Category: Economic Growth

Chinese Subsidies Create Unprofitable Overcapacity and Risk of Crisis

(p. 5) . . . subsidies, . . . , have spurred excess capacity and created a dangerous political dynamic in which these investments have to be propped up at all cost.

China has been building factories and production capacity in virtually every sector of its economy, but it’s not clear that the latest round of investments will be profitable anytime soon. Automobiles, steel, semiconductors, cement, aluminum and real estate all show signs of too much capacity. In Shanghai, the central business district appears to have high vacancy rates, yet building continues.
. . .
Over all, there is a lack of transparency. China’s statistics on its gross domestic product are based more on recorded production activity than on what is actually sold. Chinese fiscal and credit policies are geared toward jobs and political stability, and thus the authorities shy away from revealing which projects are most troubled or should be canceled.
Put all of this together and there is a very real possibility of trouble.

For the full commentary, see:
TYLER COWEN. “Economic View; Dangers of an Overheated China.” The New York Times, SundayBusiness Section (Sun., November 29, 2009 ): 5.
(Note: the online version of the commentary has the date November 28, 2009.)
(Note: ellipsis added.)

“How Am I Going to Live without Google?”

GoogleChinaFlowers2010-01-25.jpg “A woman examined bouquets and messages left by Google users on Wednesday outside the Internet search company’s headquarters in Beijing.” Source of caption and photo: online version of the NYT article cited way below (after the citation to the quoted article, which is a different article).

David Smick in The World as Curved, has suggested that restrictions on the internet in China, limit entrepreneurship, and ultimately economic growth.

(p. 5) BEIJING — At the elite Tsinghua University here, some students were joking Friday that they had better download all the Internet information they wanted now in case Google left the country.

But to many of the young, well-educated Chinese who are Google’s loyal users here, the company’s threat to leave is in fact no laughing matter. Interviews in Beijing’s downtown and university district indicated that many viewed the possible loss of Google’s maps, translation service, sketching software, access to scholarly papers and search function with real distress.
“How am I going to live without Google?” asked Wang Yuanyuan, a 29-year-old businessman, as he left a convenience store in Beijing’s business district.
. . .
Li An, a Tsinghua University senior, said she used to download episodes of “Desperate Housewives” and “Grey’s Anatomy” from sites run by BT China that are now closed. “I love American television series,” she said with frustration during a pause from studying Japanese at a university fast-food restaurant on Friday.
The loss of Google would hit her much harder, she said, because she relies on Google Scholar to download academic papers for her classes in polymer science. “For me, this is terrible,” Ms. Li said.
Some students contend that even after Google pulls out, Internet space will continue to shrink. Until now, Google has shielded Baidu by manning the front line in the censorship battle, said a 20-year-old computer science major at Tsinghua.
“Without Google, Baidu will be very easy to manipulate,” he said. “I don’t want to see this trend.”
A 21-year old civil engineering student predicted a strong reaction against the government. “If Google really leaves, people will feel the government has gone too far,” he insisted over lunch in the university cafe.
But asked whether that reaction would influence the government to soften its policies, he concentrated on his French fries. “I really don’t know,” he said.

For the full story, see:
SHARON LaFRANIERE. “Google Users in China, Mostly Young and Educated, Fear Losing Important Tool.” The New York Times, First Section (Sun., January 17, 2010): 5.
(Note: the online version of the article has the title “China at Odds With Future in Internet Fight” and is dated January 16, 2010.)
(Note: ellipsis added.)

The source of the photo at the top is the online version of:
KEITH BRADSHER and DAVID BARBOZA. “Google Is Not Alone in Discontent, But Its Threat Stands Out.” The New York Times (Thurs., January 13, 2010): B1 & B4.
(Note: the online version of the article has the slightly different title “Google Is Not Alone in Discontent, But Its Threat to Leave Stands Out” and is dated January 14, 2010.)

The reference to the Smick book is:
Smick, David M. The World Is Curved: Hidden Dangers to the Global Economy. New York: Portfolio Hardcover, 2008.

Socialist Chavez’s Thugs Destroy Venezuelans’ Economic Freedom

VenezuelanNationalGuardPriceInspection2010-01-24.jpg “A member of the National Guard stands guard during a inspection of prices at a store in La Guaira outside Caracas Jan. 12.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A8) CARACAS — President Hugo Chávez’s decision to devalue Venezuela’s currency in order to shore up government finances could backfire on the populist leader if the move leads to substantially higher prices and extends an economic downturn.

