Nordi-Flexi-Curity

New Economist has been indulging himself (actually, truth be known he wants us to indulge him) with three posts on the Nordic Model (here, here and here).

Two things strike me. Firstly the fact that the UK presidency has been an absolute non-event (except for getting the Turkey negotiations started) since we were promised an ambitious programme of debate about precisely the topic of the EU social and economic model.

Secondly, as the last paper cited by New Economist makes clear:

The analysis also provides strong support for so-called absolute β-convergence among the Nordic countries. Thus, initial differences between the countries, in terms of real output per employee, real output per hour, and real wage per employee, slowly fade away over time. This finding tells us that the Nordic countries are not that different when it comes to saving rates, levels of the technology, and government policies.

Which means, of course, that these countries would have been ideal candidates for forming a currency union. Oh well, things that might have been! (Also it is perhaps worth making a mental note to check out more about that Nordic recession in the early 90s and what happened next).

Not Good News On European R&D

This is not very encouraging:

European spending on re-search and development is falling further behind target, widening the innovation gap between the EU and competitors such as the US and Japan, two studies show.

North American and Asian companies are outpacing European businesses in R&D investment and spending more in high-technology sectors, according to data to be released on Friday by the European Commission’s research directorate.

It is doubly not very encouraging due to a point made in a paper which Brad Setser points us to. The paper is the U.S. and Global Imbalances: Can Dark Matter Prevent a Big Bang? by Ricardo Hausmann and Fredrico Sturzenegger. Basically they argue that the net US financial position is not as dire as it seems due to the existance of ‘dark matter’ (or in more converntional terms, due to the part of the iceberg which isn’t visible and measured). US assets they argue are conventionally undervalued due to the presence of ‘hard to measure’ components. Central to their argument is this point:

We would say that EuroDisney in reality is not worth 100 million (what BEA would value it) but four times that (the capitalized value at our 5% rate of the 20 million per year that it earns). BEA is missing this and therefore grossly understates net assets. Why can EuroDisney earn such a return? Because the investment comes with a substantial amount of know-how, brand recognition, expertise, research and development and also with our good friends Mickey and Donald. This know-how is a source of dark matter. It explains why the US can earn more on its assets than it pays on its liabilities and why foreigners cannot do the same.

I would say the argument that ‘foreigners’ are unable to leverage “know-how, brand recognition, expertise, research and development” is a ridiculously simplistic one, and it almost stretches the bounds of credulity that someone might believe this, but that having been said, if here in Europe we continually fail to maintain our R&D pace it will not be such a silly argument at some stage in the foreseeable future.

Khaled Al_Masri Update

Well, as the FT puts it:

Ms Rice on Wednesday signalled a major policy shift by stating explicitly that US personnel were prohibited from using “cruel, inhumane and degrading” treatment of detainees as she weathered protests in Europe over secret Central Intelligence Agency prisons and alleged torture.

As I have been arguing for some time now Condaleeza Rice is definitely interested in bridge building and not in rubbing salt in old wounds. In doing this she will have to face those inside the United States who favour a more protectionist and isolationsist policy. Ca bouge. Good.

Meantime we could ask the question whether most of the buck for not explictly prohibiting these practices previously will now be passed to Dick Cheney, certainly former Chief of Staff to Secretary of State Colin Powell Colonel Lawrence Wilkerson thinks it might well be:

Sarkozy Cancels Trip To Martinique and Guadeloupe

I still feel very ambivalent about Nicholas Sarkozy. Clearly France needs reform, and he seems to be the most likely politician to bring it, but some of his words and deeds worry me. His attitude towards positive discrimination as a step towards equality of opportunity for the ‘new French’ is obviously a point in his favour (at least for me it is), on the other hand his ‘tightening’ of the immigration laws is a step in entirely the opposite direction. France needs to resolve its ability handle cultural diversity, not turn its back on it. Today we have another example of what makes me nervous:

“France’s colonial past caught up with Nicolas Sarkozy on Wednesday as the interior minister cancelled a Caribbean trip to avoid protests over what some claim are political attempts to glorify the country’s history as a colonial power.”

“The last-minute cancellation of Mr Sarkozy’s trip to the French overseas territories of Martinique and Guadeloupe is the latest sign the government has raised racial tensions by introducing a law calling for schools to teach the “positive role” of colonisation.”

In a globalised world, internal politics and external politics are hard to separate, especially when there are parts of France which lie outside the geographical frontiers of Europe. My point would not really be whether everything was bad about colonialism or not, but about what someone who claims to be in favour of ‘deregulation’ is doing introducing a law which states:

“the school syllabus should recognise, in particular, the benefits of the French presence in overseas territories”.