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According to an online test of politicial orientation, I am a libertarian!
(see the definition of libertarianism in Wikipedia)
The Political Compass test however used to define me as a centrist. I like the libertarian label better.
Go check out who you are!
| You are a (68% permissive) and an... (70% permissive) You are best described as a:
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Many people are tired of the India vs. China debate. After all, India and China are more likely to be complementary than substitute for each other. One is better in hardware while the other is better in software, there is more opportunities for cooperation.
There absolute loser from China’s rise in world production is actually Latin America. Latin America has much higher wage level than China, Thailand, or Malaysia. The region however is much backward in production technology. This is not going to be sustainable. In a “flattened world”, no importers are willing to pay higher price for lower quality products.
Jeffery Sachs used to say: the problem of Argentina is not fiscal policy, but how it is possible that a country like Argentina, with per capita income as high as 10,000 USD, is still engaging in low knowledge-intensive productions.
It is not sustainable. You need to overhaul your education system and upgrade your production technology, in order to catch up with the rising East Asia.
The Inter-American Development Bank has just published a book on this very topic, titled “The Emergence of China: Opportunities and Challenges for Latin America and the Caribbean”
The book is available for download (PDF file)
As food for thought, the book provides very detailed background information and insights. I am not happy with the answer of the book though, that the solution for Latin America is to serve China as a provider of energy, raw material, and commodities. You are turning Latin America into Africa (Nigeria, specifically)!
Brazil in the short term has reason to celebrate as it hits a jackpot as a result of China's hiking demand for iron ores, but don't forget that India is actually a bigger exporter of iron ores to China than Brazil currently is. If India can be an exporter of both raw material and high-tech services, why do you think Latin America should accept to be downgraded to a misery third-world exporters of commodity producer.
Hope this article can stimulate some discussions on how Latin America can cope with the rise of China and East Asia.
Richard Nixon used to advise then young Donald Rumsfeld : “Latin America does not matter.... no one gives one damn about Latin America!” Hope that’s not an accurate description of the reality.
China has been said to be the World’s factory and cheap labor is said to be the reason why China attracts most of the manufacturing activities away from developed countries as well as from other developing countries.
Africa’s wage level is much lower than China, but they are never on the radar screen as threat to China’s position though. Nevertheless, let’s make a more relevant comparison between China and India.
India has a hard time in attracting manufacturing firms to move there. Many Indians attribute the “failure” to “that’s because we don’t have cheap labor; we focus on service industry with higher value-added”
Let’s compared the minimum wage of China and India to get a idea of who really has cheap labor.
Take China’s Guangdong province as an example. This province is where manufacturing activities agglomerate and where most immigrant workers from inland provinces are employed.
The hourly minimum wage in Guangdong province of China (Effectively July 2006- July 2007) :
Shenzhen (Special Economic Zone) and Guangzhou (two core cities, where manufacturing activities are moving out):
4.66 Yuan/hour ( = 0.58 USD= 26.7 Rs.)
Shenzhen (outside SEZ), Foshan, Dongguan, Zhuhai, Huizhou, where most of the “sweat shops are actually located:
4.02 Yuan/Hour (=0.5 USD = 23.1 Rs.)
For India, I heard that the minimum wage is between 7.5 -12.5 Rs./Hour.
(Please correct me if I am wrong; and if anyone can provide me with the minimum wage level, the actual enforcement, and the coverage of workforce, in typical manufacturing-intensive regions in India, it would be most helpful for me to make a more representative comparison)
So, minimum wage in China's manufacturing sector is between two to three times that of India!
You may argue that laws are never actually enforced in China. Well, indeed, complicated laws usually get circumvented in China. That’s why the most common violations of labor laws in China are, among others, paying normal wage for overtime work, insufficient safety and health work conditions, insufficient compensation for work-related injuries, no compensation for lay-offs... These laws get circumvented because employers always managed to maneuver the vague language of the laws in favor of themselves.
Minimum wage requirement however is in general complied by employers particularly in foreign-owned factories, because it is so easy for regulators to monitor and verify, particularly considering that most factories in the area are in the formal sector and not small workshops.
The most power force however is the market: today if you pay lower than the amount required by the minimum wage, I doubt you are able to recruit any skilled workers to work in Guangdong province, and most employers find it not worthwhile to go down the skill ladders. Labor cost after all constitutes only small fraction of the cost in typical factories producing electronic equipments and employers do not want risk having lower quality of disgruntled workers. For details see my previous post in the Bulletin: “Unlimited labor supply in China? Not anymore! Wages are hiking!”
