The title caught your attention didn't?
The actual question to be deliberated is whether there is much difference in the way the US President and the President of the European Council are elected.
Not that much, after all!
And here is why.
When the American voters are voting for President, each state is "carried" by one of the candidates and all of that state's electors go to that candidate. Each state does of course elect a different number of electors, depending on its population. But the correlation is not linear.
It is thus possible for a candidate to lose in many states by let's say 20% or more and still get elected if he/she carries some of biggest states and get's 100% of their electors, with a mere 51.1% vs 49.9% margin! Why? Because all that matters, after all, is the number of electors each candidate has in the Electoral College.
The President of the European Council as well as the closest the EU has to a Secretary of State (aka Foreign Minister)) are selected by the European Council, ie the elected heads of state (eg the Pres of France) or government (usually Prime Minister)of the 27 member states. Unless they are acting in "IGC" capacity (eg when they decide on new EU Treaties) each member of the European Council has a different voting weight, roughly correlated with the population of that state.
So how different are the members of the European Council than the US Electoral College after all? If anything, in the EU, unlike the US, the Secretary of State is too (s)elected by the "electors". The fact that HVR the current Pres. of European Council is of EPP affiliation and the EU High Rep of PES affiliation(Party of European Socialists) is a reflection of the fact that when the election took place the majority of the members of the European Council were EPP members while there was a significant minority of PES members.
IMO neither of the systems are democratic enough, ie there is a certain deficit, but that applies, almost equally to both the EU and the US!
Thursday, June 30, 2011
Wednesday, June 29, 2011
On EU and world dynamics: 9 spare thoughts
These are some spare thoughts - observations re the systemics and on-going dynamics in Europe and the world:
1) EU & Eurozone: Integration, convergence and cohesion: Maybe the future of Europe depends on the possibility that the rest of the Europeans become more "Mediterranean".
2) The only way the Eurozone will get a central finance ministry, as some propose, is if there is a Eurozone political union, ie a whole government cabinet and PM. No more unsound European architecture. In my book, fiscal union means an EU (or EZ) federal "IRS", so it has to be part of political union. No way around that!
3) The EU public must realise that w/o full union their countries become economic colonies of China, India, the US (if it not completely bought up by China soon) etc. Instead, some of their leaders are "flirting" with the leadership of China. China wants to keep Euro alive and, what is moire, expensive so that the Eurozone keeps importing its products en masse! China & Japan should do away with formal & informal barriers to entry into their markets by US or EU firms, otherwise WTO trade rules are somewhat of a joke. And the exchange rate of the Euro vis-a-vis the USD, the Yuan etc destructive for the Eurozone economy, even Germany's IMO.
4) What would have happened with either the German industry had exported heavily to the PIIGS or German finance had invested heavily in PIIGS bonds, instead of both?
5) Do you really want to reduce the prices of PIIGS exports & tourism to make them more competitive? Then why not help them avoid the cut of the middlemen, at least in intra-EU business?
6) The EU needs one single "agency: to manage all funding projects in the EU not just transport & energy, in line with a new Strategic Plan (not the EU2020).
7) It's OK to limit global economic migration or even movement of people but not OK to limit global migration of capital? Solutions to the crisis include EU full union and/or regionalisation (ie de-globalisation) of global finance.
8) Why are industrial producer prices so much higher in NL & Belgium compared to Germany and France? Who is now "exporting" inflation, in the form of very high industrial producer prices, to the Netherlands and Belgium?
9) Who will move to political union (IMO inevitable): a) The EU27 b) An EU26 c) The Eurozone d) The Europlus23 e) other?
1) EU & Eurozone: Integration, convergence and cohesion: Maybe the future of Europe depends on the possibility that the rest of the Europeans become more "Mediterranean".
2) The only way the Eurozone will get a central finance ministry, as some propose, is if there is a Eurozone political union, ie a whole government cabinet and PM. No more unsound European architecture. In my book, fiscal union means an EU (or EZ) federal "IRS", so it has to be part of political union. No way around that!
3) The EU public must realise that w/o full union their countries become economic colonies of China, India, the US (if it not completely bought up by China soon) etc. Instead, some of their leaders are "flirting" with the leadership of China. China wants to keep Euro alive and, what is moire, expensive so that the Eurozone keeps importing its products en masse! China & Japan should do away with formal & informal barriers to entry into their markets by US or EU firms, otherwise WTO trade rules are somewhat of a joke. And the exchange rate of the Euro vis-a-vis the USD, the Yuan etc destructive for the Eurozone economy, even Germany's IMO.
4) What would have happened with either the German industry had exported heavily to the PIIGS or German finance had invested heavily in PIIGS bonds, instead of both?
5) Do you really want to reduce the prices of PIIGS exports & tourism to make them more competitive? Then why not help them avoid the cut of the middlemen, at least in intra-EU business?
6) The EU needs one single "agency: to manage all funding projects in the EU not just transport & energy, in line with a new Strategic Plan (not the EU2020).
7) It's OK to limit global economic migration or even movement of people but not OK to limit global migration of capital? Solutions to the crisis include EU full union and/or regionalisation (ie de-globalisation) of global finance.
8) Why are industrial producer prices so much higher in NL & Belgium compared to Germany and France? Who is now "exporting" inflation, in the form of very high industrial producer prices, to the Netherlands and Belgium?
9) Who will move to political union (IMO inevitable): a) The EU27 b) An EU26 c) The Eurozone d) The Europlus23 e) other?
Monday, June 27, 2011
European Affairs: Soul Mates or Friends with Benefits?
Axel Weber's most recent comments (see WSJ, "Germany's Weber Slams Rescue Efforts", June 27, 2011) are IMO more evidence of the systemic problems and the state of dynamics in the EU, its Eurozone and the world.
Has the so called European integration that almost started in 1954 with the European Defense Community and a European Political Community but instead led to the creation of the European Economic Community (along with the European Carbon & Steel Community and the Euratom) been merely an "affair" between European countries of the kind that in modern relationships lingo is referred to as "Friends with Benefits" or a relationship with serious, long tern, intent, a "marriage"? Time for Europe to face the truth re "relationships".
Some, like the UK, argue that the "relationship" was and is mainly a friends with (trade) benefits arrangement, ie no cohabitation, no sharing of a common home, just engaging basically in trade! I have already written a piece on the UK's "polyamory" approach.
In recent days, the UK public has come to realise, that the relationship with Europe and its problematic "child", the Euro, has not been as "casual"as it had thought, that what happens in Europe and its child engages the UK whether it wants it or not. Sounds a lot like relationships, doesn't it? One night stands, playboys, bad boys vs good guys, pregnancy, VD, love and/or marriage, soul mates vs friends with benefits or merely "buddies", and the rights and obligations, explicit or implicit, that arise from all that jazz!
German opinion too is slowly coming to terms with the realisation that continuous exporting without consuming has caused parts of Europe problems especially its SE part (Greece). Would love to walk away from the problems, claim that it (or the ECB) had nothing to do with creating the problems (IMO it did, see eg the 2% inflation obsession and its effects via the uber-hard Euro).
Case in point that highlights the EU's and Eurozone's systemic problems:
Greece, a country of an Ancient nation that regained its independence in 1830, deep in South Eastern Europe, with no direct land borders with the rest of the Eurozone members or the EU until 2007 when Bulgaria and Romania joined the EU. To go via land from Athens to Brussels one must board a ferry boat from Patras or Igoumenitsa to Brindisi or Ancona or Bari and then continue via land (car, rail, etc). The other option is to drive North and East, to Bulgaria, then Romania, North-West into Hungary then West to Austria, then via Germany etc!
Analogous things can be said about Finland or the 3 Baltic countries. Either enter Poland from Lithuania, then also cross Germany East to West or cross via ferry to Sweden or Denmark then into Germany.
Or Portugal.
Or Ireland.
Or Malta or Cyprus.
How has/does the EU's regional policy and its "structural" and other funds help make the EU more of a single market, ie one that provides easonable access not only for capital but also for goods, services and people? Is a road that connects Athens to Bulgaria of bilateral or EU interest or even responsibility? Bulgaria to Romania? Romania to Hungary?
Are Austria's reaction re the trucks that pass through it in the process of intra-Single Market trade to be treated as an EU issue? Can one actually expect multi-modal transport to solve any or all problems?
What about the EU environmental dimension? How does it become compatible with EU geography as well as the competitiveness of the "periphery", which is not only Greece, Italy, Spain, Portugal and Ireland, but Malta, Cyprus, Lithuania, Latvia, Estonia, Finland and Sweden as well?
One can of course ask: If all those member states of the EU constitute the periphery, where is the center? Doesn't air transport (passenger and freight) take care of access issues? No, of course it does not, but that is a whole different post (or number of posts)!
The center (or centre) of the EU? Ah, yes, the center! In the early 1990s, driving from Belgium to the Netherlands, both founding members of the EEC (1958) and both members of Benelux, I realised that as I was approaching the border, the highway changed from 3 lanes to 2! Maybe this has changed in the meantime, but I think it illustrates a point.
Was the EU a one night stand or a friends with benefits relationship? Ie one that is about to end, as some recent analyses in the press suggest (or should I say hope)? Or is it just the Euro, the child, that is causing the problem and must either be given away for adoption or have parental rights to it stripped away from Greece and maybe some other of its parents?
Or as Mr. Weber seems to suggest, after all the best option is for the whole of the Eurozone to guarantee the outstanding Greek debt? And then what, though? Marriage is inevitable and in this case it means Political Union. Who has ever heard of a 53 or 10 year one night stand? By now it has become marriage, it is at least a common-law one. And while the theoretical option of a divorce exists, it will be so messy that only the divorce lawyers will actually benefit from it, if anyone does. When they say through thick and thin, they mean it. And even trade relations can lead to "pregnancies" even if "precautions" are used. Abstention is one option, but then look at Cuba or North Korea.
Even "Alfie" changed his ways.
Time for Europe to do so too.
Has the so called European integration that almost started in 1954 with the European Defense Community and a European Political Community but instead led to the creation of the European Economic Community (along with the European Carbon & Steel Community and the Euratom) been merely an "affair" between European countries of the kind that in modern relationships lingo is referred to as "Friends with Benefits" or a relationship with serious, long tern, intent, a "marriage"? Time for Europe to face the truth re "relationships".
Some, like the UK, argue that the "relationship" was and is mainly a friends with (trade) benefits arrangement, ie no cohabitation, no sharing of a common home, just engaging basically in trade! I have already written a piece on the UK's "polyamory" approach.
In recent days, the UK public has come to realise, that the relationship with Europe and its problematic "child", the Euro, has not been as "casual"as it had thought, that what happens in Europe and its child engages the UK whether it wants it or not. Sounds a lot like relationships, doesn't it? One night stands, playboys, bad boys vs good guys, pregnancy, VD, love and/or marriage, soul mates vs friends with benefits or merely "buddies", and the rights and obligations, explicit or implicit, that arise from all that jazz!
German opinion too is slowly coming to terms with the realisation that continuous exporting without consuming has caused parts of Europe problems especially its SE part (Greece). Would love to walk away from the problems, claim that it (or the ECB) had nothing to do with creating the problems (IMO it did, see eg the 2% inflation obsession and its effects via the uber-hard Euro).
Case in point that highlights the EU's and Eurozone's systemic problems:
Greece, a country of an Ancient nation that regained its independence in 1830, deep in South Eastern Europe, with no direct land borders with the rest of the Eurozone members or the EU until 2007 when Bulgaria and Romania joined the EU. To go via land from Athens to Brussels one must board a ferry boat from Patras or Igoumenitsa to Brindisi or Ancona or Bari and then continue via land (car, rail, etc). The other option is to drive North and East, to Bulgaria, then Romania, North-West into Hungary then West to Austria, then via Germany etc!
Analogous things can be said about Finland or the 3 Baltic countries. Either enter Poland from Lithuania, then also cross Germany East to West or cross via ferry to Sweden or Denmark then into Germany.
Or Portugal.
Or Ireland.
Or Malta or Cyprus.
How has/does the EU's regional policy and its "structural" and other funds help make the EU more of a single market, ie one that provides easonable access not only for capital but also for goods, services and people? Is a road that connects Athens to Bulgaria of bilateral or EU interest or even responsibility? Bulgaria to Romania? Romania to Hungary?
Are Austria's reaction re the trucks that pass through it in the process of intra-Single Market trade to be treated as an EU issue? Can one actually expect multi-modal transport to solve any or all problems?
What about the EU environmental dimension? How does it become compatible with EU geography as well as the competitiveness of the "periphery", which is not only Greece, Italy, Spain, Portugal and Ireland, but Malta, Cyprus, Lithuania, Latvia, Estonia, Finland and Sweden as well?
One can of course ask: If all those member states of the EU constitute the periphery, where is the center? Doesn't air transport (passenger and freight) take care of access issues? No, of course it does not, but that is a whole different post (or number of posts)!
