The Annals of Marketing: Betfair vs. Ladbrokes

♠ Posted by Emmanuel in , at 5/31/2008 07:30:00 PM
As the locals here are wont to say, I have been investigating the best way to make an online "punt" (bet) on whether Big Brown will be able to become the first Triple Crown winner in thirty years. Not being an inveterate gambler, the first two choices that occurred to me were the heavily advertised firms Betfair and Ladbrokes. One of the most studied areas in marketing is new client acquisition, for it is often difficult to find new customers in relatively saturated markets like the UK. Indeed, this is a good chance to see just how marketing works. In the absence of other informational cues, one of the first things consumers react to is the branding of the product: the very name of the product itself may trigger affective responses. There are good reasons why pharmaceutical firms (and others) spend millions coming up with seemingly inane, vaguely medical-sounding names such as "Erbitux" or "Zyprexa."

In the case of these two gambling firms, their names are indeed suggestive--although not in an immediately desirable way for one firm. Betfair seems like a pretty damn good name for an online gambling firm. There is a fad in the marketing discipline known as "integrated marketing communications." That is, a product or service provider ought to provide a consistent theme in its marketing message; say, from the product packaging seen on store shelves to customer support. From what I can ascertain so far from Betfair, they do a relatively good job in this respect. Their brand emphasizes procedural fairness in determining odds and in placing bets. Whether this rings true is another matter, but the message is pretty consistent.

Next we have one of Britain's three largest bookies: Ladbrokes. Not being English, I have always been perplexed that one of the major gambling firms in the UK is named after an outcome I'm sure all betting lads [and "ladettes"?] would prefer to avoid: going broke. I am not exactly sure if the continued success of Ladbrokes is due to or has been hampered by its colourful name, but it's surely an attention-getter for a gambling company. Attention marketing scholars: there might be some sort of "reverse psychology" thing going on here that may be worthwhile to imitate. Should the latter possibility hold, maybe we'll see hospitals named "Blokecomatose"; cars such as the "Ford Crash" or "Volkswagen Lemon"; and supermarkets like "Poisonproduce." Before getting too carried away, though, note that the Ladbrokes site gives a perfectly good explanation why the firm is named as such:
Betting shops began to spring up around the country but were quickly outlawed by the Betting Act of 1853. Despite the legislation, around two hundred men are thought to have been running books at the time, mostly on course. In 1886 a certain Mr Schwind and Mr Pennington went into partnership as commission agents, principally with the object of backing horses trained by the former at Ladbroke Hall in Worcestershire.

Thoughts on the World Bank's New Growth Report

♠ Posted by Emmanuel in , at 5/30/2008 03:25:00 AM
The World Bank has come out with a new publication entitled the Growth Report: Strategies for Growth and Sustained Development. The effort was headed by Nobel Laureate Michael Spence. It is the product of a lengthy consultative process, with inputs from those with some knowledge on the matter in both the developed and the developing world. The World Bank being the World Bank, the release of this report has resulted in a host of contrasting opinions. Jonathan Dingel over at Trade Diversion has a fairly positive view of the publication, although you should of course go through it yourselves to make up your own minds. Actually, I am in agreement with Trade Diversion that it makes some welcome contributions. In contrast to previous World Bank efforts to promote a "one best way" to development, this publication indicates the Bank is moving towards a more pragmatic instead of a dogmatic approach.

However, William "The White Man's Burden" Easterly begs to differ. If you've read Easterly's previous work, you are no doubt familiar with his arguments: Namely, top-down efforts promoted by the World Bank are not likely to promote development in contrast to more spontaneous efforts. Also, it is better to have "searchers" who seek solutions to problems of development instead of "planners" who try to organize development as they see fit. Ironically, Easterly still sees this World Bank effort as being in the "planner" mould when the institution is moving more towards his idea of enlisting "searchers."

I have long wondered what to make of the widespread controversy over the World Bank. Those with a critical bent view it as a tool for the domination of a global capitalist class, while those with a libertarian bent view it as a bottomless sinkhole for funds better allocated elsewhere. Clearly, the institution cannot be both a ruthless enforcer of a “neoliberal” order and a bumbling spendthrift at the same time. By referring to $4 million spent on this report, Professor Easterly alludes to the latter possibility. Most likely, however, the reality lies somewhere in between.

In defence of the World Bank, the suggestions made in the report which may be uncontroversial to the point of being trite to some reflects criticism the Bank has sustained from both the left and the right. Like the Bank itself at this point in time, the report is gun-shy in staking definitive positions. Statements such as “[this report] does not provide a formula for policy makers to apply—no generic formula” and “[this report] will not give them a full set of answers, but it should at least help them ask the right questions” (p. 2) are not those which experts making top-down prescriptions would likely make. As I see it, the trouble is that Easterly tries to characterize the report as another manifestation of the “development expert” paradigm when, in reality, the World Bank has made a carefully worded effort to stay away from sweeping generalizations of this nature. Easterly cannot argue it both ways: If he believes the report is banal in not making strong recommendations, then he cannot also say that this is yet another master blueprint for development.

Indeed, it would appear to me that the more open-ended approach the World Bank proffers here demonstrates evolution in its thinking in line with his concept of “searching”: In political science, it is akin to Lindblom’s “muddling through” or Wildavsky’s “trial and error”; in anthropology to Levi-Strauss’s “bricolage”; and in econometrics to “Bayesian updating.” That international organizations like the World Bank are prone to the bloat which they themselves claim to abhor is striking, but the result of the process demonstrates evolution that should be taken constructively.

Are You Macho Enough for World Trade?

♠ Posted by Emmanuel in , at 5/30/2008 01:51:00 AM
For some reason I can no longer recall, I was reminded of John Connally, Richard Nixon's Treasury Secretary between 1971 to 1972. Oddly enough, he was a Democrat appointed by a Republican president. Indeed, he stepped down from his post as Treasury Secretary in order to head "Democrats for Nixon" in 1972. Connally is remembered for scaring other nations with the notion of dollar hegemony as encapsulated in the phrase, "our currency, your problem." The context then, of course, was that changes the US made to its monetary policy would be borne by other nations. However, Connally also made another statement which is even more over the top but is nonetheless insightful. In talking about trade relations, he made perhaps the best statement on the idea of mercantilism I have yet heard in plain terms: "My basic approach is that foreigners are out to screw us. Our job is to screw them first." [!] Even if many officials are not as forthright as Connally, surely the idea persists. Given this environment, ask yourselves this: Are you macho enough for world trade?

The Savage Garden of Asian Currency Intervention

♠ Posted by Emmanuel in , at 5/29/2008 01:08:00 AM

I truly, madly, deeply do believe that this is a rather retro post in more ways than one: The well-respected currency commentator Simon Derrick of the Bank of New York suggests in the Financial Times op-ed below that, just like at the outset of the Asian financial crisis, many countries in the region are gearing up for currency intervention measures to once again defend their respective monetary units. In recent times, the US dollar has been taking it on the chin, and the worry has been more about declining Asian export competitiveness via a weakening dollar. More recently, however, Asian countries have become more concerned about domestic inflation. This sort of inflation has made more Asian countries think about wading into the currency markets again--not so much to defend their currencies from speculators a la 1997, but to control inflation circa 2008. On 21 May 2008, USD/KRW reached a recent high of 1057.60 before large-scale intervention kicked in [see marked area in above chart]. So, let us begin with the Economic Times' take on South Korea spending nearly $2B to prop up the won.:

South Korea intervened three times to support the sliding won on Tuesday and warned the currency may have fallen too far, as it wrestled with the problem of containing inflation without choking off economic growth. The Bank of Korea is under political pressure to cut rates to help spur growth in Asia's fourth-largest economy, and minutes from an April policy review showed two of the six board members favoured a rate cut for the first time since November 2004.

