I seem to be hearing more and more from the doom and gloom school of thought about our current economic status. So, it seems to be time to take a look at some of the economics at play.
First, let's examine the weakening dollar. The US economy is still one of the world's largest, assuming the EU is counted as one economy. If you don't count the EU as one unit, we are only ahead of our next closest competitor (China) by 6.8 trillion dollars, or 11 trillion ahead of our closest European competitor (Germany.) Therefore, a weak dollar is only a huge impact on our global economic standing if you look at it from where we are, at the top. In addition, it affects our purchasing parity, meaning we can't buy as many foreign goods. To look at it another way, it makes domestic goods a better choice than imports. To simplify that we have to compare apples to oranges, the American apple vs. the Global orange. Apples still cost us the same amount, but an orange is now more than an apple. This also means that American apples are less expensive globally than oranges; more global consumers can buy apples too. You see what I mean, a weaker dollar means that we import less and export more, doing very good things for our trade deficit.
Second, the complaint of rising unemployment. We have an unemployment rate of 4.6%. In theory, this puts at just about the minimum rate, due to job fluctuation. Also, compare that to a worldwide average of 30% and it looks even better for us.
Last, I want to take a look at the much maligned housing market which my real life job is very dependant upon. The worry we all hear about is the rise in foreclosure rates, with one number I saw saying that foreclosures are "up 30%." But what does that mean? It means that now 1 out of every 172 loans defaults, primarily in the segment of loans which would never have been approved by conventional loan methods. However, the latest measurements also state that the rate would have dropped if it weren't for large spikes California, Florida, Nevada, and Arizona. While we have seen a market slowdown in development and home sales, they still sell and they still develop. Its a slump driven by overproduction and will self correct given time. Thank you, Adam Smith.
Saturday, April 5, 2008
Sunday, March 16, 2008
Back to China, and Its Less Loving Activities
After my hiatus working on other projects, such as a new blog and my actual job, I wanted to get back into the swing of things with a post about my favorite subject: China. The last time I brought up the PRC, I talked about its tying itself into the world economy and its developing economy at home. This time I would like to take a look at the downside of those efforts.
We have seen the reports on China's growing economy and we have all heard of the problems with pirated software and cheap knockoffs from China, but how many of us know how much counterfeiting is going on in that country and how much is being done about it? Worse yet, how much does it effect our daily lives?
All of those questions are easy to ask but hard to answer, partially because they are so intertwined. In order to comply with World Trade Organization regulations, China has had to publicly crack down on counterfeiting, but state owned factories are in on the game. See how complicated it has become already? Another complication to the ending the Chinese piracy is how wide spread it is. They manufacture anything from soap and shampoo to peanut butter and beer, cell phones to software, even fake motorcycles and car parts. Some estimates of the market penetration are a conservative 30% of all products sold. The shear breadth of the counterfeiting is costing legitimate businesses millions to develop means to identify the real deal from the fakes, whether it be Budweiser's temperature reactive label or Microsoft's (now faked) holographs on the boxes.
One of the reasons China is so lax on cracking down on piracy is that the state is well aware of the technological disadvantage its companies are at. Their tech base is about a decade behind most fully industrialized countries. The government aids the state run economy through efforts to steal technology from other countries to bring itself into closer competition on the world market. Like all espionage, the PRC does not limit itself to consumer goods and has had many high profile investigations into attempts to steal classified military information. This is an interesting look at China's spying tactics, for those who are interested.
Why is all of this a concern for us? After all, it's not like they are getting the one up on our industries and will be selling high quality items that do new and different things, right? Well, that isn't the concern. What the counterfeiting does to our economy is send in lower quality items (that still work) at much lower prices. The influx of low priced goods undercuts our demand economy and undermines the years of R&D and the millions of dollars in development and branding spent by our companies. It decreases the incentive to develop and makes the reputations of the companies fall. Do we really want that to happen?
We have seen the reports on China's growing economy and we have all heard of the problems with pirated software and cheap knockoffs from China, but how many of us know how much counterfeiting is going on in that country and how much is being done about it? Worse yet, how much does it effect our daily lives?
