» Economics Speak Victorian, Think Pagan Wed, 14 Nov 2012 22:05:02 +0000 en-US hourly 1 One of Forbes new billionaires: El Chapo Mon, 16 Mar 2009 07:28:43 +0000 Continue reading ]]> elchapo

Joaquin Guzman, “El Chapo,” head of Mexico’s Sinaloa cartel, has been recognized by Forbes as one of this years new billionaires.

El Chapo (Shorty) narrowly escaped an assassination attempt by a rival cartel in 1993. A few weeks later he was nabbed by officials in Guatemala and extradited to Mexico where he began a twenty year sentence for bribery and criminal association. In January of 2001, shortly before he was to be extradited to the US, he (bit of irony here) bribed prison guards and escaped via the prison laundry.

Crime has certainly paid for Shorty but I doubt he’s rubbing elbows with his fellow billionaires on some swank golf course. He’s got a $5 million DEA bounty on his head and has made Interpol’s short list. Forbes, last year, put him second behind Osama bin Laden on their top ten most wanted fugitives list. He’s reported to have undergone plastic surgery (sadly, not the deadly sort previous Mexican drug lords have suffered) to alter his appearance, changes cell phones on a daily basis and travels in a subterranean fashion via tunnels whenever possible.

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Chicken and Egg Fri, 08 Jun 2007 22:03:01 +0000 Does Africa get aid because it is poor or is it poor because it gets aid? A Kenyan economist speaking to Der Spiegel thinks the latter. Readers?

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Ask Yourself Fri, 19 Jan 2007 05:11:05 +0000 Continue reading ]]> The Economist has a great cover article on the current state of globalization, and the report is not good.

Since 2001 the pay of the typical worker in the United States has been stuck, with real wages growing less than half as fast as productivity. If you look back 20 years, the total pay of the typical top American manager has increased from roughly 40 times the average””?the level for four decades””?to 110 times the average now.

What is to be done about this poisonous mix? If globalisation depends upon voters who, as workers, no longer think they gain from it, how long before democracies start to put up barriers to trade? If all the riches go to the summit of society and that summit seems beyond everybody else’s reach, are the wealth-creators under threat?

If the winners are difficult to curb without doing damage to your economy, the losers are tough to help.

All you readers out there in your 10s, 20s, and 30s, whether you are preparing for a career or just starting one, you need to ask yourself: is it possible that someone, somewhere, in the near future could do my job cheaper than I’m doing it now? Am I doing something that can be automated?

As the global economy becomes more integrated, companies facing more international competition will look to cut costs. If you’re not in a secure job, think about how to get one.

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Stealing steel Fri, 08 Dec 2006 16:49:01 +0000 Continue reading ]]> From the Economist’s weekly newsletter on Tokyo:

Tokyo’s street furniture is falling prey to thieves. Mountains of pavement gratings, storm-drain covers and electrical cables are being moved from the capital along the bay to Yokohama, where ships are said to arrive from China to carry it away.

Yokohama police believe the crime spree is related to preparations for the 2008 Beijing Olympics, which have sent the prices of metals and alloys used in construction soaring. Chinese companies have learned how to convert waste alloys into stainless steel, creating an unforeseen demand for scrap. Japan’s metal street furniture is barely secured, owing to the country’s low levels of crime, so much of it has gone missing, particularly metal doors and aluminium fencing. Scrap dealers in Tokyo suspect stealing is at an all-time high because it is not the industry practice to ask questions over provenance. There are no authorities charged with monitoring the scrap trade.

Japan is a very safe country, and as such has been caught off-guard by various unseemly elements as globalization changes the world. The past decade has seen the country experience, and respond to, overseas crime syndicates, foreigners flouting the train ticket system, local business operations funding North Korean, and illegal drug-smuggling. Success in tackling these threats has been mixed. How will Japan stop the scrap metal thieves?

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Jihad Tax Mon, 20 Nov 2006 01:07:21 +0000 Continue reading ]]> I recently had the opportunity to attend a seminar on foreign investment in Libya, which has spent this year making great efforts to attract overseas investment in its oil fields. American, Japanese, and French countries are winning the largest number of concession agreements in recent bids, but there is much left to be explored. And investment in Libya has become simplified and more profitable due to the recent enactment of the new Investment Law, liberalizing regulations on stock ownership, wages, employee citizenship requirements, and reducing taxes (the top income rate has been dropped from 90% to 35%). But one item remains unchanged: the Jihad Tax, a flat 4% tax on all corporate profits and a 3% tax on high-wage individuals.

Just what is this so-called Jihad Tax? It was founded in the 1970s to aid the Palestinians in their struggle against Israel. More recently, the fund has been used to build Islamic universities and proselytize. The use of the proceeds today are unclear. The US-Libya Business Association, which has a clear interest in calming any worries over the tax, has stated: “It is unclear to USLO where the proceeds of this tax flow, but in light of Libyan policy, one can be reasonably certain this tax is not used to subsidize Muslim fundamentalist organizations.”

I suppose I’m confident that’s correct. (If a country wanted to use taxes on oil to finance terrorist organizations, they probably wouldn’t be so obvious as to call it the “Jihad Tax,” the very existence of which causes raises eyebrows among western investors.) But considering its use in the past to blow up Israelis, one has to wonder where the money is going.

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Canadian squeaky wheel politics Tue, 17 Oct 2006 20:46:42 +0000 Continue reading ]]> Ha ha! Lucien Bouchard, a former big whig separatist from the Parti Québécois, has stirred the “poutine”: by telling his fellow French Canadians that they don’t work hard enough. “He said”: “Quebec trails Ontario and the United States in economic terms, in part because its residents lack the same work ethic.”

