Ben Powell on Monopoly and Antitrust

independentinstitute 

Original talk given on July 20, 2012. Benjamin Powell, Senior Fellow at the Independent Institute and author of "Making Poor Nations Rich: Entrepreneurship and the Process of Economic Development," engages with high school students at the 2012 Challenge of Liberty Summer Seminar.

Cost of Labor No Longer A Big Factor in Manufacturing

ForaTv

William Bates, Chief of Staff for the Council of Competitiveness ,explains that labor is no longer the primary determinant as far as cost for big companies like Apple, which could mean bringing more manufacturing jobs to the U.S.

Chile's Economic Transformation: An Economy Gone Mad

atlasnetwork

(Part One) >>

U.S. Debt and Wealth Redistribution Turns People Against Each Another

ForaTv

Citing Keynesian economic theory, SocGen Dylan Grice demonstrates the effect of crippling US debt on all classes of the American public.

Markets slip on treacherous fiscal cliff

ReutersVideo

Japan enters 5th recession in 15 years

corbettreport

Europe's drawn-out efforts to pull itself out of the economic mire, are well documented. But, it's not alone - Japan has now entered its fifth recession in 15 years. It comes just days before the country's election, which is expected to sweep the current Prime Minister from power. RT talks to James Corbett, editor of the current affairs website The Corbett Report.

Chinese firms make great leap forward — onto US soil

abandonthecube.com

Martha C. White , NBC News contributor/

U.S. manufacturing is getting a dose of medicine – Chinese medicine, that is. And while, like much Chinese medicine, it’s unpalatable to Americans, experts say it’s a salve the economy needs.

Chinese investors will sink as much as $7 billion into American companies this year, and there’s more where that came from. “I think there’s a good case to be made that the number’s going to be higher next year,” said Thilo Hanemann, director of research at Rhodium Group, a consulting firm. “In general, we are at the beginning of a structural trend. If you look forward to 2103, there’s quite a few deals in the pipeline we already know of.”

Rhodium’s $7 billion figure goes beyond manufacturing to cover all Chinese investment, like the pending deal between AIG, which is selling just over 80 percent of its airplane-leasing unit, and a consortium of Chinese investors.

Chinese investment in European companies has surpassed the $10 billion mark, Hanemann said, as the country flexes its growing economic muscle. A new report by the National Intelligence Council says China will surpass the United States as the world’s top economy before 2030. Predictions like this provoke worry among some people in the U.S., especially since the ambitions of its industry and state often are intertwined in China, but Hanemann said the concern is overblown.

Contrary to the belief that Chinese buyers will gut a company’s intellectual property and then move production to China, a Rhodium analysis of hundreds of deals over the past decade showed that Chinese involvement was more likely to preserve or grow rather than erode the local job market.

Manufacturing is especially good at this. “There’s a big ripple effect,” said manufacturing consultant Bill Waddell. “Manufacturing, more than any other industry, drags a big tail. It creates a lot of jobs outside the factory.” China’s interest in American manufacturing is concentrated in alternative energy, electronics, aviation and other high-skill industries. “Fairly expensive manufacturing are the things that are going to come back here,” he said.

And jobs in those industries tend to be good ones, said Jeff Strohl, director of research at Georgetown University’s Center on Education and the Workforce. More >>

Monetary policy according to David Einhorn

EconomistMagazine

David Einhorn of Greenlight Capital discusses the negative effects of low interest rates at The Economist's Buttonwood Gathering on October 25th 2012.

