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Posts tagged with "economics"

Apple, America, and the Loss of U.S. Jobs

For everyone who doesn’t understand why companies move jobs overseas (hint: It’s not just the wages). And for those who don’t understand why the government can’t do anything about those jobs.

I’ve worked in international trade so much, I don’t even really see where the questions come from. It’s pretty self-evident when one looks at the actual facts and numbers. We do not have the production base with the technically skilled workers needed for such large-scale production. We’re on the wrong end of the supply-chain. We have a different mentality on mobility, work ethics, and needs.

That, in no way, suggests the Chinese model is better as a value judgement. Just more economically efficient. And it really, really, really is efficient. 

I’ve spent some time in Shenzhen when they were first building it up. Hong Kong was still the place for international trade, and the movements back and forth were cumbersome (anyone remember the cardboard border pass?). It wasn’t until Shenzhen became a free trade zone that it really blew up. Twelve lane highways connecting Shenzhen to different ports, all full of container trucks. The explosion of port facilities in Dalian, Fujian, Xiamen, etc. I wouldn’t go so far as to say Hong Kong is a ghost town, but it’s not the international trade darling it once was.

As far as the working conditions, social benefits, etc for Chinese workers, that’s not something I can decide for them. I try not to take a relativistic viewpoint, but really, this is what the US did during our Industrial Revolution. Why should we dictate what their social and employment mores are, especially when we’re in our own social economic crisis. It’s working for them, and millions are being moved out of poverty and subsistence farming from the western areas (with plenty of hardships left to warrant their own constant protests). There are things they do incredibly correct, and things they do incredibly wrong.

The other problem is that China is a very labor-intensive society. They can be, because they have the population for this. The West, especially America, is very capital (machine) intensive economy. Even if American companies moved their jobs back to the US, the first thing they’d do is find a way to automate the system. It’s about leveraging your competitive advantage. China = massive workforce with low pay. America = mechanized workforce with minimal (but still expensive) labor force.

There’s a lot more to change between our systems than some simple bumper sticker taglines. The sooner people get hip to that, the sooner we can start coming to real, workable solutions.

Apple, America, and a Squeezed Middle Class: How U.S. lost out on iPhone work.

Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

The Costs Remain the Same…

It seems energy production in the US (and around the world) is becoming more expensive. Secondary and tertiary processes are needed now to attempt to keep up with global demand for fossil-based fuels. And from what I’m seeing reported by the Economist and elsewhere, is that we’re consuming faster than production — which includes not only extraction, but transportation and refinement. The lack of refining capacity world-wide is one major factor why the US has become a net exporter of refined oil products. 

Yet, it doesn’t seem price really reflects all this. Sure, there’s the slight upward bumps in price during the summer when oil refinement production in the US switches from gasoline to heating oil. But where are the additional costs associated with fracking? With tar sands extraction? With litigation costs due to pollution? There are a ton of additional costs — because the act of extraction is becoming more expensive — that simply isn’t reflected in the price to consumers and industrialists. European prices seem more in line with actual costs.

So, when we finally square all the real costs associated with fossil-based fuels and create a realistic picture of the price, are we getting closer to price parity with different alternative fuels?

EPA Sees Risks to Water, Workers In New York Fracking Rules

New York’s emerging plan to regulate natural gas drilling in the gas-rich Marcellus Shale needs to go further to safeguard drinking water, environmentally sensitive areas and gas industry workers, the U.S. Environmental Protection Agency has informed state officials.

Wealth, Ethics, and Generational Gap

I wonder to what extent generational gap plays in the business ethics and wealth distribution debates. Today’s business school is vastly different than the business schools of 1950-1990s. The current crops of business school graduates going back twenty years are receiving healthy doses ethics, diversity, team-orientation, and stakeholder responsibility (including environmental). Projects within the community seem to become the norm; and of course it benefits whatever non-profit is using the university’s students. But, they’re not the ones running the show yet.

Those who were influenced by Reagan’s tax cuts and the culture of conspicuous consumption from the 1980s and earlier generally are still in charge of the major corporations, including the banks being protested against. It goes the same with our Congress. Sure there’s new blood in some Representatives, but the incumbent re-election rate is still so high that most would also be influenced by Reaganomics.

How many times have you changed your mind on something as fundamental as wealth distribution? I mean really changed your mind? I do not know if anything can or will change with these institutions until those people blocking change are removed.

Economics of Happiness

I was lucky to study under John Luke Gallup, one of Jeffrey Sachs' co-authors, for one of my Development Economic courses a couple years ago. My research project was on the small Himalayan country of Bhutan and how they have incorporated their Buddhist principles in their economic development. 

The current king of Bhutan, King Jigme Singye Wangchuck, coined the term “Gross National Happiness” when he started to open the tiny nation up to modernity and economic growth. We measure Gross Domestic Product, how to stack two countries against either other, say the economic growth of China versus the U.S. Gross National Happiness goes beyond that, and looks at society as a whole and asks, “Are we happier as a people?”

Granted, it’s not precise. And quite a few mainstream economists scoff at the idea of measured happiness (although, what, exactly is “utility” suppose to measure, then?). However, it has spawned the UN’s Millennium Development Goals (http://www.un.org/millenniumgoals/). 

Anyway, the article is a good read, and has some good questions for consumers to ask themselves. The main question, are we really happy?

The Economics of Happiness - Jeffrey Sachs

The mad pursuit of corporate profits is threatening us all. To be sure, we should support economic growth and development, but only in a broader context: one that promotes environmental sustainability and the values of compassion and honesty that are required for social trust. The search for happiness should not be confined to the beautiful mountain kingdom of Bhutan.

Microfinance: What Role in Africa's Development?

