Category Archives: Economics and demography

La Febbre

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A couple of weeks back I had the pleasure of seeing Alessandro D’Alatri’s recent film La Febbre (Fever). As the reviewer says (Italian link), this is a ‘normal’ (everyday) film, not a great one, even if it does include one or two memorable moments, like the scenes shot along the river bank, which were (and I imagine this is not entirely unintentional) rather reminiscent of some which are to be found in the unforgettable L’Albero Degli Zoccoli from that giant of Italian cinema Ermanno Olmi.

“La Febbre è il classico film italiano, che vuol raccontare una storia normale, di tutti i giorni, e che per farlo non trascende dai canoni della buona creanza del plot, e da quel pizzico di amara critica sociale che lo rende molto politically correct.”

(La Febbre (the fever) is a typical Italian film, the kind of film which tries to tell a simple, ‘normal’ story – an everyday one – and which in order to do this stays well within the bounds of what is normally thought to be an acceptable plot structure, and then, following the recipe, there is added just enough social criticism to make the film a highly politically correct one.)

My point of interest in this post, however, is not really the film itself, but rather the film as a reflection of something else: the disenchantment and frustration that many young Italians seem to feel with contemporary Italian society, and the impact that the evident failure of Italian civil society to adjust to Italy’s contemporary social and demographic reality may have on the future evolution of Italian economy and society.
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More Stages of the Globalisation Process

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Who knew Hungary has an entire shopping centre devoted to Chinese-owned businesses? Der Standard reports on the “Asia Centre” in the 16th district of Budapest, home to a community that has made Hungary the biggest entrepot for Chinese goods in central Europe. Last year, $4bn of Chinese exports entered Hungary, of which two-thirds was re-exported. The centre is 90 per cent utilised and is going to expand. Not entirely surprisingly, its owners are the Austrian construction group Strabag and the Austrian mutual banks’ investment arm, Raiffeisen Investment AG.

Apparently, there may be as many as 60,000 Chinese in Hungary, the flourishing legacy of a botched late-communist trade agreement. In order to keep up appearances after the two sides failed to agree anything substantive, they ended visa requirements between China and Hungary. This came into its own a year later, when large numbers of people quit China after the Tiananmen Square massacre and arrived in a Hungary that was about to be the first mover in the wave of revolutions. Originally, their businesses shot out of the ground around the eastern railway station’s freight yards. Later, the Austrian investors built the new centre.

It’s striking that they will be very well placed if this railway project comes to fruition.

On the other hand, there’s a fist. Jörg Haider’s election posters this time around carried photos of two “violent Chechens”, whose access to social services was then cut off. They haven’t been accused of an offence, and neither does the Klagenfurt police know of any case involving a Chechen.

200 Gigabits a Second

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Todd Underwood of Internet consultants Renesys has an interesting post for the day AMSIX, the Amsterdam Internet Exchange, set the world record for Internet traffic through a single facility. At 2110 CET on Monday, the world’s biggest IX saw more than 200 gigabits a second of netty goodness hurtling through its multiple 10GB Ethernet switches. That’s a whole lotta traffic. And love, this being Amsterdam.

But what especially interests me about it is that somehow, everyone does these things differently. In North America, public IXen don’t really count for much—even the mighty Equinix sees only half AMSIX’s traffic across all its exchanges. Traditionally, ISPs and telcos have preferred to set up private interconnections, or else pay a private exchange operator like Equinix. In Europe, though, public exchanges run by their users as co-operatives, where everyone connects to shared high-capacity Ethernet switches, have been a vital part of the Internet infrastructure from the word go, with LINX in Tookey Street, London SE1 being the first. Over the years, they have grown spectacularly and continue to do so—a year ago, AMS-IX was doing half the traffic it is now, LINX has doubled since January, and DECIX in Frankfurt is up 150 per cent this year.

There’s obviously a political/cultural analogy here. The Americans prefer to set up their own private wires, and the Europeans prefer sharing a really big Ethernet ring, operated as a non-profit organisation. And the South Koreans have arrived at a sort of hybrid solution, doing private interconnection in a very big way but within a shared facility. But there doesn’t seem to be any great difference in the results.

Geek culture bleg: If multiple Linux boxes are boxen, multiple muxes are muxen, more than one VAX used to be VAXen, why aren’t more than one switch switchen?

