Why Latin Nations Are Poor

With hysteria mounting about the political shift leftward in Latin America and 11 presidential races in the region over the next 13 months, the World Bank’s “Doing Business in 2006″ survey merits a read. We mentioned it two weeks ago but a fuller airing is in order.

The annual report, by the research side of the bank, measures the regulatory burden and property rights in 155 countries. This year’s results demonstrate clearly that despite persistent claims that the region has tried the “free-market” model and found it wanting, Latin America is stubbornly stuck in a statist time warp.

When it comes to burdensome government and weak property rights, Latins don’t fare as badly as Africans but their freedoms lag behind those in much of Asia and the former Soviet satellites of Europe.

It’s been 20 years since Hernando de Soto’s Lima-based Institute for Liberty and Democracy published “The Other Path,” documenting the burdens that the Peruvian state was heaping on the backs of the struggling underclass. But in two decades little has changed in a region mostly known for caudillo government and its capacity to disappoint. More than ever, the Latin predatory state is driving entrepreneurs underground and forcing the most industrious citizens to emigrate, mostly to the U.S.

Take for example Mexico, which has enormous oil reserves and open trade with North America. Its economy is sadly underperforming. Mexican Finance Minister Francisco Gil Diaz has managed the macro side of things exceedingly well. But on the micro side, Mexican businesses face crippling regulation and inadequate legal protections, weakening the potential for market competition, investment and productivity gains.

In the category of the World Bank report that deals with “hiring and firing,” Mexico ranks 125th out of the 155 countries surveyed, not least because it costs a firm almost 75 weeks of wages to fire a worker. Mexico also ranks 125th in “protecting investors” against fraud, self-dealing and other corporate abuses. Correspondingly, it ranks 100th in the “enforcing contracts” category, meaning that when two parties strike a deal, neither knows whether it will hold up.

Peru gets a better overall rating than Mexico, but it can hardly be said to encourage entrepreneurship. In “starting a business,” Peru ranks a low 106th because of the red tape Mr. de Soto wrote about so long ago. Firing a worker costs almost 56 weeks of wages, discouraging employers from hiring and risking huge costs if business takes a turn for the worse. A medium-sized business in Peru can expect a tax burden reaching almost 51% of gross profits, which is part of the reason Peru has the 133rd worst tax burden. “Enforcing contracts” takes 381 days on average, leaving Peru in 114th place in this category.

Argentina, still saddled with Peronist labor laws, has an even less flexible labor market than Peru, at 132nd in “hiring and firing.” Moreover, a medium-sized company must theoretically pay almost 98% of its gross profit to the tax man, which explains a high rate of tax evasion.

In 25th place globally, Chile has the best business climate in the region but is inexcusably behind Malaysia, Estonia and Lithuania. It badly needs to advance reforms undertaken in the 1980s, but instead the Socialist government of Ricardo Lagos has yielded to union activists by increasing labor law burdens.

Colombia — at 66th — has dreadful ratings in “hiring and firing” (130th) and in “paying taxes,” where a medium-sized business has a total payable tax of 75% of gross profits. Venezuela doesn’t enforce contracts (129th), doesn’t protect investors (142nd) and makes paying taxes a bureaucratic nightmare (145th). There are some notable improvements among small countries. Honduras gets better marks for making property registration more efficient. El Salvador has quickened “business entry” but still ranks far down the list in this category due to the cost of starting a business.

The correlation between economic freedom and prosperity is clear from reading the World Bank ratings. As one would expect, overtaxing and overregulating economic activity stunts growth, as do weak property rights. Much of the region’s stagnation is attributable to burdens inflicted by government.

Why hasn’t democracy in Latin America produced change? The answer can be found in public-choice theory — a school of economics made famous by Nobel Prize winner James Buchanan. Public choice views politics as a market, where the highest bidders have the power to “purchase” what they want. Deregulation may be best for the majority, but politicians don’t have an incentive to do it when their most powerful, best-organized constituents — the ones who put them in office — prefer the status quo. That includes not only labor unions but rich, established oligarchs and government bureaucrats. Most Latin countries don’t have large enough middle classes to counter these oppressive forces, thanks to the twin curses of overregulation and weak property rights.

