Somalia's Crisis

The world situation seems quite uncanny these days. Present day diplomats could be rightly compared to Roman emperor Nero who could not give up his penchant for music while the Rome was burning. Our generation has encountered horrendous rule of Taliban, exodus of people from Dili (East Timor), and plethora of other happenings to pique us.
On this background, we should be unfazed by another distressing and uncanny replay of Afganistan in Taliban days (now we are used to this). Can you guess about what I am talking? Yea it is Somalia. Created in 1960, the country is in downright political imbroglio. Islam is the principle religion with a smacking of christianity.
In June 2005, a berserk group led by Islamic Courts Unoin romped to victory when it siezed Somalia's capital Mogadishu. The secular warlords, who toed the White House line, failed to fend off the Islamists. The country is in a bedlam. What's worse is that Islamic Courts Union is an Islamic militia which rests under the sanctuary of al-Qaeda. This has raised immediate fears that Qaeda honcho- Bin Laden would establish new macabre stnadards using the Somalian resources. Somalians will have to pay alligiance to Laden when their government endorses his actions. May Lord (read US) save Somalians.

link between Decentalisation and terrorism

There are straddlingly divergent views between economists and politicians when it comes to the question of decentralisation in the wake of terrorist attacks. While the later prefers a centrally united approach to fight terrorism, the economists prefer decentralisation. Mr. Bruno. S .Frey (Economics Professor, University of Zurich), for obvious reasons, prefers decentralization.
When the central government rules the roost of the entire nation, it becomes an ideal target for the berserk terrorists. A single terrorist attack at the nerve-centre can cause political imbroglio and leave the economy treading waters.
A market based economy is an extreme form of decentralisation of decision making and implementation. Even if a section of the system is obliterated, the situation, though deplorable, is not perilous. Other similar organisations can fill the departed member's space. The economy as a whole is not maimed. The resiliance of such economy is illustrated by 9/11. The decentralized US was hardly affected by the attack.
Political decentralization is achieved in 2 forms: One, the separation of power between executive, legislature and judiciary. Two, Federalism i.e division of power among various levels. India has gone a step ahead (in federalism) by providing decision making power to villages.
Indian history
During the pre- British period the population was quite scattered and villages were situated at greater distances. These conditions prodded political decentralisation in India. Consequently, the villages acted as a basic political unit in which the democratic tendencies of the rural community were expressed in the form of village panchayats or assembly.
Decentralisation prevented the system from being jilted in the wake of a foreign invasion. The system could even brazen out the recalciterant attitude of certain Maharajas.
article still not complete.

Ever Heard Of Inflation Embedded In The Economy. Dodge This

Back in 1970s, the US downrightly experienced embedded inflation in the name of Wage Price Spiral (also called Wage price inflation). It all spreaded insidiously. The workers, unaware of debilitating consequences, invariably demanded big rases, both to catch up with past inflation and to offset expected future inflation. This rapacious attitude forced the companies to increase the prices of goods to keep up with profits. They also increased prices to catch up with past inflation and to offset future inflation.
The result of this leapfrogging was that inflation became a self sustaining process. The situation was grim, creating an apprehention of another great depression. How was the conundrum resolved?
It was resolved by raising the interest rates by the Fed in early 1980s. The consequences were more deplorable than 1970s. With increase in lending rates the US was at the perils of facing another slump like the great depression. The sceptre still worried the Fed. The US economy was treading water.
Wages are a major source of inflation only if workers consistently recieve raises that substantially exceed productivity growth. So, to contain inflation wages are kept low.

do u know more about it. Please mail me or leave comments.

Egotists

"In the distemper known to physicians as Chorea, the patient turns around, and continues to spin slowly on one spot. Egotism is metaphysical veriloid of this malady. The man runs around a ring formed by his own talent, falls into an admiration of it, and looses relation to the world."
Emerson

IMF's steps to damnation

Gregory Palast gives a beautiful account of IMF's strategy.
(Visit: http://pilger.carlton.com/globalisation/articles)

Joseph Stiglitz, ex-chief economist world bank, says that the Bank's meeting concludes with a meeting with a begging finance minister. After analysing the country's economy every country is handed over the same 4 point strategy viz privatisation, capital market liberalisation, market-based pricing, free trade.

Did any nation avoid this fate? Yes, said Stiglitz, Botswana. Their trick? 'They told the IMF to go packing.' 'It's a little like the Middle Ages,' says Stiglitz, 'When the patient died they would say well, we stopped the bloodletting too soon, he still had a little blood in him.'

for more on Botswana Vs IMF visit
http://www.theglobalist.com/StoryId.aspx?StoryId=2507

India an accomplice

With India supporting every action of the US, we are increasingly becoming an accomplice to the West sponcered terrorism. For more on west's sponcership please visit: http://pilger.carlton.com/globalisation/articles/58880
John Pilger talks about the silence of Univesities on these issues. Uttering on these matters is no less complicit as it used to be in Nazi government.
Dodge this : Henry Kissinger sent arms to Indonesia to help General Suharto in 1960's. The US and British governments sponcered genocide in East Timor. All this was Airbrushed by those whose job was to keep the records straight. The post war studies were conducted with the aid of foundations like Ford, Rockeller etc. They did this very efficiently and cleanly. Saddam Hussain and Milosevic were charged woth war crimes but Suharto was nwver demonised.

hummmmmmmmmmm....

