Thursday, June 26, 2008

Substitute Mexico

Substitute Mexico and Mexicans everywhere in this article and it seems to be a close analogy to the situation in the US , except that the Mexican economy is not on a major upswing right now.

Note the idea that it makes good sense that workers can nomadically move from country-to-country for work and return, maybe, if the home country's economy gets better.

There is no discussion of:
- Costs to home country : 1) affect on families , 2) social effects of large numbers of split families.
- Effects on emigrated-to countries 1) lower wages for it's own citizens 2) opportunities for citizens decreased.
- Cost of short term workers for medical/educational/social services. Frequently off-the-books so the cost is borne by local citizens. So how much cheaper is the worker? To employer, MUCH cheaper, but to the overall society there is significant additional cost.
- Race-to-the bottom - where does the process end when there is always some country with cheaper skills. What happens if Phillipine workers replace the Polish workers because they are cheaper? What will the Polish worker do ?
- Social unrest caused by nomadic worker model all over the world. This is an untenable model for the long-term.

June 26, 2008

Strong Economy and Labor Shortages Are Luring Polish Immigrants Back Home

WARSAW — For a long time, Germany has been good to Katarzyna, a 28-year-old Polish woman who works in a pharmacy in Frankfurt during the day and cleans houses in the evenings.

In six years, she has earned enough money to buy a sporty Audi and an apartment in Poland, while still having enough cash to travel widely in Europe. Millions of other Poles made similar moves from their home country, especially in the four years since Poland joined the European Union. But now a strong economy in Poland, and an increasingly acute labor shortage, are beckoning migrants like Katarzyna back. She is moving to Warsaw in July.

“All I wanted to do was earn good money fast,” said Katarzyna, who asked that her last name not be used because she is often paid off the books. “Now that everyone has emigrated from Poland, maybe I can do it there.” (loyalty to the new country is as strong as the economic advantage and lasts as long. No indication that numbers of 'migrants' want to stay long-term)

Although the reverse migration is still only a trickle, it is likely to create opportunities and challenges for the Polish government. The return should help ease the labor shortage, especially in crucial sectors like construction and building trades. But Polish officials also worry about there being enough quality jobs if the trickle becomes a rush.

In addition, migrants sent 40 billion zlotys, or about $18 billion, home in 2007, and the infusion of money would surely increase if more Poles returned permanently with their accumulated savings. Beyond that, there could be an intangible benefit from the influx of people with firsthand knowledge of the advanced economies west of Poland. (they already say that most migrants have worked manual jobs , gaining nothing about 'advanced economies')

“They bring back skills, but in a tricky sense,” said Rafal Antczak, a professor of economics at Warsaw University. “Many of these people have been doing very simple jobs, working in hotels or restaurants. But they bring back experience — life experience.”

So far this decade, about two million Poles have left their home country. Working as bartenders in Britain, builders in Ireland, cleaners in Germany and in other often menial jobs, young Poles, many from the country’s impoverished east, earned euros and pounds that they sent back to Poland or squirreled away.

Meanwhile, the Polish economy, racing to catch up with Western living standards, has driven unemployment down sharply in the past few years. And the zloty has risen against the pound and the euro, dampening the appeal of working abroad.

Driven by economic necessity, the Polish government is beginning a major effort to pave the way for migrants to return. It has sponsored advertising campaigns abroad and set up Internet-based job banks.

“Four years ago the debate was on the advantages of migration and what the government could do to make it possible for Poles to work all over Europe,” said Justyna Frelak, a migration specialist at the Institute for Public Affairs in Warsaw. “Now we are talking about the costs of migration, for family, for children, for Poles abroad, and about the labor shortages that result.”

(Just like Mexico the Polish gov't encouraged people to leave.)

Since 2006, unemployment in Poland has dropped to about 8 percent from about 14 percent, and the economy has grown at a steady clip — 6.5 percent in 2007.

With billions in European Union money pouring into the country, largely earmarked for infrastructure projects, desperation defines the state of building companies looking for help.

J. W. Construction — itself founded by a Pole who returned from the United States — brought in laborers from Uzbekistan, Tajikistan, Mongolia, China, Ukraine, Bulgaria and Mexico in the past few years. Now, its executives hope that Polish plumbers, electricians and carpenters will return as housing bubbles pop in Britain, Ireland and Spain, reducing work opportunities.

“There is a growing expectation that people are going to start coming back,” said Jerzy Zdrzalka, the company’s chief executive. “It is linked to the stagnation of the construction industry in Western Europe.”

(Poland cannot grow as an 'island' in a sea of European economic stagnation)

The pioneers of reverse migration are not yet visible in statistics. But across Europe, the possibility of returning to Poland is now the talk of the diaspora, a group knit together by low-cost airlines, cheap cellphones and the Internet.

Sporting turquoise earrings and a matching clunky necklace, and just back from a Bon Jovi concert, Katarzyna can hardly be distinguished from the average 20something West European.

Working in Frankfurt, she grew accustomed to earning more than the average wage back home in Bialystok, in eastern Poland.

She hopes the German and English she picked up abroad will help her get a job in retailing or banking, which she studied before leaving Poland.

She added that the strong zloty had helped tip the balance in favor of returning, a common sentiment among Poles who are returning or thinking about it. Questions remain, however, about how the new qualifications of returnees will mesh with the needs of the Polish economy.

Responding to the challenge of post-communist restructuring, the government authorized the creation of private universities in the 1990s that, it is widely believed, conferred many degrees of questionable integrity. This generation of graduates became the one that emigrated heavily after 2004, often forsaking professional work for manual labor.