At the cost of a civil war, El Salvador has had some success in awakening the power elite to the need for change. But most of the region is more like Mexico, where labor unions and a handful of wealthy individuals — like telecom mogul Carlos Slim and media giant Ricardo Salinas Pleigo — see no need to reform a system that serves them so well.

On reviewing the World Bank study, it is worth noting that external forces also militate against reform. The International Monetary Fund, the U.S. Agency for International Development, World Bank loan officers and the United Nations provide easy money — “aid” — to support failed governments and an entrenched ruling class. “Conditionality” has been a dismal failure. IMF assistance to Argentina worked against challengers to Peronism in the 2003 election and ensured victory for the present anti-market government.

Rich-country bureaucrats also often tie their handouts to objectives favored by rich-country pressure groups, such as environmental and labor “protections” that in the name of “social justice” add more red tape and further destroy individual initiative. All the while, Godzilla government is leaving Latin America’s underclass living in the shantytowns and favelas with little opportunity or hope.

Once Upon a Time in America

The end, or the beginning of the end, of a familiar and comfortable world: That’s how General Motors’ announcement this week of massive layoffs and plant closings, following the bankruptcy of Delphi last month, strikes one who grew up in the Detroit area in the two decades immediately after World War II. In that world, it was easy to imagine you were at the center of the economy. Detroit was then the fifth-largest metropolitan area, the home of the Big Three auto companies and the United Auto Workers — national institutions of the greatest importance. The news media followed the negotiations between the UAW and the Big Three company it picked as a target every few years, and it was assumed that the wages and benefits agreed to would set a pattern for the whole economy.

And a very good economy it seemed to be. Left behind were the Depression and the anxious years of World War II. The UAW was able to negotiate big hourly pay increases and generous medical and pension benefits as well. With no effective competition, the Big Three could pass along the cost of UAW contracts to consumers who seemed willing to pay more for dramatically restyled and heavily advertised cars. General Motors’ president, Harlow Curtice, was Time’s Man of the Year for 1955. This was a recognition not just of an individual (I wonder how able an executive Curtice was) but of a system; Time might have honored UAW’s longtime president, Walter Reuther.

* * *

The success of the Big Three and the UAW seemed a fit symbol of America’s postwar economic dynamism. In fact, this was an economy characterized not by dynamism but by stasis, to use Virginia Postrel’s term in “The Future and Its Enemies.” New Deal legislation had been designed not for economic growth but for protection from the downward spiral of deflation. Those laws, not least by encouraging unions, strove to prop up wages and prices and to provide security to workers and existing firms. Keynesian economics was employed to flatten out the business cycle as much as possible and to reduce unemployment.

By the mid-1960s, it was generally agreed that this system worked and would continue indefinitely. The Big Three could always make money by rolling out the big cars families needed to go up north each summer. As John Kenneth Galbraith then argued, auto makers could induce consumers to buy as many cars as they wanted to sell by clever advertising. UAW workers could always look forward to ever-increasing wages and benefits. The big demand in the 1970 contract negotiations was retirement for auto workers in their early 50s. The confrontational labor-management politics of the 1940s and 1950s was replaced by consensus, as Henry Ford II joined Reuther in endorsing LBJ in 1964.

Reuther, a man of great energy and ability, wanted to use the UAW as an entering wedge to transform America into a Scandinavian-style welfare state. His contracts would set the pattern for national wages; the union movement would expand into new industries and unionize most of the economy; growth would enable workers to enjoy not only high wages, but job security, medical benefits, generous pensions. They would be protected against competition by large corporations. Reuther employed a Scandinavian architect to build Solidarity House, the union’s HQ on the Detroit River, and Black Lake, its educational center in northern Michigan. Reuther, like Marx, and like so many other social democrats, envisioned workers devoting their increasing leisure hours to pursuing the culture that seemed so inaccessible to workers earlier in the century.

