Pallai runs the cafe at Massolit Books. The San Diego native is the son of Hungarian immigrants. He moved to Budapest to rediscover his roots more than three years ago. It’s the complete reverse of what many of his Hungarian peers have done or now plan to do.

“They often are completely shocked by my decision to come back here and to pursue citizenship and settle back in the home country,” Pallai said. “Most Hungarians are looking abroad.”

The economy here is dreary, and many are souring on the center-right government of Prime Minister Viktor Orban. Critics say the new constitution and new laws are chipping away at Hungary’s democratic foundation. The result?

“The anecdotal evidence is quite overwhelming,” said Istvan Rev, professor of history and political science at Central European University. “Everybody is talking about leaving Hungary and everybody knows somebody. Whole families, groups of friends who are leaving together. It’s a real exodus.”

Rev says it hasn’t been like this since 1956, when 200,000 people fled Hungary in the wake of the failed revolution, crushed by the Soviets.

He says things aren’t as bad now. But Hungarians increasingly feel that the promise of democracy, which came in 1989, is disappearing.

“People think that the hopes that the country embraced around ’89 about a brighter, more dignified, more human future, could not be taken seriously,” Rev said.

Count Sophie Orban among them. Orban, who isn’t related to the prime minister, is moving to Portugal at the end of February. The English teacher is fed up with Hungary’s shift to the right.

Sophie Orban (Photo: Nate Tabak)

Case in point is the recent rise of a far-right ultranationalist party — Jobbik. It’s known for its anti-Roma, anti-Semitic and anti-Gay rhetoric – and it recently called for Hungary’s exit from the EU. A new poll ranked Jobbik as the third-most-popular political party in the country.

Sophie Orban says the final push for her was the treatment of her sister, who’s gay.

“It was something that even before theoretically bothered me, but when it was my own sister who was, threatened with physical violence, or you know, being spat on or whatever … these are things that happened,” Orban said. “It’s not something that sort of cannot bother you.”

Orban says it speaks to a much larger problem.

“It’s not something I tell people … like I want to leave Hungary because many people are homophobic,” Orban said. “That’s just part of this whole attitude that many people have here, I think, which is, one of intolerance.”

Nikola Draskovic (Photo: Nate Tabak)

“Hungary was at that time really, lets say, it was really going up … upside … and the economy was really good … they had money … you could see the future,” Draskovic said.

Draskovic became a Hungarian citizen, but he now says to anyone back in Serbia who’s thinking of moving here: don’t come.

Draskovic plans to go to Germany, where his mother now lives.

But the Hungarian government isn’t just standing by as young people leave. It’s launched a PR campaign to encourage them to stay put.

This slick video is called “Everything Ties Me Here.” It looks like a film trailer. A young man resists the temptation of a job in Britain and opts for a civil service fellowship in Hungary. He and his girlfriend hit some hard times. But the story has a happy ending.

As for Hungary, growing numbers here aren’t willing to stick around to see how this one ends.

Hotel owners say bookings are down. Construction companies are idle. But there’s at least one sector that is actually growing: health and beauty. On a Barcelona street a tandem of beauty-related businesses thrive.

One of these shops is the Marco Aldany hair salon.

Inside, a bank of chairs is occupied, mostly by middle-aged women getting their hair washed, cut and dyed. More women wait on seats by a window. The manager here, Patricia Marquez, darts from station to station, keeping her stylists, and her clients happy.

“The truth is we can’t complain,” said Marques. “We’re lucky. It’s a good salon, and our clients are faithful. And more keep coming.”

This is a place that thrives in Spain precisely because times are otherwise tough. Marquez said that’s because people feel out of control, insecure. Here, she said, with unemployment nearly 23 percent, inexpensive ego-boosts go a long way.

“A person needs to feel handsome, to feel comfortable with themselves. If they don’t look good it doesn’t matter what they do. You have to feel comfortable in your own skin,” Marquez said.

And Marquez said clients are seeking such comfort in her chairs more often, as the economy grinds on. According to a leading Spanish consultancy, the country’s beauty industry is on track to grow 3 percent this year. The overall economy, by contrast, is flat.

One client here today is Francesca, an auburn-haired retiree. She’s on a fixed income, but said she’d never give up her weekly coif.

“Because of our culture and upbringing,” she said, “we older woman feel better with our hair done up rather than letting it get all messy. It’s a question of feeling good about yourself. If it means spending 50 bucks of your pension per month, well, we can allow ourselves that.”

Fifty bucks is a relatively cheap deal for the full treatment, by the way. Economists and sociologists say that makes treating yourself to a new hairstyle or make-over, or manicure, nearly crisis-proof.

“Haven’t you heard about the recent survey in Spain?” a client named Mariona asked at a different salon. “It found that if a Spanish woman were forced to choose between a meal or a make-over, she’d go hungry.”

It’s even more true, given Spain’s grim economic backdrop. The government is slashing spending from healthcare to education. The jobless rate keeps rising. One clue to explain why such gloom would cause people to spend more on their hair or nails can be found on the lips. That is, the Lipstick index. It’s a term coined by Leonard Lauder, of the make-up giant, Estee Lauder, in 2001. Lauder observed that in times of crisis his company sold more lipstick.

The index was hardly scientific but Analda Santano, who runs the cash register at the Cinema Nails salon, said it’s accurate. But its not just about the gloom, she said.

She said people here realize one day the crisis has to end, and that the well-groomed will be well-positioned when opportunity knocks.

“If your hands are a mess,” she said, “people will look at you badly. A woman should have her nails painted. If you’re a man your nails need to be smooth and without any flaking skin on the fingers.”

Haircuts for self-esteem, manicures for jobs that might materialize – businesses selling good looks and grooming come out on top.

North Dakota is enjoying an oil boom in the western part of the state and also leads the country in the production of 15 agricultural commodities. But the state’s economic success also has something to do with its aggressive exporting. North Dakotans have figured out a formula to sell their agricultural equipment to far-flung trading partners, from Angola to Kazakhstan to Romania.

These foreign farmers, from less-traditional American trading partners, have been coming to the Big Iron Farm Show in West Fargo for five years now. On the surface, the show is quintessential home-grown America: corn dogs, baseball caps, and lots and lots of John Deere tractors. But tucked away in the corner of the fairgrounds is a small building with international flags hanging from the rafters. Foreign visitors are provided with food and beverages, access to translators, and a place to relax. It’s here in this small “international pavilion” that deals get done.

The locals have a phrase for this hospitality: “North Dakota Nice.” Some call it courtesy; others call it smart business. It’s the little things that make a foreign visitor feel welcome: airport pick-ups, help booking hotels, and evening activities like a catered dinner at the governor of North Dakota’s farm. The foreign farmers are also given a chance to head out into a nearby field, kick the tires and test drive the equipment.

