Freitag, 18. September 2009

aha ... he is no protectionist?

No protectionism, but bending to the tire workers and manufacturing unions, by accepting the ITC recommendation to raise tariffs on imported Chinese tires....
In contrast, it seems that Mr. Bush never followed an ITC recommendation to inhibit imports (and thus trade).
The loser is the consumer ... and, if the vicious circle continues, global welfare. Who knows, maybe this brings us faster to the necessary macro adjustments that probably need to take place in the next one or two decades ...


http://www.economist.com/opinion/displaystory.cfm?story_id=14450332

Mittwoch, 19. August 2009

Swiss Pavilion at EXPO 2010 - in Shanghai

Have you ever dreamt of riding on a ski-lift downtown a metropolis?
Next year, it's your chance!!! The Swiss Pavilion at the Expo 2010 in Shanghai features the original Swiss ski-lift that takes you on a tour through the pavilion.

more on
http://www.swisspavilion.ch/en/home.html

Sonntag, 16. August 2009

Asia's Growth is Back

.. and even the Japanese grow again, at an annualied 3.7% in Q2 2009. However, this is nothing against Singapore's Q2 growth of an annualized rate of over 20%...



http://www.washingtonpost.com/wp-dyn/content/article/2009/08/16/AR2009081602331.html

Montag, 27. Juli 2009

Banking, Switzerland, Risk Management and the Ability to Change

Unfortunately, Switzerland is again in the news, ahem ... in the bad news. After the Nazi gold debate of the 1990, the country faces since 2007 increased scrutiny surrounding the buzz words "tax haven" and once more the Swiss Banking Secrecy is at the top of the controversial topics.

While Germany attacked Liechtenstein extremly rude in early 2008 regarding its Trust legislation (possibly enabling many Germans to hide their wealth from the German fiscal authorities) and later on also Switzerland, the case UBS has been in the news ever since then. Some bank seniors have been pursued in actively helping Americans hiding their money from the IRS with fancy methods. Now the IRS wants to see 52'000 accounts and names of potential Americans that have deposits at UBS. This of course would violate the Swiss Banking Law and its secrecy article which forbids governments (also the Swiss one) to have access to account information.

The banking secrecy - whatever some conspiracy theorists and pessimists may believe - has a long tradition and was never intended to protect dictators, terror financiers and rogue people.
The banking secrecy is fundamentally an expression of a very liberal, libertarian principle, i.e. constrain the size of government and thus protect privacy of individuals. The state should not have the capacity to raid people's savings and expropriate their wealth. Thus, the law intends to protect privacy and people's (property) rights. This only seemingly contradicts taxation requirements and law enforcement.
Over the years, Swiss legislation and banks have developed sophisticated tools to make sure that people's wealth is subject to taxes, i.e. it cannot simply disappear and become grey. With a withholding or sourcing tax of 35% on interest earnings, it incentivizes people to declare their proper wealth on their tax forms. Moreover, the banking commission has set standards against money laundering and banks try to track down financial flows of potentially illegal activities. I don't say this is done in a perfect and watertight fashion. As some notorious examples in the past have shown, it is and will probably always be possible to hide money. Even with the most advanced tools and technological background it may not be possible to clean up perfectly.

Instead of further developing and fine-tuning this banking system that both protects privacy but allows to prevent and track money laundering, the current fuzz may submit a potentially devastating blow to it.
Even though it is not clear how the causa UBS and USA will end, it may well have adverse effects on how (Western) banks cooperate, comply with the law and how they try out of self-interest to reduce illegal activities. Given that international finance is so vast, fluid, fast and dynamic, one should be careful in assuming that with a swift action e.g. by the OECD, the US or the Germans (even the British have some special interests, some say, to further boost their financial center) the problem is solved.

If the last two years of international pressure, Swiss banking activities and the actions of the Swiss government have taught us, then it is the inadequate (again) response of Swiss institutions to crises and international pressure. It is striking how fast the government, banks and other institutions have partially reigned in to the pressure, partially fell into the old habit of resisting as if nothing has happened in the belief that staying ignorant would be the best strategy for survival. The response was chaotic, and seems to show a lack of a risk management concept.

Despite calls to build up a strategic framework to strengthen its voice abroad, improve understanding abroad and coordinate policies at home, not enough was done in advance. Given the complicated political system in Switzerland, it may also be very likely that it stays this way: a few crises here and there, a few critics here and there, but overall the self-righteous conviction that everything still is ok, and we're fine.
Switzerland lost its once leading positions in research, education, its competitiveness is limited to a few industries, while many economic sectors are protected and isolated. And many do not seem to see the huge challenges laying ahead.
Is this country able to change?






Source:
http://www.nzz.ch/nachrichten/wirtschaft/aktuell/die_wut_der_alten_kmpen_1.3181743.html

Congratulations from the Mainland to the Island! WOW!


What a move! Mr. Hu congratulates Mr. Ma to his non-contested election as Kuomintang chairman. How cool that this happens just at the right time to have some teasers for the beginning of the US-China Strategic & Economic Dialogue that started today, July 27, 2009, in Washington DC. This was also the reason why I could not take the tunnel under 14th street from the Reagan Building to the Hoover Building (Commerce Dept).

The election could reinforce Ma's consiliatory approach to the PRC within the KMT. Additionally, many in the PRC assume that - since PRC does not accept Ma's title as president of Taiwan - that only this election to party chairman allows him the posture to get invited to the mainland. However, a re-approchement takes time and probably both sides are not yet ready for too much schmoozing. For this, there is not enough trust, and too much fear on the island.
Maybe, a real trust building measure would not just be a telegram from Beijing, but the (partial) scrapping or reduction of its missiles targetting Formosa?

