economics

More on China, the U.S., GDP, and economic power

December 20, 2009

china_economy.png

One of the great pleasures I derive from blogging here is receiving feedback from knowledgeable and thoughtful readers. One such reader — a person who has asked not to be identified — wrote in to correct my Dec. 11 post about American misperceptions of Chinese economic might.

As you’ll recall, I linked to a post by the inimitable James Fallows, in which he pointed out a recent Pew report about American views on global economic power.

The report found that 44 percent of Americans think that China — not the U.S. — is the “top global economic power.” This despite the fact that in addition to other telling factors, China’s GDP is less than one third of America’s. (See chart on the right.)

As it happens, there’s more to the story. As the reader pointed out in an email to me, the issue is not merely the 44 percent of those surveyed who picked China. In addition, it’s telling to note that just 5 percent of respondents named the “EU countries.”

Indeed, when it comes to GDP alone, a look at the 2008 numbers from sources like the IMF and the CIA World Factbook demonstrate that the European Union’s collective economy is, in fact, larger than America’s. (See the graph of national GDPs; bigger version here.)

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The CIA World Factbook’s 2008 report, for instance, says that the EU’s economy is worth $18.14 trillion — compared to $14.44 trillion for the U.S.

The IMF’s estimate is similar, while the World Bank puts the U.S. ahead of the Eurozone, since the Eurozone excludes the U.K. This Wikipedia page — List of Countries by GDP (nominal) — summarizes of the three reports quite nicely.

Now, back to the Pew report. Let’s not forget that the question was not “which country (or union) has the world’s largest GDP?”

Rather, the question was which country is the “world’s leading economic power.” Since the EU and Eurozone are not a single country, one can argue that they don’t wield as much economic power as the U.S. That’s because America, of course, is a single economic entity, while the EU cannot always act in a unified way based on the desires of its constituent members.

Fascinating stuff.

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American misperceptions about China’s economic power

December 11, 2009

china_economy.png

Note: I have updated this post here.

Excellent post from James Fallows pointing out that a new Pew report shows that 44 percent of Americans think that the “top global economic power” is China. Just 27 percent of respondents correctly picked the U.S.

Yes, China owns a lot of American T-bills. And yes, China’s economy is developing rapidly. But China’s economic might is not as great as many people assume.

From an Oct. 22nd story in the Economist headlined “The Odd Couple: America should be much more confident in its dealings with its closest rival”:

China’s economy is still less than a third the size of America’s at market exchange-rates. Its GDP per head is one-fourteenth that of America. The innovation gap between the two countries remains huge. America’s defence budget is still six times China’s.

(Emphasis mine.)

Check out Fallows’s post (linked to above) for more info.

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“Betting on Thailand”

November 8, 2009

I wanted to point out a column in Wednesday’s IHT/NYT called “Betting on Thailand.” It’s a look at how Thailand compares — and will compare over the next 20 years — with its regional neighbors in terms of business and economic development.

Here’re the last two graphs, which are particularly interesting:

Indeed, Thailand’s long-term strengths could be in the areas in which Vietnam is weak. Thailand’s successes, from sex tourism to medical tourism, owe much to freewheeling attitudes and individual initiatives, as well as to its superb location and diverse geography. For sure, public investment helped but Thais have been uniquely successful in creating a huge tourism industry. Big foreign-owned industries like cars are important but less so than a myriad of smaller enterprises that flourish in a society that is at one level very nationalistic but is sufficiently self-confident to be open to foreigners. It may be well suited to a transition to a higher-valued-added economy based on services and — like Italy — a source of niche products and creative design.

It may not get there. But if Thailand’s history of adaptation is any guide, do not bet against it. In 20 years Vietnam will have a bigger economy, will have made more money for today’s investors, and may carry more international weight. But for quality of life in an open society, my money would still be on Thailand.

(Emphasis mine.)