Quebec labour leaders are — surprise! — enraged. Globe and Mail reports that “[t]hey said Quebeckers are willing workers but that they want fair wages and a balance between work and family life.” In other words they want what other French-speakers in the world get (ie. France’s 35h workweek etc). In the G&M “comments”: “equalization” is seen to be the source of this lack of productivity. Commenters blame Quebec’s “culture of entitlement” which rises from Federal Transfer payments, distributing “excess” wealth from rich provinces to poor. From a “2005 Economist report”: on Canada:

bq. The federal government spends more in Quebec (C$43.1 billion in 2003) than it collects from it in revenues (C$39.8 billion). Indeed, the feds collect more than they spend in only three provinces: Ontario (C$18.1 billion more), Alberta (C$7.7 billion) and British Columbia (C$1.4 billion).

Then of course there is Alberta’s energy boom. Windfall revenues from the oil sands also find their way to Montreal and Quebec City. And if the Prime Minister’s office depends on the support of Quebec, which translates into political attention in the form of federal contracts.

I applaud Bouchard for standing up to his own and calling for a change in Quebec working culture, but I don’t see this problem being solved without a bigger change in Canadian political culture.

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Defending against the Ignominy of Heathenism since 1857 Mon, 16 Oct 2006 01:19:15 +0000 Continue reading ]]> The motto “In God We Trust” was placed on United States coins largely because of the increased religious sentiment existing during and after the Civil War. Secretary of the Treasury Salmon P. Chase received many appeals from devout persons throughout the country, urging that the United States recognize the Deity on United States coins. To quote in part one such letter on the US Treasury web site:

Dear Sir: You are about to submit your annual report to the Congress respecting the affairs of the national finances.

One fact touching our currency has hitherto been seriously overlooked. I mean the recognition of the Almighty God in some form on our coins.

You are probably a Christian. What if our Republic were not shattered beyond reconstruction? Would not the antiquaries of succeeding centuries rightly reason from our past that we were a heathen nation? What I propose is that instead of the goddess of liberty we shall have next inside the 13 stars a ring inscribed with the words PERPETUAL UNION; within the ring the allseeing eye, crowned with a halo; beneath this eye the American flag, bearing in its field stars equal to the number of the States united; in the folds of the bars the words GOD, LIBERTY, LAW.

This would make a beautiful coin, to which no possible citizen could object. This would relieve us from the ignominy of heathenism. This would place us openly under the Divine protection we have personally claimed. From my hearth I have felt our national shame in disowning God as not the least of our present national disasters.

As I read this, it struck me that in many ways, religion in the United States is our version of a monarchy. By which I mean this: a constitutional monarchy is a form of government where the real power is held by the parliament, but the royal family remains as a symbol of the nation.

While politically defunct, monarchies have shown to have particular positive influence in trying times. I’m thinking specifically of the Nazi bombing of London during World War II, Hirohito during the surrender and reconstruction of Japan, and the calming presence of the Thai king in the recent coup.

What of countries without a monarchy? America, without a King during the Civil War, may have had an increased reliance on religion. A republic may find trying times easier to cope with if they have something to replace a monarch, whether it be ethnic bonds or religious strength. That may be one reason for America’s increased religiosity that exists even today. And I think we can see this in other developed nations without a royal family: Korea emphasizes its ethnic heritage perhaps more than any developed nation, while France focuses incessantly on its cultural heritage.

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Economic Determinism v.s. Human Nature Tue, 11 Jul 2006 04:13:17 +0000 Continue reading ]]> Norman Angell was a British Labour politician who wrote The Great Illusion in 1909. It was eerily prescient. Angell wrote that the then common belief that increased trade would end war was simply not the case. Human will always want to fight wars, either due to the mistaken belief that it will be profitable or because a nation will feel the need to fight for pride and honor. And not only was war not less likely, it was more dangerous than ever. The economies of the great powers were so intertwined that, no matter what the outcome of any war, both sides would lose. Big time.

This was correct a century ago and it is correct today. No developed nation today would gain anything by starting a war with another great power. China, Russia, Japan, India, America, the nations of Europe, and many other countries would be foolish to fight a war with another great power in the sense that it would not be profitable. Does that mean war won’t happen? Nonsense.

Yet everywhere I see people who seem to believe that human nature has been defeated, that human society is now so developed and rational that war is extinct. These people are everywhere, on all political fronts: from idealistic liberals to optimistic analysts. Some, particularly those in the libertarian crowd (who should know human nature), overestimate the importance of economics. Regarding the current row between Japan and China over territorial sovereignty, one libertarian commentator had this to say:

There’s no way Japan or China will risk the relationship they have with each other… It is inconceivable that either nation would allow this trade relationship to sour over some small islands (China calls them “rocks”) or over Taiwan ““ regardless of any agreements the United States may have with the government of Taiwan… The economic relationship between Japan and China will continue to grow. Japan needs Chinese goods; China needs Japanese technology, investment, and know-how. The histories of these two neighbors are so intertwined that they cannot be separated. Sure, as with all families, the siblings will sometimes fight and argue, but eventually they will stand together.

Sound familiar?

Statements such as these are buying into what Angell called The Great Illusion. Wars may not be profitable, but humans are hot-headed. We fight for honor and pride. The First and Second World Wars were all based on tragic miscalculation. And that risk exists today. And the scary realization that wars are not worth it, but states fight them anyway, should give us all pause to think.

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Independence Inc. Sun, 25 Jun 2006 18:30:27 +0000 Continue reading ]]> Not long ago, I discussed the idea of a coming wave of microstates. One of the objections of some to independence for small areas like Kosovo or Abkhazia not to mention huge obstacles, is a lack of qualified people to run a new government. Montenegro, for example, was largely independent from Serbia before declaring official independence. It already had a functioning bureaucracy. Yet, for some small areas, even already running unrecognized governments like South Ossetia in Georgia, that doesn’t always mean that they would have enough skilled and qualified people to run all branches of government and provide the necessary government services, especially considering all these potential new states are largely impoverished. Citizens don’t have reliable drinking water or electricity, much less education.

So what to do? First of all, let me note that there are a number of interesting options on the table for these various regions, most all of which don’t grant full independence. This post aims to discuss the situation for newly independent small states and to the extent that it’s transferable, also the implications for autonomous areas.