('degrees of questionable integrity' ... this same underreported phenomenon has happened all over the world, particularly in the Far East Asian countries)

“The economy does not need people trained in banking who worked in a London pub,” said Krystyna Iglicka, a migration specialist at the Center for International Relations in Warsaw.

So reverse migration will probably be much more gradual than the sudden outflow from Poland. Word will quickly spread if life back home does not live up to expectations.

“It will not be a sudden process,” said Jerzy Dusynski, the Polish deputy minister of science and education. “But if we can create the opportunities for them, they will come back.”

Marcin Zochowski, 28, worked for a year in Scotland as a carpet layer and sometime carpenter before heading home to Warsaw. Thanks to flights on Wizz Air, one of Europe’s many low-cost airlines, Mr. Zochowski expects to work occasionally in Britain or Ireland, but also in Poland, seeking to maximize his earnings as well as his time with his wife and 19-month-old daughter.

Because he works in construction, he sees ample opportunities, not least because all of Europe, not only Poland, appeals to him.

“I will travel back and forth for work, but it will depend on what I find,” Mr. Zochowski said. “I have a family, so it makes sense to work a month and then come back.”

Another one bites the dust

Along with interpreting your MRI, doing your tax returns and handling the legal work when you buy/sell your home, back-office Indian workers will now be 'doing the needful' and writing your newspaper .

I liked the following sentence describing the firm and it's services:

Mindworks' Web site says the company is based outside New Delhi and provides "high-quality editorial and design services to global media firms ... using top-end journalistic and design talent in India."

There's that ubiquitous word again , 'talent' .

And 'top-end' no less ! .... faster, smarter, cheaper .... and better looking.

I guess the big question is, what jobs will be left here so that Americans can continue to afford to buy newspapers ?

OC Register to outsource some editing to India


An Indian company will take over copy editing duties for some stories published in The Orange County Register and will handle page layout for a community newspaper at the company that owns the Pulitzer Prize-winning daily, the newspaper confirmed Tuesday.

Orange County Register Communications Inc. will begin a one-month trial with Mindworks Global Media at the end of June, said John Fabris, a deputy editor at the Register.

Mindworks' Web site says the company is based outside New Delhi and provides "high-quality editorial and design services to global media firms ... using top-end journalistic and design talent in India."

Editors at Mindworks will work five shifts a week for one month, performing layout for the community paper and editing some stories in the flagship Register, Fabris said. Staffing at the company will not be affected, he said.

Fabris did not specify which community newspaper would be laid out by Indian designers.

"This is a small-scale test, which will not touch our local reporting or decision-making. Our own editors will oversee this work," Fabris said in an e-mail to The Associated Press. "In a time of rapid change at newspapers, we are exploring many ways to work efficiently while maintaining quality and improving local coverage."

The company declined to release the financial terms of the deal.

Orange County Register Communications has struggled in recent months with circulation declines. The Register recently dropped from the third-largest newspaper in California to the fifth-largest, behind the Los Angeles Times, San Francisco Chronicle, San Diego Union-Tribune and Sacramento Bee.

The company has been through three rounds of layoffs in the past year, most recently in April when up to 90 employees lost their jobs. Employees were also offered a voluntary severance program in 2006.

Orange County Register Communications is the umbrella brand for the Register newspaper, Web sites, magazines and other community publications.

Other newspapers also have outsourced some work to India. Mindworks began copyediting and design of a weekly community news section and other special advertising sections at The Miami Herald in January. A month earlier, the Sacramento Bee, also owned by the McClatchy Co., said it would outsource some of its advertising production work to India.

Friday, June 20, 2008

Largest 'Free Market' Trading Partner

Just imagine how 'strong' the U.S. economy would be right now if the government subsidized energy.

- Goods could be produced and brought to market cheaper.

- Wage demands would be muted.

- Inflation that is due to energy rising and not wages rising, would be low.

- People would have more discretionary income to spend, keeping the domestic economy humming.

- And the U.S. would have an extraordinary competitive advantage over all our trading partners that allowed the 'market' to determine the price of energy.

Welcome to the Chinese 'miracle' !

And what would happen if the U.S. then allowed energy prices to align with the 'real' market?

Everything would then reverse:

- Goods would cost MORE to produce and bring to market .

- Wage demands would be GROW and there would be demonstrations and social unrest.

- Inflation that is due to energy rising and not wages rising, would be higher. (In China at least, where the booming economy is causing wage-driven inflation . Now add in energy inflation and overall inflation goes through the roof) .

- People would have LESS discretionary income to spend, keeping the domestic economy humming.

- And the U.S. would LOSE some of it's extraordinary competitive advantage over all our trading partners, joining other countries that allowed the 'market' to determine the price of energy.

June 20, 2008

China Sharply Raises Energy Prices

HONG KONG — Faced with increasingly severe fuel shortages and the prospect of power failures during the summer air-conditioning season, the Chinese government unexpectedly announced sharp increases late Thursday night in regulated prices for gasoline, diesel and electricity.

The increases are the latest sign of how China’s integration into the global marketplace has limited the flexibility of the country’s leaders in responding to economic crises.

The government has come under intense pressure recently from both environmentalists and other governments to ease up on its fuel subsidies, which are blamed for distorting global markets, encouraging greater consumption and pushing oil prices higher for other nations.