At least: nice words are better than the ugly words a few years back!



http://www.nytimes.com/2009/07/28/world/asia/28taiwan.html?ref=world

Samstag, 18. Juli 2009

Hand In Hand

http://www.youtube.com/watch?v=8s0sLRJ_uic&NR=1
hand in hand - coming soon?
if you have a dynasty and hereditary leadership succession, you may be able to exploit one advantage: that the son can learn from the mistake of his father. well, he can also exacerbate them, but maybe that's what the current guy did ... does the new offspring go in the other direction, if he indeed is to come?
at least, it will take him a bit more than just 'breaking down the wall', but also clearing a mine field and providing some opportunities for his people to survive.

Freitag, 17. Juli 2009

Working in the Federal Triangle



Room 4001, 4th floor, Herbert C Hoover Building, Department of Commerce, view south to National Mall, visible is the Holocause Museum (center, behind building), the Jefferson Memorial (upper right, white dome) and the Department of Agriculture (upper left).

Donnerstag, 16. Juli 2009

Preserving a Dinosaur? (Almost) Everything Subsidies Make Possible...


Do you know CAP? It's not a baseball cap, but the Common Agricultural Policy, with about 71bn $ (50bn Euro) the largest agricultural subsidy program on earth (according to the New York Times, cf. link below), run by the EU. Some say it is also the biggest cRap on earth... which led then to slogans demanding to scrap it (Adam Smith Institute, LYMEC, cf. links below).

Notorious for its loopholes and its benefits not just to farmers, but also to nobilities, pharma companies, large dairy producers, sugar processors, gummy bear (candy) producers etc...
The OECD complains about leakages to unintended beneficiaries, while farmers (the main beneficiaries) complain about being neglected, but the European Commission may defend the CAP as boosting "rural development". Throughout history, there have been many, and vastly different approaches to explain and support the CAP. Most of them, however, do (in)directly rather protect and support industries, instead of pushing for innovation and "development".
Worse off are consumer in Europe, who have to pay more for some basic food stuff than in other parts of the world. Import tariffs as well as domestic production/development support are just two of the channels that make developing countries worse off, as they cannot compete and lack sufficient market access to the Western agricultural produce markets. In return, some Western states still provide food aid to developing countries that provide disincentives for them to develop their agriculture, and thus keep them underdeveloped...


http://www.nytimes.com/2009/07/17/business/global/17farms.html?ref=global-home

http://www.adamsmith.org/blog/international/time-to-scrap-the-cap-200805111351/

http://www.lymec.org/index.php?name=News&file=article&sid=613

Dienstag, 14. Juli 2009

Cars from the West ... and from the East


Since blogger.com seems to be blocked in China, there was no posting for the last two months by this humble narrator. Looking back, the summer exchange program at 复旦大学(Fudan University) in 上海 (Shanghai) was inspiring. However, as one might expect, being abroad bears some pleasant and sometimes also some unpleasant experiences.

Maybe this picture set may express some features of such experiences:

Pictures shows "Chinese launched the Geely GE, a copycat car, including a winged mascot and huge radiator grill, for just £30,000..."

http://www.telegraph.co.uk/motoring/picturegalleries/5208546/Chinas-copycars-familiar-looking-vehicles-at-Shanghai-Auto-2009.html

Freitag, 1. Mai 2009

Development Aid and Its Fate

"Your market share has fallen from 18% to 6% in a decade. Well-financed niche-players are moving in, threatening to appropriate the most exciting areas."
...
"Who, in these circumstances, would want to be in charge of global health at the World Bank?"
...
"Between 1997 and 2008 the bank provided $17 billion for government-run projects in the fields of health, nutrition and family planning."
...
"The evaluators’ criticism was not just that a third of the 220 projects under scrutiny had failed to achieve their goals, but that those goals were often misconceived. In particular, the bank’s remit is to end poverty, but that was the specific objective of only 6% of the projects and a subsidiary objective of only another 7%. Even where poverty reduction was a stated objective, little had been done to find out whether poverty had, in fact, been reduced. If there had been any investigation, it often failed to find any reduction.
There was criticism, too, of the fact that many projects were of a kind more likely to benefit the middle and upper classes which, in poor countries as in rich ones, are often better able to take advantage of infrastructure, such as new hospitals, which the bank helps to create."
...
"But in Africa three-quarters of projects were deemed not to be up to snuff."
...
"What the bank needs, in a crowded market, is a niche of its own, and it is trying to carve one out."


Source: The Economist
http://www.economist.com/world/international/displayStory.cfm?story_id=13579721&source=hptextfeature

Mittwoch, 29. April 2009

Foreign Aid ...

"The Operation Mils Mopti project in Mali is typical of AID African agricultural assistance. In 1976, AID launched a project to boost food production and marketing in the Mils Mopti area of Mali. AID plowed over $10 million into this project, which included the usual development array of applied research, more tools and fertilizer for farmers, better roads, and better grain marketing.
Almost everything went wrong, but AID kept financing the program long after its failure was evident. AID paid for the building of eighteen warehouses, but five were not built, three were not finished, three collapsed, two had their roofs blown off, and three more quickly crumbled owing to "serious structural deficiencies."[37] Fifty-four open wells with contaminated water were to be sanitized, but only nine were actually improved. A hundred mills for grinding grain were to be constructed; the project managers built and tested one mill, then gave up. The road-improvement project repaired less than one-quarter of the roads scheduled for upgrading.
Operation Mils Mopti sought to increase grain marketing, but the government marketing board paid farmers only the official price for their crops, which was far below free-market prices. To fulfill the marketing goals, the government forced farmers to sell their crops, thereby effectively expropriating their harvest. Instead of increasing sales, Mils Mopti resulted in a fall in total procurement by the government marketing board of over 80 percent by the time the project ended in 1979."

