Last week David Pilling wrote an interesting column in the Financial Times about disruptions the global supply chain has suffered as a result of natural disasters this year, and how the disruptions have prevented the companies affected from bringing their products to market. The column reminded me of one of my favorite essays of all-time- I, Pencil- which I’ve republished here.
For those of you who have never read I, Pencil, it illustrates how for a single pencil to be made thousands of people from all over the world must come together to provide the wood, graphite, paint, chemicals, components for industrial machinery, and so on. As the essay observes, the multitudes of people from all over the world who contribute to the manufacturing of the pencil rarely know who each other are, but the competitive market draws them all together into a spontaneously choreographed industrial endeavor: the production of a pencil.
Implicit in the essay is how incredibly complex the global supply chain is, and how a high level of specialization is needed to produce the tiniest parts of the simplest products. Pilling explicates the complexity of the global supply chain by describing how the tsunami in Japan earlier this year, and the recent flooding in Thailand, have stopped parts of the global supply chain in its tracks, making it virtually impossible to produce certain products. Continue reading
The last week has been- to put it modestly- very eventful for global markets, but despite the finger-pointing that always occurs in times like these it’s wrong to pin blame for the turmoil on a singular cause. Many things have gone wrong- the U.S. debt ceiling debacle, very weak second quarter economic data, the European sovereign debt crisis, the S&P downgrade of the United States credit rating- but one thing is clear: the volatility the market has seen over the past week has been primarily due to a massive crisis of confidence, not market fundamentals.
Besides a downgrade to the United States credit rating (which provided markets with precisely zero new information), no new economic data or event has emerged to justify a 14 percent drop in U.S. equity prices. Rather, markets looked at the global macroeconomic picture, which is filled with uncertainty, and have run en masse to what they perceive as safe investments (Treasuries, Swiss Franc’s, and gold). The risk and uncertainty investors see right now has a common denominator: US and EU policy makers, and their inability to move decisively to attempt to solve the problems in their respective economies.
With this in mind, it is extremely encouraging to see the European Central Bank (ECB) announce this week that it will begin buying Spanish and Italian bonds on the open market in an attempt to bring Continue reading
Today the second half of the Major League Baseball season starts in what sports writers have termed “the dog days of baseball.” I’ve always loved this phrase that describes baseball in July and August; the days are long and hot, more day games are scheduled, and the games start to take on an air of a sort of peaceful monotony.
It’s a part of the season that reminds me why I grew up loving the game, even when it became slow, and I would have rather been anywhere except practice. Each spring baseball is reborn, and each fall it comes to a wild and exciting conclusion, but it’s the middle of the season when baseball- and the longest season in American sports- starts becoming just another ho-hum part of everyday life. It’s said that baseball is America’s pastime, and it’s during the dog days when it earns that title.
I grew up worshiping baseball. Each day I would go out to the front yard and throw a tennis ball against the wall of our rammed-earth house, playing out a simulated game in my mind. In these games I would be the pitcher (to throw to the wall/batter) , a random infielder (to field the grounder that came off the wall), the first baseman (to catch the throw from the infielder coming off the wall), the umpire (to call balls and strikes), and the announcer (to explain to my imaginary audience just how great of a player I was). After each three outs I would grab my bat and take cuts at imaginary pitches, while continuing to call my own balls and strikes (I was a very biased umpire), and give play-by-play to my imaginary fans.
I’ll admit that these games were not always the most realistic. As a pitcher I struck out a majority of the batters I faced (I’m not sure my imagined competition ever got a hit off me). At the plate I never missed, Continue reading
Ryan Avent has an excellent post taking issue with Matt Steinglass’ assertion that China’s economy is thriving precisely because they have an authoritarian government, while the US and the EU’s economies are struggling under the weight of their democratic regimes.
Avent rightly points out that China, for all its rapid growth, is still not a wealthy country, despite their high total GDP. In 2010, GDP based on purchasing-power-parity per capita (PPP) in China stood at $7,519, which ranked 94 in the world. Among the economic juggernauts that have a higher PPP than China: the Dominican Republic (88), Romania (69), Mexico (59), and Croatia (48) to name a few.
To hammer home his point, Avent compares China’s GDP per capita to the per capita GDP of the 10 wealthiest, large countries in the world (who all happen to be democracies):
“… if we look at the world’s richest large countries (say those with 10m people or more) in terms of per capita GDP, we see that the league tables are dominated by democracies. In order: America, the Netherlands, Australia, Canada, Belgium, Germany, Taiwan, Britain, France, Japan, South Korea, Spain, Italy, Greece, Cyprus, Czech Republic. The first non-democratic large country to make the list? Saudi Arabia. And I don’t think we need to chalk its wealth up to sound macroeconomic management.”
Now, this isn’t to say that what has happened in China since liberal reforms started being introduced in 1978 has been anything less than an economic miracle, but it does highlight just how far China has to go to Continue reading