Paper topic bank

Trade deficit: How to beat China and other exporters

It is known that the U.S. has a very large trade deficit with China.  It appears to concern many.  But there is a perfect solution.  I have heard rumors :-) that Chinese labor is no longer as cheap as it used to be.  China has been a successful exporter, it has been growing, standards of living have been rising and so have the wages.  Now, companies start hunting for cheaper labor in other parts of the world (this is assuming that they are hunting the cheaper labor because skilled workers naturally cost more).  The solution is to stop worrying about beating China in export war, let it export away, which will raise standards of living and cost of labor in China even further, and maybe one day American labor will even become cheaper than the Chinese — well, anyway, theoretically speaking.  A little humor will do, as I do not really believe in wholesomeness of Chinese government that much.  At least not today.   // *

++++ Please see links in comment provided by Andrey.  These are an excellent edition to this topic.

In response to a comment — Soviet statistics, Russia’s modernization, and electricity usage map

I would like re-post here an insightful comment to The Economist post by Andrey:

“Достаточно взглянуть на достижения даже за последние 10 лет, все эти реформы оказываются обычным трепом и в лучшем случае откатом. В 1987 году Новосибирские экономисты, оценили реальное состояние в советской экономике на основе затрат электроэнергии. Все данные по выпуску продукции тогда были фальшивыми, во много раз завышенными. Но никто не фальсифицировал расход электричества, и на этой основе было доказано, что советская экономика не приболела, а издохла.

Оказалось, что расход энергии это надежный показатель производства. А поскольку вечером промышленность уменьшает потребление, то энергия перебрасывается на бытовой сектор и на освещение. Вот и видно все, как на ладони. Все успехи Сколкова и модернизации, “Назад в Архангельск” (послушайте Гребенщикова).”

The first link above is to a map, which  can be viewed on an English-language site here and description here.  It is a NASA project, which registers electricity usage and type in various parts of the world and shows growth or decline of human activity during a period of time.  This data has been used to draw conclusions of a country’s or region’s economic development.  It is the nighttime (consumer) usage that really gives an idea about the standard of living.

The second link is to an 1987 article on Soviet production and growth statistics.   It exposes the problems of accuracy in reporting and incentives or lack thereof :-)  In my own work I drew on the research by two outstanding U.S. scholars, Warren Nutter and Naum Jasny, who successfully battled the lack of information on the true state of the Soviet economy and inaccuracy of existing information in the 1950s-1960s.  In the light of the information released in the 2000s from the Soviet archives, it became evident that their conclusions were right on the mark.   This 1987 article with a very witty title has one interesting point.  While it is conventionally believed that the Soviet growth turned in the 1970s, it is not quite accurate.  The authors show it had happened a decade earlier.  The mitigating factor was… the price of oil.  Reminds of a recent situation, doesn’t it?  Here’s the direct quote:

“Заглянем в справочник “Внешняя торговля СССР в 1984 г.”. Из 74 миллиардов рублей годовой экспортной выручки 38 миллиардов (больше половины) получено за нефть и газ, в том числе 31 миллиард за нефть. Не будь этих денег, как страна покупала бы технику, хлеб, одежду, сахар? В 70-е годы ситуация была как раз благоприятной для нашего экономического развития. Исключительно благоприятной. Добыча нефти увеличивалась фантастически, цены на нее на мировом рынке пли круто вверх. Такого стечения обстоятельств, вероятно, больше уже не будет. Объективные трудности начинаются только теперь — добыча нефти стабилизировалась, увеличивать ее экспорт вряд ли удастся, а цены на мировом рынке упали в 3 раза. И, скажем, за тонну зерна сегодня надо отдавать три тонны нефти, хотя недавно меняли практически тонну на тонну. А покупная техника? В 1984 году ее приобрели на 24 миллиарда рублей. Это главная статья нашего импорта. Учтем, что не в пример нефти техника на мировом рынке дорожает. [195]”       // *

The Piggy Bank of EU

More European centralization is in the works:  Euro zone officials are devising a plan for the central bank.  This will allow banks to be bailed out directly, without going through the national governments.  So it seems that the crisis has not moved Europe in the direction of disintegration, but instead moving it in the direction of more centralized control.  The Fed was conceived in 1913; its European counterpart may come into existence a 100 years later.   // *

Turboprop vs. Jet

WSJ (July 9, 2012) reports that “Turboprop aircraft makers ATR and Bombardier are seeing orders swell as more carriers switch from jets.”  But the economics of this decision still is and will be muddled with regulations, and the final outcome is uncertain.  The switch to turboprop may be used as another example of economic decision making when a resource (fuel, in this case) becomes cost inefficient.  For more details on turboprop vs. jet, read here.  Currently the turboprop technology is more efficient for short routes and small airplanes, but the airlines apparently would like to see a larger size of aircraft.  General  Electric is looking to develop turboprop engines with greater efficiency.  // *

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