Source: Policy Analysis Article (1986)
http://www.cato.org/pubs/pas/pa065.html

Samstag, 25. April 2009

New birds in the sky


After the decision to phase out the F-22 abruptly at 187 planes (so far there are 183), the US Air Force seems to put more weight on the future F-35 JSF and unmanned aerial vehicles (UAV) like the predator family.
A new hot development is the predator C "Avenger", with a jet enginge.

Sonntag, 29. März 2009

National Cherry Blossom Festival March 28 - April 12, 2009 in DC



This weekend, the cherry blossom period started, and the crowds gather around Tidal Basin




http://nationalcherryblossomfestival.org/cms/index.php?id=390

Mittwoch, 4. März 2009

On the Benefits of a Free Movement of People Policy

Introduction
Is migration of labor among a group of countries beneficial? Critics argue income inequalities and differences in social welfare among countries may lead to waves of migrants flooding wealthier countries and threatening their social welfare systems and societal structures. Simultaneously, poorer countries would suffer brain drain, critics warn, while pleading for restrictive migration and protectionist labor policies. This article claims that the principle of the free movement of people (FMP) is generally beneficial on economic and social grounds, as it expands labor markets and allows increased exchanges of ideas across borders, which provides beneficial spill-over effects.
This article assesses key arguments for and against the FMP with regard to experience of the EU and affiliated countries such as Switzerland. This leads to the discussion of possible implementation problems and policy implications based upon which the article closes with some major conclusions for successful policymaking.

The Free Movement of People (FMP)

Since its inception in the 1950s, the European Communities (and subsequently its legal successor, the EU) have promoted the idea of the free movement of goods, services, capital and people. Given its politically sensitive nature, the last of those four freedoms is a more recent phenomenon and currently in the second phase of implementation. The FMP is understood as the ability to enter, stay and work without discrimination in other member states, as well as to travel without internal border checks (European Commission [EC], 2008a). The FMP policy and its implementation are closely linked to cross-border security issues (dealt with in the Schengen treaty, which enables border-crossing without passport checks among member states), labor policies and national idiosyncrasies (e.g. ethnic composition, socioeconomic diversity and political culture).

The Benefits
The major argument in favor of the FMP is grounded in economic theory: the larger the pool of available labor is, the more efficient the allocation of labor to its most productive use will be, disregarding any market rigidities. This argument has several components. First, from the perspective of a firm seeking specific types of workers, for example truck engineers, it is more likely to find adequate employees if the labor market is larger, because a larger market is likely to have more truck engineers as a smaller one. Similarly, from the view of a worker: the larger the job market is, the more probable he is to find an adequate job.
Second, if a market has many participants, price distortions are less likely as there are more individual supply and demand bargains that aggregate to a smoother determination of the market-clearing wage. This implies that one individual engineer has a negligible influence on the market wage, given that he has to compete with other engineers for a job.
Third, larger labor markets lead to more competition – among employers as well as employees – and increase specialization that sparks innovation and raises productivity. Fourth, if member states of a FMP area are not perfectly synchronic with regard to economic cycles, the FMP could mitigate recessions in one country while enabling another county’s economy to meet its labor needs, as the latter can hire workers from the former. The higher the number of FMP members states, the more effectively negative impacts of recessions could be mitigated mutually.
Overall, the FMP is expected to lead to more efficient, flexible markets and to contribute to economic growth in the participating countries. Empirical evidence supports this argument. Although some European states still have transitional restrictions in place , the effects of labor migration so far have been significant. Switzerland has seen an additional GDP growth of at least 1% due to the FMP introduction with the EU-15 in 2002 and its subsequent extension to the EU-10 in 2006 (Swiss Federal Government [SFG], 2008). The mobility between the EU-15 and the newer EU member states increased the GDP of the enlarged EU by 0.15 – 0.28% and reduced inflationary pressures in most (net) receiving countries (EC, 2008b, pp. 11-12). Eventually, remittances can be an important contribution of income for sender countries if income differentials between the sender and receiver country is large. Data for Romania and Bulgaria suggest that remittances contribute up to 5.5% of their GDP (EC, 2008b, p. 26).

A second major argument for the FMP is the simpler border-crossing which entails simpler access to study (exchanges) abroad as well as a boost for tourism. More student migration spurs the exchanges of ideas, opinions and cultures and this will inspire new ideas and innovation. Increased educational mobility and competition could raise the quality of education and increase cultural diversity. Likewise, increased cross-border tourism can contribute to cultural enrichment and enhance mutual understanding among societies. This may have positive social effects on people’s ability to adapt, to relate to others and thus to thrive in a globalizing world.
Theses social effects beneficially translate into economic gains through at least four channels. First, new ideas could lead to new products or improved production processes. Second, higher student mobility is likely to put pressure on educational institutions to compare and improve their curricula, degree programs and reputation to better fit the needs of students and to attract better faculty members, as academic institutions increasingly compete across borders throughout FMP member states. Third, cultural diversity and increased mutual understanding may reduce barriers to interact and to engage in cross-border trade. Finally, increased tourism as a result of the FMP directly feeds into enlarging a country’s GDP.