Since we aren’t talking about armed intervention and the UN isn’t a very realistic or efficient and effective answer, where does that leave us? In his recent book The Savage Wars of Peace, Max Boot writes about limited US intervention in the Dominican Republic. In 1903, a new Domican government entered office and stopped payment of foreign debt, some owed to Americans and most to Europeans. Teddy Roosevelt feared that like in other cases, the Europeans would resort to force and intervene in the island. The following is taken from page 137:

In order to preserve order and keep the Europeans out, the president agreed to assume a customs receivership. Under a treaty signed in 1905, a retired U.S. army colonel took over customs collection for the Dominican Republic. The agreement called for 55 percent of the revenues to be turned over to foreign bondholders, but because the American collectors were more honest than their predecessors, the Domican government actually received more money than ever before.

While all of the Caribbean could surely benefit from something similar today, it shows the big difference such a small program can make. Returning to newly emerging states who just as the Caribbean did and does, lack the people to efficiently, effectively and honestly run a government, who should one turn to? Why the private sector of course.

There has been much discussion about Private Military Contractors with regard to Iraq but if you’re a small emerging country and are looking to build institutions your options are the US, Europeans or the UN. While the US has bigger fish to fry at the moment, might we see companies offering government type services to countries? PMC’s would surely be useful building and running the new military. There are enough ex-government employees and highly skilled private sector people to run any nascent government.

Readers, could the private sector be used in future nation building exercises? When a lack of international support exists and/or a lack of domestic political will or willingness, why not call in the private sector?

NOTE: Don’t forget that Blackwater, for example, offered to intervene in Darfur.

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Fiscal Responsibility Or Hands Off? Sun, 11 Jun 2006 09:13:38 +0000 Continue reading ]]> In summer of 1989, Romanian dictator Nicolae CeauÅŸescu repaid Romania’s debt in full, and early. The ostensible reason was to make the country financially independent and free from the “economic imperiaism” of the West. At least part of the real reason was to give him a free hand to do as he wished domestically without outside pressure. It would also eliminate any leverage the West had over his economy and help ensure his regime’s survival. I was reminded of this, which Kaplan discussed in Balkan Ghosts, when I saw this:

Russia to repay $15bn debt early

Russia has struck a deal for early repayment of $15bn (£8bn) of debt owed to the West since Soviet times. The money is owed to members of the Paris Club, a grouping of 19 rich lending nations. The move will help Moscow save $6bn in interest payments that would otherwise have been due by the year 2020.

The payment, which is due to be completed by August, comes four months after Moscow repaid its debts to the International Monetary fund. In total, Russia owes the Paris Club $44bn (£24bn). This deal – the biggest debt redemption in the institution’s history – will cut that figure by about a third. Paris Club members include the UK, France, Germany, Japan, Russia and the US.

While there was a great deal of fuss made over the not-so-subtle takeoever of Yukos, keeeping Russia’s vast natural resources firmly under state control isn’t all that hard to understand from a Russian perspective. Russia’s biggest weapon today is its natural resources and mountains of cash from high oil prices. If it wants to reassert itself in geopolitics as a major player, Russia will need to control its own financial destiny.

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Speaking of Zimbabwe… Fri, 12 May 2006 14:44:11 +0000 Continue reading ]]> If Bolivia really wants to know what happens when you disposs landowners and chase out foreign investors…

Zimbabwe’s inflation surpasses 1,000 percent

Zimbabwe’s inflation rose above 1,000 percent in April, dramatizing the severity of an economic crisis that analysts say could trigger street protests against President Robert Mugabe’s government.

Zimbabwe, in its eighth year of recession, has the fastest shrinking economy of a country outside a war zone, according to the World Bank. Critics accuse Mugabe of running down the country with a series of controversial policies.

While Zimbabwe is now a pariah to the Western world, you may recall that Zimbabwe has found one loyal friend: China. The two countries are now buddy-buddy. Fat lot of good it’s doing the people of Harare. Bolivia (and Venezuela) should take note.

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Following the Zimbabwe Example Fri, 12 May 2006 01:17:28 +0000 Continue reading ]]> First, some personal news. I just got back to the US after four months in Japan, but I’ll be back to Tokyo in August. Ahh, the intrepid travels of your average 21st century Viceroy.

Next, the first headline I saw on google news upon getting into the country was that President Morales of Bolivia is making more trouble. Just a week after he unilaterally changed the oil and gas development contracts with foreign companies investing in Bolivia, he’s now moving on to target landowners.

Morales lines up land owners as next target

Evo Morales, the Bolivian president, on Thursday ruled out compensating foreign energy companies that face changes to their contracts as a result of a controversial nationalisation policy announced earlier this month. Speaking at a summit of Latin American and European leaders, the defiant leftwing president, accused foreign companies of pillaging his country for hundreds of years and warned that large landowners were the next target of his radical reform agenda.

“We’re not going to limit ourselves to hydrocarbon resources”Â?, Mr Morales told a packed news conference. “There is also huge land ownership, especially unproductive land, in our country.”Â?

Earlier this month, Mr Morales shocked foreign investors by sending in the army to gas fields to underline his move to nationalise the country’s energy industry. Companies have been given 180 days to renegotiate their contracts. Some energy companies, for the time being, have to pay royalties of 82 per cent to La Paz, rising from 50 per cent. Only a year ago, companies paid royalties of 18 per cent.

On Thursday, Mr Morales indicated that companies could receive compensation for physical assets taken by the state, but that they would not be indemnified for losing their concessions.

The irony of the anti-Washington rhetoric is that the companies suffering under the new regime are primarily European.

Mr Morales described foreign energy investors as “smugglers”Â? and argued they had broken Bolivian laws and paid no taxes on their profits. “We don’t have to talk, dialogue or negotiate when it comes to the policy of a sovereign state,”Â? he said.

Let’s see how you like it when they pull out of the country, stop investing in Bolivia, and foreign investment dries up leaving only subsistence agriculture.