As a matter of fact, this is exactly why the minimum wage is set to the level where it is now, i.e. almost equal to market-clearing prices. The employers basically control the whole legislative process.
But still, the minimum wage level in Chinese “sweat shops” is much higher than in India where unions have bargaining power in the legislative process of labor laws.
Well, maybe the difference is not that high. First, living expenses in China is higher; second, Chinese workers in “sweat shops” typically have at least 9 years of education.
After all, it is the whole package: infrastructure, administrative efficiency, and education level of workers, flexibility of hiring and firing, etc. that are driving the location decisions of manufacturing firms
Update:
In a report by Deloitte and Touche "India and China: The Reality Beyond the Hype", it is cited that, according to IMF data, typical monthly wage for manufacturing workers in China is almost 4.7 times that in India. But I am not able to verify the number it from the original source. (Hat tip: PSD Blog)
As the Economist magazine features in “The battle for Latin America's soul”, Latin American countries one by one is falling into hands of populists who oppose to economic reforms. It thus becomes an urgent question how market economy and economic reform can win Latin America’s soul again?
Ugo Panizza and Monica Yanez from the Inter-American Development Bank recently published a paper titled “Why are Latin Americans so unhappy about reforms?” in which they looked into the Latinobarometro survey, which was conducted yearly in Latin American countries since 1996, for answers.
They use the opinion surveys to document discontent with the pro-market reforms. They explore four possible sets of explanations for this discontent: (i) a general drift of the populace’s political views to the left; (ii) an increase in political activism by those who oppose reforms; (iii) a decline in the people’s trust of political actors; and (iv) the economic crisis.
What they find is that the macroeconomic situation plays an important role in explaining the dissatisfaction with the reform process, while the other factors are not important.
Detailed research of the survey data show that even if in 1997 100% of people belong to the center right, while in 2002 100% of them convert to extremist left, the support for reform will only go down by 9%. This means that even such an extreme assumption of drift to the left can only explain one third of the actual drop in support for reforms.
The survey results also show that increasing political activism of the leftists or decline in the trust of political actors cannot explain the drop in support for reforms
The single most important factor is the economy. Drop of GDP growth by one percentage point can reduce support for reforms by 1.1%. In the case of Argentina, growth rate dropped by 21 percentage points between 1997 and 2002, which would predict a drop in support for privatization equivalent to 23 percentage point.
In Latin America, countries experiencing crisis usually fall into vicious cycle. When the economy performs badly or experiences a crisis, it becomes much easier for populists to get into power and halt economic reforms. Without reforms the country cannot gain real competiveness internationally, and the political situation becomes self-reinforcing as the economy deteriorate further (sometimes several years can be saved with high oil price, but then the pain will be felt harder when oil price drops).
Economic and employment growth is the only criteria voters use to evaluate reforms, and they usually don’t give you second chance. Reformists need to think more about the stability consequence of the reforms they propose, because “one strike, you are out”. Better do it slowly but safely.
Reference:
Which of the democratic checks and balances—opposition parties, the judiciary, a free press—is the most forceful? Professors John McMillan and Pablo Zoido find the answer from an unusual place: the secret dossier of Vladimiro Montesinos.
In the 1990s, the Peruvian secret-police chief Montesinos systematically undermined all of these democratic checks and balances with bribes. For record-keeping and to ensure future cooperation of the bribe-takers, he video-taped and kept detailed records of almost all of his dealings with more than 1,600 bribe-takers.
After the fall of President Fujimori and the arrest of Montesinos himself, these video-tapes and documents come under public scrutiny
Professors McMillan and Zoido obtained some copies from journalist friends in Perue, and creatively quantify the values of these democratic checks and balances using the bribe prices.
They find that, Montesinos paid a television-channel owner about 100 times what he paid a judge or a politician. One single television channel’s bribe was five times larger than
the total of the opposition politicians’ bribes. The cost of bribing the politicians to get a majority in Congress added up to less than US$300,000 per month. The total cost of bribing judges was US$250,000 per month. The total cost of bribing the television channels was more than US $ 3 million per month.
By revealed preference, the strongest check on the government’s power was the news media.
Montesinos is smart but everyone makes mistakes at some point. He bribed all television channels but one: Channel N. He thought Channel N was an expensive channel with limited viewership and was not worth bribing.
Just several months after Fujimori won 2000 election, one of Montesinos’s videotapes (which will come to be called the vladivideos) was broadcast on Channel N.
