Week with “The Economist”
by Chandrakant Sampat and Niti Sampat-Patel
  
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This is what we found interesting from the current issue of the “The Economist” (September 15th-September 21st 2012)

 

The contents of this issue are interestingly linked to human behavior, weather it is in the field of politics, economics, finance or industry.  Today, short- term thinking drives human decisions. They ignore the pain that is necessary to achieve long-term benefits. Painful decisions are a must for the continued existence of civil society; otherwise such a society may cease to exist. Human beings have a capacity to foresee and imagine the future, and now is the time to act on what we see.

 

The column “Yes but…”  (47) states: “Article 79 of the 1979 constitution (Germany) thus says certain changes including anything that detracts the human dignity of democracy, are ‘ inadmissible’, even if they are willed by the parliament.” EMS (European Stability Mechanism) may give respite to the single euro but the question arises whether it can be an instrument to inject hard work and thrift which the ultimate solution to human well being.

 

“Waiting to rejoin” (49): “Catalonia’s demand for revenue rebate has become harder to ignore: this week the hundreds of thousands that rallied in Barcelona demanded independence. Mr. Rehn says ‘a country must ask for help before this is worked out.’

 

“Autumn renewal?” (51): The ultimate solution to the euro crisis is political and financial integration.  However, “there is an unholy alliance between those who refuse to share sovereignty and those who refuse to share risks.” The last paragraph of this article states, “By themselves transfers will not be large enough to end the crisis. Still done right, they could send a signal of political unity and help make reforms more acceptable.” Done wrong “the danger is that instead of fostering solidarity they could sharpen resentment and deepen the schism between debtors and creditors.”

 

Buttonwood:  ‘Voice in the wilderness’:  Notwithstanding what observations we have made in this write-up; Button wood states “a further problem is that investors overlook the fundamentals. Mr. Bogle distinguishes what he calls ‘investment returns’ from equities, which is the initial dividend yield plus earning growth.” It is hard to disagree with Mr. Bogle that “the system of retirement security is imperiled, heading for a serious train wreck.”

 

Free exchange: Hayek on the standing committee:

 

  1. “In the past year, the spirits of Keynes and Hayek have done battle for the minds of China’s policymakers. This month Andrew Baston of GK Dragonomics, a research consultancy in Beijing, argued that Hayek seems to be winning. China’s leadership is now keen to avoid the ‘Hayekian risk’ of wasted investment, he wrote, even if that increases the ‘Keynesian risk’ of inadequate demand and weak growth.” (68)

 

  1. “Moreover investment that adds little to a society’s stock of productive assets is not necessarily malinvestment. Michael Buchanan and Yin Zhang of Goldman Sachs say that some Chinese investment is seen as ‘quasi-consumption’”. (68)

 

  1. “Reclassifying this spending as consumption would increase China’s household consumption to 53% of GDP last year, compared with only 35% in the official statistics.” (68)

 

  1. “Hayek thought that badly conceived investment would only result in a worse bust later.” (68)

 

Books and arts:

 

Manufacturing: The latest chapter:

 

1.” Mr. Marsh says, the world is on the cusp of another industrial revolution, driven by several new technologies. Advances in electronics, biotechnology and the Internet are accelerating. So is the pace at which innovative ideas spread, and are combined with each other. The volume and variety of goods soars, even as prices tumble. Mr. Marsh estimates that the world’s factories crank out some 10 billion different products each year. In other words, there are more unique products than there are people.” (76)

 

2. “Advances in computer-aided design and three-dimensional printing will allow firms to make products that are individually tailored to each customer—in order to produce precisely the tool you want, or a prosthetic leg that fits perfectly—for little more than the price of a mass produced one.” (76)

 

3. “Another big change is that manufacturing has gone global. This does not mean, as some fret, that production has all moved to Chinese sweatshops.”

 

Your feedback is welcomed at nitisp@gmail.com and sampat@capitalideasonline.com