He also pointed to a looming clash with the country’s judiciary who have been criticised by the leftwing government for failing to impose laws to protect national interests. “For us, the judiciary are the representatives of the colonial state, not the people,”Â? Mr Morales warned.

Silly courts and the “rule of law.” What does the president need with courts and judges when he can just take whatever he feels like?

Analysts said the president’s message was all the stronger for being delivered in Europe, where many of Bolivia’s biggest energy investors are based. Spain’s Repsol, Total of France and Britain’s BP and BG Group are among the largest foreign energy groups in the country, along with Petrobras of Brazil.

I’m glad to say that Mexican President Vicente Fox has called a spade and spade:

Mr Morales drew criticism on Thursday from Vicente Fox, the Mexican president, who highlighted the sharp differences among latin American leaders by describing nationalisation as a “terrible”Â? path. “I think that far from putting the economy in the hands of the state, you have to put it in a market with social responsibility”Â?, he said.

The bottom line: I stand by my original prediction. And with that, I’m off to catch some much-needed sleep.

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February 2006: “Morales has proven to be something of a pragmatist so far” Sun, 07 May 2006 07:28:52 +0000 Continue reading ]]> The Bolivarian Revolution came to Bolivia “in January,”: when I surmised this was “probably the start of a new era in Bolivia with no happy ending.” Most readers were more optimistic. Lirelou and Elambend agreed with the Economist, which suggested that President Morales’ rhetoric was all puff and he was an economic realist at heart. Gollios noted that Morales has the lessons of recent history, specifically Brazil’s “sane” leader President Lula provided a smart example. Dr. Alfred Russel Wallace had expectations for a JFK-style national interest.

Now, less than five months into the Morales administration, we’ve seen a near-total nationalization of gas and oil resources. Foreign companies have been reduced to the status of operators (losing their development and extraction rights under the PSA agreements). Officially, companies have 180 days to sign new deals or leave the country. In reality, the president ordered the Bolivian army to seize the gas fields with the order “protect them with your lives.”

Latin America is a weak point in the ComingAnarchy regional focus, so I’ll quote some other blogger analysis.

Agroblogger looks at the pitfalls of nationalization:

Despite the populist nature of the new Bolivian government and overwhelming public support for nationalization, it remains to be seen whether Bolivia can avoid the historical pitfalls that inevitably come with nationalization: lack of foreign investment, lack of technical expertise and heavy equipment, graft and poor management… For centuries urban Bolivians have lived off the exploitation of non-renewable mineral resources, each taking their small cut as mineral wealth flows through the fabric of the Bolivian economy. So prevalent has this parasitic attitude become that it is ingrained in the Bolivian mentality. Most people’s economic vision is limited to achieving some kind of comfortable position in a government bureaucracy.

The problem is this: non-renewable mineral wealth stifles the development of an innovative, entrepreneurial society. Instead, there emerges a society based on vast layers of government bureaucracy, cumbersome structures that become nearly impossible to dismantle once firmly entrenched. And yes, such systems are plagued with inefficiency, corruption, and mismanagement.

To be successful, Morales must confront these paradoxes with decisive precision. The massive increases in state revenues that are sure to follow nationalization must be used wisely to create a business environment favorable to the small business owner. More than anything, Bolivia lacks an institutional framework and a sociocultural atmosphere that levels an economic playing field rife with institutionalized inequity.

Remember the “sane” Lula? From Pacific Views:

Brazil and Argentina, were initially alarmed. However, in a meeting held Thursday between the leadership of those two countries, Bolivia and Venezuela, the article says that they moved past their starting concerns and “all agreed to get behind Bolivia and support it as it tried to correct the woes of neo-liberalism.” And that counts as unsettling the region because … help me out here?

The Economist’s initial sanguine take wasn’t incorrect. Morales’ initial cabinet choices suggested a more pragmatic approach. But when you spend that kind of political capital, you have to make it up somehow:

Morales’ key constituencies have been dismayed by his cabinet choices, so it was high time for him to start satisfying his base if he was ever going to. Oh, democracy.

Oh indeed.

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Eurasian Landbridge? African megacanals? Fri, 05 May 2006 07:24:38 +0000 Continue reading ]]> In a followup to my previous post on peculiar infrastructure projects, I’d like to also bring your attention to these grand schemese for infrastructure development on a truly global scale. The projects can be seen in greater detail at the Schiller Institute, which is apparently associated with Lyndon LaRouche’s gang. The site proposes breathtakingly ambitious development plans for irrigation canals, high speed rail and infrastructure corridors.

develop africa?

From tunnels and superhighways to canals and transcontinental rail, the plans are pretty ambitious. I’ve never taken anything from the LaRouche crowd seriously, but it’s at least worth look at this group’s alternative blueprint for action in shrinking the gap.

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“Graduate students do not learn supply and demand” Thu, 26 Jan 2006 02:59:51 +0000 Continue reading ]]> “The Ph.D. Glut Revisited” should be cause for sober reflection for all of you pursuing a PhD or planning to enroll in an advanced education program. To summarize:

The Ph.D. glut has existed since the fall of 1969. The number of entry-level full-time professorial positions has remained stagnant. Few new universities have been constructed. Legislatures have resisted additional funding.

This has led to a reduction of the number of tenure-level positions. Universities and community colleges have been able to staff their entry-level positions with inexpensive instructors.

Those few Ph.D.s who receive a full-time position at a university find they are paid much less than tenured members of the department. They are assigned the lower-division classes, which are large ““ sometimes 200 to 1,000 students. These mega-classes require lecturing skills that most professors do not possess. Those untenured faculty members who perform well in mega-classes are kept on until the day of reckoning: the decision to grant them tenure, usually eight years after they go on the payroll. They are usually not re-hired unless they have published narrowly focused articles in professional journals.

The assistant professor is now 35 years old or older. He has not made the cut. He is now relegated to the academic underworld: the community colleges, where a professor is lucky to get $15 an hour teaching worn-out adults trying to earn an A.A. degree.

