Author Archives: Edward Hugh

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

Garden Of The Forking Paths?

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“Global imbalances matter” seems to be the favoured warcry over at Brad Setser’s blog these days (I’m not sure anyone really disagrees with the idea that they matter, all the arguing seems to be about how much and why). Recently however Brad seems to be drawing support from a rather unexpected quarter: “one part of the Economist” (well, one part is definitely better than none), the part which believes that despite what happened in 2005, 2006 will be the year of the “great dollar decline”: And why would this be? Because, of course, global imbalances do (here read the US CA deficit), in fact, matter.

Now there is another view available on this.

However this issue is more interesting, since the part of the Economist which believes that the US CA deficit will prove decisive in 2006, also seems to believe that global ageing isn’t in fact a terribly important phenomenon (and here).

The Economist seems to take the view – as Claus Vistesen puts it – that “Rich countries’ populations are shrinking … not to worry though“?

In fact Claus seems much nearer the mark than the part of the Economist which seems to be arguing that ageing doesn’t matter too much when he says:

I agree with the zest of their arguments, namely that the new realities mean that there will be fewer people in the workforce to support more old people in the future. In a global perpspective I also believe that the world would benefit from having fewer people on the whole. However, the point that escapes The Economist in the midst of their optimism is that some countries will have a hell of a lot more difficulties adapting than others, and as such these demographic trends might have a real negative effect, at least some places in the world.

Yes, I would say that this is just the point that escapes the ‘ageing doesn’t matter so much’ part of the Economist, who seem to believe that population meltdown in Japan wouldn’t be a problem since “the last Japanese will (only) die as soon as 2800.” (Actually the article on Japan is near to scandalous, since it only focuses on the legal minimum pensionable age, and misses entirely the important point that most Japanese already continue working after 65, and even by the age of 75 25% of the population are still working).

I have already posted extensively on the population turning point in Japan (and here). So now I would simply make two points. Firstly it is the age structure of the population which matters, not its size, and secondly, it is curious how all those people who seem to want to argue that the US current account deficit is the most important determinant of today’s global economy also feel themselves impelled to downplay (if not actually try to ridicule) the idea that changing global demography (from Bolivia, to Vietnam, to Turkey, to China, to France, to Germany, to Japan) has any important role to play in helping us understand current economic phenomena. I think there is a choice here: two world-views are colliding, and the paths are forking.

UK Housing Boom Over?

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This is the first really concrete piece of news we’ve had on the UK housing situation. George Wimpey Plc, Britain’s second-biggest homebuilder by revenue have just announced that full-year pretax profit probably fell for the first time in a decade:

U.K. sales slipped 1 percent to 12,100 homes, with the average selling price dropping 4 percent, more than analysts had expected. Pretax profit was as much as 22 percent below 2004’s record level and at the lower end of estimates, Chief Executive Officer Peter Johnson said in an interview today.

Prospective buyers shunned purchases as Britain’s benchmark interest rate reached 4.75 percent last year, making mortgage payments more expensive. A quarter-point cut by the Bank of England on Aug. 4 has yet to revive prices. Wimpey last reported a decline in annual pretax profit in 1995. The second-half figure also fell, Johnson said today.

Evo Morales Accepts The Invitation

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Another example of the law of unintended consequences: Evo was in Spain on Wednesday, probably partly as a result of the spoof phone invite from a right-wing radio station. This ‘invitation’ opened the door politically for Zapatero to offer a courtesy invite which might have otherwise drawn a lot more political backfire from the PP right.

In fact, as the linked article makes plain, it is Spanish interests – especially Repsol YPF, Iberdrola and Red Electrica – that are most immediately threatened by Morales nationalisation plans. This makes yet more dog-in-the-mangerism from the PP (Rajoy was too busy to meet with him) very hard to understand. One more time they seem to be putting Party before Common interest, hoping to be able to ensnare Zapatero in Morales’ web for short term political advantage without thinking too much about the actual future of Bolivia, or of Spanish interests there.

Morales was also in Brussels yesterday, where he met, of course (who else), Javier Solana.

Oh, How Are The Mighty Fallen!

