Why Dubai Matters

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Sure, it will pay a hefty price for its debt woes. But the city-state's open economy has attracted legions of foreign investors and serves as a model for its Gulf neighbors

By Stanley Reed

Dubai — After Dubai announced in late November that the state-controlled investment firm Dubai World was seeking to reschedule payments on some $26 billion of debt, global markets went into a tailspin. While foreign bourses quickly rebounded, local shares have taken a pounding, and the credibility of Dubai's leadership has suffered serious damage. Yet lost in all the drama is the fact that Dubai is an important economic experiment in a strategically vital region. The humiliating debt implosion aside, the emirate remains the most dynamic business hub in the Gulf and has become a model for its neighbors.

In a region of conservative, autocratic countries long chained to the boom-and-bust cycles of the oil industry, Dubai stands out for creating an open economy that has diversified well beyond energy. With nowhere near the oil and gas reserves of other Gulf countries such as Saudi Arabia and Kuwait, it had to. "Dubai shows that if you are part of the global economy, you do well; you don't have to have oil," says David Aaron, director of the RAND Center for Middle East Public Policy in Washington.

There's no denying that the emirate overreached and will pay a hefty price. Dubai led the region in allowing outsiders to own property, opening up its real estate market to foreign investment in 2003, and created a mortgage industry to finance their purchases. But lax rules ushered in wild speculation. With real estate prices rising at a double-digit annual clip, investors made a killing buying apartments with low deposits and quickly flipping them. Then when the credit crunch came, buyers fled and developers saw their cash flow dry up. Hardest hit was Nakheel, a subsidiary of Dubai World that created the iconic palm island real estate development off the coast. It has about $8 billion in debt and $13 billion in other liabilities such as bills from suppliers, Barclays Capital (BCS) reports.

Dubai's leadership has doubtless mishandled the recent turmoil. The emirate's debt problems have been looming for at least a year, but ruler Sheikh Mohammed bin Rashid Al Maktoum has made little progress in coming to grips with the challenge. As recently as October, Dubai raised nearly $2 billion in new money through an Islamic bond issue. Asked about the emirate's ability to pay its debts, Sheikh Mohammed told reporters: "I assure you, we are all right."

Part of the problem is that while Dubai is more open than its neighbors, it's no Jeffersonian democracy. It is dominated by a handful of people, and their decision-making and finances remain opaque. The debt crisis illustrates that. Until recently, no one knew how much debt Dubai had and which state-linked companies it might back in a crunch. Just as murky was the extent to which its wealthier neighbors, chiefly Abu Dhabi, were willing to bail it out. Investors who had assumed the best got spooked when it appeared Dubai couldn't meet its obligations. "To lower the perception of risk, Dubai must become more transparent quickly," says Matthew Vogel, head of emerging markets research at Barclays Capital in London.

Hassle-Free Business Climate

Nonetheless, Dubai remains the region's nimblest competitor. It is a tolerant and comfortable base for anyone seeking a foothold in the Arab world, and today Americans, Europeans, Asians, and Middle Easterners work side-by-side in the senior ranks of its big companies. Salaries are high, and there's no personal income tax. Luxury apartment buildings abound, many of them weekend getaways for residents of neighboring states who flock to Dubai to enjoy lavish restaurants and bars often filled with available young women. Then there's all that famous froth such as the indoor ski slope, the sail-shaped Burj Al Arab hotel on the beachfront, and the world's tallest building, the soon-to-open Burj Dubai.

Beneath all the glitz, though, Dubai has become a place where serious business gets done. While the city-state has just 1.6 million residents and a gross domestic product of $80 billion, it is the business gateway for a region with a $1 trillion economy, millions of eager young consumers, and hundreds of billions of petrodollars to invest. Microsoft (MSFT), General Electric (GE), Cisco Systems (CSCO), and a host of other A-list multinationals have flocked to Dubai because of its open culture, top-notch infrastructure, and hassle-free business climate.

And virtually every leading investment bank is present in the Dubai International Financial Center, a lavish gray-granite complex with ornate fountains built on what was a desolate patch of sand just a few years ago. A big draw is the emerging market for Islamic financial services, which has become a $1 trillion business globally. "Dubai will continue to lay the foundations for sustainable growth," says Michael Geoghegan, group chief executive of HSBC, the leading lender in the United Arab Emirates with $611 million in loans out to Dubai World. "I am confident that Dubai and the U.A.E. will overcome any short-term issues they face."

Model Gulf State

Dubai's homegrown companies have made their mark, too. At the core of debt-plagued Dubai World is a first-class ports operation, and the company has vast real estate holdings and a host of other businesses that span the globe. Emirates, the airline founded by the ruling Maktoum family in 1985 with $10 million in capital, is now among the world's top 10 carriers and a major customer for both Airbus and Boeing (BA). And Dubai-based Abraaj Capital, an independent group owned by local and Saudi investors, has grown into the leading private equity firm investing in the region.

Dubai's success hasn't gone unnoticed in the neighborhood, and nearby states are following its lead. Gas-rich Qatar is promoting its own financial center. Abu Dhabi has announced an $8 billion financial-services joint venture with GE. And it's working hard to transform itself into a higher-end version of Dubai with even fancier hotels and branches of the Louvre and Guggenheim museums. Even hyperconservative Saudi Arabia has taken a leaf from Dubai's book by liberalizing its financial system to draw in Western investment banks such as Morgan Stanley (MS) and Deutsche Bank (DB).

What these countries see in Dubai is a chance to move beyond the petro-economy that has provided their wealth but does little to create jobs. The Gulf region has millions of young, underemployed people who want a better life—and who risk being drawn toward Islamist extremism if they don't get it. Some of the most talented of these have made their way to Dubai, where they find a more meritocratic culture that offers seemingly endless opportunities. "They look at this place as somewhere that allows them to do things that they can't do [at home]," says Tarik Yousef, dean of the Dubai School of Government. "It has been built out of nothing."

Hard Choices

While Dubai's neighbors want to emulate its success, that doesn't mean they won't exact a serious political toll for the recent turmoil. The U.A.E., a federation of seven city-states ruled by hereditary clans, is largely bankrolled by Abu Dhabi, but Dubai is its business center. Sheikh Mo, as Dubai's leader is popularly known, is vice-president and prime minister. Abu Dhabi's ruler, Sheikh Khalifa bin Zayed Al Nahyan, serves as president, and he's unlikely to simply write a check to bail out Dubai. Instead, he will probably force Sheikh Mo to make hard choices about developer Nakheel and other troubled enterprises. Some in Abu Dhabi will even want to see Dubai pay for its profligacy by turning over stakes in major assets. The two sides "will sit down and say this is sustainable, this isn't," says Hashem Montasser, Dubai-based managing director of EFG-Hermes, the leading regional investment bank. "I am sure there will be differences."

