politics Archives - Page 6 of 7

State & Markets

While reading about Bihar’s Recovery, it dawned on me the importance of basic government structures in an economy. This sort of realisation had come to me while I was reading about the Haiti crisis and I really think all students of Economics should remind ourselves of the government structures working in the background implied in what we call a ‘Free Market’.

As observed from the article on Bihar, which interestingly is where the Buddha gained enlightenment (according to historical records), the state’s investment in infrastructure, maintaining order, a culture that respect the rights of all citizens (that can only be created from top down) often influenced very much by the enforcement of laws, as well as giving people freedom to pursue the market activities.

When we argue about the importance of not having government interventions in markets, and that state presence should only emerge in the case of market failures, we often neglect the notion that a government is in place in the background to honour the legal tender and anarchy is not the ruling ideology of the day. Trust in the free market is also important and it is upheld by law and order, which once again, falls on the government. As we’ve seen from the earthquake in Haiti, more room for market and less state is not always a good thing. Yet after acknowledging the need for a state we want to combat its advancement into various aspects of society that are usually governed by culture or self-organizing.

Maybe working on the margins of that would help Bihar discover this balance of state and market spaces.

When Economics clashes with (Geo)politics

First published in The New York Times on Wednesday, Thomas Friedman writes about the low likelihood of a “benign 2010” given the economic and geopolitical conditions currently brewing. I read the reprinted article on mypaper on Thursday and was rather amused by his arguments.

He started off by saying that 2009 was a pleasant surprise for being a rather peaceful year for “the world’s biggest economies” to heal without any major wars or political / geopolitical disruptions, and then asserts that 2010 would probably not be as peaceful. I do not really agree with him about the “three major struggles” we face (the banks vs President Obama, China vs Google & Iran vs the world), but he has managed to make rather substantial arguments.

Struggle 1: The banks vs President Obama
I did not quite think that this was a significant issue, but that is probably because Singapore is / was pretty sheltered from the full force of the economic breakdown in the West. At least in Singapore, the banks appear to be in rather good shape. But Singapore still bore some brunt from the crisis, thanks to our open economy. I will not go into an argument about how globalized our economy should be (suffice to say that I am for globalization, but not the “free-for-all” some Republicans seem to want) but I must agree that banking regulations need to be stiffened. President Obama has a very tough job balancing giving free rein to the banks to operate and continually grow their wealth (and hence America’s economy too) and managing expectations that as president he should be concerned more about his people who are suffering as a result of the folly of these bankers (and hence should punish the bankers). Either way, this tough balancing act is going to take much more than just “change we can believe in” or “yes we can” as President Obama promised before becoming president. His actions will have direct or indirect impact on the WHOLE world.

Struggle 2: China vs Google
Again, I never thought of this as a huge issue too, but it must certainly be one of much concern to quite a few if columnists keep writing every day about the relations between China and America and whether the trough in relations they are going through marks a change in tact or just posturing. The G2 (Group of 2 – China & America) notion aside, the assault on Google was certainly daring and bellicose. I am more inclined to side with Google and America, but you must also take into consideration the views of millions (of Chinese netizens) that the Chinese government have to assuage and calm. Many of them see the China-bashing as unwarranted and colonial bullying that is behind the times given the ascendant status of China, so I do not foresee that China and America’s retaliatory actions are going to end at just sanctions. I sure hope they do things calmly though… recall the saying “when elephants fight, the grass gets trampled”.

Struggle 3: Iran vs the World
Now this is an issue that I think people do not believe is a sufficiently major problem. Iran’s nuclear proliferation will be very dangerous to America as well as the world, and it will derail all the economic efforts put in by the world’s major economies given the potential changes it will cause to the geopolitical arena. This I think would be the most difficult struggle to resolve, given the ramifications that could spillover into the economic and social spheres (e.g. war). Unfortunately, given all the other problems that America and the world is facing now, it is inevitable for the Iran issue to be placed on the back-burner. But there must be understanding that neglecting the Iran issue and letting it fester will not make it any easier to solve.

