Germany Looks for a Way Back

The Wall Street Journal reports that Germany is looking to revive its economy through export-led growth. The accompanying chart gives you an idea why: traditionally, the German economy has been dominated by export activity, which accounted for almost half of the country's GDP in 2008. But, as the article points out, it will be a struggle:

It's doubtful whether German exports will grow as fast after this crisis as they did in the bubble years before it, because the U.S. and parts of Europe will save more and consume less for a while. And employment in Germany's main export sectors -- machinery, cars and chemicals -- is in long-term decline as companies cut costs and steadily shift production to cheaper countries to stay competitive.

But the alternatives are not pretty, either. As the article explains:

To some extent, Germany is trying to promote new sectors. Subsidies have turned the country into a leader in solar energy.

But Germany is second last in the number of business start-ups among 18 advanced economies surveyed by the Global Entrepreneurship Monitor, an international research project. Only Belgians found fewer new businesses than Germans, the survey finds.

A recent study by consultants McKinsey & Co. says Germany could double its average economic growth to 3% a year if it got serious about new industries, from research-led sectors to services for the growing number of elderly consumers. Without such an effort, German living standards will decline relative to other advanced economies, the report warns.

But genuinely diversifying Germany's economy would require an overhaul of the country's universities, banking and capital markets, bureaucracy, taxes and welfare state, labor market and immigration laws, say economists.

And you think we've got issues.

Technorati Tags: economy, innovation

Local food, local jobs?

Workforce Developments has a feature on the Windy City Harvest program which trains Chicago residents in the basics of urban gardening and business operations to foster new supplies of local produce and a new crop of inner city entrepreneurs. The video below provides an overview of the program.



Technorati Tags: innovation, talent

Two Cautionary Tales about How to Respond to the Economy

Unfortunately, they lead in opposite directions. First, Presidential Economic Adviser Christine Romer writes in the Economist:

The urge to declare victory and get back to normal policy after an economic crisis is strong. That urge needs to be resisted until the economy is again approaching full employment. Financial crises, in particular, tend to leave scars that make financial institutions, households and firms behave differently. If the government withdraws support too early, a return to economic decline or even panic could follow. In this regard, not only should we not prematurely stop Recovery Act spending, we need to plan carefully for its expiration.

In the Financial Times, one-time genius Alan Greenspan has a different perspective:

The US is faced with the choice of either paring back its budget deficits and monetary base as soon as the current risks of deflation dissipate, or setting the stage for a potential upsurge in inflation. Even absent the inflation threat, there is another potential danger inherent in current US fiscal policy: a major increase in the funding of the US economy through public sector debt. Such a course for fiscal policy is a recipe for the political allocation of capital and an undermining of the process of “creative destruction” – the private sector market competition that is essential to rising standards of living.

What to do? Listen to Romer, who has no track record on these matters, or go with Mr. Greenspan and his less than stellar performance? Beats me.

Technorati Tags: economy

China continues to move into the Aviation Industry

Deutsche Welle reports that European aviation firm Airbus has received its first plane manufactured in China. Airbus has expanded into China to supply that country's growing aviation market.

The Tianjin plant, which opened in September 2008, is modelled after a state-of-the-art Airbus factory in Hamburg, Germany. The plant is a joint venture between Airbus and a Chinese aviation consortium and costs some 10 billion yuan ($1.47 billion).

China has been an Airbus customer since 1985. Since then, Chinese orders have exceeded 700 aircraft and will be supplemented by a further 10 models, scheduled to leave the Tianjin plant by the end of the year. Come 2011, the factory is expected to be turning out 4 aircraft per month.

The Chinese aircraft market is the second largest in the world and already accounts for 15 percent of the European manufacturer's total sales. Chinese carriers are expected to purchase as many as 3,400 new aircraft in the coming two decades, and Airbus hopes to cash in on this by capturing half the Chinese market by 2012.

The article goes on to point out that Airbus should not be too optimistic about its position in the Chinese market. It is clear that Chinese firms are accepting contracts and investment from Airbus (and Boeing) as means to create the capacity to become a major aviation manufacturer in its own right.

Technorati Tags: innovation

Chart of the Day: Consensus Forecasts for 2010

Over at the Financial Times, Martin Wolf has posted a chart showing how economists' consensus forecasts for 2010 have changed in the first six months of 2009.

