Monthly Archives: August 2005

Optimism On The German Economy

Posted on by

Both New Economist and MacroBlog seem very upbeat about the prospects for the German economy. Macroblog cites Bloomberg and says “Things are definitely looking up“. New Economist is rather more guarded, pointing to the IMF forecast, and the recent Federal Statistics Office announcement that second quarter growth came in at 0%. But New Economist find faith in an (old) Economist view that things are getting better in Germany’s surprising economy (ask Doug on the main page about the surprising bit 🙂 ). As New Economist says “Of course the Economist can get it wrong, but in thbis case maybe they’re onto something”, while as Edward replies “of course the IMF can get it wrong, but in this case maybe they’re onto something”

The Financial Times definitely comes down on the side of the optimism camp, but in their case with significant prudence:

However, fears Germany?s election system might result in a fractious ?grand coalition? between the CDU and Social Democrats may have damped expectations more recently and economists remain cautious about the strength of any German upswing. Holger Schmieding, economist at Bank of America, warned that expectations were fickle and that ?the economic upswings heralded by major surges in the ZEW in mid-2002 and early 2004 both turned out to be disappointingly shallow and short-lived?.

As for me, well, for my part
Continue reading →

Japan’s Population Challenge

Posted on by

In one of those strange coincidences the world’s second and third largest economies are both scheduled to have elections next month – Japan on 11 September, and Germany on the 18th. The coincidences go further, since these two societies are leaders in another, non-economic, sense: they are leaders in the great global ageing revolution. Japan (at 42.64) and Germany (at 42.16) have the highest median ages of any OECD country (Italy comes third at 41.77, while the US is still a sprightly and young 36.27). The two countries also share the problem that they cannot pump up economic growth by introducing more liquidity (money) into the system, or at least the impact rates of doing so have become very low (see this post on the German problem) .

In fact the comparison goes even further since at the end of the day the elections are about pretty much the same issue: how to make the respective economies grow fast enough to be able to pay for the growing pension and health needs.

The Financial Times today has an interview with outgoing Japan economics minister Heizo Takenaka, and Takenaka is quite explicit: changing demographics is Japan?s biggest challenge.

?From now on, the total population of Japan will start falling,? he said. ?That means if we don?t create a system in which the private sector can carry more responsibility, the burden on taxpayers and on the state will become unsustainable.?

The facts indeed are compelling. Japan is in the process of becoming the first major state to experience structurally declining population (correction: as David points out in comments this is misleading for a number of reasons so lets say Japan is the first post-modern state or society with a developed economy to experience structurally declining population. It was not my intention to indirectly pass any judgement on whether Russia is a major state or not). Population was predicted to start falling in 2007, but preliminary data from the first half of the year suggest that the decline may have already begun. There is no end point in sight. The decline, which is also known as the second stage of the demographic transition, is a result of continuing low fertility, and so far there is no clear way back. Most demographic models suggest that fertility in low fertility countries may bounce back a little, but not sufficiently to reach the 2.1 TRF replacement rate (normally the assumption is in the region of 1.9, and estimates vary as to whether this will arrive in 50 years, or in 100). Meantime the UN median estimate seems to suggest that the total population of Japan (currently something over 125 million) will be around the 45 million mark come 2100. Europe and the US look carefully and take note.

ESA and Russia: Together into space?

Posted on by

Interesting news (via Randy McDonald) concerning a partnership between the European Space Agency and Russia to develop the Russians’ new Kliper reusable space shuttle.

It’s all but official?Russia and Europe will soon embark on a cooperative effort to build a next-generation manned space shuttle. Speaking at the Paris Air Show, in Le Bourget, France, in June, Russian space officials confirmed earlier reports from Moscow that their partners at the European Space Agency would join the Russian effort to build a new reusable orbiter, dubbed Kliper. After the cautious optimism they expressed at the beginning of 2005, Russians are now confident that their European partners will be on board for the largest, boldest Russian endeavor in spaceflight in more than a decade.

Interesting to note that, in one of those strange coincidences, the leading designer of the Kliper system is called Vladimir Taneev – the same name as one of the leading characters in Kim Stanley Robinson’s Mars trilogy.