Illiterate voters

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I should know better than to visit Arts & Letters Daily when I am up to my ears in work. The wealth of reading material found there provides the ideal excuse for procrastination. “Hey, I am doing something intellectual here”. Nevertheless, after having resisted the temptation to go there for a while, I finally succumbed and discovered an interesting blog and an essay on the illiteracy of voters when it comes to basic economic principles. The blog is Cato Unbound and the essay, written by economics professor Bryan Caplan, is called Straight Talk about Economic Illiteracy (pdf, via Mercatus Center). My high school major in economics notwithstanding, please do not laugh, I consider myself to be an economic illiterate and therefore had to read the essay. It was a good call. One quote to wet your appetites as well:

Admittedly, economic illiteracy does not automatically translate into foolish policies. We could imagine that the errors of half the electorate balance out the errors of the other half. In the real world though, we shall see that such coincidences are rare. The public tends to cluster around the same errors – like blaming foreigners for all their woes. Another conceivable way to contain the damage of economic illiteracy would be for citizens to swallow their pride, ignore their own policy views, defer to specialists, and vote based on concrete results. Once again, though, this is rare in the real world. Politicians plainly spend a lot of energy trying to find out what policies voters want, and comparatively little investigating whether voters’ expectations are in error. Indeed, even when politicians brag about their “results”, they usually mean that their proposals became policies, and sidestep the difficult issue of whether those policies worked as advertised.

I do have to add one caveat concerning Bryan Caplan, at least for economic illiterates like myself. Caplan, according to wikipedia, “has been heavily influenced by Ayn Rand, Thomas Szasz, and Thomas Reid”. This influence is notable in the essay, just look for his take on the word “greed”. There may be an ‘agenda’ here. I especially like the before-I-saw-the-light style he adopts. In any case, I am mainly interested in his ideas about voter illiteracy and how he defines that illiteracy in terms of his own economic belief system. Is Caplan right, in general, in saying that voters are economically illiterate? Or is he simply using that angle as a trick to ‘convince’ true illiterates to see his light as well? This is an important, albeit naive, question, since illiterates like me are dependent on information from ‘specialists’, and Caplan ‘is’ an economics professor… To be filed under “forest and trees” and “caveat emptor”?

A new take on Eurobashing

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Thomas P.M. Barnett, Pentagon pet intellectual and 4th Generation Warfare theorist, comes up with a new variant of the Eurabia meme I don’t think we’ve seen before. According to Barnett,

Nothing predicts Europe’s growing strategic irrelevancy more than their growing navel-gazing over the perceived threat of “Eurabia,” which speaks to a continent that’s gotten so fat, dumb and lazy that they’re fatalistically succumbing to fears of invasive species destroying their habitat. The reality is, of course, that thriving, self-aware societies can handle that influx and integrate the differences to make the whole stronger.

This is fascinating. All the usual US hard-right tropes are there, until the second sentence. There’s the blithe assumption of economic superiority (no mention, of course, of the US trade deficit with both the EU and China, currently 7% of GDP and climbing fast, nor for that matter the EU’s trade surplus with both..), and the corollary complacency that this will last (no mention of the gap in energy intensity between the US, the EU and Japan, for example). There’s the rhetoric of purity as applied to economics. There’s the complacent assurance of permanent strategic primacy, with (of course) no mention of Iraq or Afghanistan. But the really interesting thing is that he sees people like the Vlaams Belang’s representatives on Earth over at Brussels Journal as part of the problem, not part of the solution.

Which should make Barnett far more worth reading than, say, Mark Steyn or any of the European far-right’s growing Washington lobby. His notions about “the Core and the Gap”, the “sysadmin force” specialised in postconflict reconstruction, counterinsurgency and peacekeeping, etc should make him that anyway. In a sense, I see him as a reasonable man struggling to get out of the husk of a hidebound reactionary, rather like his fellow guerrilla warfare theorist John Robb—they both make sense, but find it necessary to convince themselves and their audience that they aren’t perhaps turning – gasp – European by talking nonsense about nonexistent civil wars and cheese-eating surrender monkeys.

It’s tempting to use a Freudian reading.
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Sensible German Regulations, Part 1

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The government of Berlin has become the first German state government to get out of the business of telling retailers when they can and cannot do business. Mostly, anyway. As the German newspaper whose web site could be better organized notes today (on page one, but is it on the front page of the web site? certainly not), Berlin has told shop owners that they may keep any hours they please from Monday to Saturday. Credit where credit is due, this is progress. Not leadership, not parity with numerous other EU nations, but still, progress.

