Management and HRM: Chains, links and what's wrong with biz/work/econ systemics today!

Rough day at the dentist and then electric fuse blew when I returned to the flat where staying temp and not feeling at home in. What a day! But the building owners' rep energised her wits and local connections when I called her, so the fuse that was busted, the one at the basement, not the flat, was fixed very quickly!

She's a master of her work. Gotta love that!

Which brings me to the point of this post:

People who master the work they do in diverse and somewhat complete ways make life for all of us better! Kudos! She has been doing this work for years but I know many who do a job for many years yet still too "casually". They make our lives worse off, I propose.

People have to try to master the work they do out of respect for themselves, their job & the people involved. No room for zombies in management and workplaces today.

What I am saying is that no job is w/o value when the person who does it respects himself, the job, the clients and all ppl involved in general. No job!

And that is where work/econ systemics are failing today imho. The rating of jobs tends to devalue many and systems fail due to 5 cent screws or low pay and what is worse, low valued/rated jobs, economically and societally, ie jobs that thus attract people who, alas, do their job as if they are "zombies"! Or to put it differently, they are simply there (and just that). They are the real "bureaucrats" of not only the public but also the private sector? Their personal fault? Maybe to some extent, but also the management's, the "HR's", and systemic faults, I argue. And these are the ones where priority must be placed, to improve things!

So even jobs that are rated low are valuable if one realises that chain is a strong as its weakest link! 1 has to look at marginal benefit/cost. When one does that, one realises that no job is of low value to the "system" if the system is to work.

Should all economists live in Greece of 2012?

My first two university degrees were focused on decision sciences as applied to transport(ation) systems: traffic, public transportation, trains, corporate logistics and of course, at least in my case, airports and airlines. I have not really practiced the trade, except for policy analysis of EU transport policy. I used to say and I believed it that any transportation analyst/planner should spend some time working as a taxi driver. I have always been inspired by international (long haul) tracking as well. Maybe I should have practiced one of these two professions anyway. Maybe.

But my point, by some analogy, is that any economist should spent significant time living the life of "people in the streets" of economies such as the Greek economy in 2012 (the econ stats of which are, they say, comparable to the ones in the US during the great crash 80 years ago). How long for? I would say at least 4 months, maybe 6. Maybe even a year.

NP Live Blog - November 6: Omabaland

To follow the flow, start from the bottom and read up:

Afternoon:

Obama-Romney:
What happens if there is a tie? Extra time or penalties?
Nothing to fear but Romney being President.
America will come "roaring back"? With a Chinese engine?


Morning: EU: The euro's credibility was built on an in-credible inflation minimization dogma that pushed the euro skyhigh. Hence the resulting vertigo.

Governing Dynamics: Capital is vagabond and homeless, so are companies, services and products. Can humans do it, though?

Governing Dynamics - Competitiveness: Only the homeless will survive?

Systemics and Dynamics Live NP Blog, October 31, 2012

Read bottom up to follow the flow:

Evening:

Euro crisis/Troika:
I thought memorandums were supposed to be brief, not as brief as executive summaries, but brief.

There seem to be 2 divergent views re the effect of Sandy on US economy: a) disruption of the recovery b) growth stimulus effect by money spend on the damages, multiplied by a greater than 1.0 factor. As per electoral effects, some think it may prove beneficial for Obama and Dems if seems presidential in his dealing with Sandy effects is deemed effective. Or could backfire. Will it also restore some faith of people in "government" and make collective esprit (eg health care) more popular. Guess we shall see.

Early morning:

EU/Euro/econ/fin crises:
Many admire the Iceland "model" of dealing with it. But they should recall it has a population of 320,000, a total area of 103,000 km2 out there in the Atlantic and a volcano!

More philosophical:
The problem with parents raising their kids with prince/princess aka noble values is that unless they also give them a Principauté, they are in for a rough ride in the "streets" of life.

Philosophical:
Hard times for "princes" and "princesses" (not the real ones, the other ones). Also hard for vagabonds, though. Unless in warmer climates.

