Renewable Energy's Bright Future: Green Energy's Pros and Cons

Renewable Energy's Bright Future: Green Energy's Pros and Cons
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Recent international focus on safe energy underscores the need for reevaluating all energy alternatives, particularly those that are clean and renewable. Because although the global economy is coming out of a recent recession, oil prices are climbing and the demand for alternative renewable sources is consistently growing. Indeed, the alternative energy market is one of the few markets that has seen substantial growth during the recent recession of the last two years. One thing is clear; the need for more efficient use of electricity with the integration of renewable energy sources is present.

Smart Grid and the Integration of Renewable Energy Sources

The Smart Grid is a Department of Energy (DOE) supported project that involves an integrated system of mixed distributed resources to increase the penetration of renewable energy – such as hydro, wind, solar, wind and geothermal, while delivering improved efficiency and reliability. These and other distributed resources will be fully integrated into the new smart, electrical grid.

What is Renewable Energy?

Renewable energy sources are sources of energy that are constantly replenished. These include energy from water, wind, the sun, geothermal sources, and biomass sources such as energy crops. In comparison, fuels such as coal, oil, and natural gas are non-renewable. Once a deposit of these fuels is depleted it cannot be replenished – a replacement source must be found instead. In the United States, both renewable and non-renewable energy sources are used to generate electricity, power vehicles, and provide heating, cooling, and light. While renewable energy is generally more expensive than conventionally produced supplies, alternative power helps to reduce pollution and to conserve fossil fuels. "People sometimes get caught up in cost-effectiveness," said Paul Torcellini, a senior engineer at the DOE's National Renewable Energy Laboratory (NREL) in Golden, Colorado. "But it can be a question of values and what we spend our money on."
For comparison purposes, we will explore a few of the different sources of renewable energy:

Hydropower

WHAT IT IS:
Hydropower refers to the use of water to generate electricity. Water is the most common renewable source of energy in the United States today. Hydroelectric power doesn't necessarily require a large dam – some hydroelectric power plants just use a small canal to channel the river water through a turbine. Other uses of hydropower include water-cooled chiller and power systems.
PROS:
Hydropower is a renewable and non-polluting energy source without any greenhouse gas discharge and no toxic waste production.
CONS:
Where dams are built in order to utilize hydropower, the cost can be substantial. Also, the unnatural block in the river's system disturbs natural fish migratory and spawning patterns.
THE FUTURE:
Hydropower energy sources should experience strong development in the coming decades because of their non-polluting nature and significant unexploited potential.

Wind Power

WHAT IT IS:
Wind power refers to the use of modern wind turbines that are used to generate electricity, either for individual use or for contribution to a utility power grid. The power in wind increases rapidly with its speed, which means that locating windmills in areas of strong winds is critical. The strongest winds in the United States tend to be in Alaska, the western United States, and the Appalachians. Wind power currently supplies about 1% of United States electricity needs, but capacity is expanding rapidly.
PROS:
Wind power is plentiful, renewable and relatively affordable. Wind power does not produce emissions.
CONS:
Wind power produces power intermittently.
THE FUTURE:
Renewable energy companies are producing technology that is becoming more attractive and although this is to be expected with climbing oil prices, the demand for alternative energy was climbing even two years ago when oil prices were low. In 2008, oil prices were lower than they are today, yet 2008 was a market year for wind energy installation. One out of two wind turbines in the United States are GE built. The painful recession that occurred in the last few years did not slow the growth of alternative renewable energy. Wind energy business is taking off with more wind energy installed in 2008 than had been installed in the previous twenty years.

Solar Power

WHAT IT IS:
Solar power refers to the use of the sun's energy to provide heat, light, hot water, electricity, and even cooling, for homes, businesses, and industry. Despite sunlight's significant potential for supplying energy, solar power provides less than 1% of U.S. energy needs. This percentage is expected to increase with the development of new and more efficient solar technologies.
PROS:
Solar power gives off no pollution, however, during the manufacturing, transportation and installation of these goods there is pollution produced.
CONS:
A big drawback of solar power is the large investment needed in order to purchase solar cells. Currently, prices of highly efficient solar cells can be above $1000, and some applications may need more than one. This makes the initial installation of solar panels very expensive. Homeowners have been reluctant to embrace solar panel installations on their homes because the panels can be aesthetically unpleasing and because the technology may require puncturing an existing roof and bolting on metal supports, which can void the roof's warranty.
THE FUTURE:
Solar panel roof tiles consist of grids of raised black cells that, up until now, have usually come in the form of large clunky rectangular panels that either stand alone, or must be bolted onto a roof. The market potential for aesthetically appealing solar panels that can be integrated into the roof of one's house is great. Read more at Sunslates (external link).

Geothermal Power

WHAT IT IS:
Geothermal power refers to the use of natural sources of heat inside the Earth to produce heat or electricity. Currently, most geothermal power is generated using steam or hot water from underground. Geothermal power generation produces few emissions and the power source is continuously available.
PROS:
Geothermal power is efficient and cost effective. This power source leads to savings. Additionally, this is around 70% cheaper than heating a home using electric heating, oil or liquefied petroleum gas.
CONS:
Geothermal power is not a do-it-yourself project because of the technical knowledge and machinery required for design and installation. The design alone may already be complicated to do and the pipe connection process requires proper training and the right tools.
THE FUTURE:
For individual household applications, geothermal heat pumps pass air through a pipe below ground that stays a constant 50 to 60 degrees, heating in the winter and cooling in the summer, saving tremendous amounts on utility costs in the process. Although geothermal stocks lost significant value during the recent recession, it is anticipated that Federal incentives will lure private capital to the sector, allowing financing to go through for new projects.

Renewable, Green Energy: Future Growth

Assumptions about world oil prices are not the only important factor that underscores the need for renewable energy use and consolidation. It is projected that by the year 2030, the demand for electricity in the United States will jump by 30%. And with projected oil prices, as well as concern about the environmental impacts of fossil fuel use and strong government incentives for increasing the use of renewable energy, the prospects for renewable energy use will likely increase worldwide.

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The washington Consensus and Indonesia

The recommendations of the Washington consensus were the commandments of many developing states, including Indonesia. They became the roadmap pursued by policy makers in developing countries, in addition to the rationale of international financial institutions such as The International Monetary Fund (IMF) and the world Bank, as well as ‘First World' countries such as The United States.
At the end of the G-20 summit, Former British Prime Minister Gordon Brown stated that the old Washington Consensus is dead. The global financial crisis prompted the leaders of The G-20 to make such a statement.
Since the last 1980s Indonesia has implemented the recommendations of the Washington Consensus. It has done so on both voluntary and imposed bases.
Its adherence has been voluntary since Indonesia's policy makers shared the ideas of the recommendations. It was imposed by the international financial institutions or donor countries when the pace of implementation of those recommendations was seen to be slow or of Indonesia seemed to be reluctant to implement the recommendations.
To avoid the impression of intervening in domestic affairs, imposition occurred through Indonesia's participation in international agreements and Indonesia's economic dependence.
Indonesia ratified the World Trade Organization Agreements in 1994 in order to implement the recommendation of trade liberalization. Indonesia has also amended its foreign investment law of 1967 in order to implement the recommendation of liberalizing inward foreign direct investment.
For the same reason, the government also amended the Company law in 1995, and amended it a second time in 2007. The capital market has been revived and the law of 1958 was amended in 1995.
Furthermore, privatization of state enterprises has been a key element of Indonesia economic reform since the late 1980s. Many state enterprises either went public or entered into joint operation schemes.
The government is deregulating many of its laws and regulations of various business sectors so not to impede market entry of restrict competition. The Banking Law of 1992 allows foreign shareholding of more than 50%. Foreign distribution and retail companies are allowed to operate. In 1999 under the insistence of the IMF through the Letter of Intent, Indonesia introduced the Law on Competition.
In addition, the government has overhauled many of its laws and regulations to give legal security for property rights. The 1996 Mortgage Law and the 1999 Liens over Movable and Intangibles Law have replaced the Dutch colonial laws on pledges.
The Copyright Law, Trademark Law and Patent Law have been amended since 2000. Other new intellectual property rights laws were introduced, such as the 2000 Layout Designs and Integrated Circuit Law, and the 2000 Trade Secrets Law.
Unequal benefit
The above are only a few examples of how Indonesia has subscribed to the recommendations of the Washington Consensus and implemented them.
Of course the recommendations are undertaken in the hope of revitalizing the Indonesian economy. Some of the recommendations have worked and benefited Indonesia.
However, most of the benefits have gone to First World countries or their companies, or those who see Indonesia as a huge and potential market. One may question, for example, whether the amendment of intellectual property rights law is due to concerns for Indonesia in this field or it is because Indonesia became a member of the WTO? Indonesia's market has been open widely to foreign goods and services. Significant trade barriers no longer exist. If there are entry barriers or unprotected rights they are mostly due to the inability of the central government to impose policy on local governments or due to weak law enforcement.
All these steps have made Indonesia more and more integrated with international economic policies. Hence, when PM Gordon Brown stated that the Washington Consensus is over, a big question now awaits Indonesia: what will be the fate of Indonesia?
Can Indonesia free itself from First World international economic policies? Can Indonesia free itself from direction by international financial institutions? Or will Indonesia continue to be dependent on global economic policies made in the First World countries or through the international financial institutions?
In the context, two main questions can be raised. Have past policy makers made the right policy choice for Indonesia to subscribe to the recommendations of the Washington Consensus? Can donor countries and international financial institutions be held responsible due to the collapse of Washington Consensus?
One thing is for sure. Indonesia cannot return to its position prior to the Washington Consensus. What has been decided in the past must be respected today. Now it will be up to the current and future administrations to make what is in place work to the advantage of Indonesia. Lessons have been learned. In the future policy makers should consider carefully when signing loan agreements. Economic dependency has been encroaching on Indonesia's sovereignty.
Furthermore, when Indonesia becomes a member of certain international agreements, due care must also be performed. Policy makers have to be aware that international agreements have been used by developed countries as political instruments. In the past they have become a tool that replaces colonialism.
In short, policy makers should make policies that will give due regard to national interests. This is by no means an attitude of being opposed to foreign investors, free trade or globalization. This is to say that everything should be benchmarked on what is best for the welfare of Indonesia and its people.