The center (or centre) of the EU? Ah, yes, the center! In the early 1990s, driving from Belgium to the Netherlands, both founding members of the EEC (1958) and both members of Benelux, I realised that as I was approaching the border, the highway changed from 3 lanes to 2! Maybe this has changed in the meantime, but I think it illustrates a point.
Was the EU a one night stand or a friends with benefits relationship? Ie one that is about to end, as some recent analyses in the press suggest (or should I say hope)? Or is it just the Euro, the child, that is causing the problem and must either be given away for adoption or have parental rights to it stripped away from Greece and maybe some other of its parents?
Or as Mr. Weber seems to suggest, after all the best option is for the whole of the Eurozone to guarantee the outstanding Greek debt? And then what, though? Marriage is inevitable and in this case it means Political Union. Who has ever heard of a 53 or 10 year one night stand? By now it has become marriage, it is at least a common-law one. And while the theoretical option of a divorce exists, it will be so messy that only the divorce lawyers will actually benefit from it, if anyone does. When they say through thick and thin, they mean it. And even trade relations can lead to "pregnancies" even if "precautions" are used. Abstention is one option, but then look at Cuba or North Korea.
Even "Alfie" changed his ways.
Time for Europe to do so too.
Saturday, June 25, 2011
Is EU monitoring done better away from the Brussels bubble these days?
Read "Escape from Brussels", in EU Referendum, June 24, 2011.
Here are some comments of mine on the topic raised:
Aside costs, IMO in the web era, EU affairs coverage needs more analysis less reporting per se hence not on location.
The core of politics coverage, in national politics around the world, and in EU/Brussels/Strasbourg is/should be the coverage of the new policy and legislative proposals. This requites a lot of reading which need not be done on location, especially since most documents etc are now available online.
That is why IMO, monitoring and analysis of EU proposals, be it my press or "interests", needs much less physical presence in Brussels/Strasbourg than a few years ago, eg in 1991-1994 when I was posted in Brussels.
Here are some comments of mine on the topic raised:
Aside costs, IMO in the web era, EU affairs coverage needs more analysis less reporting per se hence not on location.
The core of politics coverage, in national politics around the world, and in EU/Brussels/Strasbourg is/should be the coverage of the new policy and legislative proposals. This requites a lot of reading which need not be done on location, especially since most documents etc are now available online.
That is why IMO, monitoring and analysis of EU proposals, be it my press or "interests", needs much less physical presence in Brussels/Strasbourg than a few years ago, eg in 1991-1994 when I was posted in Brussels.
An alter way of making PIIGS & others more competitive
Want to reduce the prices of PIIGS and other economies exports & tourism to make them more competitive?
Why not help them avoid the cut of the middlemen in the European and world markets?
Why not help them avoid the cut of the middlemen in the European and world markets?
Central banking in the USA
On the occasion of the appointment of a new Pres of the European Central Bank (ECB) by EUCO (the European Council), a look at the US Federal Reserve System:
12 (not 50) regional Fed Reserve Banks plus a Federal Open Market Committee (FOMC) and the Federal Reserve Board in DC.
Hence there is no Federal Reserve Bank of the US per se or a US Central Bank, but a Board of Governors in DC (plus an FOMC) and 12 regional federal reserve banks!
Strange, huh?
What do you think of this, from a public policy perspective?
12 (not 50) regional Fed Reserve Banks plus a Federal Open Market Committee (FOMC) and the Federal Reserve Board in DC.
Hence there is no Federal Reserve Bank of the US per se or a US Central Bank, but a Board of Governors in DC (plus an FOMC) and 12 regional federal reserve banks!
Strange, huh?
What do you think of this, from a public policy perspective?
World systemics: Import this!
After reading the WSJ article: "Germans, Prizing Virtues of Saving, Find Euro Bailouts Hard to Swallow", June 25, 2011, my brain was stimulated enough to make the following syllogisms:
Roughly speaking, it seems some people (eg Germans) are over-saving, some (eg Americans, Greeks, Irish, Portuguese, etc) are/were over-spending (consumer credit).
Some eg Germany, China, S. Korea, etc are over-exporting, others eg USA, Greece are/were under-exporting (or over-importing).
Please import these syllogisms and export your opinion:
Was Ricardo wrong?
Roughly speaking, it seems some people (eg Germans) are over-saving, some (eg Americans, Greeks, Irish, Portuguese, etc) are/were over-spending (consumer credit).
Some eg Germany, China, S. Korea, etc are over-exporting, others eg USA, Greece are/were under-exporting (or over-importing).
Please import these syllogisms and export your opinion:
Was Ricardo wrong?
Friday, June 24, 2011
Tuesday, June 21, 2011
EU and Eurozone systemics: The mother of all crises is
EU & Eurozone: The mother of all crises is:
The perennial grandstanding by UK, France, Germany in the EU & of the latter two (Germany and France) in the Eurozone.
The perennial grandstanding by UK, France, Germany in the EU & of the latter two (Germany and France) in the Eurozone.
Monday, June 20, 2011
PPE or PLB? Philosophy plus Politics and Economics or Law and Business?
The following thoughts were prompted during/after reading "Economists, it’s time for the lawyers" by Alan Beattie in The Financial Times, June 17 2011
Since we live in societies where it's the laws that rule (although there tend to be too many laws, conflicting and ovelapping ones, to the point that the statement that a citizen must be aware of all laws is rendered utopian), a law degree is one of the qualifications needed for a CEO or other senior manager or decision maker (and has been for decades, for CEOs, in the US and internationally).
On the other hand, economics, in spite of its fancy math formulae, was and remains a social science, ie it has no "laws", as eg Physics does, so its theories tend to evolve into dogmae, hence explaining the often dogmatic disagreements between economic schools of thought (dogmae).
Maybe it is also time for the MBAs and in general for people who have experience of life, the economics of daily life and of running a biz (even a micro one) or being an executive, to assume jobs in places like the IMF, World Bank, etc.
In the UK, many political leaders etc have the well known "PPE" (Philosophy, Politics, Economics) degree. Maybe a Philosophy, Law and Business degree would be more suited in this era!
PS. One of the issues is to what extent knowledge or even a degree in Finance is needed today not only for the top exec of a place like the IMF, ie does one need to understand bond convexity to be the head of the IMF or even a citizen who can understand the Greek or the Eurozone crisis? IMO, No.
PS2. Which of course begs the question, is Finance a section of Economics or a science of its own? One could also argue whether Economics is (after all, still) a section of Sociology.
PS3. Our times, it could be said, are too financial, in addition to being too "legal", maybe too economic, not philosophical enough, too just-in-time, in other words too complex, too volatile and inter-disciplinary. Thus maybe a university degree programme in "Understanding the multi-facet world we live in and in making Decisions" in it could be the best qualification not only for leaders as well as all kinds of decision makers, even the average citizen (and voter).
Since we live in societies where it's the laws that rule (although there tend to be too many laws, conflicting and ovelapping ones, to the point that the statement that a citizen must be aware of all laws is rendered utopian), a law degree is one of the qualifications needed for a CEO or other senior manager or decision maker (and has been for decades, for CEOs, in the US and internationally).
On the other hand, economics, in spite of its fancy math formulae, was and remains a social science, ie it has no "laws", as eg Physics does, so its theories tend to evolve into dogmae, hence explaining the often dogmatic disagreements between economic schools of thought (dogmae).
Maybe it is also time for the MBAs and in general for people who have experience of life, the economics of daily life and of running a biz (even a micro one) or being an executive, to assume jobs in places like the IMF, World Bank, etc.
In the UK, many political leaders etc have the well known "PPE" (Philosophy, Politics, Economics) degree. Maybe a Philosophy, Law and Business degree would be more suited in this era!
PS. One of the issues is to what extent knowledge or even a degree in Finance is needed today not only for the top exec of a place like the IMF, ie does one need to understand bond convexity to be the head of the IMF or even a citizen who can understand the Greek or the Eurozone crisis? IMO, No.
PS2. Which of course begs the question, is Finance a section of Economics or a science of its own? One could also argue whether Economics is (after all, still) a section of Sociology.
PS3. Our times, it could be said, are too financial, in addition to being too "legal", maybe too economic, not philosophical enough, too just-in-time, in other words too complex, too volatile and inter-disciplinary. Thus maybe a university degree programme in "Understanding the multi-facet world we live in and in making Decisions" in it could be the best qualification not only for leaders as well as all kinds of decision makers, even the average citizen (and voter).
Sunday, June 19, 2011
Those who are willing to build their own lives on the shattered dreams of others, scapegoats and conspiracies
This is part of my "old" post from Friday, 11 April 2008, titled: Notes on the effects of the subprime crisis (Jan to April, 2008)
Note: Is this a great opportunity for sovereign wealth funds and other cash rich "players" around the world?
* Does the credit crunch require government intervention at a “global” level?
Is there a rationale for more “support” to be offered, in addition to the banking sector, to the securities market and the housing sector?
Are we moving from the policy concept of the central banks just providing access to extra cash, to to a concept of intervening on odd occasions and now thinking of formal overall intervention in the markets?
Monday, April 7, 2008:
* The financial industry has "booked" more than $230 billion in writedowns and losses
* Banks and brokers are under pressure from both rating agencies and debt holders to reduce their debt and reduce their so called "leverage" overall. The best way to be credible in Wall Street these days is to raise capital, even if this extra equity dilutes shareholder value for the existing shareholders, or to demonstrate that the financial institution has sufficient available cash.
* The financial industry has "booked" more than $230 billion in writedowns and losses
* Banks and brokers are under pressure from both rating agencies and debt holders to reduce their debt and reduce their so called "leverage" overall. The best way to be credible in Wall Street these days is to raise capital, even if this extra equity dilutes shareholder value for the existing shareholders, or to demonstrate that the financial institution has sufficient available cash.
Note: Is this a great opportunity for sovereign wealth funds and other cash rich "players" around the world?
* Does the credit crunch require government intervention at a “global” level?
Is there a rationale for more “support” to be offered, in addition to the banking sector, to the securities market and the housing sector?
Are we moving from the policy concept of the central banks just providing access to extra cash, to to a concept of intervening on odd occasions and now thinking of formal overall intervention in the markets?
* Which (oddly?) reminds me of a few excerpts from RFK's speech at the City Club of Cleveland, in Cleveland, Ohio on April 5, 1968, 40 years ago, ".....too often we excuse those who are willing to build their own lives on the shattered dreams of others...... Some look for scapegoats, others look for conspiracies, but this much is clear: violence breeds violence, repression brings retaliation, and only a cleansing of our whole society can remove this sickness from our soul.
For there is another kind of violence, slower but just as deadly destructive as the shot or the bomb in the night. This is the violence of institutions; indifference and inaction and slow decay. This is the violence that afflicts the poor, that poisons relations between men because their skin has different colors...".
For there is another kind of violence, slower but just as deadly destructive as the shot or the bomb in the night. This is the violence of institutions; indifference and inaction and slow decay. This is the violence that afflicts the poor, that poisons relations between men because their skin has different colors...".
What do the above have to do with the subprime affair? Nothing directly, but undirectly, maybe. And the socio-economic dynamics in the US and the world nowadays. And those who build their own lives on the shattered dreams of others. And those who look for scapegoats (eg the immigrants) for the economic hardships of the era, or the fans of all sorts of political and socio-economic conspiracy theories, and the "violence" of institutions.
Quite philosophical, and metaphorical, I know.
Saturday, June 18, 2011
Much more than faulty plumbing!
The contagion effects from Lehman and the fears from Greek crisis are evidence of very faulty global economic & financial architecture (aka systemics).
Friday, June 17, 2011
Does the EU need Financial sovereignty?
Sovereignty in 21st century terms IMO includes:
Military (having your own military - defence capability, both in manpower and tech/weapons)
Legislative: The ability to pass you own laws by political bodies where your citizens views are represented.
Economic, taxation and monetary policy: Having your own tax system, tax authorities, your own currency and the ability to have your own exchange rate policy.
It is my opinion that in 21st systemics, ie the role of China, the US, India, Russia, only a united Europe can provide such sovereignty instead of individual countries. The same way that city-states evolved to nation-states, the polities of the 21st century seem to need to have bigger size (in population, surface, etc) in order to achieve the economies of scale needed for sovereignty that is viable and can be maintained.
These are some of the areas sovereignty is need in our era, and this applied to the EU too:
1) Self-reliance in energy
2) A high level of self-reliance in at least staple foods
Food for thought:
In our era, does a state, and in particular the EU, need sovereignty in Finance?
Or at least at Eurozone level?
Sovereignty not only vis-a-vis other states but the global financial system as well?
Military (having your own military - defence capability, both in manpower and tech/weapons)
Legislative: The ability to pass you own laws by political bodies where your citizens views are represented.
Economic, taxation and monetary policy: Having your own tax system, tax authorities, your own currency and the ability to have your own exchange rate policy.