Jobs/Career:
For decades now, searching for a job had become a job. In recent years, it has become a career.

Systemics and Dynamics Live NP Blog, October 30, 2012

Read from the bottom up to follow the flow:

USA:
Time for allegiance between people > Obama to the Rescue | The Big Dog Barks | No Time for Politics? http://t.co/bZw1okwP Nature is showing who is the real boss, and should make lots of people think about human-to-human allegiance and the role of  government in the US. May thus help the Dems + Obama

Greece:
Had the Greek gov't in the 1980s established a real unemployment benefits system, like other EU, maybe Greece would be different today.

Econ:
No kidding! RT @ForexLive: Merkel/Lagarde: Global Economic Recovery Remains Uncertain http://t.co/B3yRytd6 Oct 30, 2012

Info, what info?
What unrest(s) in ATH/GRE? Most if not all events have taken place on/near 1 square. Intern media have made it seem wider.
 
Roesler/FDP:
Roesler "strikes" again re Greece, but will this campaign save his FDP "Empire" in next GER elections? #EuroWars #EmpireStrikesBack

Greece:
Now all Greece needs is a Tea Party. #stoicgeek
Was it a 2-way call? Mobile or landline? Roaming fees? Smartphone or not?

Merkel:
She is a politician too, But that is why she gave GR such a hard time, to make sure, she thought, no one else would ask 4 for same. So she thought,

Banking Union:
The EU or Euro or Euro+ shouldn't be banking on banking union as a facility towards political union. The road is different, political/civil

Labour Market (EU27):
Call me again when the #EU gets a labour market, instead of 27. By that time, there will be no labour, only robots and stepford workers.
For labour market reforms to have a raison-d-'etre, there has to be a labour market, dear Troika! #EU\

News vs Opinion:
Who cares what someone said about anything? That's not news, that's opinions. Cool but not real news, is it?
Sandy left death and damages, some member wants to leave EU, EU squabbles, GR is complicated, etc etc. The news? Oh c'mon, you know the news (EU, UK, US, etc). Same old, same old.

EU27:
If the 27 cannot agree on EU budget, why not make it a federal one with 26, 20, 17 or 10? Anyway, not the budget but the policies that count

Caprica:
NYSE re-opening tomorrow! Sure, finance does not need humans anymore! #Caprica #Sandy Oct 30, 2012

Troika/Greece:
I don't care what Troika says, the Greek competitiveness-growth-employment model has to be based on free lancers, and exporting micros+SMEs
For whom are the labor market reforms many in GR oppose??? Most of the "private sector" was always free lancers and even more so today!


EU Regional Policy:
EU funds diverted the attention of Objective 1 (PIIGS) from EU policies and effects. PIIGS would have been, I know it's a heretic view, better off w/o them

EU?
Let's face it. EEC/EU has not really been a union, more of a FRA-GER-UK thing with associate members the rest
Maybe EU better off w/o GER, FRA, UK, tho. A more real union.

EU and PIGS as family:
Some would even say a family is not real unless there are internal fights. Look at ancient Greeks! lol Oct 30, 2012
Greeks fight each other all the time they r still a family.The best of families do. But they unite when needed
3//3 Or Germans., Dutch, Finns, Slovaks, Austrians et al can move to the PIGS now and enjoy real life! #MoveToTheMed4RealLife
2/3 Of course they can wait 50-100 yrs, global warming will turn Euro core etc into PIGS and PIGS into Sahara
1/3 The truth is that many other EUROpeans envy the PIGS cos of their sun, sea, sand, zest, instead of rain, cold, esp Humidity.
 EUROpeans want(ed) a stable currency but not the extra hard EURO-DM it turned out to be (at 1.4, 1.5 times USD etc) Oct 30, 2012

About the UK:
It's complicated: Everything is simple. So simple that it's complicated.

Not quite. "Other" economies had been spoiled by Eurozone's impors from them. RT @MStarDirect: Eurozone's troubles hurting other economies, chiefly E. Europe & Latin America. Latin America also feeling pinch fr ...