The problem was that the default character of the economy, after the shocks of Depression and war, turned out to be not stasis but dynamism. Private sector unionization peaked in the mid-1950s; employment in unionized firms grew less than in nonunion firms. Union leaders believed that Section 14(b) of the Taft-Hartley Act, which allowed state right-to-work laws, was preventing unionization in the South, the Great Plains and much of the West. But the attempt to repeal 14(b) was one of the few defeats for LBJ’s Democrats in the 1965-66 Congress.

The Big Three auto firms — and the UAW — would soon face competition from foreign firms and an unforeseen demand for cars not large enough to take the family up north every summer. Attempts to wall themselves off from foreign competition either failed legislatively or produced perverse results. Faced with domestic content laws, Japanese and European firms built large plants in the U.S. with nonunion work forces. That has left the Big Three and their spinoffs, like Delphi, with redundant work forces and huge legacy costs in the form of generous pensions and open-ended retiree health benefits.

Union-driven legacy costs have already forced many steel companies and airlines into bankruptcy, with pension obligations fobbed off on the Pension Benefit Guaranty Corporation: The Big Three auto companies might as well do the same. At least there aren’t that many big unionized private industries left to fall. Besides, taxpayers and politicians angry at costs imposed by unions — particularly in the public sector — can always change the rules and reduce unions’ bargaining leverage. Just as the economic marketplace eventually reduced the power of the old industrial unions, the political marketplace could, in time, reduce the power of the “post-industrial” unions.

The attempt to protect workers from all risk has turned out to be very risky indeed, since in a dynamic economy large corporations are subject to competition from firms with lower costs. In the auto industry the result is significant pain for those who relied on the Big Three and the UAW; but the result is also a vastly faster growing economy and many more opportunities than provided by the European welfare states.

A broader result has also been the consolidation of a more demotic, market-based culture. On the Michigan freeways going up north, the big attractions are not the UAW’s cultural haven of Black Lake but Indian casinos and outlet malls, places where people throng to win sudden riches or to take advantage of low prices on brand-name goods. The attempt, made when the economy seemed static, to promise security and leisure and restrained good taste, has failed. We remain, as we have been in most of our history, a nation of hustlers (as historian Walter A. McDougall so strikingly put it) — a people who strive mightily to get ahead and advance their interests, enjoying the sometimes vulgar opportunities a dynamic economy provides.

Mr. Barone is a senior writer at U.S. News & World Report and a contributor to the Fox News Channel.

Oil Expert To Address Theory That Peak Oil Has Arrived

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ON NOVEMBER 11th, a few days short of his 96th birthday, Peter Drucker died. The most important management thinker of the past century, he wrote about 40 books (the last, “The Effective Executive in Actionâ€? will be published in January) and thousands of articles. He was a guru to the world’s corporate elite, not just in his native Europe and his adoptive America, but also in Japan and the developing world (one devoted South Korean businessman even changed his first name to Mr Drucker). And he never rested in his mission to persuade the world that management matters—that, in his own rather portentous formula, “Management is the organ of institutions…the organ that converts a mob into an organisation, and human efforts into performance.â€?
The next society

Tomorrow is closer than you think. Peter Drucker explains how it will differ from today, and what needs to be done to prepare for it
THE new economy may or may not materialise, but there is no doubt that the next society will be with us shortly. In the developed world, and probably in the emerging countries as well, this new society will be a good deal more important than the new economy (if any). It will be quite different from the society of the late 20th century, and also different from what most people expect. Much of it will be unprecedented. And most of it is already here, or is rapidly emerging.

In the developed countries, the dominant factor in the next society will be something to which most people are only just beginning to pay attention: the rapid growth in the older population and the rapid shrinking of the younger generation. Politicians everywhere still promise to save the existing pensions system, but they—and their constituents—know perfectly well that in another 25 years people will have to keep working until their mid-70s, health permitting.

