A New Spectre Is Haunting Europe, A Spanish One

A spectre is haunting Europe, but this time it is not the spectre of revolt by the popular masses, or even one of yet another wave of bank bailouts. No, the spectre which is currently stalking the corridors of Europe’s most prestigous institutions is one of a Spanish economy which stays on a flatline while Europe’s other economies, one by one, start to struggle back to life. And the main reason that this particular ghostly image is giving everyone so many sleepless nights is because Europe’s current institutional structures, and especially the monetary policy tools available at the ECB are scarcely prepared for such a nighmare eventuality. Continue reading

What Exactly Is Going On In Finland?

Finland, we have recently been told, is the world’s most prosperous nation, and it is deemed to be prosperous not only in monetary and financial terms, but also in terms of the implicit wealth of its democracy and governance. This striking assessment is to be found in the latest edition of what is known as the “Prosperity Index”, an initiative launched by the Legatum Institute, a London-based think-tank. In fact Finland took first prize – up from third last year – and was closely followed by Switzerland and the other Scandinavian countries (Sweden, Denmark and Norway – also see Doug Muir’s “debunk” of all this brouhaha here).

Finland was also notable for its recent second-place showing in the latest edition of the Tech-competitiveness index released by the Economist Intelligence Unit. The Index, which is commissioned by the Business Software Alliance, analyzes data on 66 countries around the world in an attempt to determine which of them have the most competitive information technology sectors. The study, now in its third year, examines variables like the overall business climate, the pervasiveness of the tech infrastructure, the strength and transparency of its legal system,and the availability of a well-educated and technologically literate workforce. As I say, Finland came in second to the United States, displacing last year’s runner-up, Taiwan.

And if these accolades weren’t enough already enough Finland this year took 6th place in the World Economic Forum’s Global Competitiveness Report (having been number one on earlier occasions). The Global Competitiveness Report purports to identify the world’s most competitive economies in terms of their prospects for economic growth.

Given all of this, you would really expect Finland to be doing pretty well during the current global recession, wouldn’t you, what with all that fabulous prosperity and those stupendous growth prospects? So is it? Well unfortunately it isn’t, indeed during the second quarter of 2009 Finland (which was way out in front of Ireland, another of those previous ECB “poster boys”, which only managed to clock up a 7.4% annual contraction ) had the worst recession in the entire Eurozone, well behind the so called “PIGS” who everyone suspected previously suspected would be the ones to drag the common currency area to its downfall and ruin.

So in order to find out what is actually happening in Finland, and to take an inside look at the harsh reality that lies behind all those gleaming reports, let’s take a leap across to the Finnish Statistics Office, just to see what is really going on right now in what some consider to be the world’s most prosperous nation. Continue reading

Here Comes The European Recovery

Can’t you just see it?

According to Eurostat in both the euro area (EA16) and the EU27, the seasonally adjusted household saving rate continued to increase and the household investment rate to decrease n the second quarter of 2009. In both regions the fall in business investment rates and profit shares continued, though at a lower rate. In the second quarter of 2009, the seasonally adjusted gross saving rate of households was 14.4% in the EU27 compared with 13.5% in the first quarter of 2009. In the euro area, the household saving rate was 16.5% in the second quarter of 2009, compared with 16.0% in the previous quarter. In both cases these were the highest rates recorded since the start of the time series in the first quarter of 1999.

Can’t you see it now? Maybe you need to squint harder, let’s try this – in the EU27 the gross investment rate of non-financial corporations was 20.8% in the second quarter of 2009, compared with 21.4% in the first quarter of 2009. In the euro area, the investment rate was also 20.8% in the second quarter of 2009, compared with 21.4% in the previous quarter. In both cases (again) these were the lowest rates recorded since the start of the series in the first quarter of 1999.

Still not got it? Savings up and investment down – where’s the demand coming from? Ah, yes, government stimulus. Oh well, hard luck this year, let’s try again in 2010. Or maybe someone, somewhere will finally get it: the name of the game is now (extra community) exports, and the value of the euro is going to matter.

Everyone must move to Finland right now

So some British think tank called the “Legatum Institute” has published an index of the best countries in which to live. Apparently they’ve been doing this every year for a while now, but it just now caught my eye.