My take on Greece:
My main "take" on Greece is that no one's take, including mine, is accurate. That's Greece. Un-takeable. That's my main take on Greece.

Systemics and Dynamics Live NP Blog, October 29, 2012

Please read from the bottom up to follow the flow:

Schauble says EU needs the UK at Oxford:
Or Schauble simply playing "good cop" on the UK to Merkel's "bad cop" on the UK? The reverse roles compared to Greece, that is! lol
Maybe Schauble's call on the UK to stay in EU = sign EU getting unstuck between German exceptionalism and UK Euroscepticism?
So Schauble is playing "bad cop" on Greece and "good cop" on the UK? lol Oct 29, 2012
In reference to Schauble's EU call to the UK today, read my 2005 analysis: Britain and the heart of Europe http://t.co/P4jge3ty
Re UK in Eu read "The EU and the UK in a prisoner's dilemma!" in my: How many countries committed "economic suicide" http://t.co/5ycd7VxB
Or a desperate call for help on how to deal with a feasibly emerging ESP+ITA plus FRA (?) "alliance" in EU/Euro matters? #SchaubleNeedsUK
An admission EU doesnt speak Cauder's German? RT @ReutersWorld Germany's Schaeuble tells skeptical UK "EU needs you" http://t.co/AuqM74tq
Seems to me GER needs UK to debate FRA ideas RT @ReutersWorld: Germany's Schaeuble tells skeptical UK "EU needs you" http://t.co/AuqM74tq

Italy and EU:
When Italy became a country in the 1870s, the North imposed its laws + policies on the South. The effects linger. Lessons for EU - Eurozone?

Capitalism:
Matthew 19:24 and related passages directly contradict Calvinist predeternination. Imho.

On direct vs rep democracy:
So you think the concept of elected reps of the ppl and civil soc orgs with time and staff to KNOW the draft laws can be replaced? By what?
U think direct democracy, IRL or on the Net, is easy? Was it not for slaves work, u think Ancient Athenians wld have enuff time 4 politics?

Greece:
My main "take" on Greece is that no one's take, including mine, is accurate. That's Greece. Un-takeable. That's my main take on Greece.

Centrism:
When will the main parties in the US, UK, etc converge to the center in ideas + policies and compete in their ability to implement them?

On humanity in 2012:
The main disease that is turning so many of us into real zombies is greed. Oct 29, 2012
Does it take Natural disasters or will it take a comet from outer space threat for ppl to realise we all humans and shld stick together?

Why so difficult?
Why is it so difficult for so many to realise the difference between speculative and entrepreneurial risk? Even Sarkozy did!
People in at least The West know the ratrace is ravaging them. Instead of calling it off they want everyone in to suffer like they do? Why
Why is it so difficult for so many Europeans to realise that austerity and crash of GDP does not foster growth?
Why is it so difficult for so many American voters to realise the need for a public option in health insurance?
Why so difficult for many to realise a balance of individualism + collectivism, instead of 1 of the 2, is best? Not simplistic enuff 4 them?
It's ideologies tht focus on the individual or collective instead of balance of the 2 that unbalance the world
I guess Nature is reminding American voters who's the real boss and why allegiance between humans a good thing! Will they get the msg? And vote for the Dems?

Greece:
What is the worse that can happen Nov 16?

Mantra:
Rationalize, Simplify, Economize. A good mantra for 2012?

Sandy:
Who names storms and hurricanes? After ex-GFs? For revenge?

Merkel:
Merkel has been conducting Ein Experiment on 330 million. She leads the way. But remember Das Experiment movie? Did she ever watch it? Oct 29, 2012

Pop Cult:
Walking Nationless: A new TV series coming soon to a European TV station near you! 500,000,000 wandering aimlessly.
Walking Jobless. A horror drama series coming soon! Oh my, the jobless disease that taken over their minds! #media

Centrism:
I am a geek and my audience is people and decision makers (biz, pol) of moderate but progressive/innovative mentality in Europe. US, world.