It is my opinion that in 21st systemics, ie the role of China, the US, India, Russia, only a united Europe can provide such sovereignty instead of individual countries. The same way that city-states evolved to nation-states, the polities of the 21st century seem to need to have bigger size (in population, surface, etc) in order to achieve the economies of scale needed for sovereignty that is viable and can be maintained.
These are some of the areas sovereignty is need in our era, and this applied to the EU too:
1) Self-reliance in energy
2) A high level of self-reliance in at least staple foods
Food for thought:
In our era, does a state, and in particular the EU, need sovereignty in Finance?
Or at least at Eurozone level?
Sovereignty not only vis-a-vis other states but the global financial system as well?
The EU needs "sovereignty" in energy
I have often argued that the best way for the countries of Europe to maintain their sovereignty is the new global systemics is via full union (ie not the current level of union).
Here is one example:
Eurostat has announced today a big hike in EU27 deficit for energy: -92.2 bn euro in Q1 2011 compared with -69.3 bn in Q1 2010!
Here is one example:
Eurostat has announced today a big hike in EU27 deficit for energy: -92.2 bn euro in Q1 2011 compared with -69.3 bn in Q1 2010!
The EU trade deficit in energy shows that the EU needs to become much more energy self-sufficient, else its sovereignty is at stake. The EU, is in full union, can achieve this.
EU Systemics: Some possible options for Political Union
Option A:
France
Luxembourg
Portugal
Italy
Greece
All 5 are Eurozone17 members
Option B:
A5 + Belgium
Option C:
B6 + Bulgaria + Romania
8 members, 6 of then in Eurozone17
Option D:
B6 + Germany + Austria + Slovenia
9 members, all Eurozone17 members
Option E:
D9 + Bulgaria + Romania
11 members, 9 Eurozone17 members
Option F:
Eurozone17 - Finland - Ireland
15 members, all but 2 of the Eurozone17 members
Option G:
EU27 minus UK, Hungary, Czech Rep., Sweden
In other words, the 23 that agreed to the Europlus pact a few months ago
More options are possible. Will list them plus put more beef in the 7 ones listed in this post in forthcoming post.
A key "technical" issue is whether a political union should include all Eurozone17 members or could function w/o some Eurozone members.
Plus whether it could include and function including some of the 10 non-Eurozone members.
Interesting, times, too interesting, but EUrope has to move forward., someway, somehow, finally.
Feel free to comment via comments to this post or to http://www.twitter.com/npthinking
There is also an "EU Political Union Now!" group om Facebook.
France
Luxembourg
Portugal
Italy
Greece
All 5 are Eurozone17 members
Option B:
A5 + Belgium
Option C:
B6 + Bulgaria + Romania
8 members, 6 of then in Eurozone17
Option D:
B6 + Germany + Austria + Slovenia
9 members, all Eurozone17 members
Option E:
D9 + Bulgaria + Romania
11 members, 9 Eurozone17 members
Option F:
Eurozone17 - Finland - Ireland
15 members, all but 2 of the Eurozone17 members
Option G:
EU27 minus UK, Hungary, Czech Rep., Sweden
In other words, the 23 that agreed to the Europlus pact a few months ago
More options are possible. Will list them plus put more beef in the 7 ones listed in this post in forthcoming post.
A key "technical" issue is whether a political union should include all Eurozone17 members or could function w/o some Eurozone members.
Plus whether it could include and function including some of the 10 non-Eurozone members.
Interesting, times, too interesting, but EUrope has to move forward., someway, somehow, finally.
Feel free to comment via comments to this post or to http://www.twitter.com/npthinking
There is also an "EU Political Union Now!" group om Facebook.
Thursday, June 16, 2011
Europe keeps failing in its History and Logic exams!
Can one imagine what the world would be like today of the US states had decided not to create a federal union but created a free trade area (as some Britons and other Eurosceptics want the EU to be) instead?
If the Ancient Greek city-states has created federal union in the 5th or 4th century BC, the world be different today. Rome would have probably more emerged, among other things.
In 2000 years or maybe much sooner, people will be saying the same re Europe!
Why is it so difficult for European to wise up after thousands of years of experiences and unite?
Europe has/is being "played" by the USA, the Asian tigers, Japan, China and others, plus the global financial system. Time to put an end to that or not?
Unless Europe grabs the bull by the horns, austerity in Europe will last. Time to talk of EU interest.
If the Ancient Greek city-states has created federal union in the 5th or 4th century BC, the world be different today. Rome would have probably more emerged, among other things.
In 2000 years or maybe much sooner, people will be saying the same re Europe!
Why is it so difficult for European to wise up after thousands of years of experiences and unite?
Europe has/is being "played" by the USA, the Asian tigers, Japan, China and others, plus the global financial system. Time to put an end to that or not?
Unless Europe grabs the bull by the horns, austerity in Europe will last. Time to talk of EU interest.
Wednesday, June 15, 2011
EU: political union or economic colonisation by world powers?
Especially in our era, few if any local issues and dynamics are not intertwined with regional (eg EU) or global issues and dynamics. Unless humanity goes back to countries-fortresses.
In our era's volatile global systemics, a country can always build walls ie become a fortress in an effort to preserve its sovereignty and its distinct ID, be that in culture and "values", laws and their underlying philosophy. Opt out of the global trade "game" and preserve the ownership of its key industries, rely on its own "capital", be it monetary or any in any other form. Not have to rely on the views of the global financial community or follow the rules of the WTO or other international bodies. Every country should have and has that right. But how realistic is that? How can it be self-reliant on energy, foods (at least the basic ones), security, economics, capital, etc? And what size (land, population, GDP, internal market) does this option require?
Shared sovereignty (via a real political union USA or FR of Germany style) is a better option than being colonised (economically etc) by one of the world powers, ie China, India, USA, Russia. This IMO applies to the countries of Europe, South and Central America, and other parts of the world. And the EU and UNASUR (in South America) are "vehicles" of such "shared sovereignty" but which has yet to materialise via proper political union.
Everyone is different, But that is a relative term. To a certain extent every country is different and to a certain extent all countries are the same. Which is more feasible eg a political union between eg Ireland and Greece or one between Ireland and eg South Korea? To a certain extent neither is feasible and to a certain extent both are feasible! We do live in "nothing is impossible" times.
Local, national, regional (eg European) and global citizen identities can well co-exist. The issue is at what level, local, national, regional (EU) or global the Polity is formed. Continent-state is an emerging model in terms of having the potential, via shared sovereignty, to provide an adequate level of self-reliance in energy, foods, defence, have a large enough internal market, economies of scale in many utilities and social welfare (eg a Health Service).
People have indeed tended to group around ethnic, geographical and cultural ties. But these are not static over time. Plus melting pot models have always existed (see eg my post "Globalisation, today and in 300 BC"). The US or even just NYC (or London) is a place where nationalities, languages etc can co-exist in a melting pot under a common polity, currency, laws and language spoken at work. Dozens of languages (337 according to Wikipedia) are spoken in US homes or even homes in NYC, one of the key metropoles of the era (138 languages spoken in Queens, NY)
In our era's volatile global systemics, a country can always build walls ie become a fortress in an effort to preserve its sovereignty and its distinct ID, be that in culture and "values", laws and their underlying philosophy. Opt out of the global trade "game" and preserve the ownership of its key industries, rely on its own "capital", be it monetary or any in any other form. Not have to rely on the views of the global financial community or follow the rules of the WTO or other international bodies. Every country should have and has that right. But how realistic is that? How can it be self-reliant on energy, foods (at least the basic ones), security, economics, capital, etc? And what size (land, population, GDP, internal market) does this option require?
Shared sovereignty (via a real political union USA or FR of Germany style) is a better option than being colonised (economically etc) by one of the world powers, ie China, India, USA, Russia. This IMO applies to the countries of Europe, South and Central America, and other parts of the world. And the EU and UNASUR (in South America) are "vehicles" of such "shared sovereignty" but which has yet to materialise via proper political union.
Everyone is different, But that is a relative term. To a certain extent every country is different and to a certain extent all countries are the same. Which is more feasible eg a political union between eg Ireland and Greece or one between Ireland and eg South Korea? To a certain extent neither is feasible and to a certain extent both are feasible! We do live in "nothing is impossible" times.
Local, national, regional (eg European) and global citizen identities can well co-exist. The issue is at what level, local, national, regional (EU) or global the Polity is formed. Continent-state is an emerging model in terms of having the potential, via shared sovereignty, to provide an adequate level of self-reliance in energy, foods, defence, have a large enough internal market, economies of scale in many utilities and social welfare (eg a Health Service).
People have indeed tended to group around ethnic, geographical and cultural ties. But these are not static over time. Plus melting pot models have always existed (see eg my post "Globalisation, today and in 300 BC"). The US or even just NYC (or London) is a place where nationalities, languages etc can co-exist in a melting pot under a common polity, currency, laws and language spoken at work. Dozens of languages (337 according to Wikipedia) are spoken in US homes or even homes in NYC, one of the key metropoles of the era (138 languages spoken in Queens, NY)
The alternative is colonisation, driven by economics, by one of the real world powers of the era (China, USA and maybe Russia and shortly, India (*)). A balkanised Europe, with a minimal EU and each member "sponsored" by one of those powers.
(*) Could one count the global financial system as one of those powers?
Monday, June 13, 2011
The solution to Eurozone's problems
Much is being written and said these days, especially today, around the globe re the Eurozone and its future etc etc etc.
Here is my 2 (euro)cents worth:
In addition to specific measures to address situations at specific member states, what the Eurozone needs is:
a) A "softer Euro" policy. A 1.4 or 1.5 USD per Euro rate hurts Eurozone exports and services such as tourism plus makes the Eurozone's market a "playground" for cheaper Chinese, American, British, Swedish, etc products. IMO this affects all Eurozone members, including the German economy, even exports.
b) A single currency needs a single Polity. In other words, it EU political union, all the way to a Prime Minister and proper government is needed. It should have been decided 19 some years ago in Maastricht.
European Political Union, be it with 26, 23, 20, 17 or even 15 members, will mean that the single currency will be based on a single (federal) Polity, with a proper European government, a federal income tax (US style) and a US style IRS, a central bank that is in line with the decisions of the European government (eg on exchange rate policy, see JC Junker's views expressed at the EP last week), a European NHS, a real single market for capital, goods, services and jobs.
(a) + (b) are IMO the best if not only decisive solution to Eurozone systemic problems. They are rather straight-forward but require realtalk to their eleectorates by the leaders of the states that will choose to participate.
53 years after the start of the EEC, the time for real union in Europe has come. It is as simple as that. With anything from 26 to 15 member states.
Here is my 2 (euro)cents worth:
In addition to specific measures to address situations at specific member states, what the Eurozone needs is:
a) A "softer Euro" policy. A 1.4 or 1.5 USD per Euro rate hurts Eurozone exports and services such as tourism plus makes the Eurozone's market a "playground" for cheaper Chinese, American, British, Swedish, etc products. IMO this affects all Eurozone members, including the German economy, even exports.
b) A single currency needs a single Polity. In other words, it EU political union, all the way to a Prime Minister and proper government is needed. It should have been decided 19 some years ago in Maastricht.
European Political Union, be it with 26, 23, 20, 17 or even 15 members, will mean that the single currency will be based on a single (federal) Polity, with a proper European government, a federal income tax (US style) and a US style IRS, a central bank that is in line with the decisions of the European government (eg on exchange rate policy, see JC Junker's views expressed at the EP last week), a European NHS, a real single market for capital, goods, services and jobs.
(a) + (b) are IMO the best if not only decisive solution to Eurozone systemic problems. They are rather straight-forward but require realtalk to their eleectorates by the leaders of the states that will choose to participate.
53 years after the start of the EEC, the time for real union in Europe has come. It is as simple as that. With anything from 26 to 15 member states.
If all Eurozone industry became like the German industry, then ....
I posted the following thoughts at the end my "Germany's competitiveness: Beyond myths and inside the systemics" post on June 8, but I think it is worth posting it separately as well, because it is, IMHO, important food for thought:
I read a lot of commentators, some German, some other EUropean, some from other parts of the world, urging the PIIGS to become (in terms of economic modeling) more like Germany.
My question is the following simple (and maybe dumb) one:
IF
All of the Eurozone moved from production (and export) of simple to complex goods a la Germany, then that would increase up to 300% the volume of such goods produced in the Eurozone (80 x 4 = 320) and 500% in the EU (90 x 6 = 480).
ie
for each German complex good produced by Germany now, there would be 3 more of the same produced in the rest of the Eurozone and 2 more in the rest of the EU. Making the total volume of German type complex goods produced in the EU 6 times the existing one.
THEN
What would be, via the "law" of supply and demand, the effect on the equilibrium price for German+rest EU "complex' goods?
To use a Marketing term, if the rest of the economies of the Eurozone or the EU would produce German type of goods, then there would be cannibalisation in the (EU and world) markets.
Leading of course to much lower prices for these goods.
Food for thought, huh?
Where is the ELSE?
