.
“Now, si prego!” He summons a waiter, with the air of a man who always gets what he chooses. “The lady is going to have a lobster salad, right? Can I have a salade niçoise please, no anchovies. And the sauce, not the garlic sauce, you have a horrible garlic sauce. There is one sauce that is excellent but it’s not the garlic one. Thank you! Now, back to you ... ”
I suggest wine but it is summarily rejected: “I don’t drink, I don’t indulge. Quite sad. Boring.” We both order water and double espressos instead. He has just arrived from California and confesses to being “a little jet-lagged”.
Berggruen’s unusual approach to life began early. Born in 1961, with one brother and two half-sisters, he enjoyed a privileged childhood, courtesy of his father’s art business, and went to school in Paris, where he became a wildly leftwing teenager. “I wouldn’t learn a word of English [at school] because that’s the language of imperialism,” he recalls. He later attended a Swiss boarding school, to broaden his experience, but was expelled for sedition.
In 1978, still a teenager, he moved to London and a year later attended New York University to study business. “I decided to reverse. I said, ‘OK, let’s learn about the real world and capitalism.’ The real world for me was a game and I wanted to work out how to function in it, to use it as a platform.”
In 1988, he co-founded Alpha Investment Management, a fund of hedge funds, with Julio Mario Santo Domingo Jr, the eldest son of a Colombian tycoon. They later sold it to Safra Bank for an undisclosed sum. He also created Berggruen Holdings, a private vehicle that buys stakes in companies around the world. Berggruen has never explained in detail the secret of his investment success. Indeed, when a Dutch magazine ran a profile a few years ago, he tried to buy all the copies and destroy them. “I wanted to be private,” he says. But these days Berggruen Holdings has a website, which says that the group holds real estate and long-term stakes in ventures ranging from GLG hedge fund to Karstadt and La Prisa and, more recently, the British Resolution insurance group. These, he says, have created his wealth. “My father helped me through school but everything else I did on my own.”
And, having conjured a fortune, he has now a second more ambitious goal: a bold initiative to change the way that western politics and government is conducted. A few years ago, he started attending university courses and became fascinated with the flaws in western government systems. “I have always been very interested in history, so I sat down with a group of intellectuals and wrote a utopian constitution.”
He also used $100m of his money to create a think-tank, the Berggruen Institute, which promotes fresh debate about politics and constitutional reform. Then, four months ago, he used $25m to launch a more specific campaign to “save” California, a place where he spends several months each year, usually living at the Peninsula Hotel in Beverly Hills.
The institute is now promoting radical fiscal measures to tackle the state’s ballooning debt burden and to implement longer-term structural reforms, under the rubric of the “Think Long Committee for California”. Berggruen has so much clout that his committee is now backed by a formidable array of political and business heavyweights, such as Condoleezza Rice, former US secretary of state, Eric Schmidt, chief executive of Google, and Gray Davis, former governor of California.
But why does he care so much about the Golden State? Until now his most notable contribution to the region has been to throw a star-studded party each year for the Oscars (where he is usually photographed with a bevy of beautiful stars; he does not have a long-term companion).
“California is the kind of place where change is possible,” he explains. “California is in trouble – but I think California is ready.” More specifically, the severity of the debt problem in California – which is almost comparable to that of Greece or Ireland – makes it a bellwether for the rest of the US but has also bred a sense of crisis and receptiveness to change. And, since California has a constitution that allows politicians to introduce new reforms through a popular vote, Berggruen plans to put his ideas directly to the electorate. “California is worth saving,” he insists.
