March 20, 2008
With Many Troubles at Home, U.S. Exports Carry the Economy
In addition to Georgia, the rest of the country needs to be rooting for growth in global markets; PPI explains why:
Posted by John at 3:34 PM | Comments (0) | TrackBackIn total, exports accounted for a third of last year's 2.2 percent GDP growth. As waves of bad news began to wash in last winter -- foreclosures, tumbling dollar, falling retail sales, more recently investment bank rescues -- exporters were the only thing keeping the national nose and lips above the recessionary waters. (The domestic economy shrank by -0.3 percent between October and December; export growth accounted for 0.9 growth; ergo, barely positive national 0.6 percent growth.)
Those searching for scarce good news can find some in January's trade report. This suggested another export-boom year ahead, with sales to China, Russia, Europe, and the Middle East all continuing to soar, while exports to Mexico, Canada, and Japan began to perk up. Interesting note as well: Last year's U.S.-Peru Free Trade Agreement entered into force in January, and exports to Peru hit $420 million, nearly double the $240 million for January 2007. Worsening news from the real estate, financial-market, and consumer sectors mean exporters may not be able to fend off a national recession this year. But their likely trio of round-number records -- $1 trillion in manufacturing exports, $500 billion in services exports, $100 billion in farm exports -- will ease its ferocity.
March 16, 2008
Mobile Embraces Globalization . . . and Reaps the Benefits
Mobile, Alabama has become one of America's fastest growing small cities, and the Seattle Post-Intelligencer explains why:
Posted by John at 11:01 PM | Comments (0) | TrackBackHow did this happen? Mobile officials cite an embrace of globalization, an outpouring of Southern hospitality toward big business and an ability to put aside political differences at all levels of government.
. . . "Our target for recruitment is not just limited to the U.S.," [Mobile Mayor Sam] Jones said. "It's global."
As Mobile sheds an outdated backwater image, local perceptions are changing, too.
Mobile County Commissioner Stephen Nodine said that until recently, he was skeptical of free trade. "I've always been a buy-American person," he said. "I was closed-minded about how global of an economy that we live in. Within the defense industry, everything is global."
Now, the Republican leader finds himself welcoming foreign corporations. "I keep reminding people," Nodine said of the French and the Spanish, "they're the ones who founded Mobile 300-something years ago." . . .
March 8, 2008
Yes, We Can . . . Expect Some Better Facts on NAFTA
Philip Levy makes the case, in an essay in The American I recommend you read in full:
Posted by John at 11:35 PM | Comments (0) | TrackBack. . .what about the factory workers in Ohio? Are they just imagining those lost jobs? Of course not. Manufacturing employment in the United States did hit a peak and then begin a steady decline. The problem is that the peak was in 1979, 15 years before NAFTA came into force. The long-term decline of American manufacturing jobs has much more to do with technological change than with trade. We’re producing more stuff with fewer workers.
But is there any harm if someone decides to run the same old Washington textbook campaign, take a few shortcuts of reasoning, and hold NAFTA responsible for the pain of displaced workers? There is. It offers false hope. It leads beleaguered citizens to think that a U.S. withdrawal from NAFTA would make their lives better, when it would almost certainly make their lives worse.
Can we demand better analysis and a more responsible approach from our aspiring political leaders? Yes, we can.
February 25, 2008
Mobile Capital Pressures Corporate Tax Rates
Taiwan plans a cut in its corporate tax rate, from 25% to 17.5%, while Iceland has reduced its tax on business to 15%, down from 18%. John Rutledge explains that these changes in tax policy have nothing to do with ideology; they are a response to a world in which capital is extremely mobile:
Posted by John at 5:39 AM | Comments (0) | TrackBackThese governments are not driven by ideology--free market or otherwise. They are reducing tax rates on productive capital because they have decided that they must do so to actively compete for the capital that will drive higher productivity and paychecks for their workers. Like it or not, capital owners today can move their capital wherever in the world it will earn the best risk-adjusted return. It costs little to do so. And it is virtually undetectable by anyone when they do it. This makes it much more difficult to craft a tax policy that achieves distributional, or fairness, goals and raises the stakes, in terms of lost jobs and paychecks, when policy makers inadvertently drive capital offshore.
February 23, 2008
One Shameful Result of Our Tariff System
Last year Cambodia, a country with a per capita income of less than $36 a month, paid about $419 million in tariff penalties on goods imported to the U.S. Cambodia paid more in tariffs than Great Britain, which paid $412 million.
Cambodia's tariffs to the U.S. amount to $30 annually for every man, woman, and child in the country. That's shameful.
More related information at PPI.
Posted by John at 8:01 AM | Comments (0) | TrackBackFebruary 16, 2008
Belief in Capitalism is Really Belief in Human Beings
I recently quoted Johan Norberg's In Defense of Global Capitalism on when capitalists are dangerous. In an accompanying passage, Norberg explains why a belief in capitalism is really a belief in the capability and ingenuity of human beings:
Posted by John at 12:00 PM | Comments (0) | TrackBackWhat I really believe in, first and foremost, isn't capitalism or globalisation. It isn't the systems or regulatory codes that achieve all we see around us in the way of prosperity, innovation, community, and culture. Those things are created by people. What I believe in is man's capacity for achieving great things, and the combined force that results from our interactions and exchanges. I plead for greater liberty and a more open world, not because I believe one system happens to be more efficient than another, but because those things provide a setting that unleashes individual creativity as no other system can. They spur the dynamism that has led to human, economic scientific, and technical advances. Believing in capitalism does not mean believing in growth, the economy, or efficiency,. Desirable as they may be, those are only the results. At its core, belief in capitalism is belief in mankind.