I read a lot of commentators, some German, some other EUropean, some from other parts of the world, urging the PIIGS to become (in terms of economic modeling) more like Germany.
My question is the following simple (and maybe dumb) one:
IF
All of the Eurozone moved from production (and export) of simple to complex goods a la Germany, then that would increase up to 300% the volume of such goods produced in the Eurozone (80 x 4 = 320) and 500% in the EU (90 x 6 = 480).
ie
for each German complex good produced by Germany now, there would be 3 more of the same produced in the rest of the Eurozone and 2 more in the rest of the EU. Making the total volume of German type complex goods produced in the EU 6 times the existing one.
THEN
What would be, via the "law" of supply and demand, the effect on the equilibrium price for German+rest EU "complex' goods?
To use a Marketing term, if the rest of the economies of the Eurozone or the EU would produce German type of goods, then there would be cannibalisation in the (EU and world) markets.
Leading of course to much lower prices for these goods.
Food for thought, huh?
Where is the ELSE?
Deepening of the EU and the up side of having 27 members as a pool
Certain member(s) of the then EU15 saw the then upcoming 2004 mega-enlargement (from 15 to 25) as an (sneaky) opportunity to delay if not avert the deepening of the union.
IMO the 2004, 2007 and future enlargements are a moral duty for the EU.
How about deepening then?
Well, what those certain members probably did not realise, then, or even now, is that the up side of having 27 members is that there are enough for a 26, 20, 17 or even 15 member European political union!
IMO the 2004, 2007 and future enlargements are a moral duty for the EU.
How about deepening then?
Well, what those certain members probably did not realise, then, or even now, is that the up side of having 27 members is that there are enough for a 26, 20, 17 or even 15 member European political union!
Saturday, June 11, 2011
Industrial producer prices in April, Eurozone vs USA
In my June 7 post "What are the high Industrial Producer Prices in April (EU, Eurozone) a sign of?" I noted that according to Eurostat (June 6) in April 2011 compared with April 2010, industrial producer prices gained 6.7% in Eurozone and 7.8% in the EU! With UK, +13.1% in April, having the highest hike in the EU27!
Producer prices are an indication what the retail/consumer prices will look like a few months down the line. And of course they worry economists. Yet last Thursday, both the Bank of England and the ECB chose not to raise their interest rates (yet the ECB did raise its rate 2 months ago, from 1.00% to 1.25%).
For a wider picture see my post of June 10 "While the ECB and the Bank of England kept their rates stable: ECB, BoE and Fed, 3 different central banking philosophies".
Today, I decided to have a look at what is happening on other side of the Atlantic, in the USA.
I found a table: Producer Price Index, Industrial Commodities (1982=100) in PDF format at the site of the Bureau of Labor Statistics of the US Department of Labor (US Bureau of Labor Statistics, PPI Program, last update: May 12, 2011).
I note that the index for April 2011 is 203.9 whereas the index for April 2010 was 187.0. I assume that by the operation: (203.9-187.0)/(187.0 x 100) I can get a number that I can compared with the UK, Eurozone and EU ones. That number is: +9.04%
Assuming the above assumption is correct, then the Eurozone industrial producer prices hike in April 2011 (compared with April 2010), +6.7%, is quite lower than the US one, +9.04%. That seems to imply that inflationary pressures from industrial goods at the producer stage are less strong in the Eurozone than in the USA. But I am not an expert in those things.
But remember, the USD (Fed) rate is 0 to 0.25% and the Euro (ECB) one 1.25%. And that the Fed, like the Bank of England, and unlike the ECB, has to raised its rate for a long time!
By the way, the US April inflation year-on-year was 3.2% (see: Reuters, May 14) whereas the April one in the Eurozone was 2.8% and the flash estimate of the Eurostat for May is 2.7%. The 3.2% US inflation is the highest since October 2008.
The US GDP: Compared with the first quarter of 2010, US GDP in the 1st quarter of 2011 grew by 2.3% in the United States (source: Eurostat) while in the Eurozone and the EU it was 2.5%.
This is all, for now.
What do you make of all the above?
Producer prices are an indication what the retail/consumer prices will look like a few months down the line. And of course they worry economists. Yet last Thursday, both the Bank of England and the ECB chose not to raise their interest rates (yet the ECB did raise its rate 2 months ago, from 1.00% to 1.25%).
For a wider picture see my post of June 10 "While the ECB and the Bank of England kept their rates stable: ECB, BoE and Fed, 3 different central banking philosophies".
Today, I decided to have a look at what is happening on other side of the Atlantic, in the USA.
I found a table: Producer Price Index, Industrial Commodities (1982=100) in PDF format at the site of the Bureau of Labor Statistics of the US Department of Labor (US Bureau of Labor Statistics, PPI Program, last update: May 12, 2011).
I note that the index for April 2011 is 203.9 whereas the index for April 2010 was 187.0. I assume that by the operation: (203.9-187.0)/(187.0 x 100) I can get a number that I can compared with the UK, Eurozone and EU ones. That number is: +9.04%
Assuming the above assumption is correct, then the Eurozone industrial producer prices hike in April 2011 (compared with April 2010), +6.7%, is quite lower than the US one, +9.04%. That seems to imply that inflationary pressures from industrial goods at the producer stage are less strong in the Eurozone than in the USA. But I am not an expert in those things.
But remember, the USD (Fed) rate is 0 to 0.25% and the Euro (ECB) one 1.25%. And that the Fed, like the Bank of England, and unlike the ECB, has to raised its rate for a long time!
By the way, the US April inflation year-on-year was 3.2% (see: Reuters, May 14) whereas the April one in the Eurozone was 2.8% and the flash estimate of the Eurostat for May is 2.7%. The 3.2% US inflation is the highest since October 2008.
The US GDP: Compared with the first quarter of 2010, US GDP in the 1st quarter of 2011 grew by 2.3% in the United States (source: Eurostat) while in the Eurozone and the EU it was 2.5%.
This is all, for now.
What do you make of all the above?
Friday, June 10, 2011
Is an independent central bank part of a democratic deficit?
Oh my, another post of mine on central banking!
But I cannot help it!
2 stimuli
1) Today's Reuters interview with the governor of the central bank of India: Greater need to ensure autonomy to central banks - RBI
This argument may be valid re India's specific case, but http://www.blogger.com/img/blank.gifin light of JC Junker's recent comments at the European Parliament that there is a need for an exchange rate policy and that the Euro is over-valued, the reverse argument is probably more applicable for the EU (the Eurozone actually).
2) Simon Johnson's (MIT professor, my alma mater (SB 1985) and former chief economist at the IMF) article in the New York Times (June 9): The Banking Emperor Has No Clothes.
It is a must read article, which refers to Tim Geithner inspired by a major speech Geithner made earlier this week to the American Bankers Association’s international monetary conference. A Treasury Secretary in the Obama administration, Mr Geithner was the governor of the NY Fed, one of 12 Federal Reserve Banks in the US that in turn "participate" in the US Federal Reserve Bank.
BTW, who "owns" the NY Fed (and most of the other 11 regional Feds in the US. as far as I know)? The banks! Ie the ones being supervised by the Fed in question. Oh my!
Dr. Johnson, whose views on the Euro crisis I do not usually agree with, makes though some interesting criticism of T. Geithner's philosophy and views, especially re which of the 2, the US or the UK, has the "lighter" financial regulations.
My main point:
Both of these articles stimulated me to think the following (yes, I am word playing around with the economic stimulus thing):
There is lots of criticism, by the so called Eurosceptics, whose main den is to be found in the UK but they are basically all over the place (ie planet), of an EU "democratic deficit".
Side note: I do not see the consistency of such an argument, especially when it talks of "unelected Eurocrats" (referring to the Commissioners etc) when it is coming from active citizens of a country/polity whose upper house has members that are not elected! But on this occasion my point is this:
Is central bank independence (which is nevertheless prescribed in the current EU Treaties in the case of the ECB) not an element of democratic deficit?
To the extent that the central bank, via market operations, sets a central interest rate that in turn affects liquidity thus inflation but also affects the price of the currency in the world markets vis-a-vis other currencies, how can a givernment of any kind have the ability to have an exchange rate policy as the President of the Eurogroup suggested the Eurozone should have, earlier this week?
Analyse this (or more precisely, factor this in in your understanding of the systemics of the world we live in)!
But I cannot help it!
2 stimuli
1) Today's Reuters interview with the governor of the central bank of India: Greater need to ensure autonomy to central banks - RBI
This argument may be valid re India's specific case, but http://www.blogger.com/img/blank.gifin light of JC Junker's recent comments at the European Parliament that there is a need for an exchange rate policy and that the Euro is over-valued, the reverse argument is probably more applicable for the EU (the Eurozone actually).
2) Simon Johnson's (MIT professor, my alma mater (SB 1985) and former chief economist at the IMF) article in the New York Times (June 9): The Banking Emperor Has No Clothes.
It is a must read article, which refers to Tim Geithner inspired by a major speech Geithner made earlier this week to the American Bankers Association’s international monetary conference. A Treasury Secretary in the Obama administration, Mr Geithner was the governor of the NY Fed, one of 12 Federal Reserve Banks in the US that in turn "participate" in the US Federal Reserve Bank.
BTW, who "owns" the NY Fed (and most of the other 11 regional Feds in the US. as far as I know)? The banks! Ie the ones being supervised by the Fed in question. Oh my!
Dr. Johnson, whose views on the Euro crisis I do not usually agree with, makes though some interesting criticism of T. Geithner's philosophy and views, especially re which of the 2, the US or the UK, has the "lighter" financial regulations.
My main point:
Both of these articles stimulated me to think the following (yes, I am word playing around with the economic stimulus thing):
There is lots of criticism, by the so called Eurosceptics, whose main den is to be found in the UK but they are basically all over the place (ie planet), of an EU "democratic deficit".
Side note: I do not see the consistency of such an argument, especially when it talks of "unelected Eurocrats" (referring to the Commissioners etc) when it is coming from active citizens of a country/polity whose upper house has members that are not elected! But on this occasion my point is this:
Is central bank independence (which is nevertheless prescribed in the current EU Treaties in the case of the ECB) not an element of democratic deficit?
To the extent that the central bank, via market operations, sets a central interest rate that in turn affects liquidity thus inflation but also affects the price of the currency in the world markets vis-a-vis other currencies, how can a givernment of any kind have the ability to have an exchange rate policy as the President of the Eurogroup suggested the Eurozone should have, earlier this week?
Analyse this (or more precisely, factor this in in your understanding of the systemics of the world we live in)!
While the ECB and the Bank of England kept their rates stable: ECB, BoE and Fed, 3 different central banking philosophies?
Yesterday (June 9), both ECB (European Central Bank) and the Bank of England kept their "central" rates steady! But the difference between them is 75 basis points (Euro 1.25% vs Pound 0.5%, instead of the 50 that changed when the ECB raised its interest rate 25 basus points a couple of month ago (April 7) citing fears of inflationary pressures in the Eurozone (from global oil and food prices hikes).
For context read my post of April 7 2011: "Eurozone: That 2% obsession"!
Notes:
1) See some economic theory re the 2% inflation target in my post: "Why a 2% inflation target for the Eurozone and other myths & realities!" (March 5, 2011)
For context read my post of April 7 2011: "Eurozone: That 2% obsession"!
Yesterday's respective decisions were made in the following context:
Eurozone:
1) 75/2011 - 31 May 2011
Eurostat May 31 release of its flash estimate for May 2011 annual inflation at 2.7%. Down 10 basis points from the 2.8% (annual) in April but way above the ECB's target of 2%.
Eurostat May 31 release of its flash estimate for May 2011 annual inflation at 2.7%. Down 10 basis points from the 2.8% (annual) in April but way above the ECB's target of 2%.
3) Second estimate (Eurostat, June 8) for the first quarter of 2011 GDP at +2.5% compared with the first quarter of 2010 (same rate for EU).
UK:
1) Annual inflation rate in April at 4.5%, up from 4% in March.
2) Industrial producer prices in April up 13.1% compared with April 2010 (highest in the EU)
3) Second estimate (Eurostat, June 8) for the first quarter of 2011 GDP at +1.8% compared with the first quarter of 2010 (vs 2.5% in EU as a whole and in the Eurozone).
So the UK had a +1.8% growth (GDP) rate in Q1 vs 2.5% in the Eurozone but its unemployment situation is better than the Eurozone's (7.7% in the 3 months to March vs 9.9% in April) but its industrial producer prices is much higher than the Eurozone (13.1% vs 6.7% in April) and April inflation is 4.5% vs 2.7% in the Eurozone.
The Bank of England seems to have opted to resist the temptation to address the high inflation and industrial producer prices and did not "tighten" (ie raise interest rates, same 0.5% rate for 27 months in a row). In short it opted to growth and jobs (although jobless rate lower than Eurozone's) instead of inflation curbing.
