26 de abril de 2011

Valuing gold in real terms


Apr 26th 2011, 13:21 by Buttonwood

ONE of the difficulties in writing about gold is that many commentators and readers start with very strong opinions on the subject. There is an almost religious element to its appeal; back in my FT days, one correspondent said that, by doubting the bullish case, I had "gone over to the dark side".
Gold is viewed as a hedge against rapid inflation and against the collapse of the banking system, an event that would be expected to have deflationary expectations. That gives gold bugs an each way bet and also makes it hard to interpret the signal being sent by a rise (or fall) in the gold price. It does not help that gold has no cashflows. This makes it very difficult to put a value on the metal in the way that one can suggest a stock with a price-earnings ratio of 50 looks overpriced. It also allows for a wide range of forecasts; Standard Chartered says the superbull case is for $4869 an ounce by 2020; Tim Lee of pi Economics, a monetarist, is going for $700 in 12 months' time.
The former editor of The Economist, Bill Emmott, has thrown his hat in with the sceptics. Writing in the Times on Monday (now behind Mr Murdoch's paywall so no link) under the title "The end of the golden age will soon be with us", he dismissed many of the bullish arguments. On inflation, he said that
Western economies do not have the rigid labour markets and strong trade unions that create a real wage-price spiral.
He added that
The dollar has, admittedly, been falling recently but that means that other currencies - the euro, Swiss francs, sterling, the yen - have been rising. So a second argument of the gold bugs, that the price reflects a general disillusionment with paper currencies, doesn't ring true either.
This doesn't seem a very convincing point. To the extent that the dollar falls, other convertible paper currencies have to rise. By and large, they have all been falling relative to gold; gold was Sfr 1126 an ounce at the start of last year, compared with Sfr 1326 now, a rise in Swiss franc terms of almost 18%. Were we back in the days of the gold standard, when each currency was worth a certain amount of gold, the Swiss franc would have been forced off the standard long ago.
Mr Emmott looks to China, India and the middle East for his explanation. Inflationary concerns are more marked in the first two than in the developed world, while political unrest might be pushing many middle eastern investors into the perceived safety of bullion. 
Our analysis is complicated by the fact that gold, a metal in limited supply, is priced in terms of dollars, a paper currency which can be created at will. So it is probably better to view gold  against real things that the consumer might have to buy. The two most basic needs are food and energy. So the chart shows gold relative to wheat and relative to oil over the last 25 years.
As you can see, the chart is highly volatile, particularly in the case of oil. Energy was very cheap in the late 1990s; one reason perhaps why the boom of that decade was so vigorous and long-lasting. The nadir for the gold-oil ratio came as the financial crisis gripped, and authorities responded by slashing interest rates and then invoking QE. Gold looked very overvalued in terms of wheat at the start of 2010 and still looks very pricey relative to the last quarter of a century.
What it doesn't look like is a bubble like the chart of NASDAQ in 1999 and early 2000. There was a vertical take-off in the gold-oil and gold-wheat ratios as the financial crisis occurred, largely because other commodity prices plunged while gold was fairly stable. But oil and wheat have since rebounded so one could see gold's stability in 2008-2009 as a sign of investor confidence that the authorities would avert a deflationary spiral.

IQ tests measure motivation - not just intelligence

IQ tests may not be a reliable measure of intelligence alone or a good predictor of future potential

Intelligence tests are as much a measure of motivation as they are of mental ability, says research from the US.

Researchers from Pennsylvania found that a high IQ score required both high intelligence and high motivation but a low IQ score could be the result of a lack of either factor.

Incentives were also found to increase IQ scores by a noticeable margin.

The study is published in Proceedings of the National Academy of Sciences.

Firstly, it analysed previous studies of how material incentives affected the performance of more than 2,000 people in intelligence tests.

Researchers from the University of Pennsylvania, Philadelphia, found that incentives increased all IQ scores, but particularly for those of individuals with lower baseline IQ scores.

Then the same researchers tested how motivation impacted on the results of IQ tests and also on predictions of intelligence and performance in later life.

Life is an IQ test and a personality test.”

Dr James Thompson
UCL
By using data from a long-term study of 250 boys from adolescence to early adulthood, they were able to conclude that some individuals try harder than others in conditions where the stakes are low.

