What's the perfect complement to a Michelin Star Rated dinner during an environmental conference in Copenhagen? Why a roll in the hay with the famous (legal) ladies of the night. The Copenhagen City Hall recently distributed pamphlets to all the hotels likely to be used by the dignitaries reading "Be Sustainable. Don't Buy Sex." Unfortunately for the city, this did not please the prostitution union (yes they have a union, it is a legal workforce like any other under Danish law). In response to this attack on their free market practice, the prostitution union decided to fight back in a big way. To any client who was able to show one of the pamphlets along with a badge proving their attendance of the conference, the ladies of the night would offer free services. Talk about a way to use the free market to encourage a steady customer flow in spite of unfair competition from the government. With prostitution being such a sticky subject (especially in the United States), what does everything think about this type of response? Should the government have the right to distribute flyers directly attacking a legal industry? The Danish government has recently gone strongly towards the conservative side, hence the attack on the morally reprehensible industry. These attacks could be a first step on the government taking away liberal aspects such as the prostitution and the Christiania "free drug haven area" but do they have to right to do so when an industry has been created via massive capital investments which were undergone under legal pretenses? This is a tough situation but I would argue that once this door has been opened, it would be detrimental to the economy and to the belief that citizen have in investing in industries within the nation for the future if the government keeps up this kind of behavior.
An article about this can be found here
Tuesday, December 8, 2009
Saturday, November 21, 2009
Banking: Not Only a US Problem
ABN Amro, one of the major banks in the Netherlands has been bought by the Dutch government and will be merged with other dutch bank Fortis, Scottish RBS, and Spain's Santandar to create a bank that will definitely be "too big to fail. The Dutch government just injected 3 billion euros in short term loans as well as 1.4 billion in long term bonds to keep ABN Amro running into what Dutch Finance Minister, Wouter Bos, believes will be a new profitable bank. Seems like Europe is having the same problems as the United States with banks in danger of failing and therefore merging into larger, potentially even more problematic banks such as the enormous CitiGroup, Bank of America, JP Morgan, Goldman Sachs, and more. If banks were too large to fail before, now they are simply gargantuans whose failures could potentially annihilate an entire economy. Hopefully some types of regulation as well as the not-so-free free markets can keep a global financial meltdown such as the current one from happening again.
New Common Markets
East Africa has a new common market as well as the fears and benefits that go with it. See what the BBC is saying here . Kenya, Tanzania, Rwanda, Uganda and Burundi are all members and we will see if Kenya, the largest economy out of the group will be able to dominate and take advantage of the free market or if the rest will benefit as a result of the free market.
Domo Arigato Volkswagen
Fears have long been held that the automobile industry is going to be taken over by the efficient Japanese firms, namely Toyota. As we saw earlier in the course, fears over Japan overtaking the world economy have been held since the glorious days of Styx. Today, maybe we need to keep our eyes on another Axis power, the Germans. Toyota is still the world's number one producer, but Volkswagen has just injected massive amounts of investments into its company in order to become the world's largest automaker by 2018. BBC gives us some more information about the auto battle through this article. What does this battle mean for us, the United States automakers? It means that it's game time. As Toyota and VW engage in all out warfare, there will be less room for Ford and GM. With high quality line ups beginning to emerge from both these companies with selections such as the resurgent Ford Taurus, the Chevy Malibu, the always powerful and fun Corvette, the new Camaro, the ever popular Ford F-150, and many more, there has never been a better time for the US producers to present a challenge. However, as Toyota and VW continue to produce amazing cars under both their own brands as well as under their affiliates such as Lexus under Toyota and Audi, Porsche, Lamborghini, Bentley, and Bugatti under VW, there is a steep hill ahead. Focusing on only the domestic market has been shown to no longer be enough of a battle. Instead, the US producers are going to have to move on to high growth markets such as China and India with cars that are both luxurious enough to outperform their domestic brands while being price conscious enough to remain affordable. The new models may be great for the domestic market and are starting to show better sales, especially with the cash for clunkers program, but they are not capable of dominating these new markets. Me and the many leaders of these debt-laden US automakers are looking for any suggestions as to how these markets can be taken over, so feel free to give your opinions.
PS We all know that compact cars are all the rage in these countries, so there needs to be something more than just focusing on making fuel efficient, smaller cars.
PS We all know that compact cars are all the rage in these countries, so there needs to be something more than just focusing on making fuel efficient, smaller cars.
Monday, November 2, 2009
US View on the Current Economic Crisis
To most, the United States is the epicenter of the global financial crisis that has overtaken the world. The collapse began with American banking firms and was partially caused by the American subprime mortgage lending program that had been undertaken by banks all over the world. However, the responsibility of the American Federal Reserve Bank has minimized the impact of this economic downturn and has reduced any effects of this recession upon the rest of the world. While not going so far as to save all irresponsible American banks, the stimulus package was able to save some of the banks who were in danger of facing bankruptcy in the face of bad debts. Lehmann Brothers and Bear Stearns were able to have their best assets recovered and the losses to the American people were minimal.
The manner in which the global economy has progressed over the past several decades has meant that the world’s financial institutions have become intimately linked. With investments being made in foreign currencies and assets being traded from nation to nation, when one nation’s banking sector was hit as an effect of excessive deregulation others inevitably followed. The United States was not the only nation to be hurt by this issue. When Great Britain and the Netherlands decided they could make a higher inflation rate by investing in Iceland and their nation’s banks were hurt in much the same way. Japan went through a similar process in the 1990s and the Southeast Asian crisis went along the same lines as well. The United States is not to blame for the state of economic affairs the globe is currently experiencing but its actions to escape the recession should be followed as the nations of the world move past this horrible time.