These small touches, along with the state’s heavy recruitment of the foreign farmers and equipment sellers in the first place, seem to be working. Farmers from places like Azerbaijan or Ukraine could go to shows much closer to home or in easier-to-reach parts of the United States. But they told me they choose Fargo, in no small part, because they’re welcomed.

The grim news comes just after Standard and Poors announced that it was downgrading Italy’s credit rating. Meanwhile, the Greek government continues, amid protests, to try to find a way to keep from going bankrupt within the month.

The move to downgrade Italy’s credit-worthiness did not come as a total surprise. After all, the country has Europe’s second-largest debt level.

Italy has tried to address its problems recently by passing harsh, and unpopular, austerity measures. Those measures are designed to tackle the country’s deficit. On the growth side, however, Italy has not been quite as successful.

Giorgio La Malfa, former Minister of European Affairs for Italy, says that the problem is political, and that it rests with his old boss, Prime Minister Silvio Berlusconi.

“The Berlusconi government obviously lacks credibility both internally and externally,” says La Malfa. “Therefore, Italy would need would be to make a clean break with this situation. What we would need would be to have a government, a new government without Mr Berlusconi as Prime Minister.”

For his part, Berlusconi says that the credit downgrade “didn’t reflect reality,” and he promised still further measures designed to kick-start economic growth.

But the move by Standard and Poors has quickly put one word back on people’s lips here in Europe — “contagion.”

“The timing is bad because the Greek situation has not been solved,” says Marc Lansonneur, an analyst with Société Générale Private Banking.

“You’re just adding gasoline onto the fire, and that means the markets are going to be more volatile, and investors are going to have negative sentiments.”

Greek protesters (Flickr Image: Tom Tsiros)

The Greek government is still trying to convince the European Union, the European Central Bank, and the IMF that it deserves the next round of bail-out money. Greece says it needs that money — more than 10 billion dollars worth — or it will be out of cash by the middle of next month.

In the past week, it has proposed raising property taxes. That move was met with protests.

Now, the Greek government is considering slashing public sector pay and pensions, again. That was met with more protests today in Athens, where civil servants burned tax papers.

“We just said to the government, that it is enough with all these measures,” says Vassilis Xenakis of the Greek Confederation of Civil Servants in Athens.

“We paid already by cutting our wages. We paid already by increasing our taxes. We worked very hard to become a member of the Eurozone, and of course we’ll try to stay in the Eurozone. But if they continue in this direction, you will see the situation get worse and worse.”

EU, IMF and European Central Bank officials are still saying, publicly, that Greece can avoid defaulting on its loans.

Banks from across Europe are carrying that Greek debt. And that means a default could spell more economic turmoil, more contagion.

“There’s no reason that this has to be a complete disaster for Europe, if governments face reality and their banks in some kind of shape for the market reaction likely to ensue should Greece default,” says Paul Blustein, a former Washington Post journalist who is currently working on a book about the global financial crisis.

“But, find me the European politician who is eagerly awaiting the chance to stand up in front of the voters and say we have to put more money into the banks, and I’ll show you a two-headed zebra.”

Read the Transcript
The text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

Lisa Mullins: The human cost of the economic crisis in Europe is clear enough.  Bankruptcy and unemployment, homelessness, mental illness and suicide are all on the rise.  The Greek health ministry reports that suicides were up 40% in the first half of this year compared to the same period last year.  One case is profiled in today’s Wall Street Journal.  Marcus Walker wrote the piece about a businessman from the island of Crete.

Marcus Walker: Vaggelis Petrakis was a typical Cretan in some ways.  He grew up in the poverty of postwar Crete in a very humble olive growing community in the mountains of the islands.  Didn’t have much of an education, but soon as he could he moved to town and worked hard and built up his own business over many years. He traded in fruit and vegetables.  Bought them from farmers on the island and sold them to supermarkets and above all, to hotels who were part of a booming tourist trade.  And he sold local produce such as watermelon, aubergine, eggplant as you’d say, and oranges.  And his warehouse was full of such good fresh Cretan produce during the good years.

Mullins: When did things start going bad for him?

Walker: Things really went downhill at around the time of the Greek debt crisis started, which was in late 2009.  And it was precipitated by the fact that the Greek state was running out of money and the Greek banks which owned the Greek government bonds were taking heavy losses on those bonds.  And so as a result, Greek banks stopped lending to Greek businesses and the whole country fell into recession through the bursting of this credit bubble, and affected everybody — the hotel trade, the retail trade and wholesalers such as Petrakis.

Mullins: So he had kind of a creative solution.  What did he do?

Walker: Yeah, yeah, well, many Greek people took part in this very strange, informal lending system using post-dated checks.  And how it worked was basically you would write your supplier — if you were a hotel you would write your food supplier say — a post-dated check that couldn’t be cashed for say, six months. And then the supplier, in this case, the grocer, Mr. Petrakis, would take this check to a bank because he needed cash now.  The bank would buy the check, but at a discount, which meant Petrakis could get money now, but less than he ought to have for his food that he was supplying.

Mullins: So what happened then?

Walker: Well, in his increasing desperation he took part in a clearly illegal scheme.  He bought a forged check from an apparently corrupt accountant who he knew.  The check was made out in the name of an Athenian company with whom he had no dealings.  And he took it to the bank and tried to sell this check to the bank in the normal way. The bank spotted the fake and told the police, and he was arrested.  This really seemed to have broken his morale entirely, and he felt his reputation had been ruined by trying this illegal scheme, which was a last ditch effort it seems to keep himself above water.

Mullins: All right, to stay afloat and he was also mislead by people he thought were friends.

Walker: That’s right, many of the business relationships he build up over many, many years, including even relatives, it turned out that when the economy went downhill the whole social and human climate became raw and brutal.  People stopped paying him and told him that was his problem.  He seems to have taken this very badly and people he thought were friends, he fell out with and had arguments with.  And this made him increasingly depressed.

Mullins: So what ultimately happened?

Walker: Eventually he after one loud argument with a supplier who claimed that Petrakis owed him money, he got in his car and drove off, and his family called the police and reported a missing person.  But the police seemed to have done very little.  His family searched for him all night long and in the small hours of the next morning, his wife heard his dog whimpering in an olive grove next to a plot of land that the family owned.  And there she found her husband, Mr. Petrakis, who had shot himself in his head with his hunting rifle.  And he was still alive when she found him, but he died soon after.

Mullins: Mr. Petrakis fits the profile in many ways despite his individual story of other people who have committed suicide in Greece.  Tell us about your conversations with people who work at a telephone helpline in Greece.