The government fell. Fujimori fled to Japan. Montesinos was arrested in Venezuela and sent back to Peru for trials.
Reference:
How to Subvert Democracy: Montesinos in Peru (PDF file)
A video showing Montesinos counting out US$1.5 million for Jose Francisco Crousillat, the VP of America Television, Channel 4
Bribe receipts. Left: a supreme court justice acknowledges being paid US$10,000. Right: a member of the National Electoral Board acknowledges being paid US$15,000
Every two months, World Bank’s finance research and policy staff publish an academic- oriented newsletter featuring latest research progress in finance and development-related topics. The newsletter is interestingly named as the Interest Bearing Notes (IBN). I always find IBN to be a must-read for keeping pace with the constantly-moving knowledge frontier in finance research. I can testify that IBN is a very focused knowledge “bank” that seldom diversifies into non-interest-bearing operations.
IBN's self description:
"Interesting Bearing Notes is a product of the Finance Team in the World Bank's Development Research Group, in association with the policy staff in the Financial Sector Operations Vice Presidency. We report on our own and other people’s research, dataset, conferences and miscellanea. Our working papers and descriptions of research projects in progress can be found, along with a list of forthcoming seminars and conferences, on our web page (http://econ.worldbank.org/programs/finance). The next issue of Interest Bearing Notes will appear in July, so please send comments, suggestions and requests to be added to our distribution list, to Agnes Yaptenco (ayaptenco@worldbank.org) by July 10."
Is economic prosperity of a nation partly determined by genes of its population?
Is this a question that is too politically incorrect? Well, scientific inquiry has no boundary. Economics professors Enrico Spolaore and Romain Wacziarg study genetic and economic data for a wide cross section of countries around the world, and discover that genetic distance, a measure associated with the amount of time elapsed since two populations' last common ancestors, bears a statistically and economically significant correlation with pairwise income differences.
They also find that genetic distance between two populations also determines differences in human capital and social institutions, which suggests that differences in human characteristics transmitted across generations - including culturally transmitted characteristics - can affect income differences by creating barriers to the diffusion of innovations.
The Diffusion of Development (PDF file)
Abstract: This paper studies the barriers to the diffusion of development across countries over the very long-run. We find that genetic distance, a measure associated with the amount of time elapsed since two populations' last common ancestors, bears a statistically and economically significant correlation with pairwise income differences, even when controlling for various measures of geographical isolation, and other cultural, climatic and historical difference measures. These results hold not only for contemporary income differences, but also for income differences measured since 1500 and for income differences within Europe. We uncover similar patterns of coefficients for the proximate determinants of income differences, particularly for differences in human capital and institutions. The paper discusses the economic mechanisms that are consistent with these facts. We present a framework in which differences in human characteristics transmitted across generations - including culturally transmitted characteristics - can affect income differences by creating barriers to the diffusion of innovations, even when they have no direct effect on productivity. The empirical evidence over time and space is consistent with this "barriers" interpretation.
Professor Enrico Spolaore and Romain Wacziarg published an interesting study on the economic effect of merging two countries on economic growth. They conduct simulations for large number of potential mergers of geographic neighboring countries. Some results are quite interesting.
In general, small countries benefit from merging with larger countries, and poorer countries benefit from merging with their richer neighbors.
According to the simulation, were Bangladesh to merge with India, she would grow faster by 1-2 % per year, and in the long run, she may double her income. The merger of Argentina (or Bolivia, or Peru, or Paraguay, or Uruguay) with Brazil, or Mexico (or Canada) with the U.S. would create economic benefits of similar magnitude for these smaller neighbors as they get full access to larger markets.
Pakistan’s economic growth rate will increase by 1.2-1.5 % per year, and long-run income level will be double, if she were to merge with India. India on the other hand will not gain much. Indian growth rate would be raised by 0.1%, and in the long run become 10% richer. (This may explains why Indians in general are less interested in signing free trade arrangement with smaller countries such as Thailand.)
Certainly the merger of these two countries with different culture and religion will create social problems that certainly will outweigh the economic benefit. But on the other hand this also sadly highlights the huge economic costs of two countries hating each other for half a century.
Borders and Growth (PDF file)
Abstract: This paper presents a framework to understand and measure the effects of political borders on economic growth and per capita income levels. We present a model that provides a theoretical foundation to estimate empirically the effects of political borders on growth. In our model, political integration between two countries results in a positive market size effect and a negative effect through reduced openness vis-à-vis the rest of the world. We estimate the growth effects that would result from the hypothetical removal of national borders between pairs of adjacent countries. We also identify zones of mutually beneficial political integration, and discuss the applicability of our framework to European political integration.