Therefore, the study says, "relying on IQ scores as a measure of intelligence may overestimate the predictive validity of intelligence."

Getting a high score in an IQ test requires both high intelligence and competitive tendencies to motivate the test-taker to perform to the best of their ability.

Dr James Thompson, senior honorary lecturer in psychology at University College London, said it had always been known that IQ test results are a combination of innate ability and other variables.

"Life is an IQ test and a personality test and an IQ result contains elements of both (but mostly intelligence).

"If an IQ test doesn't motivate someone then that is a good predictor in itself."
http://www.bbc.co.uk/news/health-13156817

The Arab Spring and The Palestine Distraction

Arab peoples aren't obsessed with anti-Americanism and anti-Zionism. It's their rulers who are.

By JOSEF JOFFE

In politics, shoddy theories never die. In the Middle East, one of the oldest is that Palestine is the "core" regional issue. This zombie should have been interred at the beginning of the Arab Spring, which has highlighted the real core conflict: the oppressed vs. their oppressors. But the dead keep walking.

"The plight of the Palestinians has been a root cause of unrest and conflict in the region," insisted Turkish President Abdullah Gul in the New York Times last week. "Whether these [recent] uprisings lead to democracy and peace or to tyranny and conflict will depend on forging a lasting Israeli-Palestinian peace." Naturally, "the U.S. has a long overdue responsibility" to forge that peace.

Writing in the Financial Times, former U.S. National Security Adviser Brent Scowcroft intoned: "The nature of the new Middle East cannot be known until the festering sore of the occupied territories is removed." Read: The fate of democracy hinges on Palestine.

So do "Iran's hegemonic ambitions," he insinuated. This is why Tehran reaches for the bomb? Syria, too, will remain a threat "as long as there is no regional peace agreement." The Assad regime is slaughtering its own people for the sake of Palestine? And unless Riyadh "saw the U.S. as moving in a serious manner" on Palestine, Mr. Scowcroft warned, the Saudis might really sour on their great protector from across the sea. So when they sent troops into Bahrain, were they heading for Jerusalem by way of Manama?

Shoddy political theories—ideologies, really—never die because they are immune to the facts. The most glaring is this: These revolutions have unfolded without the usual anti-American and anti-Israeli screaming. It's not that the demonstrators had run out of Stars and Stripes to trample, or were too concerned about the environment to burn Benjamin Netanyahu in effigy. It's that their targets were Hosni Mubarak, Zine el Abidine Ben-Ali, Moammar Gadhafi and the others—no stooges of Zionism they. In Benghazi, the slogan was: "America is our friend!"

The men and women of the Arab Spring are not risking their lives for a "core" issue, but for the freedom of Egypt, Tunisia, Libya and Syria. And of Iran, as the Green revolutionaries did in Tehran in 2009.


Syrian anti-government protesters march during a demonstration in Banias, Syria, on April 17.

Every "Palestine-first" doctrine in the end comes down to that fiendish "Arab Street": The restless monster must be fed with Israeli concessions lest he rise and sweep away our good friends—all those dictators and despots who pretended to stand between us and Armageddon. Free Palestine, the dogma goes, and even Iran and Syria will turn from rabid to responsible. The truth is that the American and Israeli flags were handed out for burning by those regimes themselves.

This is how our good friends have stayed in power: Divert attention and energy from oppression and misery at home by rousing the masses against the enemy abroad. How can we have free elections, runs a classic line, as long as they despoil our sacred Islamic lands? This is why anti-Americanism and anti-Semitism are as rampant among our Saudi and Egyptian allies as among the hostile leaders of Iran and Syria.

The Palestinians do deserve their own state. But the Palestine-first strategy reverses cause and effect. It is not the core conflict that feeds the despotism; it is the despots who fan the conflict, even as they fondle their U.S.-made F-16s and quietly work with Israel. Their peoples are the victims of this power ploy, not its drivers. This is what the demonstrators of Tahrir Square and the rebels of Benghazi have told us with their silence on the Palestine issue.

So Palestine has nothing to do with it? It does, though not in the ways insisted by Messrs. Gul and Scowcroft. The sounds of silence carry a different message: "It's democracy, stupid!" Freedom does not need the enemy at the gate. Despots do, which is why they happily let the Palestinian sore fester for generations.

