RIP Prof Bipan Chandra

A sad day for Indian history. Prof Bipan Chandra passed away.

One can disagree with Prof Bipan Chandra’s interpretation of history but one can only be awed by seeing his contribution to Indian history. An amazing scholar.

Washington Recaptured…

It is quite remarkable to see how Prof. Simon Johnson has stuck to the cause of crony financialism (crony capitalism is a little broader) and doing away with it.

Here he compares how Washington was captured by the Brits in 1814. And after 200 years it is being captured by Wall Street and Big Banks.

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38 maps that explain the global economy..

Superb visual post on world economy by Matt Yglesias. Amazing maps on world economy each one showing a different story. It is still incomplete bit nevertheless.

It is so fascinating to learn economics this way. But most of our textbooks are so dry. The only pictures we have are those dreaded graphs.

Good show.

Should we call this Great Financial Crisis a Greater Depression instead?

Brad Delong certainly thinks so.

How Starbucks was restored to its old-self

Interesting case-study on the coffee giant. It discusses how Howard Schultz brought back Starbucks from a plain coffee shop to a coffee shop with the Starbucks experience. The giant had lost some mojo in the middle and was just trying to please Wall Street at the cost of losing out its original self.

How it was brought back is what this piece discusses..

The other side of Aadhaar card..

The positive side is all we know. It will create this unique identity for Indians across and enable financial inclusion etc etc.

Gopal Krishna in MoneyLife gives one the other side (dark one) of Aadhaar card network. He points how in US/UK the new Govt actually scrapped their biometric identification schemes. Before elections, the current Indian govt promised to scrap it too but has gone back on its promises making Aadhaar as the base for its manifold programs.

So what is the story here? The author says biometric card is like a modern say enslavment where govt gets to intrude in one’s life. Moreover, there are lots of conspiracy theory over this biometric info being shared for international (read US) security purposes and India being party to it.

The issue is not whether we should have ID cards. The real problem is whether Aadhaar should be a biometric ID card?

Again, we just don’t know or even reflect on the other side of any public policy project. I mean even if all this is just myth, one should be aware of it.

World economic history and IMF in cartoon format…

Joe Procopio and Nick Galifianakis of IMF have this interesting cartoon strip on the topic. 

They should have also shown the colossal mistakes the institution has made in its history..

 

How Beatles saved UK from its foreign exchange crisis in 1960s..(Some lessons for India too…)

A superb article in IMF’s F&D Sep-14 edition by Simon Wilson.

He points how Beatles helped UK tide off its forex crisis for some years in 1960s. Via its concerts it got foreign exchange to UK. It also became a case for live music being exported and recognised as a BOP earning perhaps for the first time:

The other side of financial globalization of football

Usually we celebrate how globalisation and finance has transformed football across the world.

Akash Bhattacharya provides the other side of this development:

When a hamburger becomes a doughnut and other lessons about globalization…

There are two views on US economy. One it is on a perennial decline and other it shall recover given its strong institutions etc.

Daniel Inkenson belongs to the first kind and shows how US is on a perennial decline. Companies are quitting US and locating elsewhere. Reason – taxation issues, infra issues and so on.

He points how Burger King wishes to buy a Candian doughnut maker Tim Hortons and move to Canada:

How reliable are companies’ credit ratings?

Krishna Kant  of BS points to an internal study which looks at rating agencies of some 250 odd companies.

The ratings are same for companies which appear to be different on fin ratios:

Competition Commission of India slaps fine om 14 car makers..

One day old news but an important one. Competition Commission of India slapped fine of Rs 2500 cr on 14 automakers for not allowing competition in the auto components market. CCI gradually gaining teeth and understanding what is going on in Indian economy. This is a body which should have been formed long back as we have had all kinds of practices in the name of competition and private ownership.

I mean how do 14 players prevent competition? We are told in textbooks that large number of players ensure there is competition. But it is not the case here. These 14 car players have sort of formed a cartel and not allowed other players to sell auto components/parts of their brands:

Ricardo on Orissa-West Bengal potato/vegetable trade..

India and its politics is interesting and bizarre at most times.

I am not sure how many of us are following the Orisaa/West Bengal crisis on trading of potatoes and vegetables.

Apparently. Orissa supplies veggies to WB and latter supplies potatoes to Orisaa. Just like Ricardo’s example, it seems WB has comparative adv over potatoes and Orissa over veggies. The two states specialise in their comp adv and trade with each other. Win win for both as our text-books suggest.

Alas, the reality is not as simple. There are lot of other considerations which influence trade and it is not just economics.

Shouldn’t our Hon’ble President/SC (or someone more important) explain the sacking/transfer of so many State Governors?

This is getting really really nasty. I am no political expert but all this random sacking/transfering of so many State governors is just preposterous.

It is true that ruling party is paying back to Congress as latter did the same in 2004 or so. Infact, it is like tit for tat. But after the 2004 sacking Hon’ble Supreme Court said such sacking should not be allowed. Or we don’t believe in SC anymore? The crazy amount of politicisation of everything in this country is reaching an alarming level. The executive is becoming way too powerful.

