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INTERNATIONAL EDITIONS: HIGHLIGHTS AND EXCLUSIVES, DECEMBER 22, 2008 ISSUE
COVER: The $4,000,000,000,000 (Yes, that's $4 trillion) (All overseas editions). Jeffrey E. Garten, the Juan Trippe professor of international trade and finance at the Yale School of Management, writes that the trillions of dollars spent so far are not slowing the rapid descent of the global economy. The answer is even more trillions, and fast. "We stand on the threshold of a calamity that goes well beyond the rupture of the banking system and the deepening of a global recession and that leads to major political instability and conflict," Garten writes. "The needed response is a big-bang global bailout that is even bigger than what we have seen so far, one that puts governments in front of the contagion rather than always one step behind, and that is large and sweeping enough to restore confidence."
http://www.newsweek.com/id/174336
Southern Comfort. Senior Editor Daniel Gross explores the second auto industry that has emerged over the past two decades: nonunion, Southern-based, and foreign-owned. He examines the "Little Eight," foreign manufacturers that have moved into Kentucky, Tennessee, Alabama, Mississippi, South Carolina, Georgia and Texas, and transformed the economic geography of the nation's auto industry. "Today's Southern solons have watched their local economies blossom thanks to a younger, more-vibrant auto industry unencumbered by the Big Three's legacy costs and union work rules-a sort of anti-Detroit that has the flexibility and ability to turn profits by making the types of cars that Americans actually want to buy," writes Gross.
http://www.newsweek.com/id/174337
GLOBAL INVESTOR: What China Can Learn From 1929. Michael Pettis, a finance professor at Peking University and the author of "The Volatility Machine: Emerging Economies and the Threat of Financial Collapse," writes that, as it did in 1929, the world is experiencing a global contraction. But this time the roles of the United States and China are reversed: whereas in the 1920s U.S. overproduction fed foreign overconsumption, today U.S. overconsumption had been fed by Chinese overproduction. "If U.S. overconsumption was one half of the global imbalance, it cannot help much if American debt-fueled household overconsumption is simply replaced by American debt-fueled government overconsumption. The fundamental imbalance, [John Maynard] Keynes would have argued, as he did in the 1930s, is that with Americans forced to reduce their overconsumption, China must reduce overproduction-either by boosting domestic consumption or by closing factories," Pettis writes.
http://www.newsweek.com/id/174529
Why China Is Too Scared to Spend. Special Correspondent Mary Hennock reports that China's social-security network is broken, badly, and nowhere are the problems worse than in health care. A serious illness can still wipe out a family's savings. Huang Ming, a Cornell professor who teaches at
Beijing's Cheung Kong Graduate School of Business, says, "It's in the interest of the government to develop the social safety net fast. It will stimulate consumption. [Chinese] save because they are frightened of getting sick." The costs of illness can be ruinous. Yet tackling China's vast medical crisis is daunting. Even President Hu Jintao acknowledged in 2006 that "medical-service fairness is declining and medical fees are too high for most people to afford." He called for faster development of rural services, a network of city clinics, timely treatment and safe drugs at affordable prices. But progress has been glacial, centered on pilot studies and exercises more visible to experts than the public.
http://www.newsweek.com/id/174524
President on the Precipice. Paris Bureau Chief Christopher Dickey and Special Correspondent Tracy McNicoll report that French President Nicolas Sarkozy has no effective opposition at all. The far right crumbled before his election last year, the Socialist Party collapsed after it and since his supporters hold a 55 percent majority in the National Assembly, Sarkozy is now unrestrained by domestic checks and balances. With no opposition on the left or the right, he could turn his economic policies in a whole new direction. Having been elected on a platform of less state intervention, Sarkozy suddenly embraced state intervention with a vengeance, promoting this month a ¤26 billion stimulus package that would dramatically increase France's budget deficit. Whether, in the end, Sarkozy will go down as a man of destiny, or merely of obstinacy and arrogance, only history-and perhaps his fellow European leaders-can decide.
http://www.newsweek.com/id/174522
WORLD VIEW: Fighting Wars of Peace. Assistant Managing Editor Jonathan Tepperman writes that the United States' eagerness to engage in humanitarian peacekeeping missions "seems to have been extinguished by Iraq." "Even former secretary of state Madeleine Albright, who helped orchestrate interventions in Haiti, Bosnia and Kosovo during the Clinton years, now says such missions 'would seem impossible in today's climate.'" Unless Obama's foreign-policy team has its way, that is. His choice for U.N. ambassador, Susan Rice, served on the National Security Council during the Rwanda genocide and has vowed that if she ever faces a similar crisis, she will "come down on the side of dramatic action." "Still, only one thing will ultimately determine whether the United States intervenes when crisis strikes: 'political will,' as Albright puts it," Tepperman writes.
http://www.newsweek.com/id/174523
THE LAST WORD: Asif Ali Zardari, president of Pakistan. Zardari told Special Diplomatic Correspondent Lally Weymouth in a recent interview that he will not allow any group, including the Lashkar-e-Taiba, the Pakistani terrorist group that India blames for the Thanksgiving attacks in Mumbai, to use Pakistani soil "for any form of aggression toward any friend or foe." Zardari adds that he wants to improve relations with India. "I want to be a friend of India and a friend of the world and [a foe of terrorism] because I am a victim myself. There is always room for improvement on every side. There is room for the world to help me with the present situation in Pakistan, where poverty is a friend of the terrorists," he says.
http://www.newsweek.com/id/174277
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