Until Dubai cleans up its act, it will be much harder to find the money needed to keep building the new highways, the public transit system, and other big infrastructure projects that have helped give it its edge. Already businesses in the emirate say it's tough to line up bank credit, and that won't ease anytime soon. "We are expecting it to be very difficult for Dubai-based entities to raise money," says Farouk Soussa, a Standard & Poor's (MHP) analyst in Dubai.

Given Sheikh Mo's missteps in the current crisis, he may find himself increasingly under the thumb of his neighbors in Abu Dhabi. It hasn't gone unnoticed that solo portraits of him on billboards in prominent locations across Dubai have been replaced by signs showing both the Dubai leader and Sheikh Khalifa.

Dubai may no longer be allowed to run an independent foreign policy. Sheikh Mo has long kept the city-state close to Iran—and tapped into its capital—while most other Gulf states see the Islamic Republic as one of their greatest enemies. And Abu Dhabi, which worries that the U.A.E. is losing its character due to excessive immigration, may push to tighten up on visas for visitors from Iran, Russia, and elsewhere. "The entire U.A.E. will gravitate toward Abu Dhabi," says Ian Bremmer, president of New York-based risk consultancy Eurasia Group. "That means Dubai will become more conservative socially and politically. Dubai's branding will be toned down."

"Don't Count Dubai Out"

That toned-down branding means the emirate will surely rein in some of its excesses. Although the skyline and palm islands won't disappear, further over-the-top development will likely be put on hold. The city-state has "realized it's no longer about building the world's tallest tower," says Saud Masud, research chief for Swiss bank UBS (UBS). "Now it's about Dubai's legacy and its long-term future." And the crisis could help spur greater transparency—admittedly the weakest part of Dubai's economic model, says David Kirsch, an analyst at Washington-based consultancy PFC Energy. "This will put more pressure on Dubai to tighten up on regulations and improve governance," Kirsch says.

It is also hard to see Dubai losing its role as the region's leading business hub. It's true that Qatar's Doha, Abu Dhabi, and even the Saudi capital, Riyadh, are scoring some successes in attracting banking and other businesses. And with greater access to capital, they'll be able to close the infrastructure gap with Dubai. But few expatriates are going to want to settle in those places, which don't really want lots of foreigners and their unfamiliar ways anyhow.

While Dubai's current problems may be severe, the viability of its economic model remains sound. Demand for business services is down now, but it will surely bounce back once the credit crunch eases. "Don't count Dubai out," says Carlyle Group co-founder David Rubenstein. "It has world-class infrastructure, a high-quality talent pool, and will continue to be an important financial center for decades to come." Singapore, which has served as an inspiration for Dubai, learned from the crash of 1997-1998 and emerged much stronger from it. Dubai, too, now has the opportunity to take lessons from its mistakes and thrive once again.

With Vivian Salama, Arif Sharif, Anthony DiPaola, Jason Kelly, Rochelle Garner, and Jonathan Keehner.

U.S. Fears Iraq Development Projects May Go to Waste - NYTimes.com

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By TIMOTHY WILLIAMS

BAGHDAD — In its largest reconstruction effort since the Marshall Plan, the United States government has spent $53 billion for relief and reconstruction in Iraq since the 2003 invasion, building tens of thousands of hospitals, water treatment plants, electricity substations, schools and bridges.

But there are growing concerns among American officials that Iraq will not be able to adequately maintain the facilities once the Americans have left, potentially wasting hundreds of millions of dollars and jeopardizing Iraq’s ability to provide basic services to its people.

The projects run the gamut — from a cutting-edge, $270 million water treatment plant in Nasiriya that works at a fraction of its intended capacity because it is too sophisticated for Iraqi workers to operate, to a farmers’ market that farmers have not been able to decide how to divvy up space for, to a large American hospital closed immediately after it was handed over to Iraq because the government was unable to supply it with equipment, a medical staff or electricity.

The concern about the sustainability of the projects comes as Iraq is preparing for pivotal national elections in January and as rebuilding has emerged as a political imperative in Iraq, eclipsing security in some parts of the country as the main anxiety of an electorate frustrated with the lack of social, economic and political progress. American forces are scheduled to begin withdrawing in large numbers next year.

In hundreds of cases during the past two years, the Iraqi government has refused or delayed the transfer of American-built projects because they can not staff or maintain them, Iraqi and American government officials say.

Other facilities, including hospitals, schools and prisons built with American funds, have remained empty long after they were completed because there were not enough Iraqis trained to operate them.

“As large-scale construction projects — power plants, water-treatment systems and oil facilities — have been completed, there has been concern regarding the ability of Iraqis to maintain and fund their operations once they are handed over to the Iraqi authorities,” said a recent analysis prepared for Congress by the Congressional Research Service.

The Government Accountability Office and the special inspector general for Iraq reconstruction have also issued reports during the past several months about the potential failure of American-financed projects once they are transferred to Iraq.

Stuart W. Bowen Jr., inspector general for Iraq reconstruction, said his watchdog agency had “regularly raised concerns about the potential waste of U.S. taxpayer money resulting from reconstruction projects that were poorly planned, badly transferred, or insufficiently sustained by the Iraqi government.”

The blame is shared, officials said. While Iraq has often been guilty of poor management, American authorities have repeatedly failed to ask Iraqis what sort of projects they needed and have not followed up with adequate training. And whether or not the American-built health centers and power plants are ever used as intended, the American companies that won the lion’s share of rebuilding contracts from the federal government have been paid.

The Iraqi government, prodded by American officials here, has pledged to begin spending more of its own money on reconstruction, but the country is facing a substantial budget deficit because of declines in international oil prices.

Prime Minister Nuri Kamal al-Maliki has insisted that reconstruction is the next task. What is not clear is where the $400 billion the government says it needs will come from.

“We will use the revenue we have from oil, but the government feels it has to do more than that to rebuild,” said Ali al-Alak, an adviser to Mr. Maliki.

In the meantime, the Americans — military and civilian reconstruction specialists alike — continue to depart in large numbers, taking with them their money, equipment and expertise.

Despite the $53 billion spent by the United States, many Iraqis have criticized the rebuilding effort as wasteful. Ali Ghalib Baban, Iraq’s minister of planning, said it had had no discernable impact. “Maybe they spent it,” he said, “but Iraq doesn’t feel it.”

Iraqis, for whom bombed-out buildings are an unremarkable part of urban existence, also say they have seen little evidence of rebuilding.

“Where is the reconstruction?” asked Sahar Kadhum, a resident of Kut, about 100 miles southeast of Baghdad. “The city is sleeping on hills of garbage.”

Indeed, despite the billions in American funds, more than 40 percent of Iraqis still lack access to clean water, according to the Iraqi government. Ninety percent of Iraq’s 180 hospitals do not have basic medical and surgical supplies, according to the aid organization Oxfam. Iraqis also have from disproportionately high rates of infant mortality, cerebral palsy and cancer.