Libertarianism:
Other than than, no one really bothers me, even libertarians or nationalist or anti-EUers. as long as they are not in my T/L.
Libertarianism is as unrealistic as communism. Only works when one alone on an island. Liberal Democrat: is another thing.
In short: Rand is as irrelevant as Marx. Had enough of libertarians when I ran with a libdem (I thought) party in Euro-1999.

US of E:
My support for a US of Europe is not ideological, it is practical (and constructively critical). Why? I lived in a US (of A) for 5.5 yrs! Oct 29, 2012

EU and the SMEs:
A real EU single market would have led to pan-EU niche markets for SMEs. But not a real single mkt yet, is it? #Marketing

PIGS and EU Animal Farm:
Are we on the verge of experiencing a rise of the PIGS (+FRA) in EU/Euro politics/decision making? Just askin. Reading signs?

Mark his words or not?
Rajoy: Spain, Italy Back Greece Remaining In Euro "one down will be all down.

Systemics:
The biggest "fights" people have are not with other ppl but group-think as well as systemics and dynamics. Much harder than person-on-person. And karate won't do.

From USSR to the EU to ....:
From good bye Lenin to good bye Merkel?

EU:
Athens in the Delos Allaince, Germany in the Eurozone or EU. Compare and contrast!

Memories:
Memories were meant to fade for a reason (from one of my poems)

Capitalism: My definition

Capitalism is the system where people make money out of money, by lending or investing it and where te most crucial resource for starting and operating a business is financial (monetary) capital.

The transition from manufacturing and other industry to services as well as intellectual (largely non-tangible, non-material) products was supposed to gradually decrease the importance of financial capital in starting and operating a business (services or intellectual products such as music, books/ideas etc) and increase the importance of labour-human capital and the grey matter.

For many reasons, this has not happened. I have and will continue to tweet and blog on the reasons (eg here). In this post I want to emphasize that the extra-time that Capitalism as I defined it has got has produced some  really weird dynamics. Is the strategic option for the US and the EU to save and even regain manufacturing from Japan, China et al, or to learn how to live in a post-industrial era (at least for the "West")?

Agoromania?

Agoromania: So ir does not matter how well a company or economy performs per se, but only (how ell) compared to (market or analysts' expectations?

O tempora!

(Agoromania, part of Agorocracy)

Never mind Social Media and Finance. The value of Strategy and Philosophy in 2012.

Philosophy talks about enlightenment and wisdom.

Strategy talks, in effect, on awareness of the external (environment) and the internal (to the company).

Know thyself and understand the word. Then you are in sync with the universe and at peace.

In the era of social media (monetization, SEO, likes, friending, etc) and finance (CDSs, etc), it is the real economy that still the real economy. Of course the real economy pf 2012 cannot rely on construction (see problems with real estate bubbles in the US, Ireland, Spain) or traditional manufacturing.

But, my point, in this note is, that Strategy and Philosophy, albeit not buzz words of the times, are crucial tools in surviving and prospering in these times, or at least, being "happy" or content (for persons and for organisations, including corporations).

PS. The above does not mean that Finance and Social Media are or should be unimportant. Simply puts them in the right perspective and speaks out on the value of Strategy and of Philosophy in biz, politics and life in general,

The return to reality

The return to reality passes through the real economy.
That applies to the EU and to the US.

Is Ordoliberalism the key to understanding a) the German or b) the Merkel way in Euro-economics

A very interesting article by Ulrike Guérot and Sebastian Dullien, "Why Berlin is fixed on a German solution to the eurozone crisis', in The Guardian on March 2.

The authors refer to Ordoliberalism and inter alia argue that: "..Crucially, its importance in German thought also suggests that a change in government in the next general election in 2013 is unlikely to change Berlin's approach to the big issues" and "These central tenets that lay out how to run an economy are largely an article of faith across Germany. Even the Greens have strong support for ordoliberalism".