The European Central bank underwent a similar bailout plan to recapitalize the banking system and give it the liquidity it required in order to avoid disaster. As the banking systems around the world become more able to lend without fear of overleveraging themselves, the world will begin to exit this crisis and be able to move forward stronger than ever. As the crisis abates, the world will have to remember that it was the extreme deregulation of the recent past that allowed for this crisis to occur and by ensuring that the banking system is appropriately governed by the responsible parties of the world, future crises can be avoided. The large stimulus package the United States invested into its economy has already begun to pay off as several banks have repaid the loans with interest. Any nations that are still feeling the reeling effects of the global crisis should take this point to heart as they can follow with their own stimulus packages in order to grow out of their own piece of the crisis. Under no circumstances should this crisis be used as an excuse to stop the process of globalization. The free movement of goods and capital cannot possibly be contained and stopped and any attempt to do so would only send those economies even further into a deep depression. The ages of isolationism are over and the global economy must be embraced. However, regulation of this global economy must be carried out in order to prevent individual actors from wreaking havoc upon the world once again.
The manner in which the global economy has progressed over the past several decades has meant that the world’s financial institutions have become intimately linked. With investments being made in foreign currencies and assets being traded from nation to nation, when one nation’s banking sector was hit as an effect of excessive deregulation others inevitably followed. The United States was not the only nation to be hurt by this issue. When Great Britain and the Netherlands decided they could make a higher inflation rate by investing in Iceland and their nation’s banks were hurt in much the same way. Japan went through a similar process in the 1990s and the Southeast Asian crisis went along the same lines as well. The United States is not to blame for the state of economic affairs the globe is currently experiencing but its actions to escape the recession should be followed as the nations of the world move past this horrible time.
The European Central bank underwent a similar bailout plan to recapitalize the banking system and give it the liquidity it required in order to avoid disaster. As the banking systems around the world become more able to lend without fear of overleveraging themselves, the world will begin to exit this crisis and be able to move forward stronger than ever. As the crisis abates, the world will have to remember that it was the extreme deregulation of the recent past that allowed for this crisis to occur and by ensuring that the banking system is appropriately governed by the responsible parties of the world, future crises can be avoided. The large stimulus package the United States invested into its economy has already begun to pay off as several banks have repaid the loans with interest. Any nations that are still feeling the reeling effects of the global crisis should take this point to heart as they can follow with their own stimulus packages in order to grow out of their own piece of the crisis. Under no circumstances should this crisis be used as an excuse to stop the process of globalization. The free movement of goods and capital cannot possibly be contained and stopped and any attempt to do so would only send those economies even further into a deep depression. The ages of isolationism are over and the global economy must be embraced. However, regulation of this global economy must be carried out in order to prevent individual actors from wreaking havoc upon the world once again.
Sunday, November 1, 2009
Paul Krugman: Lessons From History Soon Forgotten
Paul Krugman’s The Return of Depression Economics takes a historical journey through past economic crises while relating them to the modern day. This strategy makes the book extremely applicable because it shows where mistakes have been made and repeated throughout history and which ones have contributed to the current global economic crisis. Journeys through the Great Depression, Argentina, Southeast Asia, Japan, Brazil, and the modern globe create a full picture for the reader to use in forming his or her own opinion on the causes of financial crises. Krugman is by his own admission a supporter of Keynes. For a further look of where his bias may lie, Krugman’s daily blog is named The Conscience of a Liberal. As is to be expected coming from a left-leaning economist, Krugman blames not the basic system for crises but the manner in which people have manipulated it. Instead of following Keynesian theory, nations under threat of a crisis have instead undertaken fiscal and monetary policies that were contractionary instead of expansionary and by doing so placed further strain upon the financial system and thereby driving it further into recession.
This was the mistake made by Hoover before the Great Depression and under orders from the IMF; the same mistake was repeated by several of the East Asian nations, Argentina, and Brazil. As for the current crisis, Krugman places some blame upon America’s economic “messiah” – Allan Greenspan. He points to the point that Greenspan replaced the Stock Bubble of the 1990s with the Housing Bubble of the current decade. The subprime mortgages that were allowed to be traded at will due to deregulation during the Bush Administration followed this and soon the highly leveraged “shadow banking” system was in collapse. As for an outlook on the future, Krugman remains skeptical as the stimulus package amounted to only about 1% of GDP while he believes a stimulus of at least 4% would be necessary to properly bring the economy out of its slump, as worked for Sweden in the 1990s. As for dangers to other economies, Krugman points to currency crises that come from not taking action early enough in the crisis. One lesson that he stresses is to make a decision, no matter what it is. Staying in a state of limbo only creates speculation and exacerbates the problems, making any action that will be taken less effective. Developing nations often faced the issue of choosing to either allow their currency to devalue or to raise interest rates, neither of which was desirable. However, the practice of choosing neither until it was too late always made things much worse for everyone involved. After looking at several of these crises, Krugman finally tackles the current crisis and generalizes that it is such a major disaster because it contains pieces from all of the previous crises in one. As he puts it, the current crisis has as parts of its whole a bursting real estate bubble, runs on banks in the shadow banking system, a liquidity trap, a disruption of international capital flows, and a currency crisis. With all of these placed together, Ben Bernanke has his work cut out for him and according to Krugman, he has not yet done enough to placate all of these economic beasts.