Exacerbating the problem, Iraqi and American officials say that hundreds of thousands of Iraq’s professional class have fled or been killed during the war, leaving behind a population with too few doctors, nurses, engineers, scientists and others.

In Hilla, 60 miles south of Baghdad, a recently completed $4 million maternity hospital built by the Americans is open, but the staff members are unable to operate much of its equipment.

“The building is fairly good and the Americans have provided the hospital with a variety of high-tech medical devices, but they did not pay attention to the training of doctors in how to use them,” said Jawad al-Jubouri, a district officer.

In Falluja, west of Baghdad, a $98 million waste water treatment plant built by the United States serves only one-third of the homes it was intended to because the Iraqi government has not supplied it with sufficient fuel “raising the possibility that the U.S. effort has been wasted,” according to a special inspector general’s report.

At Ibn Sina Hospital in Baghdad, which had been the American military’s largest medical center in the country, Iraqi security forces took up guard positions even before the conclusion of a ceremonial transfer to the Iraqi government last month. The hospital, however, has been closed because the Health Ministry lacks the staff and equipment to reopen it, even though the American military said it left $7.9 million in equipment behind.

Iraq’s most notorious reconstruction project might be the $165 million Basra Children’s Hospital in southern Iraq. Championed by Laura Bush when she was the first lady, its completion has been delayed by more than four years, and the project is $115 million over budget.

Once the hospital opens — perhaps next year — there will be too few doctors and other medical staff members to take advantage of much of its modern equipment.

“It was supposed to open in March, but I don’t think it will be ready,” said Ahmed Qassim, the hospital’s director. He added: “Maybe July, but we don’t know. Maybe not July.”

Duraid Adnan contributed reporting from Basra, John Leland from Baghdad and Iraqi employees of The New York Times from Basra, Hilla and Kut.

University of California, Crown Jewel of Education, Struggles With Cuts - NYTimes.com

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By TAMAR LEWIN

BERKELEY, Calif. — As the University of California struggles to absorb its sharpest drop in state financing since the Great Depression, every professor, administrator and clerical worker has been put on furlough amounting to an average pay cut of 8 percent.

In chemistry laboratories that have produced Nobel Prize-winning research, wastebaskets are stuffed to the brim on the new reduced cleaning schedule. Many students are frozen out of required classes as course sections are trimmed.

And on Thursday, to top it all off, the Board of Regents voted to increase undergraduate fees — the equivalent of tuition — by 32 percent next fall, to more than $10,000. The university will cost about three times as much as it did a decade ago, and what was once an educational bargain will be one of the nation’s higher-priced public universities.

Among students and faculty alike, there is a pervasive sense that the increases and the deep budget cuts are pushing the university into decline.

The budget cuts in California, topping $30 billion over the last two years, have touched all aspects of state government, including health care, welfare, corrections and recreation. They have led to a retrenchment in state services not seen in modern times, and for many institutions, including the state university system, have created a watershed moment.

The state’s higher education budget has been slashed by $2.8 billion this year, including $813 million from the university system — about the equivalent of New Mexico’s entire higher education budget.

“Dismantling this institution, which is a huge economic driver for the state, is a stupendously stupid thing to do, but that’s the path the Legislature has embarked on,” said Richard A. Mathies, dean of the College of Chemistry here at Berkeley, long the system’s premier campus. “When you pull resources from an institution like this, faculty leave, the best grad students don’t come, and the discoveries go down.”

As the litany of cuts continues, there is a growing worry that senior faculty members may begin to defect. In fact, some colleges around the nation have begun identifying funds to use to recruit U.C. professors.

Since California adopted a master plan for higher education in 1960, the state has been, in the words of the historian Kevin Starr, “utopia for higher education.” Eight of the 10 University of California campuses — all but Merced and San Francisco — are in the top 100 in this year’s U.S. News & World Report’s rankings. But maintaining that edge, without resources, is difficult.

In 2004, international rankings by the London-based Times Higher Education named Berkeley the No. 2 research university in the world, behind only Harvard. This year, Berkeley plummeted to No. 39, mostly because of its high faculty-to-student ratio. The other international rankings, by Shanghai Jiao Tong University, rated Berkeley No. 3 this month.

Patrick M. Callan, president of the National Center for Public Policy and Higher Education, a nonpartisan group that promotes access to higher education, said that while public universities in many states were facing financial problems, California was in a class by itself.

“In most states, it’s the economy, and you can say that in a couple of years, it will bounce back,” Mr. Callan said. “But in California, it’s really part of a significant retrenchment of the whole public sector. If the perception is that it’s going to be chronic, and people give up on California, the pre-eminence of Berkeley and U.C.L.A. would be in danger.”

No wonder, then, that people like Bruce Fuller, a Berkeley professor of education and public policy, are asking themselves whether it is time to move on.

As co-director of the Institute for Human Development, an interdisciplinary research group that suffered big cuts, Mr. Fuller worries that the unit is losing its intellectual excitement and its ability to support his grant proposals. Then, too, he lost his two best graduate students last year to Stanford.

“To stay on top, you need to be bringing in new people,” Mr. Fuller said. “And I’m not sure how many of my most stimulating colleagues will still be here in three years.”

So although he was not swayed last year when the University of North Carolina came calling, Mr. Fuller said, he may be more receptive this year.

Formerly taboo ideas, like allowing U.C.L.A. and Berkeley to charge substantially more than other campuses, or even eliminating the research mission at some of the newer campuses, are being put forward. Many here seem to be in a state of shock that things have been allowed to get so bad at one of the nation’s leading public research universities, one with a long tradition of excellence. Berkeley faculty, past and present, have won 21 Nobel prizes. And last month, two of the 24 MacArthur fellowship grants went to a Berkeley computer scientist and a molecular biologist.

Students, professors and union workers alike say the state’s 20 percent cutback in financing imperils the system’s ability to provide a top-quality education to all qualified California students, particularly those from low-income families, who make up almost a third of the university’s student body.

Mark Yudof, the university system president, has created a commission that will make recommendations next spring on the future size and shape of the system. Just about everything seems to be on the table. There is even talk of creating an online “11th U.C. campus,” to bring in new revenue by offering courses — and degrees — to qualified students in other states and countries.

As support from the state dwindles, it is inevitable that the university will begin to look more like a private institution. The proportion of out-of-state students will rise next year: at Berkeley, almost a quarter of the freshmen admitted for next year will be international or out-of-state students.

And, as at private universities, student fees are rising rapidly, balanced, in large part, by bigger aid packages for low- and middle-income students. Across the 10 campuses, instructional budgets are being reduced by $139 million, with 1,900 employees laid off, 3,800 positions eliminated and hiring deferred for nearly 1,600 positions, most of them faculty.

Mr. Yudof rejects suggestions to retrench, like adopting a two-tiered system in which the Santa Cruz, Riverside and Merced campuses would be teaching institutions and no longer focus on research.

