In Why MBAs are Going East, Business Week scares the reader with another version of Japan, Inc. taking over the world, updated 20 years, and now including such powerhouses as Vietnam. The issues it raises are important; the tone strikes me as a bit overblown.
The subtitle is Unprecedented growth, good salaries, and the ability to make an impact faster make Asia the new promised land for B-school grads.
No real argument with that here, though calling Asia's growth "unprecedented" is incorrect. Asia ia maturing. If you want super-rapid growth, you will need to take risks. Think parts of Africa, for example, or North Korea. China has the second largest economy in the world. It took the quasi-capitalist route in the 1980s. South Korea has been growing for decades. And so on.
Here's the take-home message, which this brief article ends with:
"The best and the brightest are leaving," says the Rotman School's Florida. "As a country, the U.S. has never confronted this before."
Now, Dr. Florida is a professor at the University of Toronto's business school. Why has Business Week gone to a foreign country for quotes in two parts of a brief article? Schadenfreude?
Will the U. S. suffer the equivalent of Britain's brain drain after WW II?
Without being overly dramatic, it is not difficult to predict that international arbitrage will occur, because it has been occurring for centuries. The more the U. S. raises taxes on the rich while sparing the non-rich, the more attractive lower-tax venues appear, both in after-tax dollars and psychologically.
Copyright (C) Long Lake LLC 2010
Showing posts with label Asia-pacific Journal. Show all posts
Showing posts with label Asia-pacific Journal. Show all posts
Monday, March 15, 2010
Saturday, February 21, 2009
China: Decoupled, or a Potemkin Economy?
The easy thinking about future global economic growth is that China, with its massive population and growth-oriented government, will take over the mantle of economic leadership from the West in general and the U.S. in specific.
Lately, a variety of economic statistics out of China have cast doubt upon this. Electricity production is down. Exports are down. Even the government is having problems:
February 17 – China Knowledge: “China saw its fiscal revenue fall 17.1% year on year to RMB 613.16 billion (US$89.72 billion) in January, according to…the Chinese Ministry of Finance…”.
17%? That does not happen in a growing economy.
Similar and worse statistics are emanating from all over Asia and environs, as reported by "Credit Bubble Bulletin":
February 16 – UPI: “Japan’s economy shrank in the fourth quarter at the worst annual rate since the first quarter of 1974, government officials said. The Japanese economy, the second-largest in the world, was particularly hard hit by plummeting exports and a downturn in domestic consumer spending… The real gross domestic product declined at an annual rate of 12.7% from October to December…”
February 16 – Bloomberg (Tom Kohn): “The cost of protecting Japanese corporate bonds from default rose to a record after the economy shrank the most since the 1974 oil shock last quarter.”
February 16 – Bloomberg (Michio Nakayama and Shigeru Sato): “Japan’s electricity generation dropped for a sixth straight month in January, falling 6.4% from a year earlier as factories and businesses cut production because of the deepening recession.”
February 18 – Bloomberg (Janet Ong and Yu-huay Sun): “Taiwan’s economy shrank at the fastest pace on record last quarter… Gross domestic product fell 8.36% from a year earlier…”
February 18 – Bloomberg (Janet Ong and Yu-huay Sun): “Taiwan’s central bank cut interest rates to a record low... Governor Perng Fai-nan and his board pared the discount rate on 10-day loans to banks to 1.25% from 1.5%...”
February 16 – Bloomberg (Seyoon Kim and William Sim): “South Korea faces a ‘deeper and longer’ recession than during the 1997-1998 Asian financial crisis as the global slump pummels exports and indebted consumers and companies cut spending, Nomura Holdings Inc. said. ‘The biggest difference this time around is the country’s exports won’t provide a cushion for a drop in local demand,’ Nomura’s… Kwon Young Sun said.”
February 16 – Bloomberg (Sangim Han and Kim Kyoungwha): “South Korea failed to meet its target at an auction of 10-year bonds for a second consecutive month on concern that the nation will increase debt sales to fund stimulus spending.”
February 17 – Bloomberg (Shamim Adam): “Singapore’s exports fell the most in at least 22 years in January… Non-oil domestic exports dropped 34.8% from a year earlier, after contracting 20.8% in December…”
Back to China. Numbers are only numbers. However, please click on and read the following report from a man who claims to be on the ground in China, as reported by Mish in "Inside China". Here is a sample of this man's report:
I've been to China a lot Mish, spent many months at a time there for the last eight years. China is already in a massive overcapacity real estate bubble. They are building three apartments for everyone that is lived in. Most apartments are empty and those that are rented do not come close to paying the interest on the loan.
There are huge department stores with products loaded on the shelves and staff everywhere and no one is shopping! Staff outnumbers customers five to one. It's surreal. They are ready, waiting for a great wave of shopping to come, but no wave is coming.
Eventually this "borrow and build" economy will be a pop heard round the world. China runs on construction, build build build, but there is no reason for that many places and spaces and big mall businesses with no consumers.
Is it possible that the corruption and overbuilding were worse in China than in the U.S. and U.K.?
If so, the implications would be horrible for China but perversely could be good for us, as the Chinese would then be forced to stop building/over-building roads and other infrastructure, and could then keep buying our debt at expensive prices (low interest rates).
Another wrinkle in a wild and crazy time.