All of those questions are easy to ask but hard to answer, partially because they are so intertwined. In order to comply with World Trade Organization regulations, China has had to publicly crack down on counterfeiting, but state owned factories are in on the game. See how complicated it has become already? Another complication to the ending the Chinese piracy is how wide spread it is. They manufacture anything from soap and shampoo to peanut butter and beer, cell phones to software, even fake motorcycles and car parts. Some estimates of the market penetration are a conservative 30% of all products sold. The shear breadth of the counterfeiting is costing legitimate businesses millions to develop means to identify the real deal from the fakes, whether it be Budweiser's temperature reactive label or Microsoft's (now faked) holographs on the boxes.
One of the reasons China is so lax on cracking down on piracy is that the state is well aware of the technological disadvantage its companies are at. Their tech base is about a decade behind most fully industrialized countries. The government aids the state run economy through efforts to steal technology from other countries to bring itself into closer competition on the world market. Like all espionage, the PRC does not limit itself to consumer goods and has had many high profile investigations into attempts to steal classified military information. This is an interesting look at China's spying tactics, for those who are interested.
Why is all of this a concern for us? After all, it's not like they are getting the one up on our industries and will be selling high quality items that do new and different things, right? Well, that isn't the concern. What the counterfeiting does to our economy is send in lower quality items (that still work) at much lower prices. The influx of low priced goods undercuts our demand economy and undermines the years of R&D and the millions of dollars in development and branding spent by our companies. It decreases the incentive to develop and makes the reputations of the companies fall. Do we really want that to happen?
Wednesday, February 27, 2008
This is just ridiculous...
http://www.cnn.com/2008/WORLD/americas/02/26/us.warming.ap/index.html?eref=rss_topstories
I'll actually post about this later. Just read it for now.
I'll actually post about this later. Just read it for now.
Monday, February 11, 2008
I have been meaning to finish my post on China, but instead this article caught my eye. While Khomeini may not have been the most popular of rulers in the eyes of the West, he and his religious revolution had a moral compass to fall back on to justify his actions. Also, his followers and clerical successors have been, dare I say it, more open minded than the current leader of Iran. Their defeat in these elections only serves to strengthen Ahmadinejad's power base, strengthened through a political caste without the sometime restraints of a religious point of view, leaving only a leadership devoted to the altar of realpolitik.
Monday, January 28, 2008
The Changing China
In an earlier post, I mentioned China briefly and would like to open that can of worms just a little bit further today. When I was in college, I wrote a paper which detailed why I believed China would continue to integrate itself into the world economy and power structure in a peaceful manner. I argued this in light of China's emerging economy, its liberalizing labor laws, and China's changing attitudes toward trading on a global scale. In many ways, I still stand by this assessment, but it is also disturbing to note that China is becoming a dichotomous country in terms of its outlook on the world around it.
One, China's economy needs outside sources for technology and outside markets. Chinese companies are beginning to invest in other countries in the region and the world, trying to integrate themselves into an already strong Occidental market. With China's manufacturing ability and immense manpower, production is not a problem. What is a problem is the lack of the technological base possessed by the West, specifically the educational and scientific advantages in the United States. China can buy the technology it needs, but this can be costly. They can also reverse engineer or steal the technology they need, but this can be dangerous. Just because they know how we make something does not mean that they can replicate it. Yes, they can follow the plans but they may not have the high quality equipment to make it correctly, leading to low quality copies, almost like a dirty Xerox copier where you can see what its supposed to be, but you can't use it nearly as well. Also, as part of China's search for a market for its goods, they will sell to anyone who can buy, including states which have a historically strained relationship with China, such as North Korea, and states with a strained relationship with the United States, such as Iran.
G. John Ikenberry points out that China can grow into the current world structure, or can grow in opposition to it. He uses several examples, first that the United States grow into the world structure around the turn of the 20th century, and subsequently changed the world power structure peacefully and without damaging the countries in Europe where the power had formerly resided. Second, he points out that Germany in the same time frame grew its economy and military at a high rate, and then challenged the rest of Europe. I think that China can learn from this history lesson, because, even though Germany had a much larger and better trained military as well as a larger economic base, the old guard still defeated them resoundingly. Unfortunately that defeat led to Germany's rise in the 1930's and Hitler's attempt to lead the country into its former glory. It would be to China's advantage to grow within the current world economy, as it already has a large stake in it. To disrupt that trade and anger those sources of income would unnecessarily hamper economic growth.