“My mission is to defend, protect, enhance and grow the University of California,” Mr. Yudof said. He added that he hoped the current measures would be enough to get the system back on track.

But that may not be the case. Just to fend off further cuts, he said, the state will need to add nearly $900 million to the university’s budget next year.

Whatever that budget looks like, Mr. Yudof said, there will be no more furloughs. “It’s too demoralizing,” he said.

This year, the University of Texas lured three senior faculty members from the University of California, among them William F. Hanks, and his wife, Jennifer Johnson-Hanks, both anthropologists.

“Last spring, when we made the decision, there were issues, but the budget hadn’t quite slammed down to the extent it has since then,” Mr. Hanks said. “It looks a lot bleaker now.

“But in our case, it wasn’t so much wanting to leave Berkeley as wanting to come to U.T. Surprisingly, there’s more intellectual excitement and dynamism here. The department is growing and expanding, and we’re part of a cohort of new people, which is a fabulous feeling, fraught with potential.”

Meanwhile, back in his old department at Berkeley, things are tight — and no replacements can be hired. “Our biological anthropology course, which is required for psych majors, used to be offered every semester,” said Meg Conkey, an archeology professor, “and now it’s just spring semester, and probably there will be students who don’t get in.

“We just don’t have as many people to draw from, and we’re likely to have three retirements coming up,” she said. For undergraduates, the budget cuts are creating new strains about graduating in four years. Classes will be larger and teaching assistants fewer, and already, dozens of students have been unable to register for sections of introductory chemistry courses.

“Last semester, I couldn’t get into a lab section for Chem 3A,” said Nawal Siddiqui, a bioengineering major who hopes to go to medical school. “So now I’m taking Chem 3B lectures, with the labs for Chem 3A. It’s kind of hard.”

The chancellor of Berkeley, Robert J. Birgeneau, expresses optimism that more money can be saved without cutting into the educational muscle of the university. “If the budget doesn’t get worse,” he said, “we can recover in two years.”

Dr. Birgeneau tells of a recent meeting with a student leader, who said students were most unhappy about the decision to end Berkeley’s tradition of keeping the library open 24 hours during finals, and an hour later, a parent meeting where he mentioned that complaint — and immediately got a $30,000 pledge to pay for round-the-clock library access during finals.

“If they keep cutting, it’ll take us longer to recover,” Dr. Birgeneau said. “But Berkeley can always recover.”

GAO finds fault with stimulus jobs data but touts transparency - washingtonpost.com

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By Ed O'Keefe
Washington Post Staff Writer
Friday, November 20, 2009

Government auditors raised doubts Thursday about the number of jobs created or saved by the economic stimulus program, but they also said that mistakes reported in recent weeks signal the benefits of government transparency.

Roughly 10 percent of the recipients of stimulus dollars failed to submit quarterly reports last month, according to a Government Accountability Office report released Thursday.

"I think missing reports may drive the job numbers up, and I think there are enough inaccuracies in here to drive the numbers down," said Earl E. Devaney, who oversees Recovery.gov, the government's stimulus-tracking Web site. The Obama administration reported last month that the stimulus has created or saved about 640,000 jobs thus far.

Some recipients' failure to report spending data last month "is distressing and must be addressed," Devaney said, adding that Congress should penalize recipients who fail to report.

The doubts expressed by Devaney and acting GAO Comptroller General Gene L. Dodaro at Thursday's House oversight committee hearing lend nonpartisan credence to general concerns about stimulus data. Devaney, who assumed his position in the spring, has repeatedly cautioned government officials at all levels that early data would probably contain errors. But some of those mistakes aren't necessarily a bad thing, he said.

"In reality, this data should serve in the long run as evidence of what transparency can achieve," he said. "In the past, this data would have been scrubbed from top to bottom before its release. The agencies would never have released the information until it was near-perfect."

Republicans attacked the jobs figures, referring to the data as "propaganda" and "garbage," and called the entire stimulus reporting process "disgusting."

"The administration continues to misread the economy, misunderstand the nature of economic growth, mislead the American people with faulty jobs claims and miss the steps this country needs to take to get our economy back on track," said Rep. Darrell Issa (R-Calif.).

The Obama administration has struggled to clearly define stimulus job creation because -- as Devaney and Dodaro noted -- it is difficult to know what role the funding played.

"This has never been done before," White House stimulus adviser Ed DeSeve said after the hearing. "You can't name another government program that has done this."

Obama faces congressional anger about economy - washingtonpost.com

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ECONOMIC WOES TAKING A TOLL
House Republicans call on Geithner to resign

By Brady Dennis, Zachary A. Goldfarb and Neil Irwin
Washington Post Staff Writer
Friday, November 20, 2009

Growing discontent over the economy and frustration with efforts to speed its recovery boiled over Thursday on Capitol Hill in a wave of criticism and outright anger directed at the Obama administration.

Episodes in both houses of Congress exposed the raw nerves of lawmakers flooded with stories of unemployment and economic hardship back home. They also underscored the stiff headwinds that the administration faces as it pushes to enact sweeping changes to the financial regulatory system while also trying to create jobs for ordinary Americans.

President Obama's allies in the Congressional Black Caucus, exasperated by the administration's handling of the economy, unexpectedly blocked one his top priorities, using a legislative maneuver to postpone the approval of financial reform legislation by a key House committee.

Two buildings away, at a session of the Joint Economic Committee, Republicans escalated their attacks on Treasury Secretary Timothy F. Geithner, including a call for his resignation.

"Conservatives agree that as point person, you failed. Liberals are growing in that consensus as well," said Rep. Kevin Brady (R-Tex.). "For the sake of our jobs, will you step down from your post?"

Rep. Michael C. Burgess (R-Tex.) took a different tack. "I don't think that you should be fired," he told Geithner. "I thought you should have never been hired."

Even Sen. Charles E. Schumer (D-N.Y.), a friend of the administration, suggested that Geithner had been inconsistent in addressing China's practice of keeping its currency low against the dollar.

And Rep. Peter DeFazio (D-Ore.) said Wednesday on MSNBC that he thinks Geithner should step down, pointing to his handling of the aftermath of American International Group's meltdown.

Across Capitol Hill, senators signaled their opposition to rushing regulatory reform. While some Democrats voiced reservations about parts of the bill, Republicans went further, faulting Sen. Christopher J. Dodd (D-Conn.) for pushing ahead before the roots of the crisis were understood.

Perhaps most troubling for the administration was that one of the few measures to succeed Thursday was an amendment by Rep. Ron Paul (R-Tex.) that would subject the Federal Reserve to unprecedented scrutiny. The amendment, which won bipartisan support in the House Financial Services Committee despite the reservations of administration officials, would allow the Government Accountability Office to audit all of the Fed's operations, including its decisions on interest rates and its transactions with foreign central banks.

