By Anna Nemtsova

Change is finally coming to Russia's notoriously harsh jails. Last month President Dmitry Medvedev announced a major prison overhaul after public outrage erupted over a young lawyer's death from lack of medical treatment while he awaited trial. Russia's system is plagued with the world's second-highest incarceration rate (some 900,000 people at present), and conditions have changed little since Stalin's time. Among the reforms, Medvedev plans to punish minor crimes with house arrest or bail, to soften sentences for first-time offenders and house them separately from career criminals, and to close 755 of the country's most decrepit prison colonies.

For almost half of Russia's incarcerated, though, the reforms will make life much harder. Closing rural camps will concentrate 400,000 repeat offenders into overcrowded central prisons. Their living quarters will change from large barracks to cramped four-person cells. Most of them will lose their rights to work, study, and conjugal visits. One prisoner's "reform" is about to become another's gulag nightmare.

One of the most striking turns in the fall of Toyota is how the recall scandal is playing with much of the Japanese public: as a bewildering American frenzy. Yes, they are concerned about the recall, but many assume Americans must have some malign reason for kicking up a fuss, when in fact recalls happen all the time. Some read the recommendation from U.S. Transportation Secretary Ray LaHood to Toyota drivers--"stop driving them"--as proof of a Japan-bashing Washington conspiracy. They are quick to point out that the faulty brake pedals were actually made in Indiana, not Japan. And until very recently, at least, they seemed convinced that the frenzy would fade away without lasting damage to Japan. Look at BMW: its 2008 recall of 200,000 cars for possible airbag failure left no marks on Germany's engineering reputation.

Note to Japan: you don't get it. Recalls for minor technical problems are common, but recalls of millions of vehicles for problems that can produce nightmarish, fatal crashes are not. Toyota's recall of 6.6 million cars is the sixth largest in U.S. history so far, and one of the scariest. Most automakers have learned to handle these PR disasters forthrightly, but Toyota CEO Akio Toyoda performed a duck-and-denial routine not seen since Ford tried to evade responsibility for exploding Pintos in the 1970s before he belatedly apologized last week. Americans have also long since given up on Japan bashing, have lionized Toyota as the ultimate in manufacturing quality, and have welcomed Japanese plants, even in the Deep South. Toyota would never have conceded, before the recall, that its vaunted quality controls did not cover its U.S. operations, so it's a bit disingenuous to blame "American made" parts now.

This is a global company. It needs to take global responsibility. The investigation has targeted not only those Indiana-built accelerator pedals, but floor mats and computer systems, too. The U.S. National Highway Traffic Safety Administration is still investigating. And now Japanese officials are beginning to investigate, and sentiment in Japan seems to be turning, perhaps a bit too late. Gene Grabowski of Levick Strategic Communications, which advises firms facing recalls, calls this "the worst-handled auto recall in history," and that's saying something. The exploding Pinto became a symbol of the U.S. quality problems that allowed Toyota to flourish in America, and the runaway Prius may mark another turning point, this one less auspicious for Japan.

By Jonathan Tepperman

Sometime in the past year, secret talks between India and Pakistan over Kashmir--which made great progress in 2008 before Pakistan's strongman, Pervez Musharraf, was ousted--were restarted, say U.S. and Indian sources. If successful, the negotiations would represent a huge breakthrough for the subcontinent. But the payoff would stretch even further. Solving Kashmir is looking increasingly essential to another conflict: Afghanistan. That makes the Obama administration's reluctance to engage with the issue hard to fathom.

To understand the link between Kashmir and Kabul, remember that the U.S. can't defeat the Taliban without help from Pakistan, which continues to shelter (and, allegedly, support) the Afghan insurgents. But that won't change until Pakistan resolves its rivalry with India. It is fear of India that keeps Pakistan from pulling enough troops off its eastern border to police the Afghan frontier (which Taliban members cross at will), and that explains Islamabad's desire to turn Afghanistan into a vassal state (giving Pakistan "strategic depth" in case of an Indian invasion). Only taking Kashmir--the main bone of contention with India--off the table could change this.
Given that fact, you'd expect the Obama team to be pushing the peace process forward. Instead, it has avoided the issue, largely because India erupts with rage whenever the U.S. tries to get involved. Thus Richard Holbrooke, Obama's AfPak envoy, says the U.S. won't consider stepping in.