Princeton economics professors Gene Grossman and Alan Krueger discover that economic growth is ultimately good for environment. Once the per capita income of your country reaches $8,000, enviromental quality will start to improve because now you can better afford those enviromental luxuries!
Their study covers four types of indicators: urban air pollution, the state of the oxygen regime in river basins, fecal contamination of river basins, and contamination of river basins by heavy metals.
They find that economic growth brings an initial phase of deterioration followed by a subsequent phase of improvement.
The turning points for the different pollutants vary, but in most cases they come before a country reaches a per capita income of $8,000.
Reference:
Economic-growth and the environment (published in the Quarterly Journal of Economics)
China’s Pearl River smells, but mayor vows to swim (earlier in this Bulletin)
Saving the environment from the environmentalists (also in this Bulletin)
As reported by Reuters, World Bank country director for China, David Dollar, thinks that big change in Yuan exchange rate may not be advisable.
“For the exchange rate, I have a lot of sympathy for the Chinese government approaching that cautiously," he said. "I agree with the macro-economists who think that it's in China's interests to allow some appreciation of the currency but I respect the government wanting to make that move gradual."
"A big change in the exchange rate really could have unpredictable effects on economic growth," he said.
"In the developing world we often seen these financial crises together with an exchange rate, macro crisis," Dollar added. "I think it's fair to say that's almost impossible in China ... because it's got about $900 billion in reserve."
Indeed, revaluation of Yuan is in the interest of Chinese government, and I guess that they already realize that appreciation of the currency is key to China's goal of transformation into a domestic-demand-driven economy. It is understanable that they want to do it gradually, not least not to be seen as yielding to American pressures.
Ravi Krishnan in Indian newspaper Financial Express claims that India loses out in free trade agreement with Thailand.
His evidence is that:
During January-December 2005, Thailand's exports of items under the Early Harvest Scheme (EHS) of the Indo-Thai FTA stood at Rs 664.3 crore — an increase of 71% over calendar year 2004. In contrast, India's exports to Thailand actually declined 33.8% to Rs 195.6 crore.
His point is that: India receives less monetary revenue from trading with Thailand and thus loses out from the deal.
Ravi forgots that trade is exchange of goods for goods, goods for money, or money for goods. In any voluntary exchange/trade, when you give away goods or money, you will receive goods or money of equivalent value as compensation.
Certainly in this deal Indians send more money to Thailand than Indians receive, but doesn’t it also indicate that Indians receive more goods from Thailand?
No one loses out from trade. As a matter of fact, both sides gain because with the same amount of money, you can get more stuff from Thailand than from inefficient domestic manufacturing sector back in India.
If you are a worker, do you think your boss always loses out when he hands you the paycheck. No, because he gets your labor of equivalent market value as exchange. Then why do you think India loses out from trade simply because Thailand exports more and receive more money from India?
Introduce two publications on China current economic issues:
World Bank’s Beijing Office has released their China “Quarterly Update” for Q1
Bank of Finland’s Institute of Transition Economy (BOFIT) has been specializing in Chinese and Russian economy and following them very closely. They also regularly produce a quarterly report called “BOFIT China Review”
There is a theory that financial deregulation may be bad for China. The idea is that when liquidity constraints on households are removed, people may save less, and if high saving/investment rate is important for rapidly growing countries such as China, China may lose steam as a result of financial sector deregulation.
This is true in the history. Empirical results suggest that financial deregulation in the 1980s has contributed to the decline in national saving and growth rates in the OECD countries.
China however is a different case. She already saves too much, and now everyone agrees that domestic demand/consumption needs to be jump started. Chinese financial sector is also terribly inefficient, and deregulation of financial sector will improve it mostly in asset allocation front instead of consumer lending front. For cultural reasons, it is also hard to convince Chinese consumers to take out loans from banks to increase spending.
Currently consumer lending has very small share in Chinese banks’ loan portfolio. This is increasing over time because banks are seeing it as a more profitable and safer business, and foreign banks (e.g. Citibank) are particularly interested in developing products for high net-worth consumers and the rapidly emerging middle class.
