Posts Tagged: China


22
Oct 08

Economics for Business Lecture 13: Introduction to Macroeconomics

I’ve got some numbers for you.

There are 6.7 billion people on planet earth right now. 300 people are born every minute, 1/10 of them born to teenagers. 16 of those 300 babies will die by age 5. One of their mothers will die in childbirth, which if you work it out is 40,000 people dead a month. 1,100 people will die every ten minutes, on average, on Earth. Human life generated 2.3 billion tons of carbon dioxide per month in 2007, and we use more than 1/2 of the total fresh water on the planet while producing more than 3 tonnes of waste per person, and cleverly shoving that waste in our water supplies.

We produced $65.61 trillion worth of stuff on earth last year, 2% of which was spent on defence. Globally the average output per person is worth about 10 grand. 30% of the people on Earth who want to work can’t, because they are unemployed. Some might call this a reserve army of labour, but more of that later. Only 4% of the Earth’s population is directly engaged in agriculture, with everyone else either making stuff or selling that stuff. Only 10% of the Earth’s surface is arable land.
We trade a lot with each other, and spend a huge amount of our time digging stuff out of the ground to start productive processes.

World map of GDP real growth rates.

Image via Wikipedia

We fight about land. “Stretching over 250,000 km, the world’s 322 international land boundaries separate 194 independent states and 70 dependencies, areas of special sovereignty, and other miscellaneous entities”.  Ethnicity, culture, race, religion, and language have divided states into separate political entities as much as history, physical terrain, political fiat, or conquest, resulting in sometimes arbitrary and imposed boundaries. Boundary, borderland/resource, and territorial disputes vary in intensity from managed or dormant to violent or militarized; un-demarcated, indefinite, porous, and unmanaged boundaries tend to encourage illegal cross-border activities, uncontrolled migration, and confrontation. Ethnic and cultural clashes continue to be responsible for much of the territorial fragmentation and internal displacement of the estimated 6.6 million people and cross-border displacements of 8.6 million refugees around the world as of early 2006.

87% of us have the ability to read the directions on a medicine bottle, and on average humans can expect to live to be 66 years old or so, well up from 40 years ago, when the average age some one could expect to live to was only 40 across the globe. Most people have some form of education, but standards (and definitions of what it means to be educated) are very different depending on where you go.

On Earth, we produce more cars per hour than babies. But only just.

56 Million deaths occur per year,  Which, per day, is 153,781, or 2 per second.  Today 356,201 people were born. In the last 3 seconds, 12 people popped out. Most of those 12 people came from India, China, and Africa.

The world is a very large place, and it is sometimes a good idea to talk about issues using a large frame of reference like a country, or a trading bloc, or a planet. When we talk about the determinants of cycles of boom and bust in the economy as a whole, or talk about the inflation rate, or compare the growth of one country with another, we are using concepts best talked about in macroeconomics. We’ll begin by defining our terms, then move on to talk about economic growth on Friday.

Growth matters. You’ll see why in the lecture when I show you this.

Important concepts I’ll show you tomorrow: GDP, gross domestic product, economic growth, inflation, living standards. Read chapter 1 of Barro, the second part of the book.


28
Sep 08

A Nuclear Ireland?

Gerard posts on an issue I’ve been working on for something else—the need for a growing economy to provide itself with power without burning fossil fuels. Even together, solar, wind, wave, hydroelectric, and other greener technologies aren’t yet up to the task of  supplying Ireland’s needs, as the government’s 2007 white paper has shown. As James Lovelock has controversially written, in the short to medium term, say 25 years or so, nuclear power is the only option for advanced economies to grow without fossil fuels. 

Let me elaborate.

Ireland has repeatedly rejected the construction of a nuclear power plant, for a host of reasons, most of them irrational, take this for example, or factually incorrect, see this, or just twaddle, see this

I think if the benefits of nuclear power were put to the Irish people in a consistent and intelligent way, they would respond with a different answer. 

The benefits of nuclear power are cheap, reliable energy which is independent of fossil fuel usage and, as we’ve seen, price changes. Not only does nuclear power have negligible CO2 (global warming) emissions, but Western nuclear power has never killed a member of the public or had any measurable impact on public health, miles of column inches to the contrary. France is the shining example of the benefits of nuclear power—78% of French electricity is generated using nuclear fuel.

The costs of nuclear power are, in this order, high level waste disposal, risk of proliferation, severe accidents, and terrorism. Obviously, Ireland would not be subject to most of these risks as it is a (largely) neutral country. 

Running out of uranium isn’t really an issue either: there are approximately 14,750,000 tonnes of the stuff on Earth. Last year we used close to 67,000 tonnes of this. With type four fast breeder reactor technology, we’d have practically unlimited energy resources into the 22nd century [2]. 

Right now, our CO2 emission are 24% higher than our 1990 level. Our Kyoto protocol agreement is for 13% increases, and our energy needs are set to increase by 25% by 2015 [1]. So this is not a problem which will go away, as this ESRI report shows. Ireland is contributing to climate change in much the same way as India and China, albeit on a smaller scale. 

Pollution is the price of development. 

It’s fair to say nuclear power isn’t the solution, but there is no solution in the medium term without it, as we transition away from fossil fuel power solutions. Those electric cars won’t charge themselves. 

I’m not a fan of nuclear power, but there are ways to buy this power from abroad. As Gerard reports, a 25bn pound investment in nuclear power will take place in the UK in the next 10 years, thanks to a recent takeover. This power will need buyers. If it is priced properly, Ireland might be in a position to purchase the benefits of nuclear power without incurring many of its costs. 


10
Sep 08

Pathways to a worldwide middle class

Territories currently administered by two stat...

Today’s Irish Times has an interesting article by Richard Whelan, which counter points Gerard O’Neill’s article from yesterday concerning the disappearance of the working class in Ireland.

Whelan writes about the rise of a world wide middle class, and cites a paper (here) which predicts that half the world’s population will be middle class by 2020. This has several implications. Middle class people tend to have less children per family, and they tend to be better educated, live longer, and pollute more. The living standards of middle class people in India in 2020 will be almost unrecognisable from their grandparents only two generations before. This is the power of economic development.

The Brookings Institution paper, written by Sheng Li, focuses on China.

Li breaks down three plausible scenarios for the Chinese economy in 2020:

  • The emergence of a democratic China — A wealthier and better-educated middle class, a stronger currency, and a more robust civil society, among other phenomena, lead to greater cultural and political pluralism.
  • Prolonged chaos — Economic disparities among urban and rural populations, rampant corruption among the elite, health crises, and environmental degradation trigger intense socio-political and economic crises that undermine the stability of the Communist regime.
  • A resilient, authoritarian China — Problems among the world’s democratic countries make democracy less appealing to the Chinese people, while stable development strategies by the party-state are necessary for growth and economic stability, further entrenching the ruling power of the CCP.

Li’s paper is a good exercise in taking trends and working them up and down into plausible scenarios, which, if you’re me, makes for interesting reading.

I’m also interested in the different pathways to a middle class people can take. It’s not simply farm->call centre->education->computer programmer. There are many pathways to a worldwide middle class, so understanding the path we took in Ireland is enlightening and useful.