Walker: Yes, there’s a NGO called Klimaka, in Athens, that runs a national suicide helpline.  And psychologists who work there told me that they’re taking more and more calls from people who are thinking about suicide.  And of course, there are many different kinds of cases and many cases involve many factors, including mental illness, but they say that the growth is coming from people who have severe financial problems.  That is where the growth in the number of calls is coming from. And this is something that they haven’t really seen before, but the economy is crashing so badly it is causing people to despair because their financial and economic ruin.

Mullins: Marcus Walker is the Europe business correspondent for The Wall Street Journal.  His story on Vaggelis Petrakis appears in today’s edition of The Wall Street Journal.  Thank you very much.

Walker: Thank you.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

Germany’s economy is leaving Spain’s in the dust these days. But Spain has something Germany desperately needs: skilled labor.

Spain’s unemployment rate has been twice the European average for more than two years. And it’s still rising.

Government figures released last week show that joblessness climbed to over 20 percent in the fourth quarter of 2010. For young Spaniards it’s a staggering 44 percent.

This week Spanish Prime Minister Jose Luis Rodriguez Zapatero seemed resigned when discussing it.

“It is not going to be easy to reduce our unemployment level,” Zapatero said. “But we can have the conviction that we can overcome the problem.”

Conviction is little consolation for Spain’s young, especially the well educated – nearly an entire generation that’s gone to college but can’t find jobs.

At a Barcelona unemployment office on a recent morning there was a brisk
traffic of 20 and 30 somethings filing in with their resumes. Guillermo Garcia Cruz, a 28 year old architect and engineer, said he’s been out of work for two years.

“There are no jobs for architects,” Cruz said. “But I’ll do anything. Right now I have a part time job conducting surveys for the local housing authority.”

That brings in about 830 dollars a month. Garcia said he’s desperate enough to look for architecture jobs elsewhere.

“I’m thinking of going to Germany,” he said. “I heard that they’ve begun searching for people to fill jobs there.”

The labor shortage in Germany

For Garcia the odds might be pretty good. Germany is facing a labor shortage, as its economy heats up and its population ages.

The German government says it will likely need some 800,000 foreign workers in the near future, mostly in highly skilled jobs such as engineering and telecommunications.

Word of the German job shortage reached Spain about a week ago. But with German Chancellor Angela Merkel arriving tomorrow, the buzz over jobs abroad has grown quickly.

In one recent television skit, a man in a wig dressed as Chancellor Merkel, said for Spaniards to escape their current employment crisis they needed to be conquered by Germany. Radio commentators have begun to speak of a second “Spanish exodus.”

This wouldn’t be the first Spanish emigrated en masse to Germany. In the 1960s the Spanish economy was in tatters while Germany’s boomed. Hundreds of thousands went north. It spawned a hit Spanish movie, called “Come to Germany Pepe!” that poked fun at the Spanish guest workers.

In one scene Pepe, an uneducated country bumpkin, appears more interested in the tall German blondes than the jobs. Take it easy, another Spaniard tells him. “Here, you start work early and end late. When do you think you’ll have time for flirting?”

Spanish brain drain

The big difference with today’s potential exodus is that it is Spain’s most educated who’d leave. And that has the government worried.

Arnau Soll works at the national employment office in Barcelona, placing Spaniards in jobs abroad. He said the government resents the potential loss of its high caliber workers.

“When the situation improves here we’ll need those workers,” Soll said. “And it will be hard to get them back.”

Or will it?

Economist Atonio Argandoña, an expert on labor at Barcelona’s IESE business school, said Spaniards will return when the economy improves — as they did after the first exodus. He said the workers’ temporary stint abroad will benefit Spain in the long run.

“Because they’ll return with them new knowledge and skills,” Argandoña said.

Spaniards, as members of the European Union, are free to move to and work in Germany as they please. But there is one thing that might put the brakes on a mass exodus: the German language.

To work in Germany you have to speak German. And relatively few Spaniards study it in school.

Still, Zapatero and Merkel are supposed to discuss their respective labor needs during the summit Thursday.

No doubt many Spaniards will be listening to see if the time has come to follow Merkel back to Germany.

Violent clashes continued today in the North African nation of Tunisia. Protestors continued to voice their displeasure with a lack of job opportunities in the country, and with the corruption and cronyism they say is endemic in Tunisia.

Graphic videos posted online showed grim scenes of civilian injuries in the city of Kasserine, in west-central Tunisia. In the capital Tunis, reports claimed that the army had all but cleared out most of the downtown area, in an effort to quell demonstrators.

All of country’s schools and universities remain closed.

Dozens have been killed or injured since the violence began last month, after a university graduate working as street vendor in the town of Sidi Bouzid set himself on fire.

The 26 year old, Mohammed Bouazizi, was protesting the fact that Tunisian officials had shut down his street vending business. Bouazizi died last week, setting off a new round of protests.

Those watching from outside Tunisia are getting two dramatically different takes on events in the country.

Today, state-controlled television showed buildings that had been damaged during the clashes. One man who was interviewed told the protesters, “If you want to make a point about something, do it in a legal way, not through destruction.”

In an address to the nation yesterday, Tunisian President Zine El Abedine Ben Ali, blamed the violence on “masked gangs.”

Ben Ali, now in his 23rd year of power, contends that “a small group of hostile elements” incited students and unemployed youths to commit what he calls “acts of terror.”

He said he would do whatever it takes to protect Tunisian citizens, and he threatened to keep schools and universities closed until the violence abated.

Finally, he pledged to create 300,000 new jobs in the coming years to alleviate high unemployment.

But those featured on non-Tunisian controlled media were not buying Ben Ali’s official picture.

“Everywhere you find groups of police with batons, ready to beat people, ready to shoot,” said Radia Nasraoui, President of the Association for the Struggle Against Torture in Tunisia. Speaking the the BBC World Service, Nasraoui continued: “Ben Ali was promising many things during twenty years or more, and people can see that there is nothing concrete, no solutions.”

The revolt also continued online, with social networking sites such as Facebook and Twitter filled with reports of police and army violence against civilians from across Tunisia.

One hot spot is Kasserine, a town of around 75,000 people in west-central Tunisia. Eyewitnesses say that the violence there has been especially intense. “The government treats us like animals,” one protester told the BBC’s Arabic Service.

Numerous messages on Twitter contend that the government has deployed snipers on the roofs of buildings in the town. And a grisly handheld video, purportedly shot in a Kasserine hospital emergency room, was taken down from YouTube because it showed numerous civilians who had gunshot wounds to their necks, chests and heads.

The video, however, was quickly distributed through other online channels. One Tunisian Twitter user called it “a massacre.” Another wrote that “Ben Ali and his minions are the real terrorists.”

Facebook and Twitter have become critical tools in getting word out about what is going on in Tunisia. More than a million Tunisians are on Facebook – some with more than one account due to the fact that the Tunisian government often shuts down one of the accounts.