The central bank is resisting that pressure because inflation is at a four-year high, partly due to a surge in oil prices and won weakness, which is making imports more expensive. The currency, Asia's second-worst performer this year, may have fallen too far, Choi Jong-ku, head of the finance ministry's international bureau, told Reuters as news of the interventions began surfacing and pushed the won to a one-week high.

The foreign exchange authorities were seen selling almost $1 billion on Tuesday afternoon for won after dumping up to $800 million during the morning session, traders said. The won's rise on Tuesday revived expectations among investors that the central bank would have more room to cut interest rates at its next review on June 12.

Others said the Bank of Korea, hemmed in between rising inflation and the wishes of a growth-hungry new government, would want to avoid cutting rates for fear of stoking inflation. "The Bank of Korea's governor implied at his post-meeting comments in May that as long as the won turns weaker, it would be impossible for an interest rate cut in the near future," said Park Jong-yeon, fixed-income analyst at Woori Investment.

Annual inflation at 4.1 percent in April was above the central bank's 2.5 percent to 3.5 percent target range for a fifth straight month. "The won fell as oil prices jumped but we are worried that the won's fall might be excessive," Choi said. He also said the government was worried the won's fall was due to excessive herd behaviour in the currency market.

The intervention on Tuesday marks the second attempt to shore up the won in under a week. That pushed up the won to a session high of 1,034.9, matching the high on May 19, which was the strongest since May 8. The South Korean authorities spent an estimated $500 million last Wednesday when the won weakened past 1,050 per dollar to a 2-1/2-year low…

Analysts say massive intervention indicates the government is more concerned about inflation than growth but it still likely wants a relatively weak currency to support exports to help meet an ambitious economic growth target of 6 percent this year.

The government has repeatedly backed a weaker won to help boost growth in the export-focused economy, but analysts say fears that it will also lift inflation at home means the authorities will likely step in to prevent any nosedive. "The comment (by Choi) comes as the government needs to show action as a weaker won boosts the impact of surging oil prices on domestic demand," said Jeong My-young, an analyst at Samsung Futures Inc. "But the authorities will never allow the won to strengthen past the 1,000 (per dollar) again," she added.

Following on from this, the redoubtable Mr. Derrick suggests that other countries in the region have, ah, gone to the moon and back in similarly undertaking currency intervention:

Rumours of currency market intervention by a variety of Asian central banks are likely to gather pace, says Simon Derrick, strategist at Bank of New York Mellon. As well as reports that the Bank of Korea had re-entered the market to support the won, Mr Derrick points to talk of currency support action by the central banks of Taiwan, the Philippines and Indonesia. “Comments from a variety of central bank officials indicate that rising inflationary pressures were likely behind these operations,” he says. For example, Vietnam’s annual level of inflation leapt to 25.2 per cent in May from just 7.2 per cent just 12 months ago.

The causes of these sharp rises seem relatively understandable given the recent dramatic increases in food and energy costs globally. Hanoi, Mr Derrick points out, estimates that food prices this month jumped 67.8 per cent year-on-year. Adding to the woes of the central banks is the simple fact that the performance of many of these currencies against the dollar has tended to be a mirror image of the latest commodity price moves, he says. “In the absence of a sharp turnaround in commodity prices it seems reasonable to suppose that these currency pressures will only continue to mount. “As such it seems likely that the central banks of the region will continue their support operations as they try to stop the impact of rising commodity prices being exacerbated by sharp local currency losses.”

Dammit, it's like 1997 all over again, albeit for slightly different reasons. Cue up the Savage Garden, chick-a-Cherry cola, and pretend it's like old times. UPDATE: The Philippines has been spotted selling dollars to the tune of an estimated $150M. It's flashback time, baby. From Reuters...

The Philippine peso hit a seven-month low at 43.925 per dollar, down about half of a percent from Wednesday's close, as investors bought dollars after solid US durable goods data on Wednesday eased concerns over the US economy.

But intervention by the central bank to sell dollars helped limit the peso's further declines, traders said. "They (the central bank) were in the market this morning. I guess they sold the dollar at 43.85 and then at 43.90," said a trader in Manila. "I think the market is trying to target the 44 level, but the central bank does not want the peso to depreciate that fast and was trying to slow it down," he said. Some traders estimated the size of the intervention at $150 million.

After 46 Years, Indonesia Bids Adieu to OPEC

♠ Posted by Emmanuel at 5/29/2008 12:36:00 AM
While not one of its original members, Indonesia was one of OPEC's earlier participants, having joined the producer's association way back in 1962. A lot has changed in the 46 years since Indonesia decided to join OPEC. Ecuador joined, left, and rejoined the organization (in 2007). Angola became a recent member. More pertinently, declining oil production in Indonesia meant that it went from being an oil exporter to being a net oil importer in 2005. Although it has already paid its OPEC membership dues of EUR 2 mio this year, it has signalled that it won't be paying up next year. It is, after all, against its interests to continue to support an organization which champions higher oil prices while the country is having trouble making ends meet by subsidizing the costs of fuel. However, there is less reason to feel to sorry for the country as it remains the second largest exporter of LPG and thermal coal. From the Financial Times:

Indonesia on Wednesday said it would withdraw from Opec at the end of this year because, as a net oil importer, its interests were no longer served by being a member of the oil producers’ cartel. Purnomo Yusgiantoro, energy and mineral resources minister, said Indonesia – the cartel’s only Asian member – would like world oil prices to fall while Opec’s 12 other members would like prices to remain high.

Analysts said the decision would have little effect on either Indonesia or Opec since Indonesia’s production, of about 1m barrels a day, was only 3.1 per cent of the group’s 31.9m b/d April output.

Mr Purnomo said Indonesia would like to quit now but since it cannot recoup its 2008 membership fees, it would remain active until its dues expire. However, he said Indonesia might follow the example of Ecuador, which left Opec in 1992 and rejoined last November.

Indonesia’s oil production peaked in 1976 and, after fluctuating for two decades, started to decline in 1995 due to aging fields and a lack of investment. It became a net oil importer in 2005. The energy ministry said production would average about 1m barrels a day while usage would be at least 20 per cent higher than this. Current reserves are 8.4bn barrels.

The country remains a net energy exporter due to its massive gas and coal reserves. It is the world’s second largest liquefied natural gas exporter and second largest exporter of thermal coal, which is used mostly for power generation. Mr Purnomo said Indonesia’s gas and 2008 coal production was expected to be equivalent to 1.5m and 2m barrels of oil a day, respectively.

Kurtubi, the director of the Centre for Petroleum and Energy Economic Studies in Jakarta, said Indonesia’s decision was appropriate in light of its net importer status but that it would have little impact on either the country or Opec. “It’s the right decision because Indonesia wants oil prices to fall to stop its state budget bleeding as much as it has been recently,” he said. “It will also act as a warning to the industry and society that the country must do something to increase production.”