The Counterarguments
The FMP is often feared to induce mass migration, as people from poorer FMP countries seek to migrate to wealthier FMP countries with (often) higher wages and better social welfare schemes. While this argument implies important incentives that are indeed at work and while it can explain a part of the labor migration that took place within the EU, it massively overstates their significance. There are at least two important factors that restrain massive migration. First, cultural proximity matters. Workers are less inclined to accept the same job in a country that is culturally very different from their background. Second, having a family at home and being embedded within a social network reduces the readiness to move. This implies that the income differential must be large enough to overcome restraining factors and that people move to jobs in culturally similar countries where they feel more comfortable and accepted.
Empirical evidence supports both explanations: migrating people in the EU are on average substantially younger than the average workforce in both the sender and receiver country (EC, 2008b, p. 10) which supports the claim that people with a family and a strong social network at home move less; workers from Bulgaria and Romania move foremost to Italy, Spain and Portugal (EC, 2008b, pp. 5-7), as their mentalities and cultures are more similar compared to other EU states. Thus, cultural proximity seems more important than higher wages or higher social benefits (as Italy, Spain and Portugal are not known for an extensive welfare state, like Sweden, or for high wages, like Germany or Switzerland). Strikingly, Sweden, which has never had restrictions on the FMP, has seen very low levels of immigration, lower than for example Austria, which has restrictions and is comparable with regard to wage and social benefits levels (EC, 2008b, p. 7).

A second major counterargument against the FMP purports that labor migration would take away jobs from domestic workers in receiving (wealthier) countries, undercut their wages (dumping), lead to more illegal employment, and would cause higher unemployment. However, it appears logical that workers only move if they have a reasonable chance to find a job in the receiving country or if they have found a job before actually moving, relative to their level of sacrifice (e.g. leaving behind friends and family, and a familiar culture and language) when they migrate. If the opportunity to work abroad no longer exists (e.g. the worker was laid-off; shrinking labor demand) or has become less attractive (e.g. worsening economic conditions; decreasing income differential as his original country’s economy is growing faster than the country to which he moved; homesickness), the worker has strong incentives to move back to his original country. Hence, it is unlikely that the FMP causes increased unemployment in relatively wealthier, Western European countries.
Evidence from the European FMP helps to reject this counterargument on three grounds. First, labor migration so far has been relatively small and seems to be temporary. Data from Ireland and UK show that migration from the EU-10 has peaked in about 2006; new entries into those two states have decreased and return migration increased, particularly since fall, 2008, as both countries fell into a recession, thus reducing available jobs (EC, 2008b, p. 9). Hence, migrated workers are most likely not the main driver of unemployment in a receiving country, as they move back when economic conditions worsen. Second, the Dutch experience undermines the claim that migrating workers take away jobs from domestic workers, as the former chiefly fill positions that are apparently undesired by the domestic workforce as well as positions for which the domestic labor supply is insufficient (SZW, 2007). Third, it is unlikely that the FMP lead to more illegal or informal employment as the FMP implementation is usually accompanied by (increased) labor law compliance inspections and subsequent punishment of illicit actions. Employers seem to be willing to comply with the law when they have access to a larger labor pool: the Dutch evidence suggests that lifting restrictions on the FMP actually decreases illegal employment (SWZ, 2007).

A third counterargument accuses the FMP to cause brain drain that leaves poorer countries worse off. However, evidence from the EU highlights that FMP-induced labor migration seems to be largely temporary and mostly due to low-paid labor. Additionally, there is also migration to those relatively poorer countries, for example driven by business pioneers who seek to exploit investment opportunities in Central and Eastern Europe (i.e. EU-10 and EU-2) which has grown much faster than the EU-15 in the last few years. Further, the EU-10 and EU-2 have been very successful in attracting massive foreign direct investments and new industries (cf. the car industry in Slovakia), which drive technology and knowledge transfer. Finally, increased student exchanges mitigate possible brain drain, as foreign students come into the poorer countries and as their own students benefit from having gained experiences in Western Europe.

Policy Implications
A FMP implementation needs to take into account possible side effects. Despite evidence refuting the above mentioned counterarguments against the FMP, the fact that fears among the public (usually in the relatively wealthier countries) persist requires a careful approach. Here are four tools that support a successful FMP implementation.
First, an FMP policy works better if it is combined with a coordination on cross-border security and police affairs among the participating countries (e.g. to address issues such as smuggling and human trafficking). Neglecting to address “international issues” may lead (a.) to important negative externalities (e.g. crime) of the FMP and (b.) voters, interest groups and lawmakers to anticipate this and threaten to veto the FMP.
Second, and following from (b.) above, a successful implementation requires a broad political support domestically. This may necessitate compromises on “national issues” and could entail for example the introduction of labor compliance controls, (additional) labor standards, cross-country coordination on standards for self-employed workers and transitory restrictions with a slow phasing-in of the full FMP.
Third, political acceptance necessary for the implementation and the exploitation of beneficial effects of the FMP both depend on adequate and transparent information provision to the public by the authorities, the media and various interest groups. Even in participatory democracies with complicated political decision procedures and an initially skeptical public is an FMP adoption possible, if the decision making process is intensive and enriched by a plurality of views, opinions and arguments, as the Swiss example regarding the controversial FMP extension to the EU-2 in February 2009 has shown (International Herald Tribune, 2009). Further, if the people are ill-informed about the opportunities offered by the FMP, then fewer people do actually move and this limits possible economic gains.
Fourth, as the actual effects of the FMP on migration are hard to predict, it may be reasonable to retain some policy discretion, for example the ability to reintroduce temporary restrictions if the labor market is heavily disrupted, or if the flow of migration unexpectedly has led to social disruptions and increased tensions between the migrating and the domestic population.

