www.adage.com February 10, 2003 QwikFIND ID: AAO42D

By Conrad Dahlsen and Laurel Wentz

CARACAS, Venezuela (AdAge.com) -- Marketers and ad agency staff trickled back to work last week in This video is one of the 200 anti-government ads produced and aired during the strike. It documents what started as a clash between pro- and anti-government crowds that ended with both sides playing soccer.

DOWNLOAD Download the .pdf photo page from the 02.10.03 print edition of Advertising Age: 'Venezuela's ad offensive'.

Venezuela after an economically disastrous general strike failed to oust populist President Hugo Chavez, who has already started reprisals against Venezuela's media.

Against government Commercial advertising, by agreement between the National Association of Advertisers and the media, disappeared until the strike, called Dec. 2, ended.

For two months, the only commercials on Venezuelan TV were the opposition's relentless barrage of powerful and often witty anti-Chavez spots.

"We made over 200 commercials," said Arturo Casado, president of the Venezuelan Federation of Advertising Agencies and of Publicis Groupe's Leo Burnett Venezuela. Fifteen agencies worked together, although most shops and clients were closed until Feb. 3 in what one agency executive called a "collective personal decision" to support the strike.

Threats Mr. Chavez's often-violent supporters took note of the ad blitz. "I got threatening phone calls," said one agency executive. "I couldn't believe it. Talk about scared."

Now Mr. Casado says the effort will continue. But the Venezuelan economy is in tatters.

"Packaging companies have been on strike. The gasoline shortage makes it hard to get goods to market. And now exchange controls make it problematical for manufacturers to import raw materials," said Gloria Chibas, executive vice president at Publicis-owned A.W. Nazca Saatchi & Saatchi.

Procter & Gamble At Procter & Gamble Co., the largest advertiser in Venezuela's fast-shrinking $1.8 billion ad market, about 60% of workers were out during the strike, said Antonio Boada, P&G's director-corporate communications in Caracas. Now they're back, but without much to do. Production is down because raw materials are scarce and distribution channels are disrupted, leaving supermarkets running low on P&G brands, he said.

"It's impossible to foresee what is going to happen," said Bobby Coimbra, president of WPP Group's J. Walter Thompson, Caracas. "We are going to survive, but getting back to normal will take a long, long time."

Reprisals Fears are growing that Mr. Chavez will seek to punish both the media and business community who continue to oppose him. His government last week added leading network Venevision to the four TV channels under investigation for alleged violations of the Telecommunications Law, which could lead to fines, suspensions or even closure.

The networks attacked Mr. Chavez throughout the strike. The opposition Democratic Coordinating Committee's commercials, which aired frequently, criticized his record, advocated early elections and tried to promote harmony among Venezuelans to counter the populist president's tactics of fostering enmity between rich and poor.

Aimed at an ad-savvy population, one spot parodied MasterCard's "Priceless" campaign and another used rival brands such as Coca-Cola and Pepsi-Cola to stress that differences can exist without violence. A series, the popular "Chavez vs. Chavez," juxtaposed the president's promises with his contrary actions. In one spot, using real footage and rock group Queen's "We Are the Champions" as a soundtrack, Chavez supporters turn up at an opposition march, but instead of fighting, the two sides play an impromptu game of soccer in the street.

DirectTV One commercial, responding to a government official's ridiculous claim that satellite channel DirecTV recorded everything that went on in subscribers' homes, showed a man reaching through a TV screen to gather cassette tapes.

In addition to his battle with the TV networks, Mr. Chavez has also threatened to punish his foes in the business community, whom he refers to as "coup plotters," by withholding access to U.S. dollars they need to import the raw materials on which the Venezuelan economy depends heavily. He imposed foreign-exchange controls last month.

A few ads are reappearing on TV and in print media. TV channels have notified advertisers that any space remaining from their 2002 upfront purchases can be used to buy airtime until March 15.