Indonesia raised prices of subsidised fuels, which account for 95 per cent of consumer use, by an average of 28.7 per cent last Saturday. This cut its fuel subsidy bill by Rp35,000bn ($3.76bn), or about 20 per cent.

Mr Kurtubi said it would be at least 10 years before Indonesia recovered its net oil exporter status because the 2004 oil and gas law was less investor friendly than previous legislation. Oil companies are now taxed during the exploration phase in addition to the production period.

Bloomberg adds more colour to the story. An oft-heard refrain against the notion of "peak oil" is that there is still much to go around; instead, the problem is that much of the supply which can be tapped lies in countries that are not exactly welcoming multinationals with the best exploration and exploitation technologies. This holds to some extent in Indonesia as well, although it cannot be ruled out that it will return to OPEC in the future if and when it decides to start exploiting this resource on a large scale once more:

Indonesia, the only OPEC member in Southeast Asia, will pull out of the group as aging fields and declining production force the region's biggest economy to boost imports. Energy Minister Purnomo Yusgiantoro will sign a decree today to exit the Organization of Petroleum Exporting Countries, he told reporters in Jakarta. The nation, a member since 1962, has been considering leaving the body in the past three years.

Indonesia imports about a third of its oil and production has slumped 49 percent from a peak in 1977 partly as disputes with Exxon Mobil Corp. delayed field developments and deterred investments. Subsidies to cap domestic diesel and gasoline prices may exceed $13 billion this year as a lack of refining capacity forces the nation to import fuel.

``Indonesia no longer fits in as an OPEC member because it has become a net importer,'' said Julian Lee, a senior energy analyst at the Centre for Global Energy Studies in London. ``It won't affect OPEC's ability to put more oil onto the market if it chooses to do so.''

The withdrawal from OPEC will help the nation save 2 million euros ($3.1 million) on membership fees a year, according to Purnomo, who failed earlier this year to convince the group to increase oil output in order to lower prices.

OPEC members account for more than 40 percent of the world's oil supply. Crude production from the 12 members within its quota system declined 1 percent last month to 29.74 million barrels a day, according to Bloomberg estimates.

Indonesia's exit follows the addition of two members. Angola became an OPEC member in January 2007 and Ecuador rejoined the organization in December after a 15-year absence, swelling OPEC's ranks to 13. War-torn Iraq is the only OPEC member without a quota.

Crude oil prices have doubled in the past year to reach a record $135.09 a barrel in New York on May 22 as demand growth outstrips supplies. A weaker U.S. dollar has also prompted investors to buy commodities as a hedge against inflation. Oil for July delivery was at $127 on the New York Mercantile Exchange at 12:13 p.m. London time. OPEC Secretary General Abdalla el-Badri in Vienna had no immediate comment.

Indonesia's daily crude output has been less than 1 million barrels since February 2004, according to Bloomberg estimates. Production probably fell 0.9 percent to 859,853 barrels a day in April from March, oil and gas regulator BPMigas said April 29.

``If production comes back to give us the status of a net oil exporter then we can go back to OPEC,'' Purnomo said at the Jakarta Foreign Correspondents Club today. ``We are not happy with the high oil price.''

Indonesia raised fuel prices by almost 30 percent this month to reduce the government's subsidy burden of capping pump prices. Without the increase the government may have to spend 190 trillion rupiah ($20 billion) this year, more than the 126.8 trillion rupiah it had budgeted for 2008, before next year's general election.

``This move really plays to the domestic audience,'' said Tony Regan, an energy consultant with Nexant Ltd. in Singapore. ``How can they show concern about domestic oil prices and expect people to pay more at a time when they are also part of an oil cartel that is trying to push prices up.''

Indonesia produced an average 883,000 barrels of crude oil a day in 2006, while its consumption of refined oil products that year was 1.061 million barrels a day, according to the latest edition of OPEC's Annual Statistical Bulletin.

``For OPEC, the loss of the organization's only Asian member leads to the loss of an Asian perspective at meetings and within the secretariat,'' said Lee of CGES. ``It represents a narrowing of the group's geographical and ethnic outlook'' at a time when Asian demand is becoming paramount, though ties forged over 40 years won't disappear, he said. The last OPEC member to quit the group was Gabon, which left during 1994-1995.

The Pop Psychology of WTO Doha Round Deadlock

♠ Posted by Emmanuel in at 5/28/2008 01:09:00 AM
Eric Berne's 1964 book Games People Play was more or less the starting point for a veritable cottage industry of self-help books, from Thomas Harris's I'm OK, You're OK to those endless spins on the Mars-and-Venus theme. Today, I will use games illustrated in Berne's book to explain what is going on in the current round of WTO trade negotiations. As I am (somewhat) cynical and value non-esoteric explanations, Berne's book fits my objectives here to a T. Unlike many subsequent books in the pop psychology genre, Games People Play is actually quite instructive. Already, I have alluded to Berne's games in calling the convoluted US position--conflicted as it is between the executive and legislature--one of "Kick Me."

I take no credit whatsoever in noting that the aftermath of the US passing the abominable farm bill is proceeding as I described earlier as anyone with a passing interest in the subject matter could have predicted the same. Yes, Bush vetoed the legislation, but healthy majorities in both houses of Congress ensure a veto override. The latest "modalities" on agricultural issues have now been circulated and talks will resume, but the passage of the US farm bill has definitely not been a sign of encouragement to countries which have long faulted the US for its extensive use of subsidies. From Reuters:

Several countries at the World Trade Organization (WTO) criticized the new U.S. farm bill on Monday for raising farm support when the WTO is trying to reach a deal to cut agricultural subsidies.

"A few of them had a go at the new farm bill," said New Zealand's WTO ambassador Crawford Falconer, after WTO members met to review the revised proposals he issued last week for a farm deal in the WTO's Doha round. The countries criticizing the $289 billion U.S. farm bill, passed last Thursday and overriding a presidential veto, included Burkina Faso, speaking for cotton producers, Canada, Paraguay and Bolivia.

Falconer said the new bill did not directly affect WTO negotiations, but agreed it would have a negative affect. "It's another factor which complicates everybody's life, there's no doubt about that politically," he said.

If WTO members, including the United States, agree a deal including reductions in farm support, and the U.S. Congress ratifies it, Congress would have to amend the farm bill to bring it into line with the new WTO rules.

Canada said that under certain assumptions the United States could hit its proposed limit for overall trade-distorting support with one product under the new bill, a participant in the meeting said. Given that food prices are likely to fall back from their current record highs in the coming years, the new farm bill will trigger support earlier than the present one, the senior negotiator for a major developing country told reporters.

But the new bill could also encourage developing countries to try to bank what has been agreed now, rather than let negotiations drag on into a new U.S. administration next year. Under current proposals, which Washington has indicated it could accept, the U.S. ceiling for overall trade-distorting support would fall to $13-16.4 billion from an estimated $48.2 billion now.

Worse still, many EU countries are not keen on giving up agricultural supports, either. Agence-France Presse notes that France and Ireland are taking umbrage to EU Trade Commissioner Peter Mandelson offering more agricultural market access to LDCs during the current round of negotiations in exchange for non-agricultural market access in LDCs:

France and Ireland poured cold water Monday on proposals to kick-start World Trade Organisation (WTO) talks, with Paris and Dublin indicating a sizeable gulf with EU Trade Commissioner Peter Mandelson. French trade secretary Anne-Marie Idrac said the two countries were far from alone in having misgivings, after she and her European Union counterparts were briefed by Mandelson on the state of negotiations. "A majority" of the 27 EU member states "expressed concern," she said.