Conclusion
A successfully implemented FMP policy expands the labor market, increases its efficiency and thus can contribute to economic growth. Simplified travelling and extended study abroad opportunities due to FMP-induced simplified border-crossing have beneficial direct and indirect economic and social effects. The European experience with the FMP suggests that labor migration is temporary, limited and depends on cultural proximity, and the job opportunities of a country. Income differentials and expected benefits play a role, but that may be limited by restraining factors (migrant’s sacrifices). The FMP in Europe does not seem to have led to increased unemployment or crowding out of domestic workers by (cheaper) foreign workers. Thriving economies of sender countries attract foreign investors and can thus effectively offset purported brain drain in sender countries.
While the FMP can face public skepticism, this could be addressed with a number of policy tools, such as accompanying measures on the international level (e.g. through combining the FMP with security issues) and on the domestic level (e.g. through compliance measures and step-by-step FMP implementation). Together with an adequate information policy about FMP, some retained policy discretion will enable governments to implement the FMP successfully and to maximize its beneficial effects.

Glossary
EU-2: Romania and Bulgaria (joined the EU in 2007)
EU-10: States that joined the EU in 2004: Cyprus, Czech Republic, Estonia, Hungary, Malta, Latvia, Lithuania, Poland, Slovakia, Slovenia
EU-15: EU member states as of 1995: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, the Netherlands, Portugal, Spain, Sweden, United Kingdom
EU-27: EU-10, EU-15 and EU-2 together

References
European Commission [EC] (2008a). Free movement within the EU – a fundamental right. Retrieved February 28, 2009 from: http://ec.europa.eu/justice_home/fsj/freetravel/fsj_freetravel_intro_en.htm
EC (2008b). Report on the impact of free movement of workers in the context of the EU enlargement [COM(2008)765 final]. Retrieved February 28, 2009 from: http://ec.europa.eu/social/main.jsp?catId=508&langId=en
EC (2009). Europe – Glossary. Retrieved March 3, 2009 from: http://europa.eu/scadplus/glossary/accession_criteria_copenhague_en.htm
International Herald Tribune (2009). Swiss OK Romanian, Bulgarian workers in referendum. Retrieved February 28, 2009: http://www.iht.com/articles/ap/2009/02/08/europe/EU-Switzerland-Foreign-Workers.php
Swiss Federal Government [SFG] (2008). Bilaterale I Schweiz – EU: Positive Zwischenbilanz. Retrieved February 28, 2009 from: http://www.news.admin.ch/message/index.html?lang=de&msg-id=22428
SFG (2009). Allgemeines - Was regelt das Abkommen Schweiz-EU zur Personenfreizügigkeit (Freizügigkeitsabkommen)? Retrieved February 28, 2009 from: http://www.personenfreizuegigkeit.admin.ch/fza/de/home/haeufige_fragen/allgemeines.0001.html#a_0001
SZW (Netherland’s Ministry of Social Affairs and Employment). (2007). More than 100.000 people from Central and Eastern Europe employed in the Netherlands. Retrieved February 28, 2009 from: http://internationalezaken.szw.nl/index.cfm?fuseaction=dsp_document&link_id=131064
Telegraph (2009). Swiss extend labour deal with EU in referendum. Retrieved March 3, 2009 from: shttp://www.telegraph.co.uk/news/worldnews/europe/switzerland/4562152/Swiss-extend-labour-deal-with-EU-in-referendum.html

Sonntag, 22. Februar 2009

Inspiration

"Nothing is less real than realism ... Details are confusing. It is only by selection, by elimination, by emphasis, that we got at the real meaning of things."
[Georgia O'Keeffe, 1922]

"As far as I'm concerned, I'm not here to live a normal life. I'm sent here on a mission ... I came here as a man of visions."
[Howard Fisher, 1984]

[As seen in the Smithsonian Museum of American Art, National Portrait Gallery Building, December 2008]

Samstag, 14. Februar 2009

Get Access to Free Market = Get Rich

What liberal politics has assumed for centuries and what essayists have debated controversly has been studied time and again. Now, a fine piece of research by Hou (2009) finds new evidence while using cutting-edge econoetric research tools to provide evidence that increasing access to domestic and international markets boosts household incomes.
Strangely, given the current economic downturn, some policymakers seem to forget this simple fact and seem to prefer to turn to nationalistic/protectionistic measures to cure and instead of opening up economies close them... if they really want to help households, and in general the whole economy, to recover, then research suggests that we should open up and enhance market access to the biggest extent possible!

Hou, Z. (2009). "Market Access and Household Consumption: Evidence from Rural China", under revision for The Review of Economics and Statistics; PhD thesis, George Washington University.
http://home.gwu.edu/~houz/research.htm

Mittwoch, 11. Februar 2009

Go Green

Is America aware of environmental AND economic challenges?

You would not a priori say yes.... if you knew.

at least alma mater (started [!!] to) try over here
http://svp.georgetown.edu/committees/sustainability/

but:
- ICC photovoltaic array: runs at roughly half of the original capacity, despite technical progress in general in boosting photovoltaic effectiveness
- Do you really think that the GUTS shuttle bus fleet is up-to-date on engines technology, vehicle efficiency etc.?
- The Car Barn (a class of its own, unfortunately); is there maybe
- insulation, anyone?
- temperature adjustment, anyone plays around with
- insulation-effective windows?
- windows and doors without huge gaps and drift?
- wasteful computer printing by students?
-"occupancy sensors in common areas"? I don't know in which building that is... wherever I am at night, ppl tend to forget to switch off the lights...
- Flushing of toilet: some have so nice sensors, they flush several times pe session...
- some restrooms have such nice water taps, the water runs for a much longer period of time than you actually need to wash your hands...

Sonntag, 8. Februar 2009

Swiss voters adopt extension of the “free movement of persons” to Romania/Bulgaria

Today, Swiss voters adopted in a referendum (popular vote) with a 59.6% majority the extension of the so-called "free movement of persons” principle to Bulgaria and Romania, which acceded to the EU in 2007. The turnout was 51% which is slightly higher than usual. The “yes”-outcome was clearer than expected as European issues are usually controversial in Switzerland and given the current economic crisis it was expected that fears would weight in even more on the “no”-side. Only in four of 26 cantons (states) in Switzerland, there was a no-majority. Compared to earlier referenda on foreign affairs, this time there was no division between the language communities/cantons in Switzerland.