Facebook is the place where Tunisians spread non-official news and videos. It is also used to arrange real world meet-ups and demonstrations.

Among Internet watchers, the Tunisian government is known for being one of the most infamous offenders when it comes to online censorship. The regime doesn’t just block and filter websites.

“They have hundreds of people doing social engineering,” said Fabrice Epelboin, editor of the French version of the tech news website Read Write Web. “You could call it community management, except in this case it’s being done against the community, to terrorize the community.”

Epelboin said Tunisian authorities have gone so far as to create fake Islamic terrorist profiles on Facebook, in order to “tell the citizens and the international community – look, if we’re not here to protect you, you’ll be living in a horrible Islamist regime.”

That said, Epelboin does not think that President Ben Ali can afford to block Facebook entirely. “He tried that almost a year ago, and there were massive riots. If he did it now, it would really be civil war.”

The same with Twitter, which Tunisians inside and outside the country are using to try to spread word of the situation inside Tunisia to a global audience.

Lina Ben Mhenni, an activist and author of the blog “A Tunisian Girl,” says that young Tunisians have very good reasons for standing up to the Tunisian authorities. “Young people are very angry, and very fed up with the lack of freedom of expression, of freedom in general,” she told the BBC. “They want to move beyond the fear they usually have of trying to change things.”

The Tunisian authorities have cracked down on some bloggers that have spoken out against the regime.

Late last week, blogger Slim Amamou was arrested less than 24 hours after doing an interview with The World. He is still being detained.

• Demonstration in Benguerdan, South East Tunisia
• Kaserine hospital – injured receiving emergency treatment
• Night vigil in Nefta, South West Tunisia

Audio Extra

Kent Wong directs the UCLA Center for Labor Research and Education. He talked with us about the relationship between immigration and unemployment here in the US.

Read the Transcript
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

LISA MULLINS: A major area of debate around immigration is jobs and unemployment. Undocumented immigrants have long been accused of “stealing” work from Americans. The charge has been popping up a lot this year in election campaigns around the country. Here’s one example. This one comes to us courtesy of station WBUR. It’s a clip of a speech by Bill Hudak, who’s a Republican candidate for Congress in Massachusetts.

BILL HUDAK:  Why is it that 10% unemployment continues? Is it possible that having so many illegal aliens in our country, is that a reason why all of a sudden we have less jobs available for the people here?

MULLINS:  Once again, that’s Republican candidate for Congress Bill Hudak in Massachusetts. Well, the relationship between unemployment and immigration isn’t clear cut. Manuel Pastor is a Professor of American Studies and Ethnicity at the University of Southern California. Manuel, are undocumented workers in America taking jobs away from Americans? If you look at the numbers, what do they tell you?

MANUEL PASTOR: Well, most of the studies that we do tend to conclude that immigrants are actually a net boon to the US economy in terms of economic growth for the most part because they provide complimentary labor. But the other thing is that this particular recession was actually caused by a financial crisis and a housing crisis. And what that’s meant is a big slow down in construction. There were a lot of undocumented workers in that sector and also in the service sector and in fact this recession has hit undocumented workers particularly hard.

MULLINS: Okay, let’s talk thought about what you said about they provide complimentary labor, complimentary versus substitute labor?

PASTOR: Yeah. In fact, undocumented workers, immigrant workers, tend to keep industries alive that might otherwise not stay in the United States. Having to do with things like garments and assembly and even agriculture. And so, these are jobs that, in fact, are by supporting those industries, we wind up also supporting the jobs of truckers and fashion designers [INDISCERNIBLE] skilled jobs within manufacturing. So most economist, if you bring a conservative economist into the room, lest your bring a more progressive or liberal economist into the room, if you bring a mainstream economist into the room, we all generally tend to agree that immigrants are a boon to the US economy. That there are some impacts of displacement in particular sectors that overall the aggregate effect is pretty small.

MULLINS: Okay, and just to be clear, when you say they’re a boon to the US economy because as the line goes, they’re taking jobs that Americans will not take. I wonder if that’s really true in all cases, especially if you have maybe a blue collar worker that lost his or her job and would be willing to work picking fruit for instance. But also I wonder what the numbers specifically, say in terms of the contribution aside from that, that undocumented immigrants are supposedly making?

PASTOR: When you look at the cross effects of immigrant workers and undocumented workers, what you tend to find is that it’s a positive effect on overall employment in the US economy. This is not to say that there aren’t particular cases of displacement in particular industries like the dry walling industry here in Southern California that had a big movement in of undocumented immigrant workers. We’ve seen some of these issues in [INDISCERNIBLE]. But overall the aggregate effect tends to be a net positive for the US economy. It is also a net positive at the federal level in terms of the taxes and Social Security contributions that immigrants, including undocumented immigrants, make and that they often never take out later.

MULLINS: Now, how could it be though that an undocumented immigrant would be able to contribute to Social Security and pay say income taxes if he or she is undocumented, here illegally and doesn’t even have a Social Security number.

PASTOR: The image of undocumented workers if of the day laborer in the informal sector in front of a Wal-mart or in front of a Home Depot. But, in fact, most folks have managed to work their way into what’s called more formal sector employment, whether they’re actually paying payroll taxes, contributing to Social Security, et cetera.

MULLINS:  Alright, thank you very much for speaking with us. Manuel Pastor is a professor of American Studies and Ethnicity at the University of Southern California. He’s also director of the Center for the Study of Immigrant Integration. Nice to talk to you.

PASTOR: Good to talk to you as well.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

Fundraiser for a local tea party candidate in Cincinnati (Photo: Jason Margolis)

With operations in Iraq and Afghanistan, the United States is, of course, a country at war. But that doesn’t seem to be getting all that much attention in the weeks leading into the mid-term elections. The World’s Jason Margolis reports from Ohio. Download MP3

Read the Transcript
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN: With operations in Iraq and Afghanistan, the United States is, of course, a country at war. But that doesn’t seem to be getting all that much attention in these weeks leading into the mid-term elections. The World’s Jason Margolis reports from Ohio.

JASON MARGOLIS:  There are two primary ways for a candidate to stand out. First, being rich and buying advertisements helps. A lot. Second, being a career politician builds some name recognition. And then, there’s a third way, says Nathan Gonzalez, political editor of the Washington newsletter The Rothenberg Political Report.

NATHAN GONZALEZ:  I think that being a veteran and having the military on your resume is a good way to get some initial attention. I think it makes voters listen to someone, a candidate that they might normally ignore.

MARGOLIS: Two years ago in Ohio, the Democratic Party found a golden boy, John Boccieri, a young, good-looking air force pilot.

JOHN BOCCIERI: Let me tell you how hard it was leaving three days after my only son was born to go serve on my last rotation over in Iraq and Afghanistan.

MARGOLIS: That’s Boccieri speaking at a recent town hall debate in Canton.