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Tencent may acquire MySpace

Recently there are rumors that China's Internet giant Tencent is negotiating with News Corp about the acquisition of MySpace.Aiming to the rumor,China bulk wholesale electronics ePathChina Yide Huang analyzed the purpose of the transaction. Yide Huang believes that, for Tencent the reason of acquisition of MySpace is to expand and strengthen the Tencent QQ influence in international markets through the influence of MySpace brand

In 2005 News Corp acquired MySpace by 500 million U.S. dollars,the price seems very cheap now. even though MySpace has served as one of the  important businesses of News Corp multi-channel income-generating strategies, now it may have been difficult for News Corp to get too much benefits from the site.

Compared with the hot Facebook, MySpace has left far behind,and even has no competition at all. Since the founder,Chris DeWolfe and Tom Anderson left Myspace in succession, the site has changed a lot of leaders.

Tencent is now a company with 50 billion U.S. dollars market capitalization, and its business is still evolving. Although Tencent is not famous in the United States, in fact, Tencent really is a larger social networking site than Facebook. Users number of Tencent QQ greatly exceeds 6.5 million.

In the Chinese domestic market, Tencent is facing competitive pressure form Sina and its micro-blogging service, but from the point of market value view, the scale of Tencent is 10 times as much as Sina. If acquired the MySpace, Tencent seems to be able to aim at larger international market, and take MySpace as the important factor of its expanding international markets and international influence. In addition, of course, there are other motives for Tencent, which can be reflected from the following facts. For example, earlier this year, Tencent acquired the U.S. online game development company in Los Angeles Riot Games at high prices, in order to increase the number of games.

However, China wholesale ePathChina Yide Huang stated that MySpace may have an important impact on expanding the international market for Tencent, but not the most important factor. Tencent may be by the use of more influential intermational brands to enhance the QQ international market influence.

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Garage Sale Profits 365 Coupon Discount and Promotion code

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The Basics of any Economy

In a traditional economy, how the resources are distributed is predicted by the habits and traditions practised by the society. Here, the Basics of Economy is guided by a pre-determined force and everyone automatically knows where they fit in. Occupations are distributed according to heritage and there is little room for growth and innovation as new ideas are usually scorned and perceived as a threat to a way of life.
In the traditional economy, there is stability and predictability and entrepreneurs are rare thus, the standard of living is significantly low.
The government plays a lot of role in the command economy. Instead of allowing tradition and habits to dictate the economy, a central government is elected or appointed to dictate the Basics of Economy. Everybody is then obliged to follow the economic decisions made by the government or their interest groups regardless of their differing or preferred stands.
The Market economy on the other hand is controlled by the forces of demand and supply. What to produce, for whom and needed quantity is all left in the hands of the market, the people. This economy permits growth and change based on the various needs of the consumers. The distribution of wealth in a market economy is often not balanced since it is tallied to the wavering needs of the market forces.
Communism captures the command economy. A central unit owns all and attempts to redistribute the wealth equally to all. The advantages and disadvantages of this approach weigh each other out.
Capitalism works well with the market economy, the direction and growth is left to the consumers and business owners. By promoting competitive living, it takes the resources of any society and puts it to good use thereby promoting efficiency and flexibility. A major setback however could be the insensitivity of this type of economy to a balanced distribution of needs.
The Basics of Economy is similar in today's major economies, most practicing socialism attempt to mix the command and market economies. In this arrangement, a central unit controls essential public demands while non-essential demands are left to compete with the harsh forces of demand and supply.
Mixed economies takes the best of all the other economies, combines them in order to meet the demands of any society on a much larger scale.

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Why Buy an Economy PC?

Simply put, an economy PC can get the job done without costing more than your car. An economy computer performs basic functions such as utilizing the Internet and running common programs, so you can pay your bills, do homework and access the Internet without breaking your budget.

These desktops probably won't satisfy hardcore gamers, multi-taskers or avid video editors; nevertheless, they perform all basic functions and don't require a large computer budget, like high-end multimedia systems. An economy PC is perfect for standard home computing, student use or as a basic office computer.Here's what an economy PC can do:

* Schoolwork/Education: Economy computers can easily handle the day to day tasks of students. Applications like Microsoft's Word, Excel, Outlook, and PowerPoint will all work with ease on an economy PC. They will also be able to handle children's educational programs and games such as Animated Storybooks and Activity Centers.
* Finances: Nearly all finance and spreadsheet applications will work on an economy PC, since they do not include complex elements like video. These systems can easily handle programs like Quicken Deluxe, TurboTax or Microsoft Money. They can also effectively open, modify and create spreadsheets using Excel or Lotus.
* Internet: All economy PCs are Internet enabled, whether via modem or network card. With an Internet Service Provider (ISP) you can browse the Web, check email, chat, and download online content.
* Manage Media: Most basic PCs now have the ability to organize and edit photos or display video and download music and podcasts.

Here are a few things basic systems struggle with:

* Gaming: Graphically intensive games like Half-Life 2, Company of Heroes, and Oblivion will likely produce slow frame rates and poor resolutions on an economy PC. Always check the recommended system requirements of the games you buy to make sure they'll provide a playable experience on your machine. Pay close attention to the processor, memory, and video memory requirements. Online gaming may also be affected by the speed of your Internet connection.
* Video Editing: Introductory PCs generally do not have enough memory to efficiently run programs like CyberLink's PowerDirector, Adobe's Premiere, or ShowBiz DVD.
* Multitasking: If you need to run multiple programs simultaneously, such as an antivirus application, several web browsers, an email application, all while listening to your favorite tunes, you may want to look for a computer with a dual core processor or additional memory.

In this site, you'll find articles on buying economy computers, news stories and comprehensive reviews on economy PCs that will help you make an informed decision on which desktop is right for you. At TopTenREVIEWS We Do the Research So You Don't Have To.
Economy PCs: What to Look For

There are many economy PCs advertised for under $500; however, we found that most of these systems are not complete packages. It is true that you can get a computer for less than $500, but keep in mind that you may need to add a monitor and software to complete the package.

We compared ten of the most inexpensive introductory systems we could find, to determine which package offers the highest quality for the lowest price. All of these low-end systems can perform basic functions such as accessing the Internet, sending and receiving emails and running basic programs like Microsoft's Office products. We looked at the processor, memory, graphics card, input/outputs, peripherals, and warranty; then rated the value for the price.

Below are the criteria TopTenREVIEWS used to evaluate economy computers.

Processor
The best economy computers run at around 2 GHz and have an AMD Athlon 64, an Intel Pentium 4 or Core Duo processor.

Memory
The top products in this review offer up to 1GB of RAM. In terms of hard drive storage, most basic systems include 80GB hard drives; however, some PCs in this price range include 250GB of storage.

Video/Audio
We looked at the type of graphics (video) card, as well as the video memory. Most budget systems have 128MB integrated graphics cards, which will run most applications except complex games and video editing programs. Most sound cards are also integrated and have the ability to connect up to five speakers and a subwoofer.

I/O Devices
Input and output devices include keyboards, mice, monitors, external drives, media card readers, and speakers. Many basic systems include several I/O devices; however, few will come with peripherals such as scanners or printers.

Price/Value
We compared the quality of the PC to the price. So a machine that comes with low-end components with a high price tag would score lower than a good basic machine with a moderate or low price.

Support/Warranty
First rate manufacturers offer reliable warranties of a year or more. Additionally, they offer easily accessible help and support through documentation, email, phone and chat.

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Transforming The Economy Begins At Home

I no longer live in a world with a collapsing economy. I am creating a new one.

This Christmas our family decided to give non-material gifts to the adults in our family.

The week before the big day, I sat down at my computer and wrote letters to everyone in my family.

I have a big family and by the time I was done, I had worked fourteen hours crafting the words that would truly express why I love the people I love, who they are for me and why I find them special.

When I was done, I found a new and unexpected peace. This struck me as strange at first because I am a man who acknowledges those he loves. After some thought, I realized I had never spent that much time thinking about the people I care about in my entire life. I saw my newfound peace had always been available to me. My obsession with my "agenda" in life had merely obscured it.

I had enrolled my family in a "new kind of gift giving" in advance. When we gathered to celebrate it was like no Christmas in our past. My family is a large, intimate and loving group. We have had many wonderful times together in the past, but by removing ourselves from commercial culture and expressing our love directly instead of by purchasing (let’s be honest) unwanted gifts, we discovered a new and profound intimacy.

The experience changed me and helped me create a new conversation I had been crafting, a conversation designed to be shared.

The Myth of the Collapsing Global Economy:

Falling down is not always a bad thing. Waterfalls do it with abandon and are one of the most beautiful phenomena on earth.

Like almost everyone on the planet, I wasted a lot of energy in the Fall of 2008 locked in fear about the financial markets and how their collapse would impact me, my family, my businesses and my life. Every day the news reports seemed to add to my internal experience of failure and helplessness.

But I found a way out of that morass. I realized in early December that the "collapsing global economy" is just a story; a repetitive, debilitating conversation that lives in fear and insufficiency. It is a "created reality" like all other realities.

I am not saying it is a myth without power. That disturbing drama has its impact on the real world. Self-destructive conversations have consequences not only for individuals, but also for nations and economic systems. People are hurting and afraid.

But though it effects are real, the sad and pitiable tale we are telling about the global economy is also a self-fulfilling prophesy. At its core is a commonly held bad attitude, an anxiety-addicted belief in scarcity.

At our house, our finances are stretched. We have had to give up things we care about…but really, we are just fine. We are healthy. Our children and grandchildren are well and happy. We are not starving. The sun rises every morning. Most of us in this country have what I often refer to as "rich people’s problems."

Billions of people in the world – and some here in the U. S. - really live on the edge of survival. They would laugh at our self-pity. They face much worse every day and have dealt with it their entire lives.

So I am no longer going to play that game. On Christmas day I made my stand. I will no longer meekly engage in that economic melodrama like a sheep being led to slaughter. I choose not to live like I am powerless. Living in fear, buying the spin so eagerly promoted by Fox and CNN is not putting money in my pocket, supporting my family, making me more effective or enhancing my life in any way.

To the contrary, it has exactly the opposite effect.

