Pirates

I talk about pirates (click on pirates for a very cool map) in my intro course in connection with the public goods hegemons provide--seas safe for commerce.

NPR had a nice piece on the rising incidence of such incidents. The shocker: "this is really the best thing Somalis have going for them economically. Piracy and ransom this year will exceed more than $50 million — it's Somalia's largest income-earner."

Blaming the Victims?

Help us, pleeeeez. While clearly we wouldn't be here without the financial crisis, the fact that we are here offers an opportunity. Naomi Klein calls this the shock doctrine: use a crisis to force change.

"The executives said the need for help stemmed from the current financial turmoil, and not from poor management."

Chris Dodd said "the executives’ discomfort for coming to Congress to ask for money was “only exceeded by the fact that they are seeking treatment for wounds that are to a large extent self-inflicted. No one can say they didn’t see this coming. These companies have been struggling for years. I support action as a way to minimize the possibility of a destabilizing event in the economy.”

Dodd is, to some extent, blaming the victim. The Execs are, to some extent, shirking responsibility.

What say you? It's your money. To help think about the impact of saying no, here's a good discussion of the jobs linked to the auto industry (thanks Elizabeth).

And by the way, don't expect the Volt to save GM's hide.

G20 Results

Read summaries here, here here, here or here, ou ici.
Read the communique here.

What do Summiters Eat?

The official menu [at Friday night's pre-summit meal] included fruitwood-smoked quail, thyme-roasted rack of lamb and baked Vermont brie with walnut crostini, along with three wines.

Comments reflect public outrage: "The insensitivity of the Bush White House, even in its last days, never ceases to amaze me. ..According to news reports last night, they serve a wine costing about $300 a bottle? Now, I'm all in favor of wine with dinner, it's a healthy, civilized drink -- but $300 a bottle? There are a wide range of perfectly acceptable wines in the $15-$25 range. But how typical, at a time when many Americans are scaling back, when there are many who go to bed hungry each night, both here and abroad, the Bush Administration spends $300 a bottle on wine."

Right, like world leaders will drink $15 wine...and are the Dems really moins rafinée?

Two quick reads...

Gordon Brown calls on governments to resist protectionism--hear that Nancy, Harry, and Barry?
The Economist provides a very nice overview of issues at play in the weekend summit. I think they discuss the issues in reverse order of importance, but oh well...

Problems, Proposals, and Positions

Lots of posts this weekend on the G20 Summit, the timing of which dovetails nicely with current focus of my IPE class. Here is some background reading.

The Problem at Hand and some proposed solutions. (This is an ebook; I don't expect you to read it all).

Position Taking
Concise overview of EU position.
But then there is the Gordon Brown complication.
The so-called BRIC countries: Brazil, Russia, India and China.
The United States.
And of course the president-elect Obama complication.

Commentaries
Why we should aim high (Mallaby on why we need a bigger IMF).
Why we should have low expectations.

...and this is my other brother Darryl

The international community urgently needs an international institution to coordinate the naming of international bodies. The task is urgent because effective international cooperation depends in part upon the names we give to international bodies. Governments have proven that they are unable to efficiently name these bodies on their own.

The G20 Summit, scheduled for Washington, DC this weekend, illustrates the nature of the problem. Which G20 is summitting? The G20 that coordinates positions of developing country agriculture exporters and acts as a negotiating block in the WTO? Nope, not that one. The summitting G20 is the one that "promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability." Left to themselves, therefore, governments have assigned the same name to two international bodies with different memberships and completely different purposes.

A name's purpose is to differentiate. This is why the old (Bob) Newhart Show always got laughs from the line, "Hi, I'm Larry. This is my brother Darryl, and this is my other brother Darryl. It's also why we laugh upon learning that George Foreman has named all five of his sons George.

Our laughter arises from the recognition that the failure to pick names that differentiate creates confusion. Consider the confusion associated with calling a G20 Summit. Which governments should attend? Do Brazil and China--members of both--send their trade or finance ministers? What agenda items should these officials prepare to discuss? Where should they go? The potential for wasteful travel (and unecessary greenhouse gas emissions) and confused and unproductive meetings is apparent. This is inefficient--very high transactions costs. This is no way to run the world.

A new international organization could eliminate such confusion (reduce transactions costs) by ensuring that each international body has a unique name. In addition, this new IO might encourage greater creativity in names. International civil servants could create alternatives to the popular "G-followed by a number" (G4; G5, G7 G8; G20, G20, G77, etc) or equally popular "Roman-numbers-appended-to-existing-names" (e.g., Bretton Woods II). If the civil servants lacked the requisite creativity, they could just keep a ledger to ensure that in a world of infinite "G-followed by a number" possibilities, each group is assigned a unique "G-followed by a number" name.

The need for this initiative grows more pressing each year as governments expand the range of issues subject to international cooperation. Without action, current confusion will grow exponentially. Eventually, government officials will routinely show up at the wrong place prepared to discuss the wrong issues. We must act now.

How Many Jobs at Risk?

You'll likely hear the following a lot over the next few weeks (months?).
A failure at GM, which represents about half of the U.S. auto industry, could eliminate 2.5 million jobs and $125 billion in personal income in the first year.

• "Michigan Gov. Jennifer Granholm said ...that one in 10 American jobs are supported by the auto industry and that if it collapsed, ""there would be a ripple effect throughout the nation."
• Majority Leader Harry Reid, D-Nev., said "...he would try to pass emergency legislation to help save millions of jobs supported by the auto industry."
  

The estimated job losses resulting from a GM bankruptcy filing (which seems increasingly likely) come from a study by the Center for Automotive Research. CAR's estimated job losses rest on the following assumptions:

Production by the big three in year 1 following bankruptcy: 0
Production by all foreign producers in year 1 of bankruptcy: 0

That's right; these estimated job losses rest on the assumption that bankruptcy by any of the big three causes the complete cessation of auto production by all producers, American and foreign brands, in the first year of filing. The extent to which that assumption is reasonable thus determines the extent to which the forecast job losses are reasonable.

Here's the full quote from the CAR report:
"We assume that domestic production by international automakers in the United States would be seriously affected by a major contraction of the Detroit Three automakers for at least a period of one year due to the high likelihood of many U.S. supplier company insolvencies. In fact, we assume in our 100 percent contraction scenario that not only does domestic production by the Detroit companies fall to zero in the first year, but that domestic production (in the U.S.) by the international producers also falls to zero" (page 3).

What's Good for GM is Good for America, Right?

Update: My estimates of wages are not far off, but I just found more complete estimates here.

239,341: The number of people employed by the "big three" auto companies
$25 billion: the amount of money US taxpayers have loaned to the big three.
$x billion: The amount of additional money Nancy Pelosi, Harry Reid, and PE Obama would like to loan to the big three.
$104,453 + 4178x: The amount of government lending per current big three job.
$29,376: Annual salary for entry level worker under 2007 UAW contract (excluding benefits and bonuses).
$58,500: Annual salary for experienced worker under 2007 UAW contract.

So, if my math is correct, what we propose to offer as a bridge loan could pay all big three workers their entire wage for two full years. And then what?

One last number:
113,000: The number of people employed in the US by foreign auto companies. Do they get a handout too?

Quid Pro Quo

"The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President Bush ... to support immediate emergency aid. Mr. Bush indicated ... that he might support some aid and a broader economic stimulus package if Mr. Obama and Congressional Democrats dropped their opposition to a free-trade agreement with Colombia."