Thinking competitively about US-China

Shadow Government

By Julian Eagle Platón and Will Inboden
Does the United States benefit from having a strategic competitor? We share the common assessment that the U.S.-China relationship will be the most important geopolitical relationship this century. The complex competition between these two powers will play out not just in Asia but across the globe. Much commentary rightly focuses on the many ways a rising China may threaten U.S. interests.
But is this competition from China merely a threat, or also potentially an opportunity for the U.S.? We think it can be the latter.
Competition is good. We welcome competition in the marketplace. As one of the fundamentals of market capitalism, we have anti-trust laws to break up monopolies and allow competition to flourish. Competitive markets are more innovative and efficient than monopolistic markets, as competitors constantly strive for improvement and advantage.
These benefits translate to the political sphere. David Landes' The Wealth and Poverty of Nations accurately identifies competition as a critical factor in Europe's ascent to world leader for half of the last millennium. "Enterprise was free in Europe. Innovation worked and paid, and rulers and vested interests were limited in their ability to prevent or discourage innovation.  Success bred imitation and emulation..." Even inventions created elsewhere in the world (e.g. gunpowder) reached their maximum potential via European rivalries.
Lack of competition can breed complacency and inefficiency, hence the constant soul-searching of U.S. foreign policy wonks following the Cold War and the demise of the Soviet Union as our chief rival. A competitor focuses and invigorates thinking, while providing a benchmark to measure progress. Chinese competition can spur America to address its weaknesses, driving the U.S. to reach new heights.
Here we are optimistic. America's capacity to compete remains strong; indeed the fundamentals of American power are undiminished. The U.S. enjoys a position of almost unparalleled geographic privilege. Natural resources are abundant, particularly arable land, new petroleum and natural gas reserves, and renewable resource capacity.  America benefits from secure borders and negligible territorial disputes. And access to two oceans facilitates continued maritime supremacy. China faces a critical shortage of arable land, numerous territorial disputes, uneasy and resentful neighbors, and comparatively limited access to the sea.
The U.S. also possesses a demographic advantage, which can continue if the U.S. maintains and reforms our open immigration system, and arrests our recent decline in fertility rates. Future immigrants will add to the population, spur greater entrepreneurship, widen the tax base, and help soften the burden of the baby boomer retirement. China faces the triple demographic peril of a shrinking and aging population with a growing gender imbalance.
Even economically, American competitiveness remains strong. The recent recession and ongoing budget travails notwithstanding, the U.S. continues to be the dominant creative force in the world. U.S. firms are strongly competitive in world markets. The U.S. also retains a significant advantage in soft power, evidenced by the greater willingness of regional powers to work with the U.S. over China.
Historically, America has a record of responding well to competition, even amidst adversity. During the 1970s, American stagnation and decline was exemplified by an ignominious retreat from Vietnam, Watergate, the oil embargo, stagflation, the Iranian hostage crisis, and an apparently ascendant Soviet Union. Similarly, Japanese economic competition in the 1980s, during another downturn in the American economy, had many prognosticators warning of looming Japanese supremacy. Japan's economy was surging and Japanese investors - steered by the powerful Ministry of International Trade and Industry - purchased scores of American assets. Ezra Vogel's 1980 book Japan As Number One crystalized this thinking.
In both cases, the magnitude of the competition was not nearly as threatening as the predictions. And in both cases the U.S. responded positively to the challenge. The Reagan economic expansion and military build-up in the 1980s helped end the Cold War, and the increased productivity and economic growth of the 1990s enabled the U.S. to meet Japan's economic challenge.
Does Chinese competition rise to the level of the Cold War contest of the superpowers? Certainly not yet, and hopefully never. Skeptics highlight China's relative weakness in comparison to the U.S., particularly in military power. Moreover, Chinese territorial ambitions in the East and South China Seas do not yet equate to Soviet domination behind the Iron Curtain and designs beyond.
China also fails to present a competing worldview in the manner of Soviet communism. Authoritarian capitalism has many hindrances and has not demonstrated an enduring appeal, as bribing populations to support authoritarian leaders can only stave off demands for self-determination in boom times. When the economy begins to lose steam, the cracks in such a scheme can be fatal. Deep flaws are already apparent in China's vaunted economic growth, in the form of environmental degradation, a speculative real estate bubble, and soaring local debt.
Continued sober and accurate analyses of rival capabilities are essential to avoid exaggerated threats and wasted resources. Imagined threats are rightfully discarded, but it is imperative to respond to actual competition. Another risk comes from tunnel vision focused exclusively on the chief rival. This necessitates an awareness of potential competition from unlikely sources, and the flexibility to respond appropriately.
It is evident, however, that the Chinese leadership views the U.S. as a threat, and that China's remarkable growth positions it as the chief competitor to the U.S. So, how can we make the most of this going forward, to ensure that competition remains free of conflict? After all, competition may have driven European supremacy in the last millennium, but it also caused incessant warfare that ultimately eroded Europe's global dominance. More >>