However, no matter what China's new economic policies are, we must remember that it is a socialist state and does not always do what we as capitalists would consider is in its best interest. As a developing country, the largest portion of its economy is still agriculture, however the policies which drive economic growth also mirror socialist Russia's environmental degradation. In order to become a major world player, China is destroying itself. Accordingly, the good of the country is to the detriment of the people. The aggressive state lead growth has lead to other aspects falling by the wayside, something that in a truly capitalist economy is much less likely to happen due to consumer and workforce pressures.
I think that this is all for now. I will continue in a later post with a, hopefully, more structured analysis.
One, China's economy needs outside sources for technology and outside markets. Chinese companies are beginning to invest in other countries in the region and the world, trying to integrate themselves into an already strong Occidental market. With China's manufacturing ability and immense manpower, production is not a problem. What is a problem is the lack of the technological base possessed by the West, specifically the educational and scientific advantages in the United States. China can buy the technology it needs, but this can be costly. They can also reverse engineer or steal the technology they need, but this can be dangerous. Just because they know how we make something does not mean that they can replicate it. Yes, they can follow the plans but they may not have the high quality equipment to make it correctly, leading to low quality copies, almost like a dirty Xerox copier where you can see what its supposed to be, but you can't use it nearly as well. Also, as part of China's search for a market for its goods, they will sell to anyone who can buy, including states which have a historically strained relationship with China, such as North Korea, and states with a strained relationship with the United States, such as Iran.
G. John Ikenberry points out that China can grow into the current world structure, or can grow in opposition to it. He uses several examples, first that the United States grow into the world structure around the turn of the 20th century, and subsequently changed the world power structure peacefully and without damaging the countries in Europe where the power had formerly resided. Second, he points out that Germany in the same time frame grew its economy and military at a high rate, and then challenged the rest of Europe. I think that China can learn from this history lesson, because, even though Germany had a much larger and better trained military as well as a larger economic base, the old guard still defeated them resoundingly. Unfortunately that defeat led to Germany's rise in the 1930's and Hitler's attempt to lead the country into its former glory. It would be to China's advantage to grow within the current world economy, as it already has a large stake in it. To disrupt that trade and anger those sources of income would unnecessarily hamper economic growth.
However, no matter what China's new economic policies are, we must remember that it is a socialist state and does not always do what we as capitalists would consider is in its best interest. As a developing country, the largest portion of its economy is still agriculture, however the policies which drive economic growth also mirror socialist Russia's environmental degradation. In order to become a major world player, China is destroying itself. Accordingly, the good of the country is to the detriment of the people. The aggressive state lead growth has lead to other aspects falling by the wayside, something that in a truly capitalist economy is much less likely to happen due to consumer and workforce pressures.
I think that this is all for now. I will continue in a later post with a, hopefully, more structured analysis.
Monday, January 21, 2008
Hardly Normal
Hardly what we would consider normal people, terrorists are in a class of insanity all to themselves. They believe that, through their extreme actions and horrendous displays of disregard for their fellow man, they can actually bring about lawful change through unlawful measures. The US military released records of al-Qaeda recruitment in Iraq of foreigners to fight for their beliefs. These documents, seized in Sinjar, remind us of how well organized international terror actually is. They also point to some hopeful signs for Iraqi development.
First, the papers have forced a revised estimate of not only where the terrorists are coming from, but also which kind of attack is perpetrated by whom. The revision of the nationalities of suicide bombers from 75% foreign to 90% is a glimmer of hope for that troubled country. Suicide bombings are probably the most effective killer in the jihad-ist's arsenal and the fact that the vast majority of those willing to perpetrate such acts are not Iraqi speaks volumes for the Iraqi peoples' commitment to the emerging government and the faith they put in its ability to improve their lives.