Today I found out the common reason for growth of China and the US despite injudicious exploitation of resources. They both have huge investments in reproducible and human capital.

NOW,what is reproducible capital?
It is the wealth (in money or property form), owned or accumulated by an individual, a firm etc. which is used in production of more wealth. exampli gratia: physical infrastructure.

Stanford Conference

A conference was held at Stanford unversity on challanges of Economic Policy Reforms in Asia on June7, 2006. 20 scholars who participated in this conference discussed causes for low productivity in India as compared to China.

Total Factor Productivity in India is still abysmally lower than Chinaprimarily because of two reasons. One, that there exist barriers to technology diffusion in India. Two, there is misallocation of resources. Misallocation is because capital and labour are inefficiently allocated.

What India requires in this milieu is flexile labour policies and prvisions for quick entry and exit of firms.This will result in diffusion of optimal technology in larger geographical area.

New question in Economics

Did you think that economics is all about money? Well you need a new insight.
Economists like Edward Glaeser and Garry Becker unleashed new chalanges before Economists at Chicago price theory conference in Aprl 2006. These include teerorism, sustainable development, democracy, religion, race etc.
for more please visit: http://www.chicagogsb.edu/news/2006-04-11_pricetheory/04-BiggestQuestions.aspx

Effect of oil prices on global economy

High oil prices result in inflation, increased input cost, reduced non oil demand and lower investment in net oil exporting countries. All this results in fall in revenue and increased budget deficit. With increase in inflation the interest rates increase because lenders demand high interest to compensate decrease in purchasing power.

Oil price increase also affects position of balance of trade between counteries and exchange rates. Net-oil importing countries experience deteriorating balance of payments and downward pressure on currency. As a result imports become more expensive. Although Governments cannot eleminate these effects it can minimise it with proper monetary measures.

Philosophy

Emerson is absolutely right when he says that our science is only nomenclature and nothing else. It does not elevate us to new moral and spiritual standards. Dodge this:

"The boy had juster views when he gazed at the shells on the beach, or the flowrs in the meadow, unable to call them by their names than the man in pride of his nomenclature."

"We should go to the ornithologist with a new feeling, if he could teach us what the social birds say, when they sit in autumn council, talking togeather in trees."

Oil despair

Oil is a major source of energy driving the world . When it's available at low prices, the outlook for growth is optimistic. It's prices have jumped from $10 a barrel in 1998 toover $70 recently. This stark increase in prices cann't be attributed to a single factor. The death of the King Fahd of Saudi Arabia on August 3 lit a conflagration in world crude oil prices, which crossed $60 a barrel. In August, 2005 hurricane Katerina crippled the supply of oil to the USA from off-shore rigs in Gulf of Maxico. High oil prices have also resulted in high levels of unemployment and ever increasing budget deficit problems. We all know that price hike in oil inturn increase prices of all goods and thus mounting pressure on consumers through inflation. Developing countries are facing financial turmoil wrought by higher oil imports. According to IEA data, India spent $15 billion (3% of GDP approx.) on oil imports in 2003. This is 16% higher than 2001 oil-bill. While the world on an average will looose .5% to 1% GDP for $10 per barrel increase in oil prices, Sub-Saharan Africa would loose 3%. This will keep economic prosperity of oil importing countries- especially the least developing countries at bay.

Most of the known and exploited oil reserves are in one part of the world, i.e. West Asia (or the Middle East). Besides this the other major petroleum exporting countries are Russia, Nigeria, Indonesia and Venezuela. These countries have experienced politically instable in the recent past and has led to the oil traders demanding a premium. The main reason, however, for the oil price hike is surge in global oil consumption. Most of this increase has come from superfluous consumption in China and the USA. Although China's oil demand grew by almost 16% last year, the consumption in the United States is the biggest factor for this growth in the global oil demand. The US, with just 5% of the world population and consuption of one quarter of the global produce, is a major reason for the northward movement of oil prices. Speculation by some oil experts, who talk about oil prices touching a high of $100, is no less a reason for recent spurt. It is becoming to them who have invested in oil business, and these are the people who create unnecessary speculation. Fund investors (Like pention funds, provident funds)have also made a beeline and have poured in a lot of money into securitised investments in oil. The fact that OPEC has reiterated time and again that it will not allow prices to fall has helped these speculators.

There are umpteen reasons why oil traders feel that oil supplies might be reduced. One of the most important is growing turbulence in the Middle East. The war in Iraq, Iran's nuclear program, and internal instability in Saudi Arabia could all lead to a dramatic fall in the supply of oil (thanks to Mr. Bush and party). The situation outside the Middle East is not festal, the strikes and political problems in Venezuela and potential instability in West Africa are a cause of concern.