Outsourcing and the Global Optimum

The last week has seen the ‘great US ousourcing debate’ hit both new highs, and new lows. On the plus side would be the declarations of the oft maligned Greg Mankiw to the effect that the “outsourcing” of jobs is beneficial to the United States economy (even with the qualification ‘perhaps’ this has merit – since despite the fact that the suggestion may not be as well-founded as Mankiw imagines, it is at least courageous in a situation where the President he is advising doesn’t appear any too clear on the question himself). Among the more evident examples of the low points would be the statement from the Democratic Presidential aspirant John Kerry to the effect that company leaders who promote business process outsourcing are ‘Benedict Arnold CEO’s’.
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Book Review: “European Integration 1950-2003: Superstate or New Market Economy?”

Once upon a time, there was a large, intellectually hegemonic, somewhat totalising ideology rooted in a heterodox school of economics. Its advocates proposed to make massive changes to the structure of society and claimed that only such a revolutionary realignment could alleviate the contradictions and failures of the existing order and save the world from stagnation and misery. They claimed that their programme would produce immediate results, and that the only reason it wasn’t immediately implemented was because entrenched interests were manipulating the public against them.

Ultimately, advocates of these principles did gain power in many places and were able to implement elements of their programme. Some came to power through revolutions of various kinds that granted them the near-dictatorial powers they needed to make the changes they believed necessary. Others were able to convince electorates and even elites that theirs was the way of the future. They turned public dissatisfaction to their advantage, especially during economic downturns when people were willing to turn to new solutions and elites feared that the masses would turn against them.

And, they had some arguable successes, but no unambiguous ones. In some places, particularly those where effectively unlimited power had shifted to them, they often maintained highly inequitable regimes which grew harder and harder to justify, faced ever growing public disaffection, and turned to more oppressive and manipulative means to sustain control. This undermined their movement, but despite the best efforts of their enemies was not quite able to kill it off.

In states where more democratic methods had been used, the need to compromise with established interests and to sustain public consent forced them to accept measures often contrary to their initial programme. Their ideological identity tended to shift over time as winning elections grew more important than ideological purity and as the drawbacks of real power became apparent. Actually being held responsible for results forced many members of this tradition to accept their enemies’ interests as at least partially legitimate, and compelled them to less radical legislative programmes.

In some of those nations, these radical parties became increasingly manipulative and difficult to distinguish from their former enemies. But, in a few places, the necessary dilution of their programme brought about an ideological synthesis that appeared successful, and this success in turn showed that the radical programmes they had once advocated were perhaps unnecessary. In the end, ideology had no real hold on them, and the models and methods that seemed to work became the political and economic programme that they were identified with. Their former allies who operated more dictatorial regimes were easily repudiated.

But others were unable to accept that option. They included dissidents who had been burned by the growing authoritarianism of their own failed revolutions, or who were simply unable to accept that their early ideological purity had become superfluous. They were isolated and powerless, only able to function in the states where their former allies had become moderates, leaving them without meaningful public support. They fumed at the world’s unwillingness to go the way they wanted, and increasingly recast the history of the world in terms of their own ideological predispositions. The past became, in their minds, an unending conflict between an ideologically pure vanguard and scheming established interests, a story of their courageous champions betrayed by back-sliding traitors. Ultimately, the world moved on and these radicals virtually disappeared outside of intellectually protected milieux like privately-funded think tanks and universities.

Of course, by the now the astute reader will have recognised that I am talking about the history of neoliberalism.
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Welcome To The World Of Kofi Annan

While EU politicians over at Davos have been mulling over the possibilities of Turkey’s membership of the EU, Kofi Annan apparently has things much clearer. In a speech to the European parliament he bluntly told MPs that Europe needs migrants to ensure a prosperous future and that Europeans should stop using immigration as a scapegoat for their social problems.
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Living in Denial

No this is not (yet) the title of one of my new pages (although we were looking into living in sin, but unfortunately it’s already taken). No the denial I am referring to is much nearer home for most of us, since it is up there in Brussels. “European Union nations are dragging their heels in their ambitious drive to become the world’s most competitive economy by the end of the decade” or so we are lead to believe from the EU annual survey published by the Commission on Wednesday.

This foolish piece of what the Spanish would call ‘chuleria’ (no easy translation but I suppose you could try vain self-important show-off bragging) – the pledge to overtake the US by 2010 – was adopted at the Lisbon 2000 summit. It was madness in its moment, now it looks just plain ridiculous.
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I just chided the others for making too many non-euro posts but whatever

I want to make sure Edward doesn’t miss this.