BOCCIERI: And whether I was flying our wounded and fallen soldiers out of Baghdad, or delivering rice to people in Africa who didn’t know if they were going to be able to alive from one day to the next, our country has been blessed with a lot.

MARGOLIS: Stump speeches like this helped Boccieri get noticed and become the first Democrat to capture Ohio’s 16^th Congressional district since 1951. This election, Boccieri doesn’t play up his military service nearly as much. He didn’t mention it until an hour into the debate in Canton, and only did so briefly when someone in the audience asked about his background. There’s a simple reason Boccieri isn’t touting his service. Political scientist Paul Beck at The Ohio State University says it’s just not the issue.

PAUL BECK: Well I think obviously the economy dominates everything. And there’s tremendous unease about the economy, especially so in Ohio. Because Ohio has had much more deep-seated economic problems, and they’ve lasted much longer than has been true of the nation on the average.

MARGOLIS: The unemployment rate in Ohio has been over 10% since early 2009. It’s not that people in Ohio have totally forgotten about the wars in Iraq and Afghanistan, says Beck. It’s just that voters now see the wars differently.

BECK:  Their concern probably is more about the domestic consequences of the war efforts, and so casualties are something that will be important to them. But I think in this election, it’s not very important. It’s hard to differentiate between the parties actually in terms of Afghan policy.

MARGOLIS: Still, this isn’t stopping some veterans from playing up their service. This is a pump up, patriotic video from the website of the organization Combat Veterans for Congress.

LYRICS: I’ve the got the reach and the teeth of a killing machine, with the need to bleed you when the light goes green. Mess me with me, and the zone to be. From the yin and the yang…

MARGOLIS: Organizations like Combat Veterans for Congress try to tap into patriotic sentiments. So are some other groups. But they’re not focusing on America’s military battles. In Cincinnati, I attended a fundraiser for a local tea party candidate and met Chris Littleton. He’s in charge of the Cincinnati Tea Party. He says his group doesn’t take a position on the wars in Iraq and Afghanistan.

CHRIS LITTLETON: We tend to stay away from foreign policy stuff just because I think this is more of a domestic movement.

MARGOLIS: Littleton does say he’d like to scale back military spending, though it’s not his top priority. He’s more focused on shrinking the federal government by trimming domestic spending. When it comes to veterans running for office, Littleton says military service doesn’t count for much with Tea Party members in Ohio.

LITTLETON: If a guy stands on the wrong principles, and he just happens to be a veteran, I mean. Now if I had two guys that were 100% dead even, every bit of their principle, everything I could sort was identical, and one guy had military service and the other guy didn’t, that’s probably a good thing, but principles first, principles first every single time.

MARGOLIS: And so, a candidate who flew planes over Iraq that probably won’t help much this election. For the World, I’m Jason Margolis, Cincinnati.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

• Gerry Hadden’s stories on The World

Read the Transcript
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN:  European countries like the U.S. are experiencing high unemployment.  As jobs disappear, the number of people living on the streets across Europe has risen.  In Spain some of the homeless are seeking shelter in airports.  The World’s Gerry Hadden explains from Barcelona.

GERRY HADDEN:  Being homeless is usually a nightmare, no matter what the scenario.  But ending up here on the floor of Barcelona’s International Airport is far from the worst of them, so says a thirty-something couple named Juan and Maria.  They sit outside the public bathrooms in this noisy terminal rolling cigarettes from scraps of tobacco they find in the airport trash.  Here there’s more security personnel, says Juan.  They make sure people don’t come around and harass you or beat you up.  It’s much more dangerous on the streets.  Maria says that on the streets someone can come along and punch your lights out, or they might rob you thinking you have something of value in your stuff.  Juan and Maria are among about 50 homeless people living in this terminal.  They push their worldly possessions around on airport carts.  They mostly keep to themselves, only banning together to ward off the occasional thief.  Barcelona’s airport is easier to live in than say JFK or London’s Heathrow.  In Heathrow the cops evict the homeless.  In New York, teams of social workers follow them around.  But here Juan and Maria say no one can tell you what to do.  They’re free to roam as they please through the long high ceiling check in halls as far as the passenger security checkpoints.  Although the authorities would like to toss us out, they can’t, the couple says.  There’s a law that prevents them.  This is a public space and it’s always open, so you can’t evict someone.  Juan knows the ins and outs of airport rules.  The unemployed security guard has been here for more than a year.  Maria arrived just a few months ago.  She was a seasonal farm hand.  The two met here.  Neither of them has any money, not even to ride the bus into town to eat at the soup kitchens.  The restaurants here don’t give us any food, Juan explains.  We survive on what we pull from the garbage cans.  We divvy up what we find so it lasts the whole week.  Yogurts, anything in cans or wrapped in plastic.  Sausage from sandwiches, whatever we can conserve.  The homeless here can also use the public bathrooms where they wash up.  In fact, some manage to stay well groomed enough to blend in among travelers, but authorities know who they are and Juan and Maria say that with peak tourism season approaching, airport managers are now pressuring them to leave.  They’re starting to treat us badly Juan says.  They’ve just taken out all of the benches to keep us from lying down.  And now they’ve taken to waking us up each day at 5:30 in the morning.  You can’t sleep during the day here in the airport any longer.  If the security guards catch you they wake you and make you go outside.  Airport representatives couldn’t immediately respond for comment.  It’s Holy week in Spain.  But one worker appears and warns Juan and Maria not to speak to journalists.  You can’t talk t anyone here, the woman says.  If you talk to reporters, you’ll be in hot water.  They could toss you out for talking to the press.  When the airport employee leaves, Juan and Maria shrug off the encounter.  They say they’re used to run ins with authority.  Plus, they know the law is on their side.  What’s more difficult, Juan says, is dealing with the travelers.  He says it’s awful how the people look at you.  Maria says they stare at you shamelessly or worse.  Just yesterday a woman passing by tossed her trash on my cart as if it were a garbage can.  Occasionally someone will give you a sandwich or something.  Others come by and stop and just look at you.  They laugh, says Juan.  Sometimes they step on you on purpose.  Juan says he’s lost all sense of time here.  As thousands of passengers stream past, day in day out, traveling for pleasure or work; two things he lacks.  For The World, I’m Gerry Hadden in Barcelona.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

• Fort McCoy
• Veterans’ Employment & Training Service (DOL)

Read the Transcript
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN:  Young American soldiers back from Iraq and Afghanistan face another battle here at home.  They’re trying to find work at a time when unemployment is just under ten percent.  Many of these veterans and reservists say they’d settle for just about anything that pays.  Kurt Carapezza caught up with some of those who are about to start the difficult hunt for a job.