Krugman’s book, The Return of Depression Economics, is undoubtedly well written. His style is equally appropriate for the average American as it is for an aspiring PhD student. His uses of simple analogies, such as the recurring babysitting coop, make difficult concepts easier to grasp. Many will find issues with points he makes throughout the book, most namely of which his strong support of government intervention to prevent economic shocks for turning into full fledged recessions. Others will find issue with his mild opinion of Greenspan, as many once regarded him as one of America’s greatest economic leaders. Overall, I will argue that the book offers lessons for anyone who cares to read from a well educated and well spoken economist. It never tries to be an unbiased view of the world, but offers what Paul Krugman believes to be the soundest advice regarding economic crises that history has taught us time and time again. More than anything, this book is a plea for leaders of the world to be prepared to act in order to save the world from experiencing such a crisis ever again. He only wants us to finally stop repeating history.
This was the mistake made by Hoover before the Great Depression and under orders from the IMF; the same mistake was repeated by several of the East Asian nations, Argentina, and Brazil. As for the current crisis, Krugman places some blame upon America’s economic “messiah” – Allan Greenspan. He points to the point that Greenspan replaced the Stock Bubble of the 1990s with the Housing Bubble of the current decade. The subprime mortgages that were allowed to be traded at will due to deregulation during the Bush Administration followed this and soon the highly leveraged “shadow banking” system was in collapse. As for an outlook on the future, Krugman remains skeptical as the stimulus package amounted to only about 1% of GDP while he believes a stimulus of at least 4% would be necessary to properly bring the economy out of its slump, as worked for Sweden in the 1990s. As for dangers to other economies, Krugman points to currency crises that come from not taking action early enough in the crisis. One lesson that he stresses is to make a decision, no matter what it is. Staying in a state of limbo only creates speculation and exacerbates the problems, making any action that will be taken less effective. Developing nations often faced the issue of choosing to either allow their currency to devalue or to raise interest rates, neither of which was desirable. However, the practice of choosing neither until it was too late always made things much worse for everyone involved. After looking at several of these crises, Krugman finally tackles the current crisis and generalizes that it is such a major disaster because it contains pieces from all of the previous crises in one. As he puts it, the current crisis has as parts of its whole a bursting real estate bubble, runs on banks in the shadow banking system, a liquidity trap, a disruption of international capital flows, and a currency crisis. With all of these placed together, Ben Bernanke has his work cut out for him and according to Krugman, he has not yet done enough to placate all of these economic beasts.
Krugman’s book, The Return of Depression Economics, is undoubtedly well written. His style is equally appropriate for the average American as it is for an aspiring PhD student. His uses of simple analogies, such as the recurring babysitting coop, make difficult concepts easier to grasp. Many will find issues with points he makes throughout the book, most namely of which his strong support of government intervention to prevent economic shocks for turning into full fledged recessions. Others will find issue with his mild opinion of Greenspan, as many once regarded him as one of America’s greatest economic leaders. Overall, I will argue that the book offers lessons for anyone who cares to read from a well educated and well spoken economist. It never tries to be an unbiased view of the world, but offers what Paul Krugman believes to be the soundest advice regarding economic crises that history has taught us time and time again. More than anything, this book is a plea for leaders of the world to be prepared to act in order to save the world from experiencing such a crisis ever again. He only wants us to finally stop repeating history.
Tuesday, October 27, 2009
Mistakes Are Meant to be Repeated
Before beginning this posting, I want to preface it by saying that nothing mentioned here is meant to be read as an attack on Professor Smitka. I respect him and was glad that he was able to relay his experience to us in class today, but many of the points being made by Professor Smitka show the problems that have plagued the IMF in the past and continue to do so into the future. Perhaps by highlighting these serious issues there can oneday be progress in the IMF to help developing nations grow and join the developed world while helping to alleviate absolute poverty around the globe.
During class I mentioned the fact that LDCs are often targeted by developed countries for dumping of surplus goods. This practice is supposed to be illegal under the WTO but has never really been curbed. EU nations are notorious for using Africa as a source for surplus butter, foodstuffs, and other goods that are being produced under strong tariffs in the developed nations. The US does the same with dairy products as well as agricultural products. Perhaps the problem is that the WTO does not choose to strongly address agricultural products as they have been the source of much controversy in the past. However there is a serious issue here that must be addressed, and it affects the IMF because the IMF claims that its purpose is to give advice to LDCs and be a lender of last resort should they need a bailout. Well, when creating an economic plan for a nation, the fact that the products a nation would naturally have a competitive advantage in are being unfairly targeted by developing nations means that the IMF should adjust its strategic advice. This has not proven the case, as the IMF holds very little if any sway over the developed nations that fund it. It cannot be denied that by dumping their products upon LDCs, dcveloped nations are trying to protect their domestic businesses and give them an unfair advantage. Market forces no longer apply to them.
Looking at the many poor nations of Africa can help show how this practice hurts LDCs. No area of the world has been kept in so much poverty with so little growth as the continent of Africa. After the fall of colonialism, these immature ecnomies were never allowed to grow and were instead harvested for their natural resources while tariffs and nontariff barriers prevented these nations from progressing to a higher level of production. Many African nations would find their comparative advantage in agriculture. Large areas of fertile land, low cost labor, and the easy ability for foreign investment to make vast profits as well as progress for local people means that the agricultural industries should be enhanced and encouraged to export to the developed world. This would create lower cost agricultural goods for people everywhere and would save taxpayers from having to subsidize inefficient industries at home. If the free market was allowed to properly function, this is how the markets would naturally function and capital would naturally flow to allow the poor nations of Africa to produce at the own comparative advantage. If this were true, the IMF would be able to encourage this kind of development and as capital would flow into the nation, progress would be allowed to naturally occur. However, the IMF is obsessed with following a model which has created many disasters in LDC economies throughout the years. Mexico, Argentina, Japan, the Asian Tigers, Iceland (the most recent target of IMF practices), and more have all been hurt by these short-sighted economists. Are they in the back pockets of the developed world? That I do not know, but I do know that those who bankroll the IMF should naturally have some sort of guidance over its policies. Even though it is supposed to be a neutral organization, money always talks. History and experience shows that the IMF has not done its proper duty and although it has had its share of successes, there have also been way too many failures which have been fatally detrimental to the economies of infant nations. As Professor Smitka himself said, he only had a single loan that he gave out to these LDC nations that actually paid back the loan. This does not help anyone. Trust is lost, the bank loses its potential profit, and the nation is being hurt because it is being guided in the wrong direction by blind economists. A massive overhaul of the system must be made or further mistakes could drive LDC nations further into poverty, perhaps into permanent solitude and starvation. I have great hope that the world will do the right thing, but the hidden protectionist policies that have been enacted by the world's greatest economic powers have prevented LDC nations from growing and matching the level of development found in the developing world who was just lucky to get there first.
