The Bigger Brother

Monster
Not so cute...

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

Jumping Fish
Jumping Ship

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

Fox Time Warner
Food Fight!

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.

Optimistic Wishes for 2010

Bully Kids
Goofing Kids...

In today’s The Straits Times, occasional columnist Tom Plate writes about ‘an optimist’s wish list for 2010‘. Tom Plate is a relatively regular columnist for The Straits Times and writes for many other newspapers in the Asia-Pacific as well. His articles also often make for interesting reading because he writes in a rather cheerful and casual (yet still professional) style, a style not exactly like Paul Krugman’s whose writings I recently referred to in my last entry for erpz.net but I enjoy his writings as much as Krugman’s.

In this article, he tries to infuse some optimism into his hopes for the coming year. Some of the wishes are really wishful thinking, but still no harm keeping your fingers crossed.

His wishes:
1. World pays more attention to South Korea, less to North Korea
Well, actually this tactic might work. North Korea is sometimes like an attention-seeking kid throwing a temper-tantrum and sometimes you need to ignore the kid for a while so that he calms down. But then again, does your kid have nuclear weapons that he can throw at his ‘friends’?

2. These bad big shots will resign: Britain’s PM Gordon Brown, Burma’s junta leader Than Shwe & North Korea’s leader Kim Jong Il
I agree on the latter two but Gordon Brown… he’s not doing a good job at all in Britain, but he’ll probably be kicked out through the elections this year. Why is Iran’s President Mahmoud Ahmadinejad not on this list? He’s a greater danger to the world than Gordon Brown is.

3. India’s Odd Couple named Time’s Man and Woman of the Year: PM Manmohan Singh & Congress party leader Sonia Gandhi
Like Plate says, US needs to pay more attention to India. It will make not ‘just a good strategic partner’ as US President Obama claims, but a staunch ally and friend not just in the War on Terror but in terms of the global economy and climate change for instance. US needs to soothe the frayed nerves of their Indian counterparts.

4. China’s President Hu opens up, gets down with Western media
This is not that hard to do on a personal perspective, but if you think about the Chinese leadership and how they go about doing things… this is pretty much like expecting Wish Number 2 to magically be granted.

5. Japan finds a successful premier: NOT Yukio Hatoyama
In all honesty, is anything so wrong with current PM Yukio Hatoyama? I think he is hamstrung by his 2 parties allied to his Democratic Party of Japan (DPJ) that are imposing many demands on him and not toeing the official alliance line. And then there’s DPJ Chairman Ichiro Ozawa who pulls strings behind the scenes… which makes the current PM’s life so difficult. Give him a chance to learn the ropes. We are so willing to give President Obama chances to make mistakes as a newly-minted leader without much experience, so why not PM Hatoyama?

He did not tackle climate change in his article as I hoped he might have, but let’s just stick to politics and economy for now. Or he probably feels pessimistic about climate change as well? We dont really know what he doesnt write, but from what he has written in his above list, if any of the wishes came true it’d make global affairs less complex and less troublesome for America at least.

Shock Doctrine

Shock Doctrine
Got shot by shock

I’ve previously read Shock Doctrine and written a review on my personal blog; it was a time before ERPZ started and became active. Here’s a reproduction of the original review:

After 2 months of reading I finally finished Naomi Klein’s powerful book, Shock Doctrine. It was a long ride deep into the dark old mines of history on the different ‘economic revolutions’ all around the world: Argentina, Chile, China, Russia, Bolivia and Poland. It was a book that was written with intentions to put down Milton Friedman, clearly anti-corporatist and in some sense, anti-globalization. From this book I understand finally how the term ‘anti-globalization’ have been mis-interpreted by so many people, even myself. I once thought that it means being against the integration of cultures, economies and companies but then I realised it gets way deeper than that.

The idea of anti-globalization is usually used to mean being against the way the phenomena is taking place in our world, that inequality is rising and corporates are like taking over the world while people in poor countries work in sweatshops, suffer in silence and endure the hardship only to realise generations later that nothing changes. It is the discovery of a certain helplessness in the bottom layer of the world. Shock Doctrine is clearly about that, and more.

In a clear but otherwise way too long writing, Naomi presented a very complete picture of how pure ideology-driven economist are used by corporates and government to advance their self-interest. And of course, in a capitalistic perspective, self-interest is just profit and money. She didn’t over turn free market theories on how a perfectly free market is able to dilute power and increase freedom but she did show that the approach that allows for extreme free market is not exactly compatible with democracy and worst of all, economist have been naive about how a free market can be brought to exist. Case after case cited in the book, firms are privatize just be selling it out to the private sector without proper valuation of the assets and this hasty act would not only delay the attainment of a market equilibrium that would be at least more socially optimal but also create new forces that increases the inertia of the market. In other words, it makes the market less free.