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Around the web: August 21-25

August 25, 2009

Some links that have caught my eye of late:

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Thailand protests and the economy

March 30, 2009

Here’s a story in today’s WSJ: “Thai Protests Build on Economic Crisis”

BANGKOK — Tens of thousands of antigovernment protesters sang and danced through the weekend outside Thailand’s main government complex, cheering on ousted former premier Thaksin Shinawatra and offering the nation’s new leaders — and others in Asia — a jarring reminder of the political risks accompanying the region’s sharp economic decline.

Local businesswoman Darunee Kritboonyalai, a founding shareholder of a Thai iced-tea brand and an active supporter of Mr. Thaksin, said the protests against Thailand’s government could grow as the economy worsens. “We’re just part of a global situation, true. But this government doesn’t know how to handle it properly,” she said.

The protesters are mainly seeking to restore Mr. Thaksin — a multimillionaire businessman who was removed from office in a military coup nearly three years ago — to power. They object to the way Prime Minister Abhisit Vejjajiva came to power and are disenchanted with how he is handling the country’s economic downturn, and so are hoping to fuel wider discontent.

Many of the 30,000-strong crowd mocked the government’s latest stimulus efforts as, at best, an imitation of policies Mr. Thaksin championed before he was ousted in 2006. Some protesters handed 2,000 baht ($56) cash handouts from the government to rally organizers instead of spending them in Bangkok’s stores, as the government intended. One elderly woman, Ananya Mhanpadungkit, climbed onto a makeshift stage to say she couldn’t accept money from what she described as an “illegitimate” government. Protest leaders said they would continue their nighttime rallies indefinitely.

Thailand’s lingering conflict between Mr. Thaksin’s populist supporters and its more conservative, military-backed government shows how the world’s economic slump is complicating a series of political battles across Southeast Asia. The region is especially dependent on trade, providing electronic components, raw materials and skilled labor for the global supply chain, and several countries are feeling the strain.

There’s also insight into how economic woes in Malaysia and the Philippines are affecting politics there.

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Thai economy slips

February 23, 2009

BBC: “Sharp decline in Thailand economy”

Thailand’s economy shrank at a record pace in the last three months of 2008 amid plummeting exports and tourism.

The economy shrank 6.1% in the October to December period from the previous quarter, the National Economic and Social Development Board (NESDB) said.

This was the largest contraction since records began in 1993. The NESDB said the economy might contract 1% in 2009.

The export-oriented Asian economy has been hit by the global downturn and political unrest at the end of 2008.

Anti-government protesters shut down Bangkok’s airports, hitting tourism, one of the key sectors of the economy.

WSJ: “Thai Economy Shrinks More Than Expected”

Thailand’s economy shrank more than expected in the fourth quarter of last year — its first contraction in nearly a decade — as the global slowdown shriveled demand for its key exports and domestic political unrest spooked its tourism sector.

The economy will likely continue to shrink in the first three quarters of this year, a government think tank said, with a reversal likely to kick in only in the last three months of the year.

Gross domestic product contracted 4.3% from a year earlier, resulting in full year GDP growth of 2.6%, the National Economic & Social Development Board said Monday. Seasonally adjusted GDP shrank 6.1% from the previous quarter.

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More on Thailand’s political future

December 16, 2008

WSJ: “New Thai Prime Minister Faces Immediate Hurdles”

Ousted premier Thaksin Shinawatra’s grip on Thai politics — and the instability it provoked — eased on Monday with parliament’s election of a new prime minister from a rival party.

The rise of 44-year-old Abhisit Vejjajiva, the Oxford-educated leader of the Democrat Party, could bring some calm after months of sometimes-violent protests that have undermined one of Southeast Asia’s linchpin economies.

But Mr. Abhisit faces significant political and economic hurdles. His new ruling coalition’s slim majority depends on the support of defectors he lured from Mr. Thaksin’s camp, which still controls the single largest party in parliament. Grass-roots support for Mr. Thaksin and his populist policies runs deep in rural Thailand, and Mr. Abhisit’s election was greeted by public protests by Thaksin supporters.

Mr. Abhisit will also have to deal with the effects of the global economic slowdown on Thailand, which some economists predict could slip into recession next year.