Anyway, I can see no reason why cost of financial deregulation (in reducing saving rates) will outweigh its benefit (in increasing consumption and transform China’s economic growth into a demand-driven model)
Saving, Growth, and Liquidity Constraints
By Tullio Jappelli and Marco Pagano (published in the Quarterly Journal of Economics)
Abstract : In the context of an overlapping-generations model, the authors show that liquidity constraints on households (1) raise the saving rate, (2) strengthen the effect of growth on saving, (3) increase the growth rate if productivity growth is endogenous, and (4) may increase welfare. The first three positions are supported by cross-country regressions of saving and growth rates on indicators of liquidity constraints on households. The results suggest that financial deregulation in the 1980s has contributed to the decline in national saving and growth rates in the OECD countries.
James Kynge just published a new book "China shakes the world: the rise of a hungry nation". Chris Patten, the last British governor of Hong Kong, wrote a nice book review for him.
Recently everyone is writing and publishing about China! Some sign of overheating?
By the way, James is hosting a online Q&A session on Financial Times website for his new book. Interested readers can go there to ask him tough questions.
“In March, the State Department said it had purchased a batch of computers from China's Lenovo Group Ltd.. At the time, Michael Wessel, a member of the congressionally created U.S.-China Economic and Security Review Commission, said the purchase should be investigated, especially if codes embedded into the computers could be remotely activated.
Lenovo bought IBM's personal computer division last May. The computers bought by the State Department were assembled in the United States and Mexico with integrated circuits made in Taiwan, according to the company. While the computer order was for unclassified systems with removable hard drives, some experts raised concerns about the opportunity for intelligence gathering through hardware and software.” --- Reuters
Are Chinese embedding codes into Lenovo computers to collect intelligence from U.S. government? Well, it is possible, because everything is possible. It is possible too that President Bush is a robot manufactured by Chinese to take over control of America. It is possible that American never actually land on the moon. It is possible that Elvis Presley is still alive. It is possible that there is a huge conspiracy within the government to hide evidence of human contact with E.T. aliens.
There is always (slim) possibility of everything, the beauty of such trick is that no one can say for sure for 100% that something may not happen. This is why it is always convenient to divert people’s attention away from domestic problems by creating hatred against foreigners and making up horrific conspiracy stories about foreigners.
By the way, Chinese government seems to be quite happy in using Intel CPU chips and Microsoft operation systems though, although sometimes not paying for the software.
Sen. Charles Schumer, D-N.Y., said Treasury's report last week that declined to brand China as a currency manipulator was ”a technical and legislative dodge.”
"China is a manipulator," Schumer said at a Senate Banking Committee hearing, "and the administration is afraid to say so."
Well, Mr.Schumer can accuse anyone of murder too, but when the experts disagree with him (Treasury department report did not find proof of manipulation), he may want to think carefully again whether he himself is actually dodging the real issue. It is agreed by most economists that U.S. domestic deficits are the real driver of the trade deficits. If you consume more than you produce, what else do you expect to see other than deficits? Are you going to blame obesity problems on European candy makers too?
China's surplus trade with the U.S. only accounts for one quarter of United States' trade deficit, which means that even China balances current account with the U.S. overnight, problems are still there. As Michael Woolfolk (senior currency strategist at the Bank of New York) said, "..government and investors will doubtless still be looking for another nation to blame."
"This is an incredibly important issue for my state," said Sen. Debbie Stabenow, D-Mich. "How many jobs are we going to lose from currency manipulation?"
The answer is none. The products China exports to the U.S. were previously made by South East Asian countries and Latin American countries, at a much higher costs though. Manufacturing jobs are moving from these places to China, not from U.S. mainland. Even if the Chinese appreciates its currency or U.S. imposes high tariff on Chinese products, it is not going to bring manufacturing jobs back to U.S. It will only divert trades from China to other developing countries, and creates a huge financial burden on American consumers.
Snow acknowledged that "the sentiment is pretty strong to do something against China. The handwriting is on the wall and China needs to act."
That’s damn right. The whole trade issue is about sentiment, not about facts. It is always easy and convenient to blame on foreigners, demonize foreigners, than to face the real issues and one’s own mistakes.
Reference:
Sens. Criticize Treasury on China Currency - Washington Post
I always believe that, to protect the environment, to help the poor.... all of these tasks require not only a good intention, a faith, but also fact-based reasoning.
Peter Huber’s book “Hard Green: Saving the Environment from the Environmentalists: A Conservative Manifesto” is such a good example of scientific reasoning.
