Archive for the ‘economics’ Category
There’s a terrific article up at n+1 by Stephen Squibb on the origins of the current crisis. The piece loses none of its pertinence – in fact, probably the opposite – due to the “resolution” of the debt ceiling issue yesterday. Go take a look…
From Paul Krugman today:
Oh, and the UK: was it “forced to impose painful austerity”? Here’s the interest rate on 10-year UK bonds:
There was no sign of a crisis of confidence in the UK budget before the May election; the Conservative government chose to embark on austerity, it wasn’t forced into it.
1. According to Bloomsberg Businessweek, “In 2010, the U.S. added 937,000 jobs; Foxconn, the Taiwan-based maker of nearly every consumer product you wanted this year, added 300,000.” But on the other hand, from another article in the same magazine,
Ah Wei has an explanation for Foxconn Technology Group Chairman Terry Gou as to why some of his workers are committing suicide at the company’s factory near the southern Chinese city of Shenzhen.
“Life is meaningless,” said Ah Wei, his fingernails stained black with the dust from the hundreds of mobile phones he has burnished over the course of a 12-hour overnight shift. “Everyday, I repeat the same thing I did yesterday. We get yelled at all the time. It’s very tough around here.”
Among other things, Foxconn manufactures the iPhone and the iPad for Apple.
Further, China moved at the end of 2010 to limit its exports of the “rare earth metals” whose supply it almost entirely controls and which are necessary for the production of most electronic devices so as, it seems, to protect its share of the manufacturing market as its workforce begins to expect ever higher wages. In other words, if there’s fancy strange rocks hiding in the engine room of your Device, they’re likely going to have to be made in China for the foreseeable future.
2. On the other hand, the guy who made the art installation pictured above – which seems to me about the most sublimely appropriate artistic representation of the global economy imaginable – had his studio demolished in Shanghai last week.
Chinese demolition workers have torn down the Shanghai studio of the artist Ai Weiwei – a move he says is linked to his political activism.
Mr Ai said the demolition crews arrived without warning on Tuesday and flattened the building within a day.
He originally had permission to build the studio, but later officials ordered it to be destroyed, saying he had failed to follow planning procedures.
Mr Ai has been increasingly vocal in his criticism of China’s leaders.
The work pictured above is “Sunflower Seeds,” which was recently on display in the Turbine Hall of the Tate Modern. Here’s the description from the Tate’s website:
Sunflower Seeds is made up of millions of small works, each apparently identical, but actually unique. However realistic they may seem, these life-sized sunflower seed husks are in fact intricately hand-crafted in porcelain.
Each seed has been individually sculpted and painted by specialists working in small-scale workshops in the Chinese city of Jingdezhen. Far from being industrially produced, they are the effort of hundreds of skilled hands. Poured into the interior of the Turbine Hall’s vast industrial space, the 100 million seeds form a seemingly infinite landscape.
Porcelain is almost synonymous with China and, to make this work, Ai Weiwei has manipulated traditional methods of crafting what has historically been one of China’s most prized exports. Sunflower Seeds invites us to look more closely at the ‘Made in China’ phenomenon and the geo-politics of cultural and economic exchange today.
Without getting all Pater-before-La-Gioconda on you, I hope that you can even vaguely imagine the overwhelming power – at once critical and, well, crushingly aesthetic in some sort of very old fashioned sort of sense – of seeing this work. When the visual titanicness of the display meets your recognition that each of the 100,000,000 seeds was painstakingly handpainted by human beings working for a wage, one comes as close as one can – as I ever have – to a painfully concrete yet at the same time marvellously abstract sense of the absurd scales, absurdly tipped scales, that orchestrate our world today.
3. Francis Fukuyama, Sisyphusianly obligated to revise forever his early call of time at the pub of history (how’s that for a mixed metaphor?), has recently written a piece for the FT titled “US democracy has little to teach China.” Here’s an extract:
The most important strength of the Chinese political system is its ability to make large, complex decisions quickly, and to make them relatively well, at least in economic policy. This is most evident in the area of infrastructure, where China has put into place airports, dams, high-speed rail, water and electricity systems to feed its growing industrial base. Contrast this with India, where every new investment is subject to blockage by trade unions, lobby groups, peasant associations and courts. India is a law-governed democracy, in which ordinary people can object to government plans; China’s rulers can move more than a million people out of the Three Gorges Dam flood plain with little recourse on their part.