I echo Friedman’s wishes that “cooler heads prevail” this year. Or else, as he says, “fasten your seat belts”.

Eggs and Bacon

I got this from a friend, who is passionate about Economics very much like me.

A hen and a pig are negotiating to solve the food shortage. The hen makes a suggestion: “I will supply the eggs if you will supply the bacon.” The pig ponders this for a moment and replies: “But yours is a contribution, mine is a total commitment.”

– Kofi Annan

The Polarity of the Internet

In today’s The Straits Times, Rachel Chang comments about “the power of the Net to polarise”.

She cites the examples of how vocal people on Facebook and their blogs, who have publicised their political views or displayed their political affiliations, have been slammed and harasssed online to the point that one such blogger stopped writing. The empowering voice of the Internet appears to work like a double-edged sword, threatening to slit the throat of the person wielding it in the face of the majority or the powerful.

It scares me sometimes how polarised views on the Internet can get. There does not seem to be room for compromise or discourse, it is very much an “us against them” game in terms of opinion rather than the moderated views across the spectrum. Chang quotes Cass Sunstein of the White House Office of Information and Regulatory Affairs for his view that people who “interact with others who share the same views… tend to become more extreme”. Of course, “the opposite is also true”, but at least looking at some of the incidents Chang has had to cover for The Straits Times, it appears as if the former applies more than the latter.

I can very much feel for myself this polarity when I visit The Temasek Review. It is considered a source that is less influenced by the government (as opposed to The Straits Times, which some may deem to be a government propagandist body) but I am seeing quite a lot of critical anti-government writing. Ever since I started visiting this website, my rosy views about the govenrment have been somewhat tainted, not in a bad way. At very least, I feel as if I am considering other non-governmental viewpoints that might reallly be the voice of the people and not just what the government feeds to us via the press. It is scary, however, how netizens slam each other for their views, be it pro-PAP or anti-PAP. It is rather heartening that there is much debate about Singapore’s future, and by and large discussion there is rather measured. It can get disturbing when emotions are flared up, as I notice in this write-up. I dare not express my views on this website for fear of being flamed to death by both pro-PAP and anti-PAP netizens.

Democracy… certainly brings about a cacophony that needs to be understood and tolerated, for all in the society to benefit. Hopefully with all the debate online and offline, people will come to a better understanding of what they want for their society. And it must mean dangerous times if arguments on the Internet spill over into real life and disrupt society.

So in essence… take heed online.

And just like Chang, I must add the disclaimer that I expect people to “shoot me nasty, unsigned email messages after reading this column”, if only just to pre-empt comments considering the nature of my writing.

Sanction no more?

In January 27’s The Straits Times, Susan Long writes in the Review column about why sanctions will not work in curbing Iran’s nuclear tendencies. Whether sanctions work or not has been a long debated issue, and simply googling the title of Long’s article “Why sanctions dont work now” will yield many articles that have been written on this subject, mostly arguing for the end of sanctions against “evil” countries like Iran and Cuba.

First, regarding Long’s write-up. She asserts that sanctions may not be as messy as outright fighting or war, but they harm the innocent civilians most and not the leaders and perpetrators. The poor suffer the most as they have limited access to food, medicine and daily necessities amongst other things, whereas the rich are not affected very much by economic sanctions since they already have the monetary ability to purchase high-end goods like “Swiss chocolate”. The elite will “thrive on the black market” while the poor suffer unnecessarily.

Sanctions can also backfire, such as when it unites a country against the perpetrators of the sanctions (often the United States of America together with the United Nations). Take the sanctions against Iran. Instead of isolating the Islamic regime led by Ayatollah Khamenei & President Ahmadinejad and causing displeasure towards the leaders by the populace, it could end up bringing together the forces that wanted to overthrow Khamenei & Ahmadinejad, led by the Green movement whose leader is Mir-Hossein Mousavi. This would make it even more difficult to “overthrow” the current Islamic regime should the incumbents unite with the opposition against the United States and the outside world.