What has not yet sunk in is that a growing number of older people—say those over 50—will not keep on working as traditional full-time nine-to-five employees, but will participate in the labour force in many new and different ways: as temporaries, as part-timers, as consultants, on special assignments and so on. What used to be personnel and are now known as human-resources departments still assume that those who work for an organisation are full-time employees. Employment laws and regulations are based on the same assumption. Within 20 or 25 years, however, perhaps as many as half the people who work for an organisation will not be employed by it, certainly not on a full-time basis. This will be especially true for older people. New ways of working with people at arm’s length will increasingly become the central managerial issue of employing organisations, and not just of businesses.

The shrinking of the younger population will cause an even greater upheaval, if only because nothing like this has happened since the dying centuries of the Roman empire. In every single developed country, but also in China and Brazil, the birth rate is now well below the replacement rate of 2.2 live births per woman of reproductive age. Politically, this means that immigration will become an important—and highly divisive—issue in all rich countries. It will cut across all traditional political alignments. Economically, the decline in the young population will change markets in fundamental ways. Growth in family formation has been the driving force of all domestic markets in the developed world, but the rate of family formation is certain to fall steadily unless bolstered by large-scale immigration of younger people. The homogeneous mass market that emerged in all rich countries after the second world war has been youth-determined from the start. It will now become middle-age-determined, or perhaps more likely it will split into two: a middle-age-determined mass market and a much smaller youth-determined one. And because the supply of young people will shrink, creating new employment patterns to attract and hold the growing number of older people (especially older educated people) will become increasingly important.

The next society will be a knowledge society. Knowledge will be its key resource, and knowledge workers will be the dominant group in its workforce. Its three main characteristics will be:

•Borderlessness, because knowledge travels even more effortlessly than money.

•Upward mobility, available to everyone through easily acquired formal education.

•The potential for failure as well as success. Anyone can acquire the “means of production�, ie, the knowledge required for the job, but not everyone can win.

Together, those three characteristics will make the knowledge society a highly competitive one, for organisations and individuals alike. Information technology, although only one of many new features of the next society, is already having one hugely important effect: it is allowing knowledge to spread near-instantly, and making it accessible to everyone. Given the ease and speed at which information travels, every institution in the knowledge society—not only businesses, but also schools, universities, hospitals and increasingly government agencies too—has to be globally competitive, even though most organisations will continue to be local in their activities and in their markets. This is because the Internet will keep customers everywhere informed on what is available anywhere in the world, and at what price.

Knowledge technologists are likely to become the dominant social—and perhaps also political—force over the next decades

This new knowledge economy will rely heavily on knowledge workers. At present, this term is widely used to describe people with considerable theoretical knowledge and learning: doctors, lawyers, teachers, accountants, chemical engineers. But the most striking growth will be in “knowledge technologists�: computer technicians, software designers, analysts in clinical labs, manufacturing technologists, paralegals. These people are as much manual workers as they are knowledge workers; in fact, they usually spend far more time working with their hands than with their brains. But their manual work is based on a substantial amount of theoretical knowledge which can be acquired only through formal education, not through an apprenticeship. They are not, as a rule, much better paid than traditional skilled workers, but they see themselves as “professionals�. Just as unskilled manual workers in manufacturing were the dominant social and political force in the 20th century, knowledge technologists are likely to become the dominant social—and perhaps also political—force over the next decades.

Structurally, too, the next society is already diverging from the society almost all of us still live in. The 20th century saw the rapid decline of the sector that had dominated society for 10,000 years: agriculture. In volume terms, farm production now is at least four or five times what it was before the first world war. But in 1913 farm products accounted for 70% of world trade, whereas now their share is at most 17%. In the early years of the 20th century, agriculture in most developed countries was the largest single contributor to GDP; now in rich countries its contribution has dwindled to the point of becoming marginal. And the farm population is down to a tiny proportion of the total.