Nonetheless, the quality of Chinese government is higher than in Russia, Iran, or the other authoritarian regimes with which it is often lumped – precisely because Chinese rulers feel some degree of accountability towards their population. That accountability is not, of course, procedural; the authority of the Chinese Communist party is limited neither by a rule of law nor by democratic elections. But while its leaders limit public criticism, they do try to stay on top of popular discontents, and shift policy in response. They are most attentive to the urban middle class and powerful business interests that generate employment, but they respond to outrage over egregious cases of corruption or incompetence among lower-level party cadres too.
Fukuyama focuses, as he would, on autocratic China’s ability to force infrastructral development and to please it’s new and growing – yet still demographically insignificant – urban middle classes. The infrastructure is important sure, and the middle classes may well be happy with the fruits of upward mobility, but we all know that the real competitive advantage – and human cost – of China’s “democracy deficit” is the fact that it is able to manipulate its internal labour market and keep its currency artificially weak, thus keeping standards of living artificially depressed.
Despite the fact that Fukuyama stages his piece as a question begging affair –
During the 1989 Tiananmen protests, student demonstrators erected a model of the Statue of Liberty to symbolise their aspirations. Whether anyone in China would do the same at some future date will depend on how Americans address their problems in the present.
– the title gives the game away. Fukuyama hasn’t really described a question so much as yet another equipoised situation, a roadmap of the configuration that, whatever the grumbling of our leaders, is basically the baserock foundation of our current and miserable status quo.
4. What causes Foxconn workers to kill themselves is that which permits Foxconn alone to add a third of the number of jobs as the entire US economy in 2010 is that which depresses wages around the world, and is that which renders Ai Weiwei obnoxious to the PRC, and is that which sanctions the race to the bottom that we’re all suffering through, the rise in in what the BBC was chirping away this morning about as the “misery index.”
We are suffering separately, and somewhat differently now. The ebb tide of the economic cycle is rapidly lowering all of our boats – our separate little skiffs that float on the sea of production. Would that we could figure out how to suffer, and thus perhaps to alleviate the suffering, together.
Just spent the morning banging out a piece centred on this, from the NYT:
The “new normal,” as it has come to be called on Wall Street, academia and CNBC, envisions an economy in which growth is too slow to bring down the unemployment rate, while the government is forced to intervene ever more forcefully in a struggling private sector. Stocks and bonds yield paltry returns, with better opportunities available for investors overseas.
Didn’t we just have a “new normal,” only slightly different from this one, a few years ago? Anyway, hope someone takes the piece… We’ll see. Again, wish I could link to it from here if it goes. Soon enough, if things go right….
The Greek crisis is, simply speaking, simply the clearest and most direct illustration of the general tendencies in place for handling the financial crisis. In most cases, states have taken on enormous debt in order to refinance corrupt banks that will only later, when the loans come due, result in dramatic cuts and, you know, closed universities and reduced medical benefits and the like. With the EU / IMF intervention in the Greek economy, both steps involved with the privatization of public wealth under the conditions of crisis, are happening at exactly the same time. From the NYT today:
The government is now committed to whack back the public sector, including pensions and popular social benefits; to raise consumption taxes to record highs; and to promote tax reform, in an effort to shrink the enormous black market, reduce tax evasion and increase government receipts.
Embedded in the euro and thus no longer in control of its own currency, Greece cannot take the easy way out of its debt by devaluing. So Greece must either cut its spending sharply or default on its loans — which would badly damage German and French banks carrying a lot of Greek debt.
That is considered one reason President Nicolas Sarkozy of France has been so quiet on the Greek crisis, Mr. Fitoussi said. The Greek deal “is an indirect way of bailing out French and German banks,” he said. “The French understood this from the start, but Germany didn’t seem to.”
Katinka Barysch, an economist and deputy director of the Center for European Reform in London, said that that realization had hit home in Germany. “It might be unpopular for the Germans and Europeans to bail out Greece, but it will be even more unpopular for them to bail out the banks that owned Greek bonds,” she said.