During class I mentioned the fact that LDCs are often targeted by developed countries for dumping of surplus goods. This practice is supposed to be illegal under the WTO but has never really been curbed. EU nations are notorious for using Africa as a source for surplus butter, foodstuffs, and other goods that are being produced under strong tariffs in the developed nations. The US does the same with dairy products as well as agricultural products. Perhaps the problem is that the WTO does not choose to strongly address agricultural products as they have been the source of much controversy in the past. However there is a serious issue here that must be addressed, and it affects the IMF because the IMF claims that its purpose is to give advice to LDCs and be a lender of last resort should they need a bailout. Well, when creating an economic plan for a nation, the fact that the products a nation would naturally have a competitive advantage in are being unfairly targeted by developing nations means that the IMF should adjust its strategic advice. This has not proven the case, as the IMF holds very little if any sway over the developed nations that fund it. It cannot be denied that by dumping their products upon LDCs, dcveloped nations are trying to protect their domestic businesses and give them an unfair advantage. Market forces no longer apply to them.
Looking at the many poor nations of Africa can help show how this practice hurts LDCs. No area of the world has been kept in so much poverty with so little growth as the continent of Africa. After the fall of colonialism, these immature ecnomies were never allowed to grow and were instead harvested for their natural resources while tariffs and nontariff barriers prevented these nations from progressing to a higher level of production. Many African nations would find their comparative advantage in agriculture. Large areas of fertile land, low cost labor, and the easy ability for foreign investment to make vast profits as well as progress for local people means that the agricultural industries should be enhanced and encouraged to export to the developed world. This would create lower cost agricultural goods for people everywhere and would save taxpayers from having to subsidize inefficient industries at home. If the free market was allowed to properly function, this is how the markets would naturally function and capital would naturally flow to allow the poor nations of Africa to produce at the own comparative advantage. If this were true, the IMF would be able to encourage this kind of development and as capital would flow into the nation, progress would be allowed to naturally occur. However, the IMF is obsessed with following a model which has created many disasters in LDC economies throughout the years. Mexico, Argentina, Japan, the Asian Tigers, Iceland (the most recent target of IMF practices), and more have all been hurt by these short-sighted economists. Are they in the back pockets of the developed world? That I do not know, but I do know that those who bankroll the IMF should naturally have some sort of guidance over its policies. Even though it is supposed to be a neutral organization, money always talks. History and experience shows that the IMF has not done its proper duty and although it has had its share of successes, there have also been way too many failures which have been fatally detrimental to the economies of infant nations. As Professor Smitka himself said, he only had a single loan that he gave out to these LDC nations that actually paid back the loan. This does not help anyone. Trust is lost, the bank loses its potential profit, and the nation is being hurt because it is being guided in the wrong direction by blind economists. A massive overhaul of the system must be made or further mistakes could drive LDC nations further into poverty, perhaps into permanent solitude and starvation. I have great hope that the world will do the right thing, but the hidden protectionist policies that have been enacted by the world's greatest economic powers have prevented LDC nations from growing and matching the level of development found in the developing world who was just lucky to get there first.
Tuesday, October 13, 2009
The IMF, Perhaps a Glorified Lobby Group
I am not sure if I am the only person who gets this feeling from looking at the IMF's website, but upon reading the "about us" and "what we do" sections, the descriptions sound very similar to many large lobby groups I have seen. The only key difference appears to be that the IMF has a large supply of money that it lends out on a discretionary basis. While other lobby groups may use their supplies of money for other purposes, the IMF lends its out. Sometimes this comes with success, other times it devastates an emerging economy. As a quote from the IMF's website, their second key function is to perform "research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets." Slightly reminiscent of a think tank right? There are many people who remain skeptical of the IMF as an ineffective institution even though its basic goals seem sound through macroeconomic theory. Maybe its past failures show that the base assumptions that are undertaken by economic models, such as perfect markets, perfect information, etc. are jumps that are too great to allow for these models to apply to lesser developed nations. It is possible that it is, in fact, the lack of effective financial institutions in these nations that makes it so that this global financial institution becomes less effective than predicted. The goals of the IMF are solid. Fostering growth in lesser developed countries becomes beneficial for all of society in the long run but sometimes artificial attempts to create a functional and thriving economy backfire and create even more dismay and distrust of the international community among the poor. If this is the case and the trust in both the IMF and the international community erode among lesser developed countries, maybe the IMF will have to become even more like a lobby group and truly sell itself to these nations whom it tries to help.
Sunday, October 4, 2009
Southeast Asia, Home of the Natural Disaster
Recently, it seems as if Southeastern Asia has been home to many a natural disaster with many casualties associated. Disasters have hit the Samoan Islands, the Phillipines, and Indonesia, each with absolutely catastrophic effects.