The government, like many around the world (this fact is rarely brought up by globalization and free trade proponents) , has struggled to keep up those subsidies as oil prices have spiked in recent months. Finally, despite fears that it will spur inflation, the government raised the retail price of diesel by 18 percent, to the equivalent of $3.58 a gallon, and the price of gasoline by 16 percent, to $3.83 a gallon. (Note that diesel still is almost 50% more expensive in the U.S., about $5/gallon, which is probably the true market value, depending on how it is taxed there- or not taxed) Electricity tariffs and the price of jet fuel were also raised.

The higher prices could prompt businesses and people across China to use less fuel and electricity, potentially slowing China’s voracious oil consumption as well as its steep rise in emissions of global warming gases. Following the news, world oil prices immediately dropped more than $4 per barrel.

But some experts said the Chinese market was so heavily distorted by state subsidies for fuel that the higher prices might encourage refiners to produce more gasoline and diesel for Chinese consumers, possibly stoking new demand.

Either way, higher energy costs threaten not only to push up prices here, but also the prices of many of the goods China ships to the United States. Inflation in China was 7.7 percent last month and over 8 percent in February, March and April. While top Chinese officials are worried about inflation, they have faced another problem in recent weeks: the Shanghai stock market has slid steeply, leaving large numbers of angry shareholders.

Hours before the government raised energy prices, the Shanghai market had plunged 6.5 percent in Thursday trading, falling partly on worries of heavy losses among Chinese energy-related companies, which have been selling fuel and energy for less than it costs to produce them.

Until now, the government’s preoccupation with consumer price inflation had many economists wondering when fuel prices would be allowed to rise at all, despite problems in the stock market.

China is the world’s second largest oil consumer, after the United States. With the announcement Thursday, China became the eighth Asian country to raise fuel prices in the past month after concluding that low retail prices could not be sustained indefinitely through government subsidies. (the Asian miracle - fueled in large part by subsidized energy. Ever wonder how it is cheaper to produce goods 10,000 miles away when transportation costs should give those products less of a pricing advantage ?)

American concerns about China’s price controls on fuel were raised as recently as this week in high-level economic talks between China and the United States in Annapolis, Md. Treasury Secretary Henry M. Paulson Jr. raised the subject during the talks, which took place Tuesday and Wednesday.

Mr. Paulson, in a speech the previous week, called on China to lift controls and cut subsidies in the energy sector, arguing that they were harmful to the dynamics of supply and demand. Fuel price controls, he said, were producing “persistent gasoline and diesel shortages” in China, and also contributing to “power outages during snowstorms this past January and February.”

Price controls, he added, also “often lead to smuggling and corruption” as well as shortages that contribute to global price spikes in the energy sector.

Treasury officials did not say Thursday that American pressure had led to the change in China’s policies, but they welcomed the move as a possible sign that China was listening to analysts from other countries.

Chinese officials have spoken for several years of their desire to move toward a more energy-efficient economy. They have periodically mentioned an intention to impose taxes on energy once world oil prices begin to fall, so as to keep the pressure on Chinese businesses and consumers to improve efficiency. (this implies that gas/diesel has NO taxes right now)

Prices for gasoline and diesel had been fixed since Nov. 1, even as world oil prices rose 45 percent in that period. (!!!) If the Chinese retail price increase on Thursday has a lasting downward effect on world oil prices, it could strengthen the position of economists who have argued that the United States should raise gasoline taxes to limit demand and drive down global oil prices.

Until now, the government’s subsidies have forced the state-controlled refiners to lose money by selling gasoline and diesel for less than the cost of the crude oil needed to make them. Power companies, too, have become reluctant to operate oil-fired power stations when they cannot sell the electricity for enough money to cover the cost of oil.(so much for the concept of China being run as a free market economy)

As refineries cut back their output this spring, the result has been crippling fuel shortages, particularly for diesel. Those shortages have already produced long lines of trucks at service stations, and might threaten the gathering of the summer harvest.

President Hu Jintao and Prime Minister Wen Jiabao took the highly unusual step on June 5 of ordering that tractors and other farm vehicles be given top priority for all supplies of diesel — usually the kind of measure that would be handled by far more junior officials.

Farmers were exempted on Thursday night from the latest increase in fuel prices, as were three provinces damaged in earthquakes last month: Sichuan, Shaanxi and Gansu Provinces. (those Chinese food products shipped worldwide thereby have a gigantic advantage since large scale farming is a very energy intensive business)

Power plants that rely on oil have also been shutting down because of high prices. While China relies mainly on coal and hydroelectric power for electricity generation, oil-fired plants are important in southeastern China.

Severe snowstorms in January and February, followed by earthquake damage and disruption for the national rail network last month, have interfered with coal shipments to some power plants and made electricity generation from oil-fired plants even more important.

China struggles each summer to generate enough electricity, although there have been a few signs that electricity generation capacity is beginning to catch up with demand. The government also announced on Thursday night that it was limiting increases in coal prices, which would help power companies afford their fuel — although at the risk of introducing the same kind of price control distortions to the coal market that have already caused problems for diesel users.

Thursday, June 19, 2008

Fair Trade

Free market capitalism as practiced by our major trading partners.

Just like oil being subsidized at a set price in India and other Asian countries.

If you insulate your population from high energy and inflation in staples, then you artificially make wages lower and they can 'compete' with the west. If you let prices fluctuate with the market then wages will rise and the wage advantage with the west evaporates.

Mexico freezes prices on 150 foods for 6 months
By ALEXANDRA OLSON, Associated Press Writer1 hour, 49 minutes ago
Food manufacturers promised Mexico's government to freeze prices on more than 150 food products Wednesday to help families cope with rising costs.

President Felipe Calderon announced that prices for goods such as cooking oil, flour, canned tuna, fruit juices, coffee, ketchup and canned tomatoes will remain fixed until Dec. 31.