Josh Marshall quotes from a Fortune interview with Peter Drucker:

“FORTUNE: You sound fairly sanguine about the state of the U.S. economy. Do you see any danger signs?
DRUCKER: Oh, yes. The biggest problem I see is our total dependence on foreign money to cover our government debt. Never before has a major debtor country owed its debt in its own currency. It is unprecedented in economic history. Japan, by contrast, owes all its foreign debt in dollars. Now if you devalue the dollar, the Japanese economy benefits, because their imports become much cheaper. And the value of their debt goes down also. The individual Japanese companies that invest in dollars would lose, but the overall Japanese economy gains. But we have no experience about what will happen here when we owe so much debt in our own currency and we’re forced to devalue the dollar. Sooner or later, we’re going to find out.

What’s more, there is an enormous amount of surplus capital in the world for which there is no productive investment. The supply greatly exceeds the demand. So there is a very jittery body of excess money that is desperately in need of returns, and it could become panic-prone. We have no economic theory or model for this.

FORTUNE: Does the U.S. still set the tone for the world economy?

DRUCKER: The dominance of the U.S. is already over. What is emerging is a world economy of blocs represented by NAFTA, the European Union, ASEAN. There’s no one center in this world economy. India is becoming a powerhouse very fast. The medical school in New Delhi is now perhaps the best in the world. And the technical graduates of the Institute of Technology in Bangalore are as good as any in the world. Also, India has 150 million people for whom English is their main language. So India is indeed becoming a knowledge center.

In contrast, the greatest weakness of China is its incredibly small proportion of educated people. China has only 1.5 million college students, out of a total population of over 1.3 billion. If they had the American proportion, they’d have 12 million or more in college. Those who are educated are well trained, but there are so few of them. And then there is the enormous undeveloped hinterland with excess rural population. Yes, that means there is enormous manufacturing potential. In China, however, the likelihood of the absorption of rural workers into the cities without upheaval seems very dubious. You don’t have that problem in India because they have already done an amazing job of absorbing excess rural population into the cities–its rural population has gone from 90% to 54% without any upheaval.

Everybody says China has 8% growth and India only 3%, but that is a total misconception. We don’t really know. I think India’s progress is far more impressive than China’s.”

Drucker makes two very interesting points that I haven’t seen disussed anywhere else

Comments?

What soldiers have in common with lawyers

Hi folks. I’ve been off-line a bit fighting with my landlord and trying to get my new apartment straightened out. I’ve moved as of the first of December. My new Internet connection is up and running, but my workstation hasn’t been able to talk to my monitor since the move. I have to bring it in to work to get it fixed, and until then, I have limited ‘Net access. There’s a post coming one of these days on the joys of IKEA when you’re an expat.

A lot’s been going on while I’ve been offline. Chirac and Raffarin have started acting like idiots over how kids dress at school. The EU constitution looks like a casualty of rapid expansion. Jean Chrétien calls it quits – the last of the Pearson-era Liberals still in the Liberal party – and turns the reins of power over to borderline conservative Liberal Paul Martin. And, Saddam Hussein is now in American hands, which will make excuses for failing to find WMD or links to Al Qaeda just that much thinner. Go ahead and browse around here to get in contact with the lawyers you need.

Speaking of Iraq, I wanted to draw your attention to yesterday’s New York Review of Books. Especially to a piece entitled Delusions in Baghdad. If Marshall McLuhan were alive today, he could stand fully vindicated before his critics.

Very young men in tan camouflage fatigues, armed, red-faced, flustered; facing them, the men and women of the world press, Baghdad division, assembled in their hundreds in less than a quarter of an hour […] as Lieutenant Colonel George Krivo put it bitterly, to “make the story. Here, media is the total message: I now have an understanding of McLuhan you wouldn’t believe. Kill twenty people here? In front of that lens it’s killing twenty thousand.”

When the US Army starts appreciating someone like McLuhan, you know the world has changed.
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German Is Getting Sexy Again. Again.

The controverse reaction to Edward’s use of a French block quote in a blog that claims to be the place for intelligent English language coverage of European affairs, made me remember my first blogging conversation. It was a discussion about Germans not publishing in English and the stipulation by the Norwegian blogger Bj?rn St?rk that ??nothing beautiful or sensible should ever be written in Norwegian, if it could be written in English.? So after speaking French all evening, and in light of the above mentioned comments as well as my imminent visit to the Frankfurt International Book Fair (link in English) I felt compelled to recycle my defence of linguistic diversity as a virtue of its own right, which was first published in a slightly different version in almost a diary on February 2nd, 2003.

Bj?rn St?rk had a look around the web and was astonished by the fact that he could find relatively few European, particularly German and French, (particularly political) blogs published in English. Contemplating the deeper issue at hand – the relation of national cultures and supra-national languages – in this case English – in an age of global interaction – Bj?rn made an interesting argument concerning cultural imperialism, linguistic protectionism, linguistic economies of scale and scope as well as the advantages of publishing in English instead of one?s native language.

No doubt about it – English has become some sort lingua franca in many respects.

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