No income for two months During the strike, agency staff met periodically to try to plan for the unplannable, and took to the streets at night in massive, flag-waving protest marches. With no income for the last two months, agencies are coping differently. In January, JWT, Saatchi and WPP's Ogilvy & Mather told staff to take their 2003 vacation time. WPP's JMC/Young & Rubicam has had about 20% of staff working half-time for half their usual pay, and the rest on unpaid leave.

Economists forecast that Venezuela's economy may contract by 25% this year, as a result of the nationwide strike, the continuing stoppage by many oil workers and the government's economic policies.

Was it worth it? Opinion is divided over whether the strike was worth it.

"It brought international attention to the situation in Venezuela," Mr. Casado said. "It also made citizens aware that the only way out is electoral."

Not everyone agrees. The strike "didn't achieve its goal," said Maribel Lopez, creative vice president of JMC/Y&R. "The cost is gigantic."

www.chicagotribune.com

A hard-charging banker left Goldman Sachs to join the State Department's Counterterrorism Finance and Designation unit, tracking the financial trail and battling a bureaucracy

By Marja Mills Tribune staff reporter Published February 10, 2003

WASHINGTON -- The day was just beginning, but already Celina Realuyo was hurrying down the long corridors of the State Department. Perpetually in a rush, the counterterrorism adviser was doing her trademark speed walk in the 2-inch heels that lift her to a full 5 feet tall. She was on a mission, the ritual that marks the one predictable slice of her day. Realuyo ducks into a little store in the basement and plunks down the usual $1.87 for a bottle of mango juice and a copy of The Washington Post. The morning sip of sweet mango juice she can count on. After that, all bets are off. "The nature of this job is that you're at the mercy of events but at the same time, there is so much planning to do for later," said Realuyo, 36. "There just isn't enough time." A former banker with a Harvard MBA, Realuyo was at her desk in Goldman Sachs' London office when the terrorism of Sept. 11 struck back home. Now she is part of the complicated -- some might say insurmountable -- effort to track how terrorists get and move their money and to try to stem the flow. Realuyo is a policy adviser with the State Department's Counterterrorism Finance and Designation Unit, one of six people assigned there full time. She offers training to foreign government officials and bankers -- those who want it -- on preventing and prosecuting money laundering, and on screening out potential clients on terrorist watch lists. "It takes money for [terrorists] to train, to travel, to carry out their plots," Realuyo said, citing the Al Qaeda operatives who pulled off the Sept. 11 plot. "It's just a piece of the puzzle," she said, "but it's a big piece." Despite a resume in overdrive and a high-security clearance, Realuyo is the first to say she is merely a cog in the wheel in the country's mounting effort to thwart terrorism. Her hectic, often frustrating routine offers a glimpse at life in the trenches for one woman drafted into this amorphous thing called the War on Terrorism. Declared by President Bush after Sept. 11, the War on Terrorism has its more visible components, of course: the troops amassed in Kuwait for the threatened invasion of Iraq; the stepped-up security at American airports; the congressional vote to create the massive new Department of Homeland Security. And then there is the kind of largely low-profile, long-range counterterrorism work Realuyo does. It is heavy on meetings and endless coordination among other federal agencies. Between trips to assess banking practices in different countries, and offer training in tightening them, Realuyo often is at her State Department cubicle well into the evening, writing reports. Computers and spreadsheets As she wryly puts it: "It's not like we're doing covert ops with night-vision goggles." Instead, Realuyo's tools are computer software and spreadsheets, PowerPoint presentations and the blue Mead spiral notebook she fills with notes and contact information at terrorist finance meetings around Washington and the world. She is one of many private sector executives who, since the terrorist attacks, have enlisted in one way or another in the government's response. The new Transportation Security Administration, for example, has been the beneficiary of a group of executives from companies such as Disney, Intel and Marriott, who went to Washington to direct the "go-teams" that helped launch one of the largest new agencies in the history of the federal government. Realuyo, born and raised in Manhattan, was leading a far different life only a year and a half ago. A gregarious, hard-charging former U.S. Foreign Service officer, Realuyo had left the government in 1998 to earn an MBA. She