Paul and allies in both parties -- more than 300 members of Congress have endorsed the measure -- are looking to increase oversight of an institution they consider partly to blame for the financial crisis. Federal officials and many private economists worry that the amendment could make future central bank policymakers reluctant to take unpopular steps to prevent inflation or support the economy for fear of second-guessing by Congress and government auditors.

The House committee had been set to vote to send the final piece of its regulatory reform package to the House floor after months of debate. That is, until the committee's chairman, Rep. Barney Frank (D-Mass.), told a shocked committee room that passage of the bill would be delayed until Dec. 1 because the Congressional Black Caucus wanted the administration to do more to help African American communities suffering in the economic decline.

Frank told committee members that black lawmakers were "frustrated by the response to the economic situation by the administration." He said the caucus had no issues with the legislation itself. "They want obviously to continue to have some bargaining power with the administration," he said after the hearing.

The caucus itself did not publicly detail its concerns Thursday, but one member, Rep. Maxine Waters (D-Calif.), issued a statement: "The recession has created a unique systemic risk that threatens all parts of the African-American community, including the poor and the middle class."

The caucus began discussing its concerns with Frank and the administration several weeks ago. Frank hosted a meeting Monday night between caucus members, Geithner and White House Chief of Staff Rahm Emanuel.

"You're talking about people whose constituents have been badly hammered by this," Frank said. "Given the nature of this recession, there needs to be some more conversations."

Frank said the caucus had concerns about whether minorities were being fairly represented in helping carry out Treasury's bailout programs and other federal efforts to resolve the financial crisis. The government has contracted out much of the work to Wall Street firms.

Congressional aides said the caucus's concerns are similar to those of the Democratic Party's liberal wing. Caucus members are pushing for legislation that would directly lead to new jobs by providing tax benefits, for example, that would provide incentives for home renovations and funding for new infrastructure projects. They also want to extend health-care and unemployment benefits.

Meanwhile, Geithner was taking a beating as he urged Congress to pass regulatory reform as quickly as possible, arguing that delay would create uncertainty for businesses across the country. Lawmakers sharply criticized him for his role in the crisis during the tense Joint Economic Committee meeting. They were particularly critical of his involvement in the decision, as president of the New York Fed, to bail out AIG.

But Geithner pressed forward: "To ensure the vitality, the strength and the stability of our economy going forward, we must bring our system of financial regulation into the 21st century. Nobody in my job should ever be in the position again of having to come into a crisis like this without those basic authorities."

Dodd, chairman of the Senate Banking Committee, chose the marbled Caucus Room in the Russell Senate Office Building -- site of past hearings on Watergate, Pearl Harbor and the Wall Street abuses during the Great Depression -- to open debate on a massive draft bill designed to achieve the most ambitious reworking of the financial system in decades.

"This is one of those moments in our nation's history that compels us to be bold," Dodd said.

But soon, ranking committee Republican Richard C. Shelby (Ala.) took the floor, and for 18 uninterrupted minutes he opined that nearly every element of Dodd's bill was misinformed, uninformed, unnecessarily rushed or just plain flawed. "This committee has not done the necessary work to even begin discussing changes of this magnitude. Nevertheless, you have laid a bill before the committee," Shelby said. "I will be opposing this legislation. Not because we disagree on its ends, but rather on its means."

Shelby said Dodd was wrong not to conduct an investigation into the causes of the recent financial crisis before pushing forward with legislation. He said rather than ending the problem of institutions that are "too big to fail," the current bill expands the government's ability to bail out big banks. Shelby apologized for the length of his critique, expressed his hope that the two men might "yet find some common ground," and yielded the floor.

"Well," Dodd said in the morning's only moment of levity, "I thank you for the endorsement."

Staff writer David Cho contributed to this report.

Unemployment Rate Rises to 10.2%, Offering Little Reassurance to Job Seekers - NYTimes.com

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By PETER S. GOODMAN

The American unemployment rate surged to 10.2 percent in October, its highest level in 26 years, as the economy lost another 190,000 jobs, the Labor Department reported Friday.

The jump into the realm of double-digit joblessness — from 9.8 percent in September — provided a sobering reminder that, despite the apparent end of the Great Recession, economic expansion has yet to translate into jobs, leaving tens of millions of people still struggling.

“The guy on the street is going to ask, ‘What recovery?’ ” said Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. “The job market is still in reverse.”

The sharp rise in unemployment seemed certain to inject fresh tension into the debate over economic policy in Washington.

Republicans point to elevated joblessness as proof that the Obama administration’s $787 billion spending package aimed at stimulating the economy had failed. Labor unions and some Democrats are calling for another round of spending to create more jobs. And all of this comes against a backdrop of continued worries about swelling federal budget deficits.

In an interview this week, Richard L. Trumka, president of the nation’s largest labor union, the A.F.L.-C.I.O., called on the government to unleash fresh spending on large-scale construction projects to put people back to work.

Absent that, “it will probably be 2012 before there starts to be real job creation,” Mr. Trumka said.

Yet despite the headline-grabbing unemployment number in the government’s snapshot of the October job market, economists sifting through the details found several reasons to take comfort.

The pace at which jobs are disappearing continued to taper off in October, the precursor to eventual growth.

Between November 2008 and April 2009 — amid the paralyzing fear that accompanied the collapse of prominent financial institutions like Lehman Brothers — the economy shed an average of 645,000 jobs a month. Between May and July, the pace dropped to an average monthly loss of 357,000 jobs. And over the last three reports, average monthly job losses have slipped to 188,000, after factoring in upward revisions to the data for August and September.

The number of temporary workers increased by 44,000 in October, adding to gains in the previous two months — an apparent sign that businesses have squeezed as much production as they can out of their existing workforces and feel the need to bring in more people.

“That goes the right way,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “That’s an encouraging sign.”

The hope is that as the economy expands, companies will use fresh profits to add to payrolls as they reach for increased sales. As workers spend their paychecks, they will create opportunities for other businesses, generating more jobs.

Some experts see this scenario unfolding now, asserting that the economy will add jobs by late winter.

“People are hurting, but if you can get past the sticker shock of the unemployment rate and look at the guts of the report, they are still very consistent with a recovery,” said Michael T. Darda, chief economist at the research and trading firm MKM Partners. “We’re getting very close to the peak unemployment rate.”

But some doubt whether recent trends can continue, absent another dose of government spending.

Though the economy grew at a 3.5 percent annualized rate between July and September, much business activity was stirred up by special programs aimed at encouraging consumers to spend, not least the cash-for-clunkers program that provided taxpayer-financed cash incentives to people trading in their cars.

As the effects of this and other stimulus programs fade over coming months, fundamental weakness may reemerge, with consumers — whose spending accounts for 70 percent of overall economic activity — confronting enormous debt, the loss of wealth and fears about job security.

