News and Analysis: 5-21 Dec 11 | EmergingFrontierMarkets.com

Based in: Manila, Philippines

Posted on Wed, 21 Dec 11:

Dan Ariely: Is it irrational to give gifts?, Wall St Journal, 17 Dec 11 [courtesy author's site]:
Many of my economist friends have a problem with gift-giving. They view the holidays not as an occasion for joy but as a festival of irrationality, an orgy of wealth-destruction. Rational economists fixate on a situation in which, say, your Aunt Bertha spends $50 on a shirt for you, and you end up wearing it just once (when she visits). But behavioral economics better understands why people don't want to give up the mystery, excitement and joy of gift giving, says Duke U prof

Bethlehem's mayor lights Christmas tree, News Agencies, 16 Dec 11 [courtesy Al Arabiya]:
Hundreds of Palestinians and pilgrims attended the annual tree-lighting ceremony in Bethlehem's Manger Square, during which the mayor lit a 15-meter Christmas tree, commencing celebrations in the town thought to be the birthplace of Jesus. Tourism in the West Bank town has been steadily on the rise, with some calling it a boom. While Israelis claim the calm has been the result of the barriers erected for security measures around the West Bank, Palestinians say the barriers only make their lives more difficult (After centuries, Bethlehem church to get new roof, AP, 26 Nov | Palestinians' Christmas statehood gambit, AP, 13 Dec | The Bethlehem Passport) [courtesy Google and Wash.Times]

Shock proof?, OECD Observer, 8 Dec 11:
Managing risk could absorb more policy time around the world in the 21st century. A recent report on global shocks defines them as "major rapid-onset events with severely disruptive consequences that cover at least 2 continents". Global shocks by definition do not give society time to adjust. The unprecedented degree of interdependence in today's world makes it harder to both foresee their consequences and identify their sources. Factors along the way may amplify their impact. How can policy makers be prepared? (Using scenarios to build strategies for an uncertain world economy, McKinsey, Nov '11)

Posted on Mon, 19 Dec 11:

Marketization in NKorea - Q&A with Peterson Inst/ UC-San Diego's Stephen Haggard, NKnet/ SKorea, Aug '11:
Q: You have been a NKorea watcher for many years. Based on your observation, what is the most significant change occurring right now in the NKorean market and also society? Do you think the regime can handle this growing inequality and corruption because these kinds of symptoms are threatening to the regime? Do you think the regime is trying to co-opt the market or to suppress it? What are the interesting findings from your survey of NKorean defectors?    (Noland: Is the NKorean economy shrinking?, Weblog at Peterson Inst, 1 Dec)

Hall of Fame: The courage of Vaclav Havel, Telegraph, 19 Dec 11:
It is given to few people to change the course of history. Vaclav Havel, who died 18 Dec aged 75, was one of them. Along with Lech Walesa, co-founder of Solidarity, he played a decisive role in the most momentous event of this generation. If Walesa's power derived from his fellow shipyard workers, Havel's came from his pen, whether as a playwright or as an essayist.  By the time of the Velvet Revolution in '89, he had become the leading opposition figure    (The intellectual and politics, Proj Syndicate)

M Brunnermeier, L Garicano, P Lane and assoc: Making Europe safer, Wall Street J, Sep '11 [PDF, courtesy Lond Sch Econ]:
Our proposed 'European Safe Bonds' are not euro bonds. They do not require one nation's taxes to pay for another nation's spending, nor do they require changes to the European treaties. ESBies alone will not solve all of Europe's current problems. Sound financial markets require constant vigilance. But ESBies would provide a way out from the regulatory gaps at the origin of the crisis, and they lay the foundation for a stronger euro zone in the long run, say 9 Euro-zone macro/ financial economists at EU/ US univs    (The 'European safe bonds' proposal - Exec sum and Q&A, Euro-nomics)

Posted on Fri, 16 Dec 11:

Martin Feldstein: The Euro zone's double failure, Wall Street J, 15 Dec 11 [courtesy NBER]:
The recent euro-zone summit was a double failure. It failed to achieve the increased European political integration that was the primary goal of German Chancellor Merkel and the other European political leaders. And it failed to improve the outlook for euro-zone sovereign bonds because those politicians continued to insist that only a fiscal union and political integration could limit the interest rates on sovereign debt. The Merkel-Sarkozy team should recognize that they have been on the wrong track, says US pres.'s Council Econ Advisers fmr chair/ Harvard prof