On the other hand, the (Protestant) Bishop of Hanover said that quiet Sundays were good for everyone. Except of course tram drivers, bus drivers, conductors, police, firefighters, hospital staff, etc etc etc. Or maybe the good bishop is on to something, and a state-mandated day of rest really is the way to go. Why not Tuesday?

Power failure

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In more ways than one. On Saturday night, between 2230 and 2300 local time, a huge chunk of the European power grid fell over, affecting supply from northwest Germany, through Holland and Belgium, and mostly in France. Further afield, small areas of Austria and Italy lost power, and the Spain-Morocco interconnection was shut off to prevent the trouble spreading. Fortunately, power was restored speedily.

At the heart of the whole thing, meet the cruise liner Norwegian Pearl. This floating gin palace was recently completed by the Meyer Werft shipyard on the river Ems in northwestern Germany. Now, Meyer’s shipyard is a long way up the river. To get a ship the size of the Pearl out, you have to wait for a spring tide. But there’s a catch – just downstream of the yard, a 400 kilovolt transmission line belonging to the German utility company E.ON crosses the river. And the more water there is in the river, the less clearance there is under the wires. So, on Saturday night, when the weather and the tide were perfect for Captain Thomas Teitge to take the ship down the river, E.ON switched the wires off. And then the troubles began.

Update: She sailed today without further trouble.
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Italy 2007 Budget Storm

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Italian Finance Minister Tommaso Padoa-Schioppa is going to be a man of his word (and not follow in the path of that other European political leader who was lying about his budget in the morning, in the afternoon, and at night). He assures us of this:

Mr Padoa-Schioppa was adamant any adjustments to the budget, which MPs must approve, would not affect its goal of cutting Italy’s budget deficit to 2.8 per cent.

This is an important re-affirmation, since this time yesterday this little detail wasn’t clear at all, as there was a small matter of 5 billion euro of cuts which were in the budget but which effectively didn’t exist. (All of this is explained in a post on the Italian Economy Watch blog, and the follow up here, as well as by Claus Vistesen on his blog).

As the Economist said:

This is not the sort of thing you expect of a former board member of the European Central Bank. But it shows how far Mr Padoa-Schioppa has had to bend to placate demands by left-wing parties within the government.

The uproar produced within the small business community – who would have seen this mony simply transferred from their coffers to those of the state – has meant that Prodi has now had to publicly vow that the budget will be changed, always of course sticking to the three principles which underlie the budget policy of the current Italian government, namely:

“It’s clear that we will make technical corrections and adjustments, but we absolutely won’t renounce the three objectives of fairness, restoring the health of the public finances and development,”

So, Tommaso Padoa-Schioppa, even though this isn’t exactly the sort of thing that you expect from an ex-director of the ECB, we will assume that this time you are serious, and that you will try to comply with the spirit of what your government has agreed with the European Commission, even if, realistically, it may be a very difficult objective to achieve in the global economic environment we may all face in 2007.

Andy Xie, India and China

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Andy Xie is a rare beast, he’s a talented, creative economist. His recent departure from Morgan Stanley, and by implication from the Global Economic Forum, is now being widely commented on in the press (and here).

Andy was really one of the first global economists to start drawing attention to the important impact the rise of the Chinese economy was going to have (you can find a selection of some of his posts on my page here, and my early China Economy Watch blog – now defunct – was full of citations from Andy, basically he was getting it right when almost everyone else was getting it wrong).

There are two memorable arguments that Xie has advanced over the years that still bear thinking about.

1) Throw away the text books. This wasn’t meant, I don’t think, to be taken literally, what he was getting at was that we are facing new phenomena, and we need to think on our feet. Intuitive economics. Two recent posts of mine (and comments) on the Indian Economy Blog reflect this legacy (and here).

2). It’s time to start conceptualising the global economy as *one* single developing economy (with a lot of market imperfections) rather than as the sum total of a lot of discrete individual economies. I still think that this idea hasn’t attracted the attention it deserves as a methodological proposal.

Ostensibly Andy left as a result of remarks he made about Singapore (if you believe the rumour mill):
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