State Media: Myanmar Won't Accept Aid Delivered by US Military, Fears Invasion

Myanmar will not allow U.S. naval ships and helicopters poised off its shore to deliver aid to cyclone victims, according to state-controlled media Wednesday which cited fears of an American invasion aimed at grabbing the country's oil reserves.

The New Light of Myanmar, a mouthpiece for Myanmar's ruling junta, said that such assistance "comes with strings attached" and referred to an article on a Web site saying that Washington wants to overthrow the country's government and seize its oil.

The United States, as well as France and Great Britain, have naval vessels loaded with humanitarian supplies off the Myanmar coast, and had been waiting for a green light to deliver them. The article did not mention the French and British navies.

Myanmar's xenophobic leaders have long feared an invasion by the United States, a concern that some analysts believe prompted the junta's abrupt decision in 2005 to move the country's capital from Yangon to the remote city of Naypyitaw, which is equipped with bunkers.

Despite Wednesday's announcement, the junta appeared to be slowly relenting to foreign pressure to accept more outside help for an estimated 2.5 million survivors faced with hunger, loss of their homes and potential outbreaks of deadly diseases.

U.N. Secretary-General Ban Ki-moon, who was headed to Myanmar, said the world body had received permission from the junta to use nine helicopters to carry aid to stranded victims.

"We have received government permission to operate nine WFP (World Food Program) helicopters, which will allow us to reach areas that have so far been largely inaccessible," Ban told reporters in New York on Tuesday before departing for the Southeast Asian country. His announcement was not immediately confirmed by officials in Myanmar.

"I believe further similar moves will follow, including expediting the visas of (foreign) relief workers seeking to enter the country," Ban said, warning that relief efforts to save survivors of the May 2-3 Cyclone Nargis had reached a "critical moment."

"We have a functioning relief program in place but so far have been able to reach only 25 percent of Myanmar's people in need," he said.

So far, the few foreign aid workers allowed inside the country have been banned from the areas of the worst devastation in the low-lying Irrawaddy delta.

The official death toll from Cyclone Nargis was over 78,000 with 56,000 more people missing.

Ban was expected to arrive in Bangkok, the capital of neighboring Thailand, on Wednesday and to fly on to Yangon on Thursday. In Myanmar, he was expected to visit areas devastated by the cyclone and to talk with officials and aid workers.

He was also scheduled to attend a meeting of aid donors in Yangon on Sunday. Myanmar, one of the world's poorest nations, claims losses from the disaster exceeded US$10 billion (€6.39 billion).

At U.N. headquarters, Ban welcomed the junta's "recent flexibility" in saying it will allow relief workers from the 10-country Association of Southeast Asian Nations - of which Myanmar is a member - to begin distributing aid.

U.N. Undersecretary-General for Humanitarian Affairs John Holmes, who left Myanmar on Tuesday after paving the way for Ban's visit, told Myanmar's leaders the wants to support aid efforts, "as we would do in any other country in any disaster of this scale, where clearly the size of the tragedy outweighs the capacity of any country to deal with it by itself."

The New Light of Myanmar article thanked the United States for airlifting in aid, an apparent reference to continuing relief flights of cargo planes from Thailand to Yangon.

The U.S. is sending about five such flights a day using C-130 cargo aircraft. American officials are required to hand the aid to Myanmar authorities upon landing in Yangon, from which it is a difficult journey to the Irrawaddy delta.

The four U.S. warships in the region were seen as a major potential boost for the relief effort with the capacity to deliver supplies to inaccessible areas of the delta, with 14 helicopters, two landing craft vessels, two high-tech amphibious hovercraft and about 1,000 U.S. Marines.

The news report gave no explanation why the regime was willing to accept aid flown on U.S. planes, with U.S. military personnel on board, but would not allow the warships and helicopters to deliver relief supplies.

It referred to an article on an Internet site called Workers World Web titled "US hostility hampers relief" in which the author reportedly said the United States wanted to topple the regime and sought access to the country's large oil deposits.

Myanmar's leaders began three days of mourning for the dead and missing on Tuesday. Flags at government offices, schools and large hotels flew at half staff, but shops opened and many people in Yangon said they had little idea what the official mourning entailed.

Others expressed anger.

"I don't think flying flags at half-mast is going to help. If they are sincere, they should welcome help from everyone," said Zin Moe, a 32-year-old clothes vendor in Yangon. "They are not letting in aid quickly enough and people are angry."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Recession unlikely if US economy gets through next two crucial months

After last Friday's announcement of the third consecutive drop in US employment figures, following hot on the heels of Ben Bernanke's admission that the American economy is already in recession - or more precisely that “a recession is possible ... there's a chance that for the first half as a whole, there might be a slight contraction” - I am probably the only economist left in the world who still believes that a US recession is likely to be avoided.