Granted, the Samoan Islands may be both extremely south and east, but for some reason, this region of the world has been pummeled recently. Thus far, at least 165 people have been killed by powerful magnitude 8.0 earthquake that struck the area, as well as from the associated tsunami. For more information on the disaster, feel free to browse cnn's article focusing on aid being sent to the region by the world. According to CNN, some villages have completely disappeared. Any crops they were growing or any sense of an economy in the area has been absolutely decimated. With the United States being in charge of American Samoa, FEMA is looking to reclaim a sense of dignity after the hurricane Katrina fiasco on the mainland. We will wait and see how FEMA fares this time around, but for the people of the area, I sincerely hope FEMA has learned from its mistakes and will be able to bring these people back to their former state of living asap.
The next disaster is currently still being updated, but the Phillipines (a former United States possession) is currently being struck by a strong typhoon. The typhoon caused numerous landslides that devastated the people living on the islands. As of 8:45 eastern time, there are 15 confirmed dead and there are not yet any estimates on how high the casualty count will rise. There are various enomorous areas of power outages, effectively halting and form of industrial economy and crippling the regions until power can be restored. Luckily winds are not a huge factor with this typhoon as they reached a high of 120 km per hour but the rain is the true killer here. As mentioned, it has created landslides and flooding is expected as well to make the situation even worse. See more about the typhoon here.
Last but not at all least is the fallout from two earthquakes having hit Indonesia. A 7.6 quake hit Sumatra on Wednesday while a 6.6 quake struck on Thursday morning in the same region. Current casualty estimates lie between 1,100 and 1,500 but the Indonesian government has claimed that about 4,000 people could be buried alive beneath the rubble and casualites could easily reach a much higher level. Thus far, only 25 bodies have actually been removed from the rubble so there is much work to be done. This is an absolute disaster for the island. Bridges are gone, power is out, water lines are broken, there is no sense of civilization left in the region. As for a relation to the international economy, this disaster means that for the moment, this region of Indonesia has no economy whatsoever. Any efforts from people in the region at the moment are entirely focussed upon saving those who are trapped and being buried alive beneath thousands of tons of rubble. For more information about this awful disaster, check out cnn's updating correspondence.
Three terrible disaster in the time of half a week. Southeast Asia is truly being pummeled. In total, casualities could reach 5,000 people in this region. Entire economies have been obliterated, people will have to begin with nothing. Any investments are sure to have been wiped out and in a part of the world that is still developing, it is highly questionable whether there are any types of insurance against such disasters that would allow these people to rebuild. For many in the developing world, a disaster such as these means ruin. A life of poverty would follow with almost no chance of recovery since they would be stuck in so great a hole that they had no hope of ever climbing out. I cannot help but wonder whether the death rate would be the same had equally terrible disaster hit a developed area of the world. Hurricane Katrina did not cause nearly as many deaths, but population density must also be taken into consideration. How much of an effect do better quality buildings, proper channels of warning communication, highly developed emergency plans, and other potentially life saving items have on the casualty rates of natural disasters such as these? This is a question worth some consideration. If it is as I would hypothesize and it has a great effect, then it truly does matter when your crib lies...it could make the difference between life and death when nature comes knocking at the door.
Granted, the Samoan Islands may be both extremely south and east, but for some reason, this region of the world has been pummeled recently. Thus far, at least 165 people have been killed by powerful magnitude 8.0 earthquake that struck the area, as well as from the associated tsunami. For more information on the disaster, feel free to browse cnn's article focusing on aid being sent to the region by the world. According to CNN, some villages have completely disappeared. Any crops they were growing or any sense of an economy in the area has been absolutely decimated. With the United States being in charge of American Samoa, FEMA is looking to reclaim a sense of dignity after the hurricane Katrina fiasco on the mainland. We will wait and see how FEMA fares this time around, but for the people of the area, I sincerely hope FEMA has learned from its mistakes and will be able to bring these people back to their former state of living asap.
The next disaster is currently still being updated, but the Phillipines (a former United States possession) is currently being struck by a strong typhoon. The typhoon caused numerous landslides that devastated the people living on the islands. As of 8:45 eastern time, there are 15 confirmed dead and there are not yet any estimates on how high the casualty count will rise. There are various enomorous areas of power outages, effectively halting and form of industrial economy and crippling the regions until power can be restored. Luckily winds are not a huge factor with this typhoon as they reached a high of 120 km per hour but the rain is the true killer here. As mentioned, it has created landslides and flooding is expected as well to make the situation even worse. See more about the typhoon here.
Last but not at all least is the fallout from two earthquakes having hit Indonesia. A 7.6 quake hit Sumatra on Wednesday while a 6.6 quake struck on Thursday morning in the same region. Current casualty estimates lie between 1,100 and 1,500 but the Indonesian government has claimed that about 4,000 people could be buried alive beneath the rubble and casualites could easily reach a much higher level. Thus far, only 25 bodies have actually been removed from the rubble so there is much work to be done. This is an absolute disaster for the island. Bridges are gone, power is out, water lines are broken, there is no sense of civilization left in the region. As for a relation to the international economy, this disaster means that for the moment, this region of Indonesia has no economy whatsoever. Any efforts from people in the region at the moment are entirely focussed upon saving those who are trapped and being buried alive beneath thousands of tons of rubble. For more information about this awful disaster, check out cnn's updating correspondence.
