News and Analysis: 3-14 Jan 11 | EmergingFrontierMarkets.com

Based in: Manila, Philippines

Posted on Fri, 14 Jan 11:

I Bremmer and D Gordon: Top risks of 2011--The risks that exercise us most center usually on a nation, an issue, an event. We worry over political chaos before or after an election, a coup in a fragile regime, or military conflict with a rogue nation. But for the 1st time, the political risk environment is much broader this year. It's the change in the world order itself that gives us most cause for concern. 2 years after the financial crisis, there's a strong argument to be made for optimism. But that conclusion implies a level of confidence, if not quite comfort, with where the world is headed. Whatever your expected shape of econ recovery - a U-, V-, L-curve, or something else - we're entering an entirely new world order, says Group pres and research head,   Eurasia Grp, 13 Jan 11 [PDF]

Developing nations are driving global growth, but risks remain: The world economy is moving on from a post-crisis bounce-back phase of recovery to slower but still solid growth this year and next. Global GDP expanded by 3.9% in '10, but is expected to slow to 3.3% in '11, acc to the Global Economic Prospects 2011. Developing nations face 3 main short-term risks: tensions in European financial markets; large and volatile capital flows; and a rise in high food prices. For the longer-term, nations need to shift focus from short-term crisis management toward measures that address underlying (and difficult to resolve) structural challenges,   World Bank, 12 Jan 11

Ronald McKinnon: Why China shouldn't float--China is again coming under heavy political pressure by the US gov't to appreciate its currency, with some European officials chiming in. Behind this political clamor is the academic view of many economists that exchange rate 'flexibility' is itself desirable, esp. as a way of correcting imbalances in foreign trade. But once one realizes that China's trade surplus just reflects its net surplus of saving over investment, and vice versa for the saving-deficient US, then there's no presumption as to which way savings-to-investment would move if its currency was appreciated, says Stanford U prof,   Int'l Economy Mag, Sep-Nov '10 [PDF] (China needs faster yuan rise - US Treas.'s Geithner, Reuters, 13 Jan 11) [courtesy Biz Spectator/ Austral.]

Posted on Wed, 12 Jan 11:

New report warns current global governance systems lack capacity to deal with global risks: The global risk context in '11 is defined by a 21st century paradox: As the world grows together, it is also growing apart. 2 cross-cutting global risks are esp significant - econ disparity and global governance failures - since both influence the evolution of many other global risks and inhibit our capacity to respond effectively to them. Now on its 6th ed., Global Risks 2011 draws on the insights of 580 expert respondents to the forum’s Global Risks Survey '10 across stakeholder groups and regions, measuring perceptions of risk likelihood, impact and interconnections for 37 global risks over a 10-year time horizon,   World Economic Forum, 12 Jan 11 [PDF, 1.6MB]

Haiti one year later: A year after the earthquake, the capital Port-au-Prince remains in ruins. Rubble from the earthquake remains in place. Nearly 1.5 mln of the city’s inhabitants still live in makeshift shelters and temporary encampments. Unsanitary conditions, crime, exposure to harsh weather, joblessness and uncertainty remain the reality for most people. The gov't has yet to announce a plan for rebuilding the city. The Interim Haiti Reconstruction Commission, co-chaired by UN Special Envoy Bill Clinton and Haiti’s PM, has rarely met and has been only partially funded. The current impasse over the results of the Nov election has created a sense of paralysis, by R Perito,   US Inst Peace, 11 Jan 11 (Is Haiti building back better? - Summary of a forum, Dec '10)

