"Nation Branding" in the Global Political Economy

♠ Posted by Emmanuel in , at 8/31/2010 12:09:00 AM

Nation branding: The strategic self-presentation of a country with the aim of creating reputational capital through economic, political and social interest promotion at home and abroad (Gyorgy Szondi)

It is perhaps inescapable in this day and age that countries keen on promoting tourism embark on "nation branding." As a marketing major from my undergraduate years, I tend to see this world through such a perspective. For instance, the Chinese brand is certainly beating the American one in the global political economy sweepstakes as the former's more easygoing and less hypocritical approach to making friends and influencing people is certainly upending the Yankee flunkies on virtually every continent.

Today, however, I will relate the example of a "nation branding" exercise gone awry that belies the imagination. Apparently, the Danish tourist authorities thought up a campaign involving someone portraying an unwed mother parading her son on YouTube (see clip above). While tending to the little 'un, she narrates a story in which she got drunk, had fun in bed, and woke up to discover that the father to-be had fled Denmark. So, she appeals for the (foreign) father to come forward. As it turns out, the storyline was entirely concocted for tourist promotion. Worse, the confusion that it caused has been immense while offending many Danes. Instead of portraying an uplifting image, some thought it depicted Denmark as a land of dumb, easy blondes. Many thought it was a condom ad and not any sort of tourist promotion ad:
In September 2009, VisitDenmark, the tourism arm of the Danish government, launched a marketing campaign on YouTube. The video introduced to the world a beautiful 20-something blonde protagonist, Karen, and her adorable baby, August. Nothing quite extraordinary there, except that Karen had a small Mama Mia problem – she had no idea who August's father is.

Speaking candidly into a webcam and computer microphone, Karen related a story of how she had met the August's father some 1.5 years ago. He was visiting Denmark, presumably as a tourist. They went to a bar, got drunk and went back to her place. He was gone by the time she awoke in the morning.

Karen explained that she could not recall the name of the man that she had slept with or his country of origin, but that she would like to get in touch with him again. She is certain that he is August's father as she had not been with any other man ever since. She was hoping, through the powers of the internet, that her message would somehow reach this man. To add a final catalytic touch on this viral video to be, Karen recruited her audience, towards the end of her video plea, to help in her search. There was no indication anywhere within the video or on the webpage to suggest that VisitDenmark was, in any shape or form, involved. Also, the story was fabricated – entirely.

The video spread quickly; more than 200,000 views in 24 hours. Many people were engaged and responded empathetically. They also did as 'Karen' had asked and shared the link with friends. The national media quickly took the bait as well, appealing for information that could possibly shed light on this overnight internet sensation.

In just four days, the YouTube counter showed more than 770,000 views. But by that time, the Danish media had exposed the hoax. People wrote emails and letters to newspapers, claiming that 'Karen' is an actress, and, as far as they were aware, not a mother. What followed was a massive public outcry. Those who were kind enough to share the video felt duped. Some opposed the portrayal of Danish women as irresponsible and 'easy'. Many felt it was an inappropriate use of taxpayer money as the video misrepresented their country and culture.

VisitDenmark's rationalisation, that it reflected the country's liberal ideals, did little to calm the furore. Following a storm of criticism, the tourism organisation's director issued an official apology and stepped down. The video stayed online for a mere two weeks.

It might not be necessary for tourism campaigns to be understood or liked by the locals, said Rhonda S. Zaharna, an associate professor at American University's School of Communications. "But the one thing that I found was that great campaigns usually enjoy strong, positive, internal resonance. That's when you know you've hit the nail on the head and you've got that defining campaign."

Speaking at Global Strategic Thinking: Managing Public Relations in a 21st Century Global Society – a conference organised by SMU's Lee Kong Chian School of Business and the Institute of Public Relations of Singapore – Zaharna explained that nation branding campaigns walk the tightrope between managing 'image' (how others perceive the nation) and 'identity' (how the nation and its people see themselves).
And me? I'm kind of excited to visit Denmark again. I've always wanted to er, see Legoland ;-) This stuff is very interesting indeed. Certainly, tourist promotion is not an activity to be taken lightly. In fact, I have come up with my own viral campaign for the United States. Really. Given America's fearsome weight management issues, I've decided to turn them into something positive. See for yourselves:

I kill myself, but not via burgers and shakes, baby.

Good Tunes: The Political Economy of Philip Glass

♠ Posted by Emmanuel in at 8/31/2010 12:03:00 AM
It shouldn't surprise anybody that I am an avid Philip Glass fan. While I generally disdain low American strip mall, subprime, and SUV culture, his work is of a higher standard. Known almost to all, Glass is arguably the finest living American composer. At a time when popular awareness of classical music is approaching nil, he bravely carries the torch. Of course, it helps his international reputation that Glass bashes widespread American atrocities such as the invasion of Iraq in the name of freedom and growth. (It may sound funny but the artistic reputation of Yanks who enjoy bashing their own is generally higher abroad.) In particular, I enjoyed his play Waiting for the Barbarians in which he dwells on the themes of state-sponsored torture and repression.

While listening to yet another addition to his extensive discography featuring the Glass Chamber Players fronted by his girlfriend Wendy Sutter, I was taken by the informative liner notes that suggest American cultural depravity and the compositional flourishes of Glass may be related after all. As it turns out, Philip Glass's father became an initially reluctant listener to modern composers such as Arnold Schoenberg, Bela Bartok, and Dmitri Shostakovich (who I do listen to, by the way). Ben Glass had trouble selling their records at his music store. To investigate why, he took these records home:
In another story, Glass would tell of the “return privilege” which was part of the record industry in which retailers were allowed to return a certain percentage of the records if they were damaged. In order to exercise this privilege, Philip and his brother Marty would go down into the basement and break the records that had not sold. This was the first job that Philip Glass ever held in the music industry.

Such an action was a logical answer to a problem: what to do with the records that didn’t sell? Being a very practical guy, as we saw with the evolution of his businesses, Ben Glass had another idea. He would take the records home and listen to them to try to find out why people weren’t buying them. It just so happens that the music which was not selling was classical and 20th century chamber music by composers like Schoenberg, Shostakovich, and Bartok. It was in this way that the Glass home record collection of 78s grew and that a very big part of Philip Glass’ artistic sensibilities were first cultivated. The soundtrack of Philip Glass’ youth had been created.

It is important to the history of music is that Philip Glass spent time as a young person at home with his father listening to chamber music records. Ben Glass was not an educated musician, but he was a music lover in best sense. In the process of listening to these records to “find out what was wrong with them,” he became a sophisticated listener and developed a taste for chamber music. Father Glass would bring Philip in to the room and simply say to the future composer, “Here kid, listen to this.” Years later, after his father’s death, Glass composed his first concert-work as a mature composer, his Violin Concerto No.1 in 1987. He composed it as a piece that he hoped his father would have liked in the tradition of the great concertos by such composers as Mendelssohn, Sibelius, and Tchaikovsky concertos.
And so the young Philip Glass was well on his way to becoming what he is today. Not bad for a onetime taxi driver. It's strange but true: American cultural ignoramuses defined the formative years of Philip Glass. I guess that's something to be thankful for as we contemplate the idiosyncrasies of Einstein at the Beach.

The Reality of US Trade Decline in Southeast Asia

♠ Posted by Emmanuel in , at 8/30/2010 12:02:00 AM
This post is a follow-up to one I made a few weeks ago concerning changing regional predominance in the Asia-Pacific. The bigger they are, the harder they fall: In 2008, the United States was left behind by China as the third-largest trading partner of ASEAN member states--Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam--after Japan and the European Union. Fast-forward to the present and the ASEAN secretariat has revealed an even more remarkable finding: In 2009, China emerged as ASEAN's outright largest trading partner even as worldwide trade fell. The EU maintained second place status, while Japan fell to third and the US stayed in fourth place.