was an international banker with Goldman Sachs in London, talking by phone with a client, when she glanced up at the office television sets on Sept. 11. Live footage of the smoking south tower at the World Trade Center flashed across the screens. She watched the second jet hit the north tower, saw the Pentagon in flames. It didn't take long, Realuyo said, for her sense of fear to give way to fury. The next week, she spoke by phone with Maura Harty, her mentor and former boss at the State Department. Harty made her pitch. "We need people like you," she said, " . . . who can follow the money." And not just that. Realuyo already "knew the building," in the lingo of the State Department. She is fluent Spanish and French, and speaks some German, Italian and Tagalog, the language of her parents' native Philippines. An international relations junkie since high school, Realuyo was raised in New York but had traveled the world with her mother, a cardiologist, and her father, a prominent New York attorney who once served as a Filipino diplomat. Realuyo earned international affairs degrees at Georgetown University and Johns Hopkins. In the Foreign Service, she was assigned to the American embassies in Spain and Panama and the U.S. mission to NATO. She also helped monitor international crises in the Situation Room, the nerve center of the White House. When she spoke with Harty, Realuyo said, she was intrigued by the anti-terrorism prospect, but unsure about going back to Washington. She would have to take a steep salary cut, uproot herself, and once again contend with the bureaucracy of the federal government. She debated the possibility with a close friend, Pam Schneider, who also had left the State Department to earn an MBA. Schneider understood why her friend was torn. "It's just a matter of does your heart or your head win out at any given time," said Schneider, a Chicago marketing consultant. "Your heart wanting to go back and do what you are passionate about and [wanting to] make . . . a difference in the world versus your head, which says you're dealing with so much bureaucracy and b.s. and being a cog in the wheel and they pay me nothing and I could be making lots of money in the private sector. That's kind of the dilemma constantly." Finally, Realuyo decided to go with her heart. "I was just so angry [about the terrorism]," Realuyo said, "and I was in a position to do something about it." A series of job interviews followed, then an extensive security check. She was in. By June of last year, she was working at the State Department. Tired of bureaucracy Six months later, Realuyo still has that passionate sense of purpose, she said, but is weary of her grinding schedule and the frustrations of trying to coordinate among the many agencies involved in anti-terrorism efforts. "The admin stuff,'" she said, "is a killer." In Washington, anti-terrorism programs sprawl across countless federal agencies, from the CIA to the FBI, from the National Security Agency to the Pentagon, from Customs to the Coast Guard. The new Department of Homeland Security is being assembled in the largest reorganization of the federal government in half a century. By March, the department, led by Secretary Tom Ridge, is expected to draw an estimated 175,000 employees from 22 federal departments and agencies. Realuyo and her State Department colleagues will remain separate from the Homeland Security Department. But many of those with whom they must coordinate -- from law enforcement officials to Treasury Department employees -- will be folded into the Homeland Security behemoth. "The problem we have," Realuyo said, "is a lot of the people we work with at Treasury don't know if they have a job at Treasury or at Homeland -- what they will do, and that will be a big blow to how we do things. . . . " That sense of limbo was palpable in Realuyo's office in makeshift quarters on the State Department's 8th floor. Other than the blue fighting fish darting around a small fishbowl -- an apropos gift from her young goddaughter -- Realuyo has not bothered to put out many personal effects. Larger quarters This spring, she is scheduled to move to the second floor and the expanded quarters of the State Department's counterterrorism office. The Office of the Coordinator for Counterterrorism, as it officially is called, has tripled in size since Sept. 11 to about 100 people. The new counterterrorism coordinator is Cofer Black, former head of the CIA's anti-terrorism center. U.S. efforts aimed at hampering terrorist financing abroad include pressing for tighter money laundering laws and banking practices in different countries, encouraging institutions overseas to freeze or seize assets of groups designated as terrorists, and seeking more regulation of charities, another source of terrorist funding in some cases. Privacy and sovereignty issues shadow many of the efforts to crack down on international terrorist financing. So does the