Here comes a knight in rusty armour. It is unfortunate that GM Europe--the only part of General Motors whose vehicles I would remotely consider buying--is also unprofitable. Let's just say that the European auto market is quite competitive aside from being stagnant. Take, for instance, French automaker Peugeot-Citroen. Hemorrhaging cash at the moment and making cars that are not so desirable, it too is feeling the pinch of European economic slowdown.
The question becomes one of whether Government Motors (or more accurately its European money-losing subsidiary) can productively join up with Peugeot-Citroen. By supposedly enhancing their market power in buying shared components and other inputs together with the associated economies of scale, it is hoped that both can survive the European shakeout. That said, there are limits to restructuring in Europe where government and labour interests often preclude shutting down automobile plants altogether:
General Motors Co. plans to...
Thou Shalt Obey Thy Lord Mandy on Globalization
On paper, I am not supposed to favourably regard Peter Mandelson, the third architect of the UK's third way along with Tony Blair and Gordon Brown. While I regard the latter two as rather odious at this point in time, I have yet to definitively suss why I remain a Lord Mandelson fan. Perhaps it's because his various machinations have ensured that he would never hold the UK's highest office--if he were such a brilliant schemer, then he would have become king instead of being exiled twice from British government.
And yet what a journey he's had! From being the EU trade commissioner to the de facto prime minister of the UK...
I [Heart] Empire: "Hong Kong Better Under Brits"
♠ Posted by Emmanuel
at 2/27/2012 04:08:00 AM
Niall Ferguson probably cemented the fashion of extolling the virtues of British empire with his bestselling book from a few years back. While the British empire had its downsides alike slavery earlier on and occasional massacres of various peoples supposedly under the crown, it was, on the balance, quite "developmental." Or at least goes Ferguson's thesis on how the British empire set the stage for the modern world characterized as it is by enhanced trade flows.
Along this line of reasoning we have Hugo Restall penning a WSJ op-ed--the outlet gives away the author's orientation--that claims Hong Kong was better off as...
Japan Ponders Limits of National Superindebtedness
♠ Posted by Emmanuel in Japan
at 2/24/2012 09:23:00 AM
That Japan owes over twice its annual output has been a favourite storyline for assorted end-of-the-world-economy cultists in triggering the next round of global financial meltdown. Nevermind that such predictions have proven woefully inaccurate given the yen strengthening to all-time highs in recent months, but there are of course...concerns.
The main reason why Japan's economy has not keeled over despite such an onerous burden are well-understood (except to the aforementioned cultists): Persistent deflation makes it actually attractive for Japanese savers to buy its sovereign debt yielding next to nothing, coupled with...
PIIGs in a Blanket: IMF & Reverse Robin Hood
I've often harped on the idea that Europe's troubled PIIGS nations shouldn't be receiving IMF funding since the nature of their woes do not primarily deal with balance-of-payments woes the institution was meant to address. Greece simply borrowed too much. Ireland overcommitted to guaranteeing its banks' viability without fully understanding the enormity of the sums they put themselves on the hook for. And so on and so forth for the others. Given that financial concerns from these concerns could exchange their euro-denominated (demoninated?) sovereign debt for euro currency at the ECB, albeit controversially, they largely had no trouble availing of the foreign currency needed to survive, either.
Another line of criticism many commentators have had is the fairness of it all. PIIGS nations are developed, whereas more and more IMF funds come from developing ones. Aside from the rationale of rescuing nations on grounds arguably outside of the mandate of the IMF, there remains the...
Onshoring--You Macho Enough to Make in the USA?
♠ Posted by Emmanuel in Trade
at 2/22/2012 09:02:00 AM
I have to run so this will be a quick if interesting one: Remember during the 2004 American presidential elections when John Kerry was inveighing against outsourcers with talk about "Benedict Arnold corporations"? What we now have is an interesting Reuters article that takes this line of argument to its (il)logical conclusion.