February 15, 2008
When Capitalists are Dangerous
From Johan Norberg's excellent In Defense of Global Capitalism, which I highly recommend:
Posted by John at 6:33 PM | Comments (0) | TrackBack. . . Capitalists are dangerous when, instead of seeking profit through competition, they join forces with the government. If the state is a dictatorship, corporations can easily be parties to human rights violations, as a number of Western oil companies have been in African states. By the same token, capitalist who stalk the corridors of political power in search of benefits and privileges are not true capitalists. On the contrary, they are a threat to the free market and as such must be criticised and counteracted. Often, businessmen want to play politics, and politicians want to play at being businessmen. That is not a market economy; it is a mixed economy in which entrepreneurs and politicians have confused their roles. Free capitalism exists when politicians pursue liberal policies and entrepreneurs do business.
Privatization at a Record Pace
According to the World Bank (pdf), 249 privatization transactions from 48 developing countries occurred in 2006, valued at a record $104.9 billion. Two of these transactions, the IPOs of the Industrial and Commercial Bank of China and Bank of China, account for one-third of the volume.
In nominal terms, this deal volume is a record; in real terms it is 17% less than the peak in 1997.
Posted by John at 6:19 PM | Comments (0) | TrackBackFebruary 11, 2008
Barnett Combats the Blues
Since we in the U.S. now seem to have the "war-weary, fearful of Chindia, how low will housing prices go" blues, Thomas P.M. Barnett offers a friendly reminder of what we've got to be thankful for:
We enjoy a wonderfully resilient global economy that's processed numerous financial panics (e.g., Asian flu, Internet bubble) and significant slowdowns by major players (Japan, Europe) over the past two decades while consistently growing.
As a result, poverty has been dramatically reduced around the planet and, as the Economist points out, we've got twice as many fast-growing economies right now as we did during the go-go '80s and '90s.
Yes, it stings having Arab sovereign wealth funds bail out Wall Street firms in the sub-prime crisis, but I dare you to think of a more painless way of re-injecting liquidity back into our markets. . . .
Anyway, by entering at bargain prices, these oil-rich regimes are simply doing what we've long advised: diversifying holdings and connecting their economies more broadly to globalization. It sure beats the alternative of white-elephant projects or military build-ups.
Speaking of guns, let me also remind you that our planet has never been more peaceful: fewer wars, less civil strife and the smallest-ever percentage of humanity engaged in or preparing for mass violence. Washington may wage global war, but nobody else is.
Not surprisingly, while we're polling glum, the rest of the world isn't. Global opinion trends over the past half-decade portray a rising tide of human happiness among nations that have opened up to globalization and thus enjoyed increasing per-capita income.
Across the Islamic world, we also see a broad decline in popular support for terrorism and, in particular, al-Qaida's brutality. We're losing old allies over Iraq, but Osama bin Laden is losing the future. . . .
. . . I say thank God for those whiz kids on Wall Street - you know, the ones who seem to come up with some new, dazzlingly complex risk management scheme every 10 years or so.
I'm not being facetious. It's that type of edgy innovation that keeps the United States the most competitive economy in the world, triggering not just our booms but also the necessary corrections. . . .
Read Barnett's complete commentary here.
Posted by John at 5:24 AM | Comments (0) | TrackBackJanuary 25, 2008
Stock Losses in Perspective
From late December until the Federal Reserve's interest rate cut earlier this week, most major stock indices had dropped by 10%-20%. The Progressive Policy Institute estimates that the total worldwide loss in market capitalization was about $9 trillion, which is roughly equal to:
--the combined GDP of China, India, and Southeast Asia combined, or
--the U.S. economy minus southern states, or
--the combined GDP of Germany, Britain, France, Italy, and the Netherlands.
Posted by John at 4:59 AM | Comments (0) | TrackBack
January 17, 2008
Getting More Bang for the Buck in Asia
Since 2002, the $240 billion gain in U.S. energy imports equals and may exceed, depending on year end trade statstics, the total growth in imports, over the same time period, from China, Hong Kong, Taiwan, Japan, Korea, and Sinapore combined. [Source: PPI]
It's fair to say that our Asian trading partners are giving us a lot more for our money, too. While the tab for energy imports has tripled over the last five years, our actual usage has increased only 10%.
Posted by John at 4:19 AM | Comments (0) | TrackBack
January 11, 2008
Learning to Hate Free Enterprise in French and German
Stefan Theil, Newsweek’s European economics editor, explains that France and Germany give their citizens a fearful view of capitalism and entrepreneurship very early: textbooks and economics courses teach students that free enterprise is the source of many of the world's ills. You can read the complete article from Foreign Policy here; a tidbit follows:
Posted by John at 6:55 AM | Comments (0) | TrackBack“Economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease and, according to some, even the development of cancer,” asserts the three-volume Histoire du XXe siècle, a set of texts memorized by countless French high school students as they prepare for entrance exams to Sciences Po and other prestigious French universities. The past 20 years have “doubled wealth, doubled unemployment, poverty, and exclusion, whose ill effects constitute the background for a profound social malaise,” the text continues. Because the 21st century begins with “an awareness of the limits to growth and the risks posed to humanity [by economic growth],” any future prosperity “depends on the regulation of capitalism on a planetary scale.” Capitalism itself is described at various points in the text as “brutal,” “savage,” “neoliberal,” and “American.” This agitprop was published in 2005, not in 1972.