Let me start by saying that I find this index pretty dubious. (N.B., there are a lot of bad international indexes out there. Don’t get me started on the American Heritage Index of Economic Freedom.) The Legatum Institute’s staff appears to be a mixture of warmed-over Thatcherites and recently-unemployed American conservatives. So it’s not surprising that the top 20 countries are dominated by western Europe and the Anglosphere, while the bottom ranks are all former colonies full of brown folk.

To make matters worse, they’re being shifty about their methodology. If you download the report (.pdf), you’ll find that it says it’s using 79 different variables, assigned to nine sub-indexes. But it does not say clearly what these variables are, nor where the information is coming from, nor whether they are weighted to create the sub-indexes. The sub-indexes are not weighted, which is another bad sign — they’re just taking the scores that they’ve generated and averaging them together.

Meanwhile, Iraq and Afghanistan are conspicuously missing. Okay, that could be from a lack of good data. On the other hand, they found enough data to go forward in Sudan, Yemen, and the Central African Republic. And having Mugabe’s Zimbabwe absolutely last makes me say “hm” — I can think of half a dozen places that should be in contention, from North Korea to the Congo — as does the very low rank given to Hugo Chavez’ Venezuela. (I’m no fan of Hugo’s. But Venezuela is the worst country in Latin America? Even after throwing out Guyana and a few other small countries that weren’t ranked, that’s a very large “hm” indeed.)

Having said that, this index is at least interesting. Continue reading

Ukraine’s Problems Show No Sign Of Abating

Despite the fact the Ukraine administration is resplendent with confidence that the International Monetary Fund is going to release the next $3.4 billion payment under the country’s $16.4 billion lending program with the Fund, things are not so clear. In fact the International Monetary Fund only this week warned Ukraine (25 October) that they might freeze assistance ahead of the forthcoming presidential election if proposals to make populist wage and pension increases move forward. Continue reading

Beyond The Consensus On European Bank Credit

Well, I never thought I would have to wait very long to get some confirmation of my last post on things that could go bump in the night in France, but even I wasn’t expecting confirmation of what I was trying to get at so quickly. Now, according to Frank Atkins in The Financial Times this morning:

The eurozone has reported the first year-on-year fall in bank lending to the private sector, strengthening the case for the European Central Bank to maintain its ultra-loose interest rate policy. The latest eurozone credit statistics indicated lending had been scaled back at an unprecedented pace, even though signs have become stronger that the 16-country region’s economy has stabilised.

What are we talking about here? Continue reading

The French Rebound Continues In October While Germany Moves Sideways

Whoever would have thought that some people once called economics the most dismal of sciences? Certainly, as the current crisis goes on and on, those of us who consider ourselves to be economists scarcely are able to find the time to squeeze in a dull moment, even here and there. But even at a broader level, interest in that most dismal of dismal topics Рthe theory and practice of central banking Рseems now to fire up levels of enthusiasm here in Spain that make even the appetising prospect of a forthcoming Real Madrid-Bar̤a football match pale in intensity. Even if it is the case, I have to admit, that the everyday Johnny (or Jill) come lately sitting in the bar still Рtruth be told Рprefers the sports columns of the daily newspapers, or the lacivious details of the latest romantic adventure of one of the rich and famous to a careful perusal of the detailed minutes of the last policy rate setting meeting over at the central bank. Continue reading

Rory the Tory?

File under “Who knew?” The Guardian reports that Rory Stewart has been selected as a candidate for the UK’s parliament from a safe (10,000 majority) Conservative seat. In one of those moves that makes me think that parliamentary systems are odd sometimes, one of his first actions will be to move so that he actually lives in the district he will represent. “I will be straight on to the estate agent in the morning,” the Guardian quotes him as saying. “I’m very much looking forward to living in the constituency and getting to know everybody.”

(Stewart’s been a soldier, a diplomat, a wanderer, a provincial governor in Iraq, a professor at Harvard and is currently a director of a significant charity helping part of Afghanistan, yet the Guardian web edition’s headline writer chooses to identify him as “Former royal tutor Rory Stewart.” What does that say about Britain? Or the Guardian? Or perhaps the Guardian’s perceptions of its audience?)

I would not have pegged the author of The Places In Between as a Tory, though on closer consideration I think he’s too much of a loose cannon an independent thinker to be much of a back-bencher at all. Anyone who drops everything to walk across Asia and spends the winter of 2001 walking across central Afghanistan is not likely to be fazed by a party whip. I haven’t yet read The Prince of the Marshes: And Other Occupational Hazards of a Year in Iraq, which probably gives a better sense of how he’ll do in constituent service. Maybe he’ll turn out splendidly. Still, he’s had a decade of changing jobs every year or two, is he likely to settle down to work in Westminster? (On the other hand, I asked the same question about Bobby Jindal, with whom I have a passing acquaintance, and he’s still on the job.)