Second, the demographic distribution of the recruits should not be terribly surprising. A large number were students. Think about demographics here in the United States; which one is the most likely to adamantly and vocally support ideological causes? Students, being younger, less experienced, and more likely to arrogantly believe that they are the only ones able to see the "truth" and must therefore be the voice of whatever their cause is, are more prone to becoming activists the world over. They are young enough that they still search for role models, and old enough that they can be manipulated into making foolish decisions without fully considering the ramifications of their actions. In the case of Islamic terrorism, this demographic can be molded into the perfect martyr, someone who blithely believes in the twisted ideology of the terrorist network, someone who can be convinced to put their life on the line for the teachings of an extreme sect of one of the world's largest religions.
Finally, the documents point to the level of organization that the largest Islamic terrorist organization in the world really has. As the article (linked above) points out, bin-Laden was a businessman before he was a terrorist, a very successful one at that. That background, as well as a need to coordinate strategy, lends itself to a structured approach to terrorism. I believe that the papers found in Sinjar do more for our intelligence networks than merely identifying areas to keep an eye on. We already knew that areas where there is conflict centering on Islamic fanaticism are areas to watch for those same fanatics becoming terrorist leaders elsewhere, using the strategies they implemented at home. Recruitment records may also help us focus on not only where, but who and how terrorists are enlisted. Records of any organization help us to understand how it works, and if al-Qaeda really does operate more like a corporation than we originally thought, that makes it that much more predictable and easy to track. Unfortunately, as we have learned with the drug cartel, it also makes it that much more effective.
My food for thought for the day, however, is a reflection on the mindset of a terrorist. The now famous saying "one man's terrorist is another man's freedom fighter" offers insight into what really drives a terrorist. Belief. No man willingly fights for a cause he does not believe is right. No amount of "focusing on the root causes" of terrorism will stop certain groups from forming. When people talk about alleviating the economic disparity or the foreign policy of western nations being the cause of the rise of terrorist cells, they ignore the fact that many terrorists (especially the leaders) are from affluent backgrounds and highly educated, many through the western university system. Most people are uncomfortable with the idea that to really stop terrorist growth, you must stop the belief that gives rise to it. To do this however, would also lead to the ability to stifle any beliefs that run contrary to what the governing authority wants you to believe. I am in no way supporting the radical thoughts that give rise to terrorism, nor am I supporting the groups themselves. I am saying that unless we as a culture change our way of thinking, there is no feasible way to end terrorism.
This essay offers an interesting and fairly accurate insight on why we are unable to end our generations plague. Many of my generation are hung up on the concept taught to most of us in government schools that we must tolerate everyone else's beliefs. What is not discussed is when it is appropriate to stop tolerating and confront a dangerous ideology, when toleration of others leads to compromising one's own beliefs because the others believe they need not tolerate your beliefs. People in our country need to remember the words of John Stuart Mill, "War is an ugly thing, but not the ugliest of things. The decayed and degraded state of moral and patriotic feeling that thinks that nothing is worth war is much worse. The person who has nothing for which he is willing to fight, nothing which is more important than his own personal safety, is a miserable creature and has no chance of being free unless made and kept so by the exertions of better men than himself."
Then again, deep down I think all of us understand the idea of dieing for a cause.
First, the papers have forced a revised estimate of not only where the terrorists are coming from, but also which kind of attack is perpetrated by whom. The revision of the nationalities of suicide bombers from 75% foreign to 90% is a glimmer of hope for that troubled country. Suicide bombings are probably the most effective killer in the jihad-ist's arsenal and the fact that the vast majority of those willing to perpetrate such acts are not Iraqi speaks volumes for the Iraqi peoples' commitment to the emerging government and the faith they put in its ability to improve their lives.
Second, the demographic distribution of the recruits should not be terribly surprising. A large number were students. Think about demographics here in the United States; which one is the most likely to adamantly and vocally support ideological causes? Students, being younger, less experienced, and more likely to arrogantly believe that they are the only ones able to see the "truth" and must therefore be the voice of whatever their cause is, are more prone to becoming activists the world over. They are young enough that they still search for role models, and old enough that they can be manipulated into making foolish decisions without fully considering the ramifications of their actions. In the case of Islamic terrorism, this demographic can be molded into the perfect martyr, someone who blithely believes in the twisted ideology of the terrorist network, someone who can be convinced to put their life on the line for the teachings of an extreme sect of one of the world's largest religions.