This has been going on ever since the fall of 1969. It is great for community college administrators, who have a never-ending supply of optimistic Ph.D.-holding graduates of all but the top two-dozen universities, plus a never-ending supply of burned-out, terrified assistant professors from top universities who did not receive tenure.

Bright graduate students possess a pair of non-marketable skills: the ability to write term papers and the ability to take academic exams. They are also economic illiterates and incurably naïve. So, they become the trusting victims of the professorial class.

I told you law school wasn’t as bad as you thought!

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British Egypt and PNM Theory Part III Fri, 20 Jan 2006 21:25:33 +0000 Continue reading ]]> Part I | Part II

In Part II, we looked at what the British administration in Egypt achieved and promised to compare the aims of British policy in Egypt, their outcomes under occupation and after and analyze it in terms of PNM theory (connectivity and the 5 flows) and attempt to draw lessons from it for the US occupation of Iraq.

British Aims:

The British did not occupy Egypt for the same reasons it acquired many of its colonies. It’s reasons were:

1) Strategic location between England and India
2) British communication and transportation hub
3) The Suez Canal
4) Eypt’s huge foreign debt and governmental incompetence

British Achievements

The British quickly got the economy turned around, dramatically improved its efficiency and transparency and significantly reduced the rate of debt to revenue. They invested in public works and infrastructure like the Aswan Dam and railways. They fostered some industrialization which gave rise to a modern working class. Exports boomed, unemployment decreased, the population grew and the economy improved thanks to sound British financial policies.

So let’s look at the 5 flows and what the British accomplished. However, we must keep in mind that at that time period and during Globalization I, the importance and moreover the substance of the 5 flows were different.

People – Without modern mass transit, this flow was nowhere near as important in those days. During that era, the flow of from the Core to the Gap was the most important with the reverse being either slaves or indentured servants (both still important). British occupation did ensure the flow of Europeans to Egypt which was crucial. Railways were also quadrupled improving the internal flow of people.

Resources – Increased. At this time, resources like oil hadn’t attained its present importance and much of the world had yet to industrialize to the point of needing vast imports. However, the British did increase the available water through the Aswan dam which created 50% more land for agricultural use.They also raised exports and through the British occupation did increase goods from Britain to Egypt though I’m unable to measure how much.

Money – Increased. British occupation and the stability and security brought with it led to increased trade and lending only made possible by the British. Taxes were lowered and affordable credit was available to more Egyptians which helped foster economic growth.

Security – Increased. British occupation directly increased the flow of security from the Core to the Gap.

Ideas – Without mass communications, this flow was also not as important in those times. However, the proportion of the population attending schools also quadrupled.

Thus, in terms of how important (and technologically possible) the flows of that time were, Britain did increase the 5 flows overall. Yet:

Egyptian industrialization would have required protective tariffs that the British would not allow. Thus, although Egypt had a solid infrastructure, a sizeable local market, and an indigenous supply of capital, industrial development was stymied by a British trade policy that sought to protect the Egyptian market for British products and to maintain Britain’s near monopoly on Egyptian cotton.

Thus, despite the positive increases in Barnett’s flows, Britain did not modernize the country as much as it could have, a major impediment to future growth and ultimately to long term stability.

Politically, though the British administration of Egypt was far more successful than that of the Egyptians, they did not foster indigenous support for the parliamentary system. Of course, in all fairness, no one was doing that the time and it was not seen as a real priority. Colonization in those days, could be couched in terms of Christianity, Commerce and Civilization which of course focused mainly on economics, not politics.

Additionally, harsh treatment of the locals combined with the suppression of political dissent, whether youth groups, political parties or the outright overthrow of Kings all led to increased discontent ultimately paving the way for England’s exit. England of course was not interested in slowly weaning the Egyptians off their presence and pushing them towards being an independent democratic state. Had they slowly increased Egyptian participation and political power with the goal of eventual total Egyptian control, it seems likely they could have succeeded in what the US is now attempting to do in Iraq.

Lessons for the US:

  • The Iraqi government’s authority must have limits
  • Control of Iraq’s finances and military should remain under US control
  • Be willing to sack leaders who jeopardize long term goals
  • Rule of law must be firmly kept above all
  • Real economic reform is crucial to long term stability
  • Promise to leave often, but only leave long after it’s possible. Think Germany, Japan, South Korea
  • Invest significant money into postwar reconstruction
  • Forgiving a considerable portion of Iraq’s debts are crucial, at least what Saddam racked up.
  • International diplomacy (and interests) can’t be regarded in the long run

British Egypt and PNM Theory

According to Barnett’s criteria for the effectiveness of a military intervention, creating enough security to attract substantial FDI, the British occupation was successful. In terms of increasing the flows of globalization (relevant to that time), it also succeeded. However, as soon as the English finally left, the country succumbed to a coup in 1952 which has lasted to this day. Whether the British can be blamed for that remains open because they did not truly aim to create the a constitutional monarch that would last but rather one that they could manipulate, ultimately leading to the nationalist backlash which ruined the country and doomed it to one man rule.


In conclusion, there seems to be ample evidence that the British did more harm than good and very clear evidence that they did more for Egypt than the Egyptians could at the time. Yet, although they instituted drastic and successful financial reforms and reshaped the political system, they did not do so with the intention of creating a long term successful and independent state which is what was almost wholly responsible for the predictable nationalist backlash and coup.

While Victorian Imperialism and its “liberal empire” may be a good model for future action, less self-interest will be crucial to creating a system with real staying power. Additionally, international assistance not only through debt forgiveness but through aid and personnel (political as well as military) will be necessary and help to legitimize the occupation and lessen the chances of a nationalist uprising. However, no good examples of this have yet to arise. The fate of Bosnia, Kosovo and Afghanistan are all still up in the air. And as the lessons listed above show, we must not be afraid to speak victorian but think pagan.