That is the opposite than what the ECB had opted for 2 months ago! But then the ECB is only "responsible" for a 2%inflation target, not jobs or growth (as eg the Fed in the US that has kept is central interest rate at 0% to 0.25% for a long time now)!
Ouch! The ECB sounds like the Terminator robot in the well known series of films that only has one "directive" (order or goal): inflation minimisation. Unlike the Fed and the BoE decision yesterday.
What I do not understand is why the Pres of the ECB had to say anything re next months meeting and decision at all! Correct me if I am wrong, but the only thing the Bank of England "says" is to release, many days later, a record of the vote of its 9 member board.
Oh well.
Mind you, JC Junker, the Pres of the Eurogroup has taken the view (April 20, 2011) 'that "European leaders should discuss monetary policy in private talks", arguing that public discussions feed speculation'
And this week (June 6) Mr. Junker said that “European Central Bank President Jean-Claude Trichet’s proposal to create a euro-area finance ministry “‘won’t work.”". He was speaking to a European Parliament committee meeting and also said that "the euro area has no exchange-rate objective" adding that “I’m more inclined to think that we should have an exchange-rate policy".
Loyal readers of my blog know what my position is on these above issues!
More soon!
Notes:
1) See some economic theory re the 2% inflation target in my post: "Why a 2% inflation target for the Eurozone and other myths & realities!" (March 5, 2011)
2) I strongly recommend reading "Rethinking Macroeconomic Policy", by Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro, Feb. 12., 2010.
The state of Economics in 2011
Is Economics the modern version of ancient myths and fairy tales?
Let us not forget that in spite fancy mathematic formulae, Economics is a social science. Dangerous when dogmatic, and a tool capable of both good & bad things.
It should be noted that a lot of the dominant economic theories & dogmae have Anglo-American (and in some cases Central Europe eg Austrian) roots and bias thus are not fit for global appeal and application.
On top of that, a lot of the old made in USA & UK liberal, capitalist, free-market economic theories are not popular in the USA & UK of today!
Yes, IMO, Economics as we know it, is in "crisis". Maybe a new version/release, upgraded and suitable for global use and with elements for global appeal is in order!
Let us not forget that in spite fancy mathematic formulae, Economics is a social science. Dangerous when dogmatic, and a tool capable of both good & bad things.
It should be noted that a lot of the dominant economic theories & dogmae have Anglo-American (and in some cases Central Europe eg Austrian) roots and bias thus are not fit for global appeal and application.
On top of that, a lot of the old made in USA & UK liberal, capitalist, free-market economic theories are not popular in the USA & UK of today!
Yes, IMO, Economics as we know it, is in "crisis". Maybe a new version/release, upgraded and suitable for global use and with elements for global appeal is in order!
Sovereignty vs Global Finance
How can anyone make the case re sovereign states/countries in 2011 when all states on Earth are nowadays so intertwined via finance?
Even re the potential for sovereignty at superstate, eg EU, level?
How?
Is de-globalisation of the free movement of capital a way? Ie erection of walls for capital instead of immigrants.
Even re the potential for sovereignty at superstate, eg EU, level?
How?
Is de-globalisation of the free movement of capital a way? Ie erection of walls for capital instead of immigrants.
Wednesday, June 8, 2011
Germany's competitiveness: Beyond myths and inside the systemics
On June 8, the German national statistics agency announced that in April (2011) German exports fell by 5.5% to 84.3bn euros compared with March 2011 (see eg BBCnews report).
The March 2011 German exports had been Euros 98.3bn which were:
1) +16% from March 2010
2) the highest monthly total since 1950 when record keeping began!
The April drop surprised analysts, according to the BBC. But it did not quite surprise me.
In my May 9 post, "German exports record high in March vs Euro/USD rate", I had wondered:
"But what was Euro/USD in March compared eg to last week (the week before "the weekend"? See a chart eg here and draw your own conclusions!"
The "here" was (and is) a EUR/USD Elliott Wave Analysis chart (May 9)(here is the latest one, June 6). They show that the price of the Euro vis-a-vis the USD not only had reached a "local" low in March 2011 but had been within the 1.35 - 1.30 USD per Euro range (roughly) from late 2010 until March 2011. One does not expect a country's exports to be correlated with the same month's currency value because after all, orders, especially international, do take some time, depending on the type of good or service (eg in tourism many bookings are made many months ahead).
But the fact that the Euro by March 2011 had been in a range lower than its local 1.5+ high that had been reached around Jan 2010 (then sliding from that 1.5+ high from roughly Jan 2010 to June 2010, when in reached a less than 1.2 "low", and the started to go up again), did pose some questions as to the factors/drivers behind the super duper German export record of March 2011.
Notably, after the March 2011 local low of approx. 1.3 USD per Euro, the Euro climbed somewhat steadily up to the 1.5 territory in the next 2+ months. Did that affect the April exports performance? That I do not know. Does someone? Feel free to comment!
In other words, German exports, which are said to be mostly manufactured "complex" goods, said to be mostly produced by sophisticated small and medium German manufacturing firms to quality levels that justify a higher price (be it due to "national" costs or the expensive Euro (successor of the expensive/hard DM or profit margin) in the world's markets was/is allegedly the "key" to Germany's export success (formerly No 1 in the world and now second only to China of the 1.3 billion people compared with 80+ million Germany).
Maybe it's my MIT education that taught me to ask questions such as "why" and "how" even for things that are pretty much taken as "facts of life" or "given" by many others, maybe it's my systemics analysis - operations research - decision science education as well as an MBA, but in any case, I was and still am eager to get to the bottom of the systemics of the German competitiveness model, beyond the myths and inside the mystique that surrounds them.
A myth that says that hard working Germans, working smart and with quality equipment and a knack for organisation and engineering, produce goods and achieve export power that the likes of Spain, Portugal, Ireland, Italy, Greece (aka PIIGS) and most of the other EUropean and other economies cannot (and should?) achieve!
Not being a believer in national stereotypes, but being a believer in systemics, I am willing to accept, after more research that there may be systemic conditions that render Germany a more competitive economy than eg the PIIGS (and if possible isolate and examine those conditions or, if you prefer, parameters or factors). But I need much more info and data than the ones offered by the analyses of German competitiveness that I have read so far. Feel free to recommend ones (via e-mail) if you are aware of.
One thing that IMO does not bode too well with the myth is the datum that 60% of German exports are to its EU Single Market partners. That means that the rest of the world, outside the EU, only buys 40% of Germany's exports. So 60% of these largely complex and 'expensive but worth it; manufactured goods are bought by a market of roughly 0.420 billion inhabitants, while the rest 40% by the rest 6.4 billion non-EU market of this planet!
And when at least 120 million of those 420 million (ie the PIIGS) are in some kind of austerity, hitting a record month in exports (March 2011) seems quite unsustainable unless there are data that other markets (eg the developing BRIcs etc) are picking up the slack one expects from the "austeritised" PIIGS (and to some extent the rest of the Eurozone and the EU).
More on this in the near future as I will be trying to dig deeper and deeper into the system/model of German competitiveness.
For now, one last note:
I read a lot of commentators, some German, some other EUropean, some from other parts of the world, urging the PIIGS to become (in terms of economic modeling) more like Germany. My question is the following simple (and maybe dumb) one:
If all of the Eurozone moved from production (and export) of simple to complex goods a la Germany, then that would increase up to 300% the volume of such goods produced in the Eurozone (80 x 4 = 320) and 500% in the EU (90 x 6 = 480). Ie for each German complex good produced by Germany now, there would be 3 more of the same produced in the rest of the Eurozone and 2 more in the rest of the EU. Making the total volume of German type complex goods produced in the EU 6 times the existing one.
In such a case, what would be, via the "law" of supply and demand, the effect on the equilibrium price for German+rest EU "complex' goods? To use a Marketing term, if the rest of the economies of the Eurozone or the EU would produce German type of goods, then there would be cannibalisation in the (EU and world) markets. Leading of course to much lower prices for these goods. Food for thought, huh?
The March 2011 German exports had been Euros 98.3bn which were:
1) +16% from March 2010
2) the highest monthly total since 1950 when record keeping began!
The April drop surprised analysts, according to the BBC. But it did not quite surprise me.
In my May 9 post, "German exports record high in March vs Euro/USD rate", I had wondered:
"But what was Euro/USD in March compared eg to last week (the week before "the weekend"? See a chart eg here and draw your own conclusions!"
The "here" was (and is) a EUR/USD Elliott Wave Analysis chart (May 9)(here is the latest one, June 6). They show that the price of the Euro vis-a-vis the USD not only had reached a "local" low in March 2011 but had been within the 1.35 - 1.30 USD per Euro range (roughly) from late 2010 until March 2011. One does not expect a country's exports to be correlated with the same month's currency value because after all, orders, especially international, do take some time, depending on the type of good or service (eg in tourism many bookings are made many months ahead).
But the fact that the Euro by March 2011 had been in a range lower than its local 1.5+ high that had been reached around Jan 2010 (then sliding from that 1.5+ high from roughly Jan 2010 to June 2010, when in reached a less than 1.2 "low", and the started to go up again), did pose some questions as to the factors/drivers behind the super duper German export record of March 2011.
Notably, after the March 2011 local low of approx. 1.3 USD per Euro, the Euro climbed somewhat steadily up to the 1.5 territory in the next 2+ months. Did that affect the April exports performance? That I do not know. Does someone? Feel free to comment!
In other words, German exports, which are said to be mostly manufactured "complex" goods, said to be mostly produced by sophisticated small and medium German manufacturing firms to quality levels that justify a higher price (be it due to "national" costs or the expensive Euro (successor of the expensive/hard DM or profit margin) in the world's markets was/is allegedly the "key" to Germany's export success (formerly No 1 in the world and now second only to China of the 1.3 billion people compared with 80+ million Germany).
Maybe it's my MIT education that taught me to ask questions such as "why" and "how" even for things that are pretty much taken as "facts of life" or "given" by many others, maybe it's my systemics analysis - operations research - decision science education as well as an MBA, but in any case, I was and still am eager to get to the bottom of the systemics of the German competitiveness model, beyond the myths and inside the mystique that surrounds them.
A myth that says that hard working Germans, working smart and with quality equipment and a knack for organisation and engineering, produce goods and achieve export power that the likes of Spain, Portugal, Ireland, Italy, Greece (aka PIIGS) and most of the other EUropean and other economies cannot (and should?) achieve!
Not being a believer in national stereotypes, but being a believer in systemics, I am willing to accept, after more research that there may be systemic conditions that render Germany a more competitive economy than eg the PIIGS (and if possible isolate and examine those conditions or, if you prefer, parameters or factors). But I need much more info and data than the ones offered by the analyses of German competitiveness that I have read so far. Feel free to recommend ones (via e-mail) if you are aware of.
One thing that IMO does not bode too well with the myth is the datum that 60% of German exports are to its EU Single Market partners. That means that the rest of the world, outside the EU, only buys 40% of Germany's exports. So 60% of these largely complex and 'expensive but worth it; manufactured goods are bought by a market of roughly 0.420 billion inhabitants, while the rest 40% by the rest 6.4 billion non-EU market of this planet!
And when at least 120 million of those 420 million (ie the PIIGS) are in some kind of austerity, hitting a record month in exports (March 2011) seems quite unsustainable unless there are data that other markets (eg the developing BRIcs etc) are picking up the slack one expects from the "austeritised" PIIGS (and to some extent the rest of the Eurozone and the EU).
More on this in the near future as I will be trying to dig deeper and deeper into the system/model of German competitiveness.
For now, one last note:
I read a lot of commentators, some German, some other EUropean, some from other parts of the world, urging the PIIGS to become (in terms of economic modeling) more like Germany. My question is the following simple (and maybe dumb) one:
If all of the Eurozone moved from production (and export) of simple to complex goods a la Germany, then that would increase up to 300% the volume of such goods produced in the Eurozone (80 x 4 = 320) and 500% in the EU (90 x 6 = 480). Ie for each German complex good produced by Germany now, there would be 3 more of the same produced in the rest of the Eurozone and 2 more in the rest of the EU. Making the total volume of German type complex goods produced in the EU 6 times the existing one.
In such a case, what would be, via the "law" of supply and demand, the effect on the equilibrium price for German+rest EU "complex' goods? To use a Marketing term, if the rest of the economies of the Eurozone or the EU would produce German type of goods, then there would be cannibalisation in the (EU and world) markets. Leading of course to much lower prices for these goods. Food for thought, huh?
The cornerstone of a free market
What many forget (or choose to forget) is that competition law is the cornerstone of genuine "free market"
Most ideologies stand on good ideas. It is their application/practice that makes the difference.
Marxism was meant for industrially mature countries eg UK, Germany etc, instead it was practiced in agri/rural Russia et al & China!
IMO Marxism is an irrelevant in 2011 as Rand-ism. And a centrist mix of capitalism & social democracy seems best in practice.
On the other hand, it can IMO be said that China is extracting communism's revenge on capitalism nowadays, via its capitalocommunist (Frankenstein-like) model and its 2001 WTO membership (a major US & European mistake).