Israel, which has reacted in utter confusion to the fall of Mubarak, might listen up as well. If democracies don't have to "busy giddy minds with foreign quarrels," as Shakespeare has it in Henry IV, then Israel's reformed neighbors might at last be ready for real, not just cold peace. Mr. Mubarak was not. Nor is Mr. Assad of Syria, who has refused every Israeli offer to hand back the Golan Heights. If you rule at the head of a tiny Alawite minority, why take the Heights and give away a conflict that keeps you in power? Peace at home—justice, jobs and consent—makes for peace abroad.

Still, don't hold your breath. Yes, democracy is where history is going, but it is a long, perilous journey even from Tunis to Tripoli, let alone all the way to Tehran.

Mr. Joffe is senior fellow at the Freeman-Spogli Institute for International Studies and a fellow at the Hoover Institution, both at Stanford.
http://online.wsj.com/article/SB10001424052748704677404576284653239512520.html?mod=WSJ_Opinion_LEFTTopOpinion

24 de abril de 2011

Dispatch from Libya: the courage of ordinary people standing up to Gaddafi

Chris McGreal, a veteran of 25 years of conflict, reveals why Libya's revolution is one of the most inspiring he has witnessed

Chris McGreal in Benghazi
guardian.co.uk, Saturday 23 April 2011 20.50 BST
Article history

Libya's eye of the storm: engineering graduate Abdullah Fasi standing amid the wreckage of Katiba military barracks in Benghazi. Photograph: Guy Martin for the Observer
The Middle East. A man with a car fashioned into a bomb. He disguises his intent by joining a funeral cortege passing the chosen target. At the last minute the man swings the vehicle away, puts his foot down and detonates the propane canisters packed into the car.

It all sounds horrifyingly familiar. Mahdi Ziu was a suicide bomber in a region too often defined by people blowing up themselves and others. But, as with so much in Libya, the manner of Ziu's death defies the assumptions made about the uprisings in the Arab world by twitchy American politicians and generals who see Islamic extremism and al-Qaeda lurking in the shadows. Ziu's attack was an act of pure selflessness, not terror, and it may have saved Libya's revolution.

In the first days of the popular uprising he crashed his car into the gates of the Katiba, a much-feared military barracks in Benghazi, where Muammar Gaddafi's forces were making a last stand in a hostile city. At that time the revolutionaries had few weapons, mostly stones and "fish bombs" — TNT explosive with a fuse that is more usually dropped in the sea off Benghazi to catch fish. The soldiers had heavy machine guns and the revolutionaries, often daring young men letting loose their anger at the regime for the first time, were dying in their dozens as they tried to storm the Katiba.

Then Ziu arrived, blew the main gates off the barracks and sent the soldiers scurrying to seek shelter inside. Within hours the Katiba had fallen.

Ziu was not classic suicide-bomber material. He was a podgy, balding 48-year-old executive with the state oil company, married with daughters at home. There was no martyrdom video of the kind favoured by Hamas. He did not even tell his family his plan, although they had seen a change in him over the three days since the revolution began.

"He said everyone should fight for the revolution: 'We need Jihad,'" says Ziu's 20-year-old daughter, Zuhur, clearly torn between pride at her father's martyrdom and his loss. "He wasn't an extreme man. He didn't like politics. But he was ready to do something. We didn't know it would be that."

Ziu may have been unusual as a suicide bomber, but he was representative of a revolution driven by dentists and accountants, lorry drivers and academics, the better off and the very poor, the devout and secular. Men such as Abdullah Fasi, an engineering student who had just graduated and was in a hurry to get out of a country he regarded as devoid of all hope until he found himself outside the Katiba stoning Gaddafi's soldiers. And Shams Din Fadelala, a gardener in the city's public parks who supported the Libyan leader up to the day government soldiers started killing people on the streets of Benghazi. And Mohammed Darrat, who spent 18 years in Gaddafi's prisons and every moment out of them believing that one day the people would rise up.

Fasi joined the revolution on day two. The protests began after sunset on 15 February outside the police headquarters to demand the release of a lawyer, Fathi Terbil, who was arrested over a lawsuit against the government on behalf of the relatives of 1,200 men killed by Gaddafi's forces at Abu Salim prison in 1996. Relatives of the dead men and lawyer friends of Terbil started to march. As they moved through the city, the crowd swelled and chanted slogans from the Tunisian and Egyptian revolutions. The police attacked them with water cannon and the government unleashed young men wielding broken bottles and clubs against the protesters. All that did was to bring thousands more on to the streets the next day, including Fasi.