Copyright (C) Long Lake LLC 2009
Lately, a variety of economic statistics out of China have cast doubt upon this. Electricity production is down. Exports are down. Even the government is having problems:
February 17 – China Knowledge: “China saw its fiscal revenue fall 17.1% year on year to RMB 613.16 billion (US$89.72 billion) in January, according to…the Chinese Ministry of Finance…”.
17%? That does not happen in a growing economy.
Similar and worse statistics are emanating from all over Asia and environs, as reported by "Credit Bubble Bulletin":
February 16 – UPI: “Japan’s economy shrank in the fourth quarter at the worst annual rate since the first quarter of 1974, government officials said. The Japanese economy, the second-largest in the world, was particularly hard hit by plummeting exports and a downturn in domestic consumer spending… The real gross domestic product declined at an annual rate of 12.7% from October to December…”
February 16 – Bloomberg (Tom Kohn): “The cost of protecting Japanese corporate bonds from default rose to a record after the economy shrank the most since the 1974 oil shock last quarter.”
February 16 – Bloomberg (Michio Nakayama and Shigeru Sato): “Japan’s electricity generation dropped for a sixth straight month in January, falling 6.4% from a year earlier as factories and businesses cut production because of the deepening recession.”
February 18 – Bloomberg (Janet Ong and Yu-huay Sun): “Taiwan’s economy shrank at the fastest pace on record last quarter… Gross domestic product fell 8.36% from a year earlier…”
February 18 – Bloomberg (Janet Ong and Yu-huay Sun): “Taiwan’s central bank cut interest rates to a record low... Governor Perng Fai-nan and his board pared the discount rate on 10-day loans to banks to 1.25% from 1.5%...”
February 16 – Bloomberg (Seyoon Kim and William Sim): “South Korea faces a ‘deeper and longer’ recession than during the 1997-1998 Asian financial crisis as the global slump pummels exports and indebted consumers and companies cut spending, Nomura Holdings Inc. said. ‘The biggest difference this time around is the country’s exports won’t provide a cushion for a drop in local demand,’ Nomura’s… Kwon Young Sun said.”
February 16 – Bloomberg (Sangim Han and Kim Kyoungwha): “South Korea failed to meet its target at an auction of 10-year bonds for a second consecutive month on concern that the nation will increase debt sales to fund stimulus spending.”
February 17 – Bloomberg (Shamim Adam): “Singapore’s exports fell the most in at least 22 years in January… Non-oil domestic exports dropped 34.8% from a year earlier, after contracting 20.8% in December…”
Back to China. Numbers are only numbers. However, please click on and read the following report from a man who claims to be on the ground in China, as reported by Mish in "Inside China". Here is a sample of this man's report:
I've been to China a lot Mish, spent many months at a time there for the last eight years. China is already in a massive overcapacity real estate bubble. They are building three apartments for everyone that is lived in. Most apartments are empty and those that are rented do not come close to paying the interest on the loan.
There are huge department stores with products loaded on the shelves and staff everywhere and no one is shopping! Staff outnumbers customers five to one. It's surreal. They are ready, waiting for a great wave of shopping to come, but no wave is coming.
Eventually this "borrow and build" economy will be a pop heard round the world. China runs on construction, build build build, but there is no reason for that many places and spaces and big mall businesses with no consumers.
Is it possible that the corruption and overbuilding were worse in China than in the U.S. and U.K.?
If so, the implications would be horrible for China but perversely could be good for us, as the Chinese would then be forced to stop building/over-building roads and other infrastructure, and could then keep buying our debt at expensive prices (low interest rates).
Another wrinkle in a wild and crazy time.
Copyright (C) Long Lake LLC 2009
Monday, February 16, 2009
Land of the Rising Sun Going Our Way?
For those interested in the prosperous but no-longer fast-growing (!) country of Japan, an interesting set of posts has appeared in the Asia-Pacific Journal. The articles cover Japanese electoral and economic policies. Given the view here that the U.S. situation has a number of parallels with post-bubble Japan, it may be worthwhile to click on the above link. The related posts, one following the other, are not technical. They relate both to the recently-passed "stimulus" bill in the U.S. and to a lesser degree to the issues related to the troubled money-center banks here.
Some of the same central planning-type thinking that is common here is debated in Japan, as the posts say:
" . . . Japanese authorities are once again stuck trying to stimulate aggregate demand."
" . . . Japanese authorities are once again stuck trying to stimulate aggregate demand."
And,
"So wrote Paul Krugman in his 1998 analysis of Japan's prolonged economic crisis, in which he argued that to escape its liquidity trap, it was necessary for "the central bank to credibly promise to be irresponsible - to make a persuasive case that it will permit inflation to occur, thereby producing the negative real interest rates the economy needs.'"
DoctoRx here: The merchants of debt, growth at any costs crowd, and inflationistas cannot stand a slow-growth but stable, prosperous and peaceful society that Japan has been for decades.
Japan is a very prosperous country. People live a long time there. Unemployment has been low. However, there is little in-migration and the population is aging. There is no point in depleting savings in an aging society. It is arguably better to live in a country where one earns 1% year on a 10-year Government bond when prices fall 1% a year than to live in a country that lives beyond its means.
The advice from balmy Florida to the Japanese is the following:
You have had a good thing going. Don't screw it up and print more and more money to try to persuade a nation of cautious savers to emulate spendthrift Americans.
Copyright (C) Long Lake LLC 2009
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