Most ideologies stand on good ideas. It is their application/practice that makes the difference.
Marxism was meant for industrially mature countries eg UK, Germany etc, instead it was practiced in agri/rural Russia et al & China!
IMO Marxism is an irrelevant in 2011 as Rand-ism. And a centrist mix of capitalism & social democracy seems best in practice.
On the other hand, it can IMO be said that China is extracting communism's revenge on capitalism nowadays, via its capitalocommunist (Frankenstein-like) model and its 2001 WTO membership (a major US & European mistake).
What do liberals (European term) and Leninists have in common?
What do the liberals (in the European not the US meaning of the term liberal) and the Leninists have in common, in iterms of ideology?
It's their distaste for private monopolies & cartels!
But whereas liberals think that they can be avoided via competition, anti-monopoly and antitrust legislation, Leninists prefer the state ownership model, for monopolies and business in general!
It's their distaste for private monopolies & cartels!
But whereas liberals think that they can be avoided via competition, anti-monopoly and antitrust legislation, Leninists prefer the state ownership model, for monopolies and business in general!
Diary June 7
1) Difficult stuff but well worth the read:
"The stealth bailout that doesn’t exist: debunking Hans-Werner Sinn" by Olaf Storbeck in his blog Economics Intelligence 6/6/2011
His analysis tells me that financial systemics have become too complicated for even renowned commentators to fully grasp.
Food for thought: How can the average citizen/voter or even policy maker be expected to use finance or regulate finance when it's so complicated? Rely on uber-experts? Food for thought.
2) Apocalyptic (in Greek that simply means revealing): Robert Peston's BBCnews blog post "Eurozone woes are US woes" of 5/6/2011 uses BIS data to reveal which countries' banks have the largest actual and potential exposures to Greece, Ireland, Portugal, Spain. A abs must read, an eye opener! No spoilers!
3) Angela Merkel is on a US visit, last one was in April 2010, ie not that long ago.
Reading the reports I could not but wonder: In at least this US, is Mrs Merkel representing Germany, the EU or the Eurozone?
By the way, I am reminded of 2 older reports by Der Spiegel Online International:
a) 04/15/2010, "Angie Goes to Hollywood: Chancellor Merkel Discovers Glitz and Glamour" by Gregor Peter Schmitz
and even more so:
b) 12/10/2010 "US Diplomats in the EU: Manipulating the Political Dwarves of Europe" by Gregor Peter Schmitz
"The stealth bailout that doesn’t exist: debunking Hans-Werner Sinn" by Olaf Storbeck in his blog Economics Intelligence 6/6/2011
His analysis tells me that financial systemics have become too complicated for even renowned commentators to fully grasp.
Food for thought: How can the average citizen/voter or even policy maker be expected to use finance or regulate finance when it's so complicated? Rely on uber-experts? Food for thought.
2) Apocalyptic (in Greek that simply means revealing): Robert Peston's BBCnews blog post "Eurozone woes are US woes" of 5/6/2011 uses BIS data to reveal which countries' banks have the largest actual and potential exposures to Greece, Ireland, Portugal, Spain. A abs must read, an eye opener! No spoilers!
3) Angela Merkel is on a US visit, last one was in April 2010, ie not that long ago.
Reading the reports I could not but wonder: In at least this US, is Mrs Merkel representing Germany, the EU or the Eurozone?
By the way, I am reminded of 2 older reports by Der Spiegel Online International:
a) 04/15/2010, "Angie Goes to Hollywood: Chancellor Merkel Discovers Glitz and Glamour" by Gregor Peter Schmitz
and even more so:
b) 12/10/2010 "US Diplomats in the EU: Manipulating the Political Dwarves of Europe" by Gregor Peter Schmitz
Tuesday, June 7, 2011
What are the high Industrial Producer Prices in April (EU, Eurozone) a sign of?
This is a follow up to my post of May 4: "Updated! Industrial Producer prices hikes among Eurozone members: Cause for concerns"
According to Eurostat (June 6)
April 2011 Industrial producer prices when compared with March 2011 are up by 0.9% in Eurozone and up by 1.0% in EU27.
But the worrying picture becomes more clear when one looks at the April 2011 figures compared with 1 year ago, ie April 2010:
In April 2011 compared with April 2010, industrial producer prices gained 6.7% in Eurozone and 7.8% in the EU!
Eurozone (April 2011 compared with April 2010):
Total industry excluding construction +6.7%
Total industry excluding construction and energy +4.4%
Intermediate goods +7.3%
Energy +13.3% (yes 13.3%!!!!)
Capital goods +1.3%
Durable consumer goods +2.0%
Non-durable consumer goods +3.4%
Industrial producer (or wholesale) prices are a sign of upcoming inflation (consume price index) trends (a few months later).
Let's look at the figures for some EU member states (April 2011 compared with April 2010):
No 1 (highest in the EU): UK +13.1% in April, vs +8.1% in December 2010 (compared with Dec 2009) and only +5.1% in November 2010 (compared with November 2009).
No 2 (and No 1 in the Eurozone): NL +11.7
No 3: Bulgaria +10.7%
No 4 (and No 2 in the Eurozone): Belgium +10.6%
No 5: Lithuania +10.5%
No 6: Denmark +9.9%
No 7: Poland and Latvia with 9.4%
No 9: Romania +8.8%
No 10 (and No 3 in the Eurozone): Finland +8.5%
Germany's and France's are both +6.4%! How about that!
See full Eurostat figures by country
Note that the Eurozone17 average in 110 basis points below the EU27 average!
Whereas international energy (oil) prices and the prices of some staple foods are said to be pushning industrial production costs up (and thus leading to higher wholesale prices) these high numbers seem to indicate that industries in the EU and the Eurozone seem to think that they can afford to pass these prices on down to the intermediaries and the final consumer (whether consumers (b2c) or other companies (b2b). Of course, some of the sales will be made inside the EU some outside.
But with the Euro being at a relatively high price vis-avis the USD, the Yuan etc, one wonders what makes those industries think they can afford not to absorb more of the extra costs of the ebergy and other inputs.
a) Are their products that unique, in the EU, EUrozone and global markets?
b) Is competition not working well in certain sectors and/or member states or the EU Single Market?
or
c) Are they merely desperate (cannot internalise more of the extra input costs, pass them on and prey)?
I have no clue as to whether it is one of the above or something else. But I am wondering.
But I cannot help wonder, more generally, whether the way to best curb inflation in the Eurozone that the ECB is gung-ho for (2% target) is via "tightening" (ie raising interest rates) or by removing barriers to more competition intra-EZ or intra-EU or both! Any views?
According to Eurostat (June 6)
April 2011 Industrial producer prices when compared with March 2011 are up by 0.9% in Eurozone and up by 1.0% in EU27.
But the worrying picture becomes more clear when one looks at the April 2011 figures compared with 1 year ago, ie April 2010:
In April 2011 compared with April 2010, industrial producer prices gained 6.7% in Eurozone and 7.8% in the EU!
Eurozone (April 2011 compared with April 2010):
Total industry excluding construction +6.7%
Total industry excluding construction and energy +4.4%
Intermediate goods +7.3%
Energy +13.3% (yes 13.3%!!!!)
Capital goods +1.3%
Durable consumer goods +2.0%
Non-durable consumer goods +3.4%
Industrial producer (or wholesale) prices are a sign of upcoming inflation (consume price index) trends (a few months later).
Let's look at the figures for some EU member states (April 2011 compared with April 2010):
No 1 (highest in the EU): UK +13.1% in April, vs +8.1% in December 2010 (compared with Dec 2009) and only +5.1% in November 2010 (compared with November 2009).
No 2 (and No 1 in the Eurozone): NL +11.7
No 3: Bulgaria +10.7%
No 4 (and No 2 in the Eurozone): Belgium +10.6%
No 5: Lithuania +10.5%
No 6: Denmark +9.9%
No 7: Poland and Latvia with 9.4%
No 9: Romania +8.8%
No 10 (and No 3 in the Eurozone): Finland +8.5%
Germany's and France's are both +6.4%! How about that!
See full Eurostat figures by country
Note that the Eurozone17 average in 110 basis points below the EU27 average!
Whereas international energy (oil) prices and the prices of some staple foods are said to be pushning industrial production costs up (and thus leading to higher wholesale prices) these high numbers seem to indicate that industries in the EU and the Eurozone seem to think that they can afford to pass these prices on down to the intermediaries and the final consumer (whether consumers (b2c) or other companies (b2b). Of course, some of the sales will be made inside the EU some outside.
But with the Euro being at a relatively high price vis-avis the USD, the Yuan etc, one wonders what makes those industries think they can afford not to absorb more of the extra costs of the ebergy and other inputs.
a) Are their products that unique, in the EU, EUrozone and global markets?
b) Is competition not working well in certain sectors and/or member states or the EU Single Market?
or
c) Are they merely desperate (cannot internalise more of the extra input costs, pass them on and prey)?
I have no clue as to whether it is one of the above or something else. But I am wondering.
But I cannot help wonder, more generally, whether the way to best curb inflation in the Eurozone that the ECB is gung-ho for (2% target) is via "tightening" (ie raising interest rates) or by removing barriers to more competition intra-EZ or intra-EU or both! Any views?
The real Greek tragedy of Europe
In the last few months, the word Tragedy or Greek Tragedy has been used a lot by international media.
Yet the real Ancient Greek tragedy was that Greek city-states did not unite into one federal state (back in the 5th century BC). If they had, 400 BC - 2011 AD history would have been quite different.
Europe's real modern tragedy is the same, ie the absence of political union among Europe's states.
And the Greek crisis is one of the in-your-face reminders of that.
Reminders of the absence of political union, military union (Greece No. 1 defense spender per capita in the EU, 22 in the world, 2006 (CIA World Factbook), fiscal union (federal tax and federal budget and of course federal European "IRS"), economic union, etc. No EU-wide "NHS", no EU-wide car registration/plates, no EU-wide job market, no EU-wide online systems in banks (how many banks operate throughout the EU the same way they operate throughout eg a federal country like Germany), etc.
Yet the real Ancient Greek tragedy was that Greek city-states did not unite into one federal state (back in the 5th century BC). If they had, 400 BC - 2011 AD history would have been quite different.
Europe's real modern tragedy is the same, ie the absence of political union among Europe's states.
And the Greek crisis is one of the in-your-face reminders of that.
Reminders of the absence of political union, military union (Greece No. 1 defense spender per capita in the EU, 22 in the world, 2006 (CIA World Factbook), fiscal union (federal tax and federal budget and of course federal European "IRS"), economic union, etc. No EU-wide "NHS", no EU-wide car registration/plates, no EU-wide job market, no EU-wide online systems in banks (how many banks operate throughout the EU the same way they operate throughout eg a federal country like Germany), etc.
The real Greek tragedy of Europe
In the last few months, the word Tragedy or Greek Tragedy has been used a lot by international media.
Yet the real Ancient Greek tragedy was that Greek city-states did not unite into one federal state (back in the 5th century BC). If they had, 400 BC - 2011 AD history would have been quite different.
Europe's real modern tragedy is the same, ie the absence of political union among Europe's states.
And the Greek crisis is one of the in-your-face reminders of that.
Reminders of the absence of political union, military union (Greece No. 1 defense spender per capita in the EU, 22 in the world, 2006 (CIA World Factbook), fiscal union (federal tax and federal budget and of course federal European "IRS"), economic union, etc. No EU-wide "NHS", no EU-wide car registration/plates, no EU-wide job market, no EU-wide online systems in banks (how many banks operate throughout the EU the same way they operate throughout eg a federal country like Germany), etc.
Yet the real Ancient Greek tragedy was that Greek city-states did not unite into one federal state (back in the 5th century BC). If they had, 400 BC - 2011 AD history would have been quite different.
Europe's real modern tragedy is the same, ie the absence of political union among Europe's states.
And the Greek crisis is one of the in-your-face reminders of that.
Reminders of the absence of political union, military union (Greece No. 1 defense spender per capita in the EU, 22 in the world, 2006 (CIA World Factbook), fiscal union (federal tax and federal budget and of course federal European "IRS"), economic union, etc. No EU-wide "NHS", no EU-wide car registration/plates, no EU-wide job market, no EU-wide online systems in banks (how many banks operate throughout the EU the same way they operate throughout eg a federal country like Germany), etc.
Monday, June 6, 2011
Global and EU systemics: Major systemic imbalances in urgent need of fixing!
I am not sure how the following model fits with traditional economic models (note: I am an MBA, decision scientist and a policy analyst, not an economist or financial analyst anyway) such as the capital - labour - land or the capital - labour - knowhow ones:
In "my" model, there are 4 factors: capital, goods, services and work. And IMO for a system, be it the EU or the USA or the world (globalisation) to work, these 4 factors must have more or less the same level of freedoms ("4 freedoms").