NOTE: Of additional interest are Paddy Ashdown’s seven principles of peacemaking from a speech he gave in June 2003. The speech can be found here as a .pdf and here as .html

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How to make $148,000 without a college degree Thu, 19 Jan 2006 23:43:00 +0000 Continue reading ]]> The following was just forwarded to me by a fellow American living in Japan. Begin:

: : : : : : :

I’m American. My wife is Japanese. I had a lot of debt. I don’t have a college degree, but I had experience and looked for an IT job, and I found one. There are still plenty of jobs here, where I’m at. In fact, there are more jobs than you can shake a stick at. If you have a network or computer background (my former job was called a “tech controller in the Air Force)… like in installl or maintenance, and you are a quick learner.. most of us , I am pretty sure are quick learners… and you can get a security clearance… which, if your not a flaming loony, a dope dealer or don’t have a HUGE criminal record is possible, then you most likely qualify.

Here’s the deal: it’s in Iraq.

Yep. I went to Iraq. It’s not dangerous…relatively speaking. I sleep in a small trailer, on a well gaurded installation.I eat excellent food – that is free! We have lobster, steak and prime rib every week! I do almost nothing….seriously! I wait for an IDNX Promina 800 to break. Wow. It doesn’t. 12 hours and 470 dollars later, I go home.

I make 148,000 dollars a year. I’m into my 4th month. I bring home $9,144 dollars a month, and I only pay taxes on everything after 80,000. It’s about 25,000 in tax for me for a year.

SO…I make 123,000 dollars a year, after taxes.

SO…if you like money, think about it. Make the money, and then take a vacation in Japan. Maybe you’ll find something.

I am supporting my wife over in Japan…and I paid off 32,000 dollars in debt…and owe 7500 bucks more… and I’ll STILL have 17000 bucks in the bank on new years day. And I’ll still have 50 grand more coming after that! Plus the 23,000 bonus check at the end… which.. will be applied to pay my taxes.

Yes, it’s boring, sometimes you get mortared, sometimes you miss everything.. but sometimes, it’s nice to have savings.

I realise this post is long .. but take a look at this …

“¢ Hourly Rate: $25.17/base
“¢ Foreign Service Premium: 50% (1.5 times base i.e., $37.76 hour, paid for all hours
worked in forward deployed area)
“¢ Work Week: 60 hours
“¢ FALA: $30.00 per day
“¢ Sign-On-Bonus: $7,500.00 paid in two installments; $3750.00 with
first regular pay; $3750.00 after 9 months of employment; Successful completion of the terms and conditions of your Employment Agreement is required to prevent forfeiture of the Sign-On-Bonus.
“¢ Completion Bonus: $1000.00 per month, accrued. Paid at end of contract.
“¢ Vacation Travel: $6500.00 annually paid in two installments; $3250.00 paid at
six months of employment; $3250.00 paid at 12 months of
“¢ Vacation: 192 hours per year (accrued/7.385 per pay period).
“¢ Vacation Hours: Vacation hours will be paid at Base Rate.
“¢ Sick: 48 hours per contract year
“¢ Vacation In Lieu of Holidays: 96 hours per year, accrued @ 8 hours per month
“¢ Housing: Provided at no cost to employee
“¢ Meals: To be provided by the government while forward deployed
“¢ Shipping Allowance: Effective immediately, the baggage allowance is one 70 lb bag plus military-issued equipment received at CRC
“¢ Term of Employment: Minimum of one year on the TAC-SWA contract
“¢ Clearance: Secret

There’s a million places to become a military a search for them… My company is ITT systems. There’s also CACI, General Dynamics, KBR, SAIC, .etc. KBR pays 80K though….. they kind of suck in the pay department.

Just thought I’d share something with you fellows…who knows, maybe you can use the info…or pass it on. Maybe you can use it to have a better, debt free life with your Japanese sweetheart. I know I will. 11Years married baby! Rock On!


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British Egypt and PNM Theory Part II Thu, 19 Jan 2006 12:15:56 +0000 Continue reading ]]> In my previous post, I gave a quick background on PNM theory and the British occupation of Egypt from 1882 to 1956. I then posed the questions: Was British intervention successful? And if so, could it be a valuable template for future intervention as related to PNM theory. So let’s look at the British occupation of Egypt.

First, let’s concentrate on the British economic reform of Egypt which was one of the primary reasons for the occupation. Egypt was heavily in debt, and had even sold a controlling share of the Suez to the British only a few years beforehand. Since the Egyptian government was filled with “patronage,” known to the developed world as corruption, structural reform of the various ministries was rather difficult and the money raised by shares of the Suez only provided a short lease on life for the Egyptian government, a few years. The British and French, Egypt’s main creditors, instituted a “stewardship” sending representatives to Cairo to take control of various ministries, already partial-colonization so to say. As Egyptians protested against their loss of sovereignty, unhappiness grew and a revolt finally broke out. When violence was directed against the European population there, the final line had been crossed.Prime Minister Gladstone, archliberal that he was ordered an intervention, despite international outcry against it. The French as usual did not participate,cried foul and resorting to their usual tactic of doing nothing.

After a swift victory, with Egypt firmly in British hands, the British embarked on far reaching economic reforms, surprisingly similar to what the IMF would do if they worked in conjunction with the US or UK military. According to Niall Ferguson:

“Evelyn Baring, later Lord Cromer, ran Egypt’s finances much like a modern structural adjustment program. The results were fiscal triumph. When the British took over Egyptian finances, debt service was consuming two-thirds of all tax revenue. Indeed, crippling taxation and cuts in the army’s budget had been among the principal causes of Arabi’s nationalist coup. By 1885, however, a debt rescheduling agreement had been reached with the foreign bondholders that gave the Egyptian economy a two-year breathing space and a new internationally guaranteed loan of 9 million pounds. By 1892 the debt crisis was over, and in the subsequent two decades the ratio of debt revenue was halved, from 10:1 to 5:1.”

British fiscal reform and control of the country paved the way for more foreign lending thanks to the underlying British security guarantee. Nevertheless, those who benefited most from the occupation complained the loudest in public. Under British rule and thus sure not to default on its loans, Egypt could also borrow at half the previous interest rates it secured.

