Going Global

Freakonomics points to a study which researched why the Chinese save so much. Of all the more obvious answers that subsequent commenters on the post came up with (like economic prosperity, social values of thrift etc) they link it it to China's one child policy;

Apparently

China’s “one child” policy, which created a huge surplus of men in the country, has driven up the cost of getting married, as more and more men compete for fewer and fewer women. To keep up, families with sons have been holding off on spending to save up wealth that boosts their children’s marriage prospects.

This leads one to wonder why there are fewer women in China in the first place, and research studies have attributed this to hepatitis B (but later dispoved by the same author), sex relative wage rates and sex selective abortion as a practice.

Also as it turns out, or as i just found out, Ben Bernanke has been saying the increasing rates of saving in other countries caused the US housing collapse. He claims that increasing savings in other nations along with liberalization and the removal of capital flow barriers created a disconnect between US long term lending rates and Fed Monetary policy.

A credible argument, but it still doesn't explain how they could just let it happen, and the myriad other inconsistencies in the actions of the fed over the few years leading to the crisis.

From China's savings to Missing women to the Global Financial crisis; This is why i like Freakonomics.

After years of being ravaged by the war the North-East is set for more Booms. But this time we are hoping for a good boom. As in an economic boom.

With the opening up of the territory, firms have already begun to show interest in expanding into the North East. The obvious beginning would be to start with production, like agriculture and fisheries. Once these base industries are developing then there will be more room and demand for industries such as banking and telecommunications to enter the fray.

Tourism is looking positive with firms like John Keells, Softlogic Holdings and some foreign parties expressing interest to invest (FT). Although we will still be under the gloomy canvas of low tourist turnover due to the global financial crisis there should be enough demand to justify large investment in North-Eastern tourism.

Marketing will play a big role in making tourism a success and this is the perfect time for the industry to seize a chance for a comprehensive international campaign. Tourists are more picky with their destinations and will need a lot of convincing to invest their money in a particular alternative, the SL industry must fight now to create the worldwide buzz and top of the mind awarenss of a top tourist destination. I blogged about another possible marketing angle here.

Other industries set to boom include construction and engeneering consultancies. There will hopefully be a lot of inflow of funds with China and Iran already pledging some USD 1 billion and 1.9 billion respectively (FT). Construction funds must be used wisely and wherever possible, local firms should be enlisted to contracts in a way that efficiency is not compromised.

On the topic of efficiency, everyone is now worried about corruption and the mishandling of development funds by corrupt government officials. Of the tsunami aid scenario was anything to go by the Rajapakshe administration will have to ensure that none of that occurs this time around. But this may be asking for too much.

Government revenues are dropping, while expense is set to increase a lot according to Dr. Srimal Abeyratne senior econ lecturer at the Colombo University speaking to the Financial Times. The governments expected revenue increase of Rs. 200 billion is said to be too optimistic as the industries on which it relies on for tax income are suffering too much as a result of the global crisis.

The government needs to ensure optimum efficiency gains and ensure it uses its current strong position to make some concrete changes in the public framework that will improve the government services sector. This includes cutting staff and saying no to loss making departments. '..In the long term, these painful changes will strengthen the government's traditionally weak financial position' says Dr. Abeyratne.

A mini credit crunch in the local banking system is not helping anyone either. With the central bank's reduced interest rates not being translated into cheaper commercial lending rates. leasing companies have jacked up their deposit requirements and the velocity of money is down because of high saving rates and low consumer spending. This needs to be eased up.

Whether these changes happen or not, it is apparent that we may have a shot at having a better chance of riding out the ill effects of the global financial crisis if we experience (and more importantly, take advantage of) a mini boom in Sri Lanka. Hopefully when the boom begins to subside the global system would have reached a more stable position, helping to prolong it.

The death of laissez faire is being proclaimed left right and centre. Government spending and Keynesian economics are coming to the fore and free market ideology is taking a hit.

Keynesian economics is often seen as the middle ground between Marxism and laissez faire as put forward by Adam Smith. The cause of the resurrection of the economy after the Great Depression, British economist John Maynard Keynes  is widely regarded as the biggest influence on modern economic policy and thought, with his mixture of freemarket idealism with government regulation and spending.

But was the current failure in the world economy the direct result of the failure of the free market itself or more specifically the failure of the baking industry? One may argue that the banking industry in itself was de-regulated and that is what caused the crisis in the first place and therefore laissez faire is to blame.

But consider the theories of Milton Friedman, who said that regulating the banks and the money supply alone in a free market economy will provide the adjustment needed to avoid any major pitfalls. In this particular crisis, money supply went out of control and so much artificial wealth was created, essentially a tower of rocks built on a base of clouds, that things had to eventually collapse.

Greed, many say, is the underlying cause of it. Sure, if people weren't greedy they wouldnt have taken those housing loans thay couldnt pay, but what about an industry that wasnt prudent in its lending? how could individuals have anticipated the crash of housing markets and the fall in the values of their homes?