In this version, the flight of "lemmings" or the exodus of Benedict Arnold corporations has largely run its course. What you have instead are many firms finding that vertical or horizontal de-integration is more costly than they thought, hence many are locating more of their enterprises back in the good ol' US of A. In many ways it's an archetypal application of transaction cost theory in which the erstwhile offshorers (that's "job killers" to you US union types) have found that the costs in terms of losing oversight or coordinating with those in other time zones, different cultures and of varying educational backgrounds is more trouble than they're...
Pro Death: US Congress Ponders Aborting Ex-Im Bank
♠ Posted by Emmanuel in Americana
at 2/21/2012 10:37:00 AM
A running thread throughout this blog's history has been that Americans are not the most cosmopolitan of people. Witness, inter alia, the racist-protectionist treatment of Dubai Ports World, the inability of 90% of their youth to find Afghanistan on a map of Asia despite their government squandering untold hundreds of billions in that "nation building" fiasco, or their veep's near-total incomprehension of what the US owes other people. I don't mean to rub the point in, but I often find that foreign bloggers like myself have superior general knowledge of American institutions than many Americans themselves. Largely insulated...
Ranking World's Largest Container Port Operators
♠ Posted by Emmanuel in Economic History,Trade
at 2/20/2012 08:58:00 AM
Among my most searched-for posts over the years this blog has been in operation have been those concerning the world's busiest ports [1, 2]. Truly, one of the underappreciated facets of globalization has been the expansion of facilities to standardize shipping merchandise throughout the world. By making containers identical to each other, loading and unloading massive amounts of goods has been made possible.
However, an even more underappreciated corollary concerns the rise of container terminal operators. Just as airlines used to be nearly the exclusive preserve of flag carriers throughout the globe in the not-so-distant...
Egypt's Beer- & Bikini-Approving Muslim Brotherhood
I suppose that attracting tourists is generic task for governments the world over nowadays. There is also a certain amount of homogenization involved in tourism with providing amenities that punters now expect unless you're offering ecotourism or frontier tourism options where roughing it out is part of the attraction. At the current time, Egypt's Muslim Brotherhood is facing pressures too familiar to troubled nations in terms of generating funding during a time of crisis. It has already (cautiously) approached the IMF in search of a (highly improbable) conditionality-free loan.
However, aside from being made to comply...
3 Cheers for Austerity: Iceland is Investment Grade
♠ Posted by Emmanuel in Credit Crisis,Europe
at 2/18/2012 04:03:00 PM
Well here's a just reward for a nation sanely adjusting to the age of austerity. While no longer AAA USA is busy gorging on yet more costly giveaways costing hundreds of billions of dollars--it's an election year, duh--another of the countries hardest hit by the 2007/08 global financial crisis is finding its footing back to safer ground.
Hard as it is to believe, Iceland has recovered sufficiently by reducing both its massive deficits and its outsized financial services industry. As a consequence, Fitch's has just rehabilitated Iceland's credit rating to investment grade:
As the first country to suffer the full force of...
The Race is On to Succeed Zoellick at World Bank
♠ Posted by Emmanuel in Bretton Woods Twins
at 2/16/2012 05:25:00 AM
I have to run but it's going to be very interesting going with the current World Bank President Robert Zoellick indicating that he is about to resign his post. The search is on for a successor with the US naturally in the vanguard. However, given the controversy of yet another European succeeding the ill-fated Dominique Strauss-Kahn with Christine Lagarde at the IMF, it is high time that representation at the Bretton Woods institutions became at least as cosmopolitan as changes in the leading players of the world economy. That is, non-European leadership at the IMF and non-American leadership at the World Bank where both jobs have been stitched up ever since. From Reuters:World Bank President Robert Zoellick said on Wednesday he will step down in June and Washington pledged to put a replacement candidate forward within weeks for a job that has always gone to an American. The Obama administration said it would open the process to competition [to non-Americans], marking the first...