"At first we didn't ask Gaddafi to leave," he says. "We just wanted a constitution, justice, a better future. Then they came shooting and beating the people. After that we said Gaddafi must leave."

"I knew I had to go to the Katiba. They were shooting us. In front of me they killed seven people in those four days. The last day was very very hard. People started to get TNT from the other camps and make the fish bombs. Every five minutes I heard a fish bomb explode."

Then Ziu charged the Katiba's gates on his kamikaze mission. What followed wasn't pretty. "(The revolutionaries) were beating Gaddafi people they captured, it's true. When they captured a Gaddafi soldier they said: 'What was this man doing? He was shooting us.' Gaddafi's soldiers wanted to kill anyone. They were using anti-aircraft weapons on humans. It cut people in half. People were angry," says Fasi. So angry that some of Gaddafi's soldiers were lynched. At least one was beheaded.

With the battle of the Katiba won and the revolutionaries in control of Benghazi, Fasi gravitated toward the city's courthouse on the dilapidated Mediterranean sea front, a mix of ornate Italian colonial-era buildings and ugly but functional modern constructs. The revolutionaries had burned the court and the neighbouring internal security offices as symbols of repression. Now they were rallying centres and something of a shrine. Relatives of Gaddafi's many victims over four decades pinned up hundreds of pictures of the dead on the courthouse walls alongside those killed around the Katiba. Ziu's portrait is there as an heroic martyr. While some mourned, others let loose with graffiti plastered across Benghazi declaring that the 42-year nightmare was nearly over.

Benghazians still marvel at their own courage in taking on the regime. Failure would almost certainly have meant execution, years in one of Gaddafi's brutal prisons or exile. Yet otherwise ordinary people inspired each other to take the risk, not for an ideological cause or over some ethnic divide but to enjoy the basic freedoms few have ever known.

Middle-aged men said they stood against Gaddafi because they couldn't bear the thought of their children growing up to face a future devoid of hope. Younger people spoke of a realisation that they could either seize the moment or resign themselves to a half-existence under the tutelage of the next generation of Gaddafis. Even a few weeks later when the regime's tanks were at the gates of Benghazi and the revolution looked as if it might be lost, expressions of regret were rare. The hardcore of revolutionaries — the female dentistry professor with an eight year-old child, the accountant with a family in the US, the shopkeeper who wonders where the money to feed his family will come from because the revolution has killed trade all said that at least they would die as free Libyans.

Few revolutions have been more inspiring. After years of reporting uprisings and conflicts driven by ideology, factional interests or warlords soaked in blood — from El Salvador to Somalia, Congo and Liberia – Libya's uprising seems to me more akin to South Africa's liberation from apartheid. For a start, the once pervasive fear of a hated regime is gone.

From the first days, scores of enthusiastic young revolutionaries, high on the prospect of looming victory, indulged the newfound freedom to finally say what they thought. They churned out screeds listing the dictator's crimes and posters caricaturing Gaddafi as a common thief and agent of Mossad. Some posters imagined him on trial before the international criminal court or strung up on one of the gallows used for public hangings to terrorise the Libyan population.

Revolutionary committees sprang up. Among them was one charged with getting the message to the outside world that Libya 2011 was not Tehran 1979. The savvy revolutionary activists watching CNN and news websites were not slow in recognising the fearmongering in parts of the US media and Congress over what kind of revolution this was.

Almost the only foreigners in Benghazi during the early days of the revolution were journalists. We were feted with free coffee in cafés and regularly stopped on the street and thanked for coming. But reporters were also quizzed by Libyans who picked up on the talk about Islamic extremists hijacking the revolution. Where, they wondered, did the idea of al-Qaeda in Libya come from? Couldn't people see what kind of revolution this is?

It is hard not to notice how desperate the core of revolutionaries is to be accepted by the west. It is common enough to run into accountants, oil executives and engineers on the frontline who have studied in Nottingham, Manchester and Brighton. They say they admire Britain and the US. Denunciations of America are noticeably absent, at least on the rebel side of the line. France's president, Nicolas Sarkozy, is a hero in rebel-held areas for recognising the revolutionary administration.