Finally, the documents point to the level of organization that the largest Islamic terrorist organization in the world really has. As the article (linked above) points out, bin-Laden was a businessman before he was a terrorist, a very successful one at that. That background, as well as a need to coordinate strategy, lends itself to a structured approach to terrorism. I believe that the papers found in Sinjar do more for our intelligence networks than merely identifying areas to keep an eye on. We already knew that areas where there is conflict centering on Islamic fanaticism are areas to watch for those same fanatics becoming terrorist leaders elsewhere, using the strategies they implemented at home. Recruitment records may also help us focus on not only where, but who and how terrorists are enlisted. Records of any organization help us to understand how it works, and if al-Qaeda really does operate more like a corporation than we originally thought, that makes it that much more predictable and easy to track. Unfortunately, as we have learned with the drug cartel, it also makes it that much more effective.
My food for thought for the day, however, is a reflection on the mindset of a terrorist. The now famous saying "one man's terrorist is another man's freedom fighter" offers insight into what really drives a terrorist. Belief. No man willingly fights for a cause he does not believe is right. No amount of "focusing on the root causes" of terrorism will stop certain groups from forming. When people talk about alleviating the economic disparity or the foreign policy of western nations being the cause of the rise of terrorist cells, they ignore the fact that many terrorists (especially the leaders) are from affluent backgrounds and highly educated, many through the western university system. Most people are uncomfortable with the idea that to really stop terrorist growth, you must stop the belief that gives rise to it. To do this however, would also lead to the ability to stifle any beliefs that run contrary to what the governing authority wants you to believe. I am in no way supporting the radical thoughts that give rise to terrorism, nor am I supporting the groups themselves. I am saying that unless we as a culture change our way of thinking, there is no feasible way to end terrorism.
This essay offers an interesting and fairly accurate insight on why we are unable to end our generations plague. Many of my generation are hung up on the concept taught to most of us in government schools that we must tolerate everyone else's beliefs. What is not discussed is when it is appropriate to stop tolerating and confront a dangerous ideology, when toleration of others leads to compromising one's own beliefs because the others believe they need not tolerate your beliefs. People in our country need to remember the words of John Stuart Mill, "War is an ugly thing, but not the ugliest of things. The decayed and degraded state of moral and patriotic feeling that thinks that nothing is worth war is much worse. The person who has nothing for which he is willing to fight, nothing which is more important than his own personal safety, is a miserable creature and has no chance of being free unless made and kept so by the exertions of better men than himself."
Then again, deep down I think all of us understand the idea of dieing for a cause.
Thursday, January 10, 2008
From Russia With Love
In my last post I briefly mentioned my concerns over Russia and its actions in the Middle East, I would like to take this space to comment on my growing concern over Russia's actions and political developments. When the Cold War ended almost two decades ago, it seemed that the USSR under Gorbachev and then Russia under Yeltsin would be able to slowly re-integrate itself to the expanding global economy. Gorbachev started the trend toward real economic development and integration with the glasnost and perestroika policies, gradually pulling his government away from state domination of the internal markets, allowing for foreign competition, and releasing the communist strangle hold on civil liberties. With the demise of the Soviet Union and the election of Boris Yeltsin as the first ever popularly elected leader of Russia, the country continued to attempt a decentralization of economic power and the privatization of corporations. Unfortunately, much of the corruption present under communist rule remained in place and derailed the planned economic development, centralizing it once again. After Yeltsin's resignation, Putin was elected by the people to contain the corruption and expand economic freedom. Here is where Russia's progress becomes cloudy.