A New Conversation:
In 2009 I am creating a conversation that is more powerful, more fulfilling and more workable. I am creating hope and abundance. I am creating a world in which anything is possible, a world in which people all over this planet make the impossible possible every day. I am creating a life for me and my family in the new paradigm I see building all around me.

You may think I am a pie in the sky idealist, but I argue I am a pragmatist. Think about it. How is that negative story working for you? How do you feel when you wake up in the morning? How do you feel after you finish watching the news? Is something good happening in your life because you are sure things are bad? I doubt it. Why don’t you give a new story a try?

The tale I am telling is that the changes going on in our world are the collapse of a tired old way of being and the genesis of a new one that will transform our lives for the better. I am creating a conversation about a new "bottom up" economy in which all are included, one already being built all over the planet by the young and the visionary.

I am creating a system of exchange and value that recognizes our interdependence and endlessly innovative. I am building an economy of infinite possibility, of sufficiency and abundance…an economy that works for everyone.

The conversation I am having is that the old is falling away and the new is born. Winter must come before the flowers of Spring can bloom. I am telling the story of a butterfly emerging from it chrysalis, its wings unfolding…a story of the glory of flight.

The tale I am creating is not one of soft-hearted idealism. It lives in the material, in the brains and words of human beings. It is a story of hard science, corporate and political realities, a pragmatic evolution forged in technology and human cultural evolution that has been growing for many years. It is a new interpretation of reality that is available to everyone all the time. Real people can act on it in their lives at any moment. It is a conversation that makes things work where they do not, like all new technologies that have value.

We are going home, home to our better selves, home to new relationships, new systems of behavior, new technologies and new societal and economic structures. Given the state of the world we have had in the past, that is a good thing.

But before we can move forward, we have to see the debilitating conversation that prevails around us for what it is. We must turn negativity into possibility. We must make our stands for a world that works and act upon them. We must quiet the cruel wind of fear that fills the tattered sails of the sinking ship of excess, failure, scarcity, corruption, partisanship, self-interest and greed that has plagued our country and our world.

Sounds too big and too hard? It’s not. All we have to do is change the subject. All we have to do is notice the "glass half full" rather than the "glass half empty" and share what we see with those we meet. After all, positive interpretations are no less real than negative ones. There is ample evidence for both and I would assert that positivism is more practical and effective.
You Create Your Own Reality
Perhaps you are convinced the world really is going to Hell in a handbasket and there is nothing you can do about it. Well think about this.

Throughout you life, neurons and other nerve tissues in your brain grow in response to your environment. The process is called neurogenesis. New synapses and whole new neurons are actually being added into the circuitry of your brain in response to the world around you. Metaphorically, they grow a lot like muscle tissue. If you use your muscles, they grow and get stronger. If you sit on the couch all day and watch TV, they atrophy.

Something (roughly) similar happens in your brain. Everything you think, feel and experience is a result how your brain responds to your experience and grows new neural tissues and connections to other neurons.

The more often a particular neural pathway is reinforced by environmental cues, the stronger it gets and the more embedded in your memory. So the behavior, attitudes and values with which you approach life – and the nature of your relationships with others – are built into your nervous system. They are not just ideas or attitudes. They are aspects of your physiology.

How you see the world and how the world sees you is built into your brain. But because your brain is constantly changing and growing, over time you can change that hard wiring simply by altering your thoughts, actions or your environment. Attitudes and values are not casual things. They are physical and the source of your everyday experience of life.

That means your words have power. Speaking is an act of creation. Over time, the way you describe the world creates your world. If you want a "better world," all you have to do is "cast your vote" each day for the world that is already working.

Ever notice who is always around when your life doesn’t work? You are. You can blame it on your circumstances if you want to, but all that does is make it persist. You can blame others, but all that does is make you suffer. Maybe you should consider an alternative.

I invite you to join me in a new conversation. We can create it together in the days and months to come…and before you know it, a new and vibrant economy will emerge.
Transformation Begins at Home
To transform the global economy we must begin by transforming our personal economies. After all, most things that are important begin at home.

That includes the current economic crisis, which began in a cascade of foreclosures and falling real estate values.

In the body of our built environment, the home is like a single cell. If you think of all the buildings, power grids, public works and transportation systems on our planet, all the things we have built in order to maintain our complex societies, our homes are the most basic unit in the "body" of human society.

Like a cell membrane, a home allows nutrients into our vulnerable inner worlds and keeps toxins - like nosy neighbors - out. Like a cell, our homes contain thermostats and other features that maintain homeostasis, protecting us from the slings and arrows of outrageous weather.
Our homes store our financial energy like the fat on our bodies. For most of us, our homes are our largest investments. Recently we have been forced to "go on a diet" and some of us lost our assets.

Homes are where we most often reproduce and subsequently nurture our young. They are powerful expressions of our identities - as Claire Cooper Marcus pointed out in House as a Mirror of the Self. A well appointed home is an extension of our bodies. It is, as physiologist J. Scott Turner suggests in The Extended Organism, an "external organ of physiology."

Imagine for a moment if the built infrastructure that supports our societies suddenly disappeared. The result would be the same for us as it would be for a colony of termites or a nest of bees...a sudden and devastating die off.

Theorists have long argued about the traits that have made Homo Sapiens so successful. The use of tools, opposable thumbs, the evolution of language and the highly complex social structures we create have all had their day as the seminal first cause...but the most visible evidence of mankind's assent to dominance is our built environment.
From caves to mud huts to castles and skyscrapers, the homes we have built and the public works we have erected to sustain them, are the proof of the efficacy of this survival mechanism.

We and our homes are engaged in an ancient and profoundly interdependent relationship. Like any other animal we evolve in response to our environment, and increasingly our environment is of our own making.
Natural selection and epigenetic gene expression occur primarily in response to our most highly frequented environments and the home is the most intimate environment of man. We build them and they build us back. We are enmeshed in and altered by our relationships with them.

Your own personal definition of home - whether your current habitation meets your ideal or not - likely includes emotional ingredients like comfort, safety, rejuvenation, peace, relaxation and the privacy to escape from the perceived expectations of others.
Despite all the mischief perpetrated by stock traders, hedge funds managers, sub-prime lenders and incompetent government regulators - the stars of the story of manipulation and greed that currently batters us daily - the truth is that those bad actors are mere symptoms of the greed and self indulgence within all of us.

In truth, you and I are the building blocks of the global economy.
The Economy is an "Emergent" Phenomenon
Like our societies, the global economy is a complex system that adapts to its environment. All such systems of relationship are made up of what systems scientists call "agents."

Just as water molecules are the main ingredient of oceans - and homes are the most basic form in our built environment - individuals and families are the most basic ingredients of our economic and political systems.

Corporations, countries and financial markets are all made of people. What we have just seen in the global economy is an emotional and psychological "tidal wave" of anxiety.

A tidal wave is an "emergent property" of a group of water molecules. It occurs when a "society" of such molecules responds to a disruption in its environment. The same is true for a hurricane or a tornado. There is nothing in a tidal wave except sea water. It has no distinct material ingredients of its own and could not exist unless every single salt water molecule within it contained the properties that allow a massive wave to form.

The same is true about the relationship between human beings and the global economy

In a world such as I describe, the successes and failures of an economy, a country or a culture emerge from the characteristics of the individuals within it. Particularly in a democratic society, leaders arise from the shared realities of the people.
Working Together Responsibly

So only you and I have the power to transform our economy. Barack Obama cannot fix the problem. All of us - consumers, bankers, stockholders, the wealthy, the middle class, the poor, our international partners, academics and economists, hedge fund managers, members of Congress, the teen working at the fast food franchise and the guy on the automobile assembly line approaching retirement - will all have to work together.

It is up to us. Every individual, each family, each small business, each multi-national corporation and each government is an economy unto itself. If we are going to learn anything from this troubling experience, it is that each of us must take responsibility for our own relationship with money. We must face this reality because it is the only truly workable long term solution to our troubles. It is also moral and upright.


The media parrot and stoke our anxiety because that is what makes financial sense in a world where information is tied to profit. So we have to change the conversation ourselves. These facts mean we must give up the "one size fits all" stereotypes we use to fix blame without ignoring the realities of human nature.

We are profoundly social and collaborate with one another instinctively. Human beings are also deeply emotional. We look to those around us to assess how we should react to the world. If our neighbors are afraid, fear spreads like a virus. The same is true of optimism and courage.

People must first see the possibility of a positive change before they can strive towards it. To accomplish that in government, we must learn to distinguish the good public servant from the bad. If we want responsible corporate behavior we must reward those corporations who are responsible and give back and distinguish them in our conversations from those who are exploitative and predatory. If we want our President to be successful, we must be balance our demands for change with some sense of our own responsibility in the matter.

We must face the realities of a global economic system and understand the interdependence inherent in our global economy. "Foreigners" are not stealing our wealth. The Chinese, Indians, Mexicans, Taiwanese and Brazilians aren't stealing our jobs. The global economy is the result of our efforts in the developed world, often imposed against the wishes of the citizens or even the leaders of those nations.

We in the West are hoist on our own petard. The impersonal realities of the marketplace are redistributing our wealth to those who compete most effectively. This occurs in the capitalistic system of value we in the West created.

We - the rich and powerful - fuel that redistribution with our endless desire for more toys, more experiences, more consumption and more status. The desperate cry of the old order - "spend, spend and spend" - is the pusher trying to entice the addict. We need to go "cold turkey" and re-examine our personal and cultural values.
And there is no turning back. This trial we face is not temporary. It is the new reality. Turning our southern border into an Iron Curtain won't save us. Isolation and protectionism are just ways to hide under our beds and ultimately impossible to achieve in an age of open borders, international trade and monetary systems and the Internet.

Tamping down rampant consumerism does not mean our economy cannot be vibrant and diverse. It only means that we must balance our needs for profit with a vision for an economy that works for all classes, all peoples and our planet as a whole.
Changing the Conversation
Again, all we have to do is change the conversation....and the rest will follow. The only real difference we can make is in our own lives and is expressed one person at a time, one family at a time. Cooperation enables us to collectively transform our systems of value. We must work together because such actions are the only solutions that will protect our descendants and the only true road to peace. We live on a planet with fixed resources but unlimited possibilities and the only workable path forward is to begin creating a world that works for everyone.

You may not care whether the "poor people" in the developing world eat or not, but you do care about the survival of your own children.