I can remember a time when Jeffrey Sachs used to do some pretty innovative work in development economics (and this one). Among other parameters influencing ‘take-off’ he used to think the demographic ones important. Increasingly this seems not to be the case. This podcast interview with Bolivian blogger Miguel Centellas and Jeffrey Sachs is not only informative as to what is happening in Bolivia itself, but also on how Sachs’ thinking is evolving. The three key issues explaining the ‘Bolivian Question’ are now: the fact that it is land-locked, the fact that there is huge inequality, and the fact that there is political instability. The first is a reality which only infrastructural investment can ammeliorate, but the second two involve addressing demographic issues if you want to move forward. At least that is my view. Incidentally hat-tip to Miguel Buitrago and also see this post and comments on the Ciao blog.

Turkey And Avian Flu

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While a lot of our attention this week is focused on the EU’s energy needs, we shouldn’t neglect this piece of news. Basically I had it right on Monday: unfortunately poor Muhammet Ali Kocyigit did test positive for the H5N1 virus, and the Turkish health minister Recep Akdag was guilty of spreading disinformation earlier in the week when he said that even if the cause of death was unknown, it definitely wasn’t avian flu.

As I also suggest here, Turkey’s progress towards a sophistocated modern democracy will be a long and hard one (that’s why we’ve given them ten years, isn’t it). Equally those of us still able to remember the role of the UK Ministry of Agriculture during the BSE outbreak will be aware that those who live in glass houses shouldn’t throw too many stones.

Quick Response?

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Well the news is coming in thick and fast. The EU Observer informs us this morning that:

The EU might build a new gas pipeline on the Adriatic Sea coast in order to ease reliance on Russia following the Russia-Ukraine gas dispute. Hungarian economics minister Janos Koka told news wires about the plan following a meeting of EU energy experts in Brussels on Wednesday (4 December). Under the scheme, tankers would deliver liquid gas from the Middle East and North Africa to an Adriatic region entry point into Europe. A feasibility study is due by March. The EU experts’ meeting was orginally tabled for May, but was brought forward after Russia turned off gas supplies to transit state Ukraine on Sunday causing sharp drops in deliveries to the EU.

I think all this takes us back to the strategic importance of EuroMed.

All Gas Or Just Hot Air?

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This is a kind of bits-and-bobs post without a lot of coherence, as I am trying to make sense of something which is hard to make sense of, so anyone with more specialist knowledge, please chip-in.

Now I think what we have here is a highly complex situation, and if individual actors behave strangely in a complex situation, this should not in fact surprise us. The big picture scenario is the economic take-off of what are going to be two enormous energy consumers – India and China – and a growing per-capita consumption of energy in the rest of the OECD towards the previous US ‘highs’. This has lead to a large and significant increase in oil prices, and the rest of what is happening can be seen as the scrum which has assembled in the wake.

Now what else do we know?
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Unfit To Lead The G8?

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The question as to whether or not Russia ” truly belongs in the prestigious Group of Eight (G-8) advanced liberal democratic market economies”, and even more to the point, whether it is in a fitting condition to take the helm in that organisation is a question which was asked by Taras Kuzio (Visiting Professor at the Elliott School of International Affairs, George Washington University) in yesterday’s issue of Eurasia daily monitor, – a publication which is rapidly becoming a ‘must read’ for those of us who want to follow what is happening along the EU’s eastern frontier.
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Towards a European strategy for the security of energy supply

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Here’s the link to the EU Energy green paper I mentioned yesterday. As is to be expected, the report is ‘fair and balanced’. The section on nuclear energy focuses mainly on the sovereign decision making process as to its adoption and emphasises the role of Brussels in ensuring environmental safety. It does, however, contain this intriguing paragraph:
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What A Surprise!

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According to the Financial Times this morning “Vietnam’s economy is expected to maintain rapid growth in the year ahead, after its gross domestic product last year expanded 8.45 per cent – the fastest pace of growth in nearly a decade.” This is to be added to the fact that “Economic growth in Vietnam, which averaged about 7 per cent between 2000 and 2004, has been driven in recent years largely by surging exports, after the signing of a long-anticipated bilateral trade agreement with the US in 2001”.

Now let’s take a quick look at the charts, yes, that’s it: median age 25.51, fertility 2.2 , life expectancy 70.61. The median age is still a little low for achieving complete take-off, but it is certainly in at the bottom end of the ‘new tigers’ range, and with fertility down to 2.2 and life expectancy already comparatively high, that median age looks set to rise rapidly.
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