Cancer Case Remanded for Strict Liability Opinion

The Pennsylvania Superior Court has asked for further explanation from a trial judge on the issue of strict liability in a brain cancer case.

Opinion: China’s Economic Empire

HONG KONG — THE combination of a strong, rising China and economic stagnation in Europe and America is making the West increasingly uncomfortable. While China is not taking over the world militarily, it seems to be steadily taking it over commercially. In just the past week, Chinese companies and investors have sought to buy two iconic Western companies, Smithfield Foods, the American pork producer, and Club Med, the French resort company.

A heavy load carrier moored at the terminal of the Chinese shipping company Cosco, carrying five cranes for the expansion of the terminal in Piraeus, Greece.

Europeans and Americans tend to fret over Beijing’s assertiveness in the South China Sea, its territorial disputes with Japan, and cyberattacks on Western firms, but all of this is much less important than a phenomenon that is less visible but more disturbing: the aggressive worldwide push of Chinese state capitalism.

By buying companies, exploiting natural resources, building infrastructure and giving loans all over the world, China is pursuing a soft but unstoppable form of economic domination. Beijing’s essentially unlimited financial resources allow the country to be a game-changing force in both the developed and developing world, one that threatens to obliterate the competitive edge of Western firms, kill jobs in Europe and America and blunt criticism of human rights abuses in China.

Ultimately, thanks to the deposits of over a billion Chinese savers, China Inc. has been able to acquire strategic assets worldwide. This is possible because those deposits are financially repressed — savers receive negative returns because of interest rates below the inflation rate and strict capital controls that prevent savers from investing their money in more profitable investments abroad. Consequently, the Chinese government now controls oil and gas pipelines from Turkmenistan to China and from South Sudan to the Red Sea.

Another pipeline, from the Indian Ocean to the Chinese city of Kunming, running through Myanmar, is scheduled to be completed soon, and yet another, from Siberia to northern China, has already been built. China has also invested heavily in building infrastructure, undertaking huge hydroelectric projects like the Merowe Dam on the Nile in Sudan — the biggest Chinese engineering project in Africa — and Ecuador’s $2.3 billion Coca Codo Sinclair Dam. And China is currently involved in the building of more than 200 other dams across the planet, according to International Rivers, a nonprofit environmental organization.

China has become the world’s leading exporter; it also surpassed the United States as the world’s biggest trading nation in 2012. In the span of just a few years, China has become the leading trading partner of countries like Australia, Brazil and Chile as it seeks resources like iron ore, soybeans and copper. Lower tariffs and China’s booming economy explain this exponential growth. By buying mainly natural resources and food, China is ensuring that two of the country’s economic engines — urbanization and the export sector — are securely supplied with the needed resources.

In Europe and North America, China’s arrival on the scene has been more recent but the figures clearly show a growing trend: annual investment from China to the European Union grew from less than $1 billion annually before 2008 to more than $10 billion in the past two years. And in the United States, investment surged from less than $1 billion in 2008 to a record high of $6.7 billion in 2012, according to the Rhodium Group, an economic research firm. Last year, Europe was the destination for 33 percent of China’s foreign direct investment.

Government support, through hidden subsidies and cheap financing, gives Chinese state-owned firms a major advantage over competitors. Since 2008, the West’s economic downturn has allowed them to gain broad access to Western markets to hunt for technology, know-how and deals that weren’t previously available to them. Western assets that weren’t on sale in the past now are, and Chinese investments have provided desperately needed liquidity.

This trend will only increase in the future, as China’s foreign direct investment skyrockets in the coming years. It is projected to reach as much as $1 trillion to $2 trillion by 2020, according to the Rhodium Group. This means that Chinese state-owned companies that enjoy a monopolistic position at home can now pursue ambitious international expansions and compete with global corporate giants. The unfairness of this situation is clearest in the steel and solar- panel industries, where China has gone from a net importer to the world’s largest producer and exporter in only a few years. It has been able to flood the market with products well below market price — and consequently destroy industries and employment in the West and elsewhere.

THIS is the real threat to the United States and other countries. However, most Western governments don’t seem to be addressing China’s state-driven expansionism as an immediate priority.

On the contrary, European governments dealing with their own economic crises see China as a country that can help, either by buying sovereign debt or going ahead with investments in their countries that will create jobs.

Opinion: Financial Collapse: A 10-Step Recovery Plan

Evidence of this forgetting is everywhere. The public has lost interest in the causes of the crisis; many, of course, are just struggling to get by. Unrepentant financiers whine about “excessive” regulation and pay lobbyists to battle every step toward reform. Conservatives bemoan “big government” and yearn to return to laissez-faire deregulation. Higher international standards for bank capital and liquidity have been delayed. I could go on.

Instead, let me try to encapsulate what we must remember about the financial crisis into 10 financial commandments, all of which were brazenly violated in the years leading up to the crisis.