Indeed, those championing a continued and strong American presence in the region have many reasons to be wary. At midyear 2010, trade between ASEAN and China is already up 55%. While some gains are attributable to global recovery in trade volumes, some are also due to the trade agreement assigned between ASEAN and China which came into effect at the start of the year. Speaking of which, fearmongering of China wiping out ASEAN in terms of export competitiveness appear overblown as ASEAN's trade surplus with China looks set to increase, not decrease or even become a trade deficit:
China-ASEAN trade volume reached 136.5 billion U.S. dollars in the first half of the year, up 55 percent year on year, making ASEAN China's fourth biggest trading partner, said Gao Hucheng, vice minister of commerce, in a press conference Monday. Gao said that the establishment of the China-ASEAN Free Trade Area on Jan. 1 was a major milestone for regional economic integration indicating that bilateral economic and trade relations have entered a new stage.

And the establishment of the China-ASEAN Free Trade Area has brought real benefits for enterprises and people of both sides, said Gao. First, bilateral trade and investment in China and ASEAN have witnessed rapid growth. The bilateral trade volume reached 136.5 billion U.S. dollars, up 55 percent year on year, 11 percent higher than the growth rate of China's [overall] imports and exports during the same period.

China's imports from ASEAN hit nearly 72 billion U.S. dollars, increasing by 64 percent, and China's exports to ASEAN hit 64.6 billion U.S. dollars, increasing by 45 percent, which means ASEAN has become China's fourth biggest trade partner.
And where were the Americans amidst all this Asian economic activity? Recently, Vietnam hosted a meeting of trade ministers involving ASEAN and its main partners in Da Nang. All and sundry were present including representatives from the EU, Japan, and others. Guess who wasn't there? If your answer is "America," then you're just about right:
President Barack Obama should complete plans to host Southeast Asian leaders this year, amid criticism of the U.S. for skipping a trade ministers meeting this week in Vietnam, the head of a U.S. business group said.

Association of Southeast Asian Nations heads are awaiting the where and when of a summit with Obama, Alexander Feldman said yesterday at the Asean conference, also attended by China, Japan, South Korea, India, Australia, the European Union, New Zealand and Russia. The U.S. absence was “a disappointment,” Asean Secretary-General Surin Pitsuwan said.

Asean leaders “don’t know whether they’re going to Washington or New York; they don’t know whether they’re going in September or October,” Feldman, president of the U.S.-Asean Business Council, said in an interview. “This is a critical test for the administration, to see if they can balance domestic and international politics...”
And there's no guessing who else was there to push for closer economic ties with ASEAN:
“The world economy more and more shifts toward” Asia, European Trade Commissioner Karel De Gucht told journalists in Danang yesterday. “It is clear to me that Asean is not only a growth engine but that it will also serve as a motor of recovery for other regions of the world.”

While the Obama administration has taken steps to boost relations between the U.S. and Southeast Asia, the lack of an American government presence in Danang represented a lost opportunity, Feldman said. “Asean is critically important to our domestic agenda, to the president’s national export initiative,” Feldman said.

Chinese Commerce Minister Chen Deming used his visit to the Danang meeting as a chance to argue for use of the yuan in trade between China and Asean, while the European Union released a statement pitching its desire for “greater economic and political engagement” with the bloc.
I am simply appalled that the likes of the Economist do not observe these meaningful events, preferring to focus on specious ones like the South China Sea non-controversy. While the US may run interference on security matters in the hopes of forestalling closer economic ties in Asia, it certainly isn't doing much that is constructive. If the EU sent its trade commissioner and China sent its commerce minister, the least America could have done is sent US Trade Representative Ron Kirk. By not even bothering to send someone to our gathering of trade officials, I guess it's clear that its interests lie elsewhere.

Like in many other parts of the world, they've been outmanoeuvred in Southeast Asia--and it's nobody's fault but theirs. The global pecking order is a-changin'.

ECB's Trichet: No-BS Talk to Yankee Debt Lovers

♠ Posted by Emmanuel in at 8/28/2010 08:39:00 PM
ECB President Jean-Claude Trichet should be most familiar to readers as the anti-Bernanke. Although his institution has certainly taken some unconventional measures to help put out fires in Europe, their magnitude pales in comparison to those taken by the self-described Yankee helicopter pilot. Unsurprisingly, Bernanke has gone on talking about policy options for further easing.

A few weeks ago, Trichet wrote an op-ed in the Financial Times that developed economies should stimulate no more. Only yesterday, Trichet attended the central banker jamboree in Jackson Hole, Wyoming, where he took the opportunity to warn his easy money American colleagues about the perils of their actions. While his entire speech is a tour de force that requires close reading, below is an excerpt concerning what the US has most likely in mind. That is, the Yanks think that living with the debt is not particularly harmful. Trichet, however, would like to disagree with this misdiagnosis:
What about the option of “living with the debt”? Some have suggested to ignore existing financial imbalances “for the time being” and focus only on the short term. Rather than pressing on with the deleveraging process, more spending could be encouraged to sustain growth in the short term.

I believe that adopting this view would be very dangerous for our economies. There is a very clear example of the consequences of choosing to live with the debt: Japan in the 1990s. The “lost decade” in that country was the result of allowing the banking system to remain fragile over many years.

Banks appear to have contributed to economic weakness by rolling over the bad debts of inefficient firms. Banks’ inadequate capitalisation implied that they were unwilling to take losses. Low productivity growth in those inefficient firms and the locking in of capital and labour put a drag on potential output. Only a healthy financial system is able to provide funding for good projects that spur productivity and innovation.

The lesson from past history is that dealing with the legacy of accumulated imbalances is not simply a duty to be fulfilled after the economic recovery, but rather an important precondition for sustaining a durable recovery. The primary macroeconomic challenge for the next 10 years is to ensure that they do not turn into another “lost decade”.

This lesson is consistent with economic theory and evidence. Since the time of Irving Fisher, economists have explored the impact of a legacy of indebtedness for growth. In various ways, these analyses suggest that an excessive debt burden – whether emanating from the corporate, household or public sector – constitute a drag on spending, thereby dampening growth.

For firms, for example, high indebtedness reduces their net worth and the ability to borrow for new projects. Consequently, firms will postpone investments until they are able to restore sound balance sheets. Similarly, households’ precautionary saving could remain high until their wealth-to-income ratios return to more normal levels, following the collapse in asset values at the peak of the crisis.

Economic growth can also be threatened by high public indebtedness, which, without a credible fiscal retrenchment plan, can generate substantial uncertainty. Firms and households know that ultimately they will have to bear the consequences of the painful measures needed to reduce debt. As long as it is unclear when the adjustment will occur and who will bear what fraction of the costs of adjustment, firms and households may delay their investment and consumption decisions, slowing down the economic recovery. In the data, evidence points to the existence of a negative association between the level of public debt and subsequent GDP growth, which is particularly marked at high debt levels.

Finally, the debt overhang can make it attractive for governments to adopt regulatory measures that compel the financial and/or household sectors to hold government debt at low or even negative real interest rates – measures referred to as “financial repression”. Forced investment in government bonds distorts the role of the financial system in channelling resources to the most efficient firms and slows down economic growth. While the effects of financial repression on growth are particularly severe, these effects may also occur through excessive financial regulation.

So the option of ‘living with the debt’ indefinitely is not a solution to the challenges currently facing policy-makers, nor is it a means to ensure sustainable economic recovery. We must focus on policies to address the debt overhang.
Ricardian equivalence, baby; don't leave home without thinking about it. On America's current trajectory, perhaps folks won't be talking about Jackson Hole but the Bernanke Hole.