Free markets are under threat, says Luigi Zingales

EconomistMagazine

Free markets are under threat, says Luigi Zingales, of the University of Chicago Booth School of Business, at The Economist's Buttonwood Gathering on October 25th 2012.

Why companies are sitting on cash

The Economist/ John Micklethwait-Editor-in-Chief

Cash has been piling up on companies’ balance-sheets since before the crisis.

MONETARY stimulus gets you only so far. In America, third-quarter profits and revenues for companies in the S&P 500 index appear to have fallen year on year for the first time since 2009, according to Thomson Reuters. Profits for roughly half the firms in the European Stoxx 600 have fallen short of expectations so far.

Companies in search of a culprit may want to glance in the mirror. Firms are trimming their budgets for everything from technology-consulting services to semiconductor equipment in the face of what Sir Martin Sorrell of WPP, a British advertising and marketing giant, calls four “grey swans” (unlike black swans, people know about grey ones). The four worries unnerving business are: the euro-zone crisis; upheaval in the Middle East; a possible recession in China; and America’s economic health and “fiscal cliff”—the combination of tax increases and spending cuts scheduled to occur at the end of this year.

This is not a new problem. Investment has steadily risen since the recession ended, but not as vigorously as profits. In America, for example, nominal capital expenditure this year (on an annualised basis) has risen by 6% compared with 2007; internal cash flow is up by 32%. Companies have been net suppliers, instead of users, of funds to the rest of the economy since 2008. Firms in the S&P 500 held roughly $900 billion of cash at the end of June, according to Thomson Reuters, down a bit from a year earlier but still 40% up on 2008.

Business leaders and conservative critics cite that cash mountain as proof that meddlesome federal regulations and America’s high corporate-tax rate is locking up cash and depressing investment. But that cannot explain why the same phenomenon prevails worldwide. Japanese companies’ liquid assets have soared by around 75% since 2007, to $2.8 trillion, according to ISI Group, a broker. Cash stockpiles have continued to grow in Britain and Canada, too, to the immense frustration of policymakers there. “Dead money” is how Mark Carney, the Bank of Canada’s governor, has described the nearly $300 billion in cash Canadian companies now hold, 25% more than in 2008. Mr Carney admonished them to “put money to work and if they can’t think of what to do with it, they should give it back to their shareholders.” More >>

Study: Huge, Unreported Amounts of Money Are Being Shifted out of China

Xi Jinping (center) and Li Keqiang (right) will become, respectively, the president and premier of China (AP)

The Blaze/ Becket Adams

BEIJING (TheBlaze/AP) — Chinese investors evaded government controls to move more than $600 billion out of their country last year and the outflow is increasing, fueling economic and political risks as communist leaders prepare for a handover of power, a Washington-based monitoring group says.

The study by Global Financial Integrity gives backing to anecdotal signs of huge, unreported movements of Chinese money out of the country. Experts say the outflows are driven by public frustration with a banking system that subsidizes state companies at the expense of savers and by businesses profiting from loopholes in the government’s pervasive economic controls.

Chinese companies are widely believed to move money abroad both to invest and to “round trip” back into the country disguised as foreign investment to win tax breaks and other incentives. Chinese families move money abroad to gain a better return than they can from state banks that pay low deposit rates.

Last year’s outflow was part of a $3.8 trillion flood of capital that left China over 11 years, Global Financial Integrity said. It said the amount rose from $172.6 billion in 2000 to $602.9 billion in 2011.