question of how effective such initiatives can be. They take place against the daunting backdrop of global money markets that send $1.5 trillion spinning around the globe every day, in everything from legitimate investments to currency speculation to tax dodging to mafia money-laundering to terrorist financing. With computer and satellite technologies and uneven banking practices internationally, it is relatively easy to deposit and move money many places with few questions asked, or paper trails left. International finance experts predict that is unlikely to change anytime soon. Spreading the banking gospel But Realuyo is passionate about the need to spread the gospel about banking practices, many of them what she calls "the basic stuff" that could make it harder to move money for terrorist purposes, or, in other cases, easier to prosecute after the fact. Her colleague Mike Gayle gave this example. An overseas terrorist group on a watch list is denied access to banks to wire funds to the U.S. for a planned attack. The snag doesn't stop the plan necessarily, but it makes it harder to execute. "It increases the chances they'll get caught . . .," Gayle said, "maybe smuggling money into the country. . . . We're trying to narrow their options and make everything harder." Asked for examples of what the anti-terrorism financing work has yielded so far, Realuyo declined to say. Those are classified, she said. "We have made a dent in disrupting the terrorist financing network but we can't say because these groups don't know how much we know." According to Realuyo, success in the broadest terms for counterterrorism finance specialists has included helping uncover terrorist plots before they unfolded, and gleaning valuable information from money trails left by terrorist groups. "People ask Why are we spending money on other countries?'" Realuyo said. "We want to detect, disrupt and dismantle terrorist networks before they reach U.S. shores." The U.S. maintains lists of groups and individuals designated as terrorists, as does the United Nations. Realuyo's job aims, in large part, to assess what the banking practices are in different countries and to recommend ways to tighten them. Endless paperwork When she is not overseas, about half of each month, she is writing reports on the last trip, coordinating the endless logistics of planning the next ones and dealing with day-to-day classified matters she will not discuss. The assessment trips are a hit-and-miss proposition: The small U.S. delegations she organizes go only to countries that want them, according to Realuyo, and those countries are under no legal obligation to follow the groups' recommendations. On a trip to Caracas last fall, for example -- one complicated by the political and economic instability there -- she and a small U.S. delegation gathered with bankers and government officials in informal meetings. The sessions are designed to be educational, not confrontational, she said. "What we do is preach to them the best practices in the U.S. and what has worked in terms of knowing who your clients are, knowing what their activities are," Realuyo said. "If you see a transfer to a country you've never seen them transfer to before, it should be a red flag." She ran through her other usual questions with bankers, including: Do you require two forms of identification before opening an account for a new client? Do you ask to see a pay slip? Do you report to a federal agency wire transfers above a certain amount? In the U.S., that amount is $10,000. Do you have name-checking software designed to catch individuals or groups on lists of designated terrorists? Do you have a compliance officer keeping up with the lists as names are added? Do you create electronic records of transactions, a money trail investigators can use to trace criminal activity? In Asuncion, Paraguay, Realuyo and a similar team conducted seminars on the topic for bankers from several South American countries. The plan is to do this in dozens of countries, region by region. Other State Department trainers have made similar trips to some Middle Eastern countries, Realuyo said, though she declined to name which ones. When she meets with bankers, Realuyo emphasizes her own banking credentials. "It's hard to talk to bankers with credibility unless you've been one of them," she said. "They tend to look at the regulators and pooh-pooh them as people who have not been practioners." Realuyo usually travels with a State Department colleague experienced in investigating money laundering issues, plus a few people from other agencies. "It's always like Noah's Ark: two from Treasury, two from Justice, two from State," she said. Hence the constant meetings and e-mails in Washington to coordinate among those entities, and others, such as the National Security Council, that have a piece of the counterterrorism finance initiatives. "I probably spend half the day running up and down the stairs to