“We just went through an unbelievable financial catastrophe in this country and it typically takes a long time to come back,” said Joshua Shapiro, chief United States economist at MFR, a market research firm in New York, who envisions jobs continuing to decline until at least the middle of next year.

Beneath the dueling interpretations of future prospects, the report left little doubt that the present was still bleak in millions of American households.

In Columbia, S.C., Raymond Vaughn is still unemployed a year and a half after he lost his job installing and repairing windows. Back in April, he was training for a new career in medical billing, a growing field, through an online course he found on the Internet. But his unemployment benefits soon ran out, eliminating his $221-a-week check, and then he could no longer muster the $98 weekly payments for his course.

Mr. Vaughn, 43, is back to what has become a familiar if dreary everyday routine. He drives to the unemployment office downtown, where the crowds seem thicker than ever. He waits his turn to sit in front of a computer so he scan meager listings and send out fresh applications. Then, he returns home, to his sagging couch and his television, where cheerful news anchors tell him that the economy is looking up.

“They say it’s supposed to be better, that’s what I see on the news,” Mr. Vaughn said. “But I sure see a lot of people down at the unemployment office. I really don’t see how the job stuff is going to change. I don’t see any jobs out there.”

Last month, Mr. Vaughn thought he had a job, a position at a factory that makes flooring boards for $13 an hour. But two weeks before he was to go in for training, the company called him to revoke the offer.

“They said they had a hiring freeze,” he said.

And so Mr. Vaughn finds himself stuck in a crowded slice of a lean economy: another unemployed man living on the largess of a woman. His fiancée’s wages from her secretarial job pay the bills.

The latest job report amplified the reality that the pain has fallen particularly hard on men, who suffered a 10.7 percent unemployment rate in October, as compared to 8.1 percent among women. Among African American men, unemployment reached 17.1 percent in October.

Unemployment reached 9.5 percent among white Americans, 13.1 percent among Hispanics and 27.6 for teenagers.

Among all groups, the underemployment rate — a broader measure of the jobs shortfall which includes people whose hours have been cut, those working part-time for lack of full-time work, and those who have given up looking — is 17.5 percent.

Health care remained a rare bright spot, adding 29,000 jobs in October. For another month, construction and manufacturing led the declines, losing 62,000 and 61,000 jobs respectively.

Such were the details of a report dominated by a single fact: The official jobless rate now occupies two digits. More than a mere statistical marker, some worried that this could perpetuate anxiety, prompting a further hunkering down within the economy.

“It’s a benchmark,” said Mr. Baker. “It’s part of a general backdrop of economic news that does affect decisions by businesses and purchases of big ticket items.”

Javier C. Hernandez contributed reporting.

Generation Recession - Nation

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When David Thyme was an even younger man than he is today, his fantasies of early adulthood did not include a 9:30 pm curfew and a bed in Covenant House, a shelter for homeless youth. Then again, they also didn't include a recession so severe that his financially strapped father would ask him to help with rent--or that when he couldn't find an entry-level job to do so, his father would ask him to leave home. "He was like, Son, you got to do what you got to do. I can't have you in my house," recalled the thin-faced 18-year-old from the Bronx.

Shawn Bolden, an earnest 23-year-old from Harlem, also nursed a different vision of his youthful years. A graduate of Monroe College with a degree in criminal justice, he imagined dedicating his days to nurturing the minds of the next generation of neglected students, doing his part to solder shut the school-to-prison pipeline. But since losing his job teaching arts and college prep at a local nonprofit in June, he's been struggling to find his way back into the classroom, all the while worrying about feeding his newborn daughter.

And then there's Charles Channon. A 25-year-old graduate of George Washington University, he dreamed that his postcollege days would be devoted to an onward-and-upward career with an international development firm--or at least a job with which to pay off $65,000 in college debt. "I wouldn't pretend that there's absolutely no conceit in me, but I do want to get out there and make the best difference I can," he said.

So much for youthful fantasies.

These are not happy days for America's young and striving. Indeed, as the economy has rocked and tumbled its way through 2009, spewing jobs like a sea-sick tourist, these have become very, very bad days. In September, the unemployment rate for people between the ages of 16 and 24 hovered morosely at 18.1 percent, nearly double the national average for that month. At the same time, the actual employment rate for 16- to 24-year-olds dropped to a startling 46 percent, the grimmest such figure on record since 1948, the year the government began keeping track. Taken together, this same group of young people has lost more than 2.5 million jobs since the economy began deflating in December 2007, roughly one-third of all the jobs lost, making them the hardest-hit age group of the recession.

And it gets bleaker. Bad as the youth unemployment numbers are, the underemployment numbers are even more distressing, with young people once again taking the hit. During the second quarter of 2009, for instance, the underemployment rate for workers under 25 was an alarming 31.9 percent; for workers between 25 and 34 the underemployment rate was 17.1 percent.

All of which suggests that for all this country's unbridled fascination with the glories of youth; for all the teen-lusting TV dramas, wunderkind "it" kids and peewee tech moguls, to say nothing of all the industries built on making the rest of us look and feel teen-queen young--being a member of today's youth explosion isn't a particularly enviable position after all.

"Young people under 30 have been far more affected than other groups in the economy during the recession," says Andrew Sum, professor of economics and director of the Center for Labor Market Studies at Northeastern University. "And the younger you are, the worse off you've been."

The reasons for this are multiple and complex, but perhaps the one that young people cite most is their desperate new job competition: adults twice their age with college degrees and decades of experience are now applying for entry-level positions. Moreover, those young people lucky enough to have found work often fall prey to the old "last hired, first fired" syndrome, putting them right back where they started. The result is that young people are not only working less than at any time since the Great Depression but could suffer the consequences deep into their individual and collective futures.

"These effects are long-lasting; they're not short and measly-lasting," explains Sum, citing several studies suggesting that a slow employment start can have long-term consequences. In the case of white male college graduates, for instance, an influential study showed that for as long as fifteen years after college, those who graduated into the recession-rocked economy of the early 1980s earned less than those who graduated into a sunny employment market. Equally disturbing: those who work only part time when younger, as so many young people must now do, see little benefit to their future wages compared with those working full time.

"We are throwing out of the labor market those kids who will benefit the most from the work experience they get, and they will lose that for the rest of their lives," Sum warns. "That's why it really is a depression for young workers. And I don't use that word lightly."

This was not the graduation party that most young folks imagined when they daydreamed about their liberation into early adulthood. It's certainly not the champagne-and-streamers rager that millennial boosters and other youth gurus anticipated when they dashed off all those messianic star charts predicting that this new wave of young folks would usher in the next epoch of dreamers and do-gooder types: the next Great Generation.