The group said it was unclear how much of the money came from corruption or other crimes but it said the illicit outflow could aggravate economic and political strains by aiding tax evasion and widening China’s sensitive wealth gap. 

The study “raises serious questions about the stability of the Chinese economy,” the group said in a statement.

“The social, political, and economic order is not sustainable in the long-run given such massive illicit outflows,” said Dev Kar, the group’s chief economist and a co-author of the report, in the statement.

Global Financial Integrity, a program of the Center for International Policy, studies illegal cross-border flows of money and promotes measures to stop them.

Some analysts have suggested the outflows reflect a loss of faith by China’s financial elite in the communist government but others say much of the money is sent back into the country disguised as foreign investment.  More on The Blaze >>

What Successful 21st Century Supply Chains Look Like

ForaTv 

Edwin Keh of The Wharton School of Business lists some characteristics of successful global supply chains that have evolved from the traditional models of years past.

Economists Need To Learn How The World Works

ForaTv

Complete program available for free at http://fora.tv/2012/09/21/future_of_finance

Dr. Paul Wilmott, an expert in quantitative finance, explains how most economists don't have real world business experience. In his opinion, economists have theories that aren't based on reality.

Premio Nobel de Economia 2012: Alvin E. Roth y Lloyd S. Shapley

Alex Tabarrok 

Alvin E. Roth

Lloyd S. Shapley

Great choices. Al Roth for matching and the design of new types of markets. Lloyd Shapley for fundamental contributions to game theory and mathematical economics including the Gale-Shapley algorithm which is a cornerstone of the matching methods Al Roth pioneered. I am especially pleased about this because of Roth’s great work on improving kidney allocation. Here is Roth’s blog, Market Design and here he is giving a talk at Google. Here is what I wrote in 2010 about Roth

Roth has applied heavy-duty theory to the very practical problems of matching doctors to residency programs, children to schools, economists to departments and kidneys to patients in a way that is stable, incentive-compatible, and maximizes the gains from exchange.  In my view, Roth is the most influential economist working today. Influential among other economists?  Yes.  But what I really mean is influential in the world.

Previous posts on MR about Roth (also here). Roth’s papers.

Economic war? Iranians protest currency collapse

Visit NBCNews.com for breaking news, world news, and news about the economy

Encabeza Suiza Competitividad Mundial. Venezuela 126, Cuba out

The World Economic Forum  ha publicado  Global Competitiveness Report 2012-2013. Los top ten paises en terminos de competividad son los siguientes:

1. Suiza
2. Singapur
3. Finlandia
4. Suecia
5. Paises Bajos
6. Alemania
7. Estados Unidos
8. Reino Unido
9. Hong Kong
10. Japon

China desciende del 26 al 29, mientras Francia aparece en el 21, Espana en el 36, Rusia en el 67 y Grecia en el 96.

En Latinoamérica Chile en el 33 encabeza la region. Panamá se ubica en el 40, Brasil en el 48; mientras México ancla en el 53,  Perú en el 61 y Colombia en el 69. Venezuela aparece en el lugar 126 de los 144 paises objeto de estudio. Cuba no fue evaluada.

Informe completo en espanol en: http://www.weforum.org/gcr.

How Deep Is the Shadow Economy?

Freakonomics/ Stephen J. Dubner

Economia Kubana: La Akademia Kubishe y la indigencia conceptual concreta

Sobre Can Cuba Move Half its Economy to the ‘Non-State’ Sector? en  The Cuban Economy - La Economía Cubana

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akantilado.wordpress.com

Como es costumbre nuestra academia se toma muy en serio cualquier afirmacion proveniente de la nomenclatura castrista analizando reactiva y no proactivamente [lamento que nuestra distinguida academia conozca solo al apparatachik Esteban Lazo por los medios de comunicacion y no hayan tenido la oportunidad de discutir con el temas economicos y empresariales]. El asunto no depende de cuantos trabajadores por cuenta propia logren establecer sus negocios sino en el volumen de productos y servicios que puedan generar [a estas alturas habria que explicarle a alguien como se calcula el PIB???]. La concepcion del regimen neocastrista cuenta entre sus sustentos con la tropicalizacion del "Zhuanda Fangxiao chino: mantener lo grande, deshacerse de lo pequeño", donde si por una parte se observa la concentracion de los polos estrategicos de la economia nacional en manos del estado [mas apropiado: en manos del Clan de Biran]; por otra parte se prohibe expresamente para los "otros" la acumulacion de propiedades y riquezas mas alla de los limites de la supervivencia en tanto divertimento social que rige el nuevo paradigma social neocastrista.

