Archive for January, 2010

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non-contributory age pensions in the Maldives

Sunday, January 24th, 2010

This is exciting news (to me at least)! Beginning next month (February 2010), all citizens resident in the Maldives, a small-island nation in South Asia, will be eligible from the age of 65 for monthly pensions of 2000 Rufiyaa. This is equivalent to 156 US dollars or 110 euros – 45% of the country’s low per capita GDP – so is a very generous entitlement.

The new President of Maldives Mohamed Nasheed (Anni) has stated that he make arrangements to provide a pension in the range of Rf 2000 to every Maldivian above 65 years of age.

“New govt to provide pension for elderly”, Maldives News Bulletin, 17-11-2008.

Details are provided on another page, which explains that a person can continue to work and still receive the pension, but the pension is tested against retirement income, so any retiree with access to a pension in excess of Rf 4000 a month will receive nothing from the new scheme. This is not a truly universal pension but – importantly – is not tested against earnings, or assets other than retirement pensions.

This is a lifetime pension benefit that will be paid to all Maldivian citizens who are resident in the Maldives and who are 65 years of age or older. The basic amount is paid monthly and is the same for everyone, except that the basic amount will be reduced by an amount equaling 50% of any other retirement pension income that you may receive (such as the Maldives Retirement Pension).

“New Maldives Pension System: Frequently Asked Questions”, 30 July 2009.

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Posted in Pensions, Universal Transfers | 1 Comment »

PhDs in the humanities

Saturday, January 23rd, 2010

[D]uring the three years that I searched for positions outside of academe, I found that humanities Ph.D.’s, without relevant experience or technical skills, generally compete at a moderate disadvantage against undergraduates, and at a serious disadvantage against people with professional degrees. ….

Just to be clear: There is work for humanities doctorates (though perhaps not as many as are currently being produced), but there are fewer and fewer real jobs because of conscious policy decisions by colleges and universities. As a result, the handful of real jobs that remain are being pursued by thousands of qualified people — so many that the minority of candidates who get tenure-track positions might as well be considered the winners of a lottery.

Thomas H. Benton, “Graduate School in the Humanities: Just Don’t Go”, The Chronicle of Higher Education, 30 January 2010.

Thomas H. Benton is the pen name of William Pannapacker, an associate professor of English at Hope College, in Holland, Michigan.

Thanks to A&L for the pointer.

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the savings glut and budget deficits

Friday, January 22nd, 2010

Columnist Samuel Brittan (1933-) disagrees with conventional wisdom that budget deficits are something always to be avoided. On the contrary, he argues, Western countries require deficit spending to offset the deflationary effects of a global savings glut.

[T]o most people’s surprise, Keynes’s [vision of] chronic savings surplus has come back thanks to China’s phenomenal savings rate. …. This was 49 pc of China’s own GDP and 28 pc of global savings (… at purchasing power parity). Germany also had a savings surplus, but Germany is now a much smaller part of the world economy.

The world was kept in balance by the US, which developed an abnormally low savings ratio, acting as a consumer of last resort in the company of other smaller economies …. The boost in US consumption was aided and abetted by the Federal Reserve’s low interest policy …. It was also enhanced by large budget deficits incurred by a supposedly strait-laced Republican Administration. ….

If Western countries begin slashing their deficits, as conventional opinion so loudly demands, what will supply the offset to Chinese savings? Most of the suggested answers are non-starters. It is no use lecturing the Chinese to consume more. Indeed the Chinese authorities are now reining back domestic demand for fear of inflation. It would be best to take Chinese policy as given and for the rest of us to adapt. ….

I can only reply to the masses of messages that the first priority of a new British Government should be to reduce the fiscal deficit: “I beg to differ.” As the Bank of England Governor, Mervyn King, has just reminded us, UK output, is some 10 pc below its previous trend. If the recent upturn in UK inflation turns out not to be a blip but a more lasting response to sterling devaluation, the appropriate reaction would be to edge up interest rates but let the Budget deficit run. The fact that this would be the opposite of the conventional wisdom only reinforces my belief that it would be right.

Samuel Brittan, “The Great Piggy Bank of China”, Financial Times, 22 January 2010.

Brittan’s newspaper columns and other writings are posted at www.samuelbrittan.co.uk . The site is well worth visiting. This is a writer who has become wiser with age. I hope he will be with us for many years to come.

