Germany On The Road To Reform?

“Voting for the C.D.U. Sunday meant putting a stop to Schr?der’s reform agenda…..But in the future, if the C.D.U. has power, there is no stopping the reforms.” says Morgan Stanley’s Elga Barsch (remember her?). This argument draws attention to an important enigma which must be puzzling a lot of people. As the New York Times puts it:

If voters are angry about economic legislation that rolls back the social welfare state, and they take out their anger on the governing party, does that make more such legislation inevitable?

As undemocratic as that might sound, investors in Germany seem to think so. As financial analysts said chances of new legislation had increased, the country’s stock market rallied Monday after a stinging defeat in regional elections for the Social Democratic Party of Chancellor Gerhard Schr?der, which led him to call for national elections in the fall.”
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Human Capital And Trade Deficits

Michael Mandel had an interesting take on the US trade deficit in Business Week earlier this month (btw: he also has a weblog).

His opinion is that the US trade deficit isn’t as big a deal as people often think. One of the reasons: that the ongoing import of human capital into the US (which of course isn’t measured in the trading accounts ledger) more than compensates for the deficit:

But get with the 21st century, folks. The trade in goods and services represents only one part of America’s connection with the rest of the world. What’s equally important — and what the trade numbers miss completely — is the incredible flow of people into the country. Each year, the U.S. receives about 700,000 legal immigrants, as well as a host of temporary skilled workers and undocumented immigrants.

Now I wouldn’t go down the same road as Mandel with the deficit question per se, but he obviously raises an interesting point here – and one, of course, that immediately strikes a chord with me.
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Just In Time?

Tony Blair inched home to a historic Labour third term in the UK last week. But looking at the changing tempo of the British economy over the last couple of months, you could be tempted to ask: was this a case of ‘just in time’ electioneering?

At the present time there seems to be a general consensus that Blair will back down during this parliament, and that the natural heir apparent is Economics Minister Gordon Brown. However if Blair won the election despite the Iraq war, and thanks mainly to economic prosperity, we could ask ourselves whether changing winds of fortune might not make the heir rather less apparent when the time for handing over actually comes.
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Changing Perspectives On Immigration.

Views of immigration are changing. Back in the mists of time, when I first came to the conclusion that ongoing demographic changes were going to be important, the voices in favour of a reconsideration of immigration policy were few and far between. Perhaps the first and most notable of these voices was the UN population division. Now things are different, and a series of recent international conferences and reports highlighting the positive advantages of immigration as an economic motor only serve to underline the fact that discussion of this important topic is very much back on the agenda.
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China’s Currency and Trade

Currency traders around the globe lazily staring into their screens must have found themselves transfixed last Friday when the flatline indicating the value of the Chinese yuan (or renminbi if you prefer) suddenly jumped to life. And so it was that during a brief 20 minute interval the yuan surged to a level of 8.270 to the dollar from the hypnotic and seemingly eternal value of 8.276. Now 6 thousandths of a dollar isn’t really a very big deal, but it is the sheer fact that it happened that is causing all the fuss.
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Turkey and the EU: Poles apart?

Like most numbers of the Spectator, the festive, XL-sized holiday edition is marred by the presence of Mark Steyn. But don’t let that put you off, there’s some good stuff there as well. And one of the better bits is an essay by Prof. Norman Stone on Turkey (Potential EU Accession of) (reg. req.).

For the most part Stone paints a picture of the old Ottoman Empire as something much less uniformly Islamic than some think. You should already be aware, of course, that what would later (in truncated form) become Turkey was a multicultural, multiethnic, multireligious state, but if you weren’t, Stone gives you a quick background. (By the time it fell apart, the Ottoman Empire had become the ‘Sick Man of Europe’; but for centuries it was a success.) What you might not have known, though, was that the orthodox Christians of the Ottoman realms were only too happy to be part of a nominally Islamic polity. The orthodox patriarchs and the Muslim sultans saw in the latinate West a common foe. Indeed my own suspicion is that the Greeks felt a keener enmity than the Turks. The sultan, understandably, might well have seen the theological differences between orthodoxy and Roman Catholicism as obscure and uninteresting (how many of us in the post-Christian lands of the west are aware of, let alone take much interest in, the distinctions between the theravada and mahayana strains of Buddhism?) To the bishops of the orthodox world, though, the sultan served (whether he cared about this or not) as a bulwark against the centralising domination of their brother-bishop at Rome.

But what set Stone off was a recent article in Die Zeit by Prof. Hans-Ulrich Wehler. The title of Wehler’s article, which formed part of the contra side in a Zeit-sponsored debate on Turkish accession to the EU, has some unfortunate historical echoes: “Das T?rkenproblem“.
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Hardly Breaking News

That the US jobs report last Friday showed continuing weakness in the labour market is certainly by now far from breaking news. I wouldn’t however want to let it pass by without comment. I think it is now abundantly clear that there is a pattern in all this somewhere (what that pattern is precisely, and what is causing it may be another matter). The US is not creating the quantity of new employment it needs. This means that the output gap (the gap between potential and actual output) is unlikely to reduce, and that the Fed will in all probability be unable to raise interest rates as vigourously as it had anticipated. This is also likely produce downward pressure on the dollar (with a consequent upward pressure on the Euro) and all sorts of other weird and wonderful things which should preoccupy those given to thinking about these matters. I think the debate is effectively over though: this is more than just a ‘soft spot’.
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