Twice as Fast

Four years ago, I was boggled to realize that astronomers had been finding planets around other stars at an average rate of one per month since the first exoplanet around a main-sequence star was discovered in 1995.

On Monday, scientists from the European Southern Observatory (ESO) announced that they had found 32 new exoplanets in recent work. Moreover, that brings the total found to roughly 400. Instead of discovering a new planet every month, the average is now much closer to every two weeks.

What is the goal? The astronomers announced their findings at a conference titled, “Towards Other Earths: perspectives and limitations in the [Extremely Large Telescope] era.” The ESO instruments have led to the detection of 24 of the 28 known exoplanets with masses of less than 20 times the earth’s. The technology to spot earth-like planets around other stars is either on the drawing board or under construction. Key puzzles are now in how to characterize atmospheres around exoplanets, and how to deduce other characteristics of earth-like planets that the astronomers expect to find.

And in two weeks, astronomers will likely have found another planet around a different star.

I’m very happy we’ve workshopped this today

Royal Mail management is hiring 30,000 temporary workers, not to replace Royal Mail’s own workers who are going on strike – which would be illegal – but ‘to clear any backlog that might develop’.

Peter Mandelson is beyond sour: he’s curdled. He says “gale-force change” is needed for Royal Mail and drops all sorts of nasty hints about various Royal Mail customers shopping elsewhere in future. Well, we’ve come to expect that from him. Nick Clegg, Liberal Democrat leader, backs Royal Mail’s managers: he says “taking the whole country hostage like this is the wrong thing to do”. Hoped for more from you there, Nick, I really did. I can’t find anything that says what the official Tory line is, but I’d be amazed if they’re backing the strikers. Finally, various private companies are lining up to take swipes.

Anyhow, I took a tour of a new-ish Royal Mail sorting facility a few years back. Think of me as one of those venture capitalists – I like to get a feel for the way a place runs, see how many cars are in the parking lot after hours, that sort of thing. Yes, it’s anecdotal evidence. Yes, my prejudices will be showing.

The facility was explicitly divided into two halves; the sorting side (basically one huge shed) and the management offices and staff welfare side. The security team had its own special room with a separate route in and out of the building (apparently to protect them from intimidation). Thieving from the mail does seem to be a concern. On touring the cloakroom I saw an employee hiding behind a row of coats; she stood very still while we were there, perhaps hoping that the group I was in would just go away. Which is exactly what we did. Maybe she was just bunking off, or maybe she was going through pockets; hard to say.

At the time of our visit, the sorting side was more or less deserted; it seems that sorting and delivery workers start early, then a whole bunch of them go out to deliver the mail they’ve just sorted. There was some machinery visible, but it was not, shall we say, a fully mechanised facility. The management side (furnished with colourful blobby chairs and break-out spaces) was busy in the sense that office workers were present. Some of them were in meeting rooms. I saw a sign on one of the meeting room doors. It said: ‘role play training in progress, do not disturb’.

From my recollection of seeing things first hand, and from what I’ve read recently, I’d say the situation at Royal Mail is like this. Relations between workers and management are terrible; the workers mistrust the management to the extent that any change to process (typically through mechanisation) is strongly resisted. On the other hand, Royal Mail ‘management’ have assembled plenty of padding between themselves and the hard, on-your-feet-all-day stuff; I suspect many of them are just going through the motions, or are doing make-work, all the while shirking the task of building a sense of common purpose. If my little vignette here is at all true to life, you have an industrial disaster in the making. And I would not lay blame on the strikers before looking hard at how other people in that organisation have been conducting themselves.

And it would be a shame to see Royal Mail stumble or fall, because I suspect there’s some good culture there worth saving. For instance, I’d much rather have Royal Mail deliver my internet purchases (yes, the internet will put Royal Mail out of business for sure) than the clown outfit called Home Delivery Network. The postie has some local knowledge; he or she likely knows you a bit, may even know that you’re out, and probably has figured a safe place to leave your package so that you don’t have to go through the redelivery mill.

I have to say the subsidised canteen was excellent, but would worsen your health if you ate there every day.