Obviously, I drew some encouragement for this view from the surprisingly decent ISM index, which triggered the huge rally in global stock markets on Tuesday (with some help from UBS and Lehman and the news of further regulatory moves to ease the credit crunch).

But the monthly employment figures are widely regarded as the real litmus test for the recession/soft landing debate.

So does Friday's 80,000 employment decline mean that the US is in recession? And does it matter anyway whether the technical definition of a recession is or is not satisfied? The answer to the first question is No and the answer to the second is Yes.

A drop of 80,000 in payroll employment is still not enough to signal a recession. If the US had already been in recession since the start of this year, as most economists believe, monthly payrolls would by now be falling by well over 100,000 a month, rather more than the average of 77,000 recorded in the past three months.

More important, other short-term indicators, such as the purchasing managers' indices, the industrial production figures and the quarterly consumption statistics (up a very decent 2.8 per cent in the fourth quarter), would be confirming the signs of a generalised downturn.

Instead, all these figures are still consistent with a mid-cycle slowdown similar to the ones that the American economy experienced in 1995-96 and 1986-87.

But does the distinction between a recession and a mid-cycle slowdown really matter anyway, given that the US is obviously suffering from one of the worst housing and financial crises in living memory - a fact that nobody (including me) can any longer deny? Actually, this distinction does matter quite a lot.

The difference between a recession and a slowdown is not just a matter of semantics, because there is a world of difference between a dislocation confined to one or two parts of the economy - say, housing and mortgage lending - and a generalised economic decline in which the weakness of demand in a few sectors creates a self-sustaining downward spiral of falling employment and incomes, weakening consumption and investment and further declines in activity across the economy as a whole.

It is the self-reinforcing and contagious nature of recessions that makes them different - and much more dangerous - than the sector-specific slowdowns that occur in market economies all the time.

This is why the National Bureau of Economic Research defines recessions in a very specific way: “A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income and wholesale-retail trade.

A recession influences the economy broadly and is not confined to one sector. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.”

This definition of recession is not just a matter of semantics. The broad-based and lasting nature of the economic decline is absolutely essential because a sector-specific or transitory slowdown is not sufficient to counteract the natural expansionary momentum of a capitalist economy.

This, incidentally, is why comments frequently seen in the media about a “housing recession” or “manufacturing recession” or “retail recession” or “export recession” are always technically inaccurate.

Problems affecting only one or two parts of the economy are a continuous feature of any market economy with its constant variations in demand and supply for particular products and services.

Such fluctuations can be very painful and disruptive for the sectors involved, but at the macroeconomic level they rarely do much serious harm.

But surely the financial and housing crises in America are now so severe that there can be no hope of avoiding the sort of self-sustaining downward spiral described above?

Apart from the lack of statistical evidence (so far) of a recession already mentioned, there are three other reasons for continuing to resist the consensus view.

First, the occurrence of a severe financial crisis is not, in itself, a sufficient reason for expecting a recession.

In fact, there have been severe financial crises that did not lead to recessions in the middle of every previous economic cycle: for example, the Latin American defaults of 1984, the stock market crash of 1987 and the savings and loan and housing collapse of 1988-89 and the Mexican peso, Asian and Russian crises of 1995-98.

A second reason why an American recession will probably be avoided - or, if it does occur, will be extremely brief - is that powerful expansionary forces are about to come into play in the US economy in the months ahead.

From the second week of May onwards, every American household will receive tax rebate cheques of between $600 (£300) and $2,000. As a result, personal disposable income will grow at an annualised rate of well over 10 per cent in the third quarter of this year.

Even if only half this money is spent, US consumption will therefore be guaranteed to grow by at least 3 per cent in the third and fourth quarters. And beyond that, the lagged effects of the Fed's recent monetary easing will kick in from the start of 2009.

This is why Mr Bernanke could afford to state so confidently on Wednesday that the US economy would return to trend or above-trend growth by early 2009.

Thirdly, there is the US housing market.

Financial markets imply a further decline of about 20 per cent in US house prices, but financial markets are sometimes wrong (as must surely be obvious by now).

US house prices have already fallen almost 15 per cent from their peak and as a result property in America is no longer expensive in relation to average incomes.

In fact, the ratio of average house prices to personal disposable incomes is now 5 per cent below its 40-year average and only 9 per cent above the record low it reached in 1990 and again in 1995.

