Month: December 2011

India and the Promise of Productivity

In the comments to Anti Chain Store Policies in India and America, “Lark” posted a long “refutation” from Triple Crisis of the “neo-liberal” arguments for retail reform in India. I will focus on one remarkable argument:

…experience across the world makes it incontrovertible that large retail companies displace many more jobs of petty traders, than they create in the form of employees. This has been true of all countries that have opened up to such companies, from Turkey in the 1990s to South Africa. Large retail chains typically use much more capital intensive techniques, and have much more floor space, goods and sales turnover per worker.

One estimate suggests that for every job Walmart (the largest global retail chain) creates in India, it would displace 17 to 18 local small traders and their employees. In a country like India, this is of major significance, since around 44 million people are now involved in retail trade (26 million in urban areas) and they are overwhelmingly in small shops or self-employed.

Of course this is no refutation, fewer jobs are precisely the point. What India needs is fewer jobs; fewer jobs in retail, fewer jobs in apparel and, most of all, fewer jobs in farming. India cannot become even a middle income country if most of its workers, for example, are farmers. To improve its standard of living, India must use fewer people to produce more agricultural output.

Fewer workers in farming (or retail) means more workers producing more goods in other industries. The same basic lesson holds throughout an economy, it is the declining sectors that allow other sectors to advance. Instantaneously? Immediately? With higher wages for every worker? No. Transitions always involve some pain; creation always involves some destruction; growth always involves change. The alternative, however, is stagnation.

The politics of growth are difficult because those who lose from change are always present and are often more numerous and perhaps even more deserving than the present winners, the capitalists, the business people, the international mega corps; but today’s losses and gains are fleeting, the permanent winners are the workers and consumers of the future who will know only the benefits of productivity.

That was then, this is now

In 2004, I wrote this to Alex:

The United States remains a strong and prosperous country. Our infrastructure, national culture of innovation, human capital, and economic dynamism are unparallelled in world history. The Bush fiscal policies, whatever their irresponsibilities, costs, and drawbacks, haven’t changed those core facts.

So I walked down to Alex’s office and issued him the following challenge: if you think I am wrong, sell all your stocks and go short on U.S. Treasury securities (and long on Brazil, if you wish!). With all the money you will make, you can buy out my half of this blog.

In my own defense, 2004 was the year when the available run of productivity statistics was looking the best, and there was no reason to think the 2001-2004 numbers were biased or misleading.

For the pointer I thank…Alex.

p.s. he didn’t do it.

Only joking

Nothing to see here, move on people…

Safaripark Beekse Bergen, near the Dutch town of Tilburg, boasts nine lions, 13 giraffes and a herd of almost 30 zebra. But this month the theme park reported sightings of an even more remarkable beast – a previously extinct specie, the Dutch guilder.

Thousands of guilders flooded into the park’s cash registers after it announced it would accept the former national currency for one weekend, in a promotion tied to the European Council summit earlier this month. At the ticket booth, thrifty locals dug into their coats to produce faded Fl 10 bills and jingling coins.

The guilder sale was a “comical stunt” to take advantage of the commotion around the euro, said a spokeswoman for the safari park’s parent company, Libema. But the promotion also tapped into the Dutch public’s widespread disillusionment with the euro and nostalgia for their old currency.

The FT link is here.

Modigliani-Miller markets in everything the culture that is China

They only look like baby pandas.

These little bundles of joy are actually chow chow dogs that have been dyed black-and-white to look like pandas.

Dyeing pets has been a trend in pet pampering for quite some time. At last summer’s Pets Show Taipei, there was a fierce dog-dyeing competition. Check out photos.

But dyeing your pets to look like other wild animals is a more recent development.

The full story is here and for the pointer I thank this guy.  Don’t miss the other photos at the link, for instance:


Anti Chain Store Policies in India and America

When we think of growth and innovation we often think first of high-tech sectors but in the United States during the roaring 1990s it was retail productivity growth, led by Walmart, that drove the country. Retail productivity is important because the retail sector is huge and because retail productivity extends backwards to manufacturing and service productivity. Today, growth in India is slowing in part because the Indian government is no longer pushing reform, and the most notable failure is the failure to modernize India’s retail sector.

The Guardian: The beleaguered Indian government has been forced to suspend its decision to allow international supermarkets to invest in India‘s £300bn retail market in the face of political opposition.

…Allies of the increasingly vulnerable administration of Manmohan Singh, now in its second term, had refused to back the measure. Critics said the move, which theoretically does not need parliamentary approval, would put millions of shopkeepers across India out of business and threaten the livelihood of farmers.

Supporters argued that it would mean improvements of infrastructure and lower prices for consumers.

Analysts said the delay to the move was due to “political not ideological factors. There are local elections coming up and no one wants to risk the commercial traders’ votes…. The failure to implement what would have been the first major economic reform since Singh’s second term began in 2009 will reinforce the sense of drift surrounding the Indian government, compounding anxiety at a time when growth has slowed, inflation remains high and the value of the Indian rupee is dropping fast.

Stock prices of Indian retailers plunged in response to the news.