The Knowledge Worker Myth vs Blue Collar Reality

♠ Posted by Emmanuel in ,,,, at 8/27/2010 12:53:00 AM
Never let it be said that there's no art to blogging. Alike in the offline world, there are talented folks who know how to weave a compelling narrative out of a mundane story, and there are those who weave a mundane narrative out of a compelling story. Today, I will of course try for the former--as I always do ;-) IMHO, something that separates a good blogger from a pedestrian one is an eye for something everyone else misses...

Once more demonstrating that you don't have to look far for IPE-relevant material, I came across this featured story on Yahoo!'s front page yesterday. There it was staring me in the face: a pretty damning indictment of what I've been taught all my life. Like me, you probably grew up in a generation that disdained blue collar work. That is, work which actually involves physical exertion and being good with one's hands has been frowned upon. It is not that these biases were made up on our own; our parents also had a role in drumming in the message that "manual labour" was something dirty. Hence, many of you are also of a generation told that lawyers, bankers, businessmen, and the like had it made. The white collar life was supposed to promise the land of milk and honey.

Certainly, academia has had an interest in propagating this story since it provides fodder for ensuring a steady stream of tuition-paying students in law, commerce, and business. Various American commentators like former Fed Chairman Alan Greenspan have constructed an entire narrative out of "knowledge workers." In recent times, that has meant training to be a software engineer or some other lofty position that makes the most of conceptualizing abstract ideas and similarly high-faluting rhetoric. The truth, though, is much less compelling. Take America (please). Not only are there scores of unemployed college graduates there, but wages of college graduates have been on a downward trend since 2000. So much for the college myth.

The aforementioned Reuters article rubs it in further by pointing out that, actually, the skills which are most in demand worldwide are not those requiring fancy college degrees but fairly "mundane" blue-collar certification:
Workers with specialized skills like electricians, carpenters and welders are in critically short supply in many large economies, a shortfall that marks another obstacle to the global economic recovery, a research paper by Manpower Inc (MAN.N) concludes. "It becomes a real choke-point in future economic growth," Manpower Chief Executive Jeff Joerres said. "We believe strongly this is really an issue in the labor market."

The global staffing and employment services company says employers, governments and trade groups need to collaborate on strategic migration policies that can alleviate such worker shortages. Skilled work is usually specific to a given location: the work cannot move, so the workers have to.

The shortage of skilled workers is the No. 1 or No. 2 hiring challenge in six of the 10 biggest economies, Manpower found in a recent survey of 35,000 employers. Skilled trades were the top area of shortage in 10 of 17 European countries, according to the survey.

While the short-term way to address to shortages is to embrace migration, the long-term solution is to change attitudes toward skilled trades, Manpower argues. Since the 1970s, parents have been told that a university degree -- and the entry it affords into the so-called knowledge economy -- was the only track to a financially secure profession. But all of the skilled trades offer a career path with an almost assured income, Joerres said, and make it possible to open one's own business.

In the United States, recession and persistent high unemployment may lead parents and young people entering the workforce to reconsider their options. The skilled trades category also includes jobs like bricklayers, cabinet makers, plumbers and butchers, jobs that typically require a specialist's certification.

Older, experienced workers are retiring and their younger replacements often do not have the right training because their schools are out of touch with modern business needs. Also contributing to the shortage is social stigma attached to such work, Manpower argues in its paper published on Wednesday.

A poll of 15-year-olds by the Organization for Economic Cooperation and Development found only one in 10 American teenagers see themselves in a blue-collar job at age 30. The proportion was even lower in Japan. Education could address that stigma. Students should be reminded that blue-collar work can be lucrative: skilled plumbers can make upwards of $75,000 a year, Manpower argues. Overall, Manpower's fifth annual talent shortage survey found 31 percent of employers worldwide are having difficulty filling positions due to the lack of suitable workers available in their markets, up one percentage point over last year...
And there's also the problem of developed countries reluctance to accept more migrants despite a lack of workers with the requisite skills:
Examples of successful, targeted migration include an Ohio shipbuilder that brought in experienced workers from Mexico and Croatia, and a French metal-parts maker that hired Manpower to find welders in Poland.

Obstacles to such migration include differing standards for certification in skilled trades, as well as political barriers to immigration, which remains an "emotive" subject in many countries, Manpower's CEO said. Japanese employers, for example, have difficulty attracting skilled workers. Sweden, on the other hand, is innovative and aggressive about strategic migration, for example by removing obstacles to workers being recertified in their specialty, Joerres said.
Coming from a country that is a large sender of migrants, I myself work on these issues of international certification and similar qualifications. In the end, all I ask is that we be allowed to compete on a level playing field despite obvious disadvantages of relative poverty and the need to traverse often vast distances away from hearth and home. For obvious reasons, though, many of those in the West would rather not extend the opportunity to foreigners to compete for qualifications on similar terms. I prefer to think that hard work will help me overcome prejudices in a white man's world.

At any rate, do read the Manpower publication Strategic Migration - A Short-Term Solution to the Skilled Trades Shortage discussed in the article above as it is quite illuminating, Manpower certainly knows its business as it is the second largest staffing company in the world. While lifting limits on migration in order to combat global slowdown is certainly of interest to me, the fact that much-maligned blue collar work is actually what's in short supply should be a wake-up call to others. Perhaps higher education is a fraud foisted on me that I've helped perpetuate. It's not a comforting thought, but hey, sometimes the truth hurts but needs to be told.

* * *
On my walk home, I usually pass Priscilla: Queen of the Desert, Dirty Dancing, and Legally Blonde. Obviously, the Brits are fond of making musicals out of blockbuster movies. Guess what's opening soon in London's theatre district? I kid you not: Flashdance: The Musical [!] Critics have always disparaged this movie and its plot that beggars belief. IMDB's plot summary sums it up nicely:
Alex Owens is a female dynamo: steel worker by day, exotic dancer by night. Her dream is to get into a real dance company, though, and with encouragement from her boss/boyfriend, she may get her chance. The city of Pittsburgh co-stars. What a feeling!
OK, so I too thought Flashdance was more of a vehicle for the 80s soundtrack than the other way around. The new musical is in the same vein: more a platform for catchy 80s songs than plot-driven drama. Still, it begs the question: if a musical featuring a hackneyed tale about a welder can be made into a London musical, what is there stopping blue collar trades from being made "glamorous" as well? It's a task of changing perceptions that begins with parents who influence their offspring's career choices. I personally believe that unemployment is unglamorous, so the blue collar stigma is undeserved.

Ultimately, perhaps it's those of us with degrees in higher education who are the real dummies. Moreover, I suspect this world would be a much better place if there were more welders than, say, investment bankers--whether they choose to be exotic dancers at night or otherwise. Young son or daughter, in the immortal words of, er, Irene Cara, take your passion...and make it happen.

UPDATE: Kindred over at IPE@UNC suggests that I was mistaken over a "few facts" about US income trends. Now Kindred's a good kid, but he is wet behind the ears as he tends to put words in my mouth and gets embarrassed for it. Anyway, I decided to look up the numbers for myself instead of relying on other's charts. Below are the figures for US income for those 25 and up for the years 2000 to 2008 from US Census Bureau tables P-16 and P-18. It doesn't matter whether it's the mean or the median or if you're male or female; real annual income has been falling there since 2000. It doesn't matter either if you're a college graduate or have a higher educational attainment [click to enlarge image]:

I guess the furriner is more familiar with US stats than the American. Also at grad school, you are taught not to compare apples and oranges, but he does so by quoting another data series and naively suggesting differences have something to do with using "mean" and not "median" data. The table above should shelve that schoolboy howler (and I even use the same data series!) Maybe Kindred should visit Singapore for I suspect the educational standard there isn't declining as markedly as it is in America. R-E-A-D-I-N-G comprehension suggests this post is about college prospects post-(US led) financial crisis, so there you go with regard to time frames. Oh well, it's good he at least recognizes income there isn't rising unlike before. As an educator, I find patience with the recalcitrant to be a virtue. Lastly, the point Manpower makes is that there are technical and vocational degrees that stand you a good chance of landing a job while there are many college degrees that don't. Again for the S-L-O-W learner, it's not college vs. non-college but in-demand technical or vocational degree vs. not-in-demand college degree. And don't get me started on this being a worldwide survey instead of another boringly parochial American one.

