Undoing Bush: the economy

Harper’s magazine – of Mr. Fish and the Harper’s Index fame – has in the June issue the series Undoing Bush: how to repair eight years of sabotage, bungling, and neglect. It covers:

• The Constitution
• The courts
• Civil service
• The environment
• Science
• The economy
• The marketplace of ideas
• Intelligence
• The military
• Diplomacy
• The national character

Impressive, no? Quite the breadth of critical discussion. We will discuss the economy, because I agree, more or less, with the argument, whereat:

Two economic calamities have occurred on George W. Bush’s watch. The first has been a radically overvalued dollar, which, it should be noted, is a legacy of the Clinton years: by the date of Bush’s inauguration in January 2001, the real value of the dollar was already 27 percent higher than its low in July of 1995, the surge due in part to the stock bubble, in part to the financial crises in East Asia and elsewhere, and in part to high-dollar cheerleading by the Clinton Administration’s treasury secretaries. And yet despite these unsustainable highs, Bush did almost nothing to reverse the run-up; the value of the dollar actually increased in 2002. It has fallen since then, but it is still 12 percent above its 1995 low. The problem that a high dollar poses for manufacturing is straightforward: if the dollar is expensive relative to other currencies, then it is very cheap for Americans to buy imported goods and very expensive for foreigners to buy U.S. exports. In effect, an overvalued dollar provides a subsidy to imports and imposes a tariff on exports. Not surprisingly, this high dollar has led to a rapidly rising trade deficit, which in 2006 grew to more than $760 billion, or nearly 6 percent of GDP. This, in turn, has been the major factor contributing to the loss since 2001 of 3 million manufacturing jobs, or more than a sixth of the entire sector.

The other major economic disaster under Bush has been the unchecked growth of the housing bubble, and although this, too, was inherited from his predecessor, Bush in this case deserves an even greater share of the blame. By the start of the Bush Administration, housing prices (which over the prior forty years had just kept even with the overall rate of inflation) had on average, and after adjusting for inflation, risen approximately 23 percent over their mid-nineties levels—a substantial but still containable surge. In 2001, however, when the stock bubble collapsed, Alan Greenspan, the Federal Reserve Board chairman, seized on the expanding housing bubble as the best tool for boosting the economy out of the recession. He pushed the short-term interest rate down to 1.0 percent—the lowest level in almost fifty years—and, more important, assured investors of the safety of the housing market, telling Congress in the summer of 2002 that “recent sizable increases in home prices . . . reflect the effects on demand of low mortgage rates, immigration, and shortages of buildable land in some areas.” By 2006, prices were 73 percent higher than their pre-bubble values, for a total of more than $8 trillion in unsustainable wealth.

The extent to which these were inherited problems is, I think, related greatly to the former Chairman of the Federal Reserve. Which I do not say lightly (“smash the IMF” is the sort of thing I say lightly). The extent to which these were inherited also in no way obsolves Bush or his administration of faulting for their handling of it. Show me a president who did not inherit problems. I say that I agree ‘more or less’. The ‘more’ is with regard to the problems, and at whose feet to lay them; the ‘less’ with the use of words like ‘calamity’ and ‘disaster’ – I would prefer we save those words, because I’m rather afraid we shall need them. In any event, using them now only facilitates being ignored (yes, I know, the other side gets to call things ‘crusades‘ and a ‘struggle for civilisation‘. No, it is not fair).

Policy and other responses suggested?

• Patiently and publicy (i.e. not just people like me railing at the darkness) explain – as the government – that house prices are wrong, and that they will once again, inexorably, return to representing market value. I.e., go down, and interest rates will rise. Anybody buying a house today had better realise that going in.
• Use regulatory tools at their disposal (the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of Federal Housing Enterprise Oversight – yes, it exists) to put a stop to risky lending.
• Make a serious and credible committment to lowering the value of the dollar – thereby preventing unwanted speculation. This would work well with the sort of thing the Bank of International Settlements has warned us about, but I’m not sure how it would go. Amongst other things there are many non-US reasons for the value of the dollar, and deliberately lowering it will have an effect on NGOs, corporations, and many smaller countries (especially those who happen to use it as official or semi-official currency – East Timor, for example, does).
• The Fed, along with the Treasury Department, should take the kinds of proactive measures detailed above to prevent the sort of asset bubbles that have afflicted the stock market, the dollar, and the housing market during the past decade. I’m all for independence of central banks – fewer things are more important for macroeconomic management, but one that managed to understand that boom-and-bust = bad would be nice.
• Tax cuts and the budget deficit. Frankly, this hardly needed to be written down at all. If the next administration doesn’t understand what a cock-up fiscal management has been, there’s no saving us.

