Mexican update: How to compete against China and win
Too often we think of the Chinese economy as a massive juggernaut that crushes all before it. But the Mexicans are starting to adapt to Chinese competition nicely:
Between October 2000 and March 2002, Mexico’s maquiladoras – factories that assemble imported parts for re-export – lost 270,000 jobs, or more than one in five, sparking fears that Mexico had permanently lost ground to China. But now the trend seems to have sharply reversed.
In the year to May, maquiladora exports rose by 21.8 per cent, part of a increase of 21.1 per cent in overall exports – the strongest monthly rise in almost four years. Employment is at its highest since 2001, with the number of maquiladora jobs up by 2.5 per cent over the year to April.
Far from buckling under competitive pressures, the link between Mexican and US industrial production seems stronger than ever.
Mexico has continued to lose jobs in such labor-intensive sectors as textiles, furniture, toys and leather goods. The new expansions are coming bundled with manufacturing innovation, “just in time” inventories, and complete integration into the chain of American production. America and Mexico also share time zones, easy travel, and yes a language (more than thirty million Spanish speakers in the U.S.).
“If you need customisation, you’re going to want that done in Mexico rather than China,” says Mr Watkins. So sectors such as auto parts, large screen TV sets, aerospace equipment and medical supplies are fuelling the sector’s recovery.
Of course this is just the theory of comparative advantage in action. If Mexico someday truly turns the corner, and becomes more like Chile, China is one of the places they will thank. Already the Mexican government has taken a constructive attitude toward Chinese competition and spoken of the need to improve in response.
Here is the full story. The next step is for Mexico to improve the cost and quality of its industrial electricity supply. Stay tuned…
Fly the friendly (Russian) skies
Drunken passengers often give air crews trouble, but Russia’s leading airline on Tuesday reported an “unprecedented” reversal: A passenger was assaulted by intoxicated flight attendants…on a domestic Aeroflot flight…Seeing that the crew were intoxicated and were not fulfilling their duties, Chernopup [a passenger] asked to be served by a sober and competent flight attendant, Dannenberg said. He was then beaten up by crew members.
Here is the full story. If only Gogol had written about airplanes…
The earthquake in France
Or should that read man bites dog? Get this:
French workers at a car components factory owned by Bosch on Monday dealt a blow to the country’s law limiting the working week to 35 hours, as they unilaterally accepted demands from the private German automotive group to work longer for the same pay.
The near-unanimity of the vote at Bosch’s Vénissieux plant near Lyon is expected to encourage other companies to seek ways of securing greater flexibility in Europe’s rigid labour markets, in the absence of political will for reform. The vote was the first of its kind in France and could set a precedent for a gradual de facto reversal of the 35-hour week.
But alas, it may not be as radical as you think. The vote was to extend the workweek from 35 to er…36 hours a week. Still, you know what Chairman Mao said.
Here is my previous post on the earthquake in Germany, read here too.
Addendum: Bill Sullivan points me to the Tao Te Ching as the original source for the Mao quotation.
The new Iraqi stock market
Iraq has just started its new Stock market. Fifteen stocks available…and thirty by the end of the month. Pepsi Baghdad, Al-Helal Industry, Dar-Al-Salam bank, Al-Kazer Construction are a few of the ones available for investment today…
Open your account by emailing here.
So far trading appears to be enthusiastic and more than a little volatile:
The miniature Liberty Bell clanged. Elbows flew. Sweat poured down foreheads. Sales tickets were passed and, with a flick of the wrist, 10,000 shares of the Middle East Bank had more than doubled in value.
The frantic pace yesterday of those first 10 minutes of trading typified the enthusiasm behind the Iraq Stock Exchange, an institution seen as a critical step in building a new Iraqi economy.In five sessions, trading volume has nearly quadrupled, and the value of some stocks has surged more than 600 percent. Traders say the gains reflect the pent-up frustration of 15 months of closure.
“How can I not be excited by this?” asked Taha Ahmed Abdul-Salam, the exchange’s chief executive officer, as he eyed the activity on the trading floor.