You may not like it that human society has reached the point that your survival is dependent on the survival of the impoverished masses of Africa, Asia and South America, but it is. You may pine for the good old days when we could prop up our lifestyles on the back of the "third world" but now the "third world" holds our bank notes.

That time is gone. You may not care about the state of the global environment; or that terrorism, extremist ideologies, pollution, global warming and the cascading extinction of species in stressed ecosystems around the planet are inextricably linked to economic inequalities.

But you will care when the first nuclear weapon goes off in a major western city, or the first deadly virus is released in your neighborhood by a disaffected extremist.

This is not just an economic downturn. It is a global economy in the process of transformation. We stand on the threshold of a new world order. This change will either be the beginning of a new and fairer global economic and political order; or we will see more violence, privation, destruction of the environment, all ultimately leading to the slow death of Western culture as we know it.

An analysis of user patterns on the Internet makes it clear what is to come. In developed countries, over 70% of the population is currently connected to the Internet, yet they account for only about 18% of all people online. In the rest of the world, less than 17% of the population is connected and that is changing at a rate in excess of 300% per year.

You do the numbers. We in the West cannot live in our "own little worlds" any longer. Oceans and massive weapons systems cannot protect us. Small bands of extremists have fought the most powerful military on earth to a draw. The long feared day has arrived and we only have two choices. The first and best is to take the lead in creating a world that works for all. The darker path is to withdraw into fortresses of isolationism and self interest, a choice that means our children and grandchildren will inherit a world much less hopeful than the one we knew as children.

I choose the former. My family too has been hurt by this economic downturn. We have had to give up many things we care about in the face of it. But those are just things. We are all still eating, laughing and loving one another. Many on this planet do not have that opportunity. I choose to take this experience as an profound opportunity, a necessary and beneficial adjustment to a changing world that offers new found hope and opportunity for everyone.

What will you do? Will you let fear guide you? Will you make a stand for what is right according to every moral and religious tradition on earth? Will you choose what is workable, pragmatic and honest - or will you choose to hide your head in the sand?

Will you stand with the dying husk of a world built on illusion, hollow consumption and self-interest or will you stand for our children?

One way or another, what happens in your life and our world is up to you.

It may seem impossible to make any real difference. It may seem too overwhelming to even contemplate, but truthfully you do not have to know what to do or how to do it to make a powerful commitment.

All you have to do is pick yourself up, realize you have the power to control your words...and change the conversation.

12:28 | 0 commentaires | Read More

For the U.s. Economy in the New Year, the Pain Will Precede the Promise

If there’s a proverb that captures the outlook for the U.S. economy in the New Year, it’s the one that says: “It’s always darkest before the dawn.”
Regardless of any formal announcement of whether or not the United States drops into an actual recession, the ongoing credit crisis guarantees a contraction of the American economy by virtually every measure we know. That period of darkness will be marked by a dramatic slowdown in economic activity, as well as by rising unemployment, additional declines in U.S. stock prices, and constant volatility. It could last as long as 12-18 months.
But when the dawn does come, it will be one to remember. If U.S. President-elect Barack Obama gets it right - and I have every reason to believe that he will - then investors will be presented with the greatest investment opportunity of our generation. At that point, shares of American companies will be at such low levels that wholesale buying by individuals, mutual funds, pension funds, institutional money managers, and foreign-controlled sovereign wealth funds, will generate gains that will not only make us whole, they will make us rich once again.
A Market Mandela
Creating an analysis of the U.S. economy’s outlook for the New Year is akin to creating a mandala, a geometric work of art whose pattern, symbolically or metaphysically, represents a microcosm of the universe from the human perspective. In some Buddhist temples, mandalas are made of tiny colored beads, painstakingly created by several monks as a form of meditation. In celebration of the ever-changing nature of the universe, the mandala is then joyously shaken by its creators, until it is once again nothing more than chaos embodied in a box of colored beads.
Regardless of the big picture, analysis of a mandala - or the economy - always starts at the center and emanates outward. With the U.S. economy, that centerpiece is credit. The credit crisis has shaken the complex mandala that is our economy and transformed the United States economy into chaos. It’s complex because this economic-forecast mandala derived its form from thousands of individual pieces - in the case of the economy, from scores of data points, many of which are currently dark and foreboding.
The credit crisis we are experiencing results from the contraction - or worse, the cessation - of lending. Under normal circumstances, institutions and markets freely facilitate capital movement between lenders and borrowers. But that’s not happening, now.
Because of a lack of transparency into the balance sheets of borrowers holding such complex and illiquid securities as collateralized debt obligations, credit-default swaps, and non-performing loans, and because of increasing recessionary fears affecting businesses and households, lenders don’t want to increase their loan exposure. Banks are holding onto the cash and liquid securities they control, using them as a cushion against their own potential losses. The U.S. Treasury Department’s direct-to-bank capital injections do not alter these banking realities. In fact, as a Money Morning investigative story recently demonstrated, instead of using these taxpayer-provided infusions to increase their lending, these banks are using the money to finance takeover deals.
The Recipe for a Recession
Whether or not the United States is technically in a recession ultimately will be divined by the National Bureau of Economic Research (NBER). The business-cycle dating committee of this privately run, nonprofit economic research group is right now studying five factors in an attempt to determine if the United States has entered a recession and, if so, when that downturn started, MarketWatch.com reported. Those five factors are:

• Gross Domestic Product (GDP).
• Industrial production.
• Employment
• Income.
• Retail sales.

Regardless of any formal announcement by the NBER of whether we’re in a recession, the credit crisis guarantees a general contraction of economic activity, by every measure.
“Any doubt that we’re officially in a recession can be put aside,” Anthony Karydakis, former chief U.S. economist for JPMorgan Asset Management (JPM) - and now a professor at New York University’s Stern School of Business - recently wrote in Fortune magazine. “The rapid deterioration of labor markets points to a sharp decline in hours worked and output in the fourth quarter. This is likely to lead to a decline in personal consumption to the tune of 5.0% or so for that period. Since [consumer spending] makes up about 70% of the economy, the stage has already been set for real GDP to shrink at a more than 4.0% rate in the fourth quarter.”
Confirmation of that belief is evident by looking at each of the NBER’s five key indicators.

• Gross Domestic Product (GDP): The U.S. Commerce Department estimated that the U.S. economy, as measured by GDP, rose 0.9% in the first quarter. In the second quarter, GDP advanced an estimated 2.8%. For the third quarter, GDP declined an estimated 0.3%. My own econometric models suggest that GDP actually contracted at a 1.5% pace in the third quarter and will decline another 2.75% in the fourth quarter. For the year, that would mean the U.S. economy actually fell 0.55%. The U.S. economy last posted a full year’s negative GDP in 1991, when it declined 0.2%. Verdict: Recession.
• Industrial Production: This measure of output by the nation’s factories and mines dropped 2.8% in September, and a very steep 6.0% in the third quarter. Verdict: Recession.
• Employment: The U.S. Bureau of Labor Statistics announced Friday that October’s unemployment rate was 6.5%, a jump of 0.4%, which was double what most economists expected, and also its highest level in 14 years. The economy has now lost a total of 1.2 million jobs since the beginning of the year, with nearly half of those losses occurring in the last three months alone, pointing to an acceleration in the pace of erosion in labor markets. Karydakis, the Stern School professor, wrote in
  Fortune : “By way of comparison, during the 2001 recession and in the sluggish growth that followed in 2002-03, the unemployment rate reached a peak of only 6.3%, in June 2003. We’ve already exceeded that mark and, given that we are still in the early phase of the current recession, the unemployment rate should be expected to push toward the 7.5% range - and possibly higher - during the next three months to six months.”
  Verdict: Recession.
• Income: Personal income increased $24.5 billion, or 0.2%, and disposable personal income (DPI) increased $25.7 billion, or 0.2%, in September. Personal consumption expenditures (PCE) decreased $33.6 billion, or 0.3%. Excluding the rebate payments made to U.S. taxpayers under the Economic Stimulus Act of 2008, DPI increased $30.3 billion, or 0.3%, in September, and increased $44.0 billion, or 0.4%, in August. Verdict: Too close to call.
• Retail Sales: October retail sales are coming in well below already-diminished expectations, and some reports have been downright depressing - including The Neiman Marcus Group Inc. -26.8%; The Gap Inc. (GPS) -16%; The Nordstrom Group (JWN) -15.7%; J.C. Penny Co. Inc. (JCP) -13%; Kohl’s Corp. (KSS) -9%; Ltd. Brands Inc. (LTD) -9%; Target Corp. Inc. (TGT) -4.8%; and Wal-Mart Stores Inc. (WMT) +2.4%. In a report last week, Moody’s Investors Service (MCO) projected that the retail sector’s woes will continue into 2009 as consumers cut back on buying apparel, footwear and accessories “in order to save money for essentials.” The credit rating firm said in a separate report that holiday spending “will prove even weaker than expected,” amid October’s financial-market swoon. Verdict: Recession.