Today, all of homes, buildings and roads occupy less than three percent of the land in the lower 48 states. Thanks to efficient use of land, we have lots of trees in the US, so we actually consume more carbon dioxide than we produce. In developing countries however, the most devastating force in deforestation is actually the use of wood as energy for heating by poor people, not paper industry that usually obtains raw material from commercial forests which are not part of the wild jungle. The development of paper and pulp industry by making more efficient use of land and raising workers’ income level actually preserve forests, because locals don’t need to destroy forest for heating energy any more. “Environmentalists” claims that by sending less post-cards you can save Amazon jungle; but the fact is that paper industry contributed very little to the deforestation of Amazon jungle.
As argued by Professor Huber, “the only way to save the wilderness is to reduce the human footprint on the land by living vertically instead of horizontally.” In the past, vast forests in New York and other states were felled by pioneers, the original “organic” farmers, to feed their families and their livestock. More than a quarter of the farmland was devoted to “turning solar energy into the renewable fuel powering their transportation system”. These buzzwords simply mean grasses and grains eaten by horses. So we used to be very “environmentalists”, but as we already see, those days were more disastrous to the environment.
In recent decades, however many of those fields have reverted to wilderness because they are no longer needed to grow food or fuel. Over the past quarter-century, Professor Huber estimates, the country has gained 70 million acres of wilderness, more than all the land occupied by cities, suburbs, roads and any other kind of development. So urbanization and economic development, opposite to what “environmentalists” have predicted, actually help preserve wilderness.
John Tierney, in his book review in New York times, highlights several of Professor Huber’s excellent points the bust the myths created by “environmentalists”
Where Soft Greens see ''urban sprawl'' destroying the countryside, Dr. Huber sees cities absorbing the farmers who once destroyed the wilderness. ''It's true that we lose a little green space at the edge of cities as suburbs grow,'' Dr. Huber said, ''but that loss is more than offset by all the wilderness gained from the farms abandoned farther away.'' You might think of New York City and its suburbs as the antidote to rural sprawl.
Where Soft Greens fret about the risks from factory farms and pesticides and genetically engineered plants, Dr. Huber exults in the land saved by new technologies. ''If you care about the open range, you should recoil from free-range chicken on the menu,'' Dr. Huber said. ''You should prefer chickens living in the agribusiness equivalent of Trump Tower. If you care about seeing more of the Vermont woods of Robert Frost, you should think twice about eating Ben & Jerry's ice cream.''
Ben & Jerry's prides itself on getting milk from small family farms in Vermont, and it opposes the use of a synthetic growth hormone to increase each cow's output. ''If farmers used that hormone, they wouldn't need so many cows,'' Dr. Huber said, ''so some of the farms could revert to forests. There would also be fewer cows emitting methane, which is one of the most powerful greenhouse gases.''
''You may want to stop someone from building new homes near you because the extra crowding reduces your quality of life,'' he said. ''But it's a fraud to confuse your self-interest with what is good for the planet. If you make it harder for people to move to cities and suburbs, they'll end up in places where cougars and eagles could be living.”
Mark Hetsgaard, in his review article also on New York Times, however disagrees with Professor Huber’s view that the answer to our environmental problems is to unleash the power of the market.
If General Motors lays off a worker that has worked for GM for 20 years, we may be angry because this person has worked for you for 20 years and how dare you get rid of him only because he is not needed anymore!
I would never blame GM, because I don’t think I have the right to. The logic is as follows.
Some people see a bottle of water half full as half empty; they only see that GM is not paying this worker in the future, but never appreciate that it is GM that created and gave him a high wage job in the first place. They didn’t complain when GM gave him this job. They should. After enjoying high wage for 20 years, he certainly loses his ability to adjust to a lower living standard that he truly deserves. In this sense, it is GM’s fault.
They only see that developing countries are stealing jobs from the U.S., but never realize that, before that American workers stole jobs from other human beings in the developing world. They complain that the competition is unfair because American workers certainly cannot live with salary of <5 dollars/hour. You should learn to! Both you and your fellow workers in developing countries are human beings; If they, with the same level of skill as yours, are earning far less than you do, why do you think you have the right to complain at all. You should actually feel guilty because in the past you stole their jobs; You were the thief, not them. Now they are just getting back the share they deserve.
A funny parody music video “Every breath you take” is currently circulated widely on Internet. The video is about the fight for Federal Reserve chairmanship between Professor R. Glenn Hubbard (Dean of Columbia Business School) and Ben Bernanke (the final winner). Professor Hubbard, who was formerly Chairman of the President's Council of Economic Advisors, was on the short list to become the Chairman of the Federal Reserve System.