To be honest, I had never heard of the term and I was and still am one of the critics of the ECB inflation policy in much of the 2000s that led to a Euro worth 1.3, 1.4 or even 1.5 USD and suffocating, IMHO, a large part the Eurozone's firms while benefiting greatly Eurozone imports from China, USA, even UK. And I do blame a German obsession, driven by Weimar Inflation traumas as well as JC Trichet's inflation minimisation philosophy.

I am also not a fan of the independence of central banks for reaaons that, it seems run 180 contrary to the Ordoliberalist philosophy (see below).

But I have also argued that the ideology that drives economic thinking in the Eurozone if not the whole EU nowadays has its foundations on a neo-conservative philosophy/ideology that is not German but shared by many of the current conservative governments in the EU/EZ, especially but not limited by any means to the Dutch one. In other words, that the problem behind Euro-austerity mania is not Germany per se, but German, Dutch and other economic neocons. And that Max Weber's "The Protestant Ethic and the Spirit of Capitalism" book (see a Wikipedia article on the book) is quite relevant to this austerity - neocon thinking.

In their Guardian article, Ulrike Guérot and Sebastian Dullien, in effect argue that there is a German way of thinking, Ordoliberalism, that drives German Euro-policy inter alia, and that it is a German not only a Merkel or CDU/CSU-FDP only philosophy.

I need to find out a lot more about this Ordoliberalism before I can comment on that.

As the Wikipedia article on Ordoliberalism suggests:

a) "Ordoliberalism is a German variant of neoliberalism[1] that emphasises the need for the state to ensure that the free market produces results close to its theoretical potential"

b) "Ordoliberal ideals (with modifications) drove the creation of the post-World War II German social market economy and its attendant Wirtschaftswunder"

but that:

c) "Since the 1960s ordoliberal influence on economics and jurisprudence has significantly diminished"

So are there fans of Ordoliberalism in Germany in 2012?

In his article "The eurozone will pay a high price for Germany's economic narcissism" in the Guardian (Jan 6, 2012) Hans Kundnahi suggests that:

"Merkel's economic advisers are deeply influenced by ordoliberal ideas – particularly on the role of the European Central Bank. To them, the role of a central bank is above all to maintain price stability – and thus promote growth only indirectly – rather than intervening to expand the money supply as the Federal Reserve and the Bank of England have done in the past few years.


Thus the former ECB chief economist Jürgen Stark – who called Eucken's book Principles of Economic Policy "a constant source of inspiration throughout my career" – resigned last September after it purchased Italian and Spanish government bonds. Bundesbank president Axel Weber quit last February for similar reasons. His successor, Jens Weidmann – formerly an adviser to Merkel – is equally opposed to the ECB's bond purchase programme."

So it does seem that OB is a dominant philosophy in the CB and Merkel camp today.

But is it (more widely) a German philosophy (affecting the whole country/political parties/Society, eg the Greens or SPD)? That is IMO the key question.

If indeed according to Stephen Padgett: "A central tenet of ordo-liberalism is a clearly defined division" of economic policy between the agents 1) monetary policy (the central bank) 2) fiscal policy (the government) and 3) macroeconomic policy (the social partners - employers and trade unions), and while I am in favour of collective bargaining for wages (yet it should be noted that Germany has no national horizontal minimum wage (unlike the USA and many EU member states, set either by government or the national social partners (Greece, NL)), only sectoral and other levels of collective bargaining), I can see a very wide rift between my POV and that of Ordo-liberalism's. A rift may actuially be an understatement, an "ocean" is more like it.

Why? Because I am of the opinion that economic policy must be comprehensive and thus formulated by a single source, ie the government. Otherwise, the costs of non or bad co-ordination between fiscal, monetary and macro-economic policies can be very high (see what is happening in Europe today). At least the US and UK central banks seem to be more "willing" to coordinate their monetary policies with government economic policy and that is better than nothing. Yet I still do not see the need for a central bank that is more than a mere department of the Ministry of Finance/Economy.