KURT CARAPEZZA:  At Fort McCoy in southwester Wisconsin, more than 300 soldiers filed pat the barbed wire perimeter and enter the military headquarters building.  Fresh from duty in Iraq, the soldiers of the 32nd Infantry Brigade Unit are sunburned and tired.  They’ll stay here at the sprawling military training center for five days, demobilizing.  That involves sitting through seemingly endless briefings covering everything from marriage counseling to coping with stress disorders.

RICK LARSON:  And as you know with the economy, it’s hard out there.  So I’m not going to try to blow smoke.

CARAPEZZA: Rick Larson is a retired Army Officer.  He leads the briefing on finding work.

LARSON:  How many people here will be looking for jobs when they go back to their home?

CARAPEZZA: About half the soldiers raise their hands including 24-year-old Sergeant Lee Jones.  Jones was a high school senior when the war in Iraq began.  Over the last four years he’s been deployed three times.  Working his way up to Special Operations in the Army National Guard and Reserves.  He says his time in the service has taught him about leadership and discipline, but coming home and looking for work is like having been stuck on a deserted island.

SERGEANT LEE JONES:  Everyone’s moved on, but you seem to have been in the same place the entire time.

CARAPEZZA: The U.S. Bureau of Labor Statistics says in 2009 veterans 24 years old and younger had an unemployment rate of roughly 27%.  About 10% higher than civilians of the same age group.  Ken Grant with the Wisconsin Department of Workforce Development says it’s party because some employers simply won’t hire a veteran.

KEN GRANT:   Let’s face it, you know having the guard and reserve soldiers on multiple deployments and then taking them away from that employer, that does hurt them.

CARAPEZZA: Grant says even when young vets do get jobs; many of them find their positions difficult to keep in this economy.

GRANT:  The younger person is the first one to let go from a factor or a closing.  They don’t have the experience or the seniority, so they would be the first ones out the door.  We’re a heavy manufacturing state, such as the auto industry, these employers have closed their doors.

CARAPEZZA: Making it difficult for young veterans and reservists like Raymond Lynch.  The 23-year-old signed up for the Army in 2003, has been deployed to Baghdad two times since then, and was laid off from a landscaping job last year, three months before his most recent deployment.

RAYMOND LYNCH:  They usually lay off anyways in the winter.  But they had to do it a couple of months short, a lot more guys, just because there wasn’t much money coming in for landscaping because of the economy.

CARAPEZZA: Lynch says he’s planning to ride out the recession by going back to school, though he’s not sure for what.

LYNCH:  At one time I wanted to be a teacher.  One time I wanted to be a psychologist.  Now I don’t know.

CARAPEZZA: During a short break in the briefings at Fort McCoy, Sergeant Lee Jones listens as another veteran’s representative talks about finding a job.

MALE VOICE 1:  The process can be as simple s you get referred to a job, you go down, you interview, you kill the interview, you’re ready to go.  Or, it can be more time consuming and we need to more things to make you job ready.

CARAPEZZA: Jones says he’s like a law enforcement or security job.  Something, he says, that has a rigid structure outside the barbed wire.  But Jones says he’s getting married in the spring and will take any job he can find.

JONES: I would like to be somewhere where it’s a self-worth job, not a job where I feel stuck and right now with getting married and everything, it’s crucial to have paycheck.

CARAPEZZA: To help these young veterans to adjust and find that elusive paycheck in a jobless recovery, labor officials say they’re planning additional job fairs specifically targeting veterans late this year.  For The World, I’m Kurt Carapezza, Madison, Wisconsin.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

Read the Transcript
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN: Around the Middle East, Islamic financiers stood by and watched as the Western financial system imploded last year.  They thought that what’s known as Sharia-compliant investing would keep their money safe.  Then came word last week of the collapse of Dubai World.   It revealed that some Islamic financing wasn’t quite as safe as it was cracked up to be.  The World’s Aaron Schachter reports.

AARON SCHACHTER: Put simply, Sharia-compliant financing is any kind of monetary transaction in accordance with the laws of the Koran.  The most basic of those laws forbids people to buy, sell or invest in products that are haram, forbidden like alcohol, gambling or pornography.  But the biggest financial sin in Islam is usury, or  charging interest.  So Islamic financiers had to come up with something else.  John Foster is former editor of Islamic Banking and Finance magazine.

JOHN FOSTER: And so, instead of just giving money to somebody, okay, to go away and then charging interest, what Islamic finance tries to do is, it tries to go into joint ventures with people. So the risk is shared between the person who is borrowing the money and the person who is providing the capital, and they both share in the profit.  Today it’s called private equity, or even venture capital.

SCHACHTER: To ensure that financial transactions or products are halal, the Muslim equivalent of kosher, financial institutions hire religious authorities to review and approve each product.  One of those authorities is Sheikh Zaher Nsouli, with the Lebanese Islamic Bank in Beirut.  Nsouli says sharing risk is intended keep financiers honest.  He says Islamic finance isn’t against making money, on the contrary.  But it is against taking risk with someone else’s money.

SHEIKH ZAHER NSOULI: You’ll not invest in anything except if you know the business risk is good, it’s healthy for the economy, it’s [INDISCERNIBLE].  You’re much more involved in the real economy.

SCHACHTER: Nsouli says Islamic banks have on average outperformed conventional ones   because when people deposit money, they’re buying shares of real projects that are Sharia-compliant.   But Islamic financing as a whole isn’t immune from Western troubles.

MOHAMMED SAID RAHMAN: If you put a chimpanzee behind a Rolls Royce, is Rolls Royce still a good car or is chimpanzee still a bad driver?

SCHACHTER: Mohammed Said Rahman is Chairman of the Institute of Halal Investing, based in Portland, Oregon.  He says in Dubai, greed got the better of  some  Islamic  financial institutions,  the chimpanzees .

RAHMAN: So what happened is that the chimpanzees that were loaning the money out to the people, their eyes were focused towards quick flip over of profits.  So Dubai was a casino.

SCHACHTER: The problem was something called a “sukuk,”  or an Islamic bond.   In theory, a sukuk should equal the cost of a project, so assets equal liability.   But in Dubai, that wasn’t the case.  They was just as much speculation there as anywhere else.  But John Foster, formerly of Islamic Banking and Finance Magazine, says the Islamic finance industry has lost its way.

FOSTER: What a lot of the modern Islamic banks have done is they’ve tried to recreate conventional finance, except with an Islamic wrapper.  So a lot of the banks would find a sheikh for hire.  But the problem which Islamic finance has got at the moment, it needs to have a good look at itself; it needs to address where it is and what it’s trying to achieve.  It shouldn’t try to be Wall Street, it should be Main Street, and it should be for the good for the whole of humanity.

SCHACHTER: Islamic banker Zaher Nsouli says that’s why the crisis in Dubai may actually be a good thing, at least for Islamic financing.