In the area of corporate America and politics, Naomi is suggesting that the corporate people have penetrated politics too deeply with CEOs becoming civil servants in top positions of the government and politicians being lobbied by powerful companies with CEOs receiving incomes more than 400 times the average person on the street. And because of that, government becomes ran like corporations, public sector jobs being slashed and direct public spending is reduced while outsourcing (locally, giving contracts to companies) all the functions that can be done by the private sector. Worst, it is infected by a touch of cronyism; and this probably explains why contracts are rarely distributed by bidding and that the contracts concentrate in the hands of the few big firms that are always ‘aiding the government’ with ‘planning’.

It has been a good read anyways and while Naomi Klein has a rather extreme stance, my reading of Joseph Stiglitz (Globlization & its Discontents as well as Making Globalization Work) have helped me appreciate the gravity of the matters she was talking about and I could understand her thinking. As always, the writer do give us a gleamer of hope about what the future may turn out to be when the ‘Shock Wears Off’ and how we can prevent similar stuff from happening again. I would recommend this book for people who have no fear of heavy non-fiction reading, a thorough interest in learning how and why corporate America is seen in bad light.

Meaningful, I’m not so sure

Clock
The clock is ticking.

Key states have announced what they call a “meaningful” agreement at the Copenhagen Climate Summit to tackle climate change. The agreement between the US, China, Brazil, India and South Africa would set a mitigation target to limit warming to no more than 2C and, importantly, to take action to meet this objective.

The five-nation brokered deal promised to deliver $30bn of aid for developing nations over the next three years, and outlined a goal of providing $100 billion a year by 2020 to help poor countries cope with the impacts of climate change. The agreement also included a method for verifying industrialised nations’ reduction of emissions. The US had insisted that China dropped its resistance to this measure.

However, it seems that only the US and China are supposedly “happy” from a meeting which seemingly had a “positive result”, or rather, what I term as a poor return from the 2 weeks worth of discussion.

In the face of a globalized world and the many challenges that we face, what the US and China put forth together seemingly only benefits them. For instance, nothing is done about limiting carbon emissions and on a legally binding treaty, something which sort of “liberalizes” the major powers in the form of US, China and India. With US out of Kyoto and the lack of a legally binding contract, China and India can be said to be free to do whatever they want, with all three nations insisting that national sovereignty comes first.

Now, I’m not saying national sovereignty should be ignored, but as we attempt to tackle a problem that we should have been engaged in long ago, we realize that the Copenhagen Accord, as Jo Leinen, chairman of the European Parliament’s environment committee described, is a completely “disappointment and below our expectations”.

Selfish interests of the global powers dominated the discussion table in Copenhagen, while the rest of the world are let down by their inability to co-operate and come up with a more radical approach to the problem. Yes, this is progress from what has come before, a necessity, but whether it will truly solve the problem, no. The roots of the problem ultimately lie in the countries’ inability to break out of their shell – their inability to come to a solid-enough compromise, and their covert belief that the economy should come first. This inability to commit to this cause from the US, China and India seemingly portrays them in a green limelight.

Progress has been made, yes, but it’s no longer about the ability to make progress, that almost didn’t happen, but rather, how fast we can reach humanity’s goal.

The clock is ticking.

Age of Turbulence

Words of the Wise
Words of the Wise

I read the review of Alan Greenspan’s book 2 years back in The Economist, but didn’t buy it until late last year when I went on a book-shopping spree. The book gone on to stay on my book table (yes, I seriously need a bookshelf) for another year or so before I dusted it two weeks ago and began reading it. In any case, I bought an updated version, which features an epilogue detailing Alan Greenspan’s take on the Subprime Financial Crisis and his prescriptions.

I was immediately surprised by Alan Greenspan’s clear writing and simple style so contrary to his famous inscrutable public announcements about the Fed. It is this that earned The Economist’s rare praise:

Sub-heading of the book review: “Not many surprises in this memoir-cum-essay except that it is an unexpectedly enjoyable read.”

Book Review Quote: “[D]espite everything, the book turns out to be first-rate. It engages on different levels: it is intelligent in a way that few popular books on economics manage or even try to be; and, wonder of wonders, it is a good read.”

The book begins as a memoir, detailing Greenspan’s childhood, interest in music, schooling, economic/technical inclinations and his long career in the Federal Reserve Bank where he was Mr Chairman. His memoir ends somewhat abruptly in retrospect at the eleventh chapter, The Nation Challenged. Beginning with the chapter, The Universals of Economic Growth, he went on with his economy essays and analysis of various economies, industries and trends. Like what The Economist says, Age of Turbulence is a good read, his memoir was very neutral and he was very humble about his work at the Fed. His accounts of the workings of the Fed provides non-American readers a good starting point to learn about their system. Greenspan’s essays on the world economy and economics stays faithful to his belief in the power of free markets and respect for the freedoms and rights that the American Founding Fathers have sought and preserved.

