COVER: The Education of Larry Summers (All overseas editions). Senior Editor Michael Hirsh and Editor-At-Large Evan Thomas profile Larry Summers, Obama's top economic adviser. Summers has gone from being part of the government that got out of the way of the markets in the freewheeling days of the late 1990s to become the man mainly in charge of the immense government bailout. Summers's greatest test will be persuading Congress to vote for "entitlement reforms" -- i.e., cutbacks and/or higher taxes on Social Security and health benefits for the poor and elderly. Summers plans to urge the president and Congress to venture into an area where politicians have long feared to tread, the so-called third rail of politics. "Necessity requires it, he says -- if the United States cannot curb its spending and debt, interest rates will soar and the economy will plunge once more."
http://www.newsweek.com/id/185934
America's New Shrink. Every day seems to bring bad news, with more on the way, observes Senior Editor Jonathan Alter. The nation is in a pessimistic mood and although Obama is popular and refreshing, he is still well short of transformative. "For all of the legislative achievements of his first month in office, Americans have not yet had their faith in the future restored," Alter writes. Despite Obama's initial stumbles, which include mistakes in cabinet selection, Alter believes President Obama has a good chance of restoring confidence and pulling America back from the brink. He writes, "My take on Obama... is that he has a firm grasp of the psychological and substantive challenges of the presidency. Equally important, his 2008 campaign proved that he possesses a superior sense of timing."
http://www.newsweek.com/id/185800
The No-Risk Culture. Special Correspondent Tracy McNicoll reports that despite the French's long held negative beliefs about entrepreneurship, there is a new law aimed at simplifying and promoting business startups. At the start of this year, a law took effect that allows just about anyone to become their own boss, without endless bureaucracy and fees. Retirees, students, workers, the unemployed and even bureaucrats can sign up online in 15 minutes and start building their own businesses, without losing their existing publicly funded pensions and unemployment and other benefits. By mid-February, there were already 62,000 auto-entrepreneurs on the books, suggesting that the number of startups could surpass half a million by the end of the year. Finance Minister Christine Lagarde says the figures "will explode the initial objective." Philippe Hayat, founder of 100,000 Entrepreneurs, a network of businesspeople that has been trying to change French attitudes toward entrepreneurship, calls the legislation "a revolution."
http://www.newsweek.com/id/185810
Going Back To the Farm. Special Correspondent Mary Hennock reports over the last 30 years, as its economy has raced ahead, China has witnessed the world's largest internal migration, with some 250 million farmers and others abandoning its impoverished heartland in search of factory work and a better life on the coast. Now, as the economy slows, many of those factories have shut down, and unemployment is thought to have hit 10 percent. Among the most worrisome effects: some 20 million migrant workers have returned home, flooding areas where able-bodied youngsters were recently a rarity. This is producing great anxiety among Chinese officials, who have begun warning of civil unrest in unusually stark terms. The fear is that jobless workers -- many of them young men -- will band together and turn to violence or crime.
http://www.newsweek.com/id/185811
GLOBAL INVESTOR: Keeping Stability at All Costs. Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, writes about Brazil's divergent attitude toward the global economic crisis. It's not as if Brazil is completely unaffected by the worldwide collapse in economic growth. After expanding at an average of nearly 4 percent over the past five years, the Brazilian economy is set to slow to a crawl in 2009. "But given its long history of crises, Brazil's reaction to the current shock is more along the lines of 'we have seen this movie before' -- and its past experience has seasoned the nation to weather such storms," Sharma writes. Another reason Brazil is different compared with many emerging markets in Eastern Europe and Asia is the country's main policy objective this decade of seeking stability above all else, rather than the 'growth at any cost' mantra in several other emerging markets."
http://www.newsweek.com/id/185826
Bring On The Credit. Special Correspondent Barrett Sheridan reports that the problem with China's banks isn't their size -- the Industrial and Commercial Bank of China is the world's sixth largest corporation, with a market value greater than Microsoft. It's that, despite their wealth, they don't lend enough. And what loans they do make go mostly to large companies and state-owned businesses. According to research by Morgan Stanley, just 7 percent of the loans made last December went to households. This isn't an accident, but the fruit of a deliberate government policy, a war on lending that Beijing has waged to help keep inflation in check. To keep prices stable during China's years of torrid growth, Beijing set quotas on how many loans could be issued. Now that the global economy is cooling, inflation is no longer a worry, according to Brad Setser, an economist at the Council on Foreign Relations, Beijing's policymakers ought to "unshackle the banks."
http://www.newsweek.com/id/185815
WORLD VIEW: Why Chavez May Outlast Us All. Jorge Castaneda, a former foreign minister of Mexico and Global Distinguished Professor at New York University, writes that Venezuela's Hugo Chavez may wind up as the longest reigning elected president in history anywhere. To win his last election, "Chavez used every conceivable instrument of the state, every imaginable subterfuge, every trick in the book, to stack the deck in his favor and against his opponents," Castaneda writes. However, as long as his opposition remains divided, they will have trouble curtailing Chavez's force. "Their defeat may prove dispiriting, and Chavez has the power to concentrate even more power in his hands, as well as further clamping down on the media, the judiciary, the unions, human-rights groups, the business community, students and the opposition."
http://www.newsweek.com/id/185825
THE LAST WORD: Igor Yurgens, economic-policy advisor to Russian President Dmitry Medvedev. Yurgens spoke to Newsweek about his radical prescriptions for reversing Russia's dependence on oil and what he sees as the main problem with the government's policies. "Our ideal scenario is that the state should mix liberal and statist policies. They should allow the market to decide what industries should die naturally, but at the same time selectively support the sectors whose collapse would cause the most social upheaval." He adds that the state should "spend its money on strategic goals like economic diversification, and developing nanotechnology, biotechnology and information technology. The biggest fault is that the government has not explained its strategy to people, and there appears to be favoritism in selecting which businesses to bail out. People believe that the state is helping its friends and letting others fail."
http://www.newsweek.com/id/185824
/PRNewswire - Feb. 22/
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