Output shifts, OECD Observer, 1 Dec 11:
Despite 2 decades of outsourcing and globalization, the US remains the world's largest manufacturer in '09. However, its share of world value-added in manufacturing declined from around 23% of the total in '90 to less than 20% in '09. China's share rose from a mere 3% to 18% over the same period, taking over Japan, previously the world's 2nd largest manufacturer, whose share dropped from 18% to 11% over the 2 decades (Bhagwati: The manufacturing fallacy, Proj Syndicate, Aug '10 | Rodrik: The manufacturing imperative, PS, Aug '11) [courtesy Amer Interest and Malaysia Star]

Posted on Wed, 14 Dec 11:

Joseph Stiglitz: The Book of Jobs, Vanity Fair, Jan '12:
Even when we fully repair the banking system, we'll still be in deep trouble - because we were already in deep trouble. That seeming golden age of '07 was far from a paradise. The fact is the economy in the years before the current crisis was fundamentally weak, with the bubble, and the unsustainable consumption to which it gave rise, acting as life support. Without these, unemployment would have been high. Bringing the economy back to "where it was" does nothing to address the underlying problems, says Nobel Laureate '01/ Columbia U prof

Robert Stavins: Assessing the climate talks - Did Durban succeed?, Weblog at Harvard, 12 Dec 11:
The UN climate talks in Durban adjourned on Sun., a day and a half after its scheduled close, and in the process once again pulled a rabbit out of the hat by saving the talks from complete collapse. But was this a success? If by 'success', one means solving the climate problem, the answer is obviously 'not close'. Indeed, if by 'success' one meant just putting the world on a path to solve the climate problem, the answer would still have to be 'no'. But, as I've argued before, such definitions of success are fundamentally inappropriate for judging the int'l negotiations on the exceptionally challenging, long-term problem of global climate change, says Harvard environmental econ prog dir

Global investors still optimistic on emerging market prospect, World Bank, 8 Dec 11:
Heightened global risk perceptions in the aftermath of the financial crisis, fueled by sovereign credit risk in the developed world and political crises in the Mideast/ NAfrica, have increased investors' concerns, acc to a new report, World Investment and Political Risk 2011, by the Bank's Multilateral Investment Guarantee Agency. A survey of global investors conducted for the report finds they are 'cautiously optimistic' about their investment plans in the next 12 months (Emerging East Asia's local currency bonds resilient but face risks, Asian Dev't Bank, 29 Nov)

Posted on Mon, 12 Dec 11:

Barry Eichengreen: Disaster can wait, Project Syndicate, 12 Dec 11 [courtesy Straits Times/ Singapore]:
Here's a forecast: there will be no shortage of predictions that '12 is shaping up as a disastrous year. My view is different: '12 will not be a year of crisis, but nor will it bring an end to our current econ troubles. Many people think that '12 will be the make-or-break year for Europe - either a quantum leap in European integration, with the creation of a fiscal union and the issuance of Eurobonds, or the euro zone's disintegration, igniting the mother of all financial crises, says UC-Berkeley prof

Charles Wyplosz: Getting there, but slowly, Vox EU, 9 Dec 11:
The night of Thu, 8 Dec, saw a meeting to save the euro. Judging by reactions Fri morning, there is some way yet to go. But Europe is getting there, slowly. A significant step has been made in the right direction; the principle is right but the details are missing. If, as is likely, it will take some time for the details to be agreed upon, the European Central Bank may find itself forced to save the euro without the political cover that it is asking for. This is a good reason for the ECB to be cautious in its assessment, says Int'l Ctr Money Banking Studies dir/ Graduate Inst (Geneva) prof

Green Group: One who does not look ahead always remains behind, OECD Observer, 1 Dec 11:
We recognize that different nations have different national circumstances and natural resource endowments. We also recognize the constraints faced by some nations in undertaking mitigation actions and in switching from fossil fuels to renewables and alternative energy. Correspondingly, strategies for switching to a low-carbon society have to be diverse, say informal group of foreign affairs ministers from Cape Verde, Costa Rica, Iceland, Singapore, Slovenia, and United Arab Emirates (New UN climate deal struck, critics say gains modest, Reuters) [courtesy Stabroek News/ Guyana]

Posted on Fri, 9 Dec 11:

What's in the new deal to save the euro? - Q&A, AP, 9 Dec 11 [courtesy NWI Times]:
Twenty-three European Union states agreed Fri to set up a new treaty, giving up crucial powers over their own budgets in an attempt to overcome a crippling debt crisis. Q: Who's in it? Who's not in it? Why did Europe need a new treaty? How will that be achieved? What did they fail to agree on? Will it work? (Aslund: Thinking the unthinkable - How to break up the euro zone, Weblog at Peterson Inst, 5 Dec)