Last week the WTO submitted new proposals on agriculture and industry to its 152 members in an effort to revive the stalled Doha round of trade liberalisation talks, launched in the Qatari capital in November 2001. Ironing out differences in farm and industrial goods areas has long dogged negotiators, while the pace of talks on services is also considered to have lagged.

"We have a lot of questions" about the agriculture proposals and "for us French there's no improvement on market access for our industrial goods to emerging markets," said Idrac. "We are less than ever in an ambitious and balanced negotiation," she told journalists after a meeting of EU trade ministers.

New Irish Foreign Minister Micheal Martin, speaking to reporters in Brussels, said there was no need and little chance of a WTO deal before the US presidential election in November. "Our view is you need substance. It's not about completing this just because there's six months left for the US presidency," he said, rejecting Mandelson's stance. Asked if he thought that it would be wise to wait until after the US election he replied "that would be my view, yes." Ireland is particularly worried that the current proposals will hit its vital meat industry hard. "The very clear imbalance in the present set of proposals makes them unacceptable to Ireland and to others," Martin said.

An EU official speaking on condition of anonymity said: "France, Poland, Ireland and to a lesser extent Lithuania really have problems with what's on the table. "Sweden and Britain are more positive," the official said, while "in the middle there is a series of countries with concerns," although "nobody called for the texts to be rejected."

Swedish Foreign Minister Carl Bildt said that Mandelson, whom France has attacked in the past for making too many concessions, enjoyed "fairly broad support" among ministers. "Some were less satisfied, and there are a number of open points to be addressed in the next ministerial in Geneva," Bildt stated.

Idrac said that Paris was against the idea of a ministerial meeting at the global free-trade body in June. "We've got the impression that the conditions are less than ever in place for a ministerial meeting in the short term that would meet European interests," she said.

This brings me to more of Berne's games. In all honesty, I believe that the Doha round as it stands is an unworkable mess, and that we are no closer to a deal now than we were in 2005 (or even 2001, for that matter). US, EU, and Japanese agricultural protectionism shows little sign of abating, and LDCs have become bolder in their demands in the meantime. Given the untenable position of the US on agricultural subsidies, LDCs and others with grievances over America's farm subsidies have the US right where they want it. In Berne-speak, it's "Now I've Got You, You SOB" (NIGYSOB). Agricultural supports are a way of demonstrating how others have been wronged by US insensitivity to global concerns. This will play out for a while, and I envision the US being dragged to the Dispute Settlement Mechanism for litigation in the near future.

There is little reason to expect a forthcoming deal. As most countries are likely to have similar expectations, multilateral negotiations may be little more than points-scoring opportunities that play to domestic audiences. For (most of) the industrialized countries, it's "cherishing our proud agricultural history" or something to that effect. For LDCs, it's "standing up to EU and US bullying despite offering few concessions on agricultural market access." The end result is same old, same old: deadlock. Thus, the Doha round degenerates into a game of ''Why Don't You--Yes But'' in which players begin by bemoaning a problem and inviting others to suggest solutions, all of which will be shot down. The real objective according to Berne is ''to demonstrate that no one can give them an acceptable suggestion.''

If someone can come up with a better pop psychology for trade negotiation failure, I'm all ears. Be careful, though, as I may be duping you into a game of "See What You Made Me Do?" (SWYMD).

PRC: Of $1.76T in FX Reserves and Shoddy Schools

♠ Posted by Emmanuel in , at 5/27/2008 10:59:00 PM
The blogosphere is all agog over news that China's foreign exchange reserves have reached an astonishing $1.76 trillion. Even if that sum proves to be somewhat exaggerated, the PRC is likely to accumulate that much in reserves in fairly short order anyway. It is estimated that 70% of China's reserves are in US dollar denominated assets to ensure that the Chinese yuan does not appreciate too rapidly. Although it is up nearly twenty percent against the US dollar since being floated in 2005, there is no telling what sorts of depths the unloved dollar would plunge to if it weren't for the continued helping hand of the PRC. In effect, the McMansion- and SUV-loving USA has been able to wage its jihad on fiscal sanity because of China's so far undiminished willingness to provide "vendor finance." The accumulation of such a massive stash of reserves cannot but have distributional consequences. In effect, the $1.76T China has accumulated in reserves has lowered the standard of living for the Chinese people by reducing the purchasing power of their currency. Effectively, the savings of the (relatively) poor Chinese are being used to fund the profligacy of wealthy Americans. It is the Matthew effect in operation on a global scale: To those who hath, more shall be given.

This brings me to the terrible tragedies which have befallen many schoolchildren in China. The New York Times has also penned an article which has attracted much commentary asking why so many schoolhouses crumbled in Sichuan province when the earthquake struck. Certainly, the massive reserves accumulated by China look jarring next to the estimated 10,000 schoolchildren who perished during the earthquake in Sichuan province. Why can't a country with such vast reserves ensure a better standard of educational provision? Of course, there is a tradeoff in that domestic spending would not be helpful in propping up the dollar. Hence, the question that causes me to lose sleep is this: Has China used a trillion plus dollars to ensure that Americans party like it's 1999 while neglecting matters such as health and education at home? It is certainly a controversial thesis, but there are bits of evidence which suggest it cannot be easily discounted.

For instance, it has been extensively noted that economic activity in China has been concentrated in urban areas, giving rise to growing income disparities in this supposedly socialist country which now exceed those in capitalist America. Perhaps unsurprisingly, many of the schools which were adversely affected were in rural areas. Again from the NYT:
The Chinese government has known that many schools, especially in rural areas, are unsafe. Since 2001, the State Council, China’s cabinet, has budgeted roughly $1.5 billion for a nationwide program to repair dangerous schools in rural areas. In 2006, Sichuan Province’s government issued an urgent notice calling for localities to stop using substandard primary and middle schools.
An earlier post I featured on China's economy notes that spending on education has taken a backseat in recent years, especially in rural areas. Again, this has gone together with an emphasis on urban instead of rural areas with regard to economic activity:
  • In the rural areas, heavy taxation was accompanied by the withdrawal and rising costs of basic government services;
  • A development that has garnered almost no attention in the West is that between 2000-2005 the number of the adult illiterate Chinese increased by 30 million, reversing decades of trend developments;
  • The way the Chinese measure adult illiteracy implies that all of this increase was a product of the rural basic education in the 1990s and this adverse development coincided closely in timing with the intensification of urban bias in the policy model.
At the moment, I am also reading an OECD booklet entitled Challenges for China's Public Spending: Toward Greater Effectiveness and Equity. It is again noted that education reflects patterns of inequality [and if I may add, can reinforce them]. On p. 50:
There is a large inequality in the distribution of spending on education across regions and across levels of education. The extent of the shortage of funds for education differs across the country and outcomes vary widely. Also, a comparatively large share of education spending is channelled to tertiary education at the expense of primary and secondary education.
Finally, I am actually in agreement with the WTO here when it ties global economic imbalances with the provision of health and education in China:

China also needs to proceed with its plans to increase government spending on social services, such as health and education, and thus human capital, as well as basic pensions, thereby possibly reducing the need for precautionary saving and thus raising consumption. These and other measures to increase consumption would not only reduce China's reliance on exports for growth, and hence its vulnerability to economic slowdowns abroad, but would also narrow the gap between national saving and gross domestic investment and therefore help to reduce China's large current account surplus.