Trading is open for two hours a day, two days a week. And how do you like this quotation from the Iraq Securities Commission?
“Right now, we’re all working together to build up the exchange. Later, when things are running smoother, then we’ll give them a hard time,” Mr. al-Okali said with a wink.
Here is the full story. Recall that not long ago, Iraq opened up markets in government securities.
If I could add to my media wish list, it would include more coverage of these developments, along with regular price reports.
The economics of teenagers
There was a time when teenagers did not dominate music markets, but was this for the better?
For some perspective, I pulled together the top-selling music of 1951, 1961, and 1971.
1951: The soundtrack for “Guys and Dolls.” Mario Lanza. Yma Sumac. The Weavers. Les Paul. Tony Bennett.
1961: Bert Kaempfert. The soundtrack for “Exodus.” Lawrence Welk. Judy Garland. But also: Elvis, Connie Francis, Brenda Lee, and Paul Anka.
1971: George Harrison. “Jesus Christ Superstar.” Janis Joplin. Sly and the Family Stone. Michael Jackson. Carole King.
Teen tastes, in other words, weren’t present on the 1951 charts at all; took up only half the list’s space in 1961; and didn’t triumph entirely until 1971.
Les Paul I like, but overall kudos to the teenagers. The list is from the ever-excellent www.2blowhards.com, and we welcome the new addition Vanessa Blowhard to the blog; here is the post itself.
Addendum: Did you know that the word “teenager” only popped up in the dictionary in 1942?
Pay or pray?
Many people give money to their churches and then go less often. Jonathan Gruber writes:
I find strong evidence that religious giving and religious attendance are substitutes: larger subsidies to charitable giving lead to more religious giving, but less religious attendance, with an implied elasticity of substitution with respect to religious giving of -0.92. [TC: If your giving goes up by one precent, your expected attendance goes down by about 1.1 percent.] These results have important implications for the debate over charitable subsidies. They also serve to validate economic models of religious participation.
Here is the abstract; you can buy the paper there for $5. Here is Jonathan Gruber’s home page.
The question for policy is whether you want churches to be wealthier or fuller. I’ll vote for wealthier, so I have no trouble endorsing the tax break for church giving. It spurs donation but apparently keeps some people at home as well. The irregular attendees are the ones whose behavior tends to vary with dollar donations.
One story is that the irregulars are guilted into going and that we should give them an easy way out, namely a donation. A cash transfer substitutes for a real time investment, which is efficient. Let’s also not forget the intra-family externality on the kids; many would rather play than hear a sermon. An alternative story is that getting these people into church, in the bodily sense, will create a positive social externality. If that’s your view, stop doing fundraising for your church. Perhaps you should stop giving money as well.
Speaking of the economics of religion, this site, put together by my colleague Larry Iannaccone, offers systematic links to the field and its scholars.
Psychoanalysis and Consumer Society
Freudian introspection aimed to foster the individual’s capacity to live an authentically personal life, yet it wound up helping to consolidate consumer society…Psychoanalysis remained marginal to European psychiatry until after Wrofl War II, when Americans brought it back to Europe, but it became central to American culture almost immediately. The reason was the weakness of traditional authority in the United States and the widespread belief in the power of the individual mind to overcome “external” difficulties. In that context, American psychoanalysis became intensely popular. As a result, it was caught up in a process that emphasized personal empowerment, self-regulation, and individual charisma. As we shal see, the actual practice of analysis was less important than its cultural impact. Ultimately American analysis came to mean almost the opposite of the self-reflective exploration of internal limitations that characterized its European counterpart.
From the intermittently fascinating Secrets of the Soul: A Social and Cultural History of Psychoanalysis, by Eli Zaretsky.