The consensus is the the US will have fairly anemic growth in 2010, though the outlook has improved somewhat in the last few months. Over that same time period, the consensus has begun looking markedly better for Japan and the UK, but the forecasts are still predicting annual growth around 1 to 1.5 percent for those economies.

The initial forecasts for the Eurozone were for growth rates in the 0.5 percent range, and they've actually gotten more pessimistic in the last few months.

Where are those green shoots, anyway?

US Housing Crisis: No End in Sight

From the Philadelphia Inquirer via Planetizen:

At a housing conference, HUD officials indicated that the depth of the mortgage crisis has all but overwhelmed federal efforts to address it:

The president's initiative to keep people in their homes through mortgage refinancing and modification has hit some early snags, administration officials said in conference sessions Thursday.

Since details were announced March 4, 16 mortgage servicers have signed up to participate in the voluntary program, representing what officials variously described as 76 percent to 81 percent of the total mortgage market.

Deputy Treasury Secretary Seth Wheeler said: "The program is not working up to its potential yet" because those servicers still are not prepared for their gigantic task.

Technorati Tags: economy

14 States Have Double-digit unemployment

The Economic Policy Institute has compiled the latest unemployment rates for the 50 states. 14 are now in double digits. Naturally, Michigan leads with a 14.1% rate. Somewhat surprisingly, Oregon is second at 12.4%, with Rhode Island and South Carolina tied for third at 12.1%. Also somewhat of a surprise: the two states with the lowest unemployment rates are North Dakota and Nebraska (although this may be related to the extensive outmigration experienced by both of these states, leaving their respective labor forces dramatically diminished). The full table is found here.

Remember, unemployment is a lagging indicator, so even if the economy begins to improve this year, expect these rates to continue to climb well into next year.

Technorati Tags: economy

Kioskiosk: An Incubator for Start Up Retailers

Springwise.com has a feature on "pop-up" spaces that malls are providing for start-up retailers:

We recently covered a program at Oakland Mall that offers startups low-cost and short-term leasing to help them to set up shop. This summer, KiosKiosk will bring a similar idea to the streets of London by offering a small kiosk space to startups selling ceramics, art, fashion and other creative products. At no cost to its temporary tenants.

Creative organisations, businesses or individuals ready to trade simply send in their details and explain why they're a good candidate to fill the space. KiosKiosk's founders note that, although the number of people enrolling in design courses in the UK increases each year, it's difficult for creative businesses to find affordable retail space in locations with enough foot traffic to attract potential buyers. The initiative is backed by the London Sustainable Development Commission, working to promote creative independent shops instead of more dime-a-dozen souvenir stalls.

Technorati Tags: innovation

Chart of the Week: Globalization. . . .Good

Has increased globablization led to massive outsourcing of US jobs? According to Richard Florida, Princeton economist Alan Blinder has estimated that 22 to 29 percent of all US jobs (including sophisticated technology jobs) were potential targets for off-shoring. What's actually happened? Here's what Florida reports:

International economist Richard Baldwin takes a close look at the actual figures and finds a very different trend. Examining IMF data on the dollar volume of trade in services originally compiled by economists, Mary Amiti and Shang-Jin Wei, Baldwin plots the dollar volume of out-sourced U.S. service work against the dollar-volume of service work that has been attracted to or in-sourced by the United States. As the chart shows, the U.S. is a net in-sourcer of service jobs, with the U.S. in-sourcing gap actually increasing over time.

Baldwin's post is here.

Technorati Tags: economy, innovation

Another Article on "Right-Sizing" Old Industrial Cities

This time the London Telegraph reports on efforts of cities like Flint Michigan to raze older neighborhoods rather than try to revive them.

The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint.

Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.

Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes.

It does make one think that, from an historical perspective, beyond a few major centers, industrialization didn't work as a growth strategy.  Throughout the Northeast and Midwest, nonmetropolitan US is littered with small cities that are empty industrial hulks, filled with extensive decay and few prospects. 

Technorati Tags: planning

India looks to Japan. . . & away from US

For most of the past decade, India has focused on the US as a key target for outsourcing opportunities.  According to the Times of India, the global slowdown has changed all that: 

Japan will drive the next phase of growth for the Indian offshoring industry, says a report by Zinnov Management Consulting. The government and IT industry body Nasscom are developing trade relations with the country. "Japan was a closed economy to us," says Som Mittal, president of Nasscom. "But with the recent economic conditions they are looking to outsource work, in order to cut costs and remain competitive. They are already partnering with China but are facing major intellectual property issues there."