Imbalances within China--urban versus rural, coastal versus interior--are tied to global economic imbalances in one way or another. Excessive reliance on exports does have its costs. Certainly, it does invite us to ask whether the $1.76 trillion largesse China has provided to the rest of the world could be put to better use, such as educating Chinese schoolchildren in better-designed buildings, for instance. While it may be controversial to link China's mind-boggling reserve accumulation to its inability to provide well-constructed school buildings, these are the sorts of questions more germane to political economy.

Le Strike: Europe Reacts to High Energy Prices

♠ Posted by Emmanuel in , at 5/27/2008 02:52:00 AM
I sometimes get a chuckle when friends and relatives in the US of A complain about "high" oil prices which now approach $4 a gallon Stateside. To put things into perspective, it is worthwhile to point out that oil is not particularly dear in the US by global standards. Here in Europe, for instance, a gallon of the black stuff will cost you $9. As fuel use is taxed to death in this part of the world, there are obvious incentives to alternative means of personal transportation. However, a lack of alternatives is hitting some harder than others, especially those who cannot but rely on petrol for their living. Today we have two examples. First up are fishermen in the Eurozone's Club Med (France, Italy, Spain, Greece, and Portugal) complaining about how high oil prices which have made their livelihoods unviable. From Agence-France Presse:

Protests by fishing fleets against soaring fuel costs threatened to spread across Europe, as French fishermen voted Monday to extend their port blockade and Spanish fleets joined the stoppage with several other countries likely to follow. Italian and Greek fishermen may also join the strike later this week. In France the cost of a litre of diesel fuel for fishing boats has shot up from 45 euro cents (70 US cents) a litre to 70 in just six months.

After tense talks in France's biggest fishing port, Boulogne Sur Mer, fishermen voted to reject an aid package from Paris and extend their strike and oil blockade in a dozen key ports by another 48 hours. Meanwhile fishermen in northeast Spain also went on strike Monday over the same grievance, in a stoppage which is expected to spread to the country's other ports Tuesday. The striking French fishing fleet planned to call for a Europe-wide protest, participants at the Boulogne meeting said. In Ancona, Italy, a "Mediterranean vigilance committee" grouping fishermen from France, Italy, Portugal and Spain called for an indefinite strike from Wednesday, but it was not clear how representative they were.

The four main Mediterranean fishing federations -- Italy, Spain, Greece and Malta -- met later Monday in Paris to discuss possible joint action. The chairman of the Mediterranean fishing association Medisamak, Mourad Kahoul, told AFP on the sidelines of the Paris meeting that European fishermen planned a demonstration this week in Brussels, without giving further details.

The French strike affects fleets in the English Channel and the Mediterranean, although one delegation, from Etaples near Calais, voted to return to work. Fleets along the Atlantic coast agreed at the weekend to head back to sea, after the government promised aid to compensate for diesel costs. "Our demands are still the same, a standardised fuel price across Europe and a responsible management of (EU) quotas," said Thierry Lepretre, head of the fishing committee in Boulogne, where groups of fishermen strung cables across the port entrance to stop colleagues heading out to sea.

French fishermen are also blockading oil depots and refineries on the country's Atlantic, Mediterranean and Channel coasts. The fishermen escalated their protests last week, disrupting cross-Channel traffic, blocking fuel depots and ransacking fish stands at supermarkets as industry leaders negotiated with President Nicolas Sarkozy's government.

Fishermen in northeastern Spain launched a similar protest on Monday to demands for government aid, saying they too are hard hit by high fuel prices. Fishermen in Belgium and Portugal are also planning protests later this week to press demands for government aid. An Italian association, the Federation of Fishing Cooperatives, said its leadership would meet Wednesday to discuss strike action.

A big national demonstration is planned in Madrid on Friday. In Spain union and government representatives met in Madrid on Monday but the talks ended without concrete agreement. Both sides agreed to future meetings aimed at countering the rising cost of fuel. The government "understands the difficulties faced by the fishing sector," said fisheries ministry spokesman Juan Carols Martin after the meeting, but stressed that it was not the only industry suffering from high commodity prices. The Spanish government has already promised a 60 percent increase in subsidies to fishing fleets to relieve their fuel expenses. In France, where fishermen have already been out on strike for several days, Paris has offered an emergency package of 100 million euros (173 million dollars).

Aside from fishermen reeling from dear petrol in the Mediterranean, British lorry [that's "truck" for everyone else] drivers are also demanding rebates on fuel from the government as fuel prices soar. Plus, more stringent vehicle emissions regulations which are set to come into effect may incur the wrath not only of the transport industry but also of the general public. With gas prices these high, aren't there enough disincentives to using dilapidated, highly polluting vehicles? In any event, do visit British news sites in the coming days for possible footage of lorries choking London in protest. [UPDATE: See this footage, f'rinstance.] They sure do love "industrial action" here in Europe. From the BBC:

Hauliers say diesel prices topping 120p a litre, plus a planned 2p fuel tax rise, will drive firms "to the wall". Protesters are demanding an "essential user" duty rebate for HGV drivers. It comes as Chancellor Alistair Darling prepares to meet Labour MPs concerned about plans to increase road tax on older, more polluting vehicles.

A convoy of lorries, led by drivers from Kent, is expected to make its way to central London before handing a petition to 10 Downing Street. Motorists have been warned to expect major delays. In Wales, organisers say around 100 drivers have signed up to take part in a 60-mile convoy protest from Cross Hands, near Llanelli, to the Senedd in Cardiff Bay, where they too will hand in a petition.

Mike Presneill, of Transaction 2007, who is helping organise the London protest, said: "Fuel is rocketing. The government has the power to act but appears not to be listening. Hundreds of UK transport firms are being driven to the wall." Haulage company boss Peter Carroll, another of the protest organisers, told BBC News: "The main thing we're hoping to achieve is to get the government to recognise that this isn't a problem, or even a big problem, it's an absolute crisis."

With each lorry now costing £1,000 per week in fuel, he said hundreds of UK companies would go out of business if nothing was done, to be replaced by continental hauliers using cheaper fuel from abroad. He said drivers recognised the government could not control global oil prices but said it an "essential user" duty rebate of between 20p and 25p per litre for lorries would help firms compete on a "level playing field" with foreign hauliers.

Mr Carroll said a similar rebate scheme was already operating in the UK for bus companies. He added: "If they do that, we keep in business, we continue to pay our taxes and play our part in UK business and also the government wins because we take some of the inflationary pressure out of the economy. "Because all the time that our fuel is going up, we're trying to push those costs onto our customers, who in turn try to push it onto members of the general public."

The government is coming under mounting pressure over fuel prices and its plans to increase road tax for vehicles registered since 2001 which emit higher levels of pollutants. Owners of the most polluting cars could face a tax rise of as much as £200 - a move which the Conservatives say the increase will hit poorer drivers hardest.