Just days after Mr. Chávez cut the value of the “strong bolivar” currency, some businesses were marking up prices. Shoppers jammed stores to stock up on goods before the increases took hold.
Amelia Soto, a 52-year-old housewife waited in line at a Caracas drugstore to buy 23 tubes of toothpaste. “Everywhere I hear that prices are going to skyrocket so I want to buy as much as I can now,” she said.
Airlines have doubled fares; government officials said they were looking into reports that large retail chains were also increasing prices.
. . .
The price increases are setting the stage for confrontations with authorities following Mr. Chávez’s orders to shut down retailers that raise prices.
. . .
The higher prices for consumer goods represent a huge liability for a country facing 27% inflation, one of the highest levels in the world.

For the full story, see:
DARCY CROWE and DAN MOLINSKI. “Prices in Venezuela Surge After Devaluation.” The Wall Street Journal (Weds., JANUARY 13, 2010): A8.
(Note: the online version of the article has the title “Venezuelans Rush to Shop as Stores Increase Prices.”)
(Note: ellipses added.)

Venture Capitalists Invested 37% Less in Start-Ups in 2009

(p. B5) Venture capitalists, whose money provides fuel to technology start-ups, last year invested the lowest amount in such companies since 1997, according to a report from PricewaterhouseCoopers and the National Venture Capital Association released on Friday.
. . .
In 2009, venture capitalists invested $17.7 billion in 2,795 start-ups — 37 percent less cash and 30 percent fewer deals than in 2008. Internet companies, which have excited investors for more than a decade, took a big hit as investment declined 39 percent.

For the full story, see:
CLAIRE CAIN MILLER. “Venture Capital Was Tight for Tech Start-Ups in ’09.” The New York Times (Fri., January 22, 2010): B5.
(Note: ellipsis added.)

World’s Poor Care More About Food and Illness than Global Warming

(p. A21) The saddest fact of climate change–and the chief reason we should be concerned about finding a proper response–is that the countries it will hit hardest are already among the poorest and most long-suffering.

In the run-up to this month’s global climate summit in Copenhagen, the Copenhagen Consensus Center dispatched researchers to the world’s most likely global-warming hot spots. Their assignment: to ask locals to tell us their views about the problems they face. Over the past seven weeks, I recounted in these pages what they told us concerned them the most. In nearly every case, it wasn’t global warming.
Everywhere we went we found people who spoke powerfully of the need to focus more attention on more immediate problems. In the Bauleni slum compound in Lusaka, Zambia, 27-year-old Samson Banda asked, “If I die from malaria tomorrow, why should I care about global warming?” In a camp for stateless Biharis in Bangladesh, 45-year-old Momota Begum said, “When my kids haven’t got enough to eat, I don’t think global warming will be an issue I will be thinking about.” On the southeast slopes of Mt. Kilimanjaro in Tanzania, 45-year-old widow and HIV/AIDS sufferer Mary Thomas said she had noticed changes in the mountain’s glaciers, but declared: “There is no need for ice on the mountain if there is no people around because of HIV/AIDS.”

For the full commentary, see:
BJORN LOMBORG. “OPINION; Time for a Smarter Approach to Global Warming; Investing in energy R&D might work. Mandated emissions cuts won’t..” The Wall Street Journal (Tues., DECEMBER 15, 2009): A21.

Heart Disease Is Not Just a Malady of Modern Societies, But “Is Part of the Human Condition”

MummyScanHeartDisease2009-12-21.jpg“Scientists scanned 20 mummies, and examined scans of two more, for the study.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A5) ORLANDO, Fla. — Researchers said they found evidence of hardening of the arteries in Egyptian mummies dating as far back as 3,500 years, challenging longstanding assumptions that cardiovascular disease is mainly a malady of modern societies.

A team of heart-imaging experts and Egyptologists examined 22 mummies from the Egyptian National Museum of Antiquities in Cairo in a CT scanning machine, looking for evidence of calcium buildup that could indicate vascular disease.
They were able to identify the hearts, arteries or both in 16 of the mummies, nine of whom had deposits of calcification. An analysis determined the deposits were either definite or probable evidence of atherosclerosis, the condition that leads to heart attacks and strokes.
“Not only do we have atherosclerosis now, it was prevalent as long as 3,500 years ago,” said Gregory Thomas, a cardiologist and imaging specialist at University of California, Irvine, who was principal investigator of the study. “It is part of the human condition.”
The research was presented Tuesday at the American Heart Association scientific meeting here. A report is also scheduled to appear in Wednesday’s issue of the Journal of the American Medical Association.