And yet, bleak as the current climate is, the story behind the statistics is also far more complicated--and, in some ways, uglier--than many of the recent apocalyptic pronouncements about a "lost generation" and "dead end kids" would suggest (see BusinessWeek's October 19 cover story and the September 27 New York Post, if you dare). Certainly there are scads of lost young souls roaming the aisles of job fairs, cluttering unemployment offices and weighing whether it's more important to pay the electricity or the phone bill. But in this generation of 80-odd million, some people are far more lost than others, while some have the luxury of not being lost at all. Quite simply, the real danger of the recession is not necessarily a lost generation of unemployed millennials so much as a Swiss cheese generation where the places once occupied by the least affluent--particularly the least affluent people of color--have simply been carved out.

"I hope people are really clear that this is not an equal-opportunity recession, that it's hurting the weakest," says Dedrick Muhammad, senior organizer and research associate for the Institute for Policy Studies Program on Inequality and the Common Good, who has done extensive research on the recession's disparate, and decidedly racial, impact on the people of this country.

Once again, the data help tell the story. As reported by the Bureau of Labor Statistics in early October, young African-American teens between the ages of 16 and 19 have an unemployment rate of 40.7 percent, while young Latinos of the same age are unemployed at a rate of nearly 30 percent--both drastically higher than the 23 percent unemployment experienced by their white peers. Among 20- to 24-year-olds, the disparity is even more dramatic: while young white workers in their early 20s have an unemployment rate of 13.1 percent, their African-American compatriots are unemployed at the rate of 27.1 percent, more than twice as high.

Or as Sum summarizes, "If you are both low-income and black or low-income and Hispanic, you have lost the most. And if you are young, affluent and a woman, in terms of just labor market studies, you've done OK... although across the board everybody has lost."

These losses have stacked up quickly, but today's great youth crisis didn't happen overnight, the sudden result of an immaculate recession. For young workers--and in particular young, low-income and workers of color--the struggle began long ago, with the changes that began refashioning the economy as far back as the 1980s: the decline of unions; the long, slow death of manufacturing; the rise of the service economy; and the near-total disappearance of proactive government policy. The last decade in particular, with its post-dot-com recession followed by a jobless youth recovery, has been particularly bruising.

The result of all this has been that many of today's young people--again, especially the poor, those with less education and people of color--have a measurably harder road to travel than their generational elders, according to "The Economic State of Young America," a report published in spring 2008 by Demos, a New York-based research and advocacy organization. Between 1975 and 2005, for instance, the typical annual income for workers between the ages of 25 and 34 decreased across all educational brackets, with the exception of women with bachelor's degrees. Men without a high school diploma suffered most, their annual income plummeting by 34.2 percent, while men with a high school diploma or the equivalent earned the runner-up slot, with an income drop of 28.5 percent. As for women, those with less than a high school diploma, as well as those possessing just a diploma, lost less ground than their male counterparts; but then again, they're still doing worse than before and, perhaps more to the point, they still fare significantly worse than men their age.

At the same time, today's young workers have had to do more with less. College tuition rates have skyrocketed--in fact, rates for four-year public universities have more than doubled since 1980--with the unsurprising result that nearly two-thirds of students graduating from four-year colleges in 2008 left in debt. The cost of childcare now eats up as much as 10 percent of a two-parent family's income in many states (as much as 14.3 percent in Oregon). And young people between the ages of 19 and 34 are the most likely population to be uninsured--not because they don't want health benefits but because employers don't offer them. A case in point: 63.3 percent of recent high school graduates had employer-provided healthcare in 1979, whereas just 33.7 percent had it in 2004.

"What we're looking at is a situation where young people entered the recession already feeling the brunt of thirty years' worth of pretty gradual but nonetheless dramatic economic and social changes," says Nancy Cauthen, director of the Economic Opportunity Program at Demos. "The recession just made a bad situation worse."

Thankfully, there's something of a pewter lining surrounding all this bleakness: not only are certain swaths of this generation among the most politically engaged in decades but the generation's politics in general trend decidedly toward the progressive. Indeed, many young people have already begun coming together, in protest and coalition-style advocacy, to push for everything from green jobs to increased bank regulation to state budgets that aren't balanced on students' backs (thank you, University of California protesters!).

This is promising, since the list of much-needed solutions to young people's recession problems is long and daunting--beginning, many researchers agree, with the need to create more jobs: green jobs, Job Corps jobs, public works jobs, even tax credit-induced jobs. However, these can't be just any old jobs; they must be jobs targeted toward young people, jobs for which employers are induced to hire the youthful, inexperienced and most vulnerable, because, as Sum says, "Very few kids are being hired by the stimulus." His solution: pull them into the workforce either through direct job creation, partial subsidies or targeted tax credits to youth-hiring businesses. Moreover, he advises, these jobs also must last longer than a brief six- to twelve-week summer fling. That's how long the roughly 284,000 summer youth jobs funded by the stimulus lasted, even though there is almost no evidence that a quickie summer job has any lingering effect on a young person's long-term prospects--though there is evidence that summer jobs that extend into longer-term employment help quite a bit, according to Sum.

But above all, these new jobs have to be far more plentiful and ambitious in scope than the ones created thus far, not the least because it will take years for the country to crawl out of the vast employment hole, roughly 10.7 million jobs deep, created by this recession. And while 284,000 summer youth jobs certainly represent an important start, they not only don't meet the current need but seem downright piddling compared with the nearly 1 million government-sponsored summer youth jobs that existed during the late 1970s.

"This is classic of Obama's situation: Obama can double something or increase it 100 percent from the previous administration, but it's still so insignificant to the problem," explains Dedrick Muhammad. By contrast, he observes, "Wall Street's booming because the government took seriously their problems and did a massive intervention."

Of course, even if a slew of youth jobs materialized overnight, it would only be the beginning, since, as Cauthen cautions, "the recession could end tomorrow and that's not necessarily going to mean a bright future for young people." For that, she and others have argued, this generation needs more systemic, probing change, including easier access to the protection of unions in the form of the Employee Free Choice Act, more affordable health insurance in the form of universal health coverage, childcare that doesn't decimate their paychecks. And that's just for starters. With these policies in place, the rising generation still has a chance at the starry future that's been predicted for it. Without them, well, just imagine the way things are now--and then extrapolate.

Two recent events in New York City illustrate the way the world is trending for two very different groups of young people--the young and bailed-out versus the young and bailed-on. The first took place amid the brick-and-ivy greenery of Columbia University, in the world of the bailed-out. It was mid-September, and several hundred college students had packed into the school's Faculty House for an intimate evening with a team of Goldman Sachs recruiters. A year earlier, these recruiters probably seemed like a dying species, a herd of expensively dressed mastodons taking their valedictory spin, while the sober-suited students must have looked almost pitiable. But on this evening, the recruiters looked very much alive--downright brash--as they wooed the standing-room-only crowd of eager if anxious-looking students. Clutching brochures that urged them to "make the most of your talent," these students listened in unblinking awe as the recruiters spoke of their bank's "competitive advantage," its "global impact," the golden "opportunity" that awaited all Goldman employees, old and young.

