Two economics-related stories I suggest checking out:
1) This New York Times story by Charles Duhigg and Keith Bradsher, which was the toast of Twitter yesterday, is worth a read.
It’s called “How the U.S. Lost Out on iPhone Work.”
You’re probably familiar with many of the concepts here — higher labor costs and fewer engineers in the U.S., China’s nimble and powerful manufacturing capacity and supply chain integration, etc. — but this piece weaves things together quite nicely.
2) This piece, by Chrystia Freeland, was in the print edition of today’s IHT.
It’s a look at the ideas behind economist Jim O’Neill’s new book
, “The Growth Map: Economic Opportunity in the BRICs and Beyond.”
As Freeland writes:
In the 19th century, the Industrial Revolution and the opening of the American frontier created the Gilded Age and the robber barons who ruled it. Today, as the world economy is being reshaped by the technology revolution and globalization, the resulting economic transformation is creating a new gilded age and a new plutocracy.
The two forces are intricately related. Indeed we are living through slightly different gilded ages that are unfolding simultaneously. The West is experiencing a second gilded age, while the emerging markets, as Mr. O’Neill and others have documented, are experiencing their first gilded age.
(Emphasis mine.)
Tagged as:
economics
The FT and Forbes have recently run stories on Thailand’s controversial plans to pay farmers above-market rates for rice.
In short, farmers say the price hike is a necessary for them to make a fair wage.
Exporters say their margins are already thin, and that by making Thai rice more expensive, the government will price the commodity out of the global market.
(Thailand exports 30 percent of the world’s rice, so there are global and regional concerns about food costs, as well.)
The FT‘s Beyond BRICS blog reports:
Rice is more than just another commodity: for 3bn people it is a vital part of their daily diet, and when prices hit over $600 a tonne, or some 50 per cent above their 10 year average, they start to worry.
The 10-year average for Thailand’s benchmark 100 per cent grade B white rice is around $400 a tonne but today it is selling for $619 a tonne. That is partly because Thailand, the world’s biggest exporter, has said that it would pay its farmers Bt14,800/tonne – equivalent of about $800/tonne in the export market, in a move aimed at boosting the incomes of rural farmers.
Questions of the sustainability of the project have centered around the depth of Thailand’s pockets – it supplies about a third of the global trade of 30m tonnes annually – and its political resolve, but supply side economics are also going to play a role.
Earlier, Forbes weighed in:
Governments in Asia always keep a close eye on food staples like rice. The domestic price of rice matters, and so does the amount of rice available on global markets. This is why all eyes are on Thailand, the world’s largest exporter. Its government plans to start buying rice from farmers next month at a generous premium to market prices. Some reckon this will set off another rally in world rice prices. Others argue that a bust is more likely, given ample stocks. Either way, it’s another reminder of how agricultural subsidies distort commodity markets.
(All emphasis mine.)
Tagged as:
economics
Bloomberg reports today that:
Thailand’s five-week old government signaled it wants the nation’s central bank to stop raising interest rates as Prime Minister Yingluck Shinawatra seeks to stoke growth in Southeast Asia’s second-biggest economy.
“I did not agree with high interest rates to handle inflation if it’s not demand-pull inflation,” Deputy Prime Minister Kittiratt Na-Ranong said in an interview in Bangkok today. Yingluck’s administration has pledged to almost double the minimum wage in parts of the country and buy rice from farmers at above-market rates after winning the July 3 election with support from lower-income voters.
Tagged as:
economics
I wanted to point out two excellent resources for explaining some of the macroeconomic issues related to the debt ceiling standoff in Washington at the moment.
The first is a dispassionate piece from FactCheck.org that examines U.S. federal spending versus income. The current problem is represented in this graph:
The red is outlays — or spending — and the blue is revenues. Not a pretty picture.
(Interestingly, on the one hand, the gap between spending and revenue is especially big now. But on the other hand, running a significant deficit has been the norm since the 1970s.)
To summarize the piece: For the last several years we have had increased federal spending due to the stimulus package, banking bailout, and Social Security and Medicare payouts. In addition, military costs are up due to post-Sept. 11 wars.
At the same time, federal revenues are down partly due to reduced income tax receipts because of the Bush tax cuts. And the recession has meant less revenue from corporate taxes.
Read the whole thing.
And second, I suggest listening to the most recent episode of NPR’s “Planet Money” podcast. It’s called “How Much Debt Is Too Much?”
Harvard economist Ken Rogoff discusses historical rates of sovereign debt and examines various countries’ GDP to debt ratios. This is a measure of the total value of nations’ economies compared to how much they owe.
What do you think this ratio is for three countries in the news of late: Greece, Italy, and the U.S.?
Listen to the show to find out. The figures may surprise you.
(Image: Global debt to GDP ratio, via Wikipedia.)