For the full story, see:
RON WINSLOW. “Heart Disease Found in Egyptian Mummies.” The Wall Street Journal (Weds., NOVEMBER 18, 2009): A5.
(Note: the online version of the article has a date of NOVEMBER 19, 2009 and is titled “Heart Disease Found in Egyptian Mummies.”)

Entrepreneurial Innovation Comes from Diverse Outsiders Rather than Establishments

(p. 113) Firms that win by the curve of mind often abandon it when they establish themselves in the world of matter. They fight to preserve the value of their material investments in plant and equipment that embody the ideas and experience of their early years of success. They begin to exalt expertise and old knowledge, rights and reputation, over the constant learning and experience of innovative capitalism. They get fat.

A fat cat drifting off the curve, however, is a sitting duck for new nations and companies getting on it. The curve of mind thus tends to favor outsiders over establishments of all kinds. At the capitalist ball, the blood is seldom blue or the money rarely seasoned. Microcosmic technologies are no exception. Capitalism’s most lavish display, the microcosm, is no respecter of persons.
The United States did not enter the microcosm through the portals of the Ivy League, with Brooks Brothers suits, gentleman Cs, and warbling society wives. Few people who think they are in already can summon the energies to break in. From immigrants and outcasts, street toughs and science wonks, nerds and boffins, the bearded and the beer-bellied, the tacky and uptight, and sometimes weird, the born again and born yesterday, with Adam’s apples bobbing, psyches (p. 114) throbbing, and acne galore, the fraternity of the pizza breakfast, the Ferrari dream, the silicon truth, the midnight modem, and the seventy-hour week, from dirt farms and redneck shanties, trailer parks and Levittowns, in a rainbow parade of all colors and wavelengths, of the hyperneat and the sty high, the crewcut and khaki, the pony-tailed and punk, accented from Britain and Madras, from Israel and Malaya, from Paris and Parris Island, from Iowa and Havana, from Brooklyn and Boise and Belgrade and Vienna and Vietnam, from the coarse fanaticism and desperation, ambition and hunger, genius and sweat of the outsider, the downtrodden, the banished, and the bullied come most of the progress in the world and in Silicon Valley.

Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

Safe Drinking Water Matters More than Global Warming

(p. A17) Getting basic sanitation and safe drinking water to the three billion people around the world who do not have it now would cost nearly $4 billion a year. By contrast, cuts in global carbon emissions that aim to limit global temperature increases to less than two degrees Celsius over the next century would cost $40 trillion a year by 2100. These cuts will do nothing to increase the number of people with access to clean drinking water and sanitation. Cutting carbon emissions will likely increase water scarcity, because global warming is expected to increase average rainfall levels around the world.

For Mrs. Begum, the choice is simple. After global warming was explained to her, she said: “When my kids haven’t got enough to eat, I don’t think global warming will be an issue I will be thinking about.”
One of Bangladesh’s most vulnerable citizens, Mrs. Begum has lost faith in the media and politicians.
“So many people like you have come and interviewed us. I have not seen any improvement in our conditions,” she said.
It is time the developed world started listening.

For the full commentary, see:
Bjørn LOMBORG. “Global Warming as Seen From Bangladesh; Momota Begum worries about hunger, not climate change.” The Wall Street Journal (Mon., NOVEMBER 9, 2009): A17.

Gilder’s Microcosm Tells the Story of the Entrepreneurs Who Made Personal Computers Possible

