Who will win the 2008 Olympics? "Even with the opening ceremony of the 2008 Beijing Olympic Games more than a month away, it is possible to predict which countries will come home winners. Using an original model based on economics and a dash of statistics and with no knowledge of individual sports or athletes, it is possible to accurately forecast both the number of medals and the number of gold medals that the top countries will win.

Country > Predicted Total Medals in Beijing > Total Medals won in Athens

U.S. > 105 > 102
Russia > 92 > 92
China > 81 > 63
Germany > 51 > 49
Australia > 49 > 49"

Going for the Gold: Who Will Win the 2008 Olympic Games in Beijing (Andrew B. Bernard, Tuck School of Business at Dartmouth, July 2008)

Labels: China, economics, life, news, Olympics, sports, World

2:08 PM 0 Comments Links to this post

A very brief look at the other side of the coin: the American Petroleum Institute Easy to read and follow, I picked up Linda McQuaig's 'It's the Crude, Dude: War, Big Oil and the Fight for the Planet,' while vacationing in Canada last year.

The title is what grabbed me, followed by the subject matter. The actual content has been nothing short of provocative, revealing and attention grabbing (especially the bit about Chavez 'saving' OPEC, and how Rockefeller and Standard Oil came about).

In one of her chapters, McQuaig mentions, in less-than-cozy terms, the American Petroleum Institute. The API, according to their website, is:

"...the only national trade association that represents all aspects of America’s oil and natural gas industry. Our 400 corporate members, from the largest major oil company to the smallest of independents, come from all segments of the industry. They are producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies that support all segments of the industry."

I'm mentioning them because some of their documents which, for whatever reasons or interests they are trying to serve, are interesting and worth reading, especially:

Understanding Today's Crude Oil and Product Markets (Oil Primer)

The Facts About Oil Industry Mergers, Market Power and Fuel Prices: An API Primer

The Truth About Oil and Gasoline: An API Primer

Labels: American Petroleum Institute, economics, news, oil, politics, U.S., World

11:13 AM 0 Comments Links to this post

Relations between China and Africa "FEARS of a "no fun Olympics" are growing as security restrictions increase and become more bizarre with less than 20 days to go until the opening ceremony.

Beijing police have been visiting bar owners in the popular Sanlitun area and asking them to sign pledges agreeing to not serve black people or Mongolians and ban activities including dancing."

Fears of a 'no-fun' Olympics in Beijing (theage.com.au)

"BEIJING — Chinese police officials have forced some Beijing bar owners to sign secret pledges promising to prohibit blacks from entering their bars during the Olympics next month, a Hong Kong newspaper says.

The police denied the report Friday, and most bars denied any knowledge of the pledges. But many African residents of Beijing say they are facing harassment from police and discrimination from bars as the Olympics approach."

Africans in Beijing harassed as Olympics approach (globeandmail.com)

"No one alive at the close of the 19th century could have missed the "scramble for Africa". A motley collection of robber barons, imperialist ideologues, explorers, rogues and adventurers - the likes of Cecil Rhodes and the appalling Leopold II, King of the Belgians - carved up the continent in the name of five European powers.

Today, few appear to have noticed that a second "scramble for Africa" is under way. This time, only one giant country is involved, but its ambitions are every bit as momentous as those of Rhodes and company. With every day that passes, China's economic tentacles extend deeper into Africa. While Europe sought direct political control, China is acquiring a vast and informal economic empire."

Why China is trying to colonise Africa (Telegraph)


(NOTE: Is it just me, or is there something fishy going on here? Are the Chinese trying to have their cake and eat it, too? Then again, what do I know? IANAE - I Am Not An Economist, IANAP - I Am Not A Politician, IANAOE - I Am Not An Oil Exec and so on and so forth...)


"The People's Republic of China and the Federal Republic of Nigeria established diplomatic relations on February 10, 1971. Bilateral relations have since enjoyed smooth and steady development."

China-Nigeria Relations (EMBASSY OF THE PEOPLE'S REPUBLIC OF CHINA IN THE FEDERAL REPUBLIC OF NIGERIA)

"The traditional friendship and relations of good cooperation between China and African countries have stood the test of time and gone through the trial of international turbulent events. This relationship, being a good example to the developing countries, has been further consolidated and developed under the present new situation."

China-Africa Relations (Ministry of Foreign Affairs of the People's Republic of China)

"China has secured four oil drilling licences from Nigeria as President Hu Jintao continues his week-long tour of Africa, his second in three years. In exchange China will invest $4bn (£2.25bn) in oil and infrastructure projects in Nigeria."

China and Nigeria agree oil deal (BBC NEWS)

"According to China's Ministry of Commerce, China and Nigeria signed an 8.3 billion US dollar railway construction contract. China will build 1315 kilometers of railroad in the west African state; this is the biggest infrastucture project abroad for a Chinese company to date."