Putin has led an interesting life, and I think it offers insight into the man's leadership style and goals. He has a history of combining state positions, but only to consolidate his own power. Beyond that he has ballooned the size of the bureaucracy (11-17% in 2005 alone) and nationalized corporations in an attempt to regulate and control economic growth. By statistical standards, he has succeeded in leaps and bounds with an economic growth rate of 6.7%, compared to the US's rate of 2.9%. Growth in personal incomes has been approximately 12% per year. While these figures are good, there are some problems. The most well known problem in Russia's economy is the well-publicised corruption and organized crime network, both of which act as a funnel for wealth away from the Russian labor force. Also, there is the problem of not having a diverse basis of exportable products. The majority (80%) of exports consists of market driven commodities, such as oil, natural gas, metals, and timber. With any sort of global downturn in the market, or even a recession within one of Russia's major trading partners, a major source of income could vanish. As I mentioned in the last post, much of the state's exports in industrial goods comes in the form of military technology and equipment. Lastly, while productivity and income are up, they still lag far behind the rest of the developed world. Russia's work force is about half of that of the United states and the total GDP is one thirteenth of ours. Russia's GDP per capita in 2006 was just over $12,000, as compared to the United States GDP per capita of around $43,000. None of that can sit well with the world's only former-superpower.
In addition to the economic troubles, some of Russia's policies are disconcerting as well. Putin has developed such a cult-of-personality (his 2000 election was with a 56% majority vote, followed by the 2004 election by over 70% of the vote, along with a high approval rate) that he can organize the wildly popular youth movement, the Nashi, and even name his successor, Dmitri Medvedev. Putin's nationalistic youth movement indoctrinates the next generation of leaders to state (read: Vladimir Putin) approved ways of thinking and revisionist history, glorifying the exploits of the USSR. The group is strikingly reminiscent of the Hilter-Jugend in the 1930's, even being accused of silencing dissenting voices within the country. Also, Russia's handling of the situation with Chechnya demonstrates the lessons in diplomacy Putin learned during his time in the KGB. Finally, Putin's ability to virtually assure Medvedev's election this year tells me that the former state security officer become president will continue to be a major player in the formation of policy and diplomatic affairs.
Let us not forget, Putin is a man who was trained by one if the best propaganda machines the world has ever seen, the KGB. Win the hearts and minds of the people, or beat them into agreement, all is fair in the secretive and brutal world of the secret police.
Putin has led an interesting life, and I think it offers insight into the man's leadership style and goals. He has a history of combining state positions, but only to consolidate his own power. Beyond that he has ballooned the size of the bureaucracy (11-17% in 2005 alone) and nationalized corporations in an attempt to regulate and control economic growth. By statistical standards, he has succeeded in leaps and bounds with an economic growth rate of 6.7%, compared to the US's rate of 2.9%. Growth in personal incomes has been approximately 12% per year. While these figures are good, there are some problems. The most well known problem in Russia's economy is the well-publicised corruption and organized crime network, both of which act as a funnel for wealth away from the Russian labor force. Also, there is the problem of not having a diverse basis of exportable products. The majority (80%) of exports consists of market driven commodities, such as oil, natural gas, metals, and timber. With any sort of global downturn in the market, or even a recession within one of Russia's major trading partners, a major source of income could vanish. As I mentioned in the last post, much of the state's exports in industrial goods comes in the form of military technology and equipment. Lastly, while productivity and income are up, they still lag far behind the rest of the developed world. Russia's work force is about half of that of the United states and the total GDP is one thirteenth of ours. Russia's GDP per capita in 2006 was just over $12,000, as compared to the United States GDP per capita of around $43,000. None of that can sit well with the world's only former-superpower.
In addition to the economic troubles, some of Russia's policies are disconcerting as well. Putin has developed such a cult-of-personality (his 2000 election was with a 56% majority vote, followed by the 2004 election by over 70% of the vote, along with a high approval rate) that he can organize the wildly popular youth movement, the Nashi, and even name his successor, Dmitri Medvedev. Putin's nationalistic youth movement indoctrinates the next generation of leaders to state (read: Vladimir Putin) approved ways of thinking and revisionist history, glorifying the exploits of the USSR. The group is strikingly reminiscent of the Hilter-Jugend in the 1930's, even being accused of silencing dissenting voices within the country. Also, Russia's handling of the situation with Chechnya demonstrates the lessons in diplomacy Putin learned during his time in the KGB. Finally, Putin's ability to virtually assure Medvedev's election this year tells me that the former state security officer become president will continue to be a major player in the formation of policy and diplomatic affairs.
Let us not forget, Putin is a man who was trained by one if the best propaganda machines the world has ever seen, the KGB. Win the hearts and minds of the people, or beat them into agreement, all is fair in the secretive and brutal world of the secret police.
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