I want my money back
It’s late in the game to be blogging this, but I’ve just seen Michael Moore’s Fahrenheit 9-11. I was dragged to the movie, more or less against my will. I won’t review the film’s well-known problems with the facts. I was at least as disturbed by the implicit racism. For instance it portrayed the Saudis as vile connivers, in a manner reminiscent of 19th century racial propaganda. [N.B. I agree we should trust the Saudi government less, but this is not the point.] Even worse was the segment on the “Coalition of the Willing”; Costa Ricans for instance are shown as a primitive and laughable people who work with oxen.
Most of all the film shows an overall contempt for humanity. The American poor, supposedly the object of Moore’s concern, come across as stupid, inarticulate, and easily duped. The only idyllic paradise we ever see is Saddam Hussein’s Iraq, where all appears beautiful.
It is a sad day in Cannes and in the United States when a movie of this kind commands so much attention. There are many important and intelligent critiques of the foreign policy of the Bush Administration, but this is not one of them. On top of everything else, the film was outright boring, especially during the second half.
Teaching with a blog
A few days ago I reported on an educational experiment; David Tufte taught his undergraduate economics class by making them write blogs. David has now posted his assessment of the pluses and minuses of the experience, and how to make it work. If you’ve ever tried the same, please write in and share your experience.
Movie downloading on the rise
Illegal downloading is not going away. And movie downloading could soon be a bigger issue than music downloading:
Films and other files larger than 100MB are becoming the most requested downloads on networks around the world, said UK net analysts CacheLogic….
It estimates that at least 10 million people are logged on to a peer-to-peer (P2P) network at any time.
“Video has overtaken music,” CacheLogic founder and chief technology officer Andrew Parker told BBC News Online.
The firm has come up with its picture of file-sharing by inspecting activity deep in the network rather than just at the ports.
P2P is the largest consumer of data on ISP’s networks, significantly outweighing web traffic and every year costing an estimated £332 million globally, according to CacheLogic. [TC: This is a figure you don’t usually hear, though its calculation remains obscure.]
In the sphere of music, traditionally assumed to account for the vast majority of file-sharing, it is no longer about the big guns such as Kazaa, which has declined in popularity since being targeted by the RIAA (Recording Industry Association of America).
File-swappers have moved their attention to other peer-to-peer software, such as Bittorrent.
While the FastTrack network (which carries Kazaa ) still accounts for 24% of all P2P traffic, the lesser known Bittorrent and eDonkey together account for 72% of file-sharing, according to CacheLogic’s report…
On the release of one major Hollywood blockbuster, 30% of the P2P traffic at one ISP came from a single 600MB file.
Here is the full story. Here is (sketchy) evidence that movie downloading leads to fewer theater visits. South Koreans seem to have a special propensity to download movies.
That all being said, downloading has not been so bad for the music industry. Sales are up, read this too. What is the biggest winner? Country music. Concert revenues, supposedly the future of the music industry (“give music away for free and then tour”), are on the downslide.
My take: DVDs are currently cinematic goldmines, read here too. This won’t last forever, and part of the “rent exhaustion” will include additional movie downloads, especially from low income viewers. Hollywood will end up back in a normally profitable state of affairs. I’m all for copyright enforcement, but current violations are not (yet?) close to a critical point.
Addendum: Legal music downloads are shifting the balance toward classical music.
How to stop an asteroid
A mission to smash into a space rock to deflect it and study its structure has been given priority over five other potential asteroid projects by the European Space Agency…Scientists don’t know enough about asteroid insides to predict how one would respond to attempts to nudge it off an Earth-impact course or turn it into harmless dust. While no asteroids are currently known to be on track to hit the planet, experts say a regional catastrophe is inevitable in the very long run– over millennia. And run-ins with small asteroids that could incinerate a large city occur ever few thousand years.
It’s nice to see the Europeans supplying a global public good of this kind.
…the mission could launch in five to six years.
Don Quijote [the project’s name, probably not a political winner] is similar to NASA’s Deep Impact mission, which is slated to fling a small probe at a comet on July 4, 2005.
Here is the full story. Here is Alex’s earlier post on asteroid deflection as a public good. And the ever-insightful Randall Parker offers further commentary.
Fishy fraud?