Por otra parte, el sistema de cuentas nacionales de Cuba no actua como conocemos en los paises occidentales, sino que es un sistema estadistico que arrastra graves errores metologicos [entre ellos la doble y triple agregacion de los valores creados sin descontar como corresponde el consumo material y la amortizacion que forman parte de los costos y gastos pero no del nuevo valor creado] y de registro del dato primario [solo a manera de ejemplo: en una de las miles de ocasiones que revise in-situ estadisticas en empresas cubanas pude constatar que el consumo de arena reportado en un ano solo por una empresa constructora permitiria convertir en playa todo el literal costero de la isla, pero esas cifras habian sido aprobadas por los jefes de agrupaciones constructoras, tecnicos y especialistas, vicedirectores economicos y directores de empresas, la delegacion provincial de la construccion, por las direcciones municipal y provincial  de estadisticas, por el viceministro de la esfera economica de la construccion, por los ministerios de economia y planificacion y estadisticas and so on y nadie objeto ni chisto hasta que en dialogo con un ministro expuse el asunto], por lo que cualquier cifra resultante del Producto Interno Bruto es conceptual y tecnicamente un disparate, siendo facilmente objetable. Por otro lado, el PIB asi como otras categorias del sistema de cuentas nacionales, son instrumentos manipulables al servicio de la propaganda oficial.

No es necesario insistir en los efectos distorsionadores del sistema monetario vigente en la conformacion de los costos y gastos -y por consiguiente de los valores de mercado-, ni del sistema de precios, ninguno de los cuales tiene fundamentacion economica y si socio-politica en tanto instrumentos del mecanismo de control y coercion social. Tampoco parece necesario extenderse en el hecho que los cuentapropistas hacen como que apenas sobreviven mientras el gobierno hace como que les cobra los impuestos.

Quizas seria oportuno para estimularle la mollera a alguien necesitado de un testosterona booster indicarle por donde se van moviendo las cordenadas de cierto sector de la economia cubana real: Si con el ingreso promedio mensual un torontiano puede adquirir 8 m2 de real estate y en Miami Dade County 22, hoy en La'bana el ratio es de 1=1.003. Cogieron la pista???

Gold! Haiti eyes potential $20 billion boom

Dieu Nalio Chery  /  AP

Children watch workers drill for gold, copper and silver in Trou Du Nord, Haiti, on April 10.

By MARTHA MENDOZA

TROU DU NORD, Haiti — Its capital is blighted with earthquake rubble. Its countryside is shorn of trees, chopped down for fuel. And yet, Haiti's land may hold the key to relieving centuries of poverty, disaster and disease: There is gold hidden in its hills — and silver and copper, too.

A flurry of exploratory drilling in the past year has found precious metals worth potentially $20 billion deep below the tropical ridges in the country's northeastern mountains. Now, a mining company is drilling around the clock to determine how to get those metals out.

In neighboring Dominican Republic, workers are poised to start mining the other side of this seam later this year in one of the world's largest gold deposits: 23 million ounces worth about $40 billion.

The Haitian government's annual budget is $1 billion, more than half provided by foreign assistance. The largest single source of foreign investment, $2 billion, came from Haitians working abroad last year. A windfall of locally produced wealth could pay for roads, schools, clean water and sewage systems for the nation's 10 million people, most of whom live on as little as $1.25 a day.

"If the mining companies are honest and if Haiti has a good government, then here is a way for this country to move forward," said Bureau of Mines Director Dieuseul Anglade. More >>