The series of articles as a whole are a bloody interesting read. I think there ought to be a lot more on there – telecommunications, transit, etc., but those are merely missed opportunities. They aren’t very big, very dark clouds, on the horizon for (one would have thought) all to see. Sadly, the immediate economic health needs to be assured before long-run economic growth can be built back into the economy.

New labour laws in china

China enacted a labour law Friday meant to improve workers’ rights amid complaints about unpaid wages and other abuses, and an official tried to assure wary foreign investors they will not be hurt by the new standards.

That last piece is the interest part, for me. I told my students last October about a new set of labour regulations – including more protection for collectivism/unionisation – upon which China was working. When I asked them who was most against the idea, the guessed correctly: the US, or rather US corporations.

Some of the world’s big companies have expressed concern that the new rules would revive some aspects of socialism and borrow too heavily from labor laws in union-friendly countries like France and Germany.

To some extent it has; not with regards to socialism, or anything so knee-jerkingly stupid as that, but with regard to prior fears that some rules would come into place governing the treatment by corporations of temporary workers, laying-off of employees, the right to unionisation – in fact early versions insisted upon union approval of layoffs. Now they just insist that unions be told. Which is fair, the early version would not have worked (for domestic employees and a foreign company? There’s no common good. There’d be no collective rescues a la Delta airlines, for example).

In a very positive move, the legislation was open for public discussion and input, giving the government some 190,000 pieces of same from domestic workers and companies, as well as foreign companies (there’s an American Chamber of Commerce in China, for Cliff’s sake).

Unfortunately the short-sighted media is a little off-perspective. Most of the stories I saw tied this to the recent scandal of slave-labour. A lot of use of the word ‘amid’, which I don’t think is fair (to China or to readers). This legislation has been kicking about since 2005, and it was only a matter of time before it came together and went ahead. Newspapers would do well to remember Tony Abrams, Tom DeLay and the Mariana Islands before getting too worked up about it. For its level of development, China is actually pretty progressive in this area.

Blue Hotel, on a lonely highway

Via (wait for it): Inhabitat, Greenroofs, Designflute and the architects, Atkins.

Songjiang Hotel in Songjiang, China, would have to be the coolest I’ve ever seen (or it will be, once built).

Built directly into the side of a former quarry, it has minimal environmental impact (I mean, for a hotel that size), and uses geo-thermal energy for power and heating, as well as green roofing (hence the link to greenroofs.com, as well the natural vegetation and waterflows.

An aquatic theme runs through the design both visually and functionally. Curved wings of the main body of the guestrooms enclose a naturally lit internal atrium, which uses the existing rock face with its waterfalls and green vegetation. This will be overlooked by guestroom balconies and contain restaurants and cafés at the base. Two underwater levels will house a restaurant and guestrooms facing a ten-metre deep aquarium. The lowest level of the hotel will contain a leisure complex with a swimming pool and water-based sports. An extreme sports centre for activities such as rock climbing and bungee jumping will be cantilevered over the quarry and accessed by special lifts from the water level of the hotel.

So next time you’re in China (after this is built), consider a trip to Songjiang.

Drugs that won’t make you vomit enough to stop using them?

I have a neighbour with really terrible taste in music. If they have any at all. Does that sound snotty? Forgive me if it does, but I’m being tortured by some kind of prog-rock trauma machine.

Fun with advertising! Australians, the US has no law – as we do – forbidding Direct-to-Consumer advertising. Don’t, by the by, ever let that change (I mean, don’t allow it in Australia – by all means try to get it banned in the US too).