If U.S. exports are taken out of the GDP calculations going back to January, it’s apparent that there has been very little domestic growth in the economy. And when revisions are finalized in the next few months, we’ll be looking back at the recession that we’re all but certain is upon us right now. Until the credit markets are freed up and borrowers are extended credit at reasonable rates, it’s unlikely that credit, the centerpiece of the economy, will be anything other than a major cog in the wheel.
There are some signs of a thaw, but not anytime soon. The U.S. Federal Reserve’s lowering of the Fed Funds target rate to 1.0%, and coordinated rate reductions by the Bank of England and the European Central Bank, as well as other major world-wide central banks, may start to ease the stranglehold gripping the worldwide credit markets. The London interbank offered rate (Libor), a critical interest rate against which trillions of dollars of mortgages, bank loans and derivatives are priced, dropped to 2.39% last week from a high of 4.82% on Oct. 10.
The prospect of President-elect Obama’s choosing a different means of attacking the credit crisis will be closely watched and, by itself, may create an air of confidence that perceptions will change. But changed perceptions will not be enough.
The truth about our economic outlook is that it is predicated on demonstrably better transparency. If U.S. banks follow the lead of their European counterparts, which have recently been freed from fair-value, mark-to-market accounting, and which may retroactively mark assets to “internal models” back to July, then balance-sheet clarity will continue to be cloaked in darkness. Lack of confidence in the banking system will persist, especially among the banks themselves. The first order of attack needs to be the creation of a fundamental leadership position that leads to an open, transparent and accountable measure of balance sheet assets and liabilities. As long as failing banks are being propped up, this cycle of credit contraction will persist.
The outlook for the economy is inextricably tied to the price of oil. The run-up of benchmark crude this summer to the record $145 a barrel level, and its subsequent fall to half that level, has wreaked havoc throughout the economy. Similarly, the run-up in commodity prices, and their subsequent fall, also has caused a lot of damage. Together, the dramatic rise and fall in the pricde of oil and other commodities is a harbinger of greater volatility in the future.
Follow the Money
Follow the money. Capital rapidly inflated the tech-stock bubble. When that bubble burst, capital flowed into and flooded the hard-asset world of real estate. When that bubble burst fast, speculative money dove into oil and commodities. When the U.S. and world economies looked weak, those bubbles burst. The looming threat of inflation this past summer instantly gave way after the drop of oil, gold, metals and agricultural commodities. And now, deflation is seen as the looming threat on the horizon.
Which threat should we worry about?
The answer is - both. The prospect for near-term deflation seems all too real. As raw material prices fall and finished good prices fall due to a lack of purchasing power resulting from lack of credit and world-wide recessionary fears, the U.S. consumer has fundamentally changed his or her collective psychology. Is U.S. consumerism, which is responsible for 70% of GDP, in full retreat? If it is, as all measures project, then it’s likely that government stimulus efforts will overshoot their intended mark.
Just look at what the United States has done already as it battles this financial crisis. It has:

• Handed out more than $150 billion in stimulus rebate checks.
• Floated a $700 billion financial bailout rescue plan - almost $160 billion of which has already been placed.
• Bailed out American International Group Inc. (AIG), to the tune of $125 billion.
• Covered JP Morgan Chase & Co.’s bet on taking over
  The Bear Stearns Cos. - to the tune of $29 billion.
• Looked to lend struggling automakers $25 billion.
• Agreed to guarantee depositors at all banks.
• Stepped in to buy commercial paper that no one else will buy.
• Guaranteed money-market-fund investors.
• And backstopped the Federal Deposit Insurance Corp. (FDIC), Fannie Mae (FNM) and Freddie Mac (FRE).

And now we’re getting wind of another stimulus package and more help for everyone.
If, in six months to a year, the credit markets are facilitating borrowers again, the massive buildup of U.S. debt will result in a falling dollar and higher interest rates.
That spells inflation.
A massive re-inflation of the economy portends another flood of speculative money into oil and commodities. The cycles are increasingly condensed, more volatile and will be increasingly more disruptive.
Welcome to the brave new world of global finance and speculation.
The Federal Reserve’s balance sheet has ballooned from $900 billion to more than $1.8 trillion. That’s 13% of GDP. The Treasury Department has telegraphed its intention to float $550 billion of debt in the fourth quarter and estimates it will have to float another $368 billion in the first quarter of 2009. Our national debt will then be close to 49% of GDP.
If there is an easing of credit in the economy, and borrowers come to market with the pent-up demand that has not been met for the past year, the competition for funds will raise interest rates. Higher interest rates will counter any stimulus effect from government programs.
Who will buy U.S. Treasury debt if the world is less apprehensive about credit quality? Lenders will once again seek higher returns, potentially forcing the Treasury Department to increase its rates. The potential of this event may sink the dollar if investors perceive that the U.S. economy is stagnant and the world is awash in dollars. The yield curve - the spread between the Treasury’s two-year and the 10-year paper - has been steepening. A steepening yield curve, where short-term borrowing costs are low and long-term rates considerably higher, is good for banks that borrow short and lend long.
But if the perception of risk diminishes, and the perception of future inflation increases, the yield curve will invert and the threat of rising rates will cause a sell-off in the short end of the curve and a rush into longer-dated maturities. Any increase in short-term interest rates would be painful for struggling banks. An inverted yield curve would be devastating, and inevitably would lead to more bank failures.
Home on the Range …
At the core of the U.S. economy sits a desperately ailing piece of the mandala - the U.S. housing market. The once bright prospect of home ownership, which historically formed a beautiful economic picture, right now doesn’t exist. For most Americans, the family home constituted the bulk of their wealth. Or at least it did. And this family financial portrait will get worse before it gets better, since the real estate collapse is far from over. Goldman Sachs Group Inc. (GS), for instance, projects another 15% drop in housing prices.
I think that’s conservative. Mortgage rates are actually rising as Fannie and Freddie have to pay higher interest on their short-term notes and bonds. Thirty-year fixed-rate mortgage paper averaged 6.47% last week, up from its 52-week low of 5.36%. The 15-year fixed paper was trading at 6.18%, up from its 52-week low of 4.91% (based on Bankrate.com (RATE) rate surveys). This trend is definitely not our friend. As housing prices continue to fall, and inventories stagnate and grow in many areas, homeowners are increasingly underwater and are increasingly entertaining foreclosure as a viable economic alternative to indentured servitude.
The Hope for Homeowners Plan, which looks to lower interest rates and reduce principal on mortgages, and which makes homeowners pay a share of the appreciation on their home to their lender when they sell it, was initiated in October and was expected to garner some 400,000 takers. As of last week, according to The Wall Street Journal, there had been only 42 takers. That’s not a misprint - 42 - I even checked with The Journal.
In the real estate realm, the proverbial “other shoe” hasn’t dropped yet, but certainly is dangling - and that’s commercial real estate. As homeowners writhe in agony and stop spending, retailers will go out of business, businesses of all stripes will suffer and commercial real estate will implode. The leverage left over from just the private equity foray into commercial real estate in the acquisitive 2006-2007 period is staggering. Refinancing will be impossible. Banks are stuck with hundreds of billions of dollars of leveraged loans that they took on as bridge and mezzanine financing from the private-equity shops alone, at the time believing they would be able to securitize those loans and sell them off to investors.
There’s no chance of that, now.
One deal in particular illustrates this entire mess. Private equity behemoth The Blackstone Group LP (BX) took Hilton Hotels Corp. private for $26 billion. Blackstone put up $6 billion of its own money as equity and borrowed the other $20 billion from Bear Stearns, Bank of America Corp. (BAC), Deutsche Bank AG (DB), Goldman Sachs, Morgan Stanley (MS), Merrill Lynch & Co. Inc. (MER) and Lehman Brothers Holdings Inc. (OTC: LEHMQ).
Based on a current analysis of the deal at the multiple of seven times projected cash flow that the market currently puts on Starwood Hotels & Resorts Worldwide Inc. (HOT) - Hilton’s nearest rival - if Blackstone values its property comparably, it will have to mark its Hilton holdings down 50%, because it paid 13 times projected cash flow. That wipes out all of Blackstone’s equity in the deal. What’s more, the $4 billion portion of the loan that Bear Stearns took on, courtesy of JP Morgan Chase casting off Bear’s orphaned liabilities, now sits on the Fed’s balance sheet - and isn’t likely to go anywhere anytime soon.
Until the real estate cycle completes its implosion and begins to stabilize, there’s nothing that will fundamentally alter the outlook for the economy. This is Ground Zero. President-elect Obama must resist creating only a political solution to the overwhelming economic problem of declining house prices and declining real estate prices in general. Any attempt to put a band aid on this economic plague will only delay the day of reckoning. I regret deeply the conclusion that the lake must be drained before we can realistically climb out of it. But there just aren’t enough ferrymen to get us all to shore.
Always a Silver Lining - My Forecast
The outlook for the economy is not rosy - and that’s an understatement. But there is a silver lining. Even in the near term, the stock market will present innumerable wealth-creation opportunities.

• First, there are plenty of shorting opportunities out there now, and more will present themselves in the future.
• Second, in due course - in perhaps 12-18 months - we will be presented with the investment opportunity of our generation. If President-elect Obama gets it right, and I believe he’s got the potential to bring us all together and get the country through this (and if you’re reading this Mr. President-elect, I’d like to put in my vote for [New York Fed President] Timothy Geithner as next U.S. treasury secretary), American companies will be able to be purchased so cheaply that fortunes will be made. The recovery will not only make us whole, it will make our people and our nation rich again.

I have absolutely no doubt that the United States will lead the world back into balance. The sea change that has arrived is the result of the conservative experiment having lost its true moorings, pushing the economy into disaster. Not that a wholesale swinging of the pendulum to the other side would be good. In fact, it would be disastrous. We have the potential to end up with a new, fair, transparent and judiciously regulated environment where capital formation can again spread its wings and the U.S. economy can fly.
There are new hands reaching into the colorful box of beads that comprise the American landscape and economy. From any human perspective, the United States is more than a microcosm of the universe; it is the center of the world as we know it. It will take time to construct the new mandala. We all need to meditate on the process to ensure that the design we embrace will ultimately be inclusive, forward-looking and - like all great art - an inspiration to all who view it.
[Editor’s Note: Contributing Editor R. Shah Gilani has toiled in the trading pits in Chicago, run trading desks in New York, operated as a broker/dealer and managed everything from hedge funds to currency accounts. In his recent investigation of the U.S. credit crisis, Gilani was able to provide insider insights that no other financial writer or commentator could hope to match. He drew upon the experiences and network of contacts that he developed through the years to provide Money Morning readers with the "real story" of the credit crisis - and to propose an alternate plan of action. It’s a perspective on the near-financial meltdown that more than a quarter-million readers have read in Money Morning alone - to say nothing of the hundreds of other Internet outlets worldwide that have picked up and published Gilani’s unique insights.
How can you protect yourself? Well, with the U.S. financial markets in such disarray, Money Morning is looking for profit opportunities beyond U.S. borders. In our newest report, we’ve discovered a firm that’s been posting quarter-after-quarter of earnings surprises - even as the rest of Wall Street tanked. Not only does this company have a lock on China - the fastest-growing market on the planet - this corporate gem is also riding the profit wave of the most-powerful global trend we’re following right now. If you act immediately - as an added bonus - you’ll also receive a free copy of CNBC analyst Peter D. Schiff’s
New York Times best-seller, "Crash Proof: How to Profit from the Coming Economic Collapse."