Japanese companies could also potentially offshore a lot of R&D to India. Japan is home to 191 of the top 1,000 global R&D spenders of which only 21 currently have an international R&D presence.

And the extent to which India can further build its R&D capacity through these links, it becomes an even greater long-term threat to the US and its leadership position in worldwide R&D.  The full story is here.

Technorati Tags: economy, innovation, talent

The Future of Computing

The New York Times has an interesting summary of how increases in computing power and decreases in costs are changing the geography of high technology:

In his book “The Big Switch,” Nicholas Carr draws an analogy between the rise of mega-data centers and the Industrial Revolution. Just as nascent industries, once powered by water wheels, were by the 20th century able to “run their machines with electric current generated in distant power plants,” advances in technology and transmission speeds are permitting computing to function like a utility, a distant but ever-accessible cloud of services.

This has sweeping implications for business and society. Instead of buying software and hiring I.T. employees, companies can outsource things like customer relationship management, or C.R.M., the database software that companies use to track client interactions, to an Internet company like salesforce.com, which sells subscriptions, or seats, to its services. “Customers who have two seats on salesforce.com, like a mom-and-pop flower shop, have access to the same application as a customer that has 65,000 seats, like Starbucks or Dell,” Adam Gross, vice president of platform marketing with salesforce.com, told me at the company’s offices in San Francisco. By contrast, just a few years ago, he went on, “if you were to attack a really large problem, like delivering a C.R.M. application to 50,000 companies, or serving every single song ever, it really sort of felt outside your domain unless you were one of the largest companies in the world. There are these architectures now available for anybody to really attack these massive-scale kinds of problems.”

The full story is here.

Technorati Tags: innovation

A Song for A Friday

World Bank Downgrades an Already Gloomy Forecast

From the Wall Street Journal:

The World Bank publicly released an update on Thursday. . . saying it expected the global economy to contract by "close to 3%." That is sharply worse than the World Bank's March estimate of a 1.75% contraction. Mr. Zoellick said that while there are signs of an easing of the recession in wealthy countries, developing nations are suffering from a drop in exports, remittances and foreign investment.

Yikes! On the bright(?) side, the forecast indicates that the developed economies should be spared the worst of this and they expect the 2010 recovery to be more robust that previously predicted. The downside: it is the developing economies that are really getting clobbered. Not good for the citizens therein, nor does it bode well for global stability.

Technorati Tags: economy

Life in a Banana Republic

In case you ever wanted to know what life is like in a banana republic, I am writing from a place where the upper house of the legislature just changed hands from one party to another. The party that lost control was a feckless mess. The party taking control recruited two members from the majority party to effect the shift. One of the recruits was recently indicted for slitting his female companion's throat with a broken glass. The other recruit (who in the deal was named to be first in line to succeed the chief executive) is under investigation for corruption charges.

To top it all off, the coup itself was orchestrated by a billionaire who resented the fact that the former majority party raised taxes on wealthy people like himself. In what tin-horn backwater can you find a government run like this? You'd be surprised (or maybe not).

The World's 50 Most Innovative Companies

Based upon survey work by the Boston Consulting Group, BusinessWeek has its list for this year right here.  Just like last year, Apple, Google and Toyota are in the first three slots. (On the whole, North America does very well, by the way.)

Technorati Tags: innovation

Another step toward an Asian Economic Union

The Far Eastern Economic Review reports that the finance ministers of the Asean +3 group have agreed on the governance structure for the Chiang Mai Initiative (CMI). Growing out of the Asian financial crisis of the 90s, CMI is a financial stablization fund for Asia. FEER's report indicates that this is a major step towards an Asian Monetary Fund.

It is particularly noteworthy that the region’s two dominant powers, China and Japan, which have a notoriously difficult relationship, have come together under the umbrella of the Asean Plus Three and that they have agreed on a cooperative framework that goes far beyond previous initiatives like the Economic Review and Policy Dialogue that the Asean Plus Three established in April 1999. With 32% each, China and Japan both contribute identical shares to the reserve pool.

The full article is here.

