Tag Archives: growth

De Lacy on the Carbon Tax

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, […]

Krugman’s take on protection

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 […]

A whiff of luddism

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 […]

Market and PPP measures of GDP

Source: IMF data mapperSource: IMF data mapper

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.

Thailand’s spiral

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?

Costs and benefits of trade

Asian exports have grown rapidly

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?

World trade: it’s not the 1930s

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.