Greece today may well be the touch-off point for market instability just as Thailand was back in July 1997 — who would have thought a Baht devaluation would have touched off a major Asian financial crisis. Then again, who thought the subprime mortgage market would unleash a broad credit collapse — certainly not the folks at the Federal Reserve. And, as for the Euroland, don’t take its longevity for granted either. Go back to the history books and read about how long other currency unions lasted in that part of the world in the past (like the Latin Monetary Union circa 1867 or the Scandinavian Monetary Union circa 1873).

1. China's future growth rate will be about 8% per year between 2000 and 2040;
2. EU-15 will only grow at 1.2% per year between 2000 and 2040;
3. The U.S. GDP between the same years will grow at 3.7% per year.

China rising as science superpower; huge growth in research activity. A Financial Times story on Monday (Jan. 25) compiled data from Thomson Reuters and Web Science database to show Chinese researchers published about 112,000 scientific articles in peer-reviewed journals in 2008. US researchers led the pack with the most published articles (333,000).

Among the BRIC countries, China has made the most impressive gains in research publications, with notable strengths in the areas of chemistry and materials science. The quality of the science in Chinese papers still is variable, but clearly the Chinese are increasingly working across borders with members of the international research community and a growing number of foreign researchers are publishing jointly with their Chinese colleagues. Generally speaking, the quality of Chinese research is improving.
Brazil has also made huge strides in increasing its out-put of scientific articles, with particular expertise shown in the areas of agriculture and bioscience. In contrast, India, and in particular Russia, failed to live up to expectations of increasing research prowess.

China’s heavy investment in education and R&D during the past decade is now coming to fruition with China joining other research leaders. The return of the Chinese re-searchers who have studied and worked in North America and Europe are playing an important role in China’s development. China has also been successful in translating basic science advances into commercial applications. This phenomenon is reflected, e.g. in the large increase in international patent applications.

Is a euro-zone bond issue the answer to Greece's problems? Prime Minister George Papandreou unsurprisingly thinks it a good idea. But he and other European leaders shouldn't waste time fantasizing about it. Even if there weren't huge technical, political, economic and legal headaches to solve, a euro-zone bond could cause more problems than it solves at present.

The attraction of a euro-zone bond is that it would provide cheaper funding to countries whose borrowing costs have risen sharply as a result of the crisis: mainly Greece, but also Portugal and Ireland. But any advantages in terms of increased European solidarity are far outweighed by the costs associated by a huge increase in moral hazard.

Issuing a euro-zone bond would remove all incentive for weaker states to take difficult decisions; they would be able to spread the pain to taxpayers in other countries instead. Borrowing costs would likely rise for other euro-zone members, including those viewed by the markets as having maintained relative fiscal solidity, such as Germany, Finland and the Netherlands, ultimately leading to tax hikes or spending cuts.

The euro-zone's "no bail-outs" approach would have been shown to be fatally flawed—and the currency bloc's credibility, already damaged by failures to enforce sanctions against countries breaking the Stability and Growth Pact rules, would be further damaged.

In the longer-term, and in calmer economic waters, a shift to issuing debt at the euro-zone level might make sense—but only if introduced for the right reasons. A common euro-zone debt market could be more liquid than the multitude of national markets, making the euro more attractive as a reserve currency; this is an aspect that benefits U.S. Treasurys, after all. But this would require a radical centralization of political authority, and further changes to European treaties. Given the trauma of the Lisbon treaty process, few would have appetite for it now.

How To Destroy American Jobs

by Matthew Slaughter

Mr. Slaughter is associate dean and professor at the Tuck School of Business at Dartmouth, research associate at the National Bureau of Economic Research, and senior fellow at the Council on Foreign Relations. From 2005 to 2007 he served as a member of the White House Council of Economic Advisers.

Deep in the president's budget released Monday—in Table S-8 on page 161—appear a set of proposals headed "Reform U.S. International Tax System." If these proposals are enacted, U.S.-based multinational firms will face $122.2 billion in tax increases over the next decade. This is a natural follow-up to President Obama's sweeping plan announced last May entitled "Leveling the Playing Field: Curbing Tax Havens and Removing Tax Incentives for Shifting Jobs Overseas."

The fundamental assumption behind these proposals is that U.S. multinationals expand abroad only to "export" jobs out of the country. Thus, taxing their foreign operations more would boost tax revenues here and create desperately needed U.S. jobs.

This is simply wrong. These tax increases would not create American jobs, they would destroy them.

Academic research, including most recently by Harvard's Mihir Desai and Fritz Foley and University of Michigan's James Hines, has consistently found that expansion abroad by U.S. multinationals tends to support jobs based in the U.S. More investment and employment abroad is strongly associated with more investment and employment in American parent companies.

When parent firms based in the U.S. hire workers in their foreign affiliates, the skills and occupations of these workers are often complementary; they aren't substitutes. More hiring abroad stimulates more U.S. hiring. For example, as Wal-Mart has opened stores abroad, it has created hundreds of U.S. jobs for workers to coordinate the distribution of goods world-wide. The expansion of these foreign affiliates—whether to serve foreign customers, or to save costs—also expands the overall scale of multinationals.

Expanding abroad also allows firms to refine their scope of activities. For example, exporting routine production means that employees in the U.S. can focus on higher value-added tasks such as R&D, marketing and general management.

The total impact of this process is much richer than an overly simplistic story of exporting jobs. But the ultimate proof lies in the empirical evidence.

Consider total employment spanning 1988 through 2007 (the most recent year of data available from the U.S. Bureau of Economic Analysis). Over that time, employment in affiliates rose by 5.3 million—to 11.7 million from 6.4 million. Over that same period, employment in U.S. parent companies increased by nearly as much—4.3 million—to 22 million from 17.7 million. Indeed, research repeatedly shows that foreign-affiliate expansion tends to expand U.S. parent activity.

For many global firms there is no inherent substitutability between foreign and U.S. operations. Rather, there is an inherent complementarity. For example, even as IBM has been expanding abroad, last year it announced the location of a new service-delivery center in Dubuque, Iowa, where the company expects to create 1,300 new jobs and invest more than $800 million over the next 10 years.

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