So every now and then I’m exposed to this. Today for example, cleaning while appreciating tbs taking a break from Law and Order re-runs (Australians: forget it. That’s a joke for the Americans) and showing those Noah Wyle Librarian movies, cleaning the apartment. Avoiding work, basically.

Ooh, the bad guy just died. This is such a poor man’s Indian Jones, but I’ll take it until the real one rises again.

Anyway. An advertisement for the drug Requip, a pharmaceutical treatment for Restless Leg Syndrome (it has it’s own foundation, though I’d like to see who stumps up the money for it). As the nice lady on the telly ran through in her most cheerful voice, the side-effects of Requip (potentially) include:

• Nausea (40 percent)
• Excessive tiredness, which is known as somnolence (12 percent)
• Vomiting (11 percent)
• Dizziness (11 percent; also fainting when you stand up for some people)
• Fatigue (8 percent)
• Diarrhea (5 percent)
• Sore throat (9 percent)

For between 2% and 5% of people:

• Spinning sensation (vertigo)
• Indigestion (dyspepsia)
• Diarrhea
• Dry mouth
• Abdominal pain
• Swelling
• Influenza
• Pain in the joints (arthralgia)
• Muscle cramps
• Pain in the legs or arms
• Numbness or tingling
• Cough
• Nasal congestion
• Back pain
• Inflammation of the sinuses (sinusitis).

This is for restless legs. There are even more, believe it or not – but less than 1%, and not required by law to be mentioned in the advertisement.

What I loved – loved – about all this was one line in particular (although a woman running through this list as though it was groceries was entertaining enough): that people vomited, but not enough to stop using the treatment. Eh? So you may become nauseated, you may vomit, but manufacturer GSK is betting you won’t vomit enough to stop taking their pills. Alternatively they’re telling you that although may vomit, everyone else can handle it so don’t be such a sook.

Ramos Horta pushes for tax-free East Timor

No sooner do I post about Indonesia than I see a story about East Timor. Background:

The Democratic Republic of Timor-Leste. They’re having elections again, parliamentary this time, not Presidential. Last year Jose Ramos-Horta, former Foreign Minister-then-Prime Minister, won (resoundingly) that one, succeeding clear hero of independence Xanana Gusmao who is now running for Prime Minister in these parliamentary elections. To be fair they only won independence in 2002, suffered rampaging militant loyalists and UN intervention – a poor enough start for the first new nation of the century.

On to the story. With a PPP-adjusted GDP of USD800 per capita they’re among the poorer end of the nations of the world – according to the CIA factbook (2005). According to the IMF, GDP is USD1700, from 2004 estimates. Given that East Timor is pretty drought-prone, I wouldn’t be surprised.

So Ramos-Horta has said he wants to follow Hong Kong’s model of very low, very simple taxation. No estate taxes, stamp duties (such as they are) are due to be removed, earned-income taxation is simple and with very low marginal rates, as are corporate taxes on earned-income. Those two are just about it, and they’ve proved remarkably good at bringing prosperity to Hong Kong (being rented out by England and made a trade/finance hub helped, too…).

It’s pretty interesting. The differences between the two are substantial:

• Hong Kong has few natural resources. East Timor has the Greater Sunrise gas field, worth around USD30bn. The sharing between East Timor and Australia has proved to be very entertaining (we tried to screw them over, and eventually settled for a very small share of the revenues).
• Hong Kong is a technocracy; East Timor is a republic. More importantly, a republic that fought like hell for its independence, at the hands of the people (rather than the capitalists, distinguishing it also from the US). This will alter government intervention in markets and social infrastructure, which is minimal in Hong Kong.

So slightly different. Ramos-Horta wants to use the oil and gas reserves – a common treasury – to rebuild after Indonesian loyalists laid waste to what infrastructure they had. By doing this with those revenues, and keeping the tax system very neat and simple, he’s setting East Timor up for the sort of streamlined capitalist economy that Hong Kong has. Which may or may not work as well as it did there. It certainly won’t work out as badly as other nations – say, Nauru or Liechtenstein – but it has to start from scratch, without a British Empire on one side and China on the other, to build there first.