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US health care reform

Thursday, January 21st, 2010

The current versions of health reform are the product of decades of debate between Republicans and Democrats. The bills are more conservative than Bill Clinton’s 1993 proposal. For that matter, they’re more conservative than Richard Nixon’s 1971 plan, which would have had the federal government provide insurance to people who didn’t get it through their job.

Today’s Congressional Republicans have made the strategically reasonable decision to describe President Obama’s health care plan, like almost every other part of his agenda, as radical and left wing. And the message seems to be at least partly working, based on polls and the Massachusetts surprise. But a smart political strategy isn’t the same thing as accurate policy analysis.

David Leonhardt, “Economic Scene: Centrist, and Yet Not Unified”, New York Times, 20 January 2010.

There is much more in this informative column. Elsewhere, another NY Times columnist confesses:

I’m pretty close to giving up on Mr. Obama, who seems determined to confirm every doubt I and others ever had about whether he was ready to fight for what his supporters believed in.

Paul Krugman, “He Wasn’t The One We’ve Been Waiting For”, The Conscience of a Liberal, 20 January 2010.

It is difficult to be optimistic regarding the prospect of the United States joining the rest of the developed world in providing some sort of universal health care to its citizens. Access to the emergency room of a hospital does not qualify as ‘health care’, despite former President GW Bush’s assertion to the contrary.

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Chile’s new President

Tuesday, January 19th, 2010

Wealthy businessman Sebastián Piñera narrowly defeated Eduardo Frei, candidate of the centre-left Concertación coalition, in last Sunday’s run-off election. A Financial Times editorialist acknowledges “Chile’s democracy has solidified”, but warns that the conservative Mr Piñera may not be the best choice for Chile’s economy.

Concertación can be proud of its economic record. Chile has enjoyed solid economic growth in all but two years since Pinochet’s ouster. ….

These will be hard acts for Mr Piñera to follow. … [H]e promises to create 1m jobs and to raise the growth rate to 6 per cent from 4 per cent over the last decade [but this] higher growth rate must not come at the expense of the poor. ….

Mr Piñera’s private interests … remain a source of concern. Unless he relinquishes control of his corporate empire and avoids giving business connections political influence, he may paradoxically be worse for Chile’s economy than the country’s pragmatic left.

“A change for Chile”, Financial Times, 19 January 2010.

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‘failed state’ as a failed concept

Monday, January 18th, 2010

One can only speculate about the political motives for inventing an incoherent concept like “state failure.” It gave Western states (most notably the US superpower) much more flexibility to intervene where they wanted to (for other reasons): you don’t have to respect state sovereignty if there is no state. After the end of the Cold War, there was less hesitation to intervene because of the disappearance of the threat of Soviet retaliation. “State failure” was even more useful as justification for the US to operate with a free hand internationally in the “War on Terror” after 9/11.

These political motives are perfectly understandable, but they don’t justify shoddy analysis using such an undefinable concept.

It’s time to declare “failed state” a “failed concept.”

William Easterly and Laura Freschi, “Top 5 reasons why ‘Failed state’ is a failed concept”, Aid Watch, 13 January 2010.

NYU economist William Easterly is co-editor (with Jessica Cohen) of What works in development: Thinking Big and Thinking Small (Brookings, 2009).

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Moscow’s stray dogs

Sunday, January 17th, 2010

When author Susanne Sternthal moved to Moscow last year with her family, she was surprised to see so many stray dogs. They live everywhere, much like homeless humans. Some 500 strays live in metro stations, and some have even learned to ride the trains. Sternthal describes their lives, drawing on the work of Andrei Poyarkov, a 56-year old specialist in wolves who began to study Moscow’s stray dogs 30 years ago.

He [biologist Andrei Poyarkov] quickly found that the strays were much easier to study than wolves. “To see a wild wolf is a real event,” he says. “You can see them, but not for very long and not at close range. But with stray dogs you can watch them for as long as you want and, for the most part, be quite near them.” According to Poyarkov, there are 30,000 to 35,000 stray dogs in Moscow, while the wolf population for the whole of Russia is about 50,000 to 60,000. Population density, he says, determines how frequently the animals come into contact with each other, which in turn affects their behaviour, psychology, stress levels, physiology and relationship to their environment.