Switzerland adopted the “free movement of persons”, which exists within the EU, with the EU-15 (as the union consisted of 15 member states) in 2000 and subsequently extended it to the ten new EU members in 2005 (after the EU enlargement in 2004). As Romania and Bulgaria became EU member states, another extension was necessary, but among the public very controversial, given the sizeable income disparities between Switzerland and Rumania/Bulgaria.

The “free movement of persons” means that all citizens, disregarding their nationality, can migrate freely in the member countries, can work and study without the need for getting permissions/visas etc. and can settle where they want. According to several studies, this principle has substantially contributed to the EU’s and Switzerland’s economic growth (i.e. up to 1 percentage point) in the last few years and has increased the competitiveness and flexibility of the (common) labor market.

The issue was subject to a vote in Switzerland due to a popular referendum (i.e. support of 50’000 citizens required) taken by right-wing political forces, after the federal parliament has passed the bill. The “popular referendum” is one of several so-called “direct-democratic” instruments (besides the “mandatory referendum” and the “initiative”).

The issue and the related campaign prior to the vote were hugely controversial. A group of parties from the left to the center right together with the business federation and labor unions has fought in favor of the issue, while some right-wing parties with affiliated interest groups have fought against it. Proponents emphasized the importance of the bill for the economy while opponents argued an adoption of the issue would lead to more economic migration, lower salaries, more jobless, more crime and loss of sovereignty.

With this vote, Switzerland remains the only country in Europe whose citizens have repeatedly voted in favor of EU issues, and in particular on such emotional issues like migration/labor market topics, in the last 15 years. Most EU countries do not have referendums and thus their parliaments ratified “free movement of persons”-related bills.

The Swiss vote this Sunday is the last step in a row of popular votes on European issues and confirmed the bilateral relations between the EU and Switzerland, as the latter choose not to accede to the EU (or EC).


For more information:
Adrian Ineichen
adrian.i@gmx.ch
202-550-1466 (USA)


For further information:
http://www.nzz.ch/nachrichten/schweiz/klares_ja_zur_personenfreizuegigkeit_1.1935829.html
in German (NZZ is the leading Swiss newspaper)

http://www.swissinfo.ch/eng/politics/internal_affairs/Swiss_say_yes_to_EU_labour_accord.html?siteSect=1511&sid=10301524&cKey=1234106327000&ty=st
in English (Swissinfo is a government-funded news channel)

MOAB - Mother Of All Breads


rising big... Fri, Feb. 6, 2009, 4am

Sonntag, 1. Februar 2009

Being a Leader (and the creed behind it)

It seems that in the US, there is much more talk about leaders as in Europe, i.e. there seems to be the assumption in place that an individual leader can (and often does) make a huge difference. Maybe this is derived from the American belief in the power of the individual, of a can-be-done mentality (with often positive, but sometimes also very negative implications). This is at least the impression after one has read some articles about managers and leaders for last week's comparative public management class.

And yes, if you like, you can find examples in the real-world:

Dieter Zetsche was praised as "Dr. Z" (coming from Daimler-Benz, Germany) when he was able to change and cut at Chrysler, but his success was only temporary... soon afterwards, the Germans gave up, considered Chrysler to be a hopeless case and sold the company.

"Change we can believe in" - aha! And now? Do we really need to wait for the federal government to change, or can we change ourselves and move our own butt towards a more efficient & sustainable future? Or do we need to wait for the seem-to-be-Messiah?
A leader can only have an impact if he has some people around him ready to join forces, ready to commit themselves to the common cause, but also critical enough not to follow blindly.

Hailed as a genius not long time ago, John Thain was "Lynched at Merrill" (title in the Financial Times, Monday, January 26, 2009), after it became clear that the board of Merrill Lynch paid out about 4bn $ in boni despite a desastrous 2008.

Yeah, sometimes it takes more to be a good leader than many believe - but all too often people suddenly hail you and follow you blindly if you start to have some (unexpeceted?) success. This seems to be easier here in the US. But it seems also to be easier here to go down fast - faster than in Europe, and people abandon you as if you're a hot and smelly potato. And suddenly, a new 'leader' emerges....

...is this typical for a big country? Or is this impression typical for somebody who has grown up in a small country (which has an aversion against big-time leaders and (pseudo-)elites?)?
In any case, sometimes it might be helpful to think and examine, before hail, praise and follow - the downturn might be too strong to indulge into the luxury of not thinking...

Freitag, 23. Januar 2009

What matters how: institutions, human capital? Or: what Malaria might tell you about your development

Is it that a sound political framework with stable and persistant instutions contribute to economic growth, or are, alternatively, sound institutions merely an by-product of a development process that relies primarliy on human and social capital which spurs economic growth (and which leads to more benign regimes through accomodating people by higher and growing incomes)?

The first, institutional approach has diverse followers (depending where you stand, you might wanna include Montesquieu, Buchanan, Tullock, but certainly Easterly/Levine, Dollar/Kray, North and probably also Rodrik and associates).
This logic predicts that political institutions and limited government cause economic growth, and lead to pro-investment policies.

The latter approach may reach out to Aristotle (or at least S.M. Lipset) in the belief that educated people are more inclined to resolve issues peacefully through negotiation than through violence. Key themes are literacy, human and social capital (sounds a bit like Pierre Bourdieu?) - but NOT necessarily good governance and political participation/democracy (cf. the examples of dictator-led South Korea before the 1980s, pseudo-democratic Singapore, Taiwan before 1980s etc.). Subsequently over the years of economic growth the regimes may turn more democratic, or may at least improve its institutional structure.