Also, the best coffee comes from East Timor. Buy some if you ever see it.

Private Equity again: is Detroit selling up to pay out retirement funds?

With more news that the private equity …somethings (vultures? At the moment at least not wagons) are circling the auto industry, still.

A small group of private equity funds this week received information on Land Rover and Jaguar in preparation for a possible sale of Ford Motor’s two UK luxury brands, the Financial Times has learned.

First, I know what you’re thinking: doesn’t anything belong to itself anymore? No, not really.

Recipients of the data – which one person close to the process described as “more of a teaser, and less than an information memorandum” – are said to include Cerberus Capital Management, Ripplewood Holdings, One Equity Partners and at least one other fund with an interest in the automotive sector.

Just to keep the baedeker straight, Cerberus just bought out Daimler-Chrysler for USD7.4bn (they also just missed out with a Telco bid. Also, they’re fighting CAFE standards already. This also means they own Jeep – a competitor of Land Rover. Ripplewood Holdings also was interested in the Chrysler deal. It does my head in.

The two brands don’t seem valuable to Ford and – assuming this energy legislation does anything at all – will cost money. Ford might be getting out now to spare themselves the trouble of even caring about what to do with big engines?

GM selling Allison is more interesting anyway

This story was another of those starting points, though. Ford is appearing to take a loss on Land Rover and Jaguar to shed them. I read the other day that GM is going ahead with its sale of Allison Transmission. Two other Equity groups entirely – Onex Group and the Carlyle Group are paying GM USD5.6bn for the unit. It’s GM’s most profitable (or among them) division – as was their financial GMAC, also sold a while back. GM did this for two explicit reasons,

1. Focussing instead on core business (about which there is some disagreement. When you do what GM does, having a profitable division that does what Allison inside your tent is the preferred circumstance), and more importantly
2. Raising cash for dealing with unions, later this summer.

The markets loved the move:

The union thing? It looks for all the world like GM is going along with the plan to set up an independent trust to deal with retirement and/or health care costs once and for all, subsequently walking away from the liability. Which we can all agree is probably wise idea. The two other companies mentioned in the previous speculation were Ford and Chrysler – two companies also selling up divisions.

Post-Script

What did, finally, strike me as odd/cool about the GM story was the plan by the Carlyle and Onex groups’ partnership to take Allison public. That is not the usual order of things. But Allison makes money, and clearly they figure they have a better bet selling the company to the public than jimmy-ing its costs around a bit and selling it to another private group. What this means for, say, the workers and their benefits, remains to be seen. It seems to me positive, though – treating the division like a company, rather than an asset, bodes well for the workers, while selling it to a broader range than investors rather than another leveraged buyout consortium is probably better all around. Perhaps Onex and Carlyle have figured out that finding another such group several months from now might be nigh-impossible?

There is an 11-year wait for public housing in Sydney?

That was my piece of interesting information, from this story in something called the Fairfield Champion.

I don’t place great importance to human interest stories (these count, statistics students, as anecdotal evidence, not actual evidence. When people refer to “proof by evidence”, make sure they aren’t actually bulking up anecdotal evidence). This one is fascinating, though: Iraqi immigrants, handyman husband never had a full-time job in their 11 years in Australia (I can imagine Howard voters loving that one), but offered a fully-leveraged mortgage, which they’ve finally run out of chances to keeping paying. Husband has left, photo of wife with 3 kids, evicted at the end of the month.

Like I said, what really hit me was the throw-away line about the wait for public housing. Bloody hell. Those who remember the days of the Thatcher’s “right-to-buy” homeless families (not me, no) will pause at that one. Big shortages of public housing does not portend well when we’re expecting an increasing number of evicted bankrupts suddenly entering a rental market that is already at historically low vacancy rates – irrespective of their awful credit rating.

Continuing this latter point, the actual story I first spotted (much earlier today, but I had to go to the bank. Post-”9/11″ laws here mean I can’t just get on the internet to wire money to Australia – like I can in every other country. It’s a more convoluted, and far more annoying, process).