TPP is Ludicrous: US Auto, Canadian Agri Edition
Here are two more examples of the rather enormous roadblocks to the US government attempting to expand an APEC PTA to counterbalance growing Chinese trade dominance in the region. In their own ways, they are rather ludicrous examples of how Trans-Pacific Partnership (TPP) enlargement is infeasible at the current time given the policies of certain aspirant nations:(1) Having largely survived via government bailouts, American automakers are now encouraging the US government not to let Japan join TPP enlargement negotiations for the reason that the Japanese supposedly throw up "non-tariff barriers." Having tried to pry open the Japanese market before via the blunt route of trade negotiations, it seems these automakers haven't yet learned their lesson. That is, selling big, gas-guzzling left-hand drive cars in a market where almost all cars are small, frugal and right-hand drive doesn't work. Quoting from a Japanese official on these alleged NTBs:A Japanese government source in Tokyo...
Day's EU Analogy: Greece 2012 = Versailles 1919
♠ Posted by Emmanuel in Credit Crisis,Europe
at 2/15/2012 06:12:00 AM
My oh my. There appears to be some sort of competition going on among journalists to make the most outlandish analogy between what's going on with Greece in the EU and a historical European moment best forgotten. A few weeks ago we had the FT's Wolfgang Munchau likening events in today's Europe to the Thirty Years' War--in part a religious conflict between Catholic and Protestant faiths. Now we have CNN business and travel journalist Richard Quest saying that the conditions being imposed on Greece are alike those of the Treaty of Versailles [!] Which, of course, imposed such heavy burdens on Germany that they led to hyperinflation...
Not-So-Still Life: A Greek Riot Scene
I'm a bit strapped for time today so here's something that captures the moment in Greece. On Facebook, my Greek friends have been posting these sorts of riot pictures and videos for several years now. I suppose it's conventional scenery when the IMF is called into action. Whether the IMF's presence raises the probability of these scenes happening or whether social disturbances are more indicative of government mismanagement is certainly a question for debate. It's back to the old debate of whether the IMF is merely the "doctor" called in when a nation's financial situation is already dire, or if the IMF makes matters worse...
Revisiting WWII, or When Adidas Made Bazookas
This coming week I am going to discuss European economic integration in class. As most of you can recite from memory, the European Union got its start as the European Coal and Steel Community (ECSC) back in 1952. However, the political logic of the ECSC is a bit more obscure. While you will appreciate the necessity of rebuilding an industrial base in Europe post-WWII, the political story is a bit more involved.You see, the French had a recurring fear of postwar German reconstruction coming in the form of re-industrialization. A number of conditions laid down on Germany after WWI concerned limiting its re-industrialization...
Asian Values 2012: Dr Mahathir Kicks West's Hiney
♠ Posted by Emmanuel in Credit Crisis,Southeast Asia
at 2/10/2012 07:49:00 AM
To say that I am ambivalent about still-controversial former Malaysian Prime Minister Mahathir bin Mohamad is an understatement. On one hand, his time in office was accompanied by economic gains that were among the best in our region of Southeast Asia. On the other hand, he has had a penchant for vanity projects that are a big drain on the public purse alike the ill-starred Proton national car project. And don't get me started with his party UMNO playing along with if not leading the persecution of his former protege Anwar Ibrahim on dubious grounds. If you think your country's politics are rough, then I don't know what you'll...
Poland's Bid to Become a European Big Beast
♠ Posted by Emmanuel in Europe
at 2/09/2012 11:17:00 AM
There is much discussion about an "EMU-lite" being the likely result of current crises in the Eurozone. When all is said and done, what will supposedly remain in the eurozone are traditionally strong economies that were among the earliest joiners such as Germany, Austria and the Netherlands. Yet, one of the most overlooked aspects of European integration remains that, even at the current time, there are far more countries trying to get into the EMU than those trying to get out (of which there are precisely zero--at least in official discourse). Witness, for instance, the last country to join this club--Estonia at the start...