Tagged as:
economics
A Reuters story from yesterday: Analysis: Thailand risks growing old before it gets rich:
Earning $6 a day from her food stall outside her home next to a railway track, Lumyai Rungruang is sceptical of news that Thailand’s wages are rising. The 54-year-old is too busy contending with spiralling inflation.
Coconut juice has doubled in price. Egg prices are up 50 percent at 90 baht ($2.95) a dozen. Doubtful her income can keep pace, she bristles when pressed about her future.
“I expect to work the rest of my life,” the mother of five said from her makeshift stall with its corrugated iron roof and bamboo stools, where she sells rice porridge and noodles.
For the past decade, Thailand’s minimum wage has trailed inflation, creating one of the widest gaps between rich and poor in Asia according to the World Bank, and fuelling working-class frustrations that erupted into violent street protests last year.
But Thai wages are creeping up, supported by an average 6.4 percent minimum-wage increase this year, rising agricultural prices that have helped farmers, a shortage of skilled workers and a planned increase in civil-servant salaries from April.
While higher incomes could boost Prime Minister Abhisit Vejjajiva’s chances at polls this year and prod consumer spending, they raise questions over whether Thailand’s economy, Southeast Asia’s second biggest, can keep its cost advantage over Asian rivals — from China to Malaysia and India.
They also highlight another troubling question facing the Thai government and millions of workers like Lumyai: will Thailand grow old before it grows rich, as its population of 67 million people ages at one of the fastest rates in Asia?
(Emphasis mine.)
Tagged as:
economics
For an examination of what the rising Thai baht — previous posts here and here — means to the Thai government and exporters, I suggest this post from James Harriman at Asian Correspondent:
Panic over the rising baht:
…The Thai baht has strengthened significantly versus the US dollar over the last year, as have most other Asian currencies. As of the second week of October, the baht is up 10.8 percent against the dollar, making it the strongest performing currency in Southeast Asia. Factors driving currency appreciations in the region include interest rate differentials with the US, current account surpluses, and positive investment sentiment on local stocks and bonds.
Market watchers anticipate the US Fed will flood the market with additional liquidity in the coming months, which will put further upward pressure on regional currencies.The graph below shows the performance of regional currencies versus the dollar over the last year. All regional currencies have appreciated with the exception of the Vietnamese Dong, which has depreciated almost 10.0 percent.
(Click through to the post to view a larger graph.)
Tagged as:
economics,
thai_baht
A brief Financial Times blog post worth checking out: Thai capital controls: more to come:
The Thai government’s attempts to relieve the upward pressure on the baht by reinstating a 15 per cent withholding tax on foreign bond holders has had little intended effect so far. On Tuesday the baht continued its inexorable climb hitting Bt29.82 after opening at Bt29.92, an increase of 0.3 per cent on the day.
Now, it looks as though government officials may be considering an additional tax on short-term fund flows, following the lead of their Brazilian counterparts.
The baht has appreciated by nearly 11 per cent against the dollar so far this year, rattling the exporters who account for 65 per cent of GDP.
Tagged as:
economics
I suggest checking out this sobering IHT op-ed from economist Stephen Roach, who’s now at Yale after having been non-executive chairman of Morgan Stanley Asia.
The Asian Way:
HONG KONG — What a contrast! After three years living in Asia, I returned to the United States a couple of months ago, with enormous respect for how Asia has pulled itself together after its own devastating crisis in the late 1990s. Now I was back.
Bouncing back and forth only deepened my conviction that an important shift in the gravity of global economic power from the West to the East could well be at hand.
It’s not just the Asian miracle that reinforces my belief in such a possibility. America has lost its way. In the years I was away, it has become a very different place. The despair of chronically high joblessness is sapping the nation’s sense of self and poisoning the political debate.
(Emphasis mine.)
Roach points to problems in the U.S. such as rising unemployment rates and an overarching sense of entitlement. Meanwhile, Roach says, Asian governments have focused their policies on encouraging stability following the region’s own economic hardships.
Worth a read.
(Via D.)
Tagged as:
economics
Bloomberg: Baht Rises to 13-Year High as Growth Outlook Boosts Inflows:
Sept. 6 (Bloomberg) — Thailand’s baht rose to the strongest level since 1997 as the outlook for economic growth and speculation interest rates may rise further encouraged investors to pour money into the nation’s stocks and bonds.
The baht gained 0.4 percent to 31.07 per dollar as of 1:32 p.m. in Bangkok and touched 31.06, according to data compiled by Bloomberg. That’s its highest level since August 1997, when the currency’s collapse helped trigger the Asian financial crisis.
Tagged as:
economics,
thai_baht
NYT: “China Passes Japan to Become No. 2 Economy“:
After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.
The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.
Related Newley.com post: “More on China, the U.S., GDP, and economic power.”
Tagged as:
China,
economics,
Japan