Yet it is also not hard to see why the outside world was uncertain about the revolutionaries. No other country in the Middle East is quite so defined by its leader.

The cult of Gaddafi and his Green Book, his links to terrorism and the sheer brutality of a regime that publicly hanged students at Benghazi university for dissent, left little to be admired. The Libyan leader's colourful behaviour, including a taste for Amazonian bodyguards, led much of the world to conclude that he was unstable as well as dangerous. From the outside, there were good reasons to wonder if the collective sanity of the Libyan people had not gone off the rails in those 42 years, especially when Libyans were seen on television in near hysterics as they fanatically waved Gaddafi's green flag and swore to die for him.

"He made us ashamed of our country. He made us ashamed of ourselves," says Mohammed Darrat, the former army officer who, in joining the throngs outside the Benghazi courthouse during the first days of the revolution, committed his first political act since Gaddafi flung him into jail in 1970. "Gaddafi gave this image to the world of the Libyan people as criminals or fanatics. It wasn't true. We knew all along that he didn't speak for us. It was always the people of Libya versus one family, the Gaddafis."

That may not be entirely true. Many Libyans did very nicely out of the regime, at the price of unyielding loyalty to the "brother leader". But it is true that large numbers of Libyans regarded Gaddafi with contempt. Fasi, 23, grew up listening to his parents talk of Gaddafi as mentally unstable. "They thought he was mad – all my family talking about him and what he did in the 70s and 80s. They regarded him as a criminal for Lockerbie and a lot of other things. They hated it that the rest of the world only saw Gaddafi and not the Libyan people," he says.

Fasi was warned by his parents never to repeat such views outside the house. That didn't stop him. "For my generation, we were talking about it a lot. You can't say Gaddafi is mad to just anybody. You can say it to close friends, but not to someone you don't know properly, in case he's a spy for internal security. In the last few years we were talking about that a lot among ourselves, saying we don't want Gaddafi. But none of us expected Gaddafi to fall. Everybody was waiting for him to die. We left it to God to deal with him and we told ourselves whatever happens after there can be no one worse than Gaddafi," he says.

Until that day, many young Libyans saw no future in their own country. They were generally less concerned with Gaddafi's crimes against his own people — Benghazi was a favoured place for public hangings of political dissidents — than with the despair of living in a country where they saw no future. "I had to join the revolution because we didn't have any hope here," says Fasi. "A lot of my friends left the country after graduation. You see the outside, you see the other countries, you see how they live free. Even if their economies are bad, they are free. That's the point."

For Darrat, the revolution is about something else entirely. It's personal. He knew Gaddafi from their army days, recognised the nature of the man and turned against him almost from the moment he seized power in 1969. "I went to military academy in Iraq. I saw that revolution and all the suffering there, the crimes," he says. "After Gaddafi's revolution I joined a secret group of army officers. We watched a lot of soldiers in the upper ranks behaving immorally, harming people because they wanted power. Because of what I had seen in Iraq I thought the same terrible things would happen here. I was right."

Darrat joined a clique of officers planning to overthrow Gaddafi, but after a few months they were betrayed and arrested. "Gaddafi said we were traitors. They showed no humanity. They beat us day after day to obtain information. They smashed my leg and my back. I couldn't walk," he said.

Darrat was sentenced to life in prison. He left behind a wife and four children. Hundreds of other military personnel were also jailed. He describes prison as "very, very bad". After two operations to repair the damage done by the beatings to his legs and back he was immediately returned to his cell without anything to control the pain.

Darrat brings out a picture of his military academy graduation class. In it is one of the army officers who brought Gaddafi to power in the 1969 coup. Another in the group was executed for opposing the Libyan leader. He has no idea why Gaddafi freed him early. "Who knows what Gaddafi thinks," he says. "I don't know how we allowed him to take control of our lives. We could all see what he was."

When Gaddafi seized power he promised to do more for the poor with his distinctive brand of socialism. Wealthier Libyans lost properties. People in rented accommodation were told it now belonged to them. Yet for all the ideological rhetoric a substantial part of Libya's population still lives in poverty.

In a corner of Benghazi rarely seen by its better-off residents is a warren of roughly constructed shacks and containers made into houses. Shams Din Fadelala built his own place from breeze blocks and corrugated iron on a piece of barren land that was once the compound of a German oil company. From the outside, the house does not have an air of permanence. Inside it is immaculately turned out with china models of flowers and birds on the coffee table.