Three terrible disaster in the time of half a week. Southeast Asia is truly being pummeled. In total, casualities could reach 5,000 people in this region. Entire economies have been obliterated, people will have to begin with nothing. Any investments are sure to have been wiped out and in a part of the world that is still developing, it is highly questionable whether there are any types of insurance against such disasters that would allow these people to rebuild. For many in the developing world, a disaster such as these means ruin. A life of poverty would follow with almost no chance of recovery since they would be stuck in so great a hole that they had no hope of ever climbing out. I cannot help but wonder whether the death rate would be the same had equally terrible disaster hit a developed area of the world. Hurricane Katrina did not cause nearly as many deaths, but population density must also be taken into consideration. How much of an effect do better quality buildings, proper channels of warning communication, highly developed emergency plans, and other potentially life saving items have on the casualty rates of natural disasters such as these? This is a question worth some consideration. If it is as I would hypothesize and it has a great effect, then it truly does matter when your crib lies...it could make the difference between life and death when nature comes knocking at the door.
Outside Reading Title Chosen
This blogger is proud to be able to announce his choice for his book on financial and economic crisis.
And with an emphatic drum roll, I hereby announce Paul Krugman's The Return of Depression Economics and the Crisis of 2008 as my official choice. It will arrive soon and I will be soon be able to relate to the world the exact reasons for the economic crisis that has so crippled the world.
And with an emphatic drum roll, I hereby announce Paul Krugman's The Return of Depression Economics and the Crisis of 2008 as my official choice. It will arrive soon and I will be soon be able to relate to the world the exact reasons for the economic crisis that has so crippled the world.
Wednesday, September 23, 2009
Free Trade as a Cause of Racism
As I was pondering the effects of allowing free trade to, as Stiglitz would want, be both "fair" and "free," I came upon a problem. As we discussed in class, the free movement of people is a sticky subject. It becomes very emotional, security issues are created, and just about everyone can agree it is not feasible at the current time even though it would prove beneficial for society as a whole according to pure economic theory. As I said, while thinking this problem through, I saw another issue that has been arising throughout the world due to the movement of people, although not free, becoming easier than ever. Racism against incoming people is rising incredibly in the countries that acutally have a need for cheap labor to do the jobs they do not want themselves. For specific examples, I will cite Denmark and Holland. In Denmark, there is a strict divide between Turkish immigrants and ethnic Danes. Separate living areas, distinct differences in education and income levels, as well as very separate cultures is creating a hatred that is reminicent of the United States during the days of Martin Luther King Jr. With such a homogenous society as Denmark has, full of blond haired and blue eyed children living in what the UN would describe as the happiest possible country in the modern world, it becomes easy to spot someone who doesn't belong. Is it simply these physical differences that are creating problems? Or is it the open nature of the Danes, with their newspaper cartoons making fun of Allah that is antagonizing the Muslim communities that have come to Denmark?
In Holland the problem is similar. Moroccan immigrants are being discriminated against in every aspect of life. However, there is also a crime wave whose proportion has never been seen in the Netherlands. Moroccan loverboys are kidnapping Dutch girls and selling them into slavery, women's bikes are being stolen from their back yards, and areas with only a single police officer are having their stores robbed on a monthly basis. The prime minister has admitted that Holland simply does not have enough police officers to combat this new level of crime. Their jail cells are empty, in fact they are even considering leasing their jails to Belgium for it to hold its criminals in. However, crime continues to spread. Amsterdam is no longer a city where people can go for a fun night on the town. Now Dutch teens must be constantly aware, looking for where the attack could possibly come. With Rotterdam being one of the first major cities in the Western World with a Muslim leader, is this an example of democracy showing the two conflicting cultures can actually live together in harmony, or is it an attack from the outsiders whose steadily growing numbers allow them to seize power at their own wills? Could democracy's very ideals be its Achille's heel? If a nation created around democratic ideals becomes dominated by a group of people who prefer a more extreme form of government, in this case perhaps Muslim rule, can those who created the ideals do anything to stop the demise of their culture?
Racism is an ugly thing. It is not beneficial to anyone. It slow economies, splits cultures, creates violence, and is generally harmful for everyone involved in it. However, when immigrants refuse to assimilate into an existing culture, what is to be done if they become hostile? How can two cultures with such different ideas about the world come together in a single harmonious society? If the answers to these questions come to you, feel free to share because there may be a Nobel Prize awaiting you.
In Holland the problem is similar. Moroccan immigrants are being discriminated against in every aspect of life. However, there is also a crime wave whose proportion has never been seen in the Netherlands. Moroccan loverboys are kidnapping Dutch girls and selling them into slavery, women's bikes are being stolen from their back yards, and areas with only a single police officer are having their stores robbed on a monthly basis. The prime minister has admitted that Holland simply does not have enough police officers to combat this new level of crime. Their jail cells are empty, in fact they are even considering leasing their jails to Belgium for it to hold its criminals in. However, crime continues to spread. Amsterdam is no longer a city where people can go for a fun night on the town. Now Dutch teens must be constantly aware, looking for where the attack could possibly come. With Rotterdam being one of the first major cities in the Western World with a Muslim leader, is this an example of democracy showing the two conflicting cultures can actually live together in harmony, or is it an attack from the outsiders whose steadily growing numbers allow them to seize power at their own wills? Could democracy's very ideals be its Achille's heel? If a nation created around democratic ideals becomes dominated by a group of people who prefer a more extreme form of government, in this case perhaps Muslim rule, can those who created the ideals do anything to stop the demise of their culture?
Racism is an ugly thing. It is not beneficial to anyone. It slow economies, splits cultures, creates violence, and is generally harmful for everyone involved in it. However, when immigrants refuse to assimilate into an existing culture, what is to be done if they become hostile? How can two cultures with such different ideas about the world come together in a single harmonious society? If the answers to these questions come to you, feel free to share because there may be a Nobel Prize awaiting you.