Common to both approaches are apparently the emphasis on property rights which are supportive for human and physical capital formation, and some sort of competition.

Glaeser et al. seem to support the second logic, but along the way, things aren't as clear as one want them to be. Suddenly, Acemoglu's approach reemerges: European settlers have taken with them their institutional visions/traditions and depending which conditions they found in colonies, they developed exploitative institutions (i.e. if the region was densely populated by locals already) or gov-constraining ones (i.e. if they settled in low-density areas) that caused long-run growth.
One is then not far away anymore of the 'Geographic factors matter'-school of thought (old, but reemerged due to Jeffrey Sachs). Following Sachs's brief analysis (NBER Working Paper 9490) defends geographic factors by doing a regression with a Malaria variable that suggests that ecological conditions directly affect the level of p.a. income after controlling for institutional quality.
And this is just the beginning: there are many more strands of thinking about what factors matter how and in which way(s) run causalities....
Gaudeamus igitur.

basing on:
Glaeser, E.L., La Porta, R., Lopez-de-Silanes, F. & Shleifer, A. (2004). Do Institutions Cause Growth? In: Journal of Economic Growth, Vol. 9, pp. 271-303.

Sachs, J. (2003). Institutions Don't Rule: Direct Effects of Geography on Per Capita Income. NBER Working Paper 9490.

Freitag, 16. Januar 2009

Public Choice (yeah) --> Institutions III (getting dismantled?)

Yeah, the good guys, do-gooders and others.

Wasn't it a certain Rod Blagojevich, who proudly claimed to clean up, to be the nice and proper guy, after his predecessor as Governor of Illinois was involved in corruption, scandals etc.? The good guy gets elected and turns bad (if he ever was good...). Roddie wanted to sell a Senate seat and faces himself impeachment...

and now, another gag - Italy (what else would you have guessed?) is back in the news. But this time, it's not Berlusconi, but the political left - ridere licet, but crying out loud is allowed too (from the Economist):

"On January 5th the centre-left mayor of Naples, Rosa Russo Iervolino, unveiled a new and reshuffled city administration. There were six new faces in her 16-strong team. Four of their predecessors had been arrested on suspicion of taking part in what prosecutors claim was a plan for the “systematic looting” of public funds. A fifth had committed suicide after he too came under investigation for corruption and other alleged offences.

The scandal in Naples, which revolves around a €400m ($545m) public-services contract, is the most substantial but by no means the only one to have assailed the opposition. Since the end of November, centre-left politicians have been put under suspicion, or even arrest, in seven other cities and regions."

Source:
http://www.economist.com/world/europe/displaystory.cfm?story_id=12906536


if you have ever believed, that some people, willing (maybe sometimes) to do something good, do actually good (for the public, hum ... or for themselves?:-) and never bad, read Mancur Olson.
Yeah, public choice - poor Italians: whoever they wanna vote for, it most likely will turn out to be a lemon....

Donnerstag, 15. Januar 2009

Do Good and Develop - Institutions II (Economic Development)

Having an economic development (policy) class is an exciting thing. Given the multitudes of factors and processes one might be willing to take into account (or neglect, or deny) and the level of bickering and finger pointing, one might be tempted to say: anything goes (but, lesson no. one: do no harm - not even this is easy...). In retrospect, some nice theories/creeds/schools of thought have been active.
(For those of you who know better and dislike a 'kick-and-rush' approach to science may roll their eyes upon reading the following. Apologies! But it seems like things are done this way over here).

After WWII, people wondered how to help poor nations. Given a lack of theoretical models, the experiences of the Marshall plan as well as one's own history of industrialization and development formed the basis the 'stages of growth' model by Walt Rostow: economically, there are the five stages: traditional society, pre-conditional stage for take-off, take-off, drive to maturity and the age of mass consumption/welfare. This was described as a linear development (epitomized by Harrod-Domar model, or a sort of AK model). [btw: our time: 1950/60s, big-time econ dev in the West, belief in progress and sunshie]

Some things change, some things don't. In the 1970's, a bunch of societal, political and economic disruptions have taken place.
One new model (or better: way of thinking) was talking about "structural changes" (cf. Arthur Lewis, Hollis Chenery) and commonalities in "patterns of development", i.e. structural transformation in developing countries would have several key features that are largely similar in several countries. Changes would need to take place in econ./pol./soc./institutional realms both domestically and internationally. Given the increasing interdependencies globally, internal/external factors could hinder (constraints) or promote development. Some themes: shift from agricultural to industrial production, accumulation of physical and human capital, enhanced and diversified consumer demand, urbanization and smaller families.
Unclear is whether these are the themes found, or the consequences of development or the actual causes. At least, the way of thinking led one to assume that a 'correct' approach with mixing the right policy ingredients would determine a positive development.
(btw: you may forget the two sector Lewis model with labor surplus in the agri-sector - it sounds just too funny).

Uiiih, conspiracy theories exist everywhere. In the 1970s international dependence models emerged.
First, hard-core marxist thinking contributed to the center-periphery approach in which industrialized (evil capitalists...ahem) exploit dev countries, keep them small and dependend, while a willing group of compradores (elites in dev countries) gather their perks and keep their countries from reforming. Hence, this thinking suggests an externally enforced (and internally secured) underdevelopment and looks pessimistic about future prospects. Uaaa.. luckily, history did largely run different from this grimm thinking.
Second, a bit more benign, "False paradigm" approach claims that underdevelopment is a consequence of ill-fated and faulty advice given my experts, narrow-minded and herd-behaving scholars etc. with biased/ethnocentric recommendations about how to develop, forgetting to adequately recognize differences in traditions, social structures, mentalities etc.
Third, a dualistic way of thinking is almost always applicable, same here. Superior vs inferior groups of countries can coexist, may not change, the junior may not be able to gain from the senior's nice experience, and their development may even diverge, instead of converge.
(look at South Korea, and you wonder who came up with marxist gugus; ok, look at other countries and draft your own theory blend).