A group of 35 Labour MPs have signed a motion calling on the Treasury to think again about the retrospective aspects of the policy. They are expected to warn Mr Darling the government could lose votes over the issue. One Labour MP warned the party risked alienating "Mondeo man" - the name given in the past to middle-income voters Labour needed to woo if it wanted to defeat the Conservatives.

A Treasury spokesman on Monday said the government was aware of their concerns. But environment minister Joan Ruddock said that, while she sympathised with motorists, the government "could not lose sight of the environment agenda". She denied the retrospective aspect of the policy was unfair, saying: "Over a 10-year period... I think the direction we have been going in has been clear to people at the time," she said.

Labour MP Ronnie Campbell, who framed the MPs' motion, told the BBC: "The increase is unfair to people who bought their cars a year ago, not knowing that the government was going to put that road tax on." He said the government was in danger of making the same sort of mistake as when it abolished the 10p income tax rate, and was accused of penalising poorer families.

Mr Campbell, MP for Blyth Valley, also called on the government to think again over plans to raise the cost of fuel duty by 2p per litre from the autumn. Meanwhile, Business Secretary John Hutton is to tell conference delegates Britain needs to become more energy efficient. The country must invest substantial amounts in alternative sources of power, such as wind and wave farms, he will tell the British Atlantic Survey meeting in Cambridge.

Videoconferencing Our Way to a Greener Future

♠ Posted by Emmanuel in ,, at 5/27/2008 02:13:00 AM
In the past, I've made posts on the ongoing battle over a planned third runway at Heathrow [1, 2]. To be sure, the point of contention here in the UK is not just over another Heathrow runway, but on adding flight capacity in many other locations.From a political standpoint, it's a real fun quarrel as it involves a large cross-section of society. In favour are airlines, airport operators, and a number of other firms; against are those who live near airports, environmentalists, and other green-minded individuals The World Wildlife Fund (WWF) has just come out with a report touching on the economics of expanding air travel in the UK via additional airports or airport terminals. In the report, the WWF argues that the economic case for expanding air travel facilities is specious for the following reasons after contracting a research company to poll FTSE 350 companies:
  • 62% of companies surveyed are already reducing their business travel footprint.
  • A further 24% of companies are currently developing plans to do so.
  • 89% of companies expect they will want to fly less over the next 10 years.
  • 85% of companies say that videoconferencing can help them reduce their flying.
  • 89% of companies believe that videoconferencing can improve their productivity.
The primary criticism made in the report is that firms will not require as much additional air travel capacity as what the authorities say they will need in the future. Besides, technological advancements like videoconferencing will further reduce the need for air travel. However, the report also notes that business travellers make up just 22% of total trips. Aside from the obvious point that intentions noted in a survey do not necessarily reflect future behaviour, then, there are bigger gaps in this counterargument: What about leisure travel in and out of the UK? Also, what about freight and cargo handling? If these two matters could have been included in the equation, then the WWF could have come up with a more comprehensive argument. The latter are economic arguments which cannot be discounted.

You can also view a videoclip on the WWF site that makes the point "we're headed for an economic downturn anway so there won't be as much demand for air travel." Of course, the world's largest airport management company, BAA, has its own blurb on how the environmental impacts of air travel can be mitigated while providing more travel options. Me? I'll take the Trans Europe Express, thank you much.

Karl Marx Was All for Free Trade

♠ Posted by Emmanuel in , at 5/23/2008 12:32:00 AM
It never ceases to amaze me that posts on the topic of Karl Marx [1, 2, 3] remain among the most popular ones here since I am hardly an authoritative commentator on Marxist thought. Nevertheless, coming from the school of "give them what they want," I will give Herr Marx the pride of place in this post. Cool Papa Marx rides again. For ideological reasons, Marxist thought plays a larger role in British public discourse and academia than in the States. You must remember that Marx is buried in London, and that a BBC poll in 1999 found he was the most influential thinker of the millennium ahead of Einstein, Newton, and Darwin. Would such a survey have returned similar results in the US of A? I think not.

Speaking of British academia, I am currently reading Capitalism Unleashed: Finance Globalization and Welfare by the late, maybe even great Oxford Marxist economist Andrew Glyn. While most of its content is boilerplate socialism with a few references to modern events thrown in, I came across an absolute stunner of a quote on p. 77 where Marx extols free trade. However, there is a supremely sardonic twist to Marx's idea: Free trade, by extending the contradictions of capitalism to all the ends of the Earth, will only hasten capitalism's demise. (See this earlier post for a Cliff's Notes version of the contradictions of capitalism if you are unfamiliar with the basic idea.) A problem with this line of thought, of course, is that few of us are as convinced as Marx about the internal contradictions of capitalism will bring about its demise. It keeps rolling along.

Of course, a coarse analysis would instead point to the demise of the Iron Curtain as a demonstration of the failure of socialism. Still, those who argue that Lenin's iteration of socialism that soon became a prominent feature of the international political economy was not as Marx intended. The "vanguard of the proletariat," Lenin's bastardized version of Marxist leadership, can in retrospect be seen as reformulating the bourgeoisie with class privileges intact under the rubric of socialism. Nowhere is this more evident than in China's variant, replete with inequality surpassing that in many (nominally) capitalist countries and Party elites. In other words, the failure of Soviet-style communism is not the failure of Marxism as the former was not representative of the latter as described by its principal author. Indeed, the more left-leaning can make an argument that the current time is ripe for making the contradictions of capitalism even more apparent than before.

It is debatable, though, whether the never-ending bliss of paradise (where the grass is green and the girls are pretty) promised by Marx after the overthrow of capitalism's shackles would be any better than what we have now. And, invoking that presumes the tipping point for fomenting the oft-predicted workingman's revolution would soon be upon us. Or, is "The Man" too big and too strong?

Anyway, on to the Marx passage in question. The essay below comes from The Northern Star, a publication of the British Chartist Movement to which Karl Marx was sympathetic to. It is Marx's undelivered speech to a gathering of those endorsing the idea of free trade--The Free Trade Congress in Brussels--in 1847. It is illuminating that today's three main IPE points of view as noted in this blog's FAQs are all in there in full guise--mercantilism (List), liberalism (Smith and Ricardo), and Marxism care of the eponymous author. That modern political-economic debate still mirrors the well-formed thoughts of Marx on the differences among these POV is illuminating, as is his conviction that, yes, the demise of capitalism is nigh. Marx being Marx, he's rather long-winded talking about Protection, Free Trade, and the Working Classes, but the last paragraph below best summarizes why Marx believed that, yes, free trade was a splendid idea. Does revolution await?

There are two sects of protectionists. The first sect, represented in Germany by Dr. List, who never intended to protect manual labour, on the contrary, they demanded protective duties in order to crush manual labour by machinery, to supersede patriarchal manufacture by modern manufacture. They always intended to prepare the reign of the monied classes (the bourgeoisie), and more particularly that of the large manufacturing capitalists. They openly proclaimed the ruin of petty manufacturers, of small tradesmen, and small farmers, as an event to be regretted, indeed, but quite inevitable, at the same time. The second school of protectionists, required not only protection, but absolute prohibition. They proposed to protect manual labour against the invasion of machinery, as well as against foreign competition. They proposed to protect by high duties, not only home manufactures, but also home agriculture, and the production of raw materials at home. And where did this school arrive at? At the prohibition, not only of the importation of foreign manufactured produce, but of the progress of the home manufacture itself. Thus the whole protective system inevitably got upon the horns of this dilemma. Either it protected the progress of home manufactures, and then it sacrificed manual labour, or it protected manual labour, and then it sacrificed home manufactures.