MicrocosmBK.jpg

Source of book image: http://images.indiebound.com/923/705/9780671705923.jpg

Many years ago Telecosm was the first George Gilder book that I read; I enjoyed it for its over-the-top verbal exuberance in detailing, praising and predicting the progress of the then-new broadband technologies. I bought his earlier Microcosm at about the same time, but didn’t get around to reading it because I assumed it would be a dated read, dealing in a similar manner with the earlier personal computer (PC) technology.
In the last year or so I have read Gilder’s Wealth and Poverty and Recapturing the Spirit of Enterprise. There is some interesting material in Gilder’s famous Wealth and Poverty, which has sometimes been described as one of the main intellectual manifestos of the Reagan administration. But Recapturing the Spirit of Enterprise has become my favorite Gilder book (so far).
In each chapter, the main modus operandi of that book is to present a case study of a recent entrepreneur, with plenty of interpretation of the lessons to be learned about why entrepreneurship is important to the economy, what sort of personal characteristics are common in entrepreneurs, and what government policies encourage or discourage entrepreneurs.
In that book I read that the original plan had been to include several chapters on the entrepreneurs who had built the personal computer revolution. But the original manuscript grew to unwieldy size, and so the personal computer chapters became the basis of the book Microcosm.
So Microcosm moved to the top of my “to-read” list, and turned out to be a much less-dated book than I had expected.
Microcosm does for the personal computer entrepreneurs what Recapturing the Spirit of Enterprise did for a broader set of entrepreneurs.
In the next few weeks, I will occasionally quote a few especially important examples or thought-provoking observations from Microcosm.

Reference to Gilder’s MIcrocosm:
Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

Other Gilder books mentioned:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992. (The first edition was called simply The Spirit of Enterprise, and appeared in 1984.)
Gilder, George. Telecosm: The World after Bandwidth Abundance. Paperback ed. New York: Touchstone, 2002.
Gilder, George. Wealth and Poverty. 3rd ed. New York: ICS Press, 1993.

Malaria “Weakly Related to Temperature”; “Strongly Related to Poverty”

(p. A17) In the West, campaigners for carbon regulations point out that global warming will increase the number of malaria victims. This is often used as an argument for drastic, immediate carbon cuts.

Warmer, wetter weather will improve conditions for the malaria parasite. Most estimates suggest that global warming will put 3% more of the Earth’s population at risk of catching malaria by 2100. If we invest in the most efficient, global carbon cuts–designed to keep temperature rises under two degrees Celsius–we would spend a massive $40 trillion a year by 2100. In the best case scenario, we would reduce the at-risk population by only 3%.
In comparison, research commissioned by the Copenhagen Consensus Center shows that spending $3 billion annually on mosquito nets, environmentally safe indoor DDT sprays, and subsidies for effective new combination therapies could halve the number of those infected with malaria within one decade. For the money it takes to save one life with carbon cuts, smarter policies could save 78,000 lives. . . .
Malaria is only weakly related to temperature; it is strongly related to poverty. It has risen in sub-Saharan Africa over the past 20 years not because of global warming, but because of failing medical response.

For the full commentary, see:

BJORN LOMBORG. “Climate Change and Malaria in Africa; Limiting carbon emissions won’t do much to stop disease in Zambia.” The Wall Street Journal (Mon., NOVEMBER 2, 2009): A17.
(Note: ellipsis added.)
(Note: the online version of the article was dated Nov. 1st.)

Global Warming Is Least Worry of Vanuatu Island’s Poor

(p. A19) In a warning often repeated by environmental campaigners, the Vanuatuan president told the United Nations that entire island nations could be submerged. “If such a tragedy does happen,” he said, “then the United Nations and its members would have failed in their first and most basic duty to a member nation and its innocent people.”

Torethy Frank, a 39-year-old woman carving out a subsistence lifestyle on Vanuatu’s Nguna Island, is one of those “innocent people.” Yet, she has never heard of the problem that her government rates as a top priority. “What is global warming?” she asks a researcher for the Copenhagen Consensus Center.
. . .
Torethy and her family of six live in a small house made of concrete and brick with no running water. As a toilet, they use a hole dug in the ground. They have no shower and there is no fixed electricity supply. Torethy’s family was given a battery-powered DVD player but cannot afford to use it.
. . .
What would change her life? Having a boat in the village to use for fishing, transporting goods to sell, and to get to hospital in emergencies. She doesn’t want more aid money because, “there is too much corruption in the government and it goes in people’s pockets,” but she would like microfinance schemes instead. “Give the money directly to the people for businesses so we can support ourselves without having to rely on the government.”
Vanuatu’s politicians speak with a loud voice on the world stage. But the inhabitants of Vanuatu, like Torethy Frank, tell a very different story.

For the full commentary, see:

BJøRN LOMBORG. “The View from Vanuatu on Climate Change; Torethy Frank had never heard of global warming. She is worried about power and running water.” The Wall Street Journal (Fri., OCTOBER 23, 2009): A19.
(Note: ellipses added.)
(Note: the online version is dated Thurs., Oct. 22.)