There were a record 1400 auctions in the region in the year to March 31, nearly double the number in 2005, Australian Property Monitors figures show.

When I saw the heading for the story (“Surge in families forced to sell their homes”) I was more than a little skeptical, but I reckon that qualifies. Evidence that these were so-called ‘distressed sales’ (selling because the bank is foreclosing and you lose the house to pay off the mortgage – the woman in the story at the top had tried this already) is in the prices, as much as the numbers – tens of thousands of dollars below averages in other areas/regions/times (the woman in the story at the top had failed because the offer she got did not satisfy the bank. So she doesn’t ’just’ lose her house, she goes all the way to bankruptcy (I’ve mentioned this trend developing).

This is a phenomenon seen here in the US, also – something I spotted Bloomberg (wireless) calling the Housing Recession – home ownership dead while the economy at large still ‘goes along’, as it were. Sydney is about doing that, too.

The number of bankruptcies and debt agreements – which are binding on defaulters – have doubled in some parts of Sydney since 2000. There were 5250 personal insolvencies registered across the city between June and February, suggesting this financial year’s total could reach nearly 8000 compared with just 4544 in 1999-2000. Parts of western Sydney have been hardest hit, with an increase in personal insolvencies of 99 per cent in Blacktown and 70 per cent in the outer west.

But the rise in bankruptcies and debt agreements is not confined to the urban fringe. Sydney’s inner west experienced an increase of 83 per cent over the past six years and there was a 74 per cent rise on the northern beaches and 60 per cent in the eastern suburbs.

The credit agency Dunn and Bradstreet released figures last week showing those defaulting on debts were getting younger, and failing to pay off smaller amounts. Half the defaulters referred to the agency, which monitors creditworthiness, were younger than 32. NSW residents were most likely to default on debts and had the largest average value of unpaid debt. Many consumers are failing to pay phone, internet and pay TV accounts.

Score. Wouldn’t it be amusing if that desalination plant comes online just when the number of people buying/occupying houses is declining because of this mess?

Funnily enough the call to end easy credit continues. Which is fine. I’ve said before this is all happening because people who shouldn’t, on paper, own homes were given mortgages anyway. Chickens are pretty much coming home to roost in the house the bank just took away from them, and it isn’t fair. I’d say more needs to be done than close the bank door after the horse bolted (it is “fun with metaphors” day). Like build public housing and a statue for Jack Lang (the Australian politician, not the French one).

Sadly, like the US, we still need consumer spending to fuel (or prop up, depending upon your mood) our economy, too. Take away the unsecured lending that pays for that and a real recession is on the offing. Leave the credit there and you risk a bigger one anyway.

Paul Wolfowitz cannot go back to Indonesia

Surely. Just reading in the Financial Times this evening that Paul Wolfowitz, architect of the Iraq War, isn’t done with his Project for the New American Century, just yet.

The White House appointee and former deputy defence secretary is leaving his post midway through his term after being forced from office over an ethics scandal.

He said he would be joining the American Enterprise Institute, a conservative think-tank in Washington, as a visiting scholar, which would allow him to continue influencing public policy.
…
He appeared to encourage recent suggestions he was being linked to a future foreign policy role in Indonesia. “Twenty years ago I was American ambassador to Indonesia and I have to freely acknowledge, because it is pretty much an open secret, that I fell in love with that country,” he said.

It is this I’d like to revisit. Wolfowitz was ambassador to Indonesia from 1986 to 1989, prior to which he was Assistant Secretary of State for East Asian and Pacific Affairs from 1982 to 1986.

Meanwhile, after overthrowing his predecessor, a fellow by the name of Suharto had taken control in Indonesia, a country in Melanesia and the Malay Archipelago. It has around 200m people, has the most muslim people of any country, and contains around 17,500 islands (around 6,000 inhabited).

It used to contain a bit more than that, actually. More on that in a moment.

Suharto enjoyed easy relations with the United States and Australia, as well as our aid and political cover – basically we propped up his dictatorship. During this dictatorship, and up until the massacre in Dili in 1991 when everyone else began to notice, he got away with the following.