You have to wake up pretty early in the morning to put one over ol' Emmanuel, Wizened IPE Buzzard ;-)

"I've Kent Right!" US vs Singaporean Education

♠ Posted by Emmanuel in ,,, at 8/26/2010 12:09:00 AM
America is the only nation in history which miraculously has gone directly from barbarism to degeneration without the usual interval of civilization - Georges Clemenceau

[NOTE: This is the second of two posts on Singapore and the United States.] Blogging is truly rewarding nowadays as the United States is receiving its proper comeuppance for severe indiscipline on a daily basis. It's good to be vindicated. In the end, it doesn't matter who you are; you eventually reap the misery that you sow. Here, though, I would like to focus on the state of education in the United States as it captures a poignant picture of American decay. I've been meaning to post this for quite some time, but a new report arrived to bolster the argument that US education is headed down the tubes like the rest of it.

Deficit fetishists will of course suggest that chronic budgetary shortfalls don't matter. However, with nearly all US states on the brink of financial ruin, it is no surprise that schoolteachers are facing the axe lest the federal government ante up more debt to dump on future generations in typical American fashion. Yet, the damning thing is that lawmakers are not trying to improve the US educational system but to stem further declines. For, the state of US education is in a truly sad state.

The first shoe to drop came about this same time last year. It was reported that average scores on the Scholastic Aptitude Test (SAT), a test required many colleges to gauge the ability of high school finishers to study at the tertiary level, fell after several years of stagnation:
High-school students' performance last year on the SAT college-entrance exam fell slightly, and the score gap generally widened between lower-performing minority groups and white and Asian-American students, raising questions about the effectiveness of national education reform efforts.

Average scores for the class of 2009 in critical reading dropped to 501 from 502, in writing to 493 from 494 and held steady in math, at 515. The combined scores are the lowest this decade and reflect stalled performance over the past three years. The reading scores are the worst since 1994.

Many observers Tuesday viewed the flat results of recent years as discouraging in light of a more than 25-year effort to improve U.S. education. "This is a nearly unrelenting tale of woe and disappointment," said Chester E. Finn Jr., president of the Thomas B. Fordham Institute, a Washington, D.C., think tank. "If there's any good news here, I can't find it."
Good job, America. What's this, "All Children (Except Asians) Left Behind"? Certainly, it looks like things are getting worse in an already highly racialized and inequitable society. I am particularly baffled by the excuse that inclusion of more Latino test takers resulting in lower scores is encouraging just because they're taking SATs. Given impending demographic trends in America, raising their scores should be a priority. If these numbers weren't bad enough already, more recent scores from the American Collegiate Test (ACT) depict an even more despairing result. Insofar as many high school graduates are required to take ACT instead of those just aspiring to go to college, ACT may be more representative:
"High schools are the downfall of American school reform," said Jack Jennings, president of the Center on Education Policy, a nonpartisan research organization in Washington. "We haven't figured out how to improve them on a broad scope and if our kids aren't dropping out physically, they are dropping out mentally."

President Barack Obama has said the nation's long-term prosperity depends on fixing the nation's high schools and preparing students to compete in a global economy. A recent study [by the OECD] found the U.S. ranks only 12th in the percentage of adults aged 25 to 34 who hold college degrees, and Mr. Obama has set a goal of becoming No. 1.

To accomplish its aims, the administration will need to finesse the co-operation of the powerful teacher's unions, Congress, parents and local school officials—groups that aren't always on the same page when it comes to education reform...The average ACT composite score has actually fallen since 2007, after increasing during the five-year period before that. This year, the average composite was 21.0, compared with 21.1 last year and 21.2 in 2007. The test is scored on a 1-36 point scale [my emphasis].
So far so bad, but that's not surprising at all given the subject matter here. What can we offer in contrast to this utterly predictable tale of woe? I humbly suggest that America's leaders look towards educationally progressive Singapore. Sometime ago, Tom Davenport of the Harvard Business Review blog thought that the city-state was a model of judgment for the US. Unlike America, Singapore places a high value on education and actually does something about it:
Singapore is obsessed with education — not just for children, but throughout life. Another of its declared challenges is, "How to design job-training programmes and wage supplement schemes for low-income older workers?" The country tops the ranks of educational achievement regularly. While it was once justifiably criticized for emphasizing rote learning, it has introduced programs that encourage creativity.
There will of course be objections that the Singaporean example is not applicable to the United States given the latter's diversity. But guess what? Singapore is also a melting pot of Chinese, Malay, Indian, and other cultures. Instead of wasting time on Islamophobia and similar bigotries, Singaporeans have laboured to create a truly multicultural society:
Singapore is a highly diverse society, with lots of citizens with Chinese, Malay, Indian, and Arab backgrounds. Yet they all seem to get along pretty well, and the country's culture is greatly enriched by the diversity. Public housing is ethnically and religiously integrated. Other countries could probably use a version of its "Maintenance of Religious Harmony Act," which prohibits religious rabble-rousing.
Take that, Sarah Palin and various Tea Party acolytes.

We all know who successfully patterned their development after Singapore instead of blindly following the example of the US into its current oblivion. Why, for instance, would you want your education system to resemble America's when you could aspire to have one like Singapore's? You can gather even more information on US trashiness till the cows come home but, suffice to say, the evidence clearly points to widespread American decay: It certainly isn't getting any smarter (see above), fitter, or better off than it was before. Let Singapore show America the way.

Michael Fay Revisited: World Should Cane America

♠ Posted by Emmanuel in , at 8/26/2010 12:01:00 AM
[NOTE: This is the first of two Singapore and America posts.] Most of you are probably old enough to remember the Michael Fay caning incident of 1994. A typical American wastrel in the Bart Simpson mould named Michael Fay was punished for allegedly spray painting cars in Singapore. Now, that city-state is famed for its cleanliness and orderliness as compared to certain other places. (Like, say, the great American city of Detroit.) For Fay's troubles, the delinquent was thrown in the gaol, and most famously, caned four times. Fay became an American media sensation, with all sorts of wusses appealing for clemency for one of their own. It also had the effect of making Singapore (temporarily) known to Americans who are famously incurious about the rest of the world.

Of course, this kid would have received six lashes were it not for the intervention of Bill "I Feel Your Pain" Clinton. Feeling aggrieved by Singaporean no-nonsense rules, then-United States Trade Representative Mickey Cantor even tried to suggest the city-state was not a proper host of a 1994 World Trade Organization event. At the end of the day, however, what the Singaporeans suggested in reply sticks: America is better off sorting its own issues that telling the rest of the world what to do.

The intervening years have brought us full circle to present-day America. What have we learned since then? Well, for one thing, that Singapore was right to hold up the mirror to American indiscipline as manifested by the likes of Fay and similar louts. Let's just say America still has fearsome issues dealing with self-control and self-discipline. Some time after returning home, Fay was found to be sniffing butane. As you probably have figured, the plight of America is that of Michael Fay writ large. The US is an addict not to butane but to debt. Just as Fay had all sorts of apologists: "Oh, he's just a kid" (he was actually 18 by then), and "Oh, he was diagnosed with ADHD"; so does America have its share of "deficits don't matter" mathlexics and stimulus junkies with nothing to show for.