"This is a measure that will positively and directly benefit the finances of millions of Mexicans," said Calderon, flanked by representatives of Mexico's business chambers. "This reflects the commitment of Mexican businessmen to the country and to price stability."

The Mexican leader has blamed high food costs on rising global energy prices, soaring food demand in China and India and the use of corn for ethanol production.

Food prices, especially rice, have reached historic highs almost everywhere in the world.
Calderon, a conservative elected in 2006, has already taken several steps to fight high prices. He eliminated import barriers on wheat, corn and rice in May, won an agreement from rice farmers to sell their crop at 10 percent below international market prices and last year imposed price caps on tortillas, Mexico's staple food.

He also announced small monthly cash subsidies to 26 million poor Mexicans, about a quarter of the population. The cash payments of about 120 pesos (US$11.6) a month are expected to cost about US$433 million.

Mexico's central bank said annual inflation rose to 4.95 percent in May, the fastest pace in more than three years, led by the swelling costs of food oils, rice, wheat products and corn tortillas. The country's daily minimum wage is about 50 pesos ($4.80).

Wednesday, June 18, 2008

Not Cheap enough

They beat around the bush here.

The title of the article could be 'Fascist loving modern corporations scour the world for the cheapest labor' .

Instead, they discuss and describe 'options' and post a litany of reasons why corporations are expanding outside China, but the last one listed in this paragraph is the main reason, because they then spend most of the rest of the article on this point - labor costs :

A long list of concerns about China is feeding the trend: inflation (inflation is running high all over the world, not just China .. they note 25% inflation in Vietnam also, where companies are running to) , shortages of workers and energy ( shortages of workers in a country with 1.5 billion people? Energy is the same cost all over the world) , a strengthening currency ( a couple percent increase per year, a piddling) , changing government policies (huh? such as ?) , even the possibility of widespread civil unrest someday (political instability is always there, but this is true in many countries that have garnered large investments). But most important, wages in China are rising close to 25 percent a year in many industries, in dollar terms, and China is no longer such a bargain. (BINGO!)

And here's the corporate guideline for investment in Asia:

A popular saying among Western investors is that Vietnam is the next China. Cambodia, with even lower wages attracting garment manufacturers, is called the next Vietnam.

Sounds like the famous baseball double-playmakers .. Tinker to Evans to Chance .... China to Vietnam to Cambodia .

And company loyalty is not a cultural staple of the region. Hey corporations, enjoy the cultural diversity!

A recent survey by Grant Thornton, a global accounting and consulting firm, found that companies were more worried about attracting and retaining critical staff in Vietnam than anywhere else in the world. (China was a close second.)

“We trained them, we educated them and then they quit,” said Akira Akashi, the chairman of Nissan Techno, a division of Nissan that designs vehicles.

The company plans to expand to 1,400 engineers in Vietnam by 2010. Beginning engineers here still earn just $200 a month, less than half the salary in China and less than a tenth of American and Japanese salaries. ($200/month . That's just over $1 hour assuming a 48 hour week, for engineers. Easy to see why they quit when they can quickly make multiples of that wage) .

June 18, 2008

Investors Seek Asian Options to Costly China

HANOI — Canon is no longer building or expanding factories in China, but the company is doubling its work force at a printer factory outside Hanoi to 8,000.

Nearby, Nissan is expanding a vehicle engineering center. Hanesbrands, the underwear company based in Winston-Salem, N.C., is setting up two new factories here, as is the Texhong Textile Group from Shanghai.

China remains the most popular destination for foreign industrial investment in the world, attracting almost $83 billion last year. But a growing number of multinational corporations are pursuing a strategy that companies and analysts call “China plus one,” establishing or expanding Asian bases outside China, particularly in Vietnam.

A long list of concerns about China is feeding the trend: inflation, shortages of workers and energy, a strengthening currency, changing government policies, even the possibility of widespread civil unrest someday. But most important, wages in China are rising close to 25 percent a year in many industries, in dollar terms, and China is no longer such a bargain.

Even as companies seek other places to make their goods, they are stalked by overheated economies: in Vietnam, for example, inflation was 25.2 percent last month.

More than corporate profit margins are at stake. When the cost of making goods in Asia rises, American consumers inevitably feel pain. The Labor Department said Thursday that import prices were 4.6 percent higher in May than a year earlier for goods from China and 6.4 percent higher for goods from southeast Asia. (Ah ... if goods were indeed only 4-6% higher! This would be virtually unnoticeable to American consumers. A $3 item would cost $3.15 !) .

Companies are using the China-plus-one strategy to mitigate the risks of overdependence on factories in one country.

Multinational corporations are “thinking about all the world and keeping a balance” between China and other countries, said Edward Kang, the chief executive of Ever-Glory International, a sportswear manufacturer in Nanjing, China. Ever-Glory, which sells to Wal-Mart and Kohl’s, is building a factory in Vietnam.

Companies remaining in China are desperately seeking to control costs. (BINGO!)

“We will maintain our capacity in China, but we will make it more automatic and reduce the number of employees,” said Laurence Shu, the chief financial officer of Shanghai-based Texhong, one of the world’s largest makers of cotton and spandex fabric.

To limit labor costs, Hanesbrands is building a largely automated factory in Nanjing. But the company is also building a factory in Vietnam, in addition to a factory it bought here, and two more in Thailand.