Hubbard liked the show. According to John Kiker, the business school's associate dean for marketing and communication.
"He was on the ground laughing so hard" when he saw the video a week ago at the school's "Follies," an annual show of satirical skits, songs and videos, said Kiker, who was in the audience as well. Hubbard "stood up after the video and got a standing ovation, so it was cool. . . . The students love him." Hubbard, responding to a request for comment by e-mail, wrote of his students, "I hope they will be as talented at raising productivity growth as in video making!" ---- Source: Washington Post
A paper by Professor Hubbard: “Capital-Market Imperfections, Investment, and the Monetary Transmission Mechanism”(PDF file) (presented at Bundesbank, Frankfurt, Germany) can help you understand his philosophy on monetary policy.
More Parody music videos on Glenn Hubbard:
“Thousands of activists rallied in the southern Indian city of Hyderabad this week to protest against the Asian Development Bank, which held its annual meeting in the city. Protesters say policies of the ADB and other multinational lenders are making poverty worse in countries like India. Anjana Pasricha is in Hyderabad for VOA, where she reports the buoyant Information Technology sector there has brought enormous benefits for the middle classes, but left many behind.”–---- VOA
It is certainly debatable whether ADB is making poverty better. But it really amuses me that they are accusing ADB for making poverty worse. Unless they take money away from you, you cannot get worse.
Sometimes when I see homeless people, I may give them several dollars. Theoretically they can accuse me for making their lives worse. I do make their lives worse. Had I given them 50,000 dollars, they would have gotten out of poverty. So indeed it is me (by not giving them 50,000 dollars) that “causes” their poverty. Theoretically those people who I haven’t had a chance to meet and certainly have not given several bucks to can accuse me of making their lives worse, of leaving them behind.
But isn’t it ridiculous? This means that by doing some good deeds, you are actually become constantly more blamable. At first you are helping them out of good will, and over time the people you help take your giving as granted, and will yell at you, reprimand you when you are one day a little bit slower in delivering foods to them. They however never blame those Indian government officials who always tax them (formally and through corruption, extortions...), let alone helping.
No one is your servant. We only help those who can help themselves and who are grateful. Before accusing others, please think first what you yourselves have done for the poor, and learn to be grateful when others are trying to help.
As covered previously in the Bulletin in "Does the new labor law really harm French youth?" , some French youth are unhappy about the new labor law and claim that increasing the flexibility of hiring and firing workers will make more people jobless. Serious quantitative study however contradicts what they naively believe.
A study done by Robert MacCulloch and Rafael Di Tella and published in the European Economic Review shows that that if France were to make its labor markets as flexible as those in the US, its employment rate would increase 1.6 percentage points, or 14% of the employment gap between the two countries.
The Consequences of Labor Market Flexibility: Panel Evidence Based on Survey Data (PDF file)
Abstract: We introduce a new data set on hiring and firing restrictions for 21 OECD countries for the period 1984-90. The data are based on surveys of business people in the countries covered, so the indices we use are subjective in nature. Controlling for country and time fixed effects, and using dynamic panel data techniques, we find evidence that increasing the flexibility of the labor market increases both the employment rate and the rate of participation in the labor force. A conservative estimate suggests that if France were to make its labor markets as flexible as those in the US, its employment rate would increase 1.6 percentage points, or 14% of the employment gap between the two countries. The estimated effects are larger in the female than in the male labor market, although both groups seem to have similar long run coefficients. There is also some evidence that more flexibility leads to lower unemployment rates and to lower rates of long-term unemployment. We also find evidence consistent with the hypothesis that inflexible labor markets produce "jobless recoveries" and introduce more unemployment persistence
Second warning for bank giants over bills fraud – The Standard
The banking regulator has warned state- owned lenders such as Bank of China for the second time in five months after discovering 750 million yuan (USD 94 million) of fraud related to bank bills.
"Some banks and their branches are blindly developing bill business at the cost of risk control," the China Banking Regulatory Commission said in a note to lenders last month.
Bank bills - notes issued by lenders promising to pay the bearer on demand - are used to pay for goods and services.
Bank of China, China Construction Bank and Agricultural Bank of China found 11 cases of bank-bill fraud between July last year and March, the commission said.
Bank of China, seeking about US$8 billion (HK$62.4 billion) in an initial share sale this month, accounted for three-quarters of the total.