Nook & cranny: William Easterly--The anarchy of success: The success of the East Asian Gang of 4 (Hong Kong, SKorea, Singapore, and Taiwan) - and now China - has exerted an irresistible lure to students of growth. Economists can say something useful about econ success, but 1st we have to clear away a lot of false overconfidence. In Bad Samaritans: The myth of free frade and the secret history of capitalism, Cambridge U's Ha-Joon Chang is both a critic and a purveyor of such overconfidence. He rightly criticizes those who have made overly strong growth rate effects for free trade and orthodox capitalism, but then he turns around and makes equally strong claims for protectionism and what he calls 'heterodox' capitalism, says NYU economist,   NY Rev of Books, Oct '09 (Easterly article continued |  Chang: Reply to Easterly, Nov '09)

Posted on Mon, 10 Jan 11:

US car business in major shift: For most of the past century, General Motors, Ford and Chrysler dominated the US car industry. Now, as a result of both long-term trends and the upheaval of the last 2 years, the Big 3 are about to be replaced by a Gang of 7 as the industry's driving force - GM, Ford, Toyota, Honda, Chrysler, Nissan and Hyundai (each with a market share of 5% or more). That's a dramatic shift from the days when the 3 Detroit companies dominated the market and dictated the industry's direction,   Wall St Journal, 4 Jan 11 (US eclipsed by China in '10 new car sales for 2nd year in row, Japan Today, 5 Jan |   Will emerging car markets stall?, Financial Post/ Canada, 6 Jan)

Kenneth Rogoff: Armageddon can wait--Where are global currencies headed in '11? After 3 years of huge, crisis-driven exchange rate swings, it is useful to take stock both of currency values and of the exchange rate system as a whole. Currency chaos seems the safest bet of all, with sharp and unpredictable swings in floating exchange rates around the world. During the mid-2000s, there was a brief window when some argued that currencies had become more stable as a corollary of the 'Great Moderation' in macroeconomic activity. Nobody is saying that now, says fmr IMF chief economist/ Harvard prof,   Proj Syndicate (courtesy Korea Times), 4 Jan 11

When value chains backfire: Did globalization contribute to the econ crisis and if so how? This is one of several interesting questions asked in Measuring Globalization: OECD Economic Globalization Indicators 2010. In snapshot mode, this recent report looks at the financial crisis, trade, technology and multinational enterprises, and asks how these may have influenced the proliferation of the crisis, just as they helped spread prosperity and wealth in the 1st place. One consideration is how production, trade and investment operate across nations and continents. A product and its components, incl its intellectual inputs, can be traced to several different nations via so-called global value chains,   OECD Observer, Oct '10

Posted on Thu, 6 Jan 11:

UN's Food Agri Org releases food price index for Dec - World prices climb to record high: The FAO's food price index for Dec, which provides a measure of the monthly change in int'l prices for major food commodities, shows a marked increase in global food prices, with higher sugar, grain, and oilseed costs driving world food prices to a record high,   Int'l Food Policy Res Inst, 5 Jan 11 (FAO, 13 Dec: Global food price monitor |  Global food security review [PDF] | Tracking global commodities prices, IFPRI, 17 Dec)

C-Suite/Boardroom: M Porter and M Kramer--How to fix capitalism, The big idea: Creating shared value--The capitalist system is under siege. In recent years business increasingly has been viewed as a major cause of social, environmental, and econ problems. Companies are widely perceived to be prospering at the expense of the broader community. Even worse, the more biz has begun to embrace corporate responsibility, the more it has been blamed for society’s failures. The legitimacy of biz has fallen to levels not seen in recent history. Business is caught in a vicious circle, says Harvard prof and social impact consulting firm FSG cofounder,   Harvard Bus. Review, Jan-Feb '11

Expanding variety of goods underscores battle for competitive advantage: The variety of goods imported to the US has dramatically increased in the past 2 decades. This growth reflects a widening circle of nations delivering the same goods to the US. Advances and widespread investment in info tech as well as greater int'l capital mobility have lowered the costs of fragmenting the production process across borders. A developing nation may begin exporting a new good because of a firm locating there the parts of the production process that are routine and labor intensive. As more firms take advantage of the cost savings of an increasingly int'l division of labor, continued growth in the variety of imports coming from developing nations can be expected, by S Monstashari,   Dallas Fed Economic Letter, Dec '10