“New loans helped to finance substantial investments in the country’s infrastructure, notably the first Aswan Dam, built between 1902 and 1906, which stored summer floodwater and then released it, doubling or tripling the crops peasant farmers could produce. Between 1886 and 1953 the area under cultivation expanded by nearly half. The railway network grew in size by a factor of four Egypt’s trade expanded rapidly until the onset of the Great Depression and again during and after the Second World War. Egypt’s peasants benefited directly not only from better infrastructure but also from lower taxation and access to affordable credit. The proportion of the population attending schools also quadrupled. All this was achieved by a combination of “English heads and Egyptian hands,” as the British liked to say.”

Yet, Ferguson does note that not all the numbers were good. As far as it is possible to estimate, the per capita Egyptian GDP stagnated between 1913 and 1950. However, the same was true of British India. The reason for this in both cases was population growth. Likely as a result of the improved economy and more available food (due to increased cultivation), the population rose so much that it negated a great deal of the progress, yet the growth was certainly due to Britains reforms. On top of that, the economy was dangerously dependent on cotton which fluctuated on the world market. Publich health was also neglected by the British which led to an increase in the infant mortality rate. Overall, the country got richer, but not the average person.

In the third and final post, I’ll look compare the aims of British policy in Egypt, their outcomes under occupation and after and analyze it in terms of PNM theory (connectivity and the 5 flows) and attempt to draw lessons from it for the US occupation of Iraq.

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The weak pillar of PNM Fri, 13 Jan 2006 21:14:53 +0000 Continue reading ]]> Came across this brilliant quote in Peter Drucker’s 1997 Foreign Affairs article “The Global Economy and the Nation-State”: :

bq. Since the early Industrial Revolution, it has been argued that economic interdependence would prove stronger than nationalist passions. Kant was the first to say so. The “moderates” of 1860 believed it until the first shots were fired at Fort Sumter. The Liberals of Austria-Hungary believed to the very end that their economy was far too integrated to be split into separate countries. So, quite clearly, did Mikhail Gorbachev. But whenever in the last 200 years political passions and nation-state politics have collided with economic rationality, political passions and the nation-state have won.

This flies in the face of one weak aspect of “Thomas Barnett’s world view”:, namely how economic determinism will encourage the “future worth creating.” The article, though a little dated, has some very interesting points. “You can read the rest here”:

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The Diversity of Economic Realities in Southeast Asia Thu, 08 Dec 2005 05:58:37 +0000 Continue reading ]]> I’ve traveled to four countries in Southeast Asia: Thailand, Malaysia, Singapore, and Cambodia. Singapore was highly developed, Malaysia moderately so; Thailand was developing fast, while Cambodia was undeveloped. I’m looking forward to observing Vietnam in just a few short days and seeing how it compares to the rest of the region.

How undeveloped was Cambodia? To show you one anecdotal photo, I snapped this when our “taxi” (an unmarked, brand new Toyota Camry) stopped to refill somewhere between the Thai-Cambodia border and the ruins of Angkor Wat (a seven hour drive; cost for two passengers about US$16).

I’ve little idea about the reality of Vietnam on the ground, but I look forward to giving you first hand reports starting next week (but highly dependent on what kind of internet connections are available).

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Cue trade war Tue, 06 Dec 2005 03:20:57 +0000 Continue reading ]]> Better start stocking up on your maple syrup and NHL players: “*from*”:

bq. The latest World Trade Organization softwood lumber ruling opens the door for Canada to retaliate against the United States, the Department of International Trade said Monday. … Canada is requesting authorization to retaliate against $200 million in U.S. goods. Arbitration will begin in early next year, following WTO adoption of the appellate body report.

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European Hypocrisy Adjustment Fri, 25 Nov 2005 11:58:08 +0000 Continue reading ]]> The EU has finally begun reducing its subsidies. I’m tempted to scold them for not doing so enough but this is a fine start, and that’s exactly what it has to be, the beginning of the phasing out of their agricultural subsidies.

Sugar firms welcome subsidy deal

Shares in European sugar firms have risen after the European Union agreed to reduce cuts to sugar subsidies. The EU plans to cut the price it guarantees farmers by 36%, having originally proposed a 39% cut. UK sugar giant Tate & Lyle said the effect of the cut would now be smaller, while Spain’s Ebro Puleva called the deal a “considerable advance”.

The cuts come after a ruling by the World Trade Organization that the subsidies breached world trade rules. At present, EU producers are paid a price three times the market rate, while imports are limited. The new deal allots 6.3bn euros ($7.4bn; £4.3bn) in compensation for farmers.

The first world tells the third world to: Democratize! Open your markets! Lift trade barriers! Develop! Open your political systems! et cetera, while in the mean time they work hard to prevent economic connectivity that will hurt them in the short term and benefit the third world in the long term. You can’t have it both ways. Cutting the subsidies now will save in foreign aid money in the future. Instead of handing out welfare, why not allow third world farmers to earn the money themselves, create jobs and economic growth and work their way towards those ideals Europe and America talk so highly of.

The money they’ll save in foreign aid over the long term can be used to compensate farmers in the short term.

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Which “Wealth of Nations”? Fri, 18 Nov 2005 03:37:21 +0000 Continue reading ]]> After finally sitting down and reading Clausewitz’s classic “On War”: I feel I should tackle another classic must read: Adam Smith’s “The Wealth of Nations”: For Clausewitz the Paret & Howard edition is probably the best, but what about Wealth of Nations? “There”: “are”: “numerous”: “versions”: out there, but which one is the “definitive” one? Can any of our economics-minded readers give a personal recommendation?

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The Many Flavors of the Social Welfare State Sat, 05 Nov 2005 21:45:04 +0000 Continue reading ]]> In both Europe and the United States, Capitalism and Socialism are portrayed as monsters and always in the extremes. Most Europeans are unaware of how America actually works just as most Americans are unaware of the many different versions of European socialism that exist. The social-welfare state exists through two main mechanisms: job protection and welfare. That is, regulating the labor market to protect those who have jobs and secondly giving money to those who have none. Yet, many European states focus only on one side of this and others on both. Though, as past articles show, I’m a strong advocate of the American system, I do recognize room for improvement and have seen and experienced the effects of socialism in Germany, both positive and negative. Thus, I’d like point out, using an old Economist article and a report on economic growth and social welfare in Europe, the many flavors of socialism and what they focus on.