Fadelala says he had lived much of his life without expectations. Gaddafi's Libya did not encourage hope for a better life. The only real ambition for many Libyans was to stay out of the hands of the dictator's notorious security police and find a job abroad. But Fadelala could not even cling to that small dream. As a gardener in Benghazi's parks, he earns just £90 a month ("I give it all to my wife," he says).

None of that stopped him from supporting Gaddafi. "I had always supported Gaddafi," he says. "There was no one else, so who else could I support? He was the leader."

As Fadelala watched the Tunisian and Egyptian revolutions on al-Jazeera he marvelled at the audacity of the revolutionaries while not entertaining a flicker of hope that the same thing could happen in Libya. "It was interesting but I though it could never happen here. This is a different country. They didn't have Gaddafi," he says.

The regime calculated that unleashing violence against the protesters would intimidate men like Fadelala from supporting the revolutionaries. It was wrong. By the second day of the revolution, Fadelala was so appalled at the violence that he took the first political stand in his life and went to the courthouse in solidarity with the revolution. "When I saw what was happening, the shooting of protesters at the Katiba, I thought: 'No more Gaddafi'. People were just protesting. He had no right to kill them for that," he says.

Fadelala was not alone. Plenty of Benghazians eyed the uprising with suspicion, worried at the breakdown of order. But Gaddafi's reaction — to slaughter protesters and accuse those demanding democratic freedoms of being drug addicts and members of al-Qaeda — revived memories of the most brutal years of the dictator's rule in the 1980s and bolstered support for the uprising.

The revolution has still to be won. Gaddafi controls more territory than the revolutionaries. He managed to get his tanks into Benghazi before western air strikes drove them back. The residents of "free Libya" are in the peculiar position of being the only people on the planet pleading with foreigners to bomb their country.

Yet the uprising has changed everything. The fear of the regime is gone. The revolution has exposed the myth of Gaddafi's invincibility even if he manages to hang on for another few months. Fasi says he now has a reason to stay in Libya. "I really want to share in building this country," he says. "It's a dream to be the best country in the world. We can be that now. I think it needs democracy, and this country is rich. Democracy and oil, that's all we need."
http://www.guardian.co.uk/world/2011/apr/23/libya-benghazi-gaddafi-revolution

22 de abril de 2011

Wael Ghonim el más influyente del mundo, según la revista Time


The 2011 TIME 100

Meet the most influential people in the world. They are artists and activists, reformers and researchers, heads of state and captains of industry. Their ideas spark dialogue and dissent and sometimes even revolution. Welcome to this year's TIME 100

Wael Ghonim
Wael Ghonim
MARTIN SCHOELLER FOR TIME
Wael Ghonim embodies the youth who constitute the majority of Egyptian society — a young man who excelled and became a Google executive but, as with many of his generation, remained apolitical due to loss of hope that things could change in a society permeated for decades with a culture of fear.
Over the past few years, Wael, 30, began working outside the box to make his peers understand that only their unstoppable people power could effect real change. He quickly grasped that social media, notably Facebook, were emerging as the most powerful communication tools to mobilize and develop ideas.
By emphasizing that the regime would listen only when citizens exercised their right of peaceful demonstration and civil disobedience, Wael helped initiate a call for a peaceful revolution.
The response was miraculous: a movement that started with thousands on Jan. 25 ended with 12 million Egyptians removing Hosni Mubarak and his regime. What Wael and the young Egyptians did spread like wildfire across the Arab world.
Thank you, Wael. Thank you to the Egyptian youth.
ElBaradei, an Egyptian politician, is a former director general of the International Atomic Energy Agency




Read more: http://www.time.com/time/specials/packages/article/0,28804,2066367_2066369_2066437,00.html