Technorati Tags: economy

Innovative Propsosals for Improving American Education

The public debate over improving American education typically falls into two categories of cliches. One side is convinced that school choice is a virtual panacea, the other advocates merit pay for teachers. In the New York Times, former NYC schools chancellor Harold Levy actually offers some original thinking on the issue. To begin with, he focuses on improving education from pre-K to graduate school, making a persuasive argument that unless the entire system is improved, piecemeal reforms will amount to little. What is he proposing? Here is a sample:

Raise the age of compulsory education. Twenty-six states require children to attend school until age 16, the rest until 17 or 18, but we should ensure that all children stay in school until age 19. Simply completing high school no longer provides students with an education sufficient for them to compete in the 21st-century economy. So every child should receive a year of post-secondary education. . . .

Advertise creatively and aggressively to encourage college enrollment. The University of Phoenix, a private, for-profit institution, spent $278 million on advertising, most of it online, in 2007. It was one of the principal sponsors of Super Bowl XLII, which was held at University of Phoenix Stadium (not bad for an institution that doesn’t even have a football team). The University of Phoenix’s enrollment has clearly benefited from its advertising budget: with more than 350,000 students, its enrollment is surpassed by only a few state universities. . . .

Unseal college accreditation reports so that the Department of Education can take over the business of ranking colleges and universities. Accreditation reports — rigorous evaluations, prepared by representatives of peer institutions — include everything students need to know when making decisions about schools, yet the specifics of most reports remain secret. . . .

Not every idea has equal merit, but all are worth considering. The full posting is here.

Technorati Tags: talent

Beatles Rockband: Another Great Moment in Western Civilization

As you may know, gaming company EA is releasing a new version of its video game "Rock Band," the Beatles version. The video is a promo for the game. I'll admit I really don't understand the appeal of this. The game seems to combine the artistic quality of of those old cheesy Beatles cartoons with the emotional experience one finds in a slots parlor.

Pong, anybody?

Is America's Innovativeness Exaggerated?

That's Michael Mandel's thesis in a recent BusinessWeek article:

If the reality of innovation was less than the perception, that helps explain why America's apparent boom was built on borrowing. The information technology revolution is worth cheering about, but it isn't sufficient by itself to sustain strong growth—especially since much of the actual production of tech gear shifted to Asia. With far fewer breakthrough products than expected, Americans had little new to sell to the rest of the world. Exports stagnated, stuck at around 11% of gross domestic product until 2006, while imports soared. That forced the U.S. to borrow trillions of dollars from overseas. The same surges of imports and borrowing also distorted economic statistics so that growth from 1998 to 2007, rather than averaging 2.7% per year, may have been closer to 2.3% per year.

The full article is here.

Technorati Tags: innovation

An Economic Turnaround in Sight?

That's what the Economist says. But the post-slump economy will be different:

The pain will eventually end. American business will regain its shine. Many firms will die, but the survivors will emerge leaner and stronger than before. The financial sector’s share of the economy will shrink, and stay shrunk for years to come. The importance of non-financial firms will accordingly rise, along with their ability to attract the best talent. . . .

In the next couple of years the businesses that thrive will be those that are miserly with costs, wary of debt, cautious with cashflow and obsessively attentive to what customers want. They will include plenty of names no one has yet heard of.

The magazine is running a profile of things to come. You can start reading here.

Technorati Tags: economy

US Jobless Rate Likely to Pass Europe's

This headline from the New York Times says it all.

“The current economic crisis,” wrote John Schmitt, Hye Jin Rho and Shawn Fremstad of the Center for Economic and Policy Research, a research organization in Washington, “has turned the case for the U.S. model almost entirely on its head.”

The usual take on our labor force is that we can't have European-style social benefits so that we can maintain labor force flexibility that will keep our unemployment rate low.

Hmmm. . .

The full article is here.

Atlanta's Community of the Future

Via Planetizen: The American Institute for Architects' This Week, reviews the latest showcase for sustainable design, the Atlanta suburb of Serenbe.

Master-planned by architect Phillip Tabb, AIA, who teaches architecture at Texas A&M University, Serenbe has a distinctive layout that achieves sustainable density while keeping nature in close proximity. The community contains about 125,000 acres, but only 20 percent of this land is to be developed as small hamlets (a total of four) that combine living and working. The scheme calls for a total of about 850 homes and several thousand residents.

Sounds like a familiar new old idea.

Technorati Tags: innovation, planning