• In 1965, between 300,000 and one million Indonesians were killed in the mass-killings following the arrest of PKI members in Suharto’s cabinet. The CIA provided the Indonesian military with a list of 10,000 suspected communists, while also acknowledging it as one of the worst mass-murders of the 20th century.
• Allegedly, Suharto was also the mastermind of the 1965 slaughter of millions of Chinese Indonesians, purportedly to eradicate the Communist Party of Indonesia.
• Through means political and …otherwise, Suharto expropriated Western New Guinea (Irian Jaya on that map), East Timor and Aceh.
• Only three parties were allowed to participate in elections: his own Golkar party; the Islamist United Development Party (PPP); and the Democratic Party of Indonesia (PDI). He was unopposed for reelection as president in 1973, 1978, 1983, 1988, 1993, and 1998.
• Under the auspices of advice from American-educated economists (the Berkeley Mafia), Indonesia stabilised their economy, restructuring and securing high levels of economic growth – including the establishment of private banks owned by friends of Suharto in 1988. Suharto embezzled more money than any other world leader in history with the estimated US $15–35 billion embezzlement during his 32 years rule.

For example. In the end Suharto was too ill to be tried – though loads of his friends and family (including his son, Tommy) were, and convicted.

Even Christopher Hitchens agrees that the United States went terribly wrong somewhere (this was just prior to him losing his mind almost completely after 2001).

This was hardly done at the will of Wolfowitz, but he was an architect on the scene, and he isn’t remembered terribly fondly from the other end of the guns. The people wiped out in the purges, the people who suffered most from the collapse in 1997, people from East Timor, Aceh. Even Irian Jaya, the least developed, became a military operations zone (trans. military wiping out ‘insurgents’ – although they managed to vote for independence in a dodgy referendum back in 1969). Even Australia. When Reagan visited in 1985 on his ‘winds of freedom’ tour – welcoming Indonesia’s human rights improvements even as a violent crackdown had just occurred – Wolfowitz was criticised for missing the single greatest opportunity to discuss democracy, sticking to economic issues entirely. When Australian journalists were held in Bali and deported, Wolfowitz tried to downplay the resulting press coverage – earning a rebuke by then Prime Minister Bob Hawke.

In March of 2001, Tim Shorrock wrote in the Asia Times,

…apparently Cold War habits die hard. Wolfowitz’s efforts to whitewash the likes of Chun, Marcos, Suharto, and Wiranto illustrate the bankruptcy of US foreign policy from Reagan to Bush. Americans concerned about what is being done abroad in their names need to watch Wolfowitz’s every move, from Korea to Iraq to Colombia.

Meanwhile, on the islands of Indonesia

• Much has happened since Wolfowitz left and everything has come out in the wash (also sounds familiar). East Timor is free – despite the efforts of both of our governments of the day(s),
• Aceh is not, but has signed a peace accord with the government after the 2006 tsunami wiped out most of the Free Aceh Movement (I don’t know what’s become of the nasty oil concessions originally granted to US companies way back in the 70s).
• Irian Jaya declared its own independence in 2000. At the moment its status is unclear (much less public international support for an island of tribesman – and our own records in Papua New Guinea are rather poor, to boot).
• The Molluca Islands have hosted seperatist and religious violence for nearly a decade, while many have fled altogether.
• West Kaliantan (Borneo) as well.

The several million ethnic Chinese will not welcome Wolfowitz’s return:

Under Suharto, Chinese were also forbidden from careers in state-sponsored academia, serving in the military, and the civil service. They were forced to carry identity cards and the use of Chinese characters and celebrations, such as the Chinese New Year, were banned.

During the violent upheavals that lead to Suharto’s downfall in May 1998, some 1,200 Chinese were believed killed. Thousands of businesses were looted, prompting tens of thousands of Chinese fled overseas. In addition, billions of dollars was transferred out of the country.

Nor will most of the 88% or so of Indonesians that are muslim – extremist or otherwise (and most Indonesians are otherwise). Islamic vs. other relgions tensions have not fared at all well since the onset of the war in Iraq. Our governments can blame whomever they like, but pissing off 200 million people in their own country won’t help diplomatic relations (assuming the Bush administration remembers what those are. Perhaps Dr. Rice can explain it while Cheney is having his 5th bypass operation one day).