Gerald Evans, the president for global supply chain at Hanesbrands, said that compared with China, “we found more ready availability of both land and labor in both Vietnam and Thailand.” Hanesbrands will be shifting some manufacturing from Mexico and Central America to Asia. (Driving migrants to seek work in America. A tough place to be ... too expensive to compete with Asia and mostly lacking educational skills for other work. This area already has had an explosion of Socialist Presidents and nationalization of production - which is another reason for less investment here... political instability . Look for more social and political unrest in the near term for our neighbors to the south.)

In China, where rural villages are running low on able-bodied young workers to send to factories (hard to imagine. At the same time we are hearing stories of millions of rural workers flocking to the cities which are overwhelmed. The 2 stories don't jibe), wages are rising more than 10 percent a year (10% of $/hr is $1.10 an hour, or an extra $1/day for a 10-hr day... not enough to break the bank) for many assembly-line workers. And pay is rising even faster for skilled workers, like machinery repair technicians.

In coastal provinces with ready access to ports, even unskilled workers now earn $120 a month for a 40-hour workweek, and often considerably more; wages in inland provinces, where transport is costlier, are somewhat lower but also rising fast. While Chinese wages are still less than $1 an hour, factory workers in Vietnam earn as little as $50 a month for a 48-hour workweek, including Saturdays. ($50 /month for 192 hours = $.26/hr ! .. now why couldn't they translate this when the previous sentence mentioned hourly? Why show the monthly rate, if not to confuse the reader? Note also that they previously mentioned that inflation is much higher in Vietnam , so how soon till the wage differential becomes moot?)

Texhong estimates that average labor costs for each textile worker in China will rise 16 percent this year, including increases in benefits costs — on top of a 12 percent increase last year. New regulations are making it harder for companies to avoid paying for benefits, like pensions, further increasing labor costs.

When those increases are combined with a currency rising against the dollar at an annual pace of up to 10 percent, labor costs in China are now climbing at 25 percent a year or more.

Inflation in China — more than 8 percent in February, March and April and 7.7 percent in May — raises the prospect that labor costs will soar even faster soon. That could push up prices for a wide range of goods exported to the United States.

China is also phasing out its practice of charging lower corporate tax rates for foreign-owned companies. By contrast, Vietnam still offers foreign investors a corporate tax rate of zero for the first four years, and half the usual rate of 10 percent for the next four years.

Foreign direct investment in China has grown by a third over the last three years. By contrast, foreign direct investment has more than doubled in this period in the Philippines, quintupled in India and soared more than eightfold in Vietnam.

Faster rates of increase in other Asian countries had partly reflected lower starting points. But investment is still growing quickly, and now it’s growing from high levels. For example, foreign investment in Vietnam reached nearly $18 billion last year.

A popular saying among Western investors is that Vietnam is the next China. Cambodia, with even lower wages attracting garment manufacturers, is called the next Vietnam.

But Vietnam has only 1/16th of China’s population and Cambodia has one-fifth of Vietnam’s. As foreign investors leap into each new country, they drive up the cost of workers and goods, a dynamic that makes it less likely that a shift in investment patterns will hold down inflation in American imports.

A recent survey by Grant Thornton, a global accounting and consulting firm, found that companies were more worried about attracting and retaining critical staff in Vietnam than anywhere else in the world. (China was a close second.)

“We trained them, we educated them and then they quit,” said Akira Akashi, the chairman of Nissan Techno, a division of Nissan that designs vehicles.

The company plans to expand to 1,400 engineers in Vietnam by 2010. Beginning engineers here still earn just $200 a month, less than half the salary in China and less than a tenth of American and Japanese salaries.

Even blue-collar labor is becoming harder to find. In addition to the size of the labor force, infrastructure is also likely to be a brake on how fast China plus one can expand. Most countries in Asia, including Vietnam, have not improved transportation links as quickly as China. Lengthy traffic jams slow down shipments and drive up costs.

Vietnam’s biggest selling point for many companies is its political stability. Like China, it has a nominally Communist one-party system that crushes dissent, keeps the military under tight control and changes government policies and leaders slowly. (this is an astonishing statement . Capitalist companies love the 'stability' of autocratic, despotic , non-democratic regimes because they bring 'order' to the country. Mussolini made the trains run on time, so no doubt these companies would love fascists and Nazis today also). 'Political Stability' takes on a new meaning.

“Communism means more stability,” Mr. Shu, the chief financial officer of Texhong, said, voicing a common view among Asian executives who make investment decisions. At least a few American executives agree, although they never say so on the record.

Democracies like those in Thailand and the Philippines have proved more vulnerable to military coups and instability. A military coup in Thailand in September 2006 was briefly followed by an attempt, never completed, to impose nationalistic legislation penalizing foreign companies.

“That sent the wrong signal that we would not welcome foreign investment — this has ruined the confidence of investors locally and internationally,” the finance minister Surapong Suebwonglee said in an interview in Bangkok.

Yet, like China, Vietnam does not offer complete tranquillity either. For instance, workers are becoming more vocal and staging more strikes, despite a government ban on independent unions.

Nearly 20,000 workers walked out this spring at a Nike shoe factory run by a Taiwanese contractor. The workers went back to work only when given a 10 percent raise, to $55 a month, and a larger meal subsidy.

That restive pattern is also evident in India, which is expected to have more people than China within two decades.

But many companies are leery of poor roads and congested ports in India, as well as long sailing times for components that must be shipped from existing factories in China. (Lack of infrastructure that can't be solved digitally by the internet ?? Some things must be done manually?? What a surprise!)

And even in India, demand for workers with industrial skills or the ability to speak English outstrips the supply — and their wages have been rising by 10 to 20 percent a year.

That has led to worries about India’s long-term competitiveness, even for those investing heavily there, like Ford Motor, which is planning to spend $500 million on factory expansion.