“The second difference between stray dogs and wolves is that the dogs, on average, are much less aggressive and a good deal more tolerant of one another,” says Poyarkov. Wolves stay strictly within their own pack, even if they share a territory with another. A pack of dogs, however, can hold a dominant position over other packs and their leader will often “patrol” the other packs by moving in and out of them. His observations have led Poyarkov to conclude that this leader is not necessarily the strongest or most dominant dog, but the most intelligent – and is acknowledged as such. The pack depends on him for its survival.

Susanne Sternthal, “Moscow’s stray dogs”, Financial Times, 16 January 2010.

There is much more. I especially enjoyed the comments of Alexey Vereshchagin, a graduate student who works with Poyarkov. Vereshchagin explains that number of stray dogs does not exceed 35,000 because food is limited. The population is in Malthusian equilibrium, so if an abandoned pet survives, “it is only to replace an adult dog that died”. Only 3% of pet dogs dumped by owners on the streets of Moscow survive more than a few days.

The article is worth reading in its entirety, but access might be restricted. Susanne Sternthal is author of Gorbachev’s Reforms: De-Stalinization through Demilitarization (Praeger, 1997).

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health care spending in the OECD

Saturday, January 16th, 2010

From National Geographic, via Washington Post columnist Ezra Klein, comes an amazing graph of health care expenditure in 21 OECD countries.

On the left axis is per capita health spending, in US dollars. The right axis is life expectancy at birth, a crude measure of outcomes. Countries with universal systems of health care are shown in blue. Countries without  universal coverage are shown in red. (There are only two – Mexico and the US – in this sample.)

The average number of visits to a doctor are shown in the thickness of the lines on the graph. There is no apparent correlation between health spending and visits to doctors. Nor is there any apparent relation between spending on health care and life expectancy. If there were a positive relation, the lines in the graph would not cross. Many do, illustrating vividly that more spending on health care does not ‘buy’ greater life expectancy. Note, though, that thicker lines tend to have steeper slopes, indicating that visits to doctors might produce increased life expectancy.

There is a lot of information packed into this unique graph. It is a pity that it is not clearer. For a better view, consult the current issue of National Geographic.

6a00OECDhealth

Posted in Health Economics | 1 Comment »

Haiti

Thursday, January 14th, 2010

Even before Tuesday’s devastating earthquake, Haiti had a distressed economy.

It is one of the poorest countries in the Western hemisphere, with around 80 percent of the population living under the poverty line and 54 percent living in abject poverty, according to the CIA World Factbook. More than two-thirds of the labor force are believed to not have formal jobs, and just 62.1 percent of adults over age 15 are literate, according to the United Nations Human Development Report.

Catherine Rampell, “Haiti’s Economy”, Economix, 13 January 2010.

There is much more – and useful links – at this Economix post.

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Greece’s fixed exchange rate

Wednesday, January 13th, 2010

How long can Greece remain in the Euro-zone? Not more than two or three years, predicts Desmond Lachman. Moreover, the sooner this happens, the better! Greece’s inability to devalue its currency only produces pain. “Any attempt to bring the budget deficit down to the Maastricht target would only deepen the recession. Attempting to restore Greek competitiveness through wage cuts would lead to years of painful and politically unacceptable deflation.”

Having spent a career studying emerging market economies at the International Monetary Fund and on Wall Street, I have seen more than my share of supposedly immutable fixed exchange rate arrangements come unstuck. I have also observed at close quarters the rather well-defined and predictable stages through which countries go as their currency regimes unravel. This experience informs me that, much like Argentina a decade ago, Greece is approaching the final stages of its currency arrangement. ….

If there is anything that the Greek authorities might learn from Argentina, it is the folly of attempting to fight the inevitable. Not only does this saddle a country with a mountain of official debt that cannot be rescheduled; it also deepens and prolongs the recession from which any post-devaluation recovery might begin. Athens should leave the eurozone sooner rather than later. However, that is not the way that Greek tragedies play out.

Desmond Lachman, “Why Greece Will Have to Leave the Eurozone”, Financial Times, 12 January 2010.

Desmond Lachman is resident fellow at the American Enterprise Institute and adjunct professor at Georgetown University. He worked for the IMF from 1984 to 1996 and for Salomon Smith Barney from 1996 to 2003.

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