The larger point is that, unfortunately, the rest of the world has been lax in caning America and tossing it in the gaol for even more outrageously loutish behaviour. By gladly funding this wastrel nation, the rest of the world has encouraged all sorts of pointless megaspending to no one's particular benefit, Like those that came before it which reached this point of decline, the fundamental identity of America on the world stage is somewhere between a bully and a hypocrite. If you don't push back, it shows no compunction in economolesting you and telling you it's for your own good. Maybe it'll throw in some freedom and growth shtick for good measure.

Some ask, "Why is the world economy so shambolic?" In reply, let's ask "Why doesn't the rest of the world discipline the financial rogue regime that has done the most to vandalize it?" Soon I will write more about how to put America in its place. Certainly, all evidence points to its current indiscipline doing no good for itself or for others.

Following the example of the archetypal Yankee offender Michael Fay, what must be done is clear: Cane it till it's deservedly red, white, and blue. It's high time someone beat some sense into America before it's too late. I guess some folks had the good sense to try and drum discipline into the US so many years ago given the waste it has become.

Funding Carry Trade w/ $, Currency of the Doomed

♠ Posted by Emmanuel in , at 8/24/2010 04:46:00 PM
It is common knowledge by now that next to nothing is going right in the US economy. America's various debt orgies have brought it little but additional misery. Deficit lovers thought they could revive this wasteland by borrowing even more humongous amounts to cure ills caused by borrowing too much in the first place. In the end, nobody feels sorry for America--except perhaps Martin Wolf, who's become something of an apologist for Anglo-Saxon orthodoxy as of late. It's justice served: if you act foolishly, you fully deserve what's coming to you.

As if we needed even more proof of the descent of this economic wasteland comes even more news of its pointless existence. Briefly, the "carry trade" is one of the most basic plays in foreign exchange. One borrows in a currency charging lower interest--the "funding currency"--and lends in a currency yielding higher. In the past, nearly zero-yield Swiss francs and Japanese yen were the favourite funding currencies of foreign exchange traders. However, a comatose US economy has meant policymakers keeping similarly low interest rates Stateside.

Voila! The dollar is now becoming a funding currency of choice. Not only is it yielding next to nothing, but limited expectations of the US escaping the ambit of its self-inflicted and wholly deserved financial ruin mean many are willing to use the dollar as a cheap and stably moribund funding currency. That is, a funding currency is best provided by an economy with few growth prospects that may require interest rate rises to cool down. Reuters explains this latest piece in the puzzle of American decline:
While the dollar is still far from surpassing the Japanese yen and the Swiss franc as the world's funding currency of choice, investors are no longer rushing to buy the greenback as a safe haven any time trouble erupts worldwide. While not inherently bad for the dollar, being a funding currency is a sign of investors' disenchantment in U.S. economic growth and return potential. In time, countries with funding units face difficulty attracting foreign investment, further eroding economic prospects and the attractiveness of their currency.

On Thursday for example, the dollar sold off against both yen and Swiss franc after a report showed factory activity in the U.S. Mid-Atlantic region unexpectedly contracted. Both currencies are lower yielding than the dollar, making them better funding options. Until recently investors would have sold them and bought back dollars after the headlines.

The move on Thursday "was not a flight into U.S. dollars, but a flight out of the dollar," said Douglas Borthwick, a managing director for trading at Faros Trading LLC, a forex execution firm in Stamford, Connecticut. "If the dollar is no longer seen as the destination for the 'flight to safety' then the market will use it as the currency to be short against high-yield trades given it will shield them the most from adverse moves," he added. "Thus it would become the funding currency of choice."

In the forex markets, a funding currency is used to finance so-called carry trades. A carry trade involves borrowing in a low yielding currency to buy higher yielding assets elsewhere. High liquidity, low yields and low volatility are all desired traits in a funding currency. The Japanese yen fit all of those attributes for years, making it popular for trades involving the Brazilian real, the Mexican peso and the Australian dollar.

"There's a possibility the dollar will be just like the yen a couple of years ago," said Dean Malone, a currency director at Compass FX in Dallas, Texas, which sold U.S. dollar versus Swiss francs on Thursday. "With yields these low, there's simply very little appreciation value in the dollar," he said. "Until we turn the corner, until employment picks up and the Fed decides to start raising interest rates, markets will keep looking for higher returns elsewhere. And the dollar may be used to help fund those trades..."

Some analysts are cautious however on reading too much into the dollar's recent trading behavior. They note that when taken into account the implied volatility and yield spreads across currency pairs -- key measures to help gauge a carry trade efficiency -- the dollar doesn't stand out as a funding unit.

Analysts at RBC Capital Markets compile a "carry value barometer," which ranks funding currencies, using option prices and measuring yield spreads adjusted for volatility. According to the bank's latest reading the Canadian dollar is now the best funding currency, in particular for trades involving the Australian dollar, South African rand, the Brazilian real and the Turkish lira.

In comparison, the dollar ranked between the 4th and 6th best option among 8 currencies, involving the same pairs. "No doubt the low yields are hurting the dollar," said Todd Elmer, a G10 currency strategist for Citigroup Inc. in New York. "But I'm not sure about selling it to buy the yen and the Swiss franc for some potential marginal yield gain."
I don't need to spell out what it means when some traders view USD as a better funding currency for the carry trade than the yen given the state of the Japanese economy for the last two decades. We knew it all along: America stinks and so does its currency. Long live the carry trade! I think it's time I took a punt on AUD/USD...

Is CSR a Distraction From Solving Social Ills?

♠ Posted by Emmanuel in at 8/24/2010 12:13:00 AM
Here we go again for another round of the endless debate about whether corporations are responsible for performing socially beneficial actions. Milton Friedman famously argued that the social responsibility of business is to increase its profits and nothing more. That is, corporations as artificial persons according to law were not obliged to address "social responsibilities." Rather, it was up to individuals outside of their roles as corporate actors to address social issues:
Of course, the corporate executive is also a person in his own right. As a person, he may have many other responsibilities that he rec­ognizes or assumes voluntarily-–to his family, his conscience, his feelings of charity, his church, his clubs, his city, his country. He may feel impelled by these responsibilities to devote part of his income to causes he regards as worthy, to refuse to work for particular corpo­rations, even to leave his job, for example, to join his country's armed forces. If we wish, we may refer to some of these responsibilities as "social responsibilities." But in these respects he is acting as a principal, not an agent; he is spending his own money or time or energy, not the money of his employers or the time or energy he has contracted to devote to their purposes. If these are "social responsibili­ties," they are the social responsibilities of in­dividuals, not of business.
Now, Aneel Karnani at the University of Michigan has been one of the most vocal modern-day critics of corporate do-gooding. He thinks microfinance misses its mark. He also thinks there is no such thing as a fortune at the bottom of the pyramid. Although I am not in agreement with Karnani on either count, he is back with yet another naysaying missive, this time in the pages of the MIT Sloan Management Review. Here, Karnani makes an even more damning suggestion than the late Milton Friedman. Whereas Friedman merely said that CSR was better suited to individuals, not corporations, Karnani suggests CSR actively harms the process of addressing social ills:
Very simply, in cases where private profits and public interests are aligned, the idea of corporate social responsibility is irrelevant: Companies that simply do everything they can to boost profits will end up increasing social welfare. In circumstances in which profits and social welfare are in direct opposition, an appeal to corporate social responsibility will almost always be ineffective, because executives are unlikely to act voluntarily in the public interest and against shareholder interests.