While learning in a course how to extract, amplify and sequence the genetic material known as DNA, University of North Carolina at Chapel Hill graduate students got a big surprise. So did their marine science professors.
In violation of federal law, more than 75 percent of fish tested and sold as tasty red snapper in stores in eight states were other species. How much of the mislabeling was unintentional or fraud is unknown, said Dr. Peter B. Marko, assistant professor of marine sciences at UNC’s College of Arts and Sciences…Our work has a margin of error of 17 percent, meaning that between 60 percent and 94 percent of fish sold as red snapper in the United States are mislabeled,” Marko said.
Here is the full story. It is unknown how much of the mislabeling is fraud and how much is human error. They tested 22 fish, albeit from a few different states. Furthermore it is commonly known, however, that what is called “scallops” is often generated from the wing of a skate ray, using a cookie cutter. That is probably not human error.
How much should we, as economists, worry about “mistakes” of this kind? After all, I’ve bought “snapper” many times, and never been disappointed, at least not relative to expectations. The real problem comes when some customers want higher quality fish, or “real snapper,” as opposed to “snapper as we have grown to know it.” Perhaps those customers are willing to pay more, but they simply cannot be sure they are getting what they want. So they don’t go buying at all.
Do you know anyone who is searching around for higher-priced kinds of fish? I don’t, although this may reflect my lack of a home in Aspen. I was happy to buy a pound of catfish [or was it?] for $7.99 this afternoon. But if anyone is suffering from this fraud, she probably earns much more than I do.
Many fraud problems have this structure. Yes, you get screwed over but the price falls too. Costs arise when everyone substitutes into lower quality. Is your auto mechanic cheating you? Well, wait a long time before visiting him — then you know there is something wrong with your car. In the meantime, some cars will break down, thus the costs of fraud. But in this case? In the meantime, some wealthy people will go without real snapper, suffering with the indignity of having to eat instead “snapper as we know it.”
Addendum: I’m still trying to figure out what “scrod” is; no dirty rejoinders please.
Markets in everything?
I cannot verify this one, but it popped up in this week’s News of the Weird:
China Daily reported in May that businessman Hu Xilm, who claims that a housefly in food 10 years ago ruined a big business deal for him, has since spent thousands of dollars on an obsession to eliminate as many flies as he can; with help from a team of volunteers he recruited, he claims to have killed 8 million.
My question: What does it cost to kill eight million flies? [And should it be a labor-intensive activity? Should it in fact be outsourced to China? Were the “volunteers” acting out of charitable motives?] If I knew the true cost, I would hold a lottery among MR readers, with a big prize for the winner.
Has the real standard of living fallen for the poor?
Don’t look at wage data, look at consumption data. The ever-wise Arnold Kling summarizes some of the evidence. For instance in 1970 only 45 percent of all households had a dryer. As of 2001 45 percent of poor households had a dryer. Three-quarters of poor households had a microwave oven, again circa 2001.
Kling writes:
Given these statistics, what explains the fact that, adjusted for inflation, the pay of the lowest-wage workers has not increased much over the past thirty years? There are a number of factors involved, but I suspect that the largest component of the explanation is a shift in the composition of the low-wage work force. In the 1970’s, many of the people at the bottom of the wage scale were heads of households. Today, many low-wage workers are providing second or third incomes to families.
The important point to bear in mind is that “the bottom fifth of the wage distribution” does not represent some permanent group of people. Instead, it signifies the earnings of workers who at that time have the lowest levels of skills and experience. My college-age daughters, doing temporary clerical work, are in the bottom fifth. But even if the income of the bottom fifth were to stagnate over the next twenty years, my daughters will earn higher incomes as they acquire valuable knowledge.
Read the whole thing, as they say.
Addendum: Here is another Kling post on productivity; it also has links to excellent pieces by DeLong and Postrel.
Minimum wage update
Eric Rasmusen offers an update on recent minimum wage controversies in the blogosphere; you’ll find the relevant links in his post, including to my own views.