Iranian President Mahmoud Ahmadinejad continues to face protests at home and the possibility of international sanctions abroad, but the biggest threat to his rule is something more banal: inflation. Iran's official inflation rate has now reached 13.5 percent, but the actual rate could be twice as high. And it looks likely to get worse. Come spring, the government plans to stop subsidizing basic goods and will instead give cash directly to poor families. That plan, as well as Ahmadinejad's push to give out more loans, will expand the cash supply and likely drive inflation higher still. Efforts to combat rising prices have so far failed. Two weeks ago the Finance Ministry capped daily bank withdrawals at $15,000. According to reports on opposition Web sites, several banks in Tehran and Isfahan were subsequently swamped by desperate customers, and in at least one case police had to be called in. 

Political protesters plan a large rally on Feb. 11, the anniversary of the 1979 revolution. If they're joined by ordinary Iranians fed up with the dismal economy, it may be a case of history repeating itself.

Seoul has long been known for its daring, innovative business culture, but the look of the place, which was drab and generic, never matched this ambition. Now 2010 may be the year that changes. In early February the city is set to unveil the first of three artificial floating islands on the Han River that will serve as host to the Seoul International Business Advisory Council and the G20 meetings this fall. The $83 million project is the latest step in Mayor Oh Se-hoon's initiative to reshape the city and turn it into a mecca for design talent, all in time for Seoul's tenure as World Design Capital. The city beat out notable rivals such as Singapore and Dubai for the biennial title--unanimously bestowed by a jury at the International Council of Societies of Industrial Design (ICSID)--and will celebrate the honor with a slate of competitions, and exhibitions culminating in a 21-day design Olympiad in September and October. 

The city will also unveil its $98 million Dongdaemun Design Plaza this year, a futuristic wavelike edifice designed by British architect Zaha Hadid that will serve as a hub for visiting and local artists. This comes on the heels of recent adventurous renovations such as the Banpo Bridge's Moonlight Rainbow, a massive fountain that turns into an illuminated waterfall show after sunset, and the Hangang Renaissance, which is replacing the riverfront's concrete embankments with lush promenades.

Wednesday marks Venezuelan President Hugo Chávez’s 11th year in office. By rights, it ought to be a gala occasion, and no doubt, the red shirts and flags of Chavismo will be in evidence. After all, for most of this decade the man who launched a Bolivarian revolution, inspired by the 19th-century would-be Latin liberator Simon Bolívar, has been the people’s choice. Now the people are not sure.

Lately, the Bolivarian Republic of Venezuela has distinctly soured on its showman president. A new survey by Hinterlaces, an important, independent pollster in Caracas, shows just how badly. The survey canvassed 903 people by landline and cell phone Jan. 25-28, just as the country was hit by rolling blackouts, a new wave of government takeovers of private businesses, and clashes between police and demonstrators following Chávez’s order to shut down the country’s popular cable station RCTV. It’s not pretty:

• 61% of those surveyed believe the country is on the wrong path.
• 78% disagree with the decision to take RCTV off the air.
• 64% say that the government’s crackdown on Venezuelan media is a threat to freedom of expression.
• 61% say they back the student-led demonstrations.
• 75% disapprove of the official energy-rationing policy.
• 61% condemn the recent expropriation of a supermarket chain.

More than a setback, this is a reversal of fortune on a massive scale. Over the years, Chávez’s critics have tarred him with every brush: “demagogue,” “despot,” “bluff artist,” and “Midas in reverse” are just some of the names he’s been called. Yet even the fiercest challengers have had to bow to the polls. In test after test, including elections, recall votes, and referendums, never mind opinion surveys, Chávez has routinely come out on top while his foes and challengers have rarely been more than a noisy minority. It’s an enviable record for any leader and proof positive─claim the Chavistas─that the Bolivarian revolution is democracy at work, built on the ballot box, not the boot heel.

Defiant, Chávez challenged his detractors to a political duel, daring them to try a recall vote. Over the last decade, he has survived them all. Would he now? According to the Hinterlaces poll, if the nationwide legislative elections scheduled for this September were to be held today, 34 percent of Venezuelans would vote for independent candidates, 26 percent would vote for the opposition, and only 28 percent would vote cast ballots for Chavistas (12 percent said they didn’t know).