When French students are not getting this kind of wildly biased commentary on the destruction wreaked by capitalism, they are learning that economic progress is also the root cause of social ills. For example, a one-year high school course on the inner workings of an economy developed by the French Education Ministry called Sciences Economiques et Sociales, spends two thirds of its time discussing the sociopolitical fallout of economic activity. Chapter and section headings include “Social Cleavages and Inequality,” “Social Mobilization and Conflict,” “Poverty and Exclusion,” and “Globalization and Regulation.” The ministry mandates that students learn “worldwide regulation as a response” to globalization. Only one third of the course is about companies and markets, and even those bits include extensive sections on unions, government economic policy, the limits of markets, and the dangers of growth. The overall message is that economic activity has countless undesirable effects from which citizens must be protected.
. . . Start-ups, Histoire du XXe siècle tells its students, are “audacious enterprises” with “ill-defined prospects.” Then it links entrepreneurs with the tech bubble, the Nasdaq crash, and mass layoffs across the economy. (Think “creative destruction” without the “creative.”) In one widely used text, a section on technology and innovation does not mention a single entrepreneur or company. Instead, students read a lengthy treatise on whether technological progress destroys jobs. . . .
Developing Multinationals
The Economist offers an extensive overview of the rapidly growing numbers of multinationals going global from China, India, Brazil, and other developing economies. The amount of investment these companies are making globally is getting substantial:
Posted by John at 6:38 AM | Comments (0) | TrackBackBy 2006 foreign direct investment (including mergers and acquisitions) from developing economies had reached $174 billion, 14% of the world's total, giving such countries a 13% share (worth $1.6 trillion) of the stock of global FDI. In 1990 emerging economies accounted for just 5% of the flow . . . and 8% of the stock. Their slice of global cross-border M&A has been climbing. It reached 14% in value terms in 2006 . . . That year they spent $123 billion in more than 1,000 cross-border deals.
The World is Mickey's Mouse House
The English language "author" whose works are most frequently translated around the world is Walt Disney Productions. [Source: PPI]
Posted by John at 6:15 AM | Comments (0) | TrackBackJanuary 9, 2008
"Demographic Cliff" Fact of the Day
According to the Washington Post, the number of children in Japan under the age of 15 has fallen for 26 consecutive years, and now represents a record low 13.6% of the population.
This fact comes from a Post article on how many in Japan are pushing robots as a solution for its declining workforce.
Posted by John at 6:13 AM | Comments (0) | TrackBackThe U.S. Stake in an Expanding World Economy
From the Christian Science Monitor:
Posted by John at 5:30 AM | Comments (0) | TrackBack. . . A growing global economy is providing the best source of momentum America has right now, as the nation's consumers struggle to cope with high oil prices and a downturn in the housing market.
How big is the momentum? Enough to offset much of housing's negative impact. Over the year that ended on Sept. 30, a rise in US exports has equaled the decline in residential construction that represents the biggest portion of housing's current drag on growth . . .
January 8, 2008
The Economist on World Migration
The Economist has a special report on migration around the world, and its effects on both developed and developing countries:
Posted by John at 5:56 AM | Comments (0) | TrackBackRich countries have taken in more highly skilled migrants than ever before. The World Bank looked at a sample drawn from 52m migrants in 20 rich countries in 2000 and found that 36% of them had a college education, a sharp rise on a decade earlier. . .
. . . easier movement of capital and goods has helped to make the world a much richer place in the past decade or two, and more human mobility has both created wealth and helped to share it out more equally. The billions sent around the world in remittances each year is testimony to that. The price of keeping people out would be high. . . .
December 17, 2007
Turning Our Back on Globalization Will Extract a Heavy Price
So argues New York Mayor Michael Bloomberg, in a Financial Times editorial:
Posted by John at 4:44 AM | Comments (0) | TrackBackThe US economy has turned downward. People are feeling insecure. There are grave concerns about jobs moving overseas and about losing ground to Asian countries. Heavy pressures are mounting on the presidential candidates in both parties to pander to protectionist and even isolationist sentiments. The year, however, is 1992. Fortunately, the two parties’ candidates – Bill Clinton and George H.W. Bush – refuse to cave in to the pressure. They resist the special interests and stand strong for the long-term health of the American economy – and the country begins one of the greatest economic expansions of our history.
Today, we would do well to remember this lesson. It is easy to say that times have changed and take a more protectionist viewpoint. In fact, times have changed. Dramatic advances in technology and increased global trade are creating enormous economic opportunities, but also challenges. If America is to remain the world’s economic superpower, it must capitalise on the opportunities and confront the challenges. Countries that run away from globalisation in the 21st century – as with those that ran away from capitalism in the 20th century – will pay a heavy price for decades to come. . . .
December 15, 2007
Global Funds Flows
Posted by John at 12:04 PM | Comments (0) | TrackBackTotal global remittances from workers to their families will reach $318 billion in 2007, up from $170 billion in 2002. Most of the money goes to developing countries, which will receive $240 billion this year—more than double the value of foreign aid. The three countries getting the most are India, China and Mexico, which together account for nearly a third of remittances to the developing world. However, Mexico has been affected by the economic slowdown in the United States and its previous rapid growth of inflows slowed to a trickle this year. The largest recipient region is Latin America and the Caribbean, but since 2002 transfers to Europe and Central Asia have increased the fastest.
December 10, 2007
Vietnam Rising as Attractive Manufacturing Locale
Bloomberg's Andy Mukherjee sees Vietnam gaining on China as a low-cost manufacturing locale:
. . . James Koh, a Singapore businessman, makes dining tables and chairs in Vietnam for customers around the world, including Williams-Sonoma Inc.'s Pottery Barn stores in the U.S.