1. Remember That People Forget

Treasury Secretary Timothy F. Geithner lamented last year that before the crisis, “There was no memory of extreme crisis, no memory of what can happen when a nation allows huge amounts of risk to build up.” He was right. As the renegade economist Hyman Minsky knew, it is normal for speculative markets to go to extremes. A key reason, Minsky believed, is that, unlike elephants, people forget. When the good times roll, investors expect them to roll indefinitely. When bubbles burst, they are always surprised.

2. Do Not Rely on Self-Regulation

Self-regulation of financial markets is a cruel oxymoron. We need zookeepers to watch over the animals. The government must not outsource this function to “market discipline” (another oxymoron) or to for-profit companies like credit-rating agencies. The Dodd-Frank Act of 2010 isn’t perfect, but it has the potential to change regulation for the better. But most of its reforms are still being phased in, and as the rules are being drafted, the industry (here and abroad) is fighting them tooth and nail and often prevailing.

3. Honor Thy Shareholders

Boards of public corporations are supposed to protect the interests of shareholders, partly by monitoring the behavior of top executives, who are employees, not emperors. In the years before the crisis, too many directors forgot those responsibilities, and both their companies and the broader public suffered from the malign neglect. Will they now remember? Some will — for a while. But sanctions on directors for poor performance are minimal.

4. Elevate Risk Management

One bitter lesson of the crisis is that, when it comes to risk taking, what you don’t know can hurt you. Too many C.E.O.’s let their subordinates ride roughshod over risk managers, tipping the balance toward greed and away from fear. The primary responsibility for keeping risk-management systems up to snuff rests with top executives and boards of directors. But the Federal Reserve and other regulators are now watching and mustn’t let up.

5. Use Less Leverage

Excessive leverage — otherwise known as over-borrowing — was one of the chief foundations of the house of cards that collapsed so violently in 2008. Overpaid investment “geniuses” used leverage to manufacture extraordinary returns out of ordinary investments. Bankers and investors (not to mention home buyers) deluded themselves into thinking they could earn high returns without assuming big risks. But leverage is like alcohol: a little bit has health benefits, but too much can kill you. The banks’ near-death experiences, plus preparation for higher capital requirements to come, are temporarily keeping them sober. But watch for the binge drinking to return.

6. Keep It Simple, Stupid

Modern finance profits from complexity, because befuddled customers are more profitable ones. But do all those fancy financial instruments actually do the economy any good? Paul A. Volcker, the former Fed chairman, once said the A.T.M. was the only beneficial financial innovation in the recent past. He may have exaggerated, but he had a point. Who needs credit default swaps on collateralized debt obligations, and other such concoctions?

7. Standardize Derivatives and Trade Them on Exchanges

Derivatives acquired a bad name in the crisis. But if they are straightforward, transparent, well collateralized, traded in liquid markets by well-capitalized counterparties and sensibly regulated, derivatives can help investors hedge risks. It is the customized, opaque, “over the counter” derivatives that are the most dangerous — and the ones more likely to serve the interests of the dealers than their customers. Dodd-Frank pushed some derivatives toward greater standardization and transparent trading on exchanges, but not enough. The industry is pushing to keep more derivatives trading out of the sunshine.

8. Keep Things on the Balance Sheet

Before the crisis, some banks took important financial activities off their balance sheets to hide how much leverage they had. But the joke was on them. The crisis revealed that some chief executives were only dimly aware of the off-balance-sheet entities their banks held. These “masters of the universe” hadn’t mastered their own books. Dodd-Frank specifies that “capital requirements shall take into account any off-balance-sheet activities of the company.” That’s a welcome step toward making off-balance-sheet entities safe and rare. Now regulators must make the rule work.

9. Fix Perverse Compensation

Offering traders monumental rewards for success, but a mere slap on the wrist for failure, encourages them to take excessive risks. Chief executives and corporate directors should “claw back” pay when putative gains turn into losses. If they don’t, we may need the heavy hand of government to do it.

10. Watch Out for Consumers

The meek won’t inherit their fair share of the earth if they are constantly being fleeced. What we learned in the crisis is that failure to protect unsophisticated consumers from financial predators can undermine the whole economy. That surprising lesson mustn’t be forgotten. The Consumer Financial Protection Bureau should institutionalize it.

Mark Twain is said to have quipped that while history doesn’t repeat itself, it does rhyme. There will be financial crises in the future, and the next one won’t be a carbon copy of the last. Neither, however, will it be so different that these commandments won’t apply. Financial history does rhyme, but we’re already forgetting the meter.

Alan S. Blinder is a professor of economics and public affairs at Princeton, a former vice chairman of the Federal Reserve and the author of “After the Music Stopped: The Financial Crisis, the Response and the Work Ahead.”