Irrelevant or ineffective, take your pick. But it’s worse than that. The danger is that a focus on social responsibility will delay or discourage more effective measures to enhance social welfare in those cases where profits and the public good are at odds. As society looks to companies to address these problems, the real solutions may be ignored.
In cases where profitability and achieving social objectives are in opposition, Karnani suggests a three-pronged government regulation, watchdogs and advocates, and self-control:
So how can that balance [between profits and the public good] best be struck? The ultimate solution is government regulation. Its greatest appeal is that it is binding. Government has the power to enforce regulation. No need to rely on anyone’s best intentions.

But government regulation isn’t perfect, and it can even end up reducing public welfare because of its cost or inefficiency. The government also may lack the resources and competence to design and administer appropriate regulations, particularly for complex industries requiring much specialized knowledge. And industry groups might find ways to influence regulation to the point where it is ineffective or even ends up benefiting the industry at the expense of the general population.

Outright corruption can make the situation even worse. What’s more, all the problems of government failure are exacerbated in developing countries with weak and often corrupt governments. Still, with all their faults, governments are a far more effective protector of the public good than any campaign for corporate social responsibility...

Civil society also plays a role in constraining corporate behavior that reduces social welfare, acting as a watchdog and advocate. Various nonprofit organizations and movements provide a voice for a wide variety of social, political, environmental, ethnic, cultural and community interests...

Overall, though, such activism has a mixed track record, and it can’t be relied on as the primary mechanism for imposing constraints on corporate behavior--especially in most developing countries, where civil society lacks adequate resources to exert much influence and there is insufficient awareness of public issues among the population...

Self-regulation is another alternative, but it suffers from the same drawback as the concept of corporate social responsibility: Companies are unlikely to voluntarily act in the public interest at the expense of shareholder interests. But self-regulation can be useful. It tends to promote good practices and target specific problems within industries, impose lower compliance costs on businesses than government regulation, and offer quick, low-cost dispute-resolution procedures. Self-regulation can also be more flexible than government regulation, allowing it to respond more effectively to changing circumstances.

The challenge is to design self-regulation in a manner that emphasizes transparency and accountability, consistent with what the public expects from government regulation. It is up to the government to ensure that any self-regulation meets that standard. And the government must be prepared to step in and impose its own regulations if the industry fails to police itself effectively.
And then he goes back into neo-Friedmanite mode. Instead of just alluding to following laws as Friedman does, Karnani places priority on devising laws in such a way that corporate malfeasance imposes too high a cost. In so doing, untoward acts are avoided since, well, they eat into profits:
In the end, social responsibility is a financial calculation for executives, just like any other aspect of their business. The only sure way to influence corporate decision making is to impose an unacceptable cost—regulatory mandates, taxes, punitive fines, pubic embarrassment—on socially unacceptable behavior. Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit. And that renders such pleas pointless.
I have several issues with Karnani's reasoning. First, laws cannot be devised as to foretell every form of corporate malfeasance. As we have seen, corporations have been cunning in working around regulation given that the resources at their disposal are usually greater than those of governments. Second, different nations have varying institutional capacities to enforce the law. That is, laws may look pertinent and stringent on paper, but implementation is another matter entirely. Third, it is entirely conceivable that a corporation can follow the letter of the law but act in bad faith.

While Karnani is worth listening to in order to sharpen arguments as to the merits of CSR, his alternatives are not quite the solutions we're looking for. With regard to the current topic, it's repackaged Freidmanite reasoning.

PRC Labour Costs Too High? SE Asia May Beckon

♠ Posted by Emmanuel in ,, at 8/23/2010 12:02:00 AM
Here's another slant on the familiar story of rising labour costs in China. It may indeed be the case that countries in export competition with China are also experiencing labour unrest over low wages. Again, China often sets the standard others have to benchmark themselves against in the wider East Asia region. So, if wage rise in China, the understandable response of others will be to demand similar rises.

Be that as it may, many countries in Southeast Asia are more than competitive with China from the standpoint of wages considered alone. However, labour is but one component in the decision to site manufacturing as you too have to factor in transportation costs, worker productivity, and domestic political stability. Below, the Wall Street Journal focuses on infrastructure development in particular, finding Southeast Asian nations wishing to compete with China lagging well behind. There are no real objections from me to this observation, though it must be noted that efforts are underway to correct this situation.

First is the ASEAN single market scheduled to come into effect by 2015 and remove impediments to the movement of goods, services, capital, and (skilled) labour across the region. Second, regional firms are already busy linking up to create working partnerships. If you're an IPE junkie, that's the difference between regionalism and regionalization. Regionalism involves national governments establishing frameworks for regional cooperation with each other, while regionalization is more organic in that individuals, firms, and other private actors in the region create relationships across national boundaries themselves.

In either case, I do believe things are looking up in Southeast Asia--especially compared to mostly moribund Western developed economies:
A key example is Southeast Asia, a region of nearly 600 million people that was once one of the world's investment darlings until it was eclipsed by China. The average factory worker in Vietnam made about $136 a month last year, in Indonesia, $129 a month, well below the $413 a month in China.

But Southeast Asia also faces enormous hurdles, including underdeveloped legal systems and problems with corruption. There is also the possibility that costs could spiral more than expected as workers learn more about wage gains in China and press for raises.

"Most of the countries, if not all, look to China for pricing direction," said Bruce Rockowitz, president of Hong Kong-based trading company Li & Fung at a recent press conference. Even so, Li & Fung Ltd. has been able to mitigate some of its rising costs by shifting business to places such as Indonesia and Vietnam.

Several Southeast Asian countries—including Cambodia, Vietnam and Indonesia—lack sufficient infrastructure to support much larger manufacturing industries, even though their wages are cheaper than China's. Individual Southeast Asian countries also lack the scale to single-handedly absorb a massive influx of jobs from China.

Leaders in the region are pressing ahead with plans to stitch together the patchwork of nations into a common market and production platform by 2015. If fully realized, the project will include fewer restrictions on the movement of skilled labor from country to country and streamlined customs procedures.

Southeast Asian countries are also making headway on road and rail investments. Efforts funded by the Asian Development Bank and others have created three major overland trade corridors, with improved highway connections across Cambodia, Thailand, Vietnam and Laos.

Many companies are pursuing the same goals on their own. In the garment industry, more than a dozen Southeast Asian suppliers have reached agreements recently to more-closely integrate their supply chains by linking stitching companies in places such as Cambodia with raw-material makers in Thailand or other nearby countries. The companies effectively agree to market goods jointly so that they appear similar to suppliers in China, which often offer all the steps needed to make a whole garment, including access to yarns, fabrics, buttons and sewing, in the same area.

The long-term goal is to make Southeast Asia operate like one country with many states, rather than a region of 10 nations, says Van Sou Ieng, chairman of the Garment Manufacturers Association in Cambodia. "We have huge differences, but we have to make it happen" to grab more business from China, he says.

A Bad Idea? Using Facebook to Catch Tax Cheats

♠ Posted by Emmanuel in , at 8/20/2010 02:02:00 AM
Dear readers, let me begin by saying that I am on Facebook not by choice but by social pressure. In marketing, one of the observed phenomena in the diffusion of innovations is precisely others continually asking you to adopt something. And so it was with Facebook: I just felt sufficiently harassed that I joined Facebook even if I almost never visit it except to reply to queries and friend requests. As a courtesy to others, you will often be made to do things you do not necessarily find necessary.

However, there are more sinister or creative ways to use Facebook that I'm now discovering aside from well-documented instances of those snooping for private information to facilitate identity theft. Earlier this year, I received a seemingly innocent message on Facebook from someone I didn't know inquiring whether I was in touch with so-and-so. This struck me as unusual insofar as this person had a profile that was easily accessible. Therefore, I told the the person inquiring to look up so-and-so's easily accessible profile. The next message explained a whole lot more: This stranger turned out to be a bank employee claiming an "urgent" need to get in touch. Sniffing around, I discovered that local banks have developed the practice of using Facebook to track down delinquent accounts like, presumably, so-and-so who was my Facebook friend. I cut off correspondence then and there as I do not believe Facebook is the proper forum for such sneakiness.