Koda Ltd., of which Koh is the managing director, also has factories in Malaysia and China. Yet, it's Vietnam's lower costs that are prompting the company to expand capacity here by 25 percent.
"The labor cost in Vietnam is half that of China, while worker productivity is about the same," says Koh. . . .
Read Mukherjee's complete article here.
Posted by John at 3:36 AM | Comments (0) | TrackBackDecember 4, 2007
Those Harmed by Sovereign Wealth Funds
While concerns are floating around regarding the effect sovereign wealth investments might have here in the United States, Anders Åslund argues that those most harmed by such investments are actually citizens ruled by leaders making these investments. In a contribution to Foreign Policy, Åslund's explains why; read his complete essay here:
Posted by John at 1:59 PM | Comments (0) | TrackBackCertain international reserves are always needed, and exporters of commodities with highly fluctuating prices require larger reserves as a safety net. However, sovereign wealth funds are something different. They reflect a paternalistic—and economically illiterate—notion that the ruler knows best while citizens are so irresponsible that they cannot be entrusted with their own savings. It would be more economical and democratic to cut taxes and let citizens save and invest themselves.
November 29, 2007
Let's Put Out the Welcome Mat for Petrodollars
The FT's John Gapper observes that Arab wealth being reinvested in the West is being done rationally, and we should welcome it:
. . . Domestically, it makes sense for the Gulf governments to invest their financial holdings into a variety of assets and to take risk. Many oil-rich states suffer the “resource curse” – the tendency for oil wealth to lead to corruption and lassitude. Gulf states such as the UAE and Qatar are trying to escape the curse by diversifying their economies and assets.
They are doing so in a professional manner. As I wrote last week about Dubai, the Gulf states are buying in expertise in the form of expatriate professionals from consulting and financial firms. According to one banker who has worked with the ADIA, it has hired 1,300 professionals from Wall Street and City firms in the past five years. It does not simply take the word of companies and banks that roll up asking for cash.
They are also getting better at navigating the sensitivities raised by Arab governments investing in western companies, after the fiasco of DP World having to shed its management of US ports when it acquired P&O last year. The recent Gulf investments in financial institutions, and in AMD, the US chip company, and Sony of Japan have not raised too many hackles.
There is no reason why they should – quite the opposite, in fact. Funds such as the ADIA have a clear rationale for taking stakes in US companies and are content not to insist on board representation or strategic control. If these investments work, it will help them to broaden their economies and to avoid the social instability common in oil-dependent countries. . . .
Gapper's complete commentary can be found here.
Posted by John at 3:59 AM | Comments (0) | TrackBackNovember 28, 2007
A Petrodollar Investment Tsumani
As long as oil prices remain about $70 a barrel, McKinsey Global Institute calculates, roughly $2 billion of new petrodollars will enter financial markets every day. [Source: Financial Times] Even with oil prices at $50 a barrel, McKinsey projects petrodollar foreign assets will grow to $5.9 trillion by 2012. (You can find the McKinsey study here.)
Consequently, it's hardly going on a a limb to expect more deals like the Abu Dhabi Investment Authority's $7.5 billion investment in Citicorp and Dubai International Capital's investment in Sony.
Posted by John at 5:16 AM | Comments (0) | TrackBackNovember 26, 2007
In the Developing World, "Lifestyle Diseases" Dwarf Other Healthcare Problems
A perverse indicator of rising global incomes and declining poverty rates is the rapidly rising incidence of chronic diseases such as heart disease, strokes, and type 2 diabetes. These "lifestyle diseases" now comprise the greatest share--over 60%--of death and disability worldwide. The science journal Nature reports:
Posted by John at 6:32 AM | Comments (0) | TrackBack. . . Some 80% of chronic-disease deaths occur in low- and middle-income countries. They account for 44% of premature deaths worldwide. The number of deaths from these diseases is double the number of deaths that result from a combination of infectious diseases (including HIV/AIDS, tuberculosis and malaria), maternal and perinatal conditions, and nutritional deficiencies.
Over the coming decades the burden from CNCDs [chronic non-communicable diseases] is projected to rise particularly fast in the developing world. Without concerted action some 388 million people worldwide will die of one or more CNCDs in the next 10 years. With concerted action, we can avert at least 36 million premature deaths by 2015. Some 17 million of these prevented deaths would be among people under the age of 70 . . .
November 25, 2007
Even with a Scorecard, It's Hard to Figure Who the Communist Players Really Are
Forty years ago, the Soviet Union and China were at odds over whether their version of communism was the most authentic. Today, communists argue with each other about who's the most "capitalist", and they all seem to be drifting in that general direction. A recent Economist visit with West Bengal Chief Minister Buddhadeb Bhattacharjee is indicative:
Posted by John at 8:58 PM | Comments (0) | TrackBackBut how on earth does Mr [Buddhadeb] Bhattacharjee reconcile his capitalism-friendly actions with his Marxist colours? He claims to remain a communist to his tobacco-stained finger-tips. Yet he admits that it is getting hard to know what that means. “The world is changing, communists are changing, even in China,” he says. “We are learning from our mistakes.” The comparison with China is obvious. Some Indian commentators have likened Mr Bhattacharjee to China's great moderniser, Deng Xiaoping. He laughs off this suggestion, and notes that communist ideology is practically extinct in China. Yet his own “Marxist principles”, which he says he has discussed at length with Hugo Chávez, the president of Venezuela, do not sound terribly radical. They are, he says, to “protect the poorest of the poor, protect un-organised workers, protect womenfolk who have no income.”