By trying to be a "restrained liberalism" as Hayek called Ordoliberalism, Ordoliberalism may have actually managed to become a model that is worse not only compared to middle of the road economic thinking but liberalism (libertarianism) as well! Worse than libertarianism or market anarchy? Is that possible? Well, there is good evidence it is!

I do see one positive element in Ordoliberalism: "The concern is that, if the state does not take active measures to foster competition, firms with monopoly (or oligopoly) power will emerge, which will not only subvert the advantages offered by the market economy, but also possibly undermine good government, since strong economic power can be transformed into political power". Because there is much more work to be done in the EU and Eurozone to make sure that competition works well and that there are not restrictive practices in the EU Single Market.

But the big questions, crucial for the future of the Eurozone and the EU, are: Is French, Spanish, Irish, Italian, Slovak et al thinking potentially compatible with Ordoliberalism? Can common ground be found? 


Or, alternatively, are there enough Ordoliberals in the rest of the Eurozone other than in Germany?


Is Ordoliberalism indeed going to be a driving or an infleuntial ideology in eg an SPD-Greens government coalition after the 2013 elections?


Much food for thought for those who care about the future of Europe.

PS. If Diogenes of Sinope was alive today, he would go live and critique the dominant way of thinking in Berlin, it seems (rather than NYC or LA or DC or London or Paris or Brussels). And he would have quite a challenge. Can one imagine a dialogue between Diogenes and Angela Merkel (by analogy to the one between Diogenes and Alexander the Great)?

Dynamics: Nothing to fear

A friend sent me a "Merry Crisis and a Happy New Fear!" season's greeting!

The more we believe that a crisis exists the bigger the crisis becomes. That's the nature of social systemics & economics and finance are social sciences!

We do indeed have nothing to fear but fear itself in these crisis dynamics and aura. They are counting on our fear, they are promoting it, they are amplifying it, to benefit their goals.

Can Europlus become Germany times 5 in the global economic arena?

On the post Dec 8 Europlius:

1) A much more spendthrift Europlus would mean less consumer spending too, ie a much stronger exports orientation for the Europlus

2) In other words, turning the Europlus into a lean and mean global exports "machine".

3) That could mean a much more aggressive trade policy for the Europlus with its trade partners (USA China, other BRICs etc).

4) Including less tolerance for hidden and other protectionist barriers by others esp in the G20.

5) So the US admin which already "accuses" Germany of exporting too much & consuming (& thus importing) too little, is probably having a fit!

Systemics: Time for major re-thinking (Eurozone. EU, world)

If 300-350 bn Euro of debt cause the Eurozone, EU and world economic systems the problems we have seen, then these systems are really flawed.

In other words, the "Greek crisis" exposes how flawed Euro, EU & world (inclusing the US) systemics (economic-financial, business, political/policy, social, etc) are!

Major re-design needed.

Plutocrats?

I first wrote these thoughts some 7 to 8 years ago, to show the complex and often oxymoronic nature of the "systemics" that exist in the world today. I kept no copy so this is a reproduction from memory. It is more relevant or if you prefer "current" today, in 2011, than it was in 2003/04.

1) A worker is laid off.

2) A TV viewer complains about the quality of content.

They both blame the "system" or various other alleged culprits.

Yet here's the hitch:

1) The worker has been laid off because his/her employer is under pressure by the financial markets - analysts - financial managers to perform better, by cutting costs. The worker has saved or invested X USD or Euros or Pounds etc either directly, via a bank deposit, or a portfolio or money market or other instrument, maybe an IRA (US or similar instrument) or indirectly, via a pension fund, private, semi-private or state operated, in shares or bonds including those of his/her employer. He/she may be aware of that or not.

So in effect, he/she loses his/her job because of the pressure the managers of his money put on his/her employer to perform better and thus give him/her the max ROI possible!

Of course the marginal gain in ROI from the loss of the job is oprobably much smaller than the loss of salary income.