Gregory Mankiw: Know what you're protesting, New York Times, 4 Dec 11 [courtesy Harvard]:
"How do you feel about the walkout?" People have asked me that question repeatedly over the last several weeks, and I think that I should answer it. On 2 Nov, a group of students staged a walkout of one of my lectures. 8 minutes into the lecture, about 5-10% of the class stood up and quietly left. I have been told that at least one student who walked out sneaked back in later: he wanted to support the protest but didn't want to miss the lecture. After a few minutes, I resumed the class as usual. So how do I feel about it? My 1st reaction was nostalgia, says fmr US pres.'s Council Econ Advisers chair/ Harvard prof

Rethinking the financial system - Q&A with fmr Fed vice-chair/ Princeton's Alan Blinder, Russell Sage Found. Review, 30 Nov 11:
Q: What is your overall assessment of what economists know about the financial sector? Which area needs more research? Did economics, as Larry Summers recently said, fail to keep with the fact that "asset prices show large volatility that doesn't always reflect fundamentals"? Which economists or experts have proven useful for your study of the financial crisis? Do you think Hyman Minsky's "financial instability hypothesis" deserves more careful study now?

Posted on Wed, 7 Dec 11:

India backtracks on plan to let in foreign retail, AP, 7 Dec 11 [courtesy Atlanta Jl-Constitution]:
India suspended its plan to open its huge retail sector to foreign companies such as Wal-Mart in a reversal seen as a major capitulation to political opponents that further weakens the admin. The biz community had hailed the initial decision just 2 weeks ago as a long overdue reform. But opposition parties and even members of the governing coalition protested (FDI in Indian retailing and inflation, Columbia FDI Perspectives [PDF] | A new capital of call centers, NY Times, 26 Nov) [courtesy Ledger]

Joseph Stiglitz: What can save the euro?, Project Syndicate, 6 Dec 11 [courtesy Social Europe Jl]:
Even if those from Europe's northern nations are right in claiming that the euro would work if effective discipline could be imposed on others, they are deluding themselves with a morality play. Public-sector cutbacks today do not solve the problem of yesterday's profligacy; they simply push economies into deeper recessions. Europe's leaders know that growth is needed. But, rather than find a formula for growth, they prefer to deliver homilies about what some previous gov't should have done. This may be satisfying for the sermonizer, but it won't solve Europe's problems, says Nobel Laureate '01/ Columbia U prof

Jim O'Neill: Some BRICs built but more still needed, Goldman Sachs, 27 Nov 11 [PDF]:
30 Nov is the 10th anniversary of the BRIC acronym when I published "Building better global economic BRICs". That '01 paper didn't create a lot of attention at the time. It was not really until after the publication in '03 of "Dreaming with BRICs: The path to 2050" that the theme really caught on. One major consequence of the BRIC story has been the desire of other emerging markets to get into the 'club' - something we recognized in '05 when we thought of the 'Next 11' idea, says Goldman Sachs Asset Mgmt chair (Poorer nations should try to reduce reliance on agric, IMF Survey Mag, 11 Nov)

Posted on Mon, 5 Dec 11:

Francois Bourguignon: Can the euro be saved? - A tough French take on Germany's hardball strategy, Les Echos, 1 Dec 11 [Transl. by Worldcrunch]:
Merkel's strategy - that of taking advantage of the acute debt crisis to introduce the strong fiscal discipline that the euro zone needs - is understandable. So too is her reluctance to catapult Germany into a series of major rescue operations without any guarantee that its European partners are willing to accept such discipline. But the condominium is burning. First things 1st, that blaze needs to be put out, says fmr World Bank chief economist/ Paris School Econ dir (How biz is preparing for Eurogeddon, Presseurop | Thinking the unthinkable on a euro break-up, Weblog at FT, 27 Nov)

Paul Volcker: Financial reform - Unfinished business, NY Review of Books, 24 Nov 11:
It should be clear that among the causes of the recent financial crisis was an unjustified faith in rational expectations, market efficiencies, and the techniques of modern finance. That faith was stoked in part by the huge financial rewards that enabled the extremes of borrowing, the econ imbalances, and the pretenses and assurances of the credit-rating agencies to persist so long. A relaxed approach by regulators and legislators reflected the new financial zeitgeist, says fmr Fed chair/ fmr US pres.'s Econ Recovery Advisory Board chair

Transition in Afghanistan - Looking beyond 2014, World Bank, 23 Nov 11:
Transition - the full assumption of Afghan responsibility for security by end-'14, the drawdown of most int'l military forces and the likely reduction in overall assistance - will have a profound impact on Afghan econ/ political landscape, extending well beyond '14. Potential financing gaps in the budget could threaten security and recent dev't progress. With a pop. of 30 mln and a per capita income of $528, it is among the 10 poorest nations. 36% of its pop. live below the poverty line and more than half of its pop. is considered vulnerable (Afghanistan to get $133 mln loan, IMF Survey Mag, 15 Nov)

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