What Victory Looks Like in Recovering Failed States
Victory in places like Iraq and Afghanistan, whenever it comes, will look like what's going on with Macedonia right now, says Thomas P.M. Barnett:
. . . Macedonia, with the help of the U.S. Agency for International Development, made itself the first all-broadband wireless country of its size - or larger - in the world. The name of that USAID program, Macedonia Connects, is wonderfully symbolic of this small country's dogged determination to join the global economy.
So when I first came across those "Invest in Macedonia" ads, I couldn't help but think to myself that this is what victory would look like in places like Iraq and Afghanistan - not our victory but theirs.
The ad, appropriately enough, is one big sales job. Describing itself as the "new business heaven in Europe," the unspoken come-on in the ad seems to be, "if you can't afford Croatia any more, try us instead!"
Most impressively, the ad promises that investors can register their new company in four hours or less. Try matching that in your average developing country, and you'd be lucky to get your papers signed in four months!
As for investor benefit packages, which the ad declares "will be approved within 10 business days," try these on for size: no corporate tax for 10 years; 5 percent individual income tax for five years; free connections to gas, electricity, sewer and water; and concessionary land leases for up to 75 years.
All that for joining a free economic zone (FEZ) with "immediate access to main international airport, railroad and vital road corridors."
As an international businessman who focuses on infrastructure development, let me tell you, that sort of offer gets my attention, along with the fact that the World Bank's "Doing Business 2008" report just named Macedonia the fourth-best reforming economy in the world. China was ninth.
What I like about the ad is how shamelessly Macedonia sells its existing connectivity to attract even more: FEZs, transportation hubs and free trade agreements encompassing 650 million consumers.
Toss in cheap labor and nationwide wi-fi, and you've got yourself a country just itching to be "exploited."
And, yeah, that's what victory looks like for your average failed state: getting yourself off the front page and into the business advertising section. . . .
You can find Barnett's complete commentary here; in it he'll remind you about our not-so-distant past history of conflict with in the region---the Balkan Wars of the 1990s.
Posted by John at 8:33 PM | Comments (0) | TrackBackNovember 21, 2007
Beyond the World's Doom and Gloom, Reasons to Be Thankful
While bad news may dominate the headlines, Foreign Policy offers five global trends we should all be thankful for: safer air travel, record low child mortality rates, an overall decline in global violence over the last decade or so, a decline in world poverty, and longer life expectancies. Read the details here.
Posted by John at 8:59 AM | Comments (0) | TrackBackNovember 13, 2007
Omens of the Age in China and India
PetroChina becomes the world's first trillion dollar company, and news reports pegged India's Mukesh Ambani as the world's richest man. Not so fast, reported his company, Reliance Industries, Ambani's wealth is only $50 billion, still behind Bill Gates' estimated $63 billion net worth.
Isn't it interesting, and two omens of our times, however, that both benchmarks occur within days of each other?
Posted by John at 3:52 AM | Comments (0) | TrackBackNovember 11, 2007
Thank Goodness for Globalization
Robert Samuelson explains why:
Posted by John at 12:10 PM | Comments (0) | TrackBackFor years, the U.S. economy was an engine of global economic growth. Americans were the shoppers of last resort. Other countries boosted production and jobs by exporting to us. No more. In the second quarter, U.S. consumer spending grew at a meager 1.4 percent annual rate. Just last week, the International Monetary Fund said it expects the world economy to grow 4.8 percent in 2008, more than double the projected U.S. growth rate of 1.9 percent.
"At a time of subdued U.S. consumption," [Goldman Sachs economist Jim] O'Neill writes, "the world is helping the U.S. economy."
There is a larger lesson. We wrongly blame globalization for much that ails us. It's easier to denounce faceless forces beyond our borders. But globalization is not, as another IMF study shows, the chief culprit in rising economic inequality. New technologies probably deserve that distinction by widening pay gaps between skilled and unskilled workers. . . .
November 9, 2007
This Just In: China and India to Drive Energy Demand
The World Energy Outlook 2007, produced by the International Energy Agency, offers forecasts for future energy demand which will surprise no one:
--Worldwide energy needs are expected to grow by 55% from 2005 to 2030.
--Developing economies will account for about three-quarters of this increase, with China and India alone accounting for 45% of the gain.
--Among energy sources, coal use will experience the greaterest increase, jumping 73%; China and India will account for most of this increase.
--$22 trillion in supply infrastructure spending will be required to meet worldwide energy demand by 2030.
An executive summary and the complete report can be found here.
Posted by John at 2:56 AM | Comments (0) | TrackBackThe Scale of Chinese-European Trade
And one reason for Europe's angst over China; from the IHT:
Posted by John at 2:39 AM | Comments (0) | TrackBackBeijing is now Europe's largest source of manufactured imports, but the 27-nation bloc, with a population of about 470 million people, exports less to China than it does to Switzerland. [Hat tip: Marginal Revolution]
November 8, 2007
Actual Facts on Trade and the Middle Class
Dan Griswold of the Cato Institute explains the facts--which naturally run counter to electioneering myths--on the how the U.S. middle class has fared over the last decade as global trade and competition has increased:
The critics have it all wrong: The middle class isn't disappearing - it's moving up.
The Census reports that the share of U.S. households earning $35,000 to $75,000 a year (in '06 dollars) - roughly, the middle class - has indeed shrunk slightly over the last decade, from 34 percent to 33 percent. But so, too, has the share earning less than $35,000 - from 40 percent to 37 percent.