So, in 2011, when we talk of the plutocrats or "the capitalists", do we really know who we are referring to? Do we forget that most investment, money etc managers compete with each other to attract and maintain the "business" of this worker as saver/investor, directly or indirectly? How many investors, be they in the 1% or 99%, investors of 1000 or 1000000 USD or Euros etc choose Socially Responsible Investments or managers who invest their money in such?

2) The viewer happens to be a business owner. His/her company advertises on TV and/or radio and.or new media and/or print. In their effort to attract the widest audience possible and offer his/her company the best return on their ad spend, many/most media put out lower "quality" content than they otherwise would, thus prompting the reaction of the viewer. Little does he/she know that he/she is partly the culprit of the dynamics that lead to the content he/she does not like!

Complicated times. Not suitable for simple models of causality!

So who have the power? The money-crats or the managers of other people's money? Or everyone and no one? Is it a runaway train?

Food for thought.

Private and Public Sector: To each their own

As I have argued before, (see eg August 14, 2011 post: EU & USA: The right policies can come from the center) our times call for a system that provides the basics to each human and leaves them free to pursue or not the rest.

As I wrote in said post "Most political parties and political/policy platforms to the right and left of the center miss the concept that some things are better done by the market, some are better done by the public sector (aka the state). Each has activities where it is stronger than the other. Neither the (financial and other) markets nor the state should be an object of political or philosophical worship!"

Eg social security including healthcare insurance and healthcare itself are better provided by not for profit state owned or run systems (aka the European Social Model).

The current crisis in Europe and the US does not mean that European cannot support its Social Model. It means that not only social security but banking as well (except maybe for investment banking) are better run without a profit making goal by the state. If the state is to guaranteee all or most deposits, which it should, then why not own/run the banks too?

As I proposed:

"The center I am referring to recognises both:
a) the need to secure peoples' basic needs and
b) to give people more freedom in pursuing wants and dreams

in their work/economic or social or other aspects of their lives"

That is the basis for policy making in 2011. For the 99%. The private for profit sector is better at doing many many things. But not those that constitute basic needs such as healthcare and banking/savings keeping.

World (econ/trade) Cup news and dynamics!

""We are in trade war. But today we’re fighting back,” said Democratic Senator Sherrod Brown" after the US Senate passed a "China currency manipulation" bill (See "Senate passes China currency manipulation bill" in The Raw Story, October 11, 2011).

1) "War" is a heavy/loaded word, that I would not use, but Senator Brown is right in that globalisation has turned into a fierce economic/trade World Cup instead of a cooperation "game" of nations. So what was billed as a world championship primarily between multinational corporations (and "local"/national champions (companies)) has gained a second level, the economic competition (World Cup) between countries. With exports (goods and increasingly services), investment, etc as its tools (instead of eg a ball, see football). Countries are ranked by various sources (including the WEF's Global Competitiveness Report, the rating agencies, etc). Based on GNP/GDP, trade or CA balances, etc. The genre of the game is mostly competitive, and mostly fierce, not cooperative.

After the 2008 US subprime driven crisis, some spoke of "over-dependency on exports". Others spoke of "over-dependency on the financial industry" (eg of the UK/London, by a now former German Minister). An equivalent to the US over-dependency on oil that even GW Bush Jr. spoke of?

In more recent months, the US has accused Germany of exporting too much and consuming tooo little! We are also reminded that many economists especially of past times have argued that trade is supposed to be in near balance and that excessive trade surpluses are as damaging to the world economic systemics as trade deficits are.http://www.blogger.com/img/blank.gif

Some have even argued that "good" domestic consumers are a precious asset for a country (eg the US, consumption is 2/3 of the economy). Of course it helps when the market is big enough (eg the US 300 million one) and realy internal and single (unlike the EU not that single after all Single Market and the Eurozone (330 million ie larger than the US in theory, but not as internal as the US in practice). See also my August 29, 2011 post: "Show me your consumers and then I will show you mine!"