The political constraints here are enormous. Here is Marc Levinson author of The Box and more recently The Great A&P and the Struggle for Small Business in America, on some of the crazy anti-chain story policies in the United States:

President Franklin D. Roosevelt, who portrayed himself as the consumer’s friend, turned restrictions on chains into national policy. Under the National Industrial Recovery Act of 1933, one of Roosevelt’s programs to revive the economy, federally mandated codes were instituted that limited store hours, and regulated wages and prices — but the restrictions applied only to chains and large stores, not to mom-and-pop merchants. When those codes were invalidated by the Supreme Court, Congress enacted another law, the Robinson-Patman Act of 1936, intended to make most volume discounts illegal so that small shopkeepers could buy their goods for the same prices as giant chains.

In 1946, the government won criminal convictions against executives of the largest chain of all, the Great Atlantic & Pacific Tea Company (A&P), on the bizarre charge that they were violating antitrust law by selling groceries too cheaply. As late as 1953, the government was trying to break A&P apart by claiming that baking its own bread and canning its own vegetables gave the company an unfair advantage.

*Why Nations Fail*

The authors are Daron Acemoglu and James Robinson and the subtitle is The Origins of Power, Prosperity, and Poverty.  Could there be a better and more up to date book on the importance of economic institutions?  Self-recommending!  Excerpt:

[In Russia] Opposition to railways accompanied opposition to industry, exactly as in Austria-Hungary.  Before 1842 there was only one railway in Russia.  This was the Tsarskoe Selo railway, which ran seventeen miles from St. Petersburg to the imperial residencies of Tsarskoe Selo and Pavlovsk.  Just as Kankrin opposed industry, he saw no reason to promote railways, which he argued would bring a socially dangerous mobility, noting that “Railways do not always result from natural necessity, but are more an object of artificial need or luxury.  They encourage unnecessary travel from place to place, which is entirely typical of our time.”

This book has literally hundreds of good examples of how to apply institutional economics and property rights theory to economic history.

If I have a worry about the book, it is this.  I do not disagree with the claims about institutions.  But I am less sure that Acemoglu and Robinson dispose of the more “fundamentalist” theories, which might invoke say geography or other pre-institutional factors behind economic growth, political change, or for that matter levels of interpersonal trust.  Where exactly do the institutional changes come from?  They seem to come from other institutional changes (see p.209 for one example of many), elephants all the way down.  I would have chosen the alternative subtitle: “Power, Prosperity, and Poverty, Everything but the Origins.”  That’s still a lot.

The book is due out March 20.

Victorian street food

Victorian street food was a huge industry.  In the north you would find tripe sellers; I remember the one in Dewsbury market that sold nine different varieties of tripe, including penis and udder (which is remarkably like pease pudding).  Another popular street food was pea soup with, according to where you lived, either pig’s trotters or bits of ham chopped up into it.  Peas boiled in the pod and served with butter were similarly popular.  Stalls known in my youth as whelk stalls also sprang up, selling jellied eels, whelks, winkles and prawns, all by the pint or the half-pint.  You could splash a bit of vinegar on them and eat them at the stall or take them home with you.

That is from the new and excellent A History of English Food, by Clarissa Dickson Wright.  This book also offers up a good deal of confirming evidence for Paul Krugman’s prior hypotheses about English food.

Markets in everything but is there a core?

Ireland would need to get a significant reduction in its debt burden in order to get any referendum on new European budgetary rules passed, Minister of State for Finance Brian Hayes has said.

“The idea that we could have a referendum without that agreement, on a substantial re-arranging of our debt, wouldn’t fly,” Mr Hayes said in an interview with the Sunday Business Post .

“We would have to have that in place before we put the question (to the people) and that’s beginning to be understood at an EU level, which puts us in a stronger position,” he said.

Story here, via Economistmeg.

Assorted links

1. John Gray and many others try to redesign the banknotes, slide through the show.  Some are quite good.  Here is the one from Audrey Niffenegger.

2. More on the euro carry trade, note I am not an optimist on this, I simply note it is a plan of sorts.  Via Interfluidity, here is lots on financial repression, important read.

3. Zizek on Coriolanus, and my 2006 blog post on the individual mandate.

4. “There are even allegations that the Ukrainian justice minister’s official car was illegally appropriated in Germany…A number of years ago, the Ukrainian government decreed that the state could sell confiscated cars that were stolen in other countries or add them to its motor pool. This even applies when the vehicles are on an Interpol list. In other words, Justice Minister Lavrynovych wouldn’t even be violating Ukrainian laws by driving a car that was stolen in Germany.”  Story here.

5. Tumbleweed markets in everything.

Google ghost books

If you Google “Peter Temin economics of antiquity,” the book seems to exist (Princeton University Press 2011?), but none of the clickthroughs seem to yield anything.  I call them Google ghost books.  If PUP clears this up, I am happy to pass along the answer.  The mere fact that I would Google this at random suggests there is a strong demand for the book, from me at least.

In the meantime, here is Peter on financial intermediation in the early Roman empire (pdf).

Addendum: I am told that a real, non-ghost book will come out in the Fall of 2012, exciting news.

The quality gradient

“In assassinations, there are gradations of respect,” said Gladki. “The lowest is strangling. If you strangle someone, it is a sign of severe disrespect.” Using a pistol, he said, is “50/50” – kind of an OK, but not brilliant way to be killed. “And then there is the Kalashnikov. To be shot by a Kalashnikov assault rifle is the ultimate form of respect. It is a very good death for a Russian.”

From the same FT article, “Who Runs Russia?”, don’t forget this:

Indeed, the basic functions of organised crime – protection rackets, narcotics, extortion and prostitution, have increasingly been assumed by the Russian state.