Sunday, September 20, 2009
International Wage Controls?
After the economic burst of last year, there is a new focus upon finding a new balance between the free markets and the governments that must regulate them. The article I discuss here can be found from BBC World at the following link. In summary, the EU has agreed that it will focus on its agreed upon position that bonuses paid to employees should be proportional to their incomes. Therefore, it incomes fall, bonuses should follow. The EU will argue for this agreement at the next G20 summit and they will speak as a block, making theirs a very strong stance. There is no clear cut position being issued by the United States but President Obama has made it clear that he does not want there to be any set caps on bonuses. The opinion of the BBC is that this proposal will be accepted by the G20 but that it will be more of a wide set of guidelines rather than set rules regarding pay. There is often much reservation when it comes to governments becoming involved in the internal actions of businesses. More free market economists, such as Joseph Stiglitz, would most definitely not be happy with such an action, even though Stiglitz does speak of the need for the government to act as an enforcer of contracts and a power that will ensure that business will continue uninhibted and without cheating. At this point, with banks having obviously operated in a greedy manner without proper thought as to potential consequences, can even these free-market supporters such as Stiglitz support a proposal to force companies to conform to the overall business cycle? What is the right thing to do? Is this simply a period of re-regulation which will inevitably be followed by one of deregulation to bring the world back to balance?
Wednesday, September 16, 2009
Recommended Reading
For the truly avid fan of globalization, be sure to read "How Football Explains the World." Slightly humorous, but a great way to find metaphors about all the most basic points made about globalization. Attacks everything from culture clash to interest rates to currency exchanges, all in a fun package.
Venezuela the Center of a New Global Threat?
Venezuela has signed a new agreement with China worth $16 billion to invest in its oil fields in exchange for future rights to purchase the oil at what will have to be below market prices. With Russia having signed a similar agreement with Hugo Chavez earlier this year worth about $20 billion, these actions must be raising some questions in Washington. More information on this specific agreement can be found from Reuters. However, to continue our discussion, is there a new "axis of evil" being created? Or is Russia joining forces to try to reclaim its glory from the Cold War days? I say perhaps a bit of both.
It can no longer be doubted that China will soon become, if you do not already consider it so, a global economic superpower. Its enormous physical capital as well as continued growth in financial capital allows it to continue to grow while becoming more important to nations, namely the United States, as a lender. Who would have ever imagined that a nation that was a primary antagonizer for both the Korean War and Vietnam would now be one that the United States greatly depends upon? There is no doubt about it, China's economy is not only growing but it is also maturing. Beyond only creating lead paint filled child toys, China is now becoming a source for outsourcing of white collar jobs such as professors, doctors, lawyers, and many more. China and the United States could potentially be great allies, much like the US and the EU are today, but their desire to continue to achieve may push them away from such a situation and towards one where they can dominate. An alliance of weaker nations under China's flag would do much to stoke the Chinese egos while also allow it to blantantly push its policies upon those under its influence instead of doing so in a more subtle manner today.
Russia is also having a bit of an ego trip. Whether it is a group of "excursions" into Georgia, stopping gas pipelines from supplying the EU, or cyber attacks upon Estonia, Russia has steadily been working to prove it is still a global power. With its abundance of oil and gas, Russia undoubtedly has great power over nations without this blessing. However, it is also at the whim of the capital markets which its history has so much hatred for. If the prices for oil and gas drop as they did recently, income estimated throughout Russia are greatly overstated and the economy is in great trouble. Rarely have any nations become truly great while relying upon natural resources as the basis for their economies, and we will see if Russia will become and exception or if it can diversity its economy before it becomes too late.
Back to the previous point, these investments in Venezuela seem to be a point in the direction of a new type of alliance. None of these governments are particularly fond of the great power the United States has enjoyed since the collapse of the Soviet Union. Russia has little to gain from investing in Venezuelan oil, it has much for itself. However, creating a friendship with a close neighbor who is not afraid to openly criticize the United States can be a powerful international sign. Russia is ready to be the enemy once again, or at least an annoyance that will need to be considered before the United States acts in the future. China does have a great need for oil with its booming economy, but it could also venture elsewhere to get it. Instead, by investing in Venezuela, it is making a similar statement. Instead of openly opposing the United States, who is the most important trading partner for China, it will fund Venezuela who will then be able to criticize the United States for them. This move may simply seem like an investment decision at first glance, but by looking at the political situations of the nations involved, it soon becomes obvious that there are other ideas bouncing around in the background. Is this the beginning of a new Cold War? Or is it simply a push for acceptance of the power that China and Russia have been building up recently? Is it even possible for China to ever become an enemy of the United States without absolutely devastating its own economy? Could Russia survive without the sales of its oil and gas to the EU? More thoughts about these questions coming soon but feel free to ponder them for yourself. Your ideas may become reality soon enough.
It can no longer be doubted that China will soon become, if you do not already consider it so, a global economic superpower. Its enormous physical capital as well as continued growth in financial capital allows it to continue to grow while becoming more important to nations, namely the United States, as a lender. Who would have ever imagined that a nation that was a primary antagonizer for both the Korean War and Vietnam would now be one that the United States greatly depends upon? There is no doubt about it, China's economy is not only growing but it is also maturing. Beyond only creating lead paint filled child toys, China is now becoming a source for outsourcing of white collar jobs such as professors, doctors, lawyers, and many more. China and the United States could potentially be great allies, much like the US and the EU are today, but their desire to continue to achieve may push them away from such a situation and towards one where they can dominate. An alliance of weaker nations under China's flag would do much to stoke the Chinese egos while also allow it to blantantly push its policies upon those under its influence instead of doing so in a more subtle manner today.