Our food arrives but Berggruen barely notices. Earnestly, he explains that since his teenage years he has always wanted to write a better constitution for the modern world, drawing on the best traditions of both east and west. “I feel very strongly that the two things that make a country good or not are culture and government ... my utopian constitution combines western values of the individual with the excellence of government and ideal of harmony that exists more in the east ... The key issue is: how good are the structures of government, how good are they at delivering to citizens?” And now, he argues, this issue is doubly relevant given that so many western government institutions appear to be hopelessly paralysed and deficient.
But if you want to fix something, I say, why not start with Germany? “If I went to Germany and said, ‘Listen, I’ve got a bag of reforms for you,’ they would throw me out. They would say, ‘We’re Germans, we’re wonderful, we’re perfect,’ ” he says. “But here [in the US] there is a very different attitude. The system is broken, people realise it’s very broken. In California they’re all unhappy.”
So what model does he want instead? Singapore? “I think it’s probably the best-run country in the world. It probably is on the authoritarian side and it needs to loosen up a little bit,” he observes. “But the ideal system is not necessarily the most exciting system. Probably, on average, boring is good for the average person.”
That medicine is presumably not intended for him, I observe; after all, he would not park in “boring” Singapore for long. “I am a hypocrite,” he admits. “But I am not thinking of me but what is good for most.”
I laugh but, as I eat my lobster salad, I feel torn. Is it just a crazy fantasy to hope that a billionaire could solve California’s fiscal woes simply by sprinkling about some intellectual fairy dust? Perhaps. Yet his passion is mesmerising; this is a man who truly believes that he can conjure a new future. And having worked in the US for the past year, I agree with Berggruen’s criticism of the modern political system. I am also impressed that he wants to do more than just grumble.
So, I ask, is this going to be your legacy? He confesses that these days he gets “bored” making billions through business ventures. He plans to continue with his investments but wants to put more effort into politics and philosophy; one model, he concedes, is George Soros, the financier and philanthropist. Since Berggruen does not have any children, he also plans to give his money away to his political think-tank and other reform causes. He is considering creating a media empire to provide an alternative to Rupert Murdoch’s, and promote civil society.
“The biggest problem is time, not enough time to do everything and not enough time to be bored,” he complains. “My greatest luxury is boredom, but it never happens.”
I glance at my watch and say that I should get the cheque; his plate is barely touched but I have eaten most of my salad.
“You seem to be in a rush, I’m much more relaxed than you,” he chides.
I point out that his office had told me that my allotted time was one hour.
“No, you had an hour and a half,” he insists. “In six minutes, I go.” Being a global nomad might sound bohemian, but a team of earthly staff is clearly organising his diary with Teutonic precision.
I gesture for the cheque, and he grabs it. Equally firmly, I lunge. But he pulls it away. “I live here, this is my house,” he declares, laughing. “I pay.”
No, I argue, I have to pay. It’s the rules of the article.
“I know. But in this case, we’ve bypassed the rules.”
We sit frozen in a stand-off, staring at each other. Then he glances at the bill: “Hold on – oh my God, it’s very expensive!” he says. “That’s very embarrassing.” I glance too: it is, indeed, startlingly expensive; though my lobster salad tasted very pleasant, it was not so extraordinary.
“See, I must pay,” he says.
I wonder whether I dare make a huge scene – and then give up. Being a homeless billionaire, I reflect, can clearly be a very expensive business; especially if you camp in places such as the Carlyle. But as I leave the ornate restaurant, without the bill, I also feel oddly cheered.
If Berggruen displays as much stubborn determination in pushing his ideas as he did with this bill, then maybe – just maybe – they might actually fly. In any case, I would like to dream so: right now, the western world certainly needs political magic.