The involvement of extra-state institutions, like the EU and the IMF, allow the process in play to be rendered more brutally efficient, faster. The US federal government can’t quite get away with, say, handing the Veterans Administration health services infrastructure to Citigroup, nor the UK government change the direct deposit address of welfare benefits from the urban poor to the Royal Bank of Scotland, but rather have to run up debt that will later be repayed by privatization and disinvestment. With Greece, however, the interim in the middle has been shrunk considerably…
In Athens, the Greek government had no choice but to seek an I.M.F. solution after its costs of borrowing skyrocketed, but that has not made the negotiations for aid any easier.
According to people who have been briefed on the talks, the aim is to secure from Greece a letter of intent for even deeper budget cuts than the tough measures imposed so far, like reductions in civil service pay, in exchange for emergency funds.
Steps being discussed include closing down parts of the little-used Greek railway system, which employs 7,000 people and is estimated to lose a few million euros a day; limiting unions’ ability to impose collective bargaining agreements, which lead to ever-higher public sector pay; cutting out the two months of pay that private-sector workers get on top of their annual pay packages; increasing the retirement age and cutting back on pensions; and opening up the country’s trucking market in an effort to lower extremely high transportation rates that have hindered the country’s competitiveness.
With Greece now shut out of the debt markets, it has little leverage to resist — especially in light of the 8 billion euros it needs to repay bondholders on May 19. Analysts expect a deal by next week at the latest.
I’ve always been a fan of the euro – not that I’ve given it the amount of thought that I’ve given, say, the style indirect libre and such matters. But it does occur to me today that one thing the common currency seems directly to prevent is the present or eventual adoption of the Kirchner method of handling such crises:
On 15 December 2005, following Brazil’s initiative, Kirchner announced the cancellation of Argentina’s debt to the IMF in full and offered a single payment, in a historical decision that generated controversy at the time (see Argentine debt restructuring). Some commentators, such as Mark Weisbrot of the Center for Economic and Policy Research, suggest that the Argentine experiment has thus far proven successful.Others, such as Michael Mussa, formerly on the staff of the International Monetary Fund and now with the Peterson Institute, question the longer-term sustainability of Pres. Kirchner’s approach.
In a meeting with executives of multinational corporations at Wall Street—after which he was the first Argentine president to ring the opening bell at the New York Stock Exchange—Kirchner defended his “heterodox economic policy, within the canon of classic economics” and criticized the IMF for its lack of collaboration with the Argentine recovery.
The Kirchner method, rather than starving labor and the state in service of debt repayment, imposes “austerity measures” on the international banks that made the loans (confident that they’ll be back when the situation improves – and they will) and allows leeway in the domestic effects of a financial crisis (i.e. Argentinians weren’t buying Japanese televisions for quite a bit of the decade…) But due to the eurozone arrangement, this way out, whatever the ideological predilections of those in power, is probably off the table now and for a time to come… As it turns out, the eurozone right now looks like an engine for stealing trains from the Greeks to keep Orlando vacations affordable for the Germans…
And of course, amidst all this, the NYT runs its inevitable ordinary Greeks admit that they are a nation of thieves, and therefore deserve the pain that awaits them piece….
“We did this to ourselves,” said Mr. Koptides, 37. “It is our problem. It’s not Germany or Europe’s fault. We did this to ourselves.”
Greeks seem to be engaged in national soul-searching these days, wondering whether traits they once found amusing might have led to many of their difficulties now.
Some say their country may have been unprepared to join the European Union in the first place. Some focus on how European Union funds sent to Greece were spent on wasteful projects. Greece’s last administration hid the extent of its debt.
“There has always been this way of thinking in Greece that the thieves are the clever ones and the ones who don’t steal are the patsies,” said Petros Anagnostou, 46, a book dealer. “We have to develop a conscience as a community, to see ourselves as a collective society. If it is a jungle out there, then we will eat each other and end up in a place like we are today.”
But of course the right path toward the reestablishment of “a community… a collective society” is by the elimination of the right to collective bargaining and the phasing out of public mass transit!