After ol' Solow from the fifties, stirring a bit with neoclassical ingredients and funny AK-models, you get the 1980's resurgence of neoliberal models, (yeah, the time of Reagan, optimism and the fall of uncle USSR), the emergence of the Washington consensus (ask Williamson), and a bunch of different models with funny growth ingredients (productive public goods, Barro; human capital, supercharged etc.).
Besides the purist free-market approach, you may also want to consider the application of public-choice-thinking (basically about corrupt, vested-interests driven bureaucrats hijacking public institutions for filling their own pockets; have you heard of Rod Blagojevich and Chicago-style pay-to-play? ... multiply by 10^10 and you get a clue) in dev policy realms. Or, look at the World Bank and be "market-friendly", while recognizing that it takes a government to mend market frames, come up with nice policies to make sure there is actually a market. Market failures are common in dev countries (DC), as well as incomplete info, market power situations etc. Include externalities and you get to endogenous growth models and the conviction, that institutions matter.

Yeah, institutions. Let's ask Douglass North.

Sonntag, 11. Januar 2009

Swiss Design - starring Hans Erni


'Connecting Thoughts 1993'



'Dove and Pegasus 2005'


Commemorating his 100th birthday next February 21, 2009, we can safely say that he is one of the greatest artist, Switzerland has ever seen (and almost forgotten). Still alive and active as usual, he produces paintings that may lead some layman like me to remember MC Escher, Picasso or Paul Klee. He combines geometric, strict forms with artful colors and soft lines.
His works reflect art and politics, and have been internationally acclaimed. Some appeared on post stamps, or some supported the Red Cross, or have been related to the UN. 20 years ago, a museum dedicated to him opened as part of the 'Verkehrshaus' (Transportation Museum) in Lucerne, his hometown in Switzerland.

get insipired and visit:
www.hans-erni.ch

Freitag, 2. Januar 2009

Financial Institutions I

Before anyone did anything, Matsukata did [almost] everything.

Sadly, if you study financial development and institutions, you rarely come across prominent figures from Asia of the 19th century, as most literature deals with Western financial development. The more fun is to read about a Japanese (seemingly) multitalent. His story (according to wikipedia, as of today).


He was/is:
Matsukata Masayoshi (松方 正義), 1835-1924, prince, president of the Japanese Red Cross Society, privy councillor, gijokan, member of the House of Peers, and Lord Keeper of the Privy Seal of Japan. Later, he was given the title of prince and genrō.

He did/acted as:
- governor of Hita prefecture (1868-71?)
- drafted new Land Tax Reform (1873-81): highlights: pay taxes in money, not in rice, fixed rate 3%, calculated on price of estate.
- Home Minister in 1880
- Finance Minister 1881: fiscal austerity, boosted confidence in currency and fin. institutions
- tried to protect Japanese industry (at the time: uneven treaties with West), launched big government industries, (needed to) hand over to private sector --> evolved into zaibatsus.
- established Bank of Japan (issued paper money) in 1882.
- wrote Meiji constitution (1889) articles 62-72
- Prime Minister 1891/92 and 1896-98 (and simultaneously finance minister)
- produced at least 24 children
(Alexander Hamilton has done much, but could he meet this standard:-)?)

On Wisconsin Ave


The journey starts in the center of a fanzy shopping mile - M Street - in Georgetown. You pass a building with a golden dome, formerly a farmer and merchants bank (today PNC is in there). Numerous galleries, nail shopes, restaurants, boutiques etc. are along the quite narrow road.
The more north you get, the broader becomes Wisconsin, less crowded, less colorful, less upscale. Brick buildings here and there, a Safeway, a public library.
Then, on the left, a huge territory and a tall, white-grey building (a hybrid between a palace and a bunker): the Russian embassy.
Further north, just past the intersection is the beautiful National Cathedral, built between 1907 and 1990 (probably one reason why the Indiana limestone-structure is still so clean and nice: it's so young). The central tower is 301' 3" high. Highlights are Woodrow Wilson's sarcophagus and the extensive underground rooms (about half of the cathedral has underground chapels/walkways etc). And ... we're in America ...: one of the busts on the Northwestern Towers depict Darth Vader (I did not see him, it was already dark, but check out the website).

http://www.nationalcathedral.org/about/darthVader.shtml

Beyond the cathedral complex, there are many apartment buildings and you wouldn't get the feeling that you're actually in DC. Just when it get's a bit downhill again, there's Fannie Mae on the left-hand side, the big semi-public (given its inception in 1938), private (since its chartering by congress in 1968) and now entirely public (since Sept. 6, 2008) mortgage enterprise.
Nearby is also the embassy of (the Republic of China on) Taiwan, or how the plate says: "Taipei Economic and Cultural Representative Office in the US" (the building is much nicer than the name).

Further north is Tenleytown and some American University buildings with radio antennas (WAMU 88.5 FM, National Public Radio). Walking back via Albemarle Street (through a nice neighborhood) and Connecticut Ave (past DC University), I encountered a chanting crowd: protesters call for a free Palestinian state (cf. the recent Israeli action in/against the Gaza strip...).


At an earlier point, but time and again worthwile a visit is the Smithsonian museum on American Indians
http://www.nmai.si.edu/