In the last couple of weeks, some of his closest aides have been fired or demoted, while others have simply quit, including the vice president and the head of the state-run Banco de Venezuela. Recently, a group of former high ranking Boligarchs declared that Chávez has no moral authority to remain in power and publicly called for him to step down. No doubt, he will plug his ears. But for the man who fancies himself as El Comandante, the current numbers don’t add up.

By Isaac Stone Fish

When Google threatened to pull out of China last month, many experts interpreted the move as a last-straw response to Beijing's aggressive policy of Internet protectionism. It was assumed that in the wake of Google's departure, the government would set up domestic rival Baidu to become the Google of China; indeed, the company's stock surged 16 percent on the day of Google's announcement. Baidu's ambitions may be even larger: on Jan. 16, Baidu CEO and founder Robin Li announced plans to expand the brand to reach half the global market within 10 years. But there are many reasons Baidu will make a weak global challenger to Google, even with strong backing from Beijing.

In an industry that depends on trust between users and advertisers, Baidu's biggest enemy is itself. Rivals and customers have accused Baidu of tailoring its search results to favor companies that advertise most heavily on its site, of favoring domestic over foreign firms, and even of blackmailing small and medium enterprises into buying ads--using the threat that they will be removed from Baidu results if they do not comply. A Baidu spokesperson denies that the company manipulates or discriminates in its search results. Many analysts see the familiarly streamlined Baidu Web site as a direct copy of Google. Li has done nothing to quiet those critics by dismissing innovation, the bedrock of Google's global strategy, as oversold.  

Jewish settlers have long been adept at manipulating Israeli law to get what they want. Their latest target? Several homes in the Palestinian neighborhood of Sheikh Jarrah in East Jerusalem. In an ongoing series of court cases, they've argued that the homes had belonged to Jews before the establishment of Israel in 1948, and that the Palestinians who have lived there for more than 60 years are essentially squatters. So far, the settlers have won possession of three homes--but in doing so may have set a legal precedent that could backfire badly. That's because hundreds of homes in West Jerusalem, which is predominantly Jewish, were owned by Palestinians before 1948. The homeowners fled or were forced out during Israel's war of independence, and the homes were subsequently given to Jews. Now the East Jerusalem case may give those Palestinians legal grounds to demand their houses back.

Muhammad Dahleh, an Arab Israeli lawyer, says he plans to petition Israel's High Court of Justice for exactly that. Dahleh doesn't expect to win; Israeli law weighs heavily against Palestinians in such cases. But a drawn-out proceeding might be an embarrassment for Israel, highlighting what critics describe as preferential legal treatment for Jews. That could mean more trouble for a country already blanketed by international criticism.

By Nancy Cook

The big economic headline from this morning is the unexpected increase in the gross domestic product, which rose to 5.7 percent in the fourth quarter from 2.2 percent in the third quarter of 2009. That’s a big jump in this sour economy, but it’s premature to start celebrating just yet.

The national unemployment rate stubbornly remains at 10 percent, with states such as California, Rhode Island, Michigan and South Carolina suffering from even higher local unemployment rates. If people lose their jobs or feel insecure about their futures, they spend less money or opt to save more cash. Either way, they’re not buying as much stuff. Increased consumer spending is one roadmap economists see as a way to pull Americans out of this recession.

Most of the celebrated GDP growth this quarter (3.4 percent) instead came from businesses increasing their inventories. That’s nothing to scoff at, but it’s hard to tell if this economic growth will continue. “Certainly it’s better to have strong growth rather than weak growth,” says Gus Faucher, Director of Macroeconomics at Moody’s Economy.com, “but the underlying demand is still pretty soft.” Faucher says the economy won’t really start to rebound until late 2010 when the labor market improves and people head back to work. That may explain why Americans feel so low, despite several economic indicators that say the economy is improving.

Here are some other GDP readings I’d recommend:

Economists React: Too Soon to Declare ‘Recovery Accomplished’

GDP Up 5.7 Percent, Thanks To Improvements In Inventories

Stocks rise after better-than-expected GDP report