Posted on Wed, 5 Jan 11:

Coffers: Mark Mobius--Growth shifts to inflation: I view '10 as a year of econ resurgence. I believe emerging markets are now in a secular bull market, and I expect this trend to continue into '11. Private domestic consumption and gov’t expenditure in areas such as infrastructure have at least partially offset the impact of decelerating export growth. The services sector has, in our view, also been gaining in importance, esp in China and India. Generally, I believe that the econ recovery in emerging markets is likely to be sustainable in view of their strong fundamentals. In addition to robust macro data, financial and fiscal indicators remain positive, says Templeton Asset Mgmt exec chair,   Gulf News/ UAE, 30 Dec 10

Global metros show economic growth shift towards emerging markets: A new joint report examines data on econ output and employment in 150 of the world's largest metropolitan economies, located in 53 nations. It is the 1st analysis of int'l metropolitan econ performance before, during, and after the Great Recession. The top 10 cities in terms of econ recovery in '09-'10 are Istanbul, Shenzen, Lima, Singapore, Santiago, Shanghai, Guangzhou, Beijing, Manila and Rio de Janeiro,   London Sch Econ / Brookings, 1 Dec 10 (Web site | Global Metro Monitor, w/ exec sum) [PDF, 2.5MB]

Chronicler of the creative class--An interview with Richard Florida: The urban studies theorist is not from the city. The Martin Prosperity Inst director and Univ Toronto prof of business and creativity 1st came into the public eye with the '02 publication of The Rise of the Creative Class, in which he argued that high concentrations of creative people are what drive the success of metropolitan regions. Since then, his star has continued to rise with the publication of follow-up books, incl the wryly titled Who’s Your City? His latest offering is The Great Reset: How new ways of living and working drive post-crash prosperity,   Chronogram Mag, Sep '10 (The ruse of the creative class, American Prospect, Jan '10)

Posted on Mon, 3 Jan 11:

Greg Mankiw: How to break bread with the Republicans--Dear Pres Obama, Sorry to bother you. I know you are busy. But I have the sense that you could use a few words of advice. In a matter of days, Republicans will control the House of Representatives and have a larger voting bloc in the Senate. If econ policy is to make any progress over the next 2 years, you really will have to be bipartisan. To do so, you'll need to get inside the heads of the opposition. I am here to help. As a sometime adviser to Republicans, I'd like to offer a few guidelines to understanding their approach to econ policy. Follow these rules of thumb and your job will be a lot easier, says fmr US Pres Council of Econ Advisers chair/ Harvard prof, NY Times (free registr req'd), 1 Jan 11

William Easterly: Foreign aid for scoundrels--I was in a NY bar recently with a group of African intellectuals. To my surprise, I was sitting next to a democratic opposition leader whom I have long admired. He had been elected to a major office in his home country, but then the nation's leader sentenced him to life in prison. He eventually got out and left Africa, but he is still so fearful of the autocrat's security forces that he asked me not to identify him or his nation. This person said one thing that will always stay with me. While in jail, he read 'The End of Poverty' by Jeffrey Sachs. In its acknowledgments, Sachs "thanks Africa's new generation of democratic leaders who are pointing the way, incl. . ." One of those included was the opposition leader's jailer, says NYU economist, NY Review of Books, 25 Nov 10

Asia must tap deep savings, private sector to finance infrastructure: Asia must be creative in finding ways to tap its multi-trillion dollar savings and to mobilize private sector support for new infrastructure needed to sustain growth in the coming years. Gross domestic savings in emerging Asia reached close to $4 trillion in '09. Much of this large cash pile has been underutilized, with regulatory obstacles, currency mismatches and underdeveloped capital markets hindering broader financing of essential infrastructure, Asian Dev't Bank, 7 Nov 10 (ASEAN+3 forum discusses harmonizing Asia's bond markets, Sep '10)

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