Of course, sanctions are only sanctioned when the country that imposes the sanctions does not stand to lose much. And often countries that impose sanctions or threaten to do so end up revoking them out of other motivations, such as the United States’ threat to impose sanctions on Myanmar which in the end were not realised because such sanctions would have benefitted China and other rogue regimes that would increase their sphere of influence in the country.

Some other articles that disbelieve in sanctions can be found online as well. Nicholas Kristof of The New York Times has similar views to Long, published in the Global Policy Forum. David Henderson of Hoover Institution in Hoover Digest even goes as far as to propose that free trade with “rogue” nations would help to engineer collapses in these regimes when the people open their eyes to the world out there and what is on offer. Dursun Peksen in Foreign Policy names other plausible alternatives such as “engagement / dialogue” and even economic incentives like foreign aid.

In essence, the idea seems to be that should the stick fail, the carrot might be the only way out. In a globalized world such as ours, penalties like sanctions have a high chance of backfiring.

The Tsunami’s Application to Haiti

An article in The Economist discusses the lessons learnt from the Indian Ocean tsunami in 2004 which can be applied to the recent devastating Haiti earthquake. Apparently, aid agencies concur that it is not the matter of the amount of aid being delivered to Haiti, but more of the local capabilities and responses to the earthquake that will make or break the relief efforts.

Post-tsunami, 9 months later, only 39% of money promised to be spent has been dispersed. It is not that more money is needed, but the types of aid being donated must correspond with the need. When “Viagra, ski jackets and Father Christmas costumes” can be donated to the tsunami victims, it does indicate that there is the lack of sensibilities in terms of what people donate and how they provide aid. We cant really fault the kind-hearted for wanting to do something, but to donate such unsensible and insensitive stuff to people who need more than those seems to smack of sheer stupidity. Or is it just a chance to clear one’s home of junk?

In addition, local administration has to be strong and in charge during a disaster. Malaysia’s response to the tsunami (Penang was affected) contrasts vastly with Aceh’s response. Malaysia’s effective governance made relief efforts useful while the political conflict in Aceh made it even more difficult for relief efforts, even if we ignore the fact that the epicentre of the disaster was in Aceh. Even the proliferation of too many NGOs can create headaches, as each NGO fights to distribute aid and contribute to relief efforts, which can make control and management very messy for the local administration. This was proven in Aceh with 180 NGOs operating there at one point, and may prove to be another problem in Haiti which had “more NGOs per capita than anywhere else in the Americas”.

Another article by the BBC on the differences between Haiti and Aceh points out other problems that Haiti faces that Aceh did not face, such as the lack of coordination and information on security forces operating in Haiti, which made Haiti appear to be like a “war zone” as portrayed on TV. And considering that Haiti at its best of times is already a nightmare, one can imagine how the earthquake would make things so much worse.

So the Haiti government as well as other governments and NGOs helping out in Haiti have to make sure they learn some lessons from the tsunami response efforts, or else even more will suffer.

Your oil comes from… Venezuela?

Following up from my write-up on why petrol is expensive in oil-producing Alaska, another article written by The Green Conservative Jim DiPeso in The Daily Green argues that pumps should feature where their oil comes from. And the reason for such features are not just for the geography student like me keen to know where my products come from.

“Country of origin labels on gas pumps” are being advocated in the USA, the land where federal regulations dictate that agricultural products be labeled for their country-of-origin and customers like to demand for the right to knowledge about the products they consume. It helps people choose which country’s oil they want to use, and hence avoid supporting “despots” like Hugo Chavez of Venezuela or Vladimir Putin of Russia. But it will be too complicated, as much as it sounds like a really cool idea. As mentioned in my previous write-up, all that oil from different countries are pooled together then sold, so chances are the gas / petrol in your tank comes from all over the world literally. An alternative he suggests is the proportion of oil coming from which country, so consumers get to know.