The core idea of all the European systems is to lessen the income gap between rich and poor, eliminate poverty, protect people’s jobs and maintain a high standard of living across the board. According to The Economist, there are three distinct flavors of the social-welfare state:

1) The continental – Generous unemployment benefits and strict regulation of labor.
2) The Mediterranean – Only modest unemployment benefits and even stricter job protection laws.
3) The Nordic – The best unemployment benefits but very weak employment laws.

According to the Economist, the most successful version is by far the Nordic one (also used by the Netherlands) which has lower unemployment and less public debt than the Mediterranean and Continental varieties, not to mention that a recent report ranks Finland, for example, the most competitive country in the world followed by the US, Sweden, Denmark, Taiwan, Singapore, Iceland, Switzerland, Norway and Australia. Hmm, seems there may be some evidence supporting the Nordic model after all looking at that list.

The United States, in contrast to the above mentioned social models, maintains fairly low regulation of jobs (though unfortunate politically correct trends do exist) and weak unemployment benefits. And while many other factors go into making a country competitive, economic growth, unemployment etc., the overall question here is how viable the social-welfare state still is, what the various versions are, and a cost/benefit analysis thereof? Poverty is a variable that is clearly related to what social model a country uses. Yet, the numbers at least suggest that the question is not about the number of people who would be poor, but those who actually are. Thus, it’s not that Germany has no poor people but rather that they are kept above the water by taking money from those who’ve actually earned it.

Yet, if poverty is clearly related, then what about quality of life and crime? The Economist’s quality of life index shows a mixed bag with several European countries above the US and many below. However, the crime rate’s in European countries are clearly much lower than in the United States, whereby this also relates partially to weapons laws.

First of all, should the United States improve it’s social system and secondly how could it do so? While I’m by no means advocating switching to a European social model, the benefits they do have can’t be discounted. What responsibility does the government have to its people, if not morally, then at least to lower crime, drugs, and other poverty related problems through the social system? Would it not be better to spend more on prevention through a stronger social system then to spend that money on law enforcement? Keep in mind this would also allow for taxes to remain essentially the same in the long run as things were rebalanced.

What kind of benefits would there be for Americans and what factors would speak against such a plan, such as tradition? In the US, it would be difficult to recommend a bigger government role such as described above for moral reasons, however, if a purely pragmatic case was made, could it be sold?

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A Rogue German Speaks Sun, 30 Oct 2005 10:37:45 +0000 Continue reading ]]> The Wall Street Journal (via David’s Medienkritik) has a great article about Paul Kirchhof, the CDUs Finance Minister that wasn’t. The article is fairly good sized, but available for all to read. Here’s one section that’s right on the money. Oh why won’t the Germans listen to him!

So how to revive Europe’s and Germany’s economy? “First, we need lower and simpler taxes. Second, deregulation. There are too many rules which limit our economic activity and create privileges for a select few.” Third, “there is too much bureaucracy. The state needs to go back to setting the framework for the economy instead of trying to steer it. This also applies to Brussels.” He cites the EU’s recent “anti-discrimination regulation”: “It aims to regulate who can enter into a contract with whom and under what conditions. In my old textbook it used to say that people should be allowed to discriminate — if someone doesn’t want to hire people with red hair, let them go ahead. The market will punish such outrageous behavior.”

These are maverick thoughts in Germany. Mr. Schröder left it to his minions to spell out where all these scary ideas would lead. “Kirchhof is the German representative of the American neocons who surround Cheney and Wolfowitz who are also responsible for the Iraq-war,” the Social Democrats’ parliamentary deputy head Michael Müller said. Mr. Kirchhof hadn’t uttered a word about Iraq; but in order to demonize someone in Germany, one has to make him American. These were cheap but effective distractions from the real issue Mr. Kirchhof talked about — the economy. But Europe’s integration has only increased the pressure for reform: “The euro allows the pan-European comparison of goods and wages and illustrates the consequences of the different economic policies in such a radical way that reforms will have to come even much sooner than we can currently imagine.”

The basic difference that Europeans want the government to be their mother’s and Americans want the goverment to be a weekend father who gets involved as little as necessary. The article fails to miss the point that while yes, reforms are needed and will come, the problem is the mindset. Until the German government treats people like adults responsible for their own lives, the ridiculousness will continue.

The American model makes individuals responsible for themselves, with as much opportunity to succeed as to fail. Their life is their own business, not the government’s. While succeeding may not be easy (nor likely), it’s possible which is what makes the USA so unique. Europe prefers to side with the weak and those whom society leaves behind through rigid labor laws and income redistribution. The standard argument for this is America’s poverty, forgetting of course our vast wealth, low unemployment and growing economy. With double digit unemployment and an economy going nowhere, who’ll keep paying for these expensive social programs if nobody can get a job?
United States Germany
Poverty Rate 12.7% 13.5% (At Risk of Poverty)
% of Population w/o Health Insurance 15.7% Around 0%
Median Household Income: $45,543 34,740 EUR
Unemployment Rate: 5.1% 11,2
Economic Growth: ~3.5% 0.8%

For Figures on the US
For Figures on Germany

These figures are all for 2005, some even from this month. It should be noted the reason Germany actually has no “real” poverty is because the poor are supported by the government. Thus, I used the At-Risk number which is what the Germans use, i.e. how many would be under the poverty level if not supported by the government. Health insurance is similar.. Everyone has it, but it’s not open like England or Canada, people do have to pay for it monthly, though it’s often covered by companies and obviously all the people on social welfare/unemployment get it paid for by the government. I also didn’t covert the median incomes into the same currency because of fluctuation however at the moment, the Germans would make $41,913.

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