And in case the students missed the point, there was a promotional video, starring a comely squad of young analysts (all programmed, it seemed, to repeat the word "unique!"), that ended with the cultish mantra, "I believe, I believe, I believe in Goldman Sachs." It was as if it were 2006, not 2009, as if the good old days of overpaid young analysts with Town Cars and expense accounts were back again--which, thanks to the government, they essentially are.

"If you do well and you're ambitious, you really can do well," a handsome young trader of mortgage-backed securities promised a throng of students who'd gathered around him for advice.

Meanwile, several weeks earlier, in a part of town not touched by bank bailouts, a very different scene played itself out in a Covenant House conference room. There, nine homeless New Yorkers between the ages of 18 and 20--among them, David Thyme--huddled around a table topped with pizza and soda and shared their failed attempts at finding a job. All of them wanted one, but none had managed to find one despite months of scratching at the closed doors of just about every fast-food, retail and service joint in town. According to Jerome Kilbane, Covenant House New York's executive director, the organization's job training program has placed 40 percent fewer young people over the past year.

"It's kind of discouraging when you go out and you come back empty-handed every day," said Samantha, a serious-faced 19-year-old who dreams of becoming a physical therapist someday but is currently so strapped for cash she can barely afford a MetroCard to look for a job.

"I feel if I had a job I wouldn't be here," added Leonda, who is charismatic, chatty and also 19. "Not to say that this is a horrible place, but I'd be able to stand on my own two feet and live as an adult and be me."

Samantha and Leonda, who are part of a wave of homeless young folks that has swollen the ranks of Covenant House's residents by 25 percent, expressed deep anxiety about their future. But they also knew their worth. When asked what they wanted to tell the people in power, Samantha didn't hesitate.

"I say, We are your future. If we don't make it now, then who's going to take care of you when y'all is in y'all retirement phase?" she asked. "If we don't make it out of this, then basically the whole world don't make it out of this."

Gelato U. - Time

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By Nina Burleigh / Bologna

Some students arrive in Bologna, Italy, with just a secret indulgence — without shop locations, business plans or $70,000 on hand for must-have machinery. They head to Carpigiani Gelato University to learn how to turn sacks of sugar and crates of oranges, kiwis, lemons and persimmons into spoonfuls of earthly bliss.

Gelato is the ultimate refinement of a Mediterranean flavored-ice tradition that supposedly dates back to the ancient Egyptians. In the past half-century, Italians have designed machines — engineered and produced in the same region as Ferraris and Lamborghinis — that can produce ever tinier crystals of ice, allowing for less water, less air and more taste. (See pictures of Gelato University.)

For three weeks every month, 20 to 30 students from the world over gather in Bologna inside a tiered lecture room in a Jetsons-style building erected in the early 1960s for the brothers Carpigiani, who perfected the first electric gelato machine. There, a gelato maestro shows them how to transform lowly buckets of cream or bags of fruit into cold, concentrated flavor that often has half the fat of American ice cream.

Besides the secret of perfect gelato, many students are attracted by the sweet dream of self-employment. Gelato is a major growth business worldwide, a cheap luxury defying the recession as people turn to smaller pleasures. And despite the $1,052 tuition for a weeklong session, so far this year enrollment at Gelato U is up 87% compared with the same period in 2008. Who's signing up? "Mostly 40-year-olds looking for a new life," says Patrick Hopkins, director of the six-year-old educational offshoot of the Carpigiani company, which produces a majority of the world's gelato machines. (See gelato recipes from a Gelato University maestro.)

"About eight years ago, I got the idea" to become a gelato artisan, says a 45-year-old student, a European executive who asked not to be identified by name or even home country for fear of tipping off employers to a possible midcareer switch. "I figure I have about 15 years of energy left. Do I want to spend it climbing the corporate ladder? Or do I finally do this?"

Maestro Gianpaolo Valli whips such students into shape. "You need to know what makes a strawberry!" he shouts. His lively lectures, delivered in deliriously Italian-cadenced, non sequitur — studded English, cover such topics as how to identify a fruit's sugar content and how to do the surprisingly complicated math of balancing sugar (an antifreeze) and fat (the opposite): "You increase the fat content, but it freezes. So you need to compensate with sugar. You say, 'Maestro, not possible!' Yes, it is possible! I show you!"

Students attending Gelato U aim to build their gelaterias in far corners of the globe. They know that real gelato is a delicate thing that cannot survive being taken out and put back into a freezer, that it is best consumed where it is made. That's what Melissa Green, 36, an HR manager in Tampico, Ill., learned in September during her first trip to Italy, when she consumed her first gelato. After a few bites of green apple, a light went on, illuminating her future: "I tasted this, and I was like, We have got to bring this back home."

See pictures of Italian coffee.

See the top 10 food trends of 2008.

BBC - Fugitive Thai banker faces trial

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A fugitive Thai banker has lost a 13-year extradition battle and has been put on a plane back to Thailand from Vancouver, Canada.

The Thai authorities accuse Rakesh Saxena of defrauding more than $80m (£48m) from the Bangkok Bank of Commerce - something he denies.

The bank's collapse in 1996, under the weight of bad loans, exposed regulatory failures in the Thai banking system.

Thai officials say the collapse helped spark the 1997 Asian financial crisis.

Mr Saxena has argued that he would be harmed if he returned to Thailand and that he would not receive a fair trial.

But when his lawyer, Amandeep Singh, and his mother, Amrit Sarup, left Vancouver Airport where Mr Saxena was put on a plane, Mr Singh described his client as confident.

Many charges?

"He has chosen not to pursue any more legal challenges here, and ... he'll pursue his legal case in Thailand. He's very confident," Mr Singh told AP Television News.

"He's in good spirits when I spoke to him last, and we will keep abreast of his case in Thailand."

The fugitive is expected to land in Bangkok late on Friday after taking a Thursday afternoon flight from Vancouver to China, and then from Beijing to Thailand, Bangkok.

Thai authorities are reportedly dusting off dozens of case files relating to Mr Saxena's activities - a spokesman for the Office of Thailand's Attorney General told reporters that Mr Saxena has over 20 cases pending against him.

But Mr Singh argued that extradition law provided for trial on one charge only and said he had been assured by the Thai justice department that this would be the case.

Loss of confidence

Mr Saxena, who suffered a stroke last March and uses a wheelchair, was an adviser for the Bangkok Bank of Commerce when Thai authorities charged him in 1996 with setting up a series of phoney loans to siphon millions from the bank.

He fled Thailand and was arrested later that year in the British Columbia ski resort town of Whistler.

The collapse of the bank under $3bn in debts - partly accumulated by unsecured loans made to Thai politicians - created a loss of confidence in the Thai banking system that is blamed for helping to trigger Asia's economic crisis a year later.

Mr Saxena has maintained he is being made a scapegoat by well-connected executives of the bank and by financial regulators embarrassed by the scandal.