Given that disposable incomes are rising at about 6 per cent annually, the housing valuations would fall to a new all-time low within 18 months or so, even if there were no further decline in house prices from now on.

And the last time American homes were as cheap as they are today in relation to disposable incomes, interest rates were much higher.

For example, in 1990 and 1995, when house price to income ratios were last at about present levels, standard 30-year US mortgage rates were 10 per cent and 8.5 per cent respectively.

Today, the corresponding rate is 6 per cent. As a result, affordability indices that take both interest rates and incomes into account show US property to be very good value already.

For example, the National Association of Realtors' composite affordability index stands at 135, compared with a record high of 140.8 reached in 1999, at the start of the recent housing boom.

After a few more months of falling house prices or rising disposable incomes, American housing will start to look irresistibly cheap.

In sum, if America can get through the next month or two without sinking into a serious recession, the danger should be past by the second half of this year.

anatole.kaletsky@thetimes.co.uk

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Why Zappos Pays New Employees to Quit—And You Should Too

I spend a lot of time visiting with companies and figuring out what ideas they represent and what lessons we can learn from them. I usually leave these visits underwhelmed. There are plenty of companies with a hot product, a hip style, or a fast-rising stock price that are, essentially, one-trick ponies—they deliver great short-term results, but they don’t stand for anything big or important for the long-term.

Every so often, though, I spend time with a company that is so original in its strategy, so determined in its execution, and so transparent in its thinking, that it makes my head spin. Zappos is one of those companies. Two weeks ago, I paid a visit to Zappos headquarters in Henderson, Nevada, just outside Las Vegas, and spent time with CEO Tony Hsieh and his colleagues. I could write a whole series of posts (and just might) about what I learned from this incredible operation. But I want to focus this post on one small practice that offers big lessons for leaders who are serious about changing the game in their field—and filling their organization with people who are just as committed as they are.

First, some background. As most of you know, Zappos sells shoes—lots of them—over the Internet. The company expects to generate sales of more than $1 billion this year, up from just $70 million five years ago. Part of the reason for Zappos’s meteoric success is that it got the economics and operations right. It offers customers a huge selection—four million pairs of shoes (and other items, such as handbags and apparel) in a warehouse in Kentucky next to a UPS hub. (If Imelda Marcos visited that warehouse she'd likely have a coronary on the spot.) It also offers free delivery and free returns—if you don’t like the shoes, you box them up and send them back to Zappos for no charge.

So the value proposition is a winner. But it’s the emotional connection that seals the deal. This company is fanatical about great service—not just satisfying customers, but amazing them. The company promises free, four-day delivery. That’s pretty good. But most of the time it delivers next-day service, a surprise that leaves a lasting impression on customers: “You said four days, but I got them the next morning.”

Zappos has also mastered the art of telephone service—a black hole for most Internet retailers. Zappos publishes its 1-800 number on every single page of the site—and its smart and entertaining call-center employees are free to do whatever it takes to make you happy. There are no scripts, no time limits on calls, no robotic behavior, and plenty of legendary stories about Zappos and its customers.

This is a company that’s bursting with personality, to the point where a huge number of its 1,600 employees are power users of Twitter so that their friends, colleagues, and customers know what they’re up to at any moment in time. But here’s what’s really interesting. It’s a hard job, answering phones and talking to customers for hours at a time. So when Zappos hires new employees, it provides a four-week training period that immerses them in the company’s strategy, culture, and obsession with customers. People get paid their full salary during this period.

After a week or so in this immersive experience, though, it’s time for what Zappos calls “The Offer.” The fast-growing company, which works hard to recruit people to join, says to its newest employees: “If you quit today, we will pay you for the amount of time you’ve worked, plus we will offer you a $1,000 bonus.” Zappos actually bribes its new employees to quit!

Why? Because if you’re willing to take the company up on the offer, you obviously don’t have the sense of commitment they are looking for. It’s hard to describe the level of energy in the Zappos culture—which means, by definition, it’s not for everybody. Zappos wants to learn if there’s a bad fit between what makes the organization tick and what makes individual employees tick—and it’s willing to pay to learn sooner rather than later. (About ten percent of new call-center employees take the money and run.)

Indeed, CEO Tony Hsieh and his colleagues keep raising the size of the quit-now bonus. It started at $100, went to $500, and may well go higher than $1,000 as the company gets bigger (and it becomes even more difficult to maintain the all-important culture and obsession with customers.)

It’s a small practice with big implications: Companies don’t engage emotionally with their customers—people do. If you want to create a memorable company, you have to fill your company with memorable people. How are you making sure that you’re filling your organization with the right people? And how much are you willing to pay to find out?

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