“I keep saying to our people, ‘How long will it be until we’re priced out of the market?’ ” said John Parker, Ford’s executive vice president for Asia, Pacific and Africa. “The impact of that some day is you’re no longer low-cost.”

Friday, June 13, 2008

Gasoline up 100% in 12 months but Inflation is 4.2%

4.2% is ugly?

I'd like some of that ugly rather than the 'personal' inflation rate that seems to be only affecting me ! ... and maybe 100% other Americans also .

There are lies , damn lies and then there's statistics .

We will hear one day about the scandal of how these inflation numbers were manipulated and bent. But one hears mostly silence from the many thousands of economists who seem to accept them as if they were tablets handed to Moses.

Inflation getting 'uglier and uglier'

Surging energy prices help drive annual cost-of-living rate rise to 4.2%.

By Aaron Smith, staff writer

NEW YORK ( -- The cost of living rose in May as consumers were belted by energy costs, the government said Friday.

The Consumer Price Index, a key inflation reading, rose 4.2% through the 12 months ended in May, according to the Labor Department. This compared to an increase of 3.9% during the 12 months ended in April.

For the month of May, overall CPI rose 0.6%, compared to an increase of 0.2% in April. That's the biggest increase since last November, when the overall CPI surged 0.9%. A consensus of analysts interviewed by had projected an increase of 0.5% for May.

The dramatic increase in energy costs were largely responsible for the overall inflation. Energy costs rose 4.4% in May, and surged 17.4% over the 12 months ending in May, the Labor Department said.

17.4% rise in energy in last 12 months ? How is this possible when oil went from $60/barrel to $130/barrel ?

Heating oil went from $2.75 in Sept to $4.50 in May , or almost 70% in 8 months .

"These (CPI) numbers are nowhere near to what we're seeing in the real world," said Peter Beutel, energy analyst for Cameron Hanover, who believed the "real" cost of living has increased at a higher rate than the index shows. "But even these diluted numbers are showing that inflation is getting uglier and uglier and uglier."

Beutel said this puts more pressure on the Federal Reserve to increase the federal funds rate, which he thinks could happen in August or September. The rate is currently at 2%.

"The higher that inflation is, the sooner the Fed has to raise rates to help keep a lid on prices," said Beutel.

The index for fuel oil rose 10.4% in May and soared 64% over the 12 months. The gasoline index rose 5.7% in May and surged 20.8% on a year-over-year basis. The index for natural gas rose 5.6% in May, and was up 16.5% over the last year.

Electricity costs also increased, but less dramatically, edging up 0.9% in May, and rising 5.8% over the last 12 months.

As a result, transportation costs increased 2% in May, and jumped 8.1% over the 12 months ending in May.

The index for household energy costs climbed 2.8% in May, its fourth consecutive jump, the Labor Department said.

The price of food also pushed up overall costs. Food costs increased 0.3% in May, and jumped 5.1% during the 12 months ending in May.The price of milk was a big influence on the overall price, increasing 10.2% over the 12 months, despite slipping 0.7% in May.

The cost of clothing was the one area where consumers got some relief. Apparel costs deflated 0.2% in May, and decreased 0.4% over the 12 months.

The core CPI, which excludes the cost of food and energy, rose 0.2% in May, compared to an increase of 0.1% in April. A consensus of analysts interviewed by had projected an increase of 0.2% for May.

The core CPI rose 2.3% during the 12 months ending in May.

Monday, June 9, 2008

Free trade and unfettered Capitalism meets the Oil Bubble

Economic consensus is that markets are smarter than people or governments, so intervention is never good. Let the markets play out and define the value of any 'good' or 'service' .

But while markets are 'smart' over the medium to long term, they can be very irrational in the short term.

Oil has doubled/bubbled in the past year, due to irrational speculation as trillions of dollars search for greater returns after the and real estate boom-n-busts.

Irrational because demand has NOT doubled in the past 12 months. If the supply/demand was out-of-whack before this, and oil 'should have' been higher, then this also says that the markets weren't working correctly (or smartly) the past couple of years.

Read deep into the article, toward the very end to find that countries will respond to domestic unrest caused by short-term market manias with subsidies. So much for the free-trade and capitalism without interference.

Spanish authorities have promised measures such as loans and cash subsidies to help truckers cope with higher fuel costs.

Some 'free-trade' countries such as China (a Communist controlled economy) and India (a socialist country that is new to capitalism) have had to increase oil prices that are State-controlled after the Govt's having lost billions subsidizing it, although they still subsidize.

Look for these economies to show a LOT of signs of social unrest. They have lots of have-nots in their countries.

June 10, 2008

Spanish Truckers Block Border

PARIS — Gasoline at $4 a gallon? If only.

As prices across America hit an average $4 a gallon over the weekend, European motorists, truckers and economic planners wrestled with fuel costs around twice as high, blamed not only on the soaring price of oil but also high government taxes levied at the fuel pump.

That has made few people happy. In the latest show of distress, Spanish truckers Monday began a blockade of their country’s border with France, lining up their rigs in a crawling strike to protest the cost of diesel. In France, farmers on their tractors did the same, offering a foretaste of a planned national strike by truckers next Monday.

The rising European anger may well be matched by the price of oil, according to Jeffrey Currie, the global head of commodities research at the investment bank Goldman Sachs. At an oil and gas conference in Malaysia on Monday, he suggested oil prices are likely to hit $150 a barrel this summer, surpassing the record of $139.12 last Friday, Reuters reported.