Protectionists of the first sect, those who conceived the progress of machinery, of division of labour, and of competition, to be irresistible, told the working classes, “At any rate if you are to be squeezed out, you had better be squeezed by your own countrymen, than by foreigners.” Will the working classes for ever bear with this? I think not. Those who produce all the wealth and comforts of the rich, will not be satisfied with that poor consolation. They will require more substantial comforts in exchange for substantial produce. But the protectionists say, “After all, we keep up the state of society as it is at present. We ensure to the working man, somehow or other, the employment he wants. We take care that he shall not be turned out of work in consequence of foreign competition.” So be it. Thus, in the best case, the protectionists avow that they are unable to arrive at anything better than the continuation of the status quo. Now the working classes want not the continuation of their actual condition, but a change for the better. A last refuge yet stands open to the protectionist. He will say that he is not at all adverse to social reform in the interior of a country, but that the first thing to ensure their success will be to shut out any derangement which might be caused by foreign competition. “My system,” he says, “is no system of social reform, but if we are to reform society, had we not better do so within our own country, before we talk about reforms in our relations with other countries?” Very specious, indeed, but under this plausible appearance, there is bid a very strange contradiction. The protectionist system, while it gives arms to the capital of a country against the capital of foreign countries, while it strengthens capital against foreigners, believes that this capital, thus armed, thus strengthened, will be weak, impotent, and feeble, when opposed to labour. Why, that would be appealing to the mercy of capital, as if capital, considered as such, could ever be merciful. Why, social reforms are never carried by the weakness of the strong, but always by the strength of the weak. But it is not at all necessary to insist on this point. From the moment the protectionists agree that social reforms do not necessarily follow from, and that they are not part and parcel of their system, but form quite a distinct question, from that moment they abandon the question, which we discuss.

We may, therefore, leave them in order to review the effects of Free Trade upon the condition of the working classes. The problem: What will be the influence of the perfect unfettering of trade upon the situation of the working classes, is very easy to be resolved. It is not even a problem. If there is anything clearly exposed in political economy, it is the fate attending the working classes under the reign of Free Trade. All those laws developed in the classical works on political economy, are strictly true under the supposition only, that trade be delivered from all fetters, that competition be perfectly free, not only within a single country, but upon the whole face of the earth. These laws, which A. Smith, Say, and Ricardo have developed, the laws under which wealth is produced and distributed — these laws grow more true, more exact, then cease to be mere abstractions, in the same measure in which Free Trade is carried out. And the master ‘of the science, when treating of any economical subject, tells us every moment that all their reasonings are founded upon the supposition that all fetters, yet existing, are to be removed from trade. They are quite right in following this method. For they make no arbitrary abstractions, they only remove from their reasoning a series of accidental circumstances. Thus it can justly be said, that the economists — Ricardo and others — know more about society as it will be, than about society as it is. They know more about the future than about the present.

If you wish to read in the book of the future, open Smith, Say, Ricardo. There you will find described, as clearly as possible, the condition which awaits the working man under the reign of perfect Free Trade. Take, for instance, the authority of Ricardo, authority than which there is no better. What is the natural normal price of the labour of, economically speaking, a working man? Ricardo replies, “Wages reduced to their minimum — their lowest level.” Labour is a commodity as well as any other commodity. Now the price of a commodity is determined by the time necessary to produce it. What then is necessary to produce the commodity of labour? Exactly that which is necessary to produce the sum of commodities indispensable to the sustenance and the repairing of the wear and tear of the labourer, to enable him to live and to propagate, somehow or other, his race. We are, however, not to believe that the working man will never be elevated above this lowest level, nor that he never will be depressed below it. No, according to this law, the working classes will be for a time more happy, they will have for a time more than the minimum, but this surplus will be the supplement only for what they will have less than the minimum at another time, the time of industrial stagnation. That is to say, that during a certain space of time, which is always periodical, in which trade passes through the circle of prosperity, overproduction, stagnation, crisis — that, taking the average of what the labourer received more, and what he received less, than the minimum, we shall find that on the whole he will have received neither more or less than the minimum; or, in other words, that the working class, as a class, will have conserved itself, after many miseries, many sufferings, and many corpses left upon the industrial battle field. But what matters, that? The class exists, and not only it exists, but it will have increased. This law, that the lowest level of wages is the natural price of the commodity of labour, will realise itself in the same measure with Ricardo’s supposition that Free Trade will become a reality.

We accept every thing that has been said of the advantages of Free Trade. The powers of production will increase, the tax imposed upon the country by protective duties will disappear, all commodities will be sold at a cheaper price. And what, again, says Ricardo? “That labour being equally a commodity, will equally sell at a cheaper price” — that you will have it for very little money indeed, just as you will have pepper and salt. And then, in the same way as all other laws of political economy will receive an increased force, a surplus of truth, by the realisation of Free Trade — in the same way the law of population, as exposed by Malthus, will under the reign of Free Trade develop itself in as fine dimensions as can possibly be desired. Thus you have to choose: Either you must disavow the whole of political economy as it exists at present, or you must allow that under the freedom of trade the whole severity of the laws of political economy will be applied to the working classes. Is that to say that we are against Free Trade? No, we are for Free Trade, because by Free Trade all economical laws, with their most astounding contradictions, will act upon a larger scale, upon a greater extent of territory, upon the territory of the whole earth; and because from the uniting of all these contradictions into a single group, where they stand face to face, will result the struggle which will itself eventuate in the emancipation of the proletarians.

Barack Obama is Wall Street's Chosen One

♠ Posted by Emmanuel in at 5/23/2008 12:05:00 AM
I went over to to get the latest scoop on the fundraising activities of the US presidential candidates. While not totally comprehensive, the site offers a workable picture of the candidates' funding activities. Actually, the title above is kind of misleading for an obvious reason: we cannot be sure whether a particular candidate is given campaign funds because (a) s/he has a favourable disposition towards an interest group or (b) s/he has the best chance of winning. Consider the case of Wall Street. To hedge their bets, Wall Street firms have not placed all their eggs in one basket, contributing to Obama, Clinton, and McCain's respective campaigns. However the relative proportion of allocated funds may reflect preference and/or the belief that there is a frontrunner. Let us begin with Obama:

1Lawyers/Law Firms$15,019,030
2Misc Business$13,412,381
4Securities & Investment$7,498,503

As you can see, Wall Street firms are fourth among industry group contributions to Obama's campaign. In terms of outright contributions, Wall Street has made the most to the Obama campaign. Further, four of the top five Obama contributors are Wall Street firms:

Goldman Sachs $544,481
University of California $371,266
Ubs Ag $363,257
JPMorgan Chase & Co $353,808
Citigroup Inc $331,946

What about Missus Clinton? Among the remaining Big Three, she comes in second place among Wall Street industry group contributions:

1Lawyers/Law Firms$15,425,314
2Misc Business$8,411,793
3Securities & Investment$6,971,998
5Real Estate$6,077,866

As for her top five contributors, three are Wall Street bigwigs...