It's the share of households earning more than $75,000 that's jumped - from 26 percent to 30 percent.
Trade has helped America transform itself into a middle-class service economy. Yes, the country's lost a net 3.3 million manufacturing jobs in the past decade - but it's added a net 11.6 million jobs in service and other sectors where average wages are higher than in manufacturing. Most of these new jobs are in better-paying categories, like professional and business services, finance and education and health services.
Trade and globalization have also helped bolster the balance sheets of American households by delivering higher incomes, lower interest rates and wider investment opportunities. From 1995 to 2004, the real median net worth of U.S. households jumped by 31 percent, boosted by rising home values and stock prices. (Even with the recent housing slump, average home values remain more than 2.5 times what they were a decade ago, according to the S&P/Case-Shiller index.)
Despite frequently heard worries, American families are not "drowning in debt." Yes, total household debt has risen in the past decade - but total assets have risen in value even faster.
On average, U.S. households spent 14.4 percent of their income on debt payments in 2004, not much different from the 14.1 percent they spent in 1995. The bulk of what we've borrowed hasn't paid for groceries or big-screen TVs but for housing - which, again, has appreciated strongly in the last decade. . . .
Critics of trade repeat as a mantra that real wages have been stagnant since the 1970s. But the data on real wages exclude benefits - which have been rising as a share of worker compensation. Those data also rely on a cost-of-living index that has systematically overstated inflation and thus understated real income gains.
The U.S. Bureau of Labor Statistics reports that the average real hourly compensation earned by Americans has actually grown by 22 percent during the past decade - even as trade and other measures of globalization have grown rapidly. . . .
Griswold's complete essay can be found here.
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November 7, 2007
Africa's Oil Curse
Knowledge@Wharton talks to John Ghazvinian, author of Untapped: The Scramble for Africa's Oil, about Africa's "curse"--its oil riches:
. . . most Africans are seeing little benefit from this influx of oil drillers and investment. In fact, because of an economic paradox known as the "Resource Curse," they are often hurt by exports of their countries' oil. "Between 1970 and 1993, countries without oil saw their economies grow four times faster than those of countries with oil," Ghazvinian notes, adding that oil exports inflate the value of a country's currency, making its other exports uncompetitive. At the same time, workers flock to booming petroleum businesses, which saps other sectors of the economy. "Your country becomes import-dependent," he says. "That decimates a country's agriculture and traditional industries."
Read the complete article here. The comments left in response to the article are just as interesting; here's one:
Posted by John at 4:13 AM | Comments (0) | TrackBackI lived and worked in Angola for over a year providing private network telecom services to oil exploration and oil services firms. I formed a company, having to give up 49% equity to a shell company owned by the country's president and his cronies. I saw underwater siphening pipelines connected to private oil company pipelines. These lines siphened off crude and took it directly to the state owned oil company's storage. This, in addition to the fact that 80% of the private company's reported production became property of the state as part of the concession agreement. I saw container ships with cargo marked as belonging to UNICEF (presumably, corn meal and rice shipments to feed the hungry and impoverished) being cleared at the port of Luanda by Angolan military personnel and then transported to feed military troops. Public school teachers had not been paid salaries in five years.
Do not lay this level of corruption and abuse of power on the oil companies. If you are poor in this part of the world, you have found the ninth circle of Dante's Inferno.
October 31, 2007
A Black Swan World Plays to America's Strength
Nassim Nicholas Taleb, author of The Black Swan: The Impact of the Highly Improbable, sees America's strength in a globalized world being its ability to come up with the totally unexpected, unplanned innovation: black swans. It's our salvation, Taleb argues, not only economically, but in a world whose future we cannot accurately predict:
Things, it turns out, are all too often discovered by accident--but we don't see that when we look at history in our rear-view mirrors. The technologies that run the world today (like the Internet, the computer and the laser) are not used in the way intended by those who invented them. Even academics are starting to realize that a considerable component of medical discovery comes from the fringes, where people find what they are not exactly looking for.
It is not just that hypertension drugs led to Viagra or that angiogenesis drugs led to the treatment of macular degeneration, but that even discoveries we claim come from research are themselves highly accidental. They are the result of undirected tinkering narrated after the fact, when it is dressed up as controlled research. The high rate of failure in scientific research should be sufficient to convince us of the lack of effectiveness in its design.
America's primary export, it appears, is trial and error, and the innovative knowledge attained in such a way. Trial and error has error in it; and most top-down traditional rational and academic environments do not like the fallibility of "error" and the embarrassment of not quite knowing where they're going. The U.S. fosters entrepreneurs and creators, not exam-takers, bureaucrats or, worse, deluded economists. So the perceived weakness of the American pupil in conventional studies is where his or her very strength may lie. . . .
Globalization allowed the U.S. to specialize in the creative aspect of things, the risk-taking production of concepts and ideas--that is, the scalable part of production, in which more income can be generated from the same fixed assets through innovation. By exporting jobs, the U.S. has outsourced the less scalable and more linear components of production, assigning them to the citizens of more mathematical and culturally rigid states, who are happy to be paid by the hour to work on other people's ideas.
Let us go one step further. It is high time to recognize that we humans are far better at doing than understanding, and better at tinkering than inventing. But we don't know it. We truly live under the illusion of order, believing that planning and forecasting are possible. We are scared of the random, yet we live from its fruits. We are so scared of the random that we create disciplines that try to make sense of the past--but we ultimately fail to understand it, just as we fail to see the future. . . .