“I would suggest that the likelihood of that happening sooner has increased tremendously — sometime in the summer,” Mr. Currie was quoted as saying. “Demand for oil is weak but supplies are even weaker.”

In Spain, tens of thousands of truckers launched an indefinite campaign of blockades and demonstrations at midnight to protest diesel prices, up by one fifth this year to around $8 per U.S. gallon, depending on where it is bought and the levels of official discounts available in many parts of Europe to truckers, farmers and commercial fishermen.

The protests provoked clashes between supporters and opponents of the action. Spanish television showed the trucks of alleged strike-breakers with their windshields and headlights smashed and tires slashed. Spanish truckers said the price of diesel — which varies among European countries -- was now 1.30 euros per liter, roughly $7.73 per U.S. gallon, compared to 0.95 euros per liter, around $5.58 per U.S. gallon, one year ago. At highway filling stations, diesel can cost 1.5 euros per liter, or $8.90 per gallon.

Spanish authorities have promised measures such as loans and cash subsidies to help truckers cope with higher fuel costs. But the strike in Spain is likely to have much broader consequences, hitting supplies of goods to stores and supermarkets within days.

Spanish motorists and shoppers formed long lines at gas stations and supermarkets to stockpile fuel and food.

The Spanish strike is only the latest in weeks of protests stretching from Britain to Italy. Fishermen in northern Spain planned to join the truckers’ strike later.

Sunday, June 8, 2008

Overperforming Korean 'bird' families

Poorly written story. It takes a long time to get to the basic point of why this social phenomenon is happening .

The third paragraph mentions in a broad manner:

'Driven by a shared dissatisfaction with South Korea’s rigid educational system....'

But is this because they don't offer English or maybe teach it poorly ? (the title of the article is about English after all) .

The 14th and 15th paragraphs get to the basic point of the article:

South Korean students routinely score at the top in international academic tests. But unhappiness over education’s financial and psychological costs is so widespread that it is often cited as a reason for the country’s low birthrate, which, at 1.26 in 2007, was one of the world’s lowest.

South Korean parents say that the schools are failing to teach not only English but also other skills crucial in an era of globalization, like creative thinking. That resonates among South Koreans, whose economy has slowed after decades of high growth and who believe they are increasingly being squeezed between the larger economies of Japan and China.

American students are lambasted every other day for underperforming compared to students overseas. Here's a top performing country who are very unsatisfied with their educational system's methods and curriculum.

The incredible pressure to get into the right schools (usually private) , the long hours of study and the parental pressure for high achievement is also pervasive to other Asian societies. In particular Indian parents working in the US talk about how much better the schooling is back home in India. Six year olds lugging heavy backpacks of books, studying mathematics and foreign languages.

The same is true in the US for a set of students striving to achieve the highest levels in acaademia , commerce and society. Parents who believe that attending the wrong pre-school can doom their children's future career paths.

Everything has a cost. Happiness ? Creativity ? Lost childhoods ?

Globalization and the competition it creates... another upside found --> split families, unhappy children and parents, and low birth rates ! What's not to like?

June 8, 2008

For English Studies, Koreans Say Goodbye to Dad

AUCKLAND, New Zealand — On a sunny afternoon recently, half a dozen South Korean mothers came to pick up their children at the Remuera Primary School here, greeting one another warmly in a schoolyard filled with New Zealanders.

The mothers, members of the largest group of foreigners at the public school, were part of what are known in South Korea as “wild geese,” families living separately, sometimes for years, to school their children in English-speaking countries like New Zealand and the United States. The mothers and children live overseas while the fathers live and work in South Korea, flying over to visit a couple of times a year.

Driven by a shared dissatisfaction with South Korea’s rigid educational system, parents in rapidly expanding numbers are seeking to give their children an edge by helping them become fluent in English while sparing them, and themselves, the stress of South Korea’s notorious educational pressure cooker.

More than 40,000 South Korean schoolchildren are believed to be living outside South Korea with their mothers in what experts say is an outgrowth of a new era of globalized education.

The phenomenon is the first time that South Korean parents’ famous focus on education has split wives from husbands and children from fathers. It has also upended traditional migration patterns by which men went overseas temporarily while their wives and children stayed home, straining marriages and the Confucian ideal of the traditional Korean family. The cost of maintaining two households has stretched family budgets since most wives cannot work outside South Korea because of visa restrictions.

In 2006, 29,511 children from elementary through high school level left South Korea, nearly double the number in 2004 and almost seven times the figure in 2000, according to the Korean Educational Development Institute, a research group that tracks the figures for the Ministry of Education. The figures, the latest available, did not include children accompanying parents who left South Korea to work or emigrate, and who could also be partly motivated by educational goals.

South Koreans now make up the largest group of foreign students in the United States (more than 103,000) and the second largest in New Zealand after Chinese students, according to American and New Zealand government statistics. Yet, unlike other foreign students, South Koreans tend to go overseas starting in elementary school — in the belief that they will absorb English more easily at that age.

In New Zealand, there were 6,579 South Koreans in the country’s elementary and secondary schools in 2007, accounting for 38 percent of all foreign students.

“We talked about coming here for two years before we finally did it,” said Kim Soo-in, 39, who landed here 16 months ago with her two sons. “It was never a question of whether to do it, but when. We knew we had to do it at some point.”

Wild geese fathers were initially relatively wealthy and tended to send their families to the United States. But in the last few years, more middle-class families have been heading to less expensive destinations like Canada, Australia and New Zealand.

Now, there are also “eagle fathers,” who visit their families several times a year because they have the time and money. Those with neither, who are stuck in South Korea, are known as “penguin fathers.”