Microfinance is absolutely important in Africa, however it’s not a panacea. The article highlights some of the problems recently with microfinance in India, although it seems to be more of the institutional ineffectiveness rather than the theory or practice.

Yet with African nations, you are dealing with two separate issues. First, India is a developing nation, true, but it already has many institutions in place essential for a solid development plan. Roads are getting better, ports are in place, the economy is focused on export and services. The laws — while some would say corrupt — have been established; banking and financial institutions are fully functional. Many African nations do not have these same institutions in place, and so the efficiency in returns on the investment will be less. Without adequate roads, a small business person cannot get their product to market. Without adequate banking the financing provided by the microloans may be underutilized. 

Second, India has a currently weakening currency. Some may say this is a problem, but it works well for investment purposes. A strong currency has lower interest rates and less returns on capital investment. This is the problem with many African countries and their currencies: they are overvalued in order to purchase primary and food goods on the open market. Again, the return on investment through microloans will not have the same efficiency or appeal as microloans in India or Asia.

To be sure, investment needs to start somewhere, and I think microloans are a brilliant way to jump-start a local economy. I just think people need to be realistic when it comes to expectations.

Irregular Economics

But I want to add something more: why, exactly, are we supposed to have such faith in “regular economics”? What is the compelling evidence that the vision of a competitive, efficient economy allocating resources to the right uses is actually a good description of the world we live in?

I mean, it’s a lovely model, and one I, like everyone else in economics, use a lot. But I would not have said that it’s a model backed by lots of evidence. We do know that demand curves generally slope down; it’s a lot harder to give good examples of supply curves that slope up (as a textbook author, believe me, I’ve looked); and it’s a very long way from there to the vision of Pareto efficiency and all that which Barro wants us to take as the true economics. Realistically, imperfect competition, market failure, and more are everywhere.

Interesting editorial by Krugman. Yes, I’m fascinated by the micro with international trade, but I’m just as fascinated by the fluidity of macro.

Irregular Economics, Paul Krugman, NYT.

The Awesome Foundation Fosters News Innovation, $1K at a Time

Micro-funding is a big curiosity of mine. One of the biggest problems with most African nations is that their currencies are overvalued in order to buy grains on the open world market. This overvaluation of their currency makes it impossible for outside foreign direct investment, because there would be no monetary return on capital. No direct foreign investment means no increase in manufacturing or infrastructure development to start a services industry, which in turn keeps the general populace in either subsistence farming (which is fazed out due to lower market grain prices) or in abject poverty.

These micro-loans help bridge the gap between a lack of large foreign direct investment, and allowing individuals with entrepreneurial “spirit” pull themselves, their families, and often their communities out of abject poverty. And they’ve proven effective in various regions including Southeast Asia, the Caribbean, and of course Africa.

Now the micro-loans/funds idea has branched out from more direct business startups to student loans (cost of school in poor places aren’t terribly high by Developed Countries standards), and now idea generation. Yay for innovation.


From PBS.org’s Idea Lab:

The citizen journalism and new media movements have made it increasingly possible for anyone to be heard in the media, first as sources and then as writers. But what if these interested and informed citizens became builders and innovators as well? The Awesome News Taskforce wants to empower anybody to create and test out community information and journalism projects of their own — $1,000 at a time.

politicalprof:

As the Tea Party grows in influence in Congress and among the Republican presidential candidates, its popularity is in decline nationally among the electorate. From Charles Blow.

And so it is the party that espouses to follow the ‘will of the people’ are, I’m fact, ignoring the actual will of the actual people. Here I thought George H.W. Bush was out of touch with the American public. Turns out it’s darn near the entire GOP.

politicalprof:

As the Tea Party grows in influence in Congress and among the Republican presidential candidates, its popularity is in decline nationally among the electorate. From Charles Blow.

And so it is the party that espouses to follow the ‘will of the people’ are, I’m fact, ignoring the actual will of the actual people.

Here I thought George H.W. Bush was out of touch with the American public. Turns out it’s darn near the entire GOP.

Aug 7
The two biggest problems for international trade are tariffs and quotas (And subsidies. Ok, three biggest problems…). These are troublesome specially when they are from countries that developed specificallybecause of international trade. It’s just shooting yourself in the foot.Japan requires significantly high tariffs on imported rice, forcing their citizens to pay double what Americans or South Koreans would pay for their staple crop.And although there are many other reasons to lament the Fukushima nuclear disasters, one (radioactively bright) silver lining might be the reduction in import tariffs on rice.

The two biggest problems for international trade are tariffs and quotas (And subsidies. Ok, three biggest problems…). These are troublesome specially when they are from countries that developed specificallybecause of international trade. It’s just shooting yourself in the foot.

Japan requires significantly high tariffs on imported rice, forcing their citizens to pay double what Americans or South Koreans would pay for their staple crop.

And although there are many other reasons to lament the Fukushima nuclear disasters, one (radioactively bright) silver lining might be the reduction in import tariffs on rice.

A sobering look at where the job growth has been during our cost-reduction recovery. For those looking at medium- and high-paying jobs, you may want to practice your “Do you want fries with that?”From the NYT’s piece “Where the Job Growth Is: At The Low End”"The report said the biggest job losses among higher-wage occupations came among managers, computer scientists and systems analysts, human resources workers, registered nurses and accountants and auditors."(HT +Cathering Rampell)

A sobering look at where the job growth has been during our cost-reduction recovery. For those looking at medium- and high-paying jobs, you may want to practice your “Do you want fries with that?”

From the NYT’s piece “Where the Job Growth Is: At The Low End

"The report said the biggest job losses among higher-wage occupations came among managers, computer scientists and systems analysts, human resources workers, registered nurses and accountants and auditors."

(HT +Cathering Rampell)