“Keith De Lacy, chairman of takeover target Macarthur Coal, said yesterday the absence of a viable alternative to coal to fuel Asia’s economic growth would maintain high prices worldwide and protect miners against the latest “attack” by the Labor government on the industry.” Extract from The Australian Read the rest of the interview. De Lacy, […]
It seems Krugman will say anything to score a point. He wants to argue that insufficient demand (unemployment) is a problem and that redistribution (trade taxes) is not. “…the attempt to place blame for the Depression on protectionism is a sort of Noble Lie, an attempt to scare people into trade policy that’s good for […]
Ken Rogoff—the Cassandra of the financial markets crisis—insinuates a moral lesson from a another technical disaster without, however, actually defining one. “If ever there were a wake-up call for Western society to rethink its dependence on ever-accelerating technological innovation for ever-expanding fuel consumption, surely the BP oil spill should be it. Even China, with its […]
In comments on the previous post, Ian Castles AO, the former Australian Statistician, notes that the World Bank and IMF create confusion in their reports by mixed use of market-exchange-rate (MER) and purchasing-power-parity (PPP) bases for estimating output and growth. Simply, using market exchange rates to compare the value of output among countries over-estimates the size of developed economies and under-estimates the size of developing economies. This confusion affects their analyses of, among other things, trade data.
The charts (click the thumbnails), taken from the two sets of data prepared by the IMF, show the dramatic difference between MER and PPP bases for comparing output and growth. Using the PPP basis for comparison, developing countries’ economies are much larger in relation to developed economies and projected to ‘close the gap’ sometime after 2015 (take the IMF projections with a grain of salt: they’re just ‘straight line’ extensions of current patterns of growth). The only difference between the two charts is the identification of China. Note that using a PPP basis for comparison, China appears less dominant in the developing country group.
Sad, brief economic history:
“One of the reasons Thailand has failed to flourish as once predicted is that its growth was built on weaker foundations than supposed.” Extract from David Pilling in the Financial Times (subscription)
But is there such a thing as ‘weak’ or ‘strong’ foundations for macroeconomic growth?
It’s a shame that even the Financial Times has joined the chorus of alarm about the recent plunge in trade volumes.
“[The IMF] expects (Asian) regional growth of just 2.7 per cent, a fraction of the 9 per cent achieved in 2007 and a percentage point lower even than it managed during its own financial crisis a decade ago. That crisis was largely self-inflicted, the product of an overdependence on fickle flows of foreign finance. This time, the region’s balance sheets are in better shape and the crisis began elsewhere. So why does Asia appear set for an even harder fall? The answer is trade.” extract from Financial Times
Economic integration has costs as well as benefits. That’s not a surprise to anyone. So does having neighbors, children and a bank account. So what?
Some initial reactions of governments to the prospect of a dramatic downturn in world trade and production uncannily echo events of eighty years ago. Think of the ‘no-new-protection’ pledge at the November meeting of the ‘G-20’ group of governments in Washington. There was a similar event in 1929:
“In September 1929, the League of Nations recommended that member countries agree to a “tariff truce” in which tariff levels would not increase for two to three years. A conference was convened five months later for this purpose, but it broke down as central and eastern European countries embraced intensive agricul- tural protectionism in the face of a sharp decline in commodity prices. A few countries ratified the tariff-truce pledge, but it had little effect on subsequent policy.” extract from Doug Irwin: Trade policy in 2008: Great Depression redux? (Chapter from a book of short essays: see over the fold for the link)
Irwin—who specializes in the paleontology of the multilateral trading system—points out, however, that the differences between the 1930s and the 2010s are more striking than the similarities.