12:27 | 0 commentaires | Read More

THE POSITIVE IMPACTS OF FINANCIAL CRISIS ON INDIAN ECONOMY

           It took some time for policymakers and analysts in India to recognize both the speed and the intensity of the effects of the global crisis on India. Indeed, there were arguments that India, along with China, is “decoupled” from the global system and capable of becoming an autonomous growth pole, based on its recent high growth from a low per capita income base, and a young population leading to falling dependency ratios. In addition, the “strong” domestic financial sector was also seen to be immune to shocks from the international financial system. However, it turns out that this presumption was wrong, and even involved a faulty assessment of the previous boom. Recent high economic growth in India was fundamentally dependent upon greater global integration and related to the deregulation of finance combined with fiscal concessions that spurred a consumption boom among the top two deciles of the population, especially in urban areas, even as deflationary fiscal policies, poor employment generation and agrarian crisis kept mass consumption demand low. The substantial rise in profit shares in the economy and the proliferation of financial activities combined with rising asset values to enable a credit-financed consumption splurge among the rich and the middle classes, which in-turn generated higher rates of investment and output over the upswing. This was, therefore, quite similar to speculative bubble-led expansion in several other countries in the same period. This also made the growth process more vulnerable to internally and externally generated crises.
            By the middle of 2008, even before the global crisis really hit India, this process too was reaching its limits. The crisis made matters much worse by causing sharp declines in exports of manufactures and reversal of capital flows such that both current and capital accounts of the balance of payments have worsened. The macro issues have been much commented upon, but the specific impact upon certain groups has been much less widely noted. The crisis has been accompanied by changes in employment and relative prices that have adversely impacted especially upon three sections of the population that were already very vulnerable: cultivators, migrant workers and home based women workers. In addition, it has sharply affected food insecurity which was already a problem in the country

            The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises and sovereign defaults. The current financial crisis is the worst of its kind since the great depression of 1930s. It becomes prominently visible in September 2008 with the failure of several large us-based financial firms. The global financial meltdown has spelt disaster for the world economy in general and for the US and the European economies in particular. But surprisingly when world's developed economies are suffering, there the developing countries like India and China are still spending money in many projects. Do we need to believe that Indian growth story is over? The answer is a big no. India is still to enter its golden phase of growth. This is the time for India to march on and look for opportunities to make its presence felt on the global economic map.
THE INDIAN APPROACH IN CURRENT SCENARIO
            Today India stands erect to face this financial crunch with many advantages and strengths. One of the major strength is its nuclear technology which will aid India to battle out its biggest problem-power.
Cautioning against the use of word "recession" for Indian economy, Finance Minister P Chidambaram says India's growth would moderate in this difficult year, but would still be second-fastest in the world at the rate of 7-8 per cent. According to him a recession is defined as two successive quarters of contraction of GDP. He wishes to emphasize that India is nowhere near a recession. We may expect a moderation in growth rate in the current year to a level between 7 and 8 per cent. India would still be the second-fastest growing large economy in the world Chidambaram says.
            Giving a positive projection on the country's economic scenario, P.M Manmohan Singh said India could regain its annual growth rate of 8% to 9% as the world's economy could recover partially the present crisis by September this year.
            According to the Planning Commission Deputy Chairman, Montek Singh Ahluwalia, The global financial turmoil will not have any significant impact on the country's financial system as India is not exposed to the new and innovative financial instruments that triggered the meltdown. We have not been as exposed to these new and innovative instruments, which have been the source of financial distress internationally... So the direct impact on the Indian financial system is not going to be significant at all.
            There will be indirect effect As regards to India, the country is fortunate to have large foreign exchange reserves and hence it would be able to tide over any short-term disruption in capital inflows.  The strengths of the Indian economy are substantial and capital inflows would eventually resume the normal course. As far as economic growth is concerned, the downturn in the world economy is going to have an impact on India and unlike the last year, the country would not get 9 per cent growth rate during the current fiscal. Still, the growth rate could fall below 8 per cent at 7.7 per cent, as predicted by the Prime Minister's Economic Advisory Council.

POSITIVE IMPACTS ON INDIAN ECONOMY
Emergence of a new economy
            Perhaps this is the first time during such crisis period when world's big economies like US is struggling to overcome this situation India was able to invest money for launching of chandrayaan-1.This is the time when world's most powerful economies are suffering more than Indian economy. It affected developed country economies more than developing country's economy. In USA Lehman Brothers has filed for bankruptcy,  Merill Lynch has emerged with Bank of America,  Washington Mutual Operations are being apprehended by FDIC and Wachovia is being auctioned by Citigroup .In comparison to such terrific conditions India is in a better place. It is worth underlining that we have a number of companies still reporting successes at this time. Some of the businesses bucking the trend at this stage have diversified into a number of areas and others have exposure to export markets. Whilst overseas markets are increasingly tough, but the businesses have been able to benefit from the weakness of the money value which has allowed exporters additional competitiveness with their international trade.
Expose of weaknesses in the economy
            The major role of financial crunch is that it exposes the political, structural and financial weaknesses of an economy. It explores efficiency in the financial market, transparency and accountability of new or reformed organizations, opportunity for creating new jobs and technologies, sufficient fund for investment in R&D innovation and education.
            During the financial crisis period, the extent of sufferance of an economy shows its weaknesses. Because if the rest of the world gets disturbed and capital flows and liquidity shrinks, there is bound to be spillovers not just on India but all over the world.. Regulators are trying to assess the situation and taking steps to insulate their economies from the unnecessary shock. The fact that we have not been affected reflects the merit of proceeding slowly. We have actually been reforming very slowly and gradual pace of reforms has some advantage and we should continue with that pace. India should endeavor to make the regulatory system more sophisticated to ensure that the country does not run into regulator gaps that precipitated the present global financial crisis.  Our country pursued economic reforms in a calibrated manner and escaped the fallout of global financial crisis. So these expose of weaknesses will definitely help India's fast growing economy in the long run.
Cost stabilization in real estate market.
            Confederation of Real Estate Developers Association of India ( CREDAI) and National Real Estate Development Council (NREDC),  both  builders association with around 3500members each across the country,  have appealed the members to slash prices of their proporties.Builders feel that cutting down prices will spur buyers and restore confidence. This development will enable middle-class families to think of having their own homes as owning a house had become a distant dream because of unrealistic rise in real estate properties. By developing middle-class families it is for sure that Indian economy will be affected positively in long run. Because in comparison to any other country Indian middle-class families are significantly improving in monetary measures.

Rationalization of Salary Structure in IT Industry
            This financial crisis will have a positive impact on the IT industry. This sector has seen an unprecedented rise in salaries and increments. But with this financial crisis this cannot go further. No economy can afford 25% to 30% salary hike per industry per annum. So now IT industry slowdown will ensure better quality of work and also prevent attrition. Today the IT professional will think twice before changing their jobs. Along with it funds spent on recruitment, training and development and retention of man power will come down considerably. Earlier the scene was quite different. With that lucrative growth rate of salary structure, IT professionals were changing jobs frequently. It had a bad impact on the job culture of the industry in particular. Frequent change of jobs also affected the overall productivity of the industry. But now the scene is totally reverse in nature. As a result of this financial crisis professionals are not only in favor of changing the job but also ready to work more with the same salary with the objective to keep his job secure. Definitely it would help in the improvement of this sector as well as the productivity of the IT industry.
Performance Appraisal is gaining ground
            Today's businesses are under a great deal of pressure to perform. With increasing customer expectations, global competition, costs of goods and services and above all because of financial crisis, many companies struggle to meet profit forecasts. As a result, companies are beginning to discover the powerful link that exists between employee performance and financial success. Many companies are relying more heavily on human capital to address consumer demands while lowering operating costs, and improving financial position. Deploying employee performance appraisal programs that lead to measurable improvements in employee performance can provide the human capital leverage companies need to overcome many of today's business obstacles.
            Earlier as the job opportunity was more for the people; the role of performance appraisal was less.  To understanding how efficient your employees perform was critical to your business. Every year, thousands of businesses were losing millions of dollars in revenue due to inefficient employees. Now as this financial crisis arises everyone is trying to save one's job. Watching the changed job environment use of Performance Appraisal is gaining its ground day by day. As a result, everyone is ready to give his 100% to his job. Fear of losing the job improves the performance of the employees as a whole.
Austerity is the targeted path
            Today Warren Buffet advice of austerity is practically followed by many countries. Cost cutting seems to be the sole solution to this contemporary problem. Starting from Govt. sectors to big private corporate sectors, cost cutting is there everywhere. Earlier when big MNCs were spending recklessly for promoting their business where staff luxury was of major portion, today they are taking a second thought before spending a single penny.
            Splurge will no more be the watchword and greed will no more be good in corporate parlance. Financial crunch will force the companies to eliminate all forms of wastage and follow an austerity regime. India's greatest ability and strength is its tolerance and ability to adapt to difficult situations. It is now trying to tackle the issue of panic resulted out of depression and then pump massive amount of liquidity and confidence into the system. India's population plays the most crucial role here
Best place for outsourcing
            "It is time to open up banking and insurance sectors for further foreign direct investments as multinational insurers and bankers are willing to invest more in India. There is a talk that FDI limit in insurance might be hiked to49%. And this time is the best time to do it", Prabhu Guptara, Executive Director, Think-Tank of United Bank of Switzerland (UBS).

1.             According to Obama Govt. US's   priority would be given to curtail costs, which would include cutting wage expenditure and there by outsource work to countries like India.