And another thing, capitalism is essentially defined as being the same as a free market economy. But that is in essense, an incorrect assumption. Capitalism has come to be associated with all that is detrimental in human nature; greed, growing gaps in income, opression, poverty etc. But these are characteristics that will undoubtedly prevail in any type of economy be it socialist, royalist or communist because they are the causes of evil; individual greed and a lack of concern for ones fellows.

And that cannot be fixed by any new ideology.

The year draws to an end and there is still so much wrong with the world. It may be a pessimistic outlook but sadly the human race seems to be defined by the crises that befall it. We are naturally cynical towards the good things in life. an uncorrupt government? a war to be won? Equality and universal acceptance? Not all of us would meet these statements with complete optimism. We believe in the weaknesses of the human race. We believe in the age old tome of our lives; 'perfection is impossible', 'nothing is and ever will be perfect' we keep telling ourselves. but are we so far away from perfection as we think? I do not know. But there is hope.

After that somewhat soppy start, let me list out the major crises/ happenings of 2008 that will define the following years as i see them off the top of my head. But pertaining to the cynical nature of the race on Earth, i have referred to any significant event as a 'crisis' so you may think it’s a good thing, but somebody somewhere will suffer because of it, perhaps owing to its imperfect nature.

The War - can it be won? how many of us are really dying in Killinocchi? why are they not allowing reporters in there of everything is going our way? What’s really going on.

The Economy - Both local and global. it shifted the world around. Having worked for a US bank involved specifically in the area of lending to subprime customers, I was privileged to see firsthand what was going on. although I left that place sometime before the crisis hit. Greed and capitalism deregulation and irresponsibility plunged the world into darknessssss...

Nigeria - Here is a country absolutely loaded with oil reserves, wealthy as the wealthiest country in the world potentially, whose people are still suffering without basic living conditions. Corruption has reached astronomical heights and practically all the petrodollars are going into the private coffers of government officials.

What’s sad to see is the international community does not do much about it. They're in cahoots with the government of course; it's all about pillage, plunder and take what you can. The less powerful and helpless the people, the better. Nobody cares about the Nigerian people as long as they can get the oil. They are terrorized. and terror begets terror. Therefore arises the MEND. and they are branded terrorist. Kind of like the

FARC - originally a bunch of helpless Columbian farmers, fighting the industrialization of their forests. The loss of their rivers due to the building of dams. The world tried to run over them and they fought back, and another terrorist group was born.

The Middle East - namely Palestine, I do not know if there have ever been a single race of people so downtrodden and treated unfairly as these. I mean the actually cut off electricity and food supplies to the whole nation because o a political fight. This can only occur when the powerful are so vain and corrupt as the forces that instigated the unfortunate humanitarian crisis in the name of 'democracy'. Ironically, it was in protest of Hamas, who gained rule of the Gaza strip in democratic elections as opposed to their opponents who were more friendly to the West.

Global Warming - It wages on and things seem to be improving really slowly. We are beginning to see a major movement emerge in popular culture in support of the environment. But a part of me is cynical, because there really doesn’t seem t be a significant change happening.

Africa - As opposed to the rest of the world, Africa alone as a continent seem to be going through a lot. Inflation in Zimbabwe is reaching unbelievable levels, one wonders why the economy has not simply crashed apart. Aids is spreading like wildfire, one advice to you i'll give, if you're in Africa, feeling horny, and want to get it on, don't. For the love of sweet life, don't.

Obama - The embodiment of change, an end to Bush who incidentally is probably the worse one man crisis to ever hit the world since Satan himself, Obama seems to embody everything opposite. but his rhetoric draws out the cynic inside, is he really all that? Well, we'll see, but don't expect fire crackers right away.

The Balance of Power - We are finally reaching a point where there are clear signs of the beginnings of decentralization in the world's power base. Russia, Iran and China are in the forefront of the challengers to the US followed by India, Brazil and Sri Lanka (not). But fifty years is a long time to build a power base and the US is still by far the most powerful country on Earth. interesting times ahead.

So thats my list of where the world stands in terms of significant happenings as at the end of 2008. Now I'm curious to hear about yours, and what events of the world impacted your view of this year and the years following immediately afterwards. So unfortunately im gonna tag a few of you thinkers out there to ensure your kind response :D sorry. Indi, Dean, Aufidius, My prerogative, Jack Point, Noorie, LD And the Mathawaada crew you're it.

Oxfam says so-called green policies in developed countries are contributing to the world's soaring food prices, which hit the poor hardest. The group also says bio fuels will do nothing to combat climate change. (more)

Developed countries are increasingly investing on bio fuels as an alternative to traditional energy sources and this is driving up demand for food. Further, if the prices for fuel crops exceed that of food prices, the food in question will obviously be sold to make bio fuels.

Brazil especially has been an outspoken advocate for the use of bio fuels and claims that it does not affect food prices or supply in an adverse way, Oxfam begs to differ though, claiming that up to 30 million of the worlds people have been affected already.

It seems that in its eagerness to get on with trend of enviro-friendliness and clean energy, the world is losing touch with the basics. We are acting like kids with a new toy it seems. Bio fuels are not sustainable; to meet the current energy demand with bio fuels alone would mean the use of almost all the food crop in production right now.

We need some better ideas please?