Read his excellent Forbes commentary in full here.
Posted by John at 4:53 AM | Comments (0) | TrackBackOctober 28, 2007
Italy's Mafia Accounts for 7% of Its GDP
Moreover, the four main mafia groups in the country together earn about $126 billion a year, which would rank at or near the top of Italy's public companies.
The largest business of the mob is thought to be loan-sharking, and an estimated one-third of all retail shops are paying above market interest rates. Extortion is thought to be the next largest line of business. An estimated one in five retailers are thought to be handing over a portion of their earnings to the mafia.
[Source: FP Passport and The Guardian]
Posted by John at 9:00 PM | Comments (0) | TrackBackOctober 27, 2007
Raw Globalization Preserves Sushi
Reason's Katherine Mangu-Ward, reviewing The Sushi Economy: Globalization and the Making of a Modern Delicacy, explains how globalization has enhanced and preserved, not destroyed, sushi's roots and traditions:
. . . In some cases, the global sushi economy has preserved uniquely Japanese traditions better than an unchanged, pristine provincial cuisine ever could: Men whose great-grandfathers made samurai swords now make the perfect long knives used to carve precious tuna at Tokyo’s Tsukiji market, where subtle, intricate auctions are run on less computing power than the average Japanese teenager’s cell phone. Without a global shipping system and global demand, the markets would disappear.
Chowhounders who fret about lost authenticity or lament the commercialization of cuisine should think again. There is no such thing as authentic sushi, and there never has been. There was no moment when sushi was purely traditional. And tuna and avocado rolls taste a heck of lot better than a cask of semi-rotten whitefish packed with rice.
Read her complete commentary here.
Posted by John at 8:34 AM | Comments (0) | TrackBackEU "Blue" on Skilled Immigrants
The European Union has announced plans for a "blue card", similar to a U.S. "green card", which would be offered to skilled immigrants. Such a card would make it easier for immigrants with designated scientific, engineering, and technical skills to get into E.U. countries, bring their families along, swap jobs, and ultimately gain permanent residency.
While some observers believe the E.U. will have trouble getting its member countries to go along, the U.S. should take notice. We Americans like to make fun of statist Europe, but immigration is one area in which our bureaucracy may be second to none in its complexity. Consequently, small improvements in Europe's competitive position to attract the world's skilled workers may actually go a long way.
Posted by John at 8:15 AM | Comments (0) | TrackBackOctober 21, 2007
Why Global Trade Booms Even as Trade Talks Falter
Moisés Naím, editor in chief of Foreign Policy, explains why global trade is booming even as free trade negotiations are largely stalled and protectionist sentiment is ascending; you can find his complete commentary here:
. . . The short answer is technology and politics. In the past quarter century, technological innovations—from the Internet to cargo containers—lowered the costs of trading. And, in the same period, an international political environment more tolerant of openness created opportunities to lower barriers to imports and exports. China, India, the former Soviet Union, and many other countries launched major reforms that deepened their integration into the world’s economy. In developing countries alone, import tariffs dropped from an average of around 30 percent in the 1980s to less than 10 percent today. Indeed, one of the surprises of the past 20 or so years is how much governments have lowered obstacles to trade—unilaterally. Between 1983 and 2003, 66 percent of tariff reductions in the world took place because governments decided it was in their own interests to lower their import duties, 25 percent as a result of agreements reached in multilateral trade negotiations, and 10 percent through regional trade agreements with neighboring countries.
So, who needs free trade agreements if international trade is doing just fine without them?
Posted by John at 4:50 AM | Comments (0) | TrackBackWe all do. Although trade may be booming, giving up on lowering the substantial trade barriers that still exist—in agriculture, in services, or in manufactured goods traded among poor countries—would be a historic mistake. Even the more pessimistic projections show that the adoption of reforms like those included in the Doha Round would yield substantial economic gains, anywhere from $50 billion to several hundred billion. Moreover, according to the World Bank, by 2015 as many as 32 million people could be lifted out of poverty if the Doha Round were successful.
But it isn’t just the money. As the volume of trade continues to grow, the need for clearer and more effective rules becomes more critical. In this century, the quality of what is traded will be as important as the need to lower tariffs was in the last. The recent cases of deadly dog food and toxic toothpaste coming out of China prove as much. No country acting alone stands as good a chance of monitoring and curtailing such lethal goods as does the WTO working in concert with governments across the globe.
Moreover, a rules-based system accepted by a majority of nations can protect smaller countries and companies from the abusive practices of bigger nations or large conglomerates. The rule of law is always better than the law of the jungle, even in resolving trade conflicts.
But perhaps what is most important to keep in mind is that, despite all the misgivings about international trade, the fact remains that countries in which the share of economic activity related to exports is rising grow 1.5 times faster than those with more stagnant exports. And though we know that economic growth alone may not be sufficient to alleviate poverty, we have also learned that without growth, all other efforts will fall short. That argument alone should be enough to make us root for the trade negotiators, and not just the trade.
September 26, 2007
Eastern Europe Rising
Singapore placed first--for the second year in a row--in the last Doing Business report compiled by the World Bank, while Hong Kong came in at number four behind New Zealand and the United States.
Most interesting is the rise of Eastern Europe, which has witness so much reform in recent years that the region has actually edged out East Asia in the report's overall ranking of business-friendly environment. In 2006-2007, for example, about four of five Eastern European countries made at least one positive reform.