He defends his views that no one can possibly identify a bubble and actively sought to burst it before it gets too big and cause a crisis in its subsequent burst. As a matter of fact, this is the case because anyone who can confidently identify the bubble can profit from it by going against the flow and thus end up defusing it before it builds up. At times, when the so-called ‘irrational exuberance’ exerts too powerful a market force then regulators wouldn’t actually be able to defuse it anyways. He seem to sigh at the voter’s expectations that the government is almighty and is disappointed by typical politicians who doesn’t seem to understand the meaning of ‘trade-offs’. These are typical economist’s perennial concerns about the world in democracies that never seem they’ll ever go away.

As a pragmatist, Greenspan shows great appreciation for the rule of law that has maintained the workings of the market and fostered a culture of trust so essential to capitalism. And reflecting on that, Greenspan gives suggestions on how the emerging economies need to improve their governance and legal systems to catch up with their prosperity and march towards developed status. These are valuable insights gained from Greenspan’s 19 years of being the Chairman of the Federal Reserve Bank. Indeed, Greenspan confesses that he knows little about international economics until he took on this role since his work at Townsend-Greenspan & Company (which closed following his nomination to that post) deals little with the economies of other nations.

Overall, Age of Turbulence provides wonderful insights into workings of the capitalist system of America and great ideas about emerging economies, the direction the world economy is heading to – knowledge significant to any economics students and economist-wannabe.

Package for the Week

Hidden from sight
Hidden from sight

Reads for this weekend are here. Farhad Manjoo muses whether anyone would be able to stop facebook. From expanding, that is. The site has really amassed a huge group of user in a short time and people have been wondering if it would be able to generate revenue and such. Truth is, Facebook has really changed the stuff we do online quite very much and helped the Internet leap ahead as a tool for social networking.

Daniel Gross wrote about his tour to China’s most important dam and muses over his inability to find a chocolate bar there. He got Slate.com readers to send in excuses for not being able to find a chocolate bar in China. Examples included:

“Your quest for chocolate at the Three Gorges would be like me looking for Chinese dumplings at the Hoover Dam,” wrote one Beijing resident.

Jokes aside, for your watching pleasure, check out Shashi Tharoor’s recent talk on TED.com about soft power, with particular reference to India.

Rising Yuan, But not now

Give Me a minute, will rise soon...
Give Me a minute, will rise soon...

In one of the economics essay I’ve written for A Levels Practice, I argued that the appreciation of Yuan is unlikely to solve the trade surplus problem that they have and thus reality will not play out as the Americans choose to believe – trade imbalance will continue to mount and China may risk deflation, following the fate of Japan in the past. I was very lucky because during A Levels a somewhat similar question came out and I made the same sort of argument with points already in my mind.

Most journals and publications I read insist on the need for Yuan to be revalued, giving little credit for the fact that China already allowed it to appreciate against the dollar substantially compared to the past. Without the unpegging of Yuan to the Dollar in 2005, trade imbalance could have been worst. That doesn’t mean that it was the appreciation of Yuan that naturally lend its hand at achieving balance; it was mainly the gradual appreciation and the timing it was allowed to appreciate. The Economist analysed China’s side of the Yuan policy. It gives a balanced account of how political forces and potential economic problems makes China hesitant about revaluing its Yuan.

It is unfair that America always seem to put China into bad light by hinting that China could make a difference (since its central government wield a whole lot of power) but don’t want to. The fact is that there are way too many instances where Americans had the power too, but then they’d exclaim that all sorts of lobbying and market forces are in the way. If China were to give in to this sort of pressure, it would make them way too weak. Besides, America isn’t always right (in fact, most of the time it isn’t); China has done too well in their transition from central planning to market economy so far and will continue to create their own path.

The Becker-Posner Blog also features Becker and Posner’s individual views on the need for China to revalue the Yuan and when so.

Careful Bots

Steady...
Steady...

It’s a long time since I last directed readers to a lengthy prose penned at The New Yorker; while some of those long-winded stuff are reserved for pure entertainment when one is really bored in front of the computer, Jeremy Groopman wrote an interesting narrative report about robots that cares for patients. If you’ve some time to spare, it’d be good to go through some of these technology stuff that is more elaborate and human in reporting than those featured in The Economist.

The same magazine reports about another kind of careful technology. Seymour M. Hersh explores a more remote topic that less people would really bother about seriously despite its implications on many.