The Fault Line of Democracy

China may have invented the first printing press in 593 and published the first woodblock-printed newspaper, Kaiyuan Za Bao, in Beijing in 713. But in 2010 it wants to curb the newest information innovation led by Google.
To avoid censorship, Google has moved its search engine to Hong Kong and may leave China altogether after hackers, hidden for deniability somewhere deep within the Communist bureaucracy, breached Google’s proprietary systems and pieced together the e-mail exchanges of Chinese dissidents in order to trace their social networks.
Clearly a clash is shaping up that pits the raucous free-for-all of the Internet against China’s long-standing Confucian proclivity for order, respect for authority and a conformist notion of social harmony.
As they try to rebalance a relationship in which China still largely depends on American consumption of its exports and the United States largely relies on China’s purchase of U.S. Treasury debt, these tightly tethered partners in prosperity will only intensify their interaction in the coming decade. Inevitably, as the geo-civilizational plates push up against one another and produce tremors, might the cultural equivalent of subduction take place? Might, for example, more appreciation for freedom of expression shift Eastward and a greater appreciation of governing in the common interest and long-term perspective shift Westward?
To be sure, there is much cultural history under the bridge of today’s interdependence that contributes to the tectonic pace of convergence. China’s ancient “Warring States” period ended with a commitment to unified territorial integrity and stability that led to a modern focus on political control and social harmony. The path to peace after the West’s religious wars led to the opposite ideals: tolerance and diversity. In the Confucian tradition, China has relied on ethics, including obligations of the ruler to the ruled, and education to keep its institutions responsive, fair and honest. The West has relied on the check of democracy.
Nonetheless, as the political philosopher Daniel A. Bell proposes, some common ground can be envisaged along the fault lines.
Counterintuitive as it may sound to the Western ear, China may be more open to fundamental political reform than the United States. Since the rule of law in America is based upon the notion that the state itself is constrained by a body of pre-existing law that is sovereign, any thought of rewriting the Constitution is anathema.
In China, however, some intellectuals point out that Communist Party theory posits that the current system is the “primary stage of socialism,” meaning that it is a transitional phase to a higher and more superior form of socialism. The economic foundation will change with broader prosperity, and thus the legal and political superstructure must also change.
That has led some contemporary Confucian scholars to argue that new institutions for the higher stage of development should be designed based on indigenous sources of legitimacy from within the Chinese experience — meritocratic knowledge of the governing class, the people and tradition.
Mr. Bell, who teaches at Tsinghua University in Beijing, has taken these ideas a bit further. He envisions a meritocratic upper house whose members are chosen not by election, but examination; an elected national democratic legislature that advises the upper house on “preferences;” direct elections up to the provincial level, and freedom of the press. The “symbolic leader of the state” would be chosen from among the most august members of the meritocratic house.
Such a formulation and others similar to it — about which there is a rich debate across China today — sticks to the Confucian idea of meritocratic government mitigated by popular accountability, but not completely ruled by it. This seems precisely the kind of non-Western political modernization we will see as China adopts its own form of democracy.
China desperately needs such a system of accountability to stem the arbitrariness, corruption and cronyism that have accompanied the primary stage of socialism. Yet such an approach as put forth by Mr. Bell seems likely to also maintain stability in a way that parliamentary democracy of the West might not, and thus would be an acceptable course of change in China.
Paradoxically, while Chinese intellectuals seek to expand democratic accountability as the poor become more educated and prosperous, the U.S. has the opposite problem: Too much short-term focus by the citizens of the prosperous consumer democracies is undermining long-term sustainability.
Thus, while institutional innovation in China might focus on a truly empowered — yet checked — elected house, the U.S. would benefit from the type of long-term deliberation offered by bodies such as a meritocratic upper house and some entity with the responsibility for continuity of governance that stands as a unifying symbol in an ever more diverse society.
During the first round of globalization at the turn of the 20th Century, Sun Yat Sen tried to blend the institutions of Western democracy with Confucian meritocracy. Perhaps today, as the “rise of the rest” challenges Western dominance, the political imagination may again be open to new ideas. This time, it won’t be just Western ideas flowing East, but Eastern ideas flowing West as well.


by : Nicolas Berggruen and Nathan Gardels

Facebook raises new funding at $50B valuation

Facebook is now worth $50 billion,according to a report in The New York Times that says the company has raised $500 million in new funding from Goldman Sachs and Russian firm Digital Sky Technologies.

Goldman invested $450 million, while DST (which has already invested about $500 million into Facebook) provided the remaining $50 million. Goldman also plans to create a “special purpose vehicle” to pool its clients and invest another $1.5 billion in Facebook without triggering the Securities and Exchange Commission’s 500-shareholder threshold, The Times says. (Companies that break the threshold are required to disclose more information publicly.)

Facebook’s valuation has been climbing steadily on the secondary markets where shares are sold. (The SEC is now investigating those markets.) Early Facebook investor Accel Partners recently sold off some of its shares at a $34 billion valuation.

Facebook is expected to have its initial public offering as soon as 2012, although the company hasn’t said anything specific on the matter. It reportedly brought in $2 billion in revenue in 2010, and chief Mark Zuckerberg has said that the company is barely profitable, because it’s not focused on profits yet.

Last month, the second-hottest social networking company, Twitter, raised $200 million at a $3.7 billion valuation.

by : Anthony Ha

@VentureBeat

From Recovery To Expansion

As holiday shoppers drag stuffed bags from stores, and a Santa Claus stock market rally warms spirits and 401(k) accounts, economists are full of seasonal cheer and upping their expectations for 2011.