Manufacturing has travelled a long way down the same road. Since the second world war, manufacturing output in the developed world has probably tripled in volume, but inflation-adjusted manufacturing prices have fallen steadily, whereas the cost of prime knowledge products—health care and education—has tripled, again adjusted for inflation. The relative purchasing power of manufactured goods against knowledge products is now only one-fifth or one-sixth of what it was 50 years ago. Manufacturing employment in America has fallen from 35% of the workforce in the 1950s to less than half that now, without causing much social disruption. But it may be too much to hope for an equally easy transition in countries such as Japan or Germany, where blue-collar manufacturing workers still make up 25-30% of the labour force.

The decline of manufacturing will trigger an explosion of manufacturing protectionism

The decline of farming as a producer of wealth and of livelihoods has allowed farm protectionism to spread to a degree that would have been unthinkable before the second world war. In the same way, the decline of manufacturing will trigger an explosion of manufacturing protectionism—even as lip service continues to be paid to free trade. This protectionism may not necessarily take the form of traditional tariffs, but of subsidies, quotas and regulations of all kinds. Even more likely, regional blocks will emerge that trade freely internally but are highly protectionist externally. The European Union, NAFTA and Mercosur already point in that direction.

Statistically, multinational companies play much the same part in the world economy as they did in 1913. But they have become very different animals. Multinationals in 1913 were domestic firms with subsidiaries abroad, each of them self-contained, in charge of a politically defined territory, and highly autonomous. Multinationals now tend to be organised globally along product or service lines. But like the multinationals of 1913, they are held together and controlled by ownership. By contrast, the multinationals of 2025 are likely to be held together and controlled by strategy. There will still be ownership, of course. But alliances, joint ventures, minority stakes, know-how agreements and contracts will increasingly be the building blocks of a confederation. This kind of organisation will need a new kind of top management.

In most countries, and even in a good many large and complex companies, top management is still seen as an extension of operating management. Tomorrow’s top management, however, is likely to be a distinct and separate organ: it will stand for the company. One of the most important jobs ahead for the top management of the big company of tomorrow, and especially of the multinational, will be to balance the conflicting demands on business being made by the need for both short-term and long-term results, and by the corporation’s various constituencies: customers, shareholders (especially institutional investors and pension funds), knowledge employees and communities.

Against that background, this survey will seek to answer two questions: what can and should managements do now to be ready for the next society? And what other big changes may lie ahead of which we are as yet unaware?

* Peter Drucker is a writer, teacher and consultant who has published 32 books, mostly on various aspects of society, economics, politics and management. Born in 1909 in Vienna, Mr Drucker was educated in Austria and England, and holds a doctorate from Frankfurt University. Since 1971 he has been Professor of Social Science and Management at Claremont Graduate University, California.

Copyright © 2005 The Economist Newspaper and The Economist Group. All rights reserved.

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‘Second Wives’ Are Back

SHANGHAI — Li Xin knelt in a hotel room here, wearing polka-dot boxer shorts and a grimace on his face.

The deputy mayor of Jining, in Shandong province, was pleading with his lover not to report him to authorities.

But in the end, the 51-year-old official was exposed and sentenced to life in prison. His crime: accepting more than $500,000 in bribes, which he used to support at least four mistresses in Jining, Shanghai and Shenzhen.

Li’s transgressions were minor compared with those of other public officials. A top prosecutor in Henan province, for example, was recently stripped of his post and Communist Party membership after investigators alleged that he embezzled $2 million to support his lavish lifestyle — and seven mistresses.

“Everyone is saying, ‘Behind every corrupt official, there must be at least one mistress,’ ” says Li Xinde, an anti-corruption activist who researched Li Xin’s case and posted on his website a photo of the deputy mayor begging in the hotel room.

China’s economic boom has led to a revival of the 2-millennium-old tradition of “golden canaries,” so called because, like the showcase birds, mistresses here are often pampered, housed in love nests and taken out at the pleasure of their “masters.”

