Posts Tagged ‘Economics’

Occupation of an Egyptian factory: downsizing to increase efficiency or cutting people out

Under the previous Egyptian president, Hosni Mubarak, numerous public companies were sold off to the private sector. The process left many workers without employment from layoffs and factory closures. Here is a video of Egyptian workers explaining the situation they are  in as they occupying an abandoned factory.

Privatization was represented as a move to efficient business practice. In that case, it should have helped improve the country’s economy, if we understand improvement to mean better standards of living that would support the basic life needs of people.

This sort of doing business, ‘rationalizing’ both private and public firms, is not unique to Egypt. The problem with its practice is that even if the GDP of a country grows, poverty is in most cases is increasing.

This is true in many countries, no matter the size of their economies. And the practice of buying existing companies (or factories) and shutting them down is not new. On paper, it might even be shown to provide a short-term increase in the nation’s profits, depending on how you like to calculate such things.

For example, a group buys a working factory at low cost, closes it, and sells off all of its assets (machines, land, etc.) for a nice profit over the initial cost of purchase. They might decide to keep a few factories open in the short to medium term with reduced number of employees and call this efficiency. In time, even these can be closed and sold off as social and political pressure from the initial round of mass closures eases up.

Downsizing is another word for this sort of efficiency, putting capital markets in control of business management. For an example of this in the US, during the Reagan’s presidency, see the video clip below. It’s from Adam Curtis’ documentary, The Mayfair Set. I recommend watching the video from about 2 minutes and 10 seconds in.

You can watch the entire four part documentary for free on Youtube .

Start of: Episode 1 | Episode 2 | Episode 3 | Episode 4

Episode one and four are also available at the Internet Archive. Part 1 (the end is missing) | Part 4


Why China supports sanctions on Iran: not much content but full of political implications

June 9, 2010 1 comment

The UN Security Council is to impose sanctions against Iran today.

These sanctions are being billed by the US as tough, effective, and the most severe Iran has yet faced.

The new sanctions, actually, add very little that is new. The passage of sanctions is opportunity for tough talk but little tangible difference is offered over previous sanctions (see the new sanctions document here).

Flynt Leverett and Hillary Mann Leverett pick the document apart on their site, The Race for Iran:

In the main body of the resolution, there are, literally, no sanctions limiting the capacity of the Islamic Republic to produce and export hydrocarbons.

[…]Likewise, there are no sanctions barring the extension of financial services, insurance, reinsurance, etc. to Iranian individuals and entities.

China and Russia will support this resolution since the situation will not substantially change for them in regard to their dealings with Iran. Russia will still be able to deliver sales of S300 anti-aircraft missiles, and China can still invest in Iranian business, import energy, maintain its existing financial dealing via Iranian banks (I think China often trades in hard cash anyway when it comes to purchase of oil from Iran), and maintain its growing trade with Iran.

The Race for Iran adds that:

Among the entities “involved in nuclear or ballistic missile activities”, the United States was able to win the agreement of China and other Council members to include only one bank that had not been previously listed—and that bank is a subsidiary to Bank Mellat, which had been previously designated by the United Kingdom and the United States.

[…]Ostensibly, there are 15 entities listed as “owned, controlled, or acting on behalf of the Islamic Revolutionary Guard Corps”.  But this is seriously misleading.  There is, in fact, only one Revolutionary Guard-affiliated entity captured in the annex—the Khatam al-Anbiya construction company.  The other 14 entities are all either subsidiaries of Khatam al-Anbiya or subsidiaries of subsidiaries of Khatam al-Anbiya.

What the sanctions do embody is politics rather than economics. It hardens the political and diplomatic division between Iran and the US and Europe because of the rhetoric and symbolic quality attached to the application of sanctions as championed by the West. So, the rhetoric will make it more difficult for the West to conduct diplomatic dialogue and engage in economic transactions with Iran not because of new legal barriers but from political ones.

This will support and probably hasten the growing economic ties between Iran and China as well as other non-Western countries. This is to China’s advantage since it can deal with Iran while facing decreased international, mainly Western, competition; permitting it to more easily position itself as a vital economic and political entity to Iran. Essentially, the West is cutting itself out of the picture and giving China competition free access to Iran, which is geostrategically important: it can serve as a gateway to the Middle East and Central Asia, has access to the Persian Gulf and the Straight of Hormuz, has some of the largest deposits of oil and natural gas in the world, and has the potential to serve as an energy route to transit fuels from nearby countries that are also rich in hydrocarbons.

In 2009, China beat out the EU to become Iran’s largest trading partner. Trade with China amounted to some $36.5 billion while trade with the EU totaled $35 billion. Iran’s foreign minister indicated that trade with China had risen from $400 million in 1994 to $29 billion in 2008, growing at an average annual rate of 40% in the tail end of that period. In May 2009, China’s ambassador spoke at an Iran-China trade cooperation conference, stating that “The Chinese Embassy in Tehran will continue working with Iranian companies in order to expand cooperation between the two countries.”