And another snip:

Political risk is likely to remain a watchword for Thailand in the coming months. Mr. Abhisit’s narrow margin of victory in Monday’s parliamentary vote — he defeated pro-Thaksin rival Pracha Promnok by 235 votes to 198 — could make it tough for him to act decisively on the economy, or even to defend his legislative majority. Thailand’s next national election must be held by 2011.

There’s also an interactive graphic that charts Thailand’s GDP growth rate and the country’s political unrest.

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Understanding the Subprime Crisis

October 9, 2008

A few days back, I asked some of my Twitter friends to share some good resources for understanding the subprime crisis and global credit crunch.

  • Wise Kwai suggested The Subprime Primer, a 45-slide presentation using (profanity-spewing) stick figures to illustrate the meltdown. I suggest giving it a read (but be mindful that it’s — obviously — simplified).

    Understanding the subcprime crisis

  • Jay Dedman recommended the helpful This American Life episode called The Giant Pool of Money, which I’ve mentioned before. It remains an excellent resource, and one that I plan to listen to again.**

    Here are some other links that have caught my eye:

  • TheMoneyMeltdown.com: “Everything you need to know about the global money crisis of 2007-?.”
  • WSJ: Yes, Dow’s Record Was Year Ago Today, which contains this illustrative infographic. (Click the image for a larger version, or go to the article.)

    WSJ Infographic

  • I’ve read Zimran Ahmed’s blog, Winterspeak, since 2001, and he’s been posting some interesting thoughts on the credit crisis. Here was his take on things last week:

    My prediction: deflation will continue through 2008 and 2009. The economy will continue to contract as consumers reduce consumption (and increase saving, which they must do) and businesses scale back operations so they fit the new, lower personal consumption environment. This will be a slow process, though, as the Fed and Treasury have worked mightily to obfuscate prices, and drag out the bubble deflation. Eventually, Helicopter Ben will say enough is enough and start to (finally) mail freshly printed greenbacks to households. Now we will switch from a deflationary environment to an inflationary environment, China will complete it’s transition out of the dollar, and we will get real, honest-to-God 70s style stagflation. And then we will wait for the next Volker.

    I suggest reading the whole post.

  • RealClearMarkets.com is a good source for ongoing news. Thanks to Lan Anh N. for the tip.
  • The New Yorker‘s James Surowiecki has a piece called “Public Humiliation,” in which he concludes:

    Considering that Wall Street firms spend all day dealing with the market, they have been slow to understand just how vulnerable they were to it. Companies like Lehman and, earlier, Bear Stearns saw going public as an excuse to take on more risk and act more recklessly, when in fact becoming a public company makes caution more important, since the margin for error is smaller, and the punishment for failure swifter. Now that the government has acted, Wall Street (or what remains of it) may yet be able to regain investors’ confidence. But long-term survival really depends on remembering the fundamental truth about playing with other people’s money: it’s a lot of fun until they suddenly decide to ask for it back.

    (Emphasis mine.)

    **And on a related note, thanks to newley.com reader Paul D. for pointing out a NY Times article providing the backstory on how “The Giant Pool of Money” came to be.

    –> What about you? Got some good links to share? Leave them in the comments or email me (newley AT gmail.com)

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    Subprime, the Credit Crisis, and Naked Short Selling

    September 24, 2008

    Subprime, The Credit Crisis, Naked Short Selling, and More

    For an in-depth explanation of the subprime crisis — which has now, of course, led to the current chaos involving mortgage-backed securities — look no further than “The Giant Pool of Money.” That’s the name of a special, hour-long episode produced by This American Life and NPR News. The show aired back in May and has been widely praised. From the show notes:

    We explain it all to you. What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? It all comes back to the Giant Pool of Money.

    I also suggest checking out the Sept. 12 episode of TAL. In the second part of that show, called “Enforcers,” producer Alex Blumberg looks the SEC’s decision to ban naked short selling. (Related: NPR recently launched Planet Money, a new podcast devoted to financial issues.)

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