The SPD Opens The Door

Posted on by

The SPD, in the shape of its President Franz M?ntefering, has opened the door – not to swarms of locusts, or hedge fund executives but to the CDU, and its leader Angela Merkel. M?ntefering said at the weekend he would back a grand coalition with the opposition CDU should the German chancellor Gerhard Schr?der lose next month’s general election. Of course, the consensus opinion is that this would just about kill the reform process stone dead. Morgan Stanley’s Elga Bartsch has a reasoned explanation for this view here (NB, you see I don’t only malign her. Hint: try Googling for “Elga Bartsch”).

Economic Adjustment Dutch Style

Posted on by

All is not well in the Netherlands. That was obvious in the June referendum vote, and it is also obvious in the recent economic data. The Dutch economy has been struggling to gain traction of late with poor growth and an actual contraction of 0.5% in the first quarter of 2005. Unemployment too has risen alarmingly for an economy which is often regarded as fairly open and ‘liberal’, from 2% or so at the end of the 90s to around 7% today.

Poverty is also on the rise:

“The most recent preliminary figures from the government’s Bureau for Social and Cultural Planning indicate that at least 11 percent of the Dutch population, or between 700,000 and 800,000 households, lived in poverty in 2004, after the figure had declined steadily in the late 1990s to a low of 10.1 percent in 2000.”

Perhaps not the alarming and dramatic increase the AP writer wants to suggest, but hardly encouraging. Actually I’m not sure I buy the entire slant our journalist/author wants to place on the story either:

“It’s all a sign of economic troubles in a country that is shifting from a traditionally strong social welfare system toward a more free-market approach, with rising health insurance premiums and housing costs. Premiums for health insurance have risen by more than 50 percent on average in the past three years, and are expected to rise by around 10 percent in 2006.

Those trends, combined with government cuts in social spending, have led experts to predict that poverty will worsen in coming years“.

The suggestion here would seem to be that the increase in poverty is a result of the reforms. But don’t demographic factors play a part? If all-over the OECD poverty and old age have a strong correlation, and we now have more old people as a percentage of our society, shouldn’t we, unfortunately, expect poverty to rise? Mightn’t it be that without the reforms things would be worse, not better? And didn’t I read something in the Economist about a soft-landing to the housing boom in the Netherlands, might this not be connected (or be becoming harder)? Any Dutch readers got anything to add?

CAP Research File

Posted on by

In the internal political life of the EU the Common Agricultural Policy seems guaranteed to hold and maintain pride of place as the topic which produces the highest level of acrimony and vitriol per paragraph of debate space. It has also featured of late as the hotspot which lead to the summer low-point in Franco-British relations. Yet while the debate is strong on heat, it is often poor on detailed information. A report whose final draft is being made available to a wider public this week may help to do something to remedy this failing.
Continue reading →

Bra-less In Poland In Wintertime

Posted on by

With apologies to Mel Brooks, and Zero Mostel, this situation is now really getting out of hand. Not only bras, but blouses and T-shirts and mens trousers and pullovers. New Economist has the story here and here. And this on a day when readings of so-called headline inflation (including food and energy) hit the 2.2% per annum level. Fortunately core inflation (without the 2 ‘volatile’ components) is holding steady at 1.4%, but the last thing we want on our wish list for Germany are higher interest rates driven by the need to control the inflationary impact of upward moving clothing prices produced by a desire to protect laggard textile manufacturers from Chinese competition.

Survey: Germany’s (likely) upcoming election

Posted on by

While the more important part of Germany’s electorate seems to be treating the ongoing campaign as some kind of diversion from a rather rainy summer, there is also, according to a poll published in the Frankfurter Allgemeine today, a common understanding that the upcoming federal election – the one that will take place on September 18 if the constitutional court confirms President Koehler’s decision to dissolve the Bundestag – is a particularly important one.

Given this sentiment and the most unusual way the elections were called, it is not entirely surprising that, in addition to the usual pollsters, political scientists concerned with electoral research are having a busy summer. One of them is my friend Thorsten Faas at the University Duisburg-Essen, who is currently asking Germans to spend a couple of minutes filling out an online survey at www.wahlumfrage2005.de (in German).

So if you’re entitled to vote in Germany, are interested in the kind of questions political scientists might ask to make you reveal all your self-contradicting political opinions, and have a couple of minutes to spare for the progress of science, why not take the survey. I already did, and it didn’t hurt…