And perhaps choose to boycott petrol stations that buy oil from “evil” countries to sell. (Venezuela, Iran & Russia for starters…) Not that they would have much of an option, considering that coincidentally many oil producing countries happen to be rather undesirable in aspects ranging from democracy and freedom of expression to living standards, so if you wish to make a statement you’d probably have to stop driving to stop using petrol.

The Bigger Brother

A search query on Wikipedia for ‘Big Brother‘ offers a disambiguation page that offers a link to their ‘Authoritarian personality‘ article. Today, we sometimes allude to the concept of ‘Big Brother’ when we talk about our governments but we hardly picture the government being authoritarian, perhaps just more of nannying. Today’s problem for the world, however, is that our Big Brothers are getting too big, as Leader of The Economist this week pointed out.

The cover of The Economist features a big fat monstrous lump attempting to devour a corporate executive reflecting their perception of how appallingly huge and scary governments have become. As a matter of fact, developed world governments might have taken up to much of economic breathing space because of the recent events and will need to scale down their footprint more. It’s always easy to get involved in many activities in the economy but difficult to pull out. The Briefing talks about state spending ballooning and makes a fierce assault on the weaknesses of government.

One of the case mentioned was their failure to make good use of management consultants, who ends up being portrayed as conman treating “the public sector as dumping grounds for airy-fairy ideas”. Oh well, in a crisis everyone suffers, even the management consultants themselves are not doing well.

Aliens & Laws

The Lexington of the latest The Economist made an important point about the indirect impact of terrorism on America. Migration of brains into America has slowed, tourist has become rather fed-up with security checks that comes with a vacation in America and even conferences have moved away from there as a result of the hassle brought about by security restrictions. Perhaps improving the ‘service quality’ of border customs would improve the situation.

The interesting phenomena raised in the article is that giving illegal workers legal status will help reduce their competition with the American workers.

American blue-collar workers fear that Mexican immigrants will undercut their wages. Mr Hinojosa-Ojeda says they won’t if they are legal. The fear of deportation makes illegal workers accept worse conditions, he finds. Once legal, they demand higher wages, and no longer drag down those of the native-born.

The report on the economic benefits of immigration reform is available from Center for American Progress. The idea fits into conventional wisdom about making choices between alternatives. Removing the option of getting deported would naturally help raise the expectations of the foreign workers and make it harder for them to compete with those native-born.

Fox vs Time Warner

Days ago I stumbled upon a recent dispute between Fox and Time Warner Cable. The basic idea of the dispute was that Fox wanted more money from Time Warner for carrying their channels and Time Warner didn’t want to. The whole thing ended up with publicity campaigns on both sides (Rolloverorgettough.com for Time Warner Cable and Keepfoxon.com for Fox) to make use of TV viewers’ support to raise their bargaining power. They eventually settled the dispute so viewers will continue seeing Holmer Simpsons munching on doughnuts.

It is interesting how Lauren Collins explained in The New Yorker how Time Warner Cable was basically using a forced-decision device since there’s a spectrum of other options available to them. Time Warner Cable could have just absorbed the price increases and sacrifice their profits. By running the Ad campaign, they’re signaling to Fox that they’ll not accept any changes to the pricing of the deal – either get paid the same or no more screenings of Fox programmes; effectively introducing a Morton’s fork. At the same time, like what Collins mentioned in the article, “The strategy in a nutshell: couch potatoes as human shields.” The company handling Time Warner Cable’s campaign, Purple Strategies is pretty amazing; they are basically specialist in positioning stand in public for organizations or political bodies in ways that allow them to maneuver themselves under different circumstances.

The incorporation of strategic movements in corporate lives is going to become increasingly common, which gives us more reason to check out Dixitt and Nalebuff’s Thinking Strategically or their newer Art of Strategy.