try to coordinate things," Realuyo said. "Coordinating trips, finding money for training programs . . . finding trainers." So she can only roll her eyes at the image her counterterrorist title conjures up among her old banking buddies. "I'm always telling my friends, No, I'm not Sydney on Alias,'" Realuyo said. In the popular ABC television show, a glamorous young spy travels the world to go hand-to-hand with shady operatives, foiling dastardly plots before disaster strikes. As Gary Novis, a colleague who often travels with Realuyo, puts it: "The popular image is James Bond, but the reality is it's a lot of hard groundwork. It's analyzing data, doing assessments, collating it with other reports, dealing with bureaucracies." Dealing with bureaucracies has gotten harder with so many federal agencies involved in anti-terrorism initiatives. "You have all these agencies competing for the mandate and the money," Realuyo said. "The policy is run out of the White House: It's like a bunch of people vying for Dad's attention type-of-thing." Struggling with the beast Stephen Flynn, a senior fellow with the Council on Foreign Relations in New York, oversaw a recent report on U.S. efforts to combat terrorism. "There is still very much a struggle with what this beast is and how we approach it," Flynn said. "We don't have the equivalent of the containment strategy we had during the Cold War that starts to provide an organizing construct for everyone. It makes it very, very difficult to bring people with disparate interests together and say, That's where we're going; that's what we're doing.'" At the State Department, Realuyo said, senior staff members gather every morning at nine in the blue-carpeted office of Black, the new counterterrorism chief. "It's a lot about the crisis du jour," Realuyo said of the meeting, often whatever terrorism-related news is in the headlines. Realuyo does not attend that meeting. By 9:30 a.m., she is getting assignments from those who did on any immediate tasks. A recent CNN report about a suspected terrorist group having targeted an American school in Singapore, for example, sent Realuyo scrambling for background for her higher-ups. The planned attack was foiled in 2001 after Singapore authorities arrested a group of suspected Islamic militants, she said, and was only recently announced by the Singapore government. It was not the immediate crisis she first thought from the news report. "It's almost like CNN runs your day," she said. If Black or Secretary of State Colin Powell need background reports for overseas trips as they arise, Realuyo and her colleagues sometimes are called upon to prepare briefings. That means reviewing intelligence, doing research, writing reports. The press of events competes with the planning of the assessment trips overseas. Her first morning back from two weeks in Panama and Venezuela, for example, Realuyo drank her usual bottle of mango juice at her desk while clicking through some of the 400 e-mails awaiting her. She scanned recent intelligence reports about the so-called Triple-Frontier area where Brazil, Argentina and Paraguay converge. The region had just been in the news as a possible Al Qaeda breeding ground. Realuyo knew she might have to give a briefing on the matter any day to the staff of the Senate Foreign Relations Committee. At a meeting with representatives of the Treasury Department and several others involved in the overseas training, Realuyo updated them on the South American trip. "Panama, thumbs up," Realuyo said. The Panamanians were amenable to a training seminar; the U.S. group had found wired classrooms in which to conduct the classes later. "We played up the You can serve as the model for your region,'" Realuyo said. "And they ate that up." Then it was on to discussions of Venezuela; a conference in response to the October Bali nightclub bombings that killed 192; questions of which agency would pay for what. It was 9:30 p.m. that first day back before Realuyo had finished her rounds of meetings and calls and reports. Afterward, a colleague joined her for shop talk over a dinner of sushi and smoothies at Wholesome Foods in Georgetown. Realuyo keeps up with old friends, but most of her time these days is spent with people from work. "There aren't that many people who can really relate to this job," she said. "And because of security, there are only so many people you can talk about your day with." By 11 that night, Realuyo was home, a one-bedroom apartment in an upscale complex not far from her office. Realuyo, who is close to her parents and brother, said she had set herself a "drop dead date" of age 35 to be married and having children. Her schedule isn't helping in that regard. "I guess," she said, "I'll have to move it to 40." That night, Realuyo e-mailed some friends, caught an 11:30 rebroadcast of Lou Dobb's "Moneyline" on CNN and drifted off to sleep. In six hours, it would be time to get up and start again.