Consequently, the number of registered businesses in Eastern Europe is approaching levels similar to global leaders. The Czech Republic and Slovakia have as many registered businesses per capital as Singapore. Estonia and Poland now match Hong Kong with the same measure. Georgia has as many registered enterprises per capital as Malaysia.
Could anyone have foreseen such a situation two decades ago?
Posted by John at 10:13 PM | Comments (0) | TrackBackSeptember 3, 2007
Have a Great Global Labor Day
According to an IMF study, about 900 million of the world's 3.4 billion workforce is global. "Global", in this case, means workers who make products or services for export, or who cross borders for work. Such workers ranges from textile workers in China or Bangladesh, to investment bankers and currency traders in London or Tokyo, to dock workers in Germany or the United States.
These figures imply that on this 125th anniversary of Labor Day in the United States, about one in four workers worldwide are "global", a strking increase from the 1 in 9 workers who were "global" twenty-five years ago.
[Thanks to PPI for the pointer.]
Posted by John at 9:00 AM | Comments (0) | TrackBackAugust 24, 2007
More on Ireland's Rise as an Example for Latin America
My friend John Daly emailed me with some great feedback on my post on Ireland's rise as an example for Latin America:
From my reading, my interviews with people who work and invest in Ireland, and from my experience in Ireland, I would agree with Oppenheimer that Latin America--especially Mexico--should look at Ireland as an example. Certainly land reform and opening credit markets have worked brilliantly. The key, however, is education. I wrote about this last December while I visited Mexico.
One thing Oppenheimer failed to mention, though, was the move by Ireland to drop from their Constitution the notion of a unified Ireland in the 1990s. Once that was stated, the sectarian violence ended and commerce began.
We should also realize that Ireland's economy has also benefited from a perfect economic storm--which may not happen for Latin America. For the Irish, the wealthy retired German pensioner, looking for growth in their retirement funds, has heaped what appears to be an un-ending supply of capital into Ireland's educated and technologically based economy. It's one of the reasons why the Irish are getting fat while also owning some of the most expensive hotel real estate in--sit down you Anglophiles--London. My question to you, John, is this: Is there an equivalent of the German pensioners for Latin America?
A good book for your readers is The Pope's Children: Ireland's New Elite by David McWilliams, a fabulous book that profiles the new Ireland as David Brooks' Bobos in Paradise profiled America's new elite in the late 1990s. If your readers are interested in business opportunities in Ireland, they should visit the website for the US-Ireland Alliance and reach my good friend Trina Vargo, the organization's president.
Also, here's an interesting fact if you like to compare golf to business: the two reigning champs of the U.S. Open and the British Open are an Irishmen (Padraic Harrington) and an Argentinean (Angel Cabrera). Can golf be a leading economic indicator?
In answer to John's question regarding what the Latin American equivalent to Ireland's German investors, I responded as follows:
In a sense, I think Oppenheimer has a good answer for your question about the German pensioners: many Latin American countries, through their currently large resource-related revenues in oil, gas, minerals, etc., already have their own “German pensioners”. Further, investment in emerging markets on a global basis is much more prevalent today than it was 20 years ago, so Latin America has sources of capital from around the world which are much deeper than what Ireland had access to during its ascent.
Incidentally, I've spoken with Trina Vargo and she's a very helpful and knowledgeable source for anyone in the U.S. doing business in Ireland.
Posted by John at 5:47 AM | Comments (0) | TrackBackAugust 23, 2007
The Sun Also Rises
Rowan Callick, China correspondent of The Australian and formerly Asia-Pacific editor of The Australian Financial Review, offers a profile of the Asian economic behemoth few are paying much attention to: Japan. Callick's explains why Japan has come back from many years of economic stagnation, and looks at its future vis-à-vis China, Asia as a whole, and the United States. Read his complete essay here.
Posted by John at 8:20 AM | Comments (0) | TrackBackAugust 22, 2007
Ireland's Welcome Mat to Immigrants . . . and Economic Growth
A Tidbits friend whose email address I didn't recognize sent me a pointer to a New York Times article on Ireland's embrace of immigrants, which has contributed to the country's population growth, but to its economic vitality as well. As my friend noted, the Irish have learned how to welcome and assimilate immigrants from much different backgrounds, to its advantage:
No European Union country has a younger population: statistically, the Irish have been barely aging at all, with the median age staying close to 33. The country will remain young for decades, say the experts, and escape the “graying” fate of the rest of Europe.
Further, demographers now predict that the population could rise to over five million in about a dozen years, and to six million within a generation. With a growing population in Northern Ireland, the island could match its largest population — more than eight million before the devastating 19th-century famine that prompted waves of emigration — by 2032. . . .
Posted by John at 5:00 AM | Comments (0) | TrackBackThe population changes have been uneven geographically. New houses stretch in a wide arc from north Dublin to the west of the city. But the city’s core, despite being replenished by an influx of immigrants, has lost residents to the suburbs and to once unimaginably distant commuting centers in the midlands. In the south, the city of Cork shrank while the county grew.
Some experts think the scale is beyond most citizens’ imaginations: in about half a generation, the population may grow by another Dublin, which has 1.1 million people in its greater metropolitan area.
“The worst is that we find ourselves without growing our services to cope with the numbers,” Mr. Morgenroth said. “The benign outlook is that we have tackled our services and, like Switzerland or Luxembourg, we have great wealth and a great quality of life. The smaller countries can do it right.”
Eunan King, an economist at NCB Stockbrokers in Dublin, has long argued that a rising population — more workers and more consumers — will help sustain Ireland’s remarkable economic renaissance of the past dozen years. . . .