Similarly, I nearly forgot to post about this interesting article concerning how the new Philippines government aims to use social networking sites to corral tax cheats and improve collection [!] Again, it boils down to persons' willingness to snitch on their "friends," or otherwise use social networking sites to pass information about alleged tax cheats. The latter raises interesting safety issues, among other things:
The new Philippine government of President Benigno “Noynoy” Aquino is enlisting Facebook and Twitter in an ambitious effort to close the country’s gaping budget deficit. Filipinos are fervent users of new media, leading the world in text messaging. Cesar Purisima, the finance secretary, wants citizens to tweet cases of tax evasion and corruption among tax collectors or report them on Facebook.

Mr Aquino and his team must tackle a budget deficit that hit a record 3.9 per cent of gross domestic product last year. They want to reduce the gap to 2 per cent within three years, mainly through better and more honest tax collection. The campaign comes as Asians increasingly use social networking sites, in ways that not only change how they relate with family and friends but also with government.

Asia has more than 64m Facebook users, according to GreyReview, a website that tracks social media in Asia. The Philippines has about 11m Facebook users, the most in Asia after Indonesia, which has just over 18m. Observers credit new social media with helping Mr Aquino, 50, score a landslide in the recent presidential polls. His Facebook account – which features user-created videos urging people to vote for him – generated 1m fans shortly after it was created, easily becoming one of the country’s most popular sites...

Philippine officials are hoping that the outrage over widespread tax evasion that has crimped the government’s ability to deliver basic services will encourage people to report suspected cases of tax evasion and smuggling to the authorities. The government is also asking citizens to send photos of homes, cars and other properties of tax officials suspected of living lavish lifestyles way beyond their government salaries.

Social networking experts said popular goodwill towards Mr Aquino might encourage people to respond favourably to the tax appeal. “Users who are usually allergic to government exhortations in the traditional media are more accommodating on the web, perhaps because many of the content are user-generated and rely on viral distribution,” said Justine Espina-Letargo, a multimedia journalist and expert on online political campaigning.
Again, there are many security issues here for those sharing potentially incriminating evidence. I, for one, do not believe Facebook is the ideal platform for this sort of activity.

Long Live the Mighty Euro

♠ Posted by Emmanuel in , at 8/19/2010 05:10:00 PM
In case you haven't caught it yet, do read ECB Executive Board Member Lorenzo Benito Smaghi's piece in Foreign Affairs on why the euro is not only surviving but thriving amidst all the fearmongering about the imminent demise of the Eurozone and other similar folk tales. With the euro well past the $1.30 handle and the yen needing intervention against the dollar to prevent the greenback from falling below 83 yen to the dollar, I guess we all know which currency was, is, and will be on the back foot. Here is the concluding section where Smaghi not only charts the changes that should help ensure no more Greek fiascos, but also offers a prediction of continued success for the single currency:

Just as the economic crisis exposed problems in the Greek economy, it also exposed weaknesses in the euro’s institutional framework. Restoring confidence will require strengthening that framework. A task force headed by EU President Herman Van Rompuy is scheduled to offer concrete proposals to do so by the end of this year. And in June, the ECB released its own recommendations: stronger independent surveillance of the budgetary policies of the member states with more automatic implementation of sanctions; improved surveillance of country competitiveness to ensure that member states continue to converge economically; and a crisis management structure with strong conditionality to support countries that implement adjustment programs. We acknowledge that it will not be possible to expel member states that fail to comply with EU budgetary guidelines, so such a threat would ultimately not be credible.

The EC and the European Parliament have also called for the creation of three financial supervisory authorities (the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority) and a regulatory authority (the European Systemic Risk Board). Because the economies of the eurozone are so interconnected, eurozone-wide supervisory and regulatory authorities are necessary. They would have the discretion to press national governments to remedy problems and would be independent enough to act preemptively, without having to wait for a crisis to galvanize politicians to action. Some may dislike the idea of giving international bodies the power to constrain national economic policy. But financial contagion spreads too quickly, and European taxpayers have had to pay for the failures of other countries too often, for the current system to remain.

Forecasting the euro’s demise was premature. The EU and eurozone countries were able to respond to the financial crisis with appropriate corrective measures: many countries adopted strong fiscal adjustment packages; eurozone countries have announced, and in some cases already implemented, unprecedented structural reforms, not least of which was their joint decision to coordinate and publish the results of their bank stress tests; the new European Financial Stability Fund has been established and can be used to support other eurozone countries in distress, and a task force on reform will offer and approve concrete proposals to strengthen eurozone governance by the end of the year.

One might criticize these measures for having been taken only after a crisis was eminent, but this is ultimately how democracies work in the face of difficulties. Problems in the economies of eurozone countries and in the framework of the monetary union will need to be addressed, but all the constituent countries will emerge stronger if they continue to pursue the right adjustment policies. Europe will need to find the right mix of cooperation, in defending its common interests at the global level, and competition in incentivizing growth. It will need to rely both on the center, which must ensure strong fiscal policy, and on the member states, which control much of the rest of economic policy. But one should take inspiration from the EU’s history. Finding these balances has historically been one of Europe’s key strengths.
I guess folks who've been at the epicentre of two devastating, globe-spanning conflicts know that keeping it together makes more sense than the alternative--and that goes whether you're talking about security or currency matters.

The "Great Brain Race" in Global Higher Education

♠ Posted by Emmanuel in at 8/19/2010 12:23:00 AM
Global higher education is a topic of obvious interest to me since I will soon need to find more permanent university employment. However, my personal circumstances aside, there are obvious reasons why higher education should be followed by IPE scholars. First, higher education is a significant industry in itself, especially if countries can attract many full fee-paying foreign students. UK universities, for instance, claims that higher education makes a £59 billion contribution to annual GDP. Second, it is commonly believed that cutting-edge education can increase national competitiveness. For instance, while the UK has slashed funding for its universities, which are almost entirely public unlike those in the US, cuts have not been levelled in science, technology, engineering, and mathematics. These STEM subjects are supposedly key to maintaining and building competitiveness compared to, say, political science and English majors whose worth is less obvious. Third, the shifting balance of who gets what, when, and where in terms of the best and brightest students and instructors also suggest how the balance of global economic activity is shifting.

With regard to the latter, the most interesting phenomenon in recent times has been the eagerness of US and UK universities as well as others in the West to establish satellite operations in emerging countries. As with most things, marketing plays a role. One of the most successful and enterprising of British universities, for instance, is Nottingham. Not only do they have a campus in Ningbo, China that is relatively free from state interference--a colleague tells me he had no trouble getting a copy of Jung Chang's state-banned Mao: The Unknown Story for its library--but they set up another campus in Malaysia last year. If imitation is flattery, the signature building of the Ningbo campus pictured above is similar to that of the original campus.

I needn't belabour the point that most US institutions of higher education are feeling the pinch just as those in the UK are. With nearly all US states in poor fiscal shape, programmes there are being hacked and slashed like they are here. What's more, private institutions have not had it much better insofar as their endowments were badly hit by the financial crisis. These are pretty crappy times for Western academic institutions indeed. The Christian Science Monitor has an excellent article on the bedraggled state of American higher education.