www.centredaily.com Posted on Mon, Feb. 10, 2003 BY FAYE FLAM Knight Ridder Newspapers

PHILADELPHIA - KRT NEWSFEATURES

(KRT) - In the near future, individuals may be able to pinpoint which diseases they should worry most about - heart disease, Alzheimer's, stroke, prostate cancer or multiple sclerosis.

The medical crystal ball will be high-tech, inexpensive, personal genetic testing, which could be available in just five to 10 years, according to some medical researchers.

"This will create a profound revolution in medicine," predicts Leroy Hood, a molecular biologist at the University of Washington. "Medicine will become predictive, preventive and personalized."

Hood and other scientists gathered last month in Los Angeles at a seminar focused on the increasing power of genetic testing.

Such testing will offer more than just a window on your future demise, Hood said. The same technology that exposes your personal health demons could also provide strategies to battle them - new drugs to "overcome the limitations of your genes."

The seminar was organized by Gregory Stock, director of the Program on Medicine, Technology and Society at the University of California, Los Angeles.

Stock said he believed humanity stood at the dawn of a revolution people would remember for millenniums.

"Genes are the biggest window into who we are, and we are drawing back the curtain," he said. "This will call into question what it means to be a human being."

The seminar was prompted in part by the completion three years ago of the $3 billion public and private undertaking known as the human genome project. The result was a sequence of letters that represented the entire genetic code - the full complement of DNA - for a small sample of people from different ethnic groups.

Hood said he believes that in a few years many people will have their own complement of DNA sequenced and stored on a floppy disc for less than $1,000.

The genome project didn't sort out which genes had any bearing on health or illness, but such work is under way.

Scientists are looking for what they call polymorphisms - places where the genetic code differs from person to person. Some of these differences have no apparent effect while others influence people's vulnerability to disease.

Some of the latest findings have come from Iceland, where Keri Stefansson of the private company DeCode has undertaken to analyze the DNA of the 275,000 residents of his country. So far, about 70,000 people have been analyzed.

Because Icelanders keep detailed genealogy and medical records, Stefansson said, he has been able to trace patterns of disease in families and then search the DNA for genetic differences that might be responsible. In one family, he said, there were cases of a variety of cancers - melanoma, prostate cancer, pancreatic cancer and breast cancer - all, he said, related to some genetic quirk present in that family.

He has also isolated a genetic variant that appears in about a third of Icelanders with schizophrenia. The gene, he said, helps in the remodeling and growth of neurons in the brain. The finding, he said, may help scientists understand what causes schizophrenia and perhaps lead to new treatments.

But some people may not want to know their own genetic heritage in too much gory detail.

"You're going to get a lot of information, why you get frequent colds, whether you'll get cancer or ALS or Alzheimer's disease, why you're a pain in the neck," said Nancy Wexler, a medical researcher from Columbia University. "All of these have genetic components."

The knowledge gained from genetic tests, she said, "is going to affect the rest of your life."

Wexler knows firsthand about contemplating such tests, she said, because she learned when she was in her 20s that her mother was ill with Huntington's disease, an incurable neurological disorder that strikes people around their 40s and leads to a slow, horrific death. Wexler's father told her and her sister that each of them had a 50-50 chance of inheriting their mother's fatal genetic disorder.

Wexler, 57, is probably safe, since she is past the age that most people with the disorder develop serious symptoms.

As a medical researcher, she went to Venezuela to study families in which the disease was particularly rampant, and eventually helped to isolate the genetic flaw, making it possible to test people for Huntington's disease.

But most people who live with those 50-50 odds opt not to take the test, she said, preferring to go on in uncertainty. She read some quotations from people who had the test and got bad news. "It was like a loss, a loss of dreams," one read.

As other tests come along to assess risk for other fatal and possibly incurable diseases, she said, people have to keep in mind that the knowledge is irreversible - you can't ever go back.

There may be other cases, however, where advance knowledge can save your life. Icelandic researcher Stefansson said his analyses uncovered a gene that influences whether people develop pulmonary obstructive disease (chronic bronchitis and emphysema). The disease is almost inevitable if people with the genetic variant are smokers. But if they don't smoke, they will almost certainly not get the disease.

Stefansson said he anticipated most of the genetic tests that would become popular would involve preventable diseases. That way doctors will no longer give everyone the same advice - don't smoke, drink in moderation, avoid saturated and hydrogenated fats, exercise.