2) Back to the bill that just passed in the US Senate, it is not active yet anyway. Merely passed in Senate. Not the GOP majority House of Reps, at least not yet. Normally pro-free trade USA (Bush even tried to create a Free Trade Area for the whole Americas (North, Central and South in Mar del Plata in mid-2000s) but did not inspire most other Americas countries, that are nevertheless into things like Mercosur and the evolving UNASUR, while NAFTA is not too big a success according to all 3 members, and the Democrats in the House and Senate had managed to stall the adoption of bilateral agreements that Bush had concluded) But with 2012 so close, will GOP stand on its pro "free trade" principles or take into account the electoral climate too? By the way, as far as I know, Obama wa never given "fast track" powers like the ones the Democrats led House and Senate had given Bush to negotiate the now shifted towards a "lite" version WTO Doha Round of trade talks.

And while WTO exists with its 150+ members, internationa trade is still not free (only more free than it was 20 or 30 years ago) and according to many studies that there too many "hidden"/covert barriers/protectionist defenses employed by countries (eg many G20 ones) that otherwise partake in the G20 and others' public rhetoric pro-free trade!

4) I have been pondering (and blogging) as per how long before USA and/or EU realise that for them WTO membership has more restrictions than opportunities (& that they can be better served via bilateral agreements between countries, not even free trade areas)?

5) I am not even sure how compatible the US "China currency manipulation" bill is with WTO rules! Could US measures against China activated via this bill lead to China complaint to the WTO that currency manipulation is not covered by WTO rules (and thus not forbidden) and that thus the US measures justify WTO approved counter-measures by China? Not an expert, but wondering.

6) Of course, nowadays, there are only 2 economic super-powers in the world today: China and USA. Russia could be added as a +1 (in a G2+1 instead of G7+1 configuration). The U is not an world economic superpower, unless it unites politically. And the UK, France and Italy have long lost real "G" status (eg G7).

What about Germany, the ex-No1 exporter in the world (now it is China)? Well, Germany is economic/trade champion only in a EU league, not the world league, since most of its exports stay in the EU! Plus Germany (unlike USA, China, and potentially India and Russia) has too small of an internal market to "survive" bumps. That is why it needs EU/Euro.

7) Daring to be different. Not sure how Russia's plans to be a world power via oil and natura gas are working out (calls for a return to the USSR's military superpower status would suggest that the oil and natural gas strategies are not working too well), but Russia is clever in that it puts extra criteria for foreign state (vs private) investments in Russia. And no WTO membership (eve if it is aid to be vetoed by Georgia). Why? Because while USA and Germany had to offer people rebates as a stimulus for their car industries but to be consistent with WTO rules they had to make the rebates available to buyers of made in WTO inports too, Russia, not being a member of WTO merely hiked the tarrifs of car imports!

To be continued in a market near you and around the world!

Competition, pricing, inflation, interest rates and the EU SIngle Market

In business school I was taught that when a company is thinking of a new product or service, it must estimate costs, then research what the market is willing to pay, if larger, price at max. But many companies use a costs + % profit expectation = price system.

In Economics I learned that prices go up when companies see more demand and decide easier to raise price than expand capacity. Of course, in Services expanding capacity is ceteris paribus and in theory easier/cheaper than in Manufacturing.

In practice market structure (and enforcement or lack thereof, of competition law) plays key role in pricing decisions and in inflation. I suspect that is one of the reasons the Euro interest rate set by ECB is 1.5% in order to curb inflation compared eg to USA (0-0.25%): Less competitive markets than eg the US ones. That merely what I suspect. . As well as more regulations that tie the hands of business to adjust to the ups and downs. And of course a very imperfect 19 year old EU single market!

I even recall some analyses ib the last 2-3 years that said that EU single market works better outside the Eurozone than inside! Makes one wonder!

Cassandran Economy

They name storms. Why not name economic events too?

Cassandra (would be a good name for this economic crisis. So many prophecies

The appeal of economic developments

Seems to me there are a few thousand people in the world who care too much about (macro) economics and the rest 6.9bn do not give a ....!

As per all that finance jazz, even fewer!