Juggling politics and economics: Europe

I was reminded by Bismarck's juggling of politics in Europe as I read with interest the article on "when growth and social protections clash" (economist, 28 Oct).

As an economic bloc, the EU has to juggle the interests and concerns of the various nations within it. Bismarck managed to juggle interests during the early 20th century to balance these interests and to the advantage of his country. Maybe one day a Bismarck will rise to juggle the interests within EU, for the EU.

The resistance of the French to reduction in subsidies, the resistance of several European countries to reducing the social safety nets... all these are contributing to an inflexibility in the European economic system as a whole. Globalization requires countries to be flexible, adaptable and nimble. Europe has to fit the bill to compete! We're not looking at a one-country-to-world model here... but an entire bloc-to-world scenario which can possibly be either a hinderance or a big advantage.

Thinking about how the Asian countries are now becoming more competitive, particularly in East Asia, probably sheds some light on the possible reforms required in Europe... even if these reforms are gradual, they are necessary and of use!
1) Allowing market forces to operate. Be it Stiglitz or other economists, there has been much economic claims to the benefits of removing unnecessary, overall self defeating subsidies in economic systems.
2) Allowing labor market flexibility... it's especially crucial in the age where there is a trend of "drive to the bottom" and constant structural disequilibrium. Increased inflexibility of the labor market will contribute to a greater lag in adjustment of economies to "equilibrium" (and hence proving Keynesian stickiness is particularly fundamental and stark in the labor aspects... such as wages).
3) Focusing on increasing value-add. Europe has the brain power. It needs to exploit this considerable capability to its advantage. Chirac's recent comment on focusing on R&D is really a great idea where synergy in the European bloc may yield considerable results. Looking at countries such as Japan, the lag in innovation and slowdown in growth seems to be coherent. Hence, Europe needs to improve on its research aspects.
4) Paradigm shifts of outsourcing. Yes, outsourcing may mean a reduction in jobs in certain countries... (particularly in cases where jobs shift from Western to Eastern Europe)... but it is especially necessary. I remember reading Krugman's article on the hot-dog stand. What countries often fail to see in the short term is the long term gain in creation of more high value jobs... hence, the key is "TRAINING"!

I shall end off here... au revoir!

Economics of convergence

Recently I've taken an interest in reading about developmental studies.

We see from Solow Model that there may be a theoretical convergence of the world's economies in the future... it's a matter of time, or so it was?

Quoting Friedman, in this world of globalization, it's like running a "hundred-metre" race, no matter how many times you win, you'll always have to run again the next day... and if you lose by a-tenth of a second, it can be as if you lost by an hour."

From my perspective, it is an unfair race to begin with. The developing countries are being hampered by a relatively lower level of competitive status quo (e.g. in terms of secondary education levels, Information Communications infrastructure...) Also, the premature openning up of these economies to foreign competition may inject the much needed competitiveness, but the locals may be displaced in terms of economic influence. It hence places a huge responsibity on the MNC to ensure alignment of their interests with the respective developing countries' development plans.

Despite the considerable (and indeed applaudable) performance of East Asia and South Asia in the past decade in catching up in terms of development, we see African subcontinent (where a good portion of the world's poor live in) being rather left out in the developments. We need to engage these countries in real dialogue... to get a pledge by these countries to contribute to improving their countries, themselves.

Aid can do only thus much... the bulk of the work is often reliant on the local governments and adminstration.

In order for convergence in an absolute sense... we'll probably take a really "long run"... and hopefully in a long-run where we are still alive to see.

Economics... dismal science

I decided to start a small economics blog of my own.
Despite myself not being an established economist... it's interest and passion for this subject that has convicted me into creating this blog.

The response from YOU (the economists of the world) will be the key fuel to the debates on issues pertaining to some fundamental issues in our world today.

For a start, I'll be tampering with a tagboard and later comment columns for discussions... so look out for this space in the future.

I look forward to a fun, enriching and engaging experience.


”Trust men and they will be true to you; treat them greatly and they will show themselves great.” --Ralph Waldo Emerson