NSOULI: Dubai World’s crisis will lead to a shift in the way of structuring the sukuk, the way of imitating conventional models.   You need corrections from time to time.

SCHACHTER: Nsouli and others says modern Islamic finance is in its infancy.  Give it a few years to catch on, and for the mainstream to realize that  their form of ethical finance is not just something for the world’s billion Muslims.  For The World, I’m Aaron Schachter, Beirut.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

• BBC coverage
• Global Economy podcast
• Alex Gallafent on the Dubai crisis

Read the Transcript
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN: I’m Marco Werman, and this is The World, a co-production of the BBC World Service, PRI and WGBH Boston.  The Persian Gulf emirate of Dubai today tried to reassure investors about the health of its finances, but investors didn’t buy it.  Stock markets in both Dubai and neighboring Abu Dhabi fell sharply today.  The problem, as investors see it, is Dubai World.  That’s the main investment arm of the government of Dubai.  It’s having trouble repaying billions of dollars of debt, and the emirate’s government has announced that it won’t guarantee repayment of that debt, which, no surprise, makes investors nervous.  The World’s Jason Margolis explains the global implications of this Dubai mess.

JASON MARGOLIS: In terms of major world companies, Dubai World isn’t that big a deal.  When General Motors filed for bankruptcy this year, GM’s debt was nearly three times larger than Dubai World’s.   But Dubai World is different from GM.  The emirate of Dubai owns Dubai World.  So, if Dubai World, or by extension, the emirate of Dubai, can’t meet its debt obligations, that spells wider troubles, says Christopher Davidson, a Dubai credit expert from Durham University.

CHRISTOPHER DAVIDSON: Dubai’s disaster, as it unfolds, is certainly tarnishing the rest of the region.  The rest of the region by reputation will find it difficult to refinance debt too because the cost of insuring that debt increases drastically.

MARGOLIS: Davidson says banks might also think twice before loaning money to emerging economies in other parts of the world.

DAVIDSON: Dubai has tarnished the reputations of emerging markets around the world, especially Asia.

MARGOLIS: Not that there’s anything new happening in Asian markets. In fact, Dubai’s excess could also potentially tarnish other nations that have even less to do with the emirate.

DESMOND LACHMAN: A bunch of countries like Latvia, Lithuania, Estonia, together with Ukraine, and Bulgaria, and Hungary.

MARGOLIS: That’s economist Desmond Lachman at the American Enterprise Institute in Washington.  And Lachman says it’s not only emerging economies that might have trouble getting access to credit.

LACHMAN: If Dubai is reminding people there’s a lot of risk outstanding and if people begin to become a lot more risk averse, lenders become wary about lending to a country that has got very large imbalances.

MARGOLIS: Lachman says some western European countries like Greece, Ireland, Spain and Portugal could have trouble getting loans at reasonable rates.  The problems in Dubai pose another kind of risk to the world economy, to the world’s stock markets.  Banks in the United Kingdom are the most exposed with an estimated $50 billion in outstanding loans to the United Arab Emirates.  American, French, and German banks are all on the hook for about $10 billion each.  These loans sent investors scrambling this week, dumping shares, guessing which western banks are most exposed to risk.  Right now, and this might be sounding familiar, nobody is certain which banks are holding which bad loans.   But maybe it’s not all that bad. Of course, markets often overreact.

DOUG REDIKER: There’s the reality, then there’s the perception of the reality.

MARGOLIS: Doug Rediker is a former investment banker and is now with the Washington think tank the New America Foundation.

REDIKER: The reality there’s a problem in Dubai, there’s a problem in a specific area of Dubai.  Not area geographically, I mean Dubai World and Dubai World’s holdings, but that doesn’t necessarily mean that there are problems throughout emerging markets or throughout the Gulf.

MARGOLIS: But then there’s the perception of the reality.

REDIKER: From a snapshot of a trading floor mentality, if you see “Dubai Crisis” on your screen, you could, without having a greater understanding of the nuance, assume that this a broader crisis, sell your positions in a panic and as result trigger something that really isn’t warranted.

MARGOLIS: Warranted or not, that’s what we saw investors do last week. Whether their perception of reality changes this week, that’s another story.  For the World, I’m Jason Margolis

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

• BBC coverage
• Global Economy podcast
• The World’s Alex Gallafent reported from Dubai in 2007

Read the Transcript
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN: I’m Marco Werman.  This is The World.  Shoppers are turning out in strong numbers today for the start of the holiday season, but cloudy economic skies hover over this Black Friday.  Unemployment is high, credit is tight, and most investors have less money today than they did yesterday. The Dow Jones industrial average dropped 154 points to close at 10,310.  Wall Street may have been reacting to financial trouble in Dubai.  That’s the semi-autonomous city-state that’s part of the United Arab Emirates.  The World’s Alex Gallafent begins our coverage.

ALEX GALLAFENT: You may have heard about some of the things that made Dubai famous as a kind of Disneyland for grown-ups.  The indoor ski dome in the middle of a desert, the tallest tower in the world, the biggest man-made islands.  These were all part of a program of colossal spending in Dubai, but it wasn’t paid for with oil money.  Dubai’s wells are dry.  Matthew Martin is editor of the Middle East Economic Digest.

MATTHEW MARTIN: A lot of the massive growth that we’ve seen in Dubai over the past few years has all been fueled not directly off the government balance sheet but by taking on debt from the capital markets.

GALLAFENT: The company at the center of the current crisis is facing the consequences of that approach.  That company is Dubai World.  It’s a real estate group backed by Dubai’s government, and it’s one of the prime movers in the city-state’s explosive growth.  But Dubai World has racked up almost 60 billion dollars worth of debt.  This week the company asked creditors if it could postpone repayments on that debt for six months.  Christopher Davidson is the author of Dubai: The Vulnerability of Success. He says Dubai World’s troubles are the result of a broader economic strategy in the emirate.

CHRISTOPHER DAVIDSON: What we’ve seen in Dubai is trying to build an economy that’s been aimed at bringing in foreign direct investment to keep it in a desert creating a sponge like economy to bring in wealth from the region, from Britain, America, anywhere that wants to invest in real estate.  And this really has been tinkering with Dubai’s historical success as a port economy, a place where money passes through and goes somewhere else. But really, the last few years has seen a shift in the focus of the economy, and that’s really what’s been its undoing.

GALLAFENT: The global economic crisis exposed Dubai’s flawed business model. Real estate prices plummeted after years of flying ever higher.  Foreign investment slowed down.  Mahmood Nadi is a Jordanian mechanical engineer who has worked in Dubai for two years.  He says you can see the emirate’s problems in its glittering collection of high-rise buildings.

MAHMOOD NADI: Almost fifty percent not finished yet, thirty percent still not occupied.  You can say twenty percent are occupied, from the new high-rise buildings. The situation is really not stable.