It is also true that all these State Governors are just used by Centre to sent their cronies/ministers. But then with ruling party replacing these State Governors with their own people instead of looking at capabilities/expertise does not take us anywhere. It is one party spokesperson replacing the other. The transfer of some Governors to NE States and they resigning on the pretense that NE States are not important speaks volumes about our so called focus on development of NE region.

Is fiscal stimulus any useful ? Some evidence from US States spending on roads..

Sylvain Leduc and Dan Wilson get into one of the oldest debates on importance of fiscal stimulus.

They look at the evidence of whether and how US states used the fiscal stimulus given to them by the Federal Govt:

NGDP targeting is more suited to developing economies..

Pranjul Bhandari and Jeffrey Frankel make a case for NGDP targeting in developing economies.

They say NGDP is more suited to developing world:

Economists beg Arun Jaitley for a ‘job’…

Gursharan Dhanjal of Inclusion takes a dig at several Indian econs looking for a job at the Indian govt.

Ever since the new govt has come,the amount of positioning one is seeing has never been seen before. Econs who benefited much from the previous UPA govt via several positions in govt have conveniently switched sides blaming all ills of Indian economy on the UPA govt.  There are only a handful of such econs/experts who acknowledge of their alliance with previous govt bodies. Rest have just conveniently switched tracks.

Those who are already sitting on several policy positions appointed by UPA govt are just plain lucky. Rest are shuttling around for benefits. It is all amazing and shameless really.

But NDA govt is not relenting so far. It is enjoying all the publicity given by these econs in the name of change but not interested in giving back the favors.

The author calls these econs as India’s new trade union..:-)

Which economies are expected to decline? Lessons from India’s history

It is not often that Indian economy is quoted/referred by econs for comparisons across the world except for poverty etc.

Tyler Cowen asks this question of  Which countries are expected to decline and refers to India’s history. Though, his quoting India is not for anything positive as well. He says few economies in Europe are expected to decline Once the decline sets in, difficult to grow back. Look at India as one such example:

Who are some of the possible losers in this radical transformation in the global economy?

These economies have a few features in common: They try very hard to preserve old jobs at high real wages, they are not very flexible at adjusting, and they have not engaged in a major economic restructuring. While China is not the main problem of these economies, Chinese export growth and wage competition may have been a kind of final straw that made old ways unsustainable.

If either France or Italy, much less both, is in for 15 or 20 years of economic stagnation, it’s hard to see how the eurozone will avoid another major financial crisis. Portugal and Greece, both of which have been de-industrialized over the last few decades, are also possible candidates for continuing, rather than temporary, retrogression.

n Asia, the most likely future candidate for this problem is Taiwan, where real wages were largely stagnant from 2000 to 2011. In 2012, Taiwan’s trend was even more disturbing: Its economy grew 1.3 percent, but real wages fell 1.6 percent, both adjusted for inflation. Taiwanese capital has flowed into China, creating a new class of Taiwanese millionaires but hollowing out the country’s manufacturing base as capital was reallocated to the mainland.

What about the United States? The chance of an overall economic reversal here is very slim. The American economy is relatively flexible, and various candidates for future growth are strong: technology, health care research, energy and higher education. Despite its slow recovery, the United States probably still has the best fundamentals of any major economy.

Italy, which is producing less today than it was in the middle of 2000, is undergoing a triple-dip recession. Croatia is in its sixth consecutive year of recession — and joining the European Union didn’t help it much. In France, the economy has slowed to a crawl, but because taxes there are already high, there isn’t much room for further budget adjustment. French citizens expect a great deal from their government, and strikes are a common response to reduced wages or benefits.

The India story:

we might look at a different exemplar for modern times, 18th- and 19th-century economic history  India. That country’s economic retrogression during that era may help us understand the quandary that some parts of the world face today.

In 1750, India accounted for one-quarter of the world’s manufacturing output, but by 1900 that was down to 2 percent. The West became more productive as a result of the Industrial Revolution, and India lost much of its leading export sector, textiles. While the data is fragmentary, the best estimates show that India’s living standards declined through the middle of the 19th century and that its economy retrogressed, even as it borrowed some technological improvements from the West. India just didn’t do enough to move toward production on a larger scale or with better machines.

This story of India’s loss to foreign competition is documented in “Deindustrialization in 18th and 19th Century India,” a paper byDavid Clingingsmith, an economics professor at Case Western Reserve University, and Jeffrey G. Williamson, an emeritus professor of economics at Harvard.

Economists are accustomed to emphasizing the benefits of international trade, and these arguments are largely correct. But in India, internal regulations and underdevelopment, combined with British colonial depredations, prevented Indian resources from being redeployed productively. The lesson is that a sufficiently large international trade shock can lead to decades of economic decline in a major economy, especially if that economy isn’t geared to mounting a flexible response.

The world economy going in circles..

Roots of gender inequality in developing countries…

A pretty hit topic across developing economies is continued presence of gender dominance and inequality.

Seema Jayachandran looks at the toot causes of this inequality:

Definition of real estate in India and connecting realty to reality…

RBI DG R.Gandhi gives a speech on real estate sector in India titled as ‘Real estate and housing – a sensitive sector or Samvriddhi sector? Samvriddhi means growth..

He gives this interesting definition of real estate as per 10th Plan Com document (wonder whether Plan Com docs will be referenced in future):