Concubines were status symbols in imperial China. After the Communists took power, they sought to root out such bourgeois evils, even as Chairman Mao Tse-tung reportedly kept a harem of peasant women into his old age.

Now, mistresses have become a must-have for party officials, bureaucrats and businessmen.

“We are in a commodity economy,” says retired Shanghai University sociologist Liu Dalin. “Work, technology, love, beauty, power — it’s all tradable.”

So-called concubine villages — places where lotharios keep “second wives” in comfort and seclusion — are now spread across the nation, in booming cities such as Dongguan, Chengdu and Shanghai.

So common is the practice that it has spawned an industry of private detectives snooping on cheating husbands and their paramours. One such agency, called Debang, based in the western city of Chengdu, underscores how “first wives” are fighting back.

Debang was started by divorced women with one goal: to help desperate wives ferret out their double- and triple-timing husbands and make them pay for their indiscretions.

Debang wouldn’t comment, but informed people say the firm has expanded into several cities and has a staff of more than 100.

The mistress boom is contributing to a surge in divorces — and fierce battles over property when relationships collapse. Not long ago, Beijing amended the country’s marriage law to make men who indulge in mistresses pay heavy penalties and to give their spouses greater rights in separations.

Now, local governments are starting to take action.

This year the city of Nanjing issued an order for all public officials to register their extramarital relationships. In Guangzhou, a prosperous city in the south, a major university issued stern warnings to female students about having affairs and wrecking marriages. And last month, state media reported that Hainan province had stipulated that party members who kept mistresses or had children outside of marriage would be expelled.

Government leaders worry that philandering also could have detrimental effects on China’s economy and the credibility of the Communist Party.

State-run banks and agencies have lost billions of dollars to embezzlement and fraud, many at the hands of officials seeking money to support their golden canaries. In a government review of 102 corruption cases in several Guangdong province cities a few years ago, every one involved an illicit affair.

“If a government official has a mistress, there must be some corruption,” says Sun Youjun, a private investigator in Shanghai. “Visits to high-end hotels are not easy with officials’ incomes.”

Like most bureaucrats, Li Xin had a monthly paycheck of no more than a few hundred dollars. But as deputy mayor for a city of 8 million that’s a regional industrial and rail center, Li could easily boost his income. He collected bribes from more than 40 businesses in exchange for helping them with land deals, commodity sales and construction projects, according to interviews and to reports in state-owned media.

Li had a penchant for drinking, people familiar with the case said, and he showered his ladies with expensive gifts and even sheltered some of them in homes.

He met his match in Li Yuchun, the woman who took the photo of him in the hotel room. The two started out as lovers, according to some accounts, and then became business partners.

Li Yuchun exposed him after she learned he was laundering money. After she blew the whistle, she also was sent to jail this summer for five years for harboring a criminal, her brother — a sentence that drew public outcry over the risks of exposing corrupt government officials.

She was so enraged at her prosecution that in the courtroom, she bit her finger and with the blood scrawled on paper: “This is revenge,” her lawyer, Jin Xuekong, said.

“She has a very strong spirit,” he said.

Jin wouldn’t talk about his client’s relationship with the former deputy mayor.

As in most cases involving corruption, government officials refused to comment. But in Chinese Internet chat rooms, some called Li Yuchun a “hero mistress.”

In Chinese society, the practice of keeping concubines is thought to date back to the Qin Dynasty more than 2,000 years ago, when Confucianism took hold and women were considered inferior.

An entire set of protocols developed on the relationship between men, their spouses and so-called little wives, or concubines. One rule specified how often a man was to have sex with his concubine (every five days).

In subsequent dynasties, concubines were sometimes traded for things or sold or rented to traveling businessmen. Men regarded mistresses as markers of wealth and their elite status in society.

For mistresses, their value and rank largely depended on whether they were able to produce a son and on their dealings with other concubines, a complex relationship that was captured in the haunting 1991 Chinese movie “Raise the Red Lantern.”