Also IMO, the current instabilities in the global and EU systemics are due to uneven levels of fredom between these 4 factors.
Capital has a very high level of freedom to move and relocate around the world. Capital movements have, realitively speaking, few restrictions, within the world and within the EU.
Goods have seen their freedom grow exponentially since GATT was founnded after WWII leading to the creation of the WTO in 1994. But still, the level of freedom of goods is nowwhere near "free trade". Many tariffs and quotas, especially the former exist even between the WTO membems (and within WTO rules). Even in the EU Single Market for goods, many problems still exist, especially for small firms.
Services at least the most tradeable ones, have been making progress but their freedom is nowhere similar to that of capital and goods. At WTO and at EU level. Eg in the EU many are in fear of the travelling plumber!
When it comes to work or the freedom of labour, then things are quite sad, especially at WTO/global level and even at the EU level many problems exist. Too many.
My thesis is that unless the level of freedom of all these 4 factors converges upwards, it will soon start to converge downwards (that applies to the global and to the EU "systems"). In goods, the by now admitted failure of the WTO to reach agreement in the Doha agenda, opting for an effort to conclude a lite or extra lite one instead, the backwards pressures can be seen. With a zero or low level of public debt being reconised as a key factor in sovereignty (due to the Euro crisis etc), the concept can easily be expanded to the trade balance and the CA balance. Already certain countries have been accused (by the US) of "exporting too much" (eg Germany and China). Movement of workers, free lancers and people is "near apartheid" level globally and be in for political asylum or so called economic immigration reasons, it is alas getting worse pretty much all over the world.
What is more, the economic globalisation, in the form of the freedoms of capital and trade, needs to be balanced, structurally by a global political and a global social pillar!
Else, it is structuraly unsound.
If there is no global polity (a world parliament and possibly government (eg for the WTO 153)), or at least continental-level polity, I would not exclude de-globalisation and either regionalisation or nationalisation/localisation of capital and goods freedoms (see eg "buy local" initiatives).
Or a system of 4-7 major global players (federal EU, USA, China, India plus Russia, Japan, Brazil (or UNASUR), see my recent relevant post).
It is in the good interest of capital and the finance world to encourage or at least not block the globalisation of the other factors and the creation of global political and social pillars.
That is maybe why, in a way, the financial markets seem to be pushing the EU or at least the Eurozone towards political union!!! Because a single currency and a single market need a single polity as foundation and the financial system may not be always responding to crises in rational ways, but its vision is as good as anyone's. And the prudent financiers IMO know that either the other factors gain more freedom or capital loses much of its own.
Plus, the business world, those who produce and deal in goods and services, have clear vision too. And to the extent that the finance world does not manage to be part of the solution to the imbalances, they will ally with the politicians and societies against them.
Not for the battle for midde earth though! Enough metaphorical headlines or slogans (overdone by media etc in recent months). What is going on is the world today is the ultimate real show, much more interesting and cruel than any fairy tale or show.
The humans will prevail, eventually, they always do. Ask the monarchs, the Romans, the Soviets, etc. The financial system is next, it seems, if, as a system, it does not read the signs of the times and listen to the prudent voices inside it.
In "my" model, there are 4 factors: capital, goods, services and work. And IMO for a system, be it the EU or the USA or the world (globalisation) to work, these 4 factors must have more or less the same level of freedoms ("4 freedoms").
Also IMO, the current instabilities in the global and EU systemics are due to uneven levels of fredom between these 4 factors.
Capital has a very high level of freedom to move and relocate around the world. Capital movements have, realitively speaking, few restrictions, within the world and within the EU.
Goods have seen their freedom grow exponentially since GATT was founnded after WWII leading to the creation of the WTO in 1994. But still, the level of freedom of goods is nowwhere near "free trade". Many tariffs and quotas, especially the former exist even between the WTO membems (and within WTO rules). Even in the EU Single Market for goods, many problems still exist, especially for small firms.
Services at least the most tradeable ones, have been making progress but their freedom is nowhere similar to that of capital and goods. At WTO and at EU level. Eg in the EU many are in fear of the travelling plumber!
When it comes to work or the freedom of labour, then things are quite sad, especially at WTO/global level and even at the EU level many problems exist. Too many.
My thesis is that unless the level of freedom of all these 4 factors converges upwards, it will soon start to converge downwards (that applies to the global and to the EU "systems"). In goods, the by now admitted failure of the WTO to reach agreement in the Doha agenda, opting for an effort to conclude a lite or extra lite one instead, the backwards pressures can be seen. With a zero or low level of public debt being reconised as a key factor in sovereignty (due to the Euro crisis etc), the concept can easily be expanded to the trade balance and the CA balance. Already certain countries have been accused (by the US) of "exporting too much" (eg Germany and China). Movement of workers, free lancers and people is "near apartheid" level globally and be in for political asylum or so called economic immigration reasons, it is alas getting worse pretty much all over the world.
What is more, the economic globalisation, in the form of the freedoms of capital and trade, needs to be balanced, structurally by a global political and a global social pillar!
Else, it is structuraly unsound.
If there is no global polity (a world parliament and possibly government (eg for the WTO 153)), or at least continental-level polity, I would not exclude de-globalisation and either regionalisation or nationalisation/localisation of capital and goods freedoms (see eg "buy local" initiatives).
Or a system of 4-7 major global players (federal EU, USA, China, India plus Russia, Japan, Brazil (or UNASUR), see my recent relevant post).
It is in the good interest of capital and the finance world to encourage or at least not block the globalisation of the other factors and the creation of global political and social pillars.
That is maybe why, in a way, the financial markets seem to be pushing the EU or at least the Eurozone towards political union!!! Because a single currency and a single market need a single polity as foundation and the financial system may not be always responding to crises in rational ways, but its vision is as good as anyone's. And the prudent financiers IMO know that either the other factors gain more freedom or capital loses much of its own.
Plus, the business world, those who produce and deal in goods and services, have clear vision too. And to the extent that the finance world does not manage to be part of the solution to the imbalances, they will ally with the politicians and societies against them.
Not for the battle for midde earth though! Enough metaphorical headlines or slogans (overdone by media etc in recent months). What is going on is the world today is the ultimate real show, much more interesting and cruel than any fairy tale or show.
The humans will prevail, eventually, they always do. Ask the monarchs, the Romans, the Soviets, etc. The financial system is next, it seems, if, as a system, it does not read the signs of the times and listen to the prudent voices inside it.
Saturday, June 4, 2011
I philosophise therefore I endure
This is a philosophical and "political" song of mine:
I philosophise therefore I endure
What I watch
What I hear
What I read
What they tell me
Dedicated to the Greeks, the Irish and the Portuguese!
I philosophise therefore I endure
What I watch
What I hear
What I read
What they tell me
Dedicated to the Greeks, the Irish and the Portuguese!
The EU Single Market needs EU political union even more than the Euro single currency!
Some (or most Eurosceptics want the EU to revert to a common market or free trade area that they think that the EEC was all about (yet see my post The EEC was never (mainly) about economics of May 27, 2011, for an analysis why this was not the case, though).
Economics, trade in partuculat, was used as a way to bring the countries and people of Europe closer together with a view to creating better conditions for political (and defense) union than the ones in the early 50s (when the proposal for a European Defense Community was defeated in a vote of the French General Assembly (parliament)).
Yet, what the experience of the WTO rules based "free trade", including the failure of the Doha Round have shown, is that a free trade area needs single rules (laws) not only in policy areas that affect trade directly but in most policy areas. Even more so, a single market, as the one in the EU since 1/1/1993!
The EU way of creating those single/uniform laws/rules in the EU Single Market, via EU reguations (that become national law in the member states directly) and EU Directives (that need to be transposed into the national legal systems of the member states by those member states governments) did work, but IMO only to a certain extent.
Subsidiarity, a Roman principle re law making, that is embedded in the EU system, says that laws must be formulated and applied at the most appropriate level, depending on the case, ie the local (municipal regional), national or EU level.
In 2009, more than 40,000 state laws were formulated, voted and applied by the 50 states and territories of the USA. One can argue that this does not make sense, and that such volume of non-national (federal) lawmaking balkanises the country (USA) and creates problems for its citizens and legal entities, eg companies, especially the micros and SME ones. How easy is it for a micro or smal or mid size company to do business inside the whole of the US? Not as easy as non-American might think! How easy is it for an American (worker, free lancer, pensioner, job seeker, etc) to do all the red tape that comes with relocating from one US state to another? Not that easy!
What makes things easier in the US case is the common/single language. Other than that, the US Internal Market is not that single for workers, self employed, micros, SMES, large companies, retired persons etc!
Eg. They have to change car license plates when relocating, pay state and local taxes to a different authority (while their national (federal) tax remains the same). If their insurance company does not operate in the state they are moving to, what do they do? It used to be that banks were not allowed to operate in all 50 states but I think that has changed in recent years. Certain US professsionals who voluntered to go and work in the state of Luisiana after the recent catastrophe were not allowed to because their professional licenses did not apply in the state! Inter-state online commerce was exempt from any sales tax because as I read, otherwise it would render it difficult if not impossible (I am not sure if the exemption still applies or what has happened recently)!
It is one thing for local and state governments in the US to decide how to spend their budgets, ie that does not distort the single entity of the US systemics, but when laws and taxes are different then people and legal entities face not a single system, but one with local sub-systems. Ie internal market for products, services, capital and work, in principle, but in practice not single.
That is why I am now examining the German federal model closer to see happen "on the ground" of the Federal Republic of Germany's federal model. Relevant post coming soon.
The situation is much worse in the alleged EU Single Market. First, all income tax is collected by member states, no national EU (federal) income tax. Even double tax avoidance is based on bilateral agreements based on a OECD prototype! That is because the EU has no competence in matters of income tax, of persons and of legal entities! Only some in indirect taxation (eg VAT).
So, the types of single laws that a polity has, are the types required not only for a well founded single currency but more importanty, for a single market, for firms and persons, as well. Otherwise the alleged single market works only for large companies and wealthy individuals who can hire the types of experts needed to weed through the labyrinth of state and local laws. That is why mobility intra-EU is very low compared to the US or eg intra-Germany. The 21+ languages is but a relatively small barrier to the EU Single Market for real people and the real economy!
Economics, trade in partuculat, was used as a way to bring the countries and people of Europe closer together with a view to creating better conditions for political (and defense) union than the ones in the early 50s (when the proposal for a European Defense Community was defeated in a vote of the French General Assembly (parliament)).
Yet, what the experience of the WTO rules based "free trade", including the failure of the Doha Round have shown, is that a free trade area needs single rules (laws) not only in policy areas that affect trade directly but in most policy areas. Even more so, a single market, as the one in the EU since 1/1/1993!
The EU way of creating those single/uniform laws/rules in the EU Single Market, via EU reguations (that become national law in the member states directly) and EU Directives (that need to be transposed into the national legal systems of the member states by those member states governments) did work, but IMO only to a certain extent.
Subsidiarity, a Roman principle re law making, that is embedded in the EU system, says that laws must be formulated and applied at the most appropriate level, depending on the case, ie the local (municipal regional), national or EU level.
In 2009, more than 40,000 state laws were formulated, voted and applied by the 50 states and territories of the USA. One can argue that this does not make sense, and that such volume of non-national (federal) lawmaking balkanises the country (USA) and creates problems for its citizens and legal entities, eg companies, especially the micros and SME ones. How easy is it for a micro or smal or mid size company to do business inside the whole of the US? Not as easy as non-American might think! How easy is it for an American (worker, free lancer, pensioner, job seeker, etc) to do all the red tape that comes with relocating from one US state to another? Not that easy!
What makes things easier in the US case is the common/single language. Other than that, the US Internal Market is not that single for workers, self employed, micros, SMES, large companies, retired persons etc!
Eg. They have to change car license plates when relocating, pay state and local taxes to a different authority (while their national (federal) tax remains the same). If their insurance company does not operate in the state they are moving to, what do they do? It used to be that banks were not allowed to operate in all 50 states but I think that has changed in recent years. Certain US professsionals who voluntered to go and work in the state of Luisiana after the recent catastrophe were not allowed to because their professional licenses did not apply in the state! Inter-state online commerce was exempt from any sales tax because as I read, otherwise it would render it difficult if not impossible (I am not sure if the exemption still applies or what has happened recently)!
It is one thing for local and state governments in the US to decide how to spend their budgets, ie that does not distort the single entity of the US systemics, but when laws and taxes are different then people and legal entities face not a single system, but one with local sub-systems. Ie internal market for products, services, capital and work, in principle, but in practice not single.
That is why I am now examining the German federal model closer to see happen "on the ground" of the Federal Republic of Germany's federal model. Relevant post coming soon.
The situation is much worse in the alleged EU Single Market. First, all income tax is collected by member states, no national EU (federal) income tax. Even double tax avoidance is based on bilateral agreements based on a OECD prototype! That is because the EU has no competence in matters of income tax, of persons and of legal entities! Only some in indirect taxation (eg VAT).