According to a story carried by The Christian Science Monitor: “The mayor of China's top manufacturing city is hosting a "swimathon" this summer in the local Pearl River. Cleanup efforts to reverse years of industrial pollution have been so successful, claims mayor Zhang Guangning, that the Pearl is once again safe to swim. To prove it, he plans to don a suit and join the 10,000 other swimmers whom he hopes will take the plunge. But after looking into the filmy water and smelling its foul wafts, other officials are said to be begging off. Three vice-mayors told a local newspaper that they couldn't swim.”
Such political grandstanding is nothing new in China (a Great Leap Forward déjà vu), but the good side is that this time the government is focus on the environment.
“Local newspapers reported that government officials might also resort to dumping chlorine into the river or releasing fresh water from upstream reservoirs as a temporary fix. One local government environmental official ducked a reporter's question on whether the water was safe for swimmers, saying it was up to other experts to decide.
"They know the water isn't suitable for swimming if we look at the quality, but they want to push people to pay more attention to water protection," says Li Shiyu, dean of environmental science at Zhongsan University in Guangzhou.”
Although I don’t deny that environmental protection should not be ignored at any stage of economic development, but it is not clear to me whether it is more or less costly to get rich first and then clean it up. The experience of now developed countries suggests that it makes sense to sacrifice the environment when the cost of holding up economic development is too high. This is true for China too.
“While its rivers and skies have taken a pounding, observers say the degradation pales in comparison with other industrialized parts of China that have less money to spend on cleaning up. Guangzhou has begun collaborating with Hong Kong on monitoring air pollution that often blankets Hong Kong's famed skyline. Guangzhou's middle class is growing more health-conscious, and "green" groups have sprouted on university campuses.”
I know some environmental activists in New York City or Los Angles are always complaining about the air pollution where they live and want to preserve the environment of Africa. But isn’t it unfair and ironic that you are enjoying the highest level of living standard while requiring Africans to starve, build a zoo to entertain you, and in the meantime impressed by your “high moral standard”. Why don’t you switch your residence with Africans, then you get what you want and they get what they want. I don't think these "enviromental activists" would accept this offer.
International Herald Tribune carries a story about “one of the world's richest men turns to Mexico's future”.
Pro-business policy is indeed good for Mexico, but there is reason why business tycoon shouldn’t participate directly in politics.
“Slim, who has amassed a $30 billion fortune building Latin America's biggest telecommunications empire, has stepped aside from running companies to try to set the economic and social agenda for Mexico. Although he is not running in the July 2 presidential election, Slim has been acting like a candidate. He has been traveling the country by private jet in a campaign to convince the next government to cut energy costs, rid the legal system of corruption and allow more private investment in roads, power plants and the state oil monopoly, Petróleos Mexicanos, or Pemex.
....
Slim's 11-page proposal, called the Chapultepec Accord, after the Mexico City park where it was announced, includes making the police and courts more independent, cutting red tape to make government programs more responsive to the poor, and allowing more private investment in housing, schools, clinics, roads and bridges."The only healthy way to invest is if it's a combination of public and private investment," he said.
Slim is preparing to profit if his proposals go forward. In September, Slim created a company called Impulsora del Desarrollo & el Empleo en America Latina, or Ideal, to build roads, waterworks and power plants if Mexico's next president follows his recommendations for more private investment.
Absent in Slim's campaign is a call to force more competition in telecommunications. His flagship company, Teléfonos de México, or Telmex, controls more than 90 percent of the fixed phone lines in Mexico. In the past eight years, Telmex has used the courts to block antitrust rulings designed to reduce its dominance."
(1) “China’s total liabilities for non-performing loans may be as high as $900bn, dwarfing official estimates and outstripping the country’s massive foreign exchange reserves, according to a study of Beijing’s bad debt problem. The study, part of Ernst & Young’s annual global survey of NPLs, says China’s big four state banks alone have bad loans worth $358bn, or more than twice official estimates.” – Financial Times
Update (05/15/06): Ernst & Young withdrew the report admiting that the report contains errors and did not go through normal internal approval procedure. But it is not clear whether they do it because of government pressure and/or concerns for losing lucrative clients among Chinese state-owned companies.
(2) “The International Monetary Fund urged China on Tuesday to tighten access to credit, saying that last week's modest interest rate increase was insufficient to stave off economic overheating. China's M2 measure of money supply, which includes all cash and bank deposits, rose 18.8 percent in March from a year earlier to 31.1 trillion yuan, or $3.88 trillion. The value of new lending in China rose more than 60 percent in the first three months from a year earlier.” --- International Herald Tribune