21 de abril de 2011

California Dreamin'—of Jobs in Texas



Austin, Texas
It wasn't your usual legislative hearing. A group of largely Republican California lawmakers and Democratic Lt. Gov. Gavin Newsom traveled here last week to hear from businesses that have left their state to set up shop in Texas.
"We came to learn why they would pick up their roots and move in order to grow their businesses," says GOP Assemblyman Dan Logue, who organized the trip. "Why does Chief Executive magazine rate California the worst state for job and business growth and Texas the best state?"
The contrast is undeniable. Texas has added 165,000 jobs during the last three years while California has lost 1.2 million. California's jobless rate is 12% compared to 8% in Texas.
"I don't see this as a partisan issue," Mr. Newsom told reporters before the group met with Texas Republican Gov. Rick Perry. The former San Francisco mayor has many philosophical disagreements with Mr. Perry, but he admitted he was "sick and tired" of hearing about the governor's success luring businesses to Texas.
Associated Press
State Assemblyman Dan Logue, R., and Assembly Minority Leader Connie Conway, R., during a news conference on the Texas meeting.
Hours after the legislators met with Mr. Perry, another business, Fujitsu Frontech, announced that it is abandoning California. "It's the 70th business to leave this year," says California business relocation expert Joe Vranich. "That's an average of 4.7 per week, up from 3.9 a week last year." The Lone Star State was the top destination, with 14 of the 70 moving there.

Andy Puzder, the CEO of Hardee's Restaurants, was one of many witnesses to bemoan California's hostile regulatory climate. He said it takes six months to two years to secure permits to build a new Carl's Jr. restaurant in the Golden State, versus the six weeks it takes in Texas. California is also one of only three states that demands overtime pay after an eight-hour day, rather than after a 40-hour week. Such rules wreak havoc on flexible work schedules based on actual need. If there's a line out the door at a Carl's Jr. while employees are seen resting, it's because they aren't allowed to help: Break time is mandatory.

"You can't build in California, you can't manage in California and you have to pay a big tax," Mr. Puzder told the legislators. "In Texas, it's the opposite—which is why we're building 300 new stores there this year."


Other states are even snatching away parts of California's entertainment industry. The Milken Institute, based in Santa Monica, Calif., reports that 36,000 entertainment jobs have left the state since 1997. The new film "Battle: Los Angeles," which is set in California, was filmed in Louisiana.
"The red tape is ridiculous," says Mark Tolley, the managing partner of B. Knightly Homes, which relocated to Austin from Long Beach in 2005. "Regulators see developers as wearing a black hat and the environmental laws have run amok."

"I'm a pro-jobs Democrat," Mr. Newsom told me. "My party needs to get back into the business of jobs." Mr. Newsom says he's developing an economic development plan to present to Gov. Jerry Brown, who he says "gets it" on the need for business-friendly policies. Mr. Newsom told me that what impressed him most about Mr. Perry and the Texas legislators was their singular focus on job creation.

California, by contrast, seems to constantly lose focus. Several Democrats who agreed to go on the Texas trip were pressured by public-employee unions to drop out—and many did. And just as Texas business leaders were testifying about how the state's tort reforms had improved job creation, word came of California's latest priority: On April 14, the state senate passed a bill mandating that all public school children learn the history of disabled and gay Americans.
One speaker from California shook his head in wonder: "You can have the most liberated lifestyle on the planet, but if you can't afford to put gas in your car or a roof over your head it's somewhat limited."
The most dramatic reform California could make would be to change its boom-and-bust tax system so it doesn't depend on a small number of wealthy residents who can flee the state. The idea would be to broaden the income tax base and lower the state's high rates. It works today in seven states ranging from Colorado to Massachusetts. Of course, the Lone Star State has no state income or capital gains tax at all.
"Texas' economy is far less volatile due to its having neither a progressive income tax system nor a large tax burden," concludes "Rich States, Poor States," a study by the American Legislative Exchange Council. Less volatility also allows Texas to keep expenditures in check. While it shares with California the challenge of a huge budget deficit this year, it's expected to close it without raising taxes. Texas's overall spending burden remains below what it was in 1987—a remarkable feat.
When Jerry Brown ran for president in 1992, he understood the distorting nature of the tax code and proposed a flat tax with deductions only for rent, mortgage interest and charitable contributions. He called it "a silver bullet" for the economy. Mr. Brown has since abandoned that idea, grousing recently to a state legislator that "the flat tax cost me the New York Democratic primary."
But if California continues its economic decline, something Texas-sized in its ambitions may be called for— whether it's a moratorium on new business regulations or a restructuring of the state's dysfunctional unemployment compensation or litigation. Nothing less is likely to stem the outflow of businesses and jobs from the Golden State.