Russia is also having a bit of an ego trip. Whether it is a group of "excursions" into Georgia, stopping gas pipelines from supplying the EU, or cyber attacks upon Estonia, Russia has steadily been working to prove it is still a global power. With its abundance of oil and gas, Russia undoubtedly has great power over nations without this blessing. However, it is also at the whim of the capital markets which its history has so much hatred for. If the prices for oil and gas drop as they did recently, income estimated throughout Russia are greatly overstated and the economy is in great trouble. Rarely have any nations become truly great while relying upon natural resources as the basis for their economies, and we will see if Russia will become and exception or if it can diversity its economy before it becomes too late.
Back to the previous point, these investments in Venezuela seem to be a point in the direction of a new type of alliance. None of these governments are particularly fond of the great power the United States has enjoyed since the collapse of the Soviet Union. Russia has little to gain from investing in Venezuelan oil, it has much for itself. However, creating a friendship with a close neighbor who is not afraid to openly criticize the United States can be a powerful international sign. Russia is ready to be the enemy once again, or at least an annoyance that will need to be considered before the United States acts in the future. China does have a great need for oil with its booming economy, but it could also venture elsewhere to get it. Instead, by investing in Venezuela, it is making a similar statement. Instead of openly opposing the United States, who is the most important trading partner for China, it will fund Venezuela who will then be able to criticize the United States for them. This move may simply seem like an investment decision at first glance, but by looking at the political situations of the nations involved, it soon becomes obvious that there are other ideas bouncing around in the background. Is this the beginning of a new Cold War? Or is it simply a push for acceptance of the power that China and Russia have been building up recently? Is it even possible for China to ever become an enemy of the United States without absolutely devastating its own economy? Could Russia survive without the sales of its oil and gas to the EU? More thoughts about these questions coming soon but feel free to ponder them for yourself. Your ideas may become reality soon enough.
Sunday, September 13, 2009
Culture Clash: The Most Pressing Issue Today
The 21st century brings an entire new level of global integration to every nation. The days are long gone where a nation was able to control its own economy without worrying about outside influences as a primary contributing factor. The recent global economic crisis has shown us all that when one nation’s economy tumbles, the rest follow. This brings back thoughts of the domino theory during the days of communism. However, today it is even more serious. Instead of a battle between two ideologies, this phenomenon of global economic integration will affect every nation that has any sort of interaction with any other. In the modern day, the number of nations who remain unattached through trade of products, capital, information, ideas, and people can easily be counted on a single hand. Nations such as Iceland, Japan, and even perennial economic powers such as the United States and those of Western Europe were all catastrophically affected by the global financial crisis. The reason that all nations were so affected comes from this, to use an overused phrase, globalization that has been as Thomas Friedman would put it, “making the world flat.”
The European Union is perhaps the greatest example of this as the member nations have found a way to retain their individualities and political independence while creating a global economic power that rivals the longstanding hegemony of the United States. While this may be the most extreme of examples, along the way international investments, increases in technology, and the opening of the world to foreign influences has brought all nations closer together. Along with this come problems. Perhaps the most pressing of these problems is the overlapping of distinct cultures. The global war on terror is an example of how the insertion of the capitalist culture into an area of the world that had remained highly isolated from its influence created new enemies. Not that everyone from the Muslim world hates the capitalist structure and culture; many have in fact benefitted from it and stand to continue to do so. However, with a new center of power always come people who have had their positions weakened and will therefore want to fight against the new power. The problem is exacerbated when the, for lack of better words, invading culture has not made a proper effort to learn about the indigenous culture and instead tries to replace it. When indigenous people feel attacked and belittled by an invader, there are bound to be individuals who choose to fight against it to protect their honor, their history, and their culture. This problem is not an easy one to fix. In many ways, the war has already begun in the case of the war on terror and without drastic changes, it will continue. It is incredibly difficult to go from being the “bad guy” to becoming accepted by people who know you only through bombs and soldiers. Education, rebuilding of infrastructure, democracy, and perhaps simply open signs of friendship may help to ease these tensions and make this less of a problem. With other cultures, it has been less of an issue, so perhaps it can become less of one throughout the Muslim world with enough effort on both parts.
The European Union is perhaps the greatest example of this as the member nations have found a way to retain their individualities and political independence while creating a global economic power that rivals the longstanding hegemony of the United States. While this may be the most extreme of examples, along the way international investments, increases in technology, and the opening of the world to foreign influences has brought all nations closer together. Along with this come problems. Perhaps the most pressing of these problems is the overlapping of distinct cultures. The global war on terror is an example of how the insertion of the capitalist culture into an area of the world that had remained highly isolated from its influence created new enemies. Not that everyone from the Muslim world hates the capitalist structure and culture; many have in fact benefitted from it and stand to continue to do so. However, with a new center of power always come people who have had their positions weakened and will therefore want to fight against the new power. The problem is exacerbated when the, for lack of better words, invading culture has not made a proper effort to learn about the indigenous culture and instead tries to replace it. When indigenous people feel attacked and belittled by an invader, there are bound to be individuals who choose to fight against it to protect their honor, their history, and their culture. This problem is not an easy one to fix. In many ways, the war has already begun in the case of the war on terror and without drastic changes, it will continue. It is incredibly difficult to go from being the “bad guy” to becoming accepted by people who know you only through bombs and soldiers. Education, rebuilding of infrastructure, democracy, and perhaps simply open signs of friendship may help to ease these tensions and make this less of a problem. With other cultures, it has been less of an issue, so perhaps it can become less of one throughout the Muslim world with enough effort on both parts.
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