Most have cast aside any talk of a double-dip recession that was prevalent just about five months ago as housing plunged, European countries worried about paying debts and China started to put the brakes on growth. Now, many economists think the U.S. economy will grow at 3 percent or more in 2011, moving from the recovery phase to expansion.
For the first time since the economy began its cruel descent into the worst recession since the Depression, economists see evidence that gross domestic product, which is the size of the economy, finally will return to the $13.36 trillion level it left behind in 2007 and surpass that mark in the year ahead.
"It's taken us a very long time to get back to even," said Northern Trust economist Paul Kasriel. "It's been the weakest recovery since the recovery that began in April 1933."
Yet, in 2011, "I think people will worry less about losing their jobs, and if you have been out of work, you will start seeing better job opportunities," Kasriel said.
He thinks the economy will grow about 3.3 percent next year and that unemployment could drop to 8.5 percent by the end of 2011. As horrible as 8.5 percent sounds compared with the 5 percent jobless rate that predated the recession, it's an improvement over the recent 9.8 percent or 2009's peak at 10.1 percent.
With almost 17 percent of Americans unemployed or underemployed, it will take years of improved growth to absorb all the people who lost jobs during the last couple years. The economy must create about 150,000 jobs a month to start making a dent in unemployment, and it isn't there yet.
Still, optimism over 2011 has built as consumers have spent more than expected on holiday shopping and as surveys of corporate decision-makers, exports and industrial production have pointed to stronger growth. This month, after Congress extended unemployment benefits for 13 months and extended tax cuts for two years, economists reworked estimates. Many assume Americans will spend much of the extra money and add another one-half to 1 percentage point to GDP growth next year.
Macroeconomic Advisers, for example, had been predicting GDP would grow at 2.4 percent in early 2011 and rise to 3.7 percent for the year. As the firm has evaluated recent economic data, it has estimated growth in the first quarter next year at 3 percent and 4 percent for the year.
Although economists are encouraged by signs of improvement in the economy, they continue to see ongoing threats, including excessive debt in the U.S. and Europe and the possibility that the world's engine of growth, China, will fight inflation by slowing too much.
"The economic recovery will not bring economic health," JPMorgan economist Robert Mellman said in his 2011 forecast. "The boost to growth from lower taxes comes at the expense of a larger budget deficit, now forecast to be $1.5 trillion, or nearly 10 percent of GDP in 2011."
Further, he and other economists note that state and local governments, which provide about 13 percent of the nation's GDP, will have "fiscal challenges for the foreseeable future."
"State and local governments face the toughest budget outlook since the Great Depression," said Bank of America Merrill Lynch economist Ethan Harris. "The worst is yet to come."
As local governments struggle to pay their bills as property taxes fall along with real estate values, governments will have to slash payrolls and spending, cutting contracts with businesses and adding to the unemployed.
Since early fall, a strong stock market rally apparently has made people with jobs feel more comfortable about spending money. The Dow Jones industrial average is up 10.6 percent this year and has gained 76 percent since the 2009 lows. But while economists have been encouraged by spending, High Frequency Economist Ian Shepherdson said retail sales cannot keep rising at their recent pace because people are not getting pay increases.
"Disposable incomes are rising by only about 0.2 percent per month," he said.
And Americans are still digging out from record levels of debt, a process expected to take years. Although retail sales have been impressive, Shepherdson noted that less than half of all consumption involves retail, and that spending on services "has been subdued."
Some analysts also say it's difficult to understand if the economy is really on a sustainable path or just providing an illusion of strength as government stimulus, in the form of everything from tax cuts to unemployment benefits and the Federal Reserve's quantitative easing, put money into people's hands.
Deutsche Bank's fixed-income team told clients, "We think 2011 will be divided into two halves."
The first half represents a test, the analysts said: "Is the economy gaining sufficient traction that rates can begin some kind of steady normalization? The second half will be the answer."
Meanwhile, Morgan Stanley Asia Chairman Stephen Roach thinks 2011 will be a replay of 2010, with optimism early in the year, followed by fear about the aftershocks of the financial crisis.
"The rich countries of the developed world are hobbled by lingering post-crisis aftershocks," he said. "The United States, long the main engine of the global economy is low on fuel. … Europe now faces its own strain of post-crisis aftershocks."


                                                                            Gail MarksJarvis

                                                                           @Chicago Tribune