Instead, he said, doctors will be able to pinpoint which parts of the standard medical mantra will be particularly important for each patient.

Hood said he foresaw the ability to isolate genes that influence behavior - including variants that make people prone to behave violently or otherwise inappropriately.

"I think inappropriate behavior will have to be treated the same way we treat cardiovascular disease or cancer," he said. "But this opens up fascinating questions about what is normal and what is abnormal."

straitstimes.asia1.com.sg

BRASILIA - Plastic surgeons are running out of silicone because so many women want breast implants ahead of the world-famous carnival.

According to online news website Ananova, the rush for implants in Brazil is at record levels, ahead of the carnival which is scheduled to begin on March 1. Advertisement

The website quoted Dr Paulo Matsudo, director of the Brazilian Society of Plastic Surgery, as saying that the demand for breast implants had shown a tremendous increase this year.

'The summer time plus the proximity with the carnival are increasing the demand for silicone breast implants and imports are not sufficient to meet so many requests,' he said.

Perrose Pherthese silicone company spokesman Sandra Guerra said:

'The demand is too high.

'We have lost many sales in the last couple of months because we don't have enough prosthesis.'

Dr Matsudo said a new trend was that more and more Brazilians were looking for buttock silicone implants.

'Brazilians value the buttocks very much. We are doing lots of this kind of surgery as well,' he said.

focus.scmp.com

   In recent months alarm bells have started sounding about the rise of inequality in China. Breakneck economic growth has brought riches to a few, a comfortable life for an urban minority and not much to the rural majority.

If left unchecked, the thinking goes, rising inequality could turn into a tidal wave of social unrest that could even threaten the Communist Party's grip on power.

The party appears concerned enough about the widening gulf between rich cities and poor countryside that the incoming leadership has made raising rural incomes a top priority, at least in its rhetoric.

But inequality is not, in fact, a serious threat to social stability. To understand why, one must first recognise that inequality is a far more complex phenomenon that casual discussion usually suggests.

There are at least three different types of economic inequality in China; inequality in individual incomes, inequality between urban and rural incomes, and inequality between the richer (mostly coastal) and poorer (mostly inland) provinces. This week we will look at the first type; next week, at the other two.

It is beyond doubt that inequality in individual incomes has been growing faster in China than anywhere else in the world. The usual measure of this kind of inequality is the Gini coefficient, which ranges from 0 (all incomes are equal) to 1.0 (one person has all the income).

Between 1990 and 2000, China's Gini coefficient rose from 0.36 to 0.44. This level of inequality is about average for Asian developing countries and well below that of famously stratified societies such as Brazil and India. But China is the only significant economy in Asia where the Gini has risen steadily.

The trend is worrisome but not catastrophic. A poor country that suddenly starts getting richer will naturally see a rise in income inequality.

This inequality can become a social problem not when the Gini rises to a particular level, but when large groups of people are imprisoned in have-not status. This stratification can have social causes, such as ethnic, caste or apartheid barriers; or geographic or political obstacles may prevent people from moving from poor areas to regions with more opportunity.

But China has far fewer ethnic or caste barriers than most other developing countries. And as we showed last week, contrary to popular opinion, China's labouring masses are among the most mobile in the world.

This is not to say such work is always pleasant or safe. But the problem of sweatshop labour is not a problem of inequality, it is a problem of justice.

The solution lies not in equalising the wages of worker and boss, but in creating and enforcing suitable labour laws.

The pressure on the government to provide a modicum of justice for its poorer citizens is probably greater in China than elsewhere. Gross inequality in countries like India is sanctioned by well-entrenched social and religious systems, which encourage people to accept their lot.

China has smashed all such systems. The only guarantors of social stability are the state's police power and its promise that everyone has a chance to improve his or her lot. If the pace of economic growth starts to slow, the government must be able to show the have-nots that the game has not been rigged against them.

But again that is a problem of justice, not inequality.

Research by the China Economic Quarterly. (www.theceq.info)