China’s Ministry of Foreign Affairs indicates that its important economic projects with Iran include: “energy, transportation, machinery, building material, mining, coal, chemicals, nonferrous metal, etc. The main projects are subway in Teheran, multi-functional vessels, building of oil tanker, production line of cement plant, 4*32.5 thousand KW thermal power electrical machinery units in Arak, hydroelectric generation equipment, etc.”

More than “100 Chinese state companies” operate it Iran, according to Press TV. China is said to have more than $80 billion invested in the country’s energy sector, and Iran has, since 2009, opened five trade centres in China in Shanghai, Urumqi, Beijing, Hong Kong and Guan ju.

Afghanistan’s budget almost entirely financed by foreign countries

February 2, 2010 4 comments
Afghanistan, Kabul market

Afghanistan, Kabul market

Afghanistan’s national budget is 90% financed by foreign governments despite the fact that it has increased its share of income from tax and customs revenues by 50% over the past year.

The Afghan Research and Evaluation Unit has written the following on the Afghan economy:

Consistent with the current consensus on development held by the donor community and international financial institutions (IFIs), the privatisation process has gained increased momentum in Afghanistan. The government has committed to the privatisation agenda in its Interim Afghanistan National Development Strategy (IANDS) and in the Afghanistan Compact agreed upon with the international community in January 2006. This followed the November 2005 approval by the Cabinet to amend the State-Owned Enterprise Law, allowing for the divestment of state enterprises by various means. Fifty four fully state-owned enterprises (SOEs) have been slated for privatisation as going concerns or through liquidation by the end of 2009.

The report states that the total value of these sales is estimated to be US$614, which is small by international standards.

However, the total government budget of Afghanistan in 2008 was around US$685 million, so the sale of public assets amounts to a large share for a country whose assets and resources are very small. The government revenue estimate was provided by Afghanistan’s Minister of Finance, Anwar-ul-Haq Ahadi, during an interview with foreign press.

With a national budget that is so small, many foreign infrastructure projects have only added to the problem because of their large price tags, which are more suitable to high priced markets in the developed world. Although, at the time of construction, the projects may be fully funded by foreign donors, the maintenance cost of the same infrastructure may be prohibitive, impracticle, or even impossible for the Afghan government to afford without taking loans.

Consider the Louis Berger Group’s contract to build 1,000 schools, each costing US$274,000.  In this case, the Afghan government not only has to worry about maintaining the schools, they might not even be usable. In January 2009, Ann Jones, who for years worked in Afghanistan as an aid worker, says that Louis Berger, “already way behind schedule in 2005, had finished only a small fraction of them when roofs began to collapse under the snows of winter.”

Sustaining an Afghan government financially on foreign life support requires multiyear planning from all donors involved. This requires that Afghanistan’s needs be incorporated into the budgets of NATO countries, and that many of the political decisions on funding be made by foreign governments accountable to their own people. There is not much room for self-reliance in this scenario.

Sidestepping the straight line of history: workers’ narratives as counter-myths

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Below is the preface to Hindi edition of the book, The Nights Labor: the workers’ dream in 19th century France. It is written by Jacques Ranciere.

Here’s an excerpt (the entire preface follows below):

… [The] idea of time always places a hierarchy upon beings and objects.

…For me, this belief legitimizes the knowledge that decrees what is important and what is not, what makes or does not make history. It is thus that the social sciences have declared that these little stories of workers taking an afternoon walk, or straying far from the solid realities of the factory and the organized struggle, have no historical importance. In doing so they confirm the social order, which has always been built on the simple idea that the vocation of workers is to work – and to struggle – good progressive souls add – and that they have no time to lose in wandering, writing or thinking.

Read more…

Maritime Trade

April 27, 2009 3 comments

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I’m doing some research into maritime trade and key naval powers. Maritime trade is the backbone of the global economy. 90% of global trade (by volume) was transported via sea routes in 2006.

Maritime trade routes are “strategic by its control and commercial by its usage,” writes Dr. Jean-Paul Rodrigue, Associate Professor, Dept. of Global Studies and Geography, Hofstra University.

Here are some of my findings, in rough:



Both of the above tables are from the US Bureau of Transportation Statistics’ report entitled ‘Maritime Trade & Transportation 2007‘.

I’ll likely add similar tidbits of information in time prior to writing up a series of articles on the subject.

Iraq’s oil, the economy, and the war

April 21, 2009 Leave a comment

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I found these videos at the Iraq Oil Report.

Oil expert Faleh Al-Khayat presents at the European Parliament on 18 March 2009.

Part 1:

Part 2:

Analysis with Google Trends

April 11, 2009 Leave a comment

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I’ve below placed a link to a how-to paper on using Google Trends for some basic economic and data analysis.

From ‘Predicting the Present with Google Trends,’ by Hyunyoung Choi and Hal Varian:

Google Trends provides daily and weekly reports on the volume of queries related to various industries.

…we are claiming that Google Trends may help in predicting the present. For example, the volume of queries on a particular brand of automobile during the second week in June may be helpful in predicting the June sales report for that brand, when it is released in July.

Our goals in this report are to familiarize readers with Google Trends data, illustrate some simple forecasting methods that use this data, and encourage readers to undertake their own analyses.

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