I don’t know, really, what Wolfowitz will do – nothing requiring Senate confirmation, certainly. But it’s not as though either he or Bush have a record of even being aware, let along giving a shit, about the consequences of their actions. I wouldn’t be surprised if right now he was talking about democracy and reform in Indonesia and theatre missile defence in Asia, and meaning every word of it.

End of South African strike: ‘not quite win-win’

Only Canada’s Mail & Guardian had it in their heading. The public sector strike in South Africa (mentioned previously) is over, after 4 weeks. Impressive, no? Interestingly, I saw a comment that the teacher’s union had called an end to the strike because school holidays had begun. Which would be hilarious.

It is not quite win-win because the wage increase in the end was pretty well what it was in the beginning: 7.5% (recall that the government had initially gone to 6%, the unions had demanded 12%, and gone on strike when the government wouldn’t go higher than 7.25%. There are of course other elements not tied to the wage increase, including one interesting structural change:

The deal also contains a framework for setting up a minimum service agreement with essential-service workers. This will ensure that minimum services will be maintained during strikes.

“Definitely we would see a situation during a future strike that essential services would not be as severely affected. There would not be any loss of life,” said Success Mataitsane, of the National Union of Public Service and Allied Workers.

The majority of unions have signed on – a few (the teachers) have not yet, but will continue negotiation (they won’t themselves strike, because their numbers will now be too small – one hopes). My original open question answered, with regard to the 600-odd nurses fired for going on strike:

The deal also makes provision for dismissed workers to return to work and receive a written warning instead of being fired.

What isn’t yet addressed – and might not be for a while – is the skills deficit implied by emergency service workers taking this action in the first place. The current ones will return to work (after 4 weeks of no-work-no-pay you either return or start a new career fast: that’s a long time to earn any money), but the next generation may not, for these conditions, go to the effort.

Also not yet apparent is who won in the broader context of this strike, with regard to the strained relations between the Congress of South African Trade Unions and the ANC. Again, 4 weeks is a long and punishing action, and a few groups were beginning to turn on Cosatu for its apparent avarice in not taking the 7.5% when it became clear that it was the ceiling (probably a week or more ago). The cost to the economy has been estimated at around USD418m (GDP in 2006 was only USD587.5bn), and food has pushed inflation to 6.4%. Mbeki could win politically if it appears he’s protected the economy and rewarded workers. And if he can keep is leadership of the ANC at all.

Petrol rationing in Iran

The New York Times says fuel rationing in Iran prompts protests. Those protests?

Those did not set themselves alight, no. The New York Times: understater extraordinaire. Iran has a lot of oil:

(you’ll notice I have a thing for maps) Iran however has rather poor refining capacity. Currently it can produce 4.3m barrels per day, but refine only 1.6m barrels per day. It actually imports more thab 50% of its oil, (around USD10bn), which it subsidises for the market.

Along the way, Iran’s budget defecits are anything from 14% (their estimate) to 25, 30% (other economists). That may or may not be related – another explanation is tough-love preparation for sanctions, due to the whole nuclear thing. This might also help their case, arguing that oil is running out, we need nuclear energy, etc. (sounds familiar, doesn’t it?). It’s running counter to the declining exports argument I was making this morning, which is interesting to observe. Given the reaction of Iranians, though, I don’t see this lasting.

It strikes me that, rather than announcing a 3 litre-per-day ration 2 hours before it began, without so much as telling local police, dropping those subsidies and letting prices do their job would have made a hell of a lot more practical and fiscal sense. At these level of rationing, prices will soon go through the roof in an underground economy anyway – the government took roughly the dumbest approach to saving money and reducing demand for petrol. Plus it’s so damn unpopular. Who knows? It might well help the reformists in Iran.

Also along the way, it is apparently bad news for Australia. For some reason we are big on Iranian oil (unrefined, it’s probably cheap). I shall see what happens. it follows rather hard upon the strike(s) in Nigeria, though (instability another characteristic of peak oil, by the by).