DLA Piper $505,200
Goldman Sachs $445,350
Citigroup Inc $406,752
Morgan Stanley $402,845
EMILY's List $323,567

Then there's John McCain. As you all know, he hasn't amassed nearly as much firepower as the Democratic candidates for understandable reasons. By industry group, his top contributors are from:

2Lawyers/Law Firms$4,228,737
3Misc Business$3,892,667
4Securities & Investment$3,764,664
5Real Estate$2,915,560

McCain hasn't gotten even half as much as either Obama or Clinton from Wall Street. Going by campaign contributions, it appears that the supposedly populist, middle-class loving Democrats are funded more by Wall Street than the more business-friendly (at least in rhetoric) John McCain. Who would have thought his largest contributor base is the AARP set? Go figure. I round it up with the top contributors to McCain's campaign, "only" two of which are [yawn] Wall Street biggies:

Merrill Lynch $226,550
Blank Rome LLP $222,050
Citigroup Inc $206,102
Greenberg Traurig LLP $173,837
AT&T Inc $149,305

Based on campaign contributions so far, you could make a case of McCain being the least influenced by the omnipresent Wall Street contribution machine. Visit the site to understand the method they use to trace campaign funds and for periodic updates on the candidates' fundraising activities. Befitting the adage that all politics is local, it is interesting to note that unions and government employee groups loom large in the bigger scheme of things, high-profile Wall Street contributions to presidential candidates aside.

Bush Sez This is "World Trade Week 2008"

♠ Posted by Emmanuel in , at 5/22/2008 12:12:00 AM
A few days ago, our good friends at the World Trade Law blog had a post entitled "McCain Goes After the Free Trade Vote." This, of course, made me wonder if there is such a thing as a free trade vote in America, or a meaningful voting bloc positively motivated by trade issues. Let me be perfectly blunt: Selling the free trade cause in America at the present time appears to be as easy as hawking Cosmopolitan subscriptions to the Taliban (now that would be the ultimate expression of free trade ;-) Despite the quixotic nature of the cause, it is notable that another thing which binds Bush and McCain aside from Iraq is, well, free trade. Call it senseless, call it "he doesn't care no more 'cause he's a lame duck," but Bush has just declared this week to be "World Trade Week 2008" for what it's worth. That it received virtually zero press coverage just goes to show the status quo. Read it and sleep. From the White House:

Free and fair trade helps secure a future of freedom and promise. During World Trade Week, we recognize the positive effects of opening markets around the world. Open markets play an integral role in America's economic progress, creating better-paying jobs, expanding consumer choices, and providing increased opportunities for American workers and employers. Free and fair trade also increases economic growth among our trading partners.

My Administration is committed to expanding economic freedom worldwide. We will continue to seek an ambitious outcome in the Doha Round that will reduce and eliminate tariffs and other barriers on goods and open new markets for services trade. The Doha Round provides a once-in-a-generation opportunity to advance open markets, strengthen economic growth, and help millions rise out of poverty.

We also encourage the Congress to approve our pending trade agreements with Colombia, Panama, and South Korea. Our free trade agreement with Colombia is important, because it will support one of our closest allies in the Western Hemisphere currently under assault from a terrorist network. Congressional approval of this agreement would make clear America's unshakeable commitment to advancing the benefits of free markets and the interests of free people.

Today, nearly 250,000 U.S. firms export U.S. products. Ninety-seven percent of those exporters are small- or medium-sized businesses. The number of U.S. small business exporters has more than doubled since 1992. Those businesses have surpassed a quarter of a trillion dollars in annual export sales.

Free and fair trade helps reinforce our Nation's commitments to democracy, transparency, and the rule of law. This week and throughout the year, we recognize the importance of trade in promoting prosperity and freedom in the United States and around the world.

NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me by the Constitution and laws of the United States, do hereby proclaim May 18 through May 24, 2008, as World Trade Week. I encourage all Americans to observe this week with events, trade shows, and educational programs that celebrate the benefits of trade to our Nation and the global economy.

IN WITNESS WHEREOF, I have hereunto set my hand this fifteenth day of May, in the year of our Lord two thousand eight, and of the Independence of the United States of America the two hundred and thirty-second.


Out Now: The WTO's Trade Policy Review of China

♠ Posted by Emmanuel in , at 5/22/2008 12:05:00 AM
One of the things I don't like about looking up documents on the WTO site is that they're usually in Word instead of PDF format. Also, they're usually unavailable in a single document but are borken down by chapters. Unfortunately, both hold true for this important release, the WTO's biennial trade policy review of the PRC. Draw your own conclusions, but the findings and recommendations do not deviate much from Washington's line. First, here is the online summary:

The report highlights details about structural reforms, including in the financial and other sectors that have introduced more market-oriented measures aimed at achieving a more efficient allocation of resources. The report also notes that China has continued to be one of the largest recipients of inward FDI and has become a large provider of outward FDI, reflecting its increasing integration into the global economy.

However, the report identifies imbalances in the sources of growth in the economy, which is mainly driven by exports and investment rather than by consumption, a widening gap between savings and investment reflected in China’s growing current account surplus, and rising income inequality despite high GDP growth.

The WTO Secretariat report, along with a policy statement by the Government of China, will be the basis for the second TPR of China by the Trade Policy Review Body of the WTO on 21 and 23 May 2008.

Next, here are excerpts from a summary section about China's trade and investment policy network. By all means, do read the rest of the report if you're further interested:

The overall aim of China's trade policy, which has remained unchanged since its previous Trade Policy Review, is to accelerate the opening of its economy to the outside world to introduce foreign technology and know-how, develop foreign trade, and promote "sound economic development". China aims to further strengthen the multilateral trading system; at the same time, it has been intensifying its pursuit of bilateral/regional free-trade agreements with some of its trading partners.

China has continued to attach high priority to the multilateral trading system and has been participating in the Doha Development Agenda negotiations. China grants at least MFN treatment to all WTO Members except El Salvador and some territories of EC member states. China has been a party to one dispute as a complainant and nine disputes as a respondent since 2006.

During the period under Review, two free-trade agreements entered into force (the China – Chile FTA on 1 October 2006 and the China – Pakistan FTA on 1 July 2007). The Agreement on Trade in Services of the China-ASEAN Free Trade Area also entered into force on 1 July 2007. Four further agreements are being negotiated.

Although some aspects of China's trade policy regime remain opaque, it has continued to adopt measures to increase the level of transparency of its trade and trade-related policies, practices, and measures. Since its previous Review, additional measures, such as the Regulation on Open Government Information, have been introduced with a view to enhancing transparency. On 13 September 2007, the National Corruption Prevention Bureau was established. Since its previous Trade Policy Review, several new trade-related laws, including the Property Law, the Enterprise Income Tax Law, the Anti-Monopoly Law and the Law on Enterprise Bankruptcy, have been adopted.

China has recently been moving towards achieving a level playing field for foreign and domestic investors in China. Until the end of 2007, China had provided better than national treatment in its taxation policies for foreign-invested enterprises (FIEs); since 1 January 2008, a uniform enterprise income tax rate of 25% has been applied to all enterprises (including FIEs) in accordance with the Enterprise Income Tax Law, with some exceptions such as lower rates granted for investment in certain industries. It would appear that all tax incentives now apply equally to domestic firms and FIEs. Several regulations and rules have been introduced or amended with a view to further liberalizing foreign direct investment and establishing a more rules-based and predictable business environment for foreign investors.