The national experience is considered enough of a social problem that an aide to South Korea’s president recently singled out the plight of the penguin fathers.

President Lee Myung-bak said he would start to address the problem by hiring 10,000 English teachers. “This is unprecedented,” he said. “Korea is actually the only country in the world undergoing such a phenomenon, which is very unfortunate.”

South Korean students routinely score at the top in international academic tests. But unhappiness over education’s financial and psychological costs is so widespread that it is often cited as a reason for the country’s low birthrate, which, at 1.26 in 2007, was one of the world’s lowest.

South Korean parents say that the schools are failing to teach not only English but also other skills crucial in an era of globalization, like creative thinking. That resonates among South Koreans, whose economy has slowed after decades of high growth and who believe they are increasingly being squeezed between the larger economies of Japan and China.

It could take years to see how well this wave of children will fare back in South Korea, especially since they are now going overseas at the elementary level. But earlier this decade, when the wild geese children tended to be high school students, many succeeded in plying their improved English scores to get into colleges in the United States or other English-speaking countries, education experts said. For others, their years overseas was a roundabout way to get into top South Korean colleges, like Yonsei University in Seoul, which increasingly offer courses or entire programs in English.

For New Zealand’s public schools, which charge foreign students annual tuition of $8,700, South Koreans provide an important source of revenue. The economic benefits have helped offset resentment toward an Asian influx that has remade many schools in Auckland, the country’s largest city, lending an Asian character to the business district and raising home prices in the wealthier suburbs.

At Remuera Primary, Ms. Kim said she believed that English fluency would increase her sons’ chances of gaining admission to selective secondary schools in South Korea and ultimately to a leading university in Seoul. Her husband, Park Il-ryang, 43, graduated from a little-known Korean university, and he said that the resulting lack of connections had hampered his own career.

Before coming here, the parents had sent one son, Jun-sung, now 10, to evening cram schools and their other son, Jun-woo, now 8, to an English preschool. Parents in their apartment building talked incessantly about their children’s education.

Even so, the sons were not making sufficient progress in English, the parents said. They hired a private English tutor to supplement the supplementary cram schools. “We didn’t think the cram schools were doing any good, but we were too insecure to stop sending them, because the other parents were sending their children,” Ms. Kim said.

At their house recently, the sons peeked through the living-room blinds to see whether their neighbor, Charles Price, was free to play. In no time, the boys were coming and going, barefoot, between the houses, carrying “Bionicle” action figures.

The parents were pleased that their sons had integrated well into the neighborhood and school, and were now even speaking English to each other. But Ms. Kim was worried that her younger son was making shockingly simple mistakes in his spoken Korean and might not form a solid “Korean identity.”

Striking the right balance would be critical to the brothers’ re-entry into South Korea, with its fierce competition to get into the best schools.

South Korean women’s rising social status and growing economic power have fueled the wild geese migration, according to education experts like Oh Ook-whan, a professor at Ehwa Womans University who has studied the separated families. Conservatives have criticized the wild geese mothers for being obsessed about their children’s education at the risk of destroying their marriages. The women’s real intention, they say, is to get as far away as possible from their mothers-in-law.

The mothers say they are the modern-day successors to one of the most famous mothers in East Asia: the mother of Mencius, the fourth-century Chinese Confucian philosopher. In a story known in South Korea, as well as China and Japan, Mencius’s mother moved to three neighborhoods before finding the environment most favorable to her son’s education.

“I don’t know why Mencius’s mother is so revered and why we wild geese mothers are so criticized,” said Chang Soo-jin, 37, who moved here with her two children nearly two years ago. “Our coming out here is exactly the same as what she did.”

Here, the English skills of her 6-year-old daughter, Amy, have improved so much that she now has the reading abilities of an 8-year-old, said her teacher at Sunderland, a small private school where all 16 foreign students come from South Korea.

Yet Amy’s father, Kevin Park, 41, was not totally convinced that the benefits had been worth splitting up the family. He had reluctantly agreed with his wife’s decision to come here with the children and then extend their stay, twice.

After his family left Seoul, Mr. Park, an engineer, moved into what South Koreans call an “officetel,” a building with small units that can be used as apartments or offices. Hearing about wild geese fathers becoming dissolute living by themselves, he stopped drinking at home.

“I’m alone, I miss my family,” Mr. Park said grimly in an interview in Seoul. “Families should live together.”

Living apart for years strains marriages and undermines the role of a father, traditionally the center of the family in South Korea’s Confucian culture, education experts and psychologists said. Some spouses have affairs; some marriages end in divorce.

“Even if there are problems, some couples choose to ignore them for the sake of their children’s education,” said Choi Yang-suk, a psychologist at Yonsei who has studied wild geese families in the United States and Canada.

Here, Park Jeong-won, 40, and her husband, Kim Yoon-seok, 45, an ophthalmologist who was here on a visit, said their marriage had grown stronger despite living apart for four and a half years. Every reunion, they said, was like a honeymoon.

But while Ms. Park said she talked to her husband a couple of hours daily by phone, she said her son and daughter never asked to talk to their father. He, in turn, never asked to talk to his children, the couple said.

“We may be a strange family,” Ms. Park said.

Dr. Kim said his own father had always been too busy with work to spend much time with the family, and on weekends woke up at 4 a.m. to play golf.

“Maybe that’s why, now that I’m a father, I have a similar relationship with my son,” he said.

Asked whether she missed her father, Ellin, 11, said: “I don’t miss him that much. I see him every year.”

“Do you think that’s enough?” her mother asked, a little surprised.

Ellin corrected herself and said she saw him twice a year.