            In view of high credibility, Indian banks should also expand retail and other businesses abroad. There is also a need for more innovative products and global competitiveness.
            India continues to be the best place or top destination for outsourcing. Two factors are responsible for it. First when it comes to salary costs India is extremely competitive, second Indian outsourcing firms have now matured into true global companies that can offer best services at competitive prices. India is coming under the list of top outsourcing destinations with China, Brazil, Mexico, Malaysia and Chile. India has the second lowest Its-BPO salary base of $7,500-$8500 followed by China. Another advantage of India in this section is that India is having one of the largest producers of English-speaking graduates including management and engineering graduates. Such a huge number of graduates will definitely result in offering higher value-added services to the customers. Which is very weak in china as the number of youth is less here. . Today having the maximum no of youth our country is ready to adapt to this situation. Efficient young personnel are India's greatest asset here.
Opportunities for International trade.
            When looking in particular at International Trade, there are huge opportunities for when the world economy begins to grow again and demand returns to foreign markets. The competitive position of Rupees only adds weight to the potential that can be realised.
            Today countries all over the world are interested for trading with India. It will have a great impact on our foreign fund reserve and forex market.
Conclusion
            While it is uncertain how prolonged and deep the recession will be, it can be said with certainty that demand, and subsequently growth, will return. It is therefore imperative that, when this happens, policymakers have a recovery plan in place. This plan should act to foster growth in the short-term and lay the foundations for economic stability in the long-term. There is currently a high level of activity amongst the business support community with a key focus on ensuring businesses survive the downturn. A challenging and critical focus on the basics, or fundamentals of businesses, is likely to give local companies the best chance of survival over the next year.
            The growth of the public sector and the narrow reliance on financial services for growth needs to change, with manufacturers and exporters having particular attention paid to them. After watching so many positive points we Indians can ourselves that we are quite in a safer place in comparison to many developed countries economy. To conclude lets hope for a stronger India by rectifying all its economic weaknesses after this so called financial crunch.

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Political Economy of India’s Special Economic Zones: a Conceptual Frame Work

Every country stands for its own development. For this purpose the state introduces and implements new policies and programmes such as Special Economic Zones Act. After 60 years of its independence India with its 110 core population has evolved a new paradigm of its political economy which is confusing. The policies and programmes initiated by Indian government to create a ‘global village’ based on free market economy and free trade among nations cutting across all barriers, abolition of national boundaries and dismantling the nation –state system giving priority to ‘market’ over the ‘state’ . After the enactment of Special Economic Zone Act 2005, it created tremendous effects on political economy of the country.
            The term ‘political economy’ came from the two Greek words ‘Politiko’ and ‘Oikonomia, where ‘Politiko’ stands for the state and society and ‘Oikonomia’means managing the house hold economy. Political economy thus means a study of the state, society and house hold economy. The concept of political economy arose historically as the economic doctrine of a new class – the capitalist class. It has been evolved since the days of Aristotle who gave a model of public good through guaranteeing each person private possession of what he was rationally and morally entitled. Private property was elaborated later by Locke, Adam Smith, Ricardo and the physiocrates, who came to be known as the Laissez Fairists in Economics, or, the liberal democrats in politics. Adam Smith referred to political economy as a branch of the system of civil government. It was concerned with public policy.
            In Marxian view, political economy can be regarded as a subject which studies the social relations evolves between different classes of people in course of production, distribution, exchange and consumption. Political economy belongs to the broad land of economics, which opens on to political science. After a prolonged period of hibernation, the subject has again been resurrected.
Marxist political economy makes a study of how the productive forces are used under the given relations of production taking account of the lines and trends in technical progress; political economy studies the influence of production relations on such progress and its socio economic consequences. Marxist political economy starts from the assumption that human vital activity is objectively based on social material production which includes man’s interactions with the nature and whole range of relations which arise in the process. It has been realized that every political action has its obvious economic repercussion, and every economic action has had its political implications.
 The liberal school of political economy offers economic implications of political facts and factors. The liberal school has economized politics. The liberal system focuses on the atomistic individual as the relevant unit, on the description of economic behavior in terms of subject choices among alternatives, on the notion of social welfare as the maximizations of individual utility sums. The socialist system views the entire economic system as the basic unit, views economic progress in terms of the growth of the forces of production and focuses on ‘relations of production’ ‘surplus value’ and the rapid increase of social product.
By contrast the Gandhian system eschews both the notions of the atomistic autonomous individual maximizing his utility in a self regulating economy and the notion of processes of production autonomously effecting changes in the organization of production ,class relationship and the magnitude and distribution of social product instead of the Gandhian model suggest that the fundamental attribute of human economic behaviour lies in the relationship of individual to socioeconomic micro groups and the relationship of micro groups to society .The basic economic act is neither the choice between economic alternatives nor the social division of natural products, but the adjustment between individual and the micro groups to which they belong, and of those micro groups to society .It is this collaboration which is the basic theme of the Gandhian system of political economy.
The Gandhian system is viewed in micro groups that are fundamental constituents of the economic system and given full scope to develop their potential in the context of no coercive forms of political control. Social welfare is defined in terms of the functioning of the collaborative micro groups vis –a-vis its members. Gandhi believed that the introduction of technology and patterns of development must be consistent with the full employment objective.
Today economist speaks of sustainable development and ecological values. Gandhi was not against industry but as he predicted it could not give people more employment. His constructive programmes were to give employment to all people whether it be kadhi, gobar gas or tree plantations, where all can be engaged in constructive work. Gandhian economics is an alternative to overcome the exploitation of both capitalism and communism for the exponents of human social order.He was against the large scale use of machinery which kept millions without work. Swadeshi is one of the core elements in the socio-economic organisation of Gandhian system.
Gandhi observes
                       “Life here will not be a pyramid with the apex sustained by the bottom, but it will be an oceanic circle whose centre will be the individual, always ready to perish for the village, the latter ready to perish for the circle of the villages, till at last the whole becomes one life composed of individual, never aggressive in their arrogance, but ever humble sharing the majesty of the oceanic circle of which they are integral units’. The idea of the circle stands for integrating, fullness and self-sufficiency. He wrote that independence must begin at the bottom. Thus every village will be a republic or Panchayat having full powers. It follows therefore, that every village has to be self sustained and capable of managing its affairs even to the extent of defending itself against the whole world.”
 Politics and economy are considered as two basic factors in determining the nature of the state and society. They are interrelated to such an extent that the changes in one affect the other, and hence both are ‘dynamic’ and ‘flexible’ ingredients of the national and the international systems. Politics and economy taken together as political economy refers to ‘managing the economy of the state’. Conceptually political economy connotes the relationship between the state, society and the economy, the cause–effect relationship between technological change and the process of development, the economic relations among the different nations of the world.


DEFINITION OF SPECIAL ECONOMIC ZONE
            A special economic zones is a geographical region that has economic; laws more liberal than a countries typical economic laws. According to the SEZ Act 2005, A SEZ is a ‘specially delineated duty free enclave and shall be deemed to be foreign territory for the purpose of trade operations and duties and tariffs. A SEZ also been viewed as “a geographical region with different economic laws than a countries typical economic laws with the main goal of attracting foreign investment’. “A SEZ or a Free Trade Zone (FTZ) is typically an enclave of units operating in a well –defined area within the geographical boundary of a country where certain economic activities are promoted by a set of policy measures that are generally not applicable to the rest of the country”.
            The concept of special economic zones is not new. In an International Labour Organization (ILO) report traces the roots of the concept to 13th centaury Spain and in more recent times to Ireland and Puerto Rico, which established Export Processing Zones (EPZ). Export Processing Zones is the former name of the Special Economic Zones. The countries like China, United Arab Emirates, Malaysia, India, Jordan, Philippines and Russia have utilized the concept of SEZ. In 1986, there were 176 zones across 47 countries. Now the number has increased to over 5000 across 147 countries.


The zones are known by different names in different parts of the world. Most often these are Free Trade Zones  (FTZ),Industrial Free Zones (IFS) Export Processing Zones (EPZ) Bonded Free Zones and Special Economic Zones (SEZ).
          Export Processing Zone is the ancestor of SEZ. An Export Processing Zone is relatively small geographically spread area within a country. The purpose of which is to attract export oriented industries, by offering them especially favorable investment and trade conditions as compared with the reminder of the host country. The EPZ is just an industrial enclave but SEZ is an integrated township with fully developed infrastructure. The UN Industrial Development Organization (UNID) identifies five basic attributes of EPZ s are:
 ? EPZs are dominated by market mechanisms.
 ? EPZ are restricted to a limited region.
 ? EPZs specialize in the production of exports goods and offer special incentives for such production.
 ? Their major aims are to attract foreign investments, earn foreign exchange and to  generate employment
? Secondary aims are technology transfer, development linkages and regional             development .


Policies taken by the governments for the development of the nation obviously affect the people. SEZ policies are for the development of the country. These Developmental projects have economic, political and social impact. In Gandhian political economy, village level development is needed. Land needed for the establishment of the SEZs projects also affected the political economy of the country. Tax incentives, Foreign Direct Investment, New type of employment generation also affect the political economy of the country. The macro economic changes driven by SEZs will push the countries down the path of increasing socio-political crisis.  