India's vanishing Communists


Red and buried

Two state elections bring India’s once-powerful Marxists to their knees

The people’s flag is deeply shred
RED flags flutter. Hammers and sickles are daubed in lurid colours by the roadside. Placards of plump, bearded leaders—Marxist answers to Father Christmas—are propped near coconut palms. At an election tour in the southern state of Kerala, crowds of Communists are putting on a dutiful show of support. Yet few expect to see their party back in office next month.
The comrades are out to hear Prakash Karat, their grey-haired general secretary who counts, by the geriatric standards of the Communist Party of India (Marxist), as relatively youthful. He sets no hearts racing. At rally after rally desultory applause meets his comments on food inflation and graft, promises of subsidised rice and swipes at the “bourgeois” Congress party.
His message is dated. India’s economy is racing ahead and the bourgeoisie is thriving. A claim that “only India’s 59 dollar-billionaires” are prospering rings false: anyway, many in the audience are too busy fiddling with their mobile phones to pay it much heed. Keralites prosper from globalisation: one-in-four households has a relative toiling in the Gulf. “We are a consumption state, cashing 20,000 crore rupees ($4.5 billion) each year from migrant relatives” points out Gopa Kumar, a professor at the local university.
Voting took place on April 13th and the Communists are likely to be kicked out. Christians and Muslims, with nearly half Kerala’s population, have swung against them over a botched attempt to cap fees at privately run religious schools. Keralites, India’s best educated people, are famously crotchety and like to boot their incumbents out. The Reds have run the state for 28 of the past 54 years, mostly alternating with the Congress party since 1957, when Kerala became the world’s first parliamentary state (tiny San Marino aside) to vote communists into office.
More painful is their pending defeat in West Bengal, which, with 91m people, is bigger than Germany. The Communists have run it non-stop since 1977, with large majorities. That spell should end after a staggered series of polls that began on April 18th. Over 80% turnout that day and long queues of voters in the north suggest Bengali voters are hungry for change.
A high-ranking party leader concedes “the odds are against us”: people are fed up with the chief minister Buddhadeb Bhattacharjee, better known as “Buddhababu”. The Marxists held West Bengal mostly thanks to farmers, who have long been grateful for land reforms in the late 1970s. But hostility to business, the collapse of textile factories, and labour and capital flight have all battered industry.
As Bengalis grew desperate for jobs beyond the paddies, so Buddhababu shifted, telling outsiders after 2006 how fond he was of trade and asking investors like Tata Motors to set up in the state, once the capital of India’s car industry. But his efforts got nowhere. Bungled attempts to grab land, and protests by farmers, scared Tata and others away.
His fate looks likely to be sealed by a pact between the Congress and Trinamul Congress parties who have united (just about) behind the national railways minister, Mamata Banerjee. If the Communists lose, the only remaining Red state will be little Tripura, a poor and neglected patch of 3.6m people wedged behind Bangladesh in the far north-east. That marks a dramatic collapse in fortunes. Just three years ago the Communists had a power-sharing deal with the national government and were strong in parliament and state assemblies.
Their failures are mostly local. Mr Karat admits to feeling “boxed in”. The party cannot appeal to identity politics, because the Bharatiya Janata Party (BJP) draws Hindu nationalists and regional leaders such as Mayawati in Uttar Pradesh rally low-caste backers. And judged on policies, the Communists are being squeezed by Congress’s left-leaning plans for an expanded welfare state.
Tactically, too, they have erred. They could have joined the Congress-led national government in 2004, promoted young leaders and taken charge of welfare, argues Ramachandra Guha, author of a book on modern Indian history. Instead, invoking Lenin—whose white marble bust still adorns the party headquarters in Delhi—they sat outside, first backing, then trying to topple the government over a civil-nuclear deal with America. They could also have campaigned harder against corruption. “They are probably the only politicians in India who don’t have Swiss bank accounts,” suggests Mr Guha. But social activists, judges and the BJP got there first.
Their influence has mattered. They urged hostility to America in the Cold War and statist policies that choked economic growth for decades. More helpfully, they pushed literacy and women’s rights, and opposed “untouchability” and the caste system. A battering at the polls, when results are published on May 13th, will not quite finish them off: younger leaders with more flexible ideas may be back in office in a few years’ time. But a curtain, of sorts, is falling on Indian Communism.