Certainly, while Anglophone institutions still dominate university league tables worldwide, I wouldn't be at all surprised if the landscape is much changed in, say, the next 20 years. Aside from the usual suspects China and India, regional powerhouses like Hong Kong and Singapore look promising, as do free-spending Middle East countries. New Zealand is certainly no slouch in marketing higher education. For an interesting read on our changing educational milieu, do read Ben Wildavsky's new book The Great Brain Race: How Global Universities are Reshaping the World. You can view a YouTube clip where Wildavsky introduces his book, while the following is the press blurb. Interestingly, the author does not see a winner-takes-all situation emerging, but one where shared global knowledge has the potential to be the rising tide that lifts all boats:
In The Great Brain Race, former U.S. News & World Report education editor Ben Wildavsky presents the first popular account of how international competition for the brightest minds is transforming the world of higher education--and why this revolution should be welcomed, not feared. Every year, nearly three million international students study outside of their home countries, a 40 percent increase since 1999. Newly created or expanded universities in China, India, and Saudi Arabia are competing with the likes of Harvard and Oxford for faculty, students, and research preeminence. Satellite campuses of Western universities are springing up from Abu Dhabi and Singapore to South Africa. Wildavsky shows that as international universities strive to become world-class, the new global education marketplace is providing more opportunities to more people than ever before.

Drawing on extensive reporting in China, India, the United States, Europe, and the Middle East, Wildavsky chronicles the unprecedented international mobility of students and faculty, the rapid spread of branch campuses, the growth of for-profit universities, and the remarkable international expansion of college rankings. Some university and government officials see the rise of worldwide academic competition as a threat, going so far as to limit student mobility or thwart cross-border university expansion. But Wildavsky argues that this scholarly marketplace is creating a new global meritocracy, one in which the spread of knowledge benefits everyone--both educationally and economically.

Why Mexican, Not Filipino Migrants Were Hit in 09

♠ Posted by Emmanuel in , at 8/18/2010 12:17:00 AM
Among lands sending emigres, perhaps none match the Philippines in terms of the geographical spread and variety of occupations filled by its economic migrants. Yes, it even sends a blogger working at a British university you should know of--yours truly! A few months ago, I touched upon both reasons as to why the Philippines did not really suffer large falls predicted by many in the development community in terms of both demand for migrant workers and remittances sent home. That post also suggests why economists mistakenly assumed the worst for the PR in 2009. Unfortunately, our Mexican counterparts did not have share the same fortunate fate as they've been hard hit by putting too many eggs in one basket (the United States) and one occupation (construction).

I somehow missed this New York Times article by Jason DeParle when it first came out, but I guess now is as good a time as any to rectify this omission. He is perhaps the most knowledgeable reporter on global migration. While he tends to dwell too much on the negative--anecdotal evidence on the social effects of mass migration, worker abuse, and so forth--you cannot necessarily generalize across cases. Given the increasingly skilled Filipino workforce going abroad, gains in human capital manifest themselves in concomitantly increasing social protections. Anyway, before I get too long-winded, here is what he writes on the illuminating Philippines and Mexico comparison:
Migrants from the developing world sent home $316 billion last year, according to the World Bank. That was 6 percent less than the previous year, but more than the bank predicted, and $80 billion more than migrants sent as recently as 2006. Since private investment fell much more, the relative importance of the migrants’ money grew.

While remittances to Mexico took an outsize hit (16 percent over two years), the Philippines offers a contrasting model of overseas work. Mexicans are closely tied to one place (the United States), and one industry (construction). Filipinos work across the globe in dozens of occupations. Mexican migration is unmanaged and mostly illegal. Filipino workers are promoted by the state, and most go with contracts and visas.

Mr. Roque has spent his career selling Filipino labor, and as the economy slowed he stepped up his marketing. He won agreements with four Canadian provinces, which took thousands of temporary workers, including nurses, nannies, and coffee shop workers. In Saudi Arabia, a construction boom brought more jobs in the building trades. In 2008, President Gloria Macapagal Arroyo made a plea to the emir of Qatar for more work visas.

Despite the downturn, annual deployments of workers rose by a third over the past two years, to 1.4 million. The sums they sent home rose 19 percent, to $19.4 billion, according to the World Bank. “People were projecting a doomsday scenario,” Mr. Roque said.

The Magsaysay Training Center in Manila feels less like a vocational school than a theme park of migrant trades, filled with replicas of foreign work sites. Student sailors in a simulator room steer ships through high-tech storms. Student bakers in toques practice cream puff injections. A glass wall offers a view of a luxury hotel room, where instructors watch trainees wipe the marble bath and stock the minibar.

Brynnerson Cepe, 25, beamed as he bustled about in a crisp gold uniform. He spent four years earning a college degree in hotel and restaurant management and three years as a Starbucks supervisor. But in the hierarchy of Philippine status and pay, the real upward movement would come from making a hotel bed overseas. “You can earn double or more,” he said. “And you can get other opportunities.”
Endless, rather communistic books have been written about how the Philippines exploits its citizens by sending them abroad to send home much-needed foreign exchange. Still, the United Nations designates the Philippines as a country observing best practices in handling migration. While it would of course be nice if there were sufficient opportunities at home for everyone, such is not the case--as it is many parts of the globe, including the land of the gringos itself.

2010 looks like it will be another banner year in terms of the number of migrants sent abroad and the remittances received for the Philippines. As long as pay is remunerative, skills are developed that offer possibilities for upward mobility whether at home or abroad, and social protections are available, then I have few qualms about those exploring migration opportunities. In a globalized world where the labour market is no longer your backyard, you must be prepared to move where the work is and not wait for work to come to you.

I practice what I preach: When you must go, you go.

Add to Lexicon of Mathlexia: UK "Deficit Deniers"

♠ Posted by Emmanuel in , at 8/18/2010 12:10:00 AM
I must admit to warming to the UK's new Chancellor of the Exchequer George Osborne. Unlike Tim "Deficits Still Don't Matter" Geithner and other acolytes of Cheneynomics, he doesn't flinch when it comes to administering cuts to the UK budget lest it become as fiscally and morally bankrupt as its erstwhile Anglo-Saxon sparring partner.

We are all familiar with global warming deniers, many associated with various conservative think-tanks, that have no truck with science. Now Osborne introduces us to another set of folks who are mathematically instead of scientifically challenged: "Deficits don't matter because our great nation will always find some dumb sumbi***es to lend to us" and all that jazz. Fortunately, current UK leadership has had enough of American-style jihads on fiscal sanity:
George Osborne today insisted making Britain “a more equal and fair” country was at the heart of his economic policy. The Chancellor used speech to the City to insist that spending cuts would not destroy growth nor make Britain less fair. He also attacked “deficit deniers” in the Opposition parties for being willing to pass on huge debts to the nation's children.

Speaking before his speech, he said: “I want, fundamentally, a child born at the end of this period of government to have better life chances than a child born at the beginning of this government if they are born in disadvantaged circumstances.” The Chancellor added: “I also want to make sure that child is not burdened with debts that this generation were not prepared to pay off.”

He said ring-fencing the NHS and overseas aid budgets showed the Coalition was committed to fairness, although it meant bigger cutbacks elsewhere. Mr Osborne argued in his speech that public spending is being shifted to areas that will boost Britain's long-term success...“We are shaping the economy of the future by promoting a pro-growth agenda,” he said at Bloomberg's offices. “It is not about how much the government spends but about what the government actually does with the money...”

He said there were grounds for "cautious optimism" over the country's prospects, but warned that the situation could deteriorate quickly if the Government went into "denial" over the scale of the deficit. "Employment is growing at the fastest pace for over a decade, confounding predictions that the economy cannot generate private sector jobs. Manufacturing is picking up and exports are recovering thanks to increasing global demand," he said.

"As the Bank of England confirmed last week, this is consistent with the kind of gradual recovery forecast by the Office for Budget Responsibility at the time of the Budget. The much-needed rebalancing of our indebted economy - away from government and towards the private sector, away from consumption and towards business demand, away from imports and towards exports - is beginning."
Thankfully, the rest of the world seems to be keener on following the UK's lead, not that of the American heartland of deficit deniers. Let's just see where the latter end up; I can hardly wait.