A BRIEF HISTORY OF INDIA’S SPECIAL ECONOMIC ZONES
India became independent in 1947 and chose self- sufficiency along with economic autonomy. The Industrial Policy Resolution of 1948 marked the beginning of the evolution of the Indian Industrial policy. The Resolution not only defined the broad contours of the policy. But it delineated the role authority of the state in industrial development both as an entrepreneur and as an authority
The industrial policy Resolution of 1956 gave the public sector a strategic role in the economy. It categorized industries, which would be the exclusive responsibility of the state or would progressively come under state control and others. Earmarking the pre-eminent position of the public sector, it envisaged private sector coexisting with the state and thus attempted to give the policy framework flexibility. India opted for a planned economy with emphasis on state sponsored industrialization. The argument was that capital being scare in India, it was essential to regulate the flow of the available capital in to socially desirable channels. This was achieved by an elaborate system of industrial licensing and state monopoly and control over key industries.                                                                                                                      
More than 80% of the Indian population is still living in agricultural field. Agri-centered model of development was prevalent during the 1950sand the 60s. Agriculture contributes approximately one-fifth of total gross domestic product (GDP). It provides the means of livelihood to about two-thirds of the country’s population. The Sector provides employment to 59 percent of the countries workforce and is the single largest private sector occupation. Agriculture accounts for about 10 percent of the total export earnings and provides raw material to a large number of industries.
During the Jawaharlal Nehru’s period, foreign collaborations were promoted in certain sectors and foreign investment was encouraged. First Export Processing Zone (EPZ) was set up in 1965 at Kandla, in Gujarat. This was a predecessor of the Special Economic Zone in India. The Santa Cruz EPZ in Mumbai became operational in 1973.
After the death of Jawaharlal Nehru, Indira Gandhi became the prime Minister of India in 1966. She also did a lot for the economic development of the country. The Foreign Investment Board was set up in 1968. In 1973, Foreign Exchange Regulation Act (FERA) was enacted.. India set up the Santa Cruz Electronics Export Processing Zone (SEEPZ) between1973-74. It was the first EPZ which was dedicated to the electronic industry.
Doors of the Indian economy were opened during the 1980s, by Indira Gandhi and later by Rajiv Gandhi. From 1984 to 1989, the policy was to enable the middle class to consume more so as to raise the internal demand. This resulted in the raise of imports and the growth of Foreign Direct Investment. The government tried to raise the level of exports in order to balance this phenomenon. In 1984, the Free Zone policy received a fresh start. By 1991, the Indian economy was opened up for linking up the Indian market with the world leading to free flow of trade and commerce .The multilateral Financial Institutions like the World Bank and the International Monetary Fund while assisting the developing countries like India also insisted upon restructuring the polity and the administrative machinery. Following a change in the policy regime in this period and the formation of the World Trade Organization (WTO) with India becoming its founder member, it opted for a liberalized capitalist strategy. There had been introducing policies since July 1991 particularly in the industrial sector.
De-reservation of industries for the public sector was one of the major step taken by the government as part of the policy changes in the industrial sector. It was against the earlier 17 industries were reserved, there are now industries like defense production, atomic energy, coal and lignite, railways and mineral oils reserved for the public sector. Core industries like iron and steel, electricity, air transport, shipbuilding, and heavy machinery industries such as heavy electrical plants telecommunication cables and instruments are now open to private sector participation. Besides, equities held by the government in selected public sector enterprises like ONGC etc are now available to mutual funds, financial institutions, the general public and workers through a policy of divestment
In1998, the first private SEZ started its operations in Surat .This was under the jurisdiction of the Mumbai (SEEPZ)Development Commissioner, who was a nominee of the central Government.
From the beginning of the 21st century, most of the developing countries in the world have recognized the importance of facilitating international trade for the sustained growth of the economy and increased contribution to the GDP of the nation. As part of its continuing commitment to liberalisation, the Government of India has also adopted a multi-pronged approach to promote foreign investment in India. The Government of India has pushed ahead with second-generation reforms and has made several policy changes to achieve this objective.  The annual growth rate ranged between six and nine percent.
Bharathiya Janatha Party (BJP) government decided to re-launch the Free Trade Zone Policy in 2000. It changed the name of Export Processing Zone (EPZ) to Special Economic Zone (SEZ). The policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package both at the Centre and the State level with the minimum possible regulations.
The salient features of the SEZ scheme are:
v No licenses required for import
v Manufacturing or service activities allowed.
v SEZ units to be positive net foreign exchange earner within three years.
v Domestic sales subject to full customs duty and import policy in force.
v Full freedom for sub contracting.
v No routine examination by customs authorities of export/import cargo.
  The United Progressive Alliance (UPA) government Currently in power enacted Special Economic Zone Act, 2005 which was passed in June 2005 and came into force on 10th February 2006 with the notification of the SEZ Rule in 2006. The Act provides for drastic simplification of rules and single window clearance on matters relating to the union and state governments .The state governments have also been enacted their own SEZ laws to cover State subjects.
The Act provides for single window clearance mechanisms for developers and operators for ensuring orderly development of SEZs, the responsibility is assigned to the Board of Approval, constituted by the union Government. The Union Government may set up a SEZ on its own or on the basis of proposals of the state government or private developers after the Board of Approval has duly screened them .At the regional level, the Development Commissioner and his /her office will exercise administrative control of SEZs. The Labor Commissioner’s power is also delegated to the Development Commissioner. There is an approval committee to approve /reject /modify proposals for setting up units in SEZs. All suits of civil nature and notified offences in SEZs will be tried and settled by specially notified courts and affected parties may appeal to high courts against the orders of the designated courts. The  corporate units operating under SEZs will enjoy special privileges and protection granted by law.
          The Act offers a special fiscal package to the units set up in the SEZs. This package includes, exemption from customs duties, central excise duties, service tax, central sales taxes, and securities transaction tax to both the developer and the units set-up, tax holiday for 15 years like 100 percent tax exemption for five years ,50 percent for next five years, and 50 percent for the ploughed back export profits for the next five years.100percent income tax exemption for 10 years in a block of 15 years for SEZ developers.


 There is a three-tier administrative structure. On the top, a Board of Approval at the level of the Union Government has been set up for the functioning of the SEZs. Next an authority has been created by the state governments for creation and promotion of the infrastructure within each state. Finally, in SEZ mechanism /authority is provided for single window approval.   According to the 2005 Act, these zones can be set up by the developers, who could be private real persons, companies, both Indian and foreign, as also the State governments or the central government by themselves or jointly with private parties. It is also being envisaged that some of the existing Export Processing Zones would be converted into Special Economic Zones.  The SEZ Act, 2005 supported by SEZ Rules, has come in to effect on 10th  February 2006.
THREE CATEGORIES OF SEZ
In India SEZs are divided in to three categories, Multi-product SEZs Sector specific SEZs, Free Trade and Ware housing Zone (FTWZ). The first category signifies a SEZ where units may be set up for manufacture/rendering of services of two or more goods in a sector or good/services falling in two or more sectors. For multi-product service SEZ, a contiguous area of 100 hectares or more is required.
The second category defined as a zone meant exclusively for one or more product/services. The minimum area requirement is 100 hectors of contiguous and vacant land. Within sector specific SEZs, Bio-technology, Gems and Jewellery, Non conventional energy, electronics, hardware and software SEZ-including IT can be set up with minimum area has been relaxed to 50 hectares for Assam, Meghalaya, Nagaland and, Arunachalpradesh, Uttaranchal, Sikkim, J&K, Goa and the Union Territories.
 Free trade and warehousing zone (FTWZ) is the third category which minimum area requirement is 40 hectares of contiguous and vacant land. Built up area should not be less than 10 hectares.
There are 19 functional SEZs in the country which were set up prior to SEZ Act, and 154 SEZs that were notified under SEZ Act 2005. The maximum numbers of SEZs are coming up in the IT sectorThe total land requirement for the formal approvals granted till date is approximately 44,268 hectares. Out of this, about 87 approvals are for State Industrial Development Corporations (SIDCs) State Government ventures which account for over 21,169hectares
ISSUES RELATING SEZs IN INDIA
One of the main issue is related with SEZ is locating land for SEZs. Many state governments are in the process of establishing SEZs. The issue of displacement, that of compensation or land price, rehabilitation, residential property development and land speculation, the threat of possible relocation of units from other parts of the state to SEZs and the consequent loss of revenue have been flagged . Farmers are protesting against the forced acquisition of their lands. The development of SEZs would lead to the destruction of employment of peasants whose land will be acquired and will create very little employment for high tech or high skilled persons and total net employment generated may well be negative. Handing over thousands of hectares of land cheaply to promoters of industry and relaxing the laws of the land, including those that relate to the welfare of the industrial workers, protection of the environment, taxation, etc, would automatically promote industrialization and solve the nagging unemployment problem of the country overnight. The farmers/peasants in various states such as West Bengal, Orissa, Maharastra, and Punjab have opposed acquisition of their land for SEZs. The highest level of opposition has been observed in West Bengal when land was acquired by the state government for the Tata group at Singur and Salim group of Indonesia at Nandigram.  Besides the loss of agriculture land, concerns have also been raised about the project affected People.
Using water for SEZs is one of the major problems rising from different parts of the country. Mundra SEZ as per official website of the SEZ, it expects to get at least 6 million liters per day from the Sardar sarovar project, as promised by Gujarat water infrastructure Ltd.
The another main issue is rising from different parts of the country, the labour laws applicable to the rest of the country have been relaxed for the SEZs. The existing laws are well intentioned and they promote worker welfare. Relaxing such laws exclusively for the SEZs shows the government’s lack of conviction in its own commitment to social justice.
In some SEZs, the state governments are joint venture partners. In the case of some, special incentives by way of concessional electricity and water tariffs have been offered .In almost all the cases, valuable lands have been given away at concessional prices.
Considering the SEZ Act, it violates the letter and spirit of the Indian Constitution; it infringes the Fundamental Rights of the citizen guaranteed in part 3rd of the Constitution. Relaxation /inapplicability of many labour Laws (including under the Industrial Dispute Act, Contract Labour Act, Factories Act, Minimum wages Act, Trade Union Act), Environment (Protection) Act is inapplicable to SEZs ,No environmental clearance needed.  Violates  Panchayat Raj Act (1996) for local self government, violating laws granting rights and control to adivasi communities over their land, violating many international conventions on human rights.
To sum up, SEZs and other emerging developmental issues can be seen in a broad perspective and theoretical underpinnings of neo-liberalism. As far as Indian polity is considered the implications emerging from SEZs may cause increasing socio-political crisis because the society is far more complex than we assumed and that will result in organized or unorganized resistance and that may even cause anti-neo liberal political forces. So, in order to avoid the polarization of the society, civil society should engage to create a consensus on developmental issues. More over, in order to understand the continuities and changes that are taking place in the developmental scenario it needs further study.   
Endnotes
Bijoiny Mohanthy and S.C Hazary(Ed), Political Economy of India Retrospect and Prospects (New Delhi: APH Publ).
 S.C Hazary, Political Economy of India Retrospect and Prospects, ( New Delhi: APH Publi,1997.)

Sukhendu Mazumder, Politico-Economic Ideas of Mahatma Gandhi  (New Delhi: Concept Publishing House, 2004.).
B.Mohanan,(Ed), Gandhis Legacy and New Human Civilisation, Gyam publishing house, New Delhi,1999.
Vineetha Sharma, ‘Implications Of A Special Economic Zone on Project Affected People a case study of Reliance Haryana SEZ”, Man & Development, Vol.39,Dec,2007.
Jermy Grasset and Frederic Landy, ‘Special Economic Zones in India Between International integration and Real Estate Speculation’, Man &Development, Vol. 39,No.4, Dec, 2007.
India 2008, A Reference Annual, Publication Division, Ministry of Information and Broadcasting , Govt:of India, New Delhi,2008.
Partha Mukhopadhyay, “The promised land of SEZs” Seminar, Jan, 2008
.
Sheetal Sharma and Kishan Pratap,  “ The Prosperous Few and the Pauperized Many: A Perspective on Special Economic Zones”, Mainstream, February,23-March,1,2007.

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