Knowing and Making

Jim O'Neill at Goldmans has graciously  decided to admit four, no doubt very grateful, new countries into the BRIC category. Brazil, Russia, India and China have done quite well over the nine years since the BRICs were invented. The caveat is Russia, which remains highly dependent on oil and gas prices, and has institutions which are, shall we say, not fully trusted by everyone. But the other three have been firmly endorsed by events as serious players - well beyond the traditional emerging markets category. The lucky new candidates are South Korea, Turkey, Mexico and Indonesia. I am slightly surprised to see South Korea in here, as it's already an OECD member, with GDP per capita on a par with several European countries (though not quite caught up with any of the Western European EU members). It is ranked around 32nd in the world in GDP per capita - depending on exchange rates - higher than any of the original BRICs (Russia at 54 is the highest of those). But I guess if...

You have probably heard about the recent suicide of a tenth worker at Foxconn, the manufacturer of iPhones and some other Apple products. When I heard this story (not long after the report of the ninth suicide) my immediate thought was: OK, how significant is this? How many people actually work there? Now it turns out that was exactly the right thought. They have about 800,000 employees . Ten suicides therefore, sad as it is, is 1.25 suicides per 100,000 of population. This would place Foxconn among the lowest- ranked countries in the world for suicides - lower than any developed nation and less than a twentieth of the rate in Japan or Lithuania. Typical rates in most countries are about 10, meaning a Foxconn employee is eight times less likely to commit suicide than in Europe or America. Most strikingly, non-Foxconn employees in China are eleven times more likely to kill themselves than Foxconn employees! Looking into it further, there are some details which slightly modi...

I don't have time to write a detailed post today so let me do something slightly unfair by picking holes in somebody else's. Stephanie Flanders writes about (among other things) the risk to UK exports posed by the slowing eurozone economy. Germany seems to have had no growth at all, the Italian economy shrank by another 0.2%, and Spain by 0.1%. Between them, those three countries accounted for 15% of UK exports in 2008. Sounds terrible. But wait, there is a little bit of good news to partly make up for it: British exports to China were 53% higher last month than in January 2009. But they start from a very, very low base: just 2% of our exports went to China in 2008. In total, about 12% went to the Brics - with about 75% going to advanced economies, primarily the the US and the EU. Solid growth in Europe is a necessary condition for a healthy recovery in the UK. So the latest weak numbers from across the channel have given the MPC one more reason to keep the door to further...

Scott Sumner writes : "I understand that China has begun growing briskly again and that at some point they will need to start appreciating the yuan again to prevent overheating....But it is too soon to tighten now. If China slows, our recovery will also be threatened" In other words, even though the Chinese economy is growing fast, they aren't suffering inflation because there's plenty of spare capacity in the rest of the world to help keep prices down. Does that remind you of this article (and ten thousand others) from 2006? ...the increasing integration of national economies contributed heavily to the global decline in inflation. As then-Federal Reserve Chairman Alan Greenspan noted in this May 2004 speech , globalization affords Americans access to goods and services that are produced more cheaply abroad in places where large labor forces work for less money (e.g. China) Funny how things turn around, eh?

Robert Peston's article today about Chinalco highlights an important point which few economics commentators have discussed. For the last nine months oil prices have been falling substantially. The developed economics spend so much money on oil that this makes a huge difference to the money available in our pockets. As a fair estimate we can say that world oil consumption is about 80 million barrels a day. Taking the lowest figures it's reasonable to say that last summer, the world was spending $12 billion a day on oil. Now, with a barrel of oil at $44 the figure is less than $4 billion. This $4 billion every day is now sitting in our pockets - exactly as if it came to us from a VAT or payroll tax cut. This is equivalent to a $3 trillion per annum fiscal stimulus paid for not by our own government but by oil exporters. How nice of them. (Caveats: some oil is provided on long-term contracts rather than spot price, so the movements won't have such impact; and the oil exportin...

On Radio 4 this morning is an amazing programme exploring some really deep and technical issues about quantum theory and the nature of reality in physics. Amazingly in that they are brave enough to broadcast it at a time more associated with The Archers . Amazing in that the level of discussion is one that would challenge most physics and philosophy graduates, and they let it loose on a mainstream audience. I'm impressed. But then I read Robert Peston's latest post about China , and it became even more resonant. That old question is asked: who or what is to blame? In particular, was the financial crisis caused by excessive borrowing by Westerners or excessive lending by China? The thing is, of course, that neither of those things could happen without the other. That makes it impossible to really debate whether saving caused lending or vice versa, let alone which one caused the financial crisis. And that's where I am reminded of the methods of quantum physics and how we sol...