GALLAFENT: Indeed, Dubai has a skyline bought on credit, and Christopher Davidson thinks creditors are unlikely to accept Dubai World’s request to postpone its debt repayments.

DAVIDSON: For the last several months, there have been a number of international companies that have been owed sums for labor and construction work they’ve conducted in Dubai.  They’ve been rather quiet and polite about that hoping the good times will return, but I think now we’ll get to the stage where lawsuits will be pressed on the government of Dubai.

GALLAFENT: Dubai will probably look to its neighbor for help.  That’s Abu Dhabi, another part of the United Arab Emirates.  Unlike Dubai, Abu Dhabi does have oil.  In February, it bought 10 billion dollars worth of bonds from Dubai.  Many saw that deal as a bailout, but it’s not clear when or at what price Abu Dhabi would come to its neighbor’s rescue again. That uncertainty propelled today’s market worries. Another concern of investors is the lack of detail about how Dubai’s proposed debt rescheduling would work.  But British Prime Minister Gordon Brown predicted today that Dubai’s problems will not set off a second global economic meltdown.

GORDON BROWN: If this is a localized problem, then it can be dealt with, and I believe that that is the case. And I believe that this is one of things that we will see over the next few months as the world economy returns to growth, but it is an event that can be dealt with.

GALLAFENT: That’s a hope investors in the United States most likely share.  For The World, I’m Alex Gallafent.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

• BBC coverage
• Global Economy podcast
• Global economic conditions: interactive map at Moody’s Economy.com
• Gross National Happiness American Project
• French Government’s Commission on the Measurement of Economic Performance and Social Progress
  
• United Nations Human Development Report

Read the Transcript
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

KATY CLARK:  I’m Katy Clark, and this is The World, a co-production of the BBC World Service, PRI and WGBH Boston.  The great recession is technically over.  The US economy grew at an annual rate of 3.5 percent last quarter.  That’s measured by the gross domestic product, or GDP.  Here’s President Obama.

PRESIDENT OBAMA: This is obviously welcome news and affirmation that this recession is abating and the steps we’ve taken have made a difference but I also know that we’ve got a long way to go to fully restore our economy and recover from what’s been the longest and deepest downturn since the Great Depression

CLARK: The recession sure doesn’t feel over for the tens of millions of unemployed in the US and around the world.  That’s one reason why there’s a growing chorus of voices saying it’s time to ditch GDP as the leading indicator of economic health.   Here’s the World’s Jason Margolis.

JASON MARGOLIS: That’s the sound of GDP. It’s essentially a measure of the combined value of all economic transactions.  For decades, the health of a country has generally been tracked by growth in GDP.  But a growing number of people are taking issue with the measure, because GDP also includes things like this.

[sound of car crashing]

MARGOLIS: Under GDP, that’s also a sound of economic progress.

ERIC ZENCEY: One of the basic problems with GDP is it just measures economic activity. If, for instance you dent your car, GDP goes up.

MARGOLIS: That’s Eric Zencey, a professor of historical and political studies at Empire State

College in New York. When you take your car to the body shop and your insurance company pays off another driver, money is changing hands.  So, Zencey says, your car crash is spurring the economy.

ZENCEY: And it’s difficult to count that as progress. You’re just trying to restore the state you had.

MARGOLIS: Similarly, if a toxic spill pollutes a river, the cost of the clean-up counts towards GDP.  When Hurricane Katrina slammed the Gulf Coast, the cost of rebuilding was a boon for GDP.  Bad for communities and the environment, but good for the economy.  This idea that GDP shouldn’t be the ultimate determinant of prosperity isn’t new: It’s spelled out in many economics text books.  Critics say a major problem with GDP is that it lumps all economic activity together.  Former World Bank economist Herman Daly says think of it this way: imagine using GDP to gauge how well your store is doing.

HERMAN DALEY: You wouldn’t expect a merchant or a business to add up its revenues and its expenditures. That wouldn’t make any sense at all. You compare revenues and expenditures.

MARGOLIS: GDP also ignores the value things that don’t involve market transactions. Things like clean water, healthy ecosystems or a low infant mortality rate aren’t taken into account.  So why then do we cling to GDP as the holy grail of prosperity? I put that question to Herman Daly.

DALEY: <laughing> That’s a good question.  There just seems to be an enormous resistance. Economists are just, well, how shall I say? I really don’t know the answer to your question.

MARGOLIS: Perhaps it’s because of inertia.  We’ve just been doing it this way for decades.  And we can only count what’s countable. GDP is good at that. Still, some countries are trying to move beyond GDP.  French President Nicolas Sarkozy recently gathered some Nobel laureate economists and social scientists in Paris to identify the limits of GDP and come up with an alternative measure.  Here’s Princeton economist Angus Deaton speaking at the Sorbonne.

ANGUS DEATON: We must measure well being broadly, including not only income but other measures such as health, education, democratic and social participation, as well as measures of well being as people themselves perceive them.”

MARGOLIS: That’s the tricky part: How do people measure well being? Or, put another way, how do we measure happiness?  It’s a question that’s vexed philosophers for centuries. Here’s Nobel economist Amartya Sen in Paris.

AMARTYA SEN: The remark of Protagoras from the 5th century BC, Greece, that, I quote, “man is the measure of all things” unquote, has been differently interpreted in history.

MARGOLIS: The academics in the Sorbonne freely admitted,  coming up with a quantifiable, alternative measure to GDP won’t be easy.   Still, the idea is gaining traction worldwide.  The United Nations has developed what it calls the Human Development Index, a combination of GDP along with life expectancy and literacy.  In Bhutan, the government already measures what it calls “gross national happiness.”   But not everybody is excited about finding a new economic metric. Brian Dimitrovic is an economic historian at Sam Houston State University in Texas.

BRIAN DIMITROVIC: If economists want to talk about happiness, they should understand that most people won’t listen to them, because economists are statisticians and mathematicians. And the people who tell us about happiness are literary types and spiritual leaders. It is simply beyond the competence of the kind of, dare I say, social misfits that are economists. They should really stick to what they’re best at, which is simply counting things.

MARGOLIS: Dimitrovic concedes that GDP is not a perfect measure.  But he says it’s an important tool to gauge production and progress.  Critics agree, but say the importance of GDP has become over-inflated.  And Eric Zencey at Empire State College says countries with strong GDP cling to it for the wrong reasons.

ZENCEY: And so it’s a little bit like we’re winning at this game, and now you want to change the rules? I think that’s part of the resistance to moving beyond GDP.  That resistance to moving beyond GDP probably got stronger today.  That’s because in the US and many other nations, GDP is once again up.  And that means elected officials can point to one simple yardstick to show that their economic policies are succeeding.  For The World, I’m Jason Margolis.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.