Unlike in feudal China when affairs were private matters, today’s dirty laundry is often aired in the online world. This summer, Chinese media and Web surfers were caught up in the sensational story of the “richest mistress in Shanghai.”

Da Beini, 23, became a celebrity after her public row with a 36-year-old Taiwanese businessman over her attempt to sell in an online auction a garden villa in the city of Chongqing, a white Lexus sedan and other items that many assumed were gifts from her benefactor.

At a Starbucks in a high-rent district here, Da denied during an interview that she was a mistress. She wore a black leather jacket and clutched a Louis Vuitton handbag — an original, she said, showing the tags inside. Dangling from her right earlobe were silver letters spelling Dior, and around her neck was a large white topaz.

She said her clothes, her jewelry, her properties — five apartments and villas — were bought with money she earned largely by investing in China’s booming real estate market about $4,000 inherited from her mother three years ago.

“I really don’t know why,” Da said of the numerous reports in Chinese media that depicted her as a mistress.

“It’s the thinking of the whole Chinese society. If you’re young and have material things and not bad looking, they assume you must be a mistress.”

Wei Wujun, known in China as the “Mistress Killer” because of his prowess for uncovering illicit relations, blames extramarital relationships on post-revolutionary China’s “spiritual vacuum.”

Last year, 1.6 million married couples in Chinese split up, a 21% jump from 2003, according to government data. Overall, China’s divorce rate, or the number of breakups divided by marriages, now hovers at about 20%, a fivefold increase since the nation began economic reforms more than two decades ago.

Mao gave ideology to the Chinese, Wei said, but materialism is now their god. And many people with power and money are never satisfied, he said.

“There’s little government can do to stop it,” said Wei, taking a deep drag on a cigarette in front of a gaudy apartment complex, known as a concubine village, in Shanghai’s high-end Gubei district.

Few Chinese believe that laws seeking to limit extramarital affairs will have any significant effect on a system in which bureaucrats work largely in secret.

“In developed countries … if an official keeps a mistress and buys a house that’s not compatible with his income, almost everyone will know overnight,” says Huang Jingping, professor of law at Renmin University in Beijing. In China, even when fraud is apparent to insiders, it can go on for years.

As head of Chongqing’s vehicle licensing department, Bian Zhongqi accepted bribes from driving school operators and car dealers who wanted licenses or plates. He and his mistress, Zhou Changhui, came up with a plan for a steady income stream.

Drivers seeking renewals of their licenses were supposed to pay a $6 fee and pass a review of health and driving records. Bian and Zhou extracted an additional $12 to let applicants skip the process, handing out licenses to thousands.

From 1999 to 2004, authorities said, the couple collected nearly $400,000.

Standing recently in a small courtroom in Chongqing, a few feet away from his accomplice and lover, Bian sobbed as he explained why he had fallen.

It wasn’t greed, the 38-year-old insisted, suggesting that he collected the bribes to keep his mistress happy.

“It’s all because I couldn’t resist sexual temptation,” he said.

Golden Moment
Gold futures traded at about $494 an ounce on the New York Mercantile Exchange, after briefly touching $496 in earlier trading. Gold prices have nearly doubled in the past four years, typically a sign that investors are worried about rising prices and want to put their money in something that won’t fall in value as the dollar shrinks. Citing high energy prices, fairly low interest rates and U.S. trade and budget deficits, gold bulls have for months predicted that the dollar will collapse and that gold will rally to $500 and beyond. They may soon be vindicated.

And if you wish to, give a thought to what a gallon of gas cost when you were growing up and your parents filled up the family car. When I was growing up in the 50’s, gas cost maybe $0.35. That’s 35 cents a gallon. I just filled up my car with gas, as of 2 hours ago, gas on the East Coast of the U.S. cost $2.07. By that measure, the dollar of my youth is now worth $0.12, which means that it has lost 78% of its’ value.

And you thought things were just now going to hell in a hand-basket?

Ben Ali, Fock ! , Ben Ali, Yezzi !