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".

An Ingenious Solution

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The name of the late Ester Boserup came into my mind during a recent discussion in comments. The Danish economist – who is well respected by specialists, but perhaps insufficiently well known outside the ‘inner circle’ – had some pretty interesting views on global population, agriculture and technology. One of her central themes is that it is the pressure of rising population which acts as a motor of technological change (and not vice versa). A kind of Malthus in reverse. Now the point is that when a process hits a constraint, ingenuity may be brought to bear in a way which not only circumvents but supercedes the original problem. All of this was brought into my mind by news of what has been happening in Harvard recently:

“Scientists at Harvard University have found a way to ?reprogramme? adult human cells to an embryonic state. The discovery could provide an alternative to therapeutic cloning, as a way to make embryonic stem cells that are genetically identical to the patient.

The researchers fused adult skin cells with embryonic stem cells, producing hybrid cells in which the adult nucleus had returned to an embryonic state. The journal Science will publish their findings on Thursday.”

Ingenuity once more triumphs over adversity. This I think was also George Steiner’s point about the East European and Latin American novel in the 70s.

Getting Too Much Of A Good Thing

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China is getting worried about the impact of the internet on one of its national passtimes:

China on Tuesday introduced an ?anti-online game addiction system? intended to protect players from the mental and physical perils of spending too much time in front of computers.

The system, which will encourage players to play less by cutting the benefits they gain in online games, is to be implemented by local internet companies that have signed a code of conduct drawn up by China’s press and publications administration.

Don’t Stand In The Middle, Just Duck

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I don’t think this is ‘getting shot from both sides’ material, I think this is a question of post, and pull up a chair (or per llogar-hi cadires as we say in Catalan). When the loony right meets the looney left. Robertson vs Chavez. I don’t even need to write a post, since Tim Worstall has done a pretty accomplished job already. Basically the Guardian article Tim links to says it all in the first para:

“America’s leading televangelist appeared to take Christian fundamentalism into uncharted territory yesterday when he called for the assassination of Venezuela’s president, Hugo Ch?vez.”

Taking Christian evangelism into uncharted territory, that just about gets to it.

I do have one reasonably important difference with Tim on the deontological level I think: political assasination. I do not favour this, and recent US history in Latin America is not a happy one in this regard to say the least. Maybe my perspective is coloured regionally, but little as I like Chavez, I regard Vladimir Putin as a much worse global menace, and he has nuclear weapons, but no, I don’t want anyone to ‘take him out for me’, not in this lifetime thank you very much.

Update: One commenter has just reminded me of a source on this that I forgot to mention, Venezuelan blogger Miguel Octavio, and his Devil’s Excrement blog.

Optimism On The German Economy

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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
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Japan’s Population Challenge

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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.

The SPD Opens The Door

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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

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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

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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.
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Bra-less In Poland In Wintertime

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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.

France’s Trade Deficit On The Rise

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France has just clocked up a record trade deficit for the first six months of this year: 11.193 billion euros. This now adds the French to the eurozone BoP sick room along with Italy, Spain, Greece and Portugal. Of course oil imports form an important part of the picture, but that doesn’t make the headache any less.

The shortfall in June widened to 1.194 billion euros from 1.148 billion in May. The deficit for the first half of 2004 had been limited to 581 million euros.

The finance ministry said that at prices prevailing at the beginning of August France could face an energy sector deficit of more than 40 billion euros this year after 29 billion in 2004.

“The increased impact of the energy component has accounted for nearly half the deterioration in the overall trade balance for France” in the past year, the ministry said, citing rising oil prices.

Alexandre Bourgeois, an economist at Natexis Banques Populaires, said the trade deficit of the last 12 months — 20.6 billion euros — was the highest in French history.