Tuesday, 13 May 2014
Monday, 23 September 2013
- Somali government breakdown
- Illegal international activity on the Somali coast
- Illegal dumping of toxic waste
- Illegal trawling
- Willingness of shipping lines to pay ransom
Thursday, 18 July 2013
- High Unemployment
- Social Media
Many are suffering as result of the instability, a fact that is hard to ignore when it makes the nightly news. Yet, even before the Arab Spring people were suffering. Repression's tools are often imprisonment and torture. The number of prisoners suspected to be held by Assad in Syria varies between 10,000 to as many as 120,000. However, the true cost of the Devil's-food-cake-you-know cannot just be measured by present suffering but by the lost potential of generations who had few opportunities to improve their lives under these regimes. The perfect example of this is Libya - a country with minimal education, limited free speech and a stagnating economy left the population in extreme poverty with little opportunity to improve their own lives.
Monday, 4 March 2013
Sunday, 21 October 2012
Nb. This post and its comments were removed for a while so I have posted the comments at the bottom of the blog
For the skin (exclusive institutions):
- An authoritarian government
- State controlled enterprise
- A weak judicial system
- A good sprinkling of corruption
- A one child policy
- An overarching centralised education system
- A history of standardized tests and rote learning
- Plenty of rising demand for university places
To begin with there is the skin, exclusive institutions, which hinder Chinese growth. This requires the mixing together of an authoritarian regime with state controlled enterprise. Together these factors work to deter potential entrepreneurs without state backing; if you have no assurance that the state won’t punish your success at the expense of a state backed company, you will have little incentive to start or grow a successful enterprise. To this you add in a weak judicial system, one which fails to protect property rights. This further acts as deterrent to growth as businesses and individuals are reluctant to invest where their investment may be confiscated by the government.
To all this, I would whack in a healthy dose of corruption which misallocates resources and undermines the competitive market place. A report released last year by the Chinese government found that between 16,000 and 18,000 government officials and employees of state-owned enterprises had smuggled more than $120bn overseas between the mid-1990s and 2008.However, it is not just the cost to government coffers; corrupt behaviour in government changes a citizen’s incentives such that engaging in hitherto profitable economic activity is no longer worthwhile. Simply put corruption raises the price of business and puts a brake on the growth of the private sector.
At this stage you might find that the mixture reacts. As inequality rises in China, as a result of an uneven playing field, citizens are becoming less tolerant of their economic situation and the government. According to a 2012 poll by the Pew research centre, nearly half (48%) of Chinese respondents reported that wealthy inequality was “a very big problem”. In a country used to the Communist ideals of total equality this will not sit well. Indeed, China’s gini index, now at 0.46, has surpassed the 0.4 level which is a predictor of social disturbance. By exerting pressure on the batter (through the arrests of political dissidents, censorship of the press etc) you can limit the reaction somewhat, but in a country with a growing and increasingly vocal middle class this can only ever be a stop gap measure.
The second stage in this recipe, preparing the filling, is amazingly easy as it requires only one ingredient; a one-child policy. However, it is important you let this component rest, as its effects manifest themselves slowly over time. Most developed countries are in some way suffering from their ageing demography. The UK, Italy, Japan and many other developed nations are suffering as their elderly, retired populations grow and are supported by a diminishing labour force. Not only does this shrinking labour force directly impact growth it also leads to a decrease in household savings, reducing capital available for investment. However, China won’t face a diminished demography as much as a demographic drop off. The one-child policy has exacerbated the slump in China’s labour force in the coming years. While China’s current median age is 34.5, similar to America’s 37, this is expected to rise to 49 by 2050, far ahead of the expected US median age (40). Its over 65’s will account for 26% of the 2050 population, also ahead of America’s. China’s growth has been in part due to a very large and youthful labour force. When the labour force contracts (by 11% between 2010 and 2050) and this dividend disappears China will be hard pressed to find a comparable economic stimulant. To quote The Economist; “unlike the rest of the developed world, China will grow old before it gets rich”.
To top it all off you need the glaze, which puts a less optimistic shine on Chinese growth. Despite China’s success in recent PISA tests, education has not been generally celebrated as victory in China. Many in the education sector felt that high verbal and mathematical test results have come at the cost of originality and inventiveness. To quote Xiong Bingqi, an education expert at Shanghai's Jiao Tong University, Chinese students “have huge vocabularies and they do math well. However, the level of their creativity and imagination is low”. This concoction comes together when you pour in an overarching centralised education system and a history of standardized tests and rote learning. The education system is focused on high test results and its rigidity means that teachers have little scope to take students outside the ‘teach-to-test’ model. This is in part maintained by a culture standardized testing and rote learning which dates back to the Emperor Wu (141 -87 BC.) and what became known as the Mandarin examination system. The emphasis of these examinations was on discipline ad rote memorization of classical texts. Not a harbinger of Steve Jobs-esque flare. To this you apply pressure from school students themselves, who are often desperate to obtain a place at oversubscribed universities.
The by-product of these three ingredients can be damning. China’s growth has up till now been based on the adoption of existing technologies and rapid investment, not Schumpeterian creative destruction. Yet as China completes its catch up and the labour force shrinks, they will have to come to rely on innovation for sustainable growth. If the education system remains unreformed, and young Chinese aren’t taught to think creatively or originally, this will be incredibly difficult
Thus, this recipe produces a far less buoyant bake than others have proposed yet I feel it is more realistic given the interplay of the current factors. Nonetheless, the economy is not doomed to sink. While the Chinese can do nothing about their demography they could take steps to change their education system and improve the rule of law and accountability across China.
Then you would be baking with a whole different set of ingredients...