Twitchers

Torture, war, elections. Let’s talk about birdwatching for a bit.

Twitchers. The term is British. When a rare bird shows up, twitchers are people who will drop everything and rush to the scene.

They used to have phone trees, then for a while it was beepers. It’s cell-phones and e-mail now. Here is an interesting thing: if you look back to the early days of twitching, the 1960s and ’70s, you see them using an alert system that’s eerily similar to the formal regime for planespotting developed by British civil defense during WWII. Direct copy, inspiration, accident? I wonder. Does anyone here know?

Anyway. Your classic twitcher will leave job, family, or church service behind, seize camera, binoculars and notebook, jump in the car, and roar off to the copse where the black-bellied whistling duck has appeared for only the third time in Britain since 1937.
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China: Eating our Lunch or Taking us to Dinner?

That’s the dilemna posed by the latest paper from Laurence Kotlikoff Hans Fehr and Sabine Jokisch: Will China Eat Our Lunch or Take Us to Dinner. Simulating the transition paths of economies in the U.S., EU, Japan, and China the paper develops a dynamic, life-cycle, general equilibrium model to study their interdependent demographic, fiscal, growth and current account evolution.

Having taken a close look at the respective population dynamics they point out that as a consequence of relatively high fertility and net immigration rates, the U.S. population is projected to increase from 275 million in 2000 to 442 million in 2100. In Europe – as we all already know – population may well fall over the next century from 375 to 340 million, while in Japan, the population falls from 126 million to 85 million. However the projections show the Chinese population decreasing by even more – from 1.3 billion to 1.2 billion. Although China is in fact aging rapidly, its saving behavior, growth rate, and fiscal policies are currently very different from those of developed countries. Kotlikoff et al find that if successive cohorts of Chinese continue to save like the current cohorts, if the Chinese government can restrain growth in expenditures, and if Chinese technology and education levels ultimately catch up with those of the West and Japan, the developed world’s long run future looks much brighter. China eventually becomes the world’s saver and, thereby, the developed world’s savoir with respect to its long-run supply of capital and long-run general equilibrium prospects.

In a recent article on declining yield differentials William Pesek (Hat Tip Brad Setser) asks “What’s China got to do with all this?”. Perhaps the paper by Kotlikoff et al offers him part of the answer. (I have more on this paper here).

The Emerging Global Labour Market

Opening my McKinseyQuarterly Newsletter today, I find an interesting link to the McKinsey Global Institute’s latest contribution (free, but registration required) to the question whether Globalization is actually civilizing, destructive, or feeble – as Wharton’s Mauro Guillen put it in this paper with reference to Albert Hirschman’s analysis of the shifting social value attributed to markets.

Actually, the analysis is not so much concerned with moral evaluations but – as one of the study’s authors, Diana Farrell, put it in the preface, with providing

“… a fact base to the public debate on offshoring and
the emerging global labor market to enable policy makers and business leaders
to make more informed and better decisions.”

Even if the study only projects trends up to 2008, it is still apparent that any conclusions drawn from an attempt to analyse something as vast and complicated as the global labour market will always depend on far too many assumptions that may or may not turn out to be true. After all, McKinsey also managed to present a model for rationlising stock market valuations for non-cash-flow-generating companies before and after the crash in 2000 – the variable that changed was… expectations.

Still, I think it is a valuable contribution to raise the quality of the public debate by actually attempting to quantify some variables determining demand and supply. While the study – as far as I can tell from looking at the executive summary – does not support the “feeble” view of globalization, when reading the results it is probably still helpful not to forget that McKinsey is unlikely to be interested in increasing their clients’ employees fear of being outsourced any further (the study deals only with white collar offshoring) –

  • Offshoring will probably continue to create a relatively small global labor market?one that threatens no sudden discontinuities in
    overall levels of employment and wages in developed countries.
  • Demand for offshore labor by companies in the developed world will increasingly push up wage rates for some occupations in low wage countries, but not as high as current wage levels for those occupations in developed ones.
  • Potential global supply and likely demand for offshore talent are matched inefficiently, with demand outstripping supply in some locations and supply outstripping demand in others.