So, the types of single laws that a polity has, are the types required not only for a well founded single currency but more importanty, for a single market, for firms and persons, as well. Otherwise the alleged single market works only for large companies and wealthy individuals who can hire the types of experts needed to weed through the labyrinth of state and local laws. That is why mobility intra-EU is very low compared to the US or eg intra-Germany. The 21+ languages is but a relatively small barrier to the EU Single Market for real people and the real economy!
Friday, June 3, 2011
Political and Trade compatibility between countries and economies and geopolitical "polyamory": The UK's case
The recent effort to conclude the 9.5 year old Doha Round of WTO world trade talks with a very lite agenda could be seen by this POV, inter alia:
Food for thought:
Are the 153 members of the WTO "trade compatible"? Is it any accident that many groups have formed within WTO as a WTO document shows (see PDF here). Other than the 27 member EU (which did not form for WTO related purposes), the other most "active" (according to the WTO doc) groups include:
* ACP (79 members, 58 of which are WTO members),
* The African group (48 members, all WTO, ie a portion of the African Union of 53 members),
* APEC (20 members, including the US, China, Japan and Mexico. some are members of ASEAN),
* Mercosur (4 South American countries, also members of the wider UNASUR "EU type" of bloc outside the WTO),
* LDCs (43 members, 31 of which are WTO members and the rest WTO observers).
What unites countries or economies is such groups (note: quite different in content, compare eg the EU with APEC)? In the case of WTO is it common interests in the negotiations? Common "adversaries"in the negotiations? Any common "philosophies" (re economics or politics or culture or some other factor)?
What unites together The Commonwealth (formerly known as the British Commonwealth) with 54 members (not a WTO group)? According to its official site: "Beyond the ties of history, language and institutions, it is the association’s values which unite its members: democracy, freedom, peace, the rule of law and opportunity for all".
Which brings me to my main discussion point in this post:
Is the UK more compatible with the other 53 Commonwealth members than it is with the other 26 EU members? Are the factors listed by it (see above) implying a "free trade area" or "economic union" or "political union" potential that is fundamentally better, for the UK, than the one with the other 26 EU members? Is the UK willing or capable of a "committed relationship" with any group of countries/economies?
In January 2011, the UK PM got together for a summit with the PMs of the 8 so called Scandic or Nordic plus Baltic countries ie Iceland, Norway, Latvia, Sweden, Finland, Denmark, Lithuania and Estonia (1) and declared that they had compatibility in areas such as their valuing of free trade (implying the other EU members do not?), see eg BBCnews' "Cameron calls for northern European alliance" . According to the BBC: "Describing himself as a "salesman for British business", Mr Cameron said he hoped the event would produce opportunities to boost trade between the UK and the Nordic and Baltic region which was worth about the same as that with France or China".
Let us also not forget the effort to keep a "special relationship" with the US.
It seems to me that what the UK's current government (and many in the past) want is to keep all their options open, in other words the geopolitical equivalent of "polyamory". In other words, there is a commitment problem or maybe syndrome.
This type of polyamory can work, provided there are enough others that wish to engage in such relationships. Eg do the other 26 in the EU wish to accommodate/tolerate the UK's unwillingness to commit to a single currency, Schengen, and what is more crucial, political "union" ("marriage")? How many of the other 26 see the EU as a mere "friends with benefits" group instead of a "marriage"?
Does the UK's unwillingness to commit contain a visible risk of winding up all alone without a partner and real friends?
Footnote: (1) Of the 1+8, 1+6 are EU members, 2 Eurozone members.
Thursday, June 2, 2011
Is Trichet's EU Minister of Finance proposal paving the way for a Merkel-Sarko plan for move to federal political union?
"Would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the union?" asked (proposed) today the ECB's President Jean-Claude Trichet (read Bloomberg's news coverage here)
IMO, yes it would be too bold, unless this EU Minister of Finance was part of a EU federal government cabinet (including Ministers for Transport, Employment & Social Policy, Environment, etc), led by an EU Prime Minister, on the basis of the number of seats of political parties in the European Parliament. In other words, as part of a move to federal political union in the EU with a number of the 27 states (maybe the 17 of the Eurozone, maybe the 23 of the Europlus, maybe 26 but that last one not that likely).
IMO, yes it would be too bold, unless this EU Minister of Finance was part of a EU federal government cabinet (including Ministers for Transport, Employment & Social Policy, Environment, etc), led by an EU Prime Minister, on the basis of the number of seats of political parties in the European Parliament. In other words, as part of a move to federal political union in the EU with a number of the 27 states (maybe the 17 of the Eurozone, maybe the 23 of the Europlus, maybe 26 but that last one not that likely).
So why is Mr. Trichet making this bold (and IMO incomplete) proposal and why now?
a) Maybe he is expressing his view on the portfolio (Finance or ECO/FIN) that is related to his role of (near end of term) President of the ECB.
or
b) Is he paving the way for one or two national leaders, let's say Angela Merkel and Nicolas Sarkozy to propose what is within their own scope, ie the EU government and political union I referred to above! Who knows, maybe at this very minute, their advisers are working on a proposal that could be brought up even as early as the next European Council, later this month! The same way they introduced the Pact a few months ago! Sci-fi, you say? We shall see! The scenario makes sense in many ways.
No need for the EU to re-invent the wheel re federalist political union
More EU, more federalism is actually the solution to the financial crisis and many other problems.
By that I mean an immediate move to Political Union which should have been decided in Maastricht in 1991 before or instead of the EMU.
A political union, US or German (FRG) federal style with a real budget financed by a federal income tax (like the US one).
Collected by a federal EU "IRS" (again like the US).
No need for the EU to re-invent the wheel when it comes to federalist political union. The US and German federal models are there. Almost pret-a-porter (ready wear) with some minor adjustments that does not require a master tailor but will (leaership.
By that I mean an immediate move to Political Union which should have been decided in Maastricht in 1991 before or instead of the EMU.
A political union, US or German (FRG) federal style with a real budget financed by a federal income tax (like the US one).
Collected by a federal EU "IRS" (again like the US).
No need for the EU to re-invent the wheel when it comes to federalist political union. The US and German federal models are there. Almost pret-a-porter (ready wear) with some minor adjustments that does not require a master tailor but will (leaership.
Wednesday, June 1, 2011
Systemics and prospects of the WTO and of a USA, EU, Russia, Canada merger!
"Doha Trade Deal Seems Likely" reports the Wall Street Journal on May 31. 2011 (must read, here).
"Or a circumpolar space... USA, Canada, EU, Russia ..." proposed my fellow tweeter, which was exactly what I was also thinking as another potential scenario.
European Union 15.9 + United States 14.6 + Canada 1.6 + Russia 1.5 = 33.6
EU+USA+Russia: 32.0
Whether the Doha lite, or in my opinion "extra lite" agenda is agreed upon by the end of the year, or even a "zero" one (ie no deal, end of the round that started in November 2001 in Doha) I do agree with the view that the era of progress in trade multilateralism is probably over.
As I have pointed out in my posts that one can find on this blog, after the 2003 failed Cancun meeting of the WTO, many bilateral and regional trade (or more than just trade) agreements have popped up.
A few days ago (25/5), I posted on what systemics I can see developing post Doha. IMO China, India, the US, the EU (mainly) plus Japan, Russia and Brazil or UNASUR (South America's "EU" project that of course includes Brazil) will be the main "players" in the world economic "arena".
The WTO rules as they stood before the Doha Round of talks in 2001 will probably still exist (although the survival of the WTO is not a given IMO) plus whatever rules come out of the Doha lite agenda that some seem to hope to be concluded (I have my doubts, read the WSJ article for some of the reasons, aka USA, plus. as far as I know, the US Pres has no fast track powers given by Congress on concluding a deal, and if that is indeed so, it is possible that the US Congress may decide to amend (!!) any deal, thus bringing a new deal back to the WTO, etc).
Conclusions
1) Most progress in rules or deals will most likely between 2 or more of the above 4+3 main players.
2) The EU, the US, and the other main players will continue to conclude (or at least try to, see US) bilateral deals with others, in some cases group agreements, regional or not.
3) The EU needs to strengthen its position and a political union of the EU is the main such way.
More:
Here comes some thinking that some may consider sci-fi, but we shall see:
I was involved in a most interesting discussion on Twitter (aka "tweetscussion") with a very esteemed fellow tweeter, @paulstpancras) on the night of May 29 to May 30. At some point, talking of the EU, political union potential, the UK POV, I said: "Or maybe UK would be OK with EU if merged with (the) USA; 77+ states. Then (UK) could ally with Texas, Arizona, etc! :)".
Why, because in addition to covering a ring around the planet, this union would have a population size that starts to approach that of China (1.3 billion) and India (1.2 billion):
USA+CAN+EU+Russia = 0.3 + 0.03 + 0.5 + 0.14 = 0.97 billion people.
In terms of GDP (nominal (in trillion USD) 2010 estimates (Source: CIA, World Factbook)) the picture would then be:
European Union 15.9 + United States 14.6 + Canada 1.6 + Russia 1.5 = 33.6
China 5.7
India 1.4
India 1.4
There is an obvious imbalance between the 33.6 and China's and India's GDP but with their rapid growth the potential for more GDP balance between the three exists.
There is another reason why a USA+EU merger would have to bring in Russia too. Russia would get very itchy if the US and EU were to merge, and including it could fix that. Canada has only 30+ million inhabitants but huge natural resources.
So while one scenario is EU+USA+Russia+Canada, another is EU+USA+Russia with almost the same population as the former, 0.94 billion and 32.0 instead of 33.6 2010 trillion USD.
But is a EU+US merger scenario even a remote possibility? Well, yes and no. 2-3 years ago, when I think the US proposed a free trade deal, some in the European Parliament said, why not a "single market". Well, IMO a single market, even without a common currency, needs single laws, which brings things, again IMO, towards a single legislature, ie political union. IMO the US+EU potential will largely depend on developments in/with China.
But what about the rest of the world? Well, China+India+EU+USA+Russia = almost 3.5 billion people. That leaves out 3.4 billion people (of the 6.9 billion total in 2010). Note: Only 11 countries have population size over 100 million but there are many countries, more than 200 in the world (planet).
Since world GDP was estimated at 62.2 trillion USD in 2010, the result of this scenario would be:
EU+USA+Russia: 32.0
China 5.7
India 1.4
Rest of the world: 23.1
including in that 23.1:
Japan 5.4
Brazil 2.0
Canada 1.6
Australia 1.2
Mexico 1.0
Canada 1.6
Australia 1.2
Mexico 1.0
Such a merger could prompt other countries to merge in groups, eg Japan, ASEAN & rest of Asia (with or without some of the ex-USSR states) plus Oceania, Africa, South and Central America. The world would not become a global polity, but a small number of super-countries/states (regionalisation+). Global trade talks would bring to a table reps of 4 to 6 such super-states. Not all of the world's countries would want or be included of course (and why should they, there should be room for exceptions and other approaches).
But in any case, in the complicated and perpetually changing world after 10% of the 21st century has elapsed, and the rapid growth, economic and in "power" of the BRICs as well as other developing countries, the EU has to be a single polity, it cannot continue to be a loose group of 27 countries. EU political union is a must, for the EU to be taken seriously by the rest of the world (see eg recent issues re selection of new IMF chief, the issue of a UN Security Council seat for the EU, the marginal role played by the EU as opposed to the US and China in the Copenhagen COP 15+, etc).
Real
Real capitalism is not about real estate based business & investing.
Real economy is elsewhere (other sectors).
The issue is:
How much "real economy" is left in the US and Europe for it to provide real growth & real jobs?
Real economy is elsewhere (other sectors).
The issue is:
How much "real economy" is left in the US and Europe for it to provide real growth & real jobs?
The future of work, work in the future!
Food for thought: In the future, robots may do all the work and humans may spend their days philosophising, full of poetry, arts, athletics, etc, much like Ancient Greece, but with some key differences (eg w/o the slaves and with men and women in equality).
A crucial question is, though: Who will own the machines/robots and the product of their work.
A crucial question is, though: Who will own the machines/robots and the product of their work.
Cruel to be kind, miserable to be happy?
I am pondering whether one can be happy in his/her misery! Miserable to be happy?
Note: Is feeling miserable the same as feeling unhappy? I think misery and unhappiness are not the same thing, but that only my opinion .... I think that misery is a few steps above unhappiness! And a few below happiness! But then conformity is also a few steps below happiness, and some people, I guess, can be comfortable in misery. After all, happiness does tend to attract others' envy, whereas misery is less "provocative" to others!
Note: Is feeling miserable the same as feeling unhappy? I think misery and unhappiness are not the same thing, but that only my opinion .... I think that misery is a few steps above unhappiness! And a few below happiness! But then conformity is also a few steps below happiness, and some people, I guess, can be comfortable in misery. After all, happiness does tend to attract others' envy, whereas misery is less "provocative" to others!
Originally written: 2007
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