Nigeria and China railway deal: $8.3 billion (DANWEI)

Labels: Africa, China, economics, life, news, oil, Olympics, politics, World

10:11 AM 0 Comments Links to this post

Competition in the distribution sector of Barbados: Good, bad or both? DISCLAIMER: Insert usual IANA-type (I Am Not A...) disclaimers here as I'm in a rush (going to see Hancock tonight) and I want to post this before I forget.

By distribution sector of Barbados, I mean the companies that import the foodstuffs, groceries, etcetera, that we see on the shelves of our major supermarkets as well as the smaller shops.

In some(?) cases, these distribution companies also own and operate the supermarkets (an example of vertical integration at work here, folks).

After watching a bit of the budget this eve, it seems to me that The Government, as a result of the high cost of living, appears to be receptive and open to the idea of allowing foreign competitors to setup shop in Barbados. In addition, ownership of these outfits is to be kept independent from local entities in an attempt to, perhaps, avoid collusion/cartels(?). The aim here is that by allowing foreign entities into the market, competition will ensue and therefore drive down prices, thereby giving Barbadian consumers a 'break' or an 'ease.'

Now I'm a consumer, and I'm all for a 'break' and an 'ease.' No harm at all, none whatsoever. Or is there? This measure, I think, could very well be a double-edged sword, one that must be wielded carefully (or how about: there are two sides to every coin, or two sides to every issue, or the lesser of two evils? LOL).

Very quickly (as I'm running late for the show at the drive-in):

The Good:

Foodstuffs et al should be available (in theory), at competitive prices and in a wider variety, to the average Barbadian consumer. I for one am always happy to pay less. After all, I'm a Barbadian, we like that sort of stuff, but not at the expense of quality ofcourse. ;-)

The Bad:

Existing distribution & supermarket entities now faced with stiff competition from overseas competitors (who enjoy economies of scale), may be forced to compete on price in one way by reducing their costs.

Labour is a cost. Local companies may be forced to lay-off, or reduce staff levels (i.e., Barbadian employees) in order to reduce their costs, which in turn will (hopefully) allow them to offer competitive pricing in line with the overseas players. Alternatives to lay-offs may involve: reducing their profit margins or finding ways to increase the efficiency of their businesses so as to drive down costs.

Another negative aspect of foreign entrants is that if these foreign entities are a hit with the Barbadian public, and they start to make a profit for their overseas owners, where do you think these profits are going ? I'm no expert, but I guess that our Government will probably see a 'little something' in the form of taxes, duties, etcetera, but I think that the bulk of it will be heading overseas, to a parent company somewhere.

I'm sure that there are plenty of arguements and counter-arguements to what I've said, but this is simply a little food (pardon the pun) for thought. Remember, what do I know? IANA... ;-)

In conclusion, if I may offer one slight, insignificant, tiny, suggestion from little ol' me: If you're going to allow these foreign firms to setup shop in Bim, make sure that the majority of all staff hired (even the Management team), are Barbadians.

Labels: Barbados, business, economics, food, life

6:04 PM 1 Comments Links to this post

Article: 'Will Soaring Transport Costs Reverse Globalization?' A snippet from the article...

"Globalization is reversible. Higher energy prices are impacting transport costs at an unprecedented rate. So much so, that the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today. In fact, in tariff-equivalent terms, the explosion in global transport costs has effectively offset all the trade liberalization efforts of the last three decades. Not only does this suggest a major slowdown in the growth of world trade, but also a fundamental realignment in trade patterns."

Sources:

Will Soaring Transport Costs Reverse Globalization? (CIBC World Markets)

Labels: business, China, economics, life, news, oil, U.S., World

2:53 PM 0 Comments Links to this post

The Economist hits the nail right on the head! This is exactly what I'm talking about:

"STUCK in a traffic jam on the road home after an Easter break, the motorist has time to ponder many things."

For me, it wasn't the Easter break, it was a typical day and I was either stuck in traffic, or going to and fro. The end result was this post:

"The similarities between economic systems, traffic lights, junctions and roundabouts."

Labels: Barbados, blogging, economics, funny, life, politics, The Economist

10:31 AM 0 Comments Links to this post

A question and a thought or two, on privatization and the RBPF DISCLAIMER: IANAE (I Am Not An Economist), IANAPO (I Am Not A Police Officer) and IANAP (I Am Not A Politician).

A few of you, by now, should know that I tend to think about random things while I'm on the road, going to and fro. These trips give me the occasion (opportunity), to think, question, reflect and generally study things while waiting at a traffic light, or while sitting in traffic (but still keeping a constant vigil on the flow of traffic in front and behind me, talk about multi-tasking!).

Today was no different. While I was not doing this sort of thinking (or philosophizing?) while driving home, the question came to me much later (at around 2:45 AM).

What would happen if we were to privatize the RBPF?

Don't laugh. I'm asking a serious question. Spare it some thought. For those of you who are unfamiliar with the term, Wikipedia has the following to say:

"Privatization is the incidence or process of transferring ownership of business from the public sector (government) to the private sector (business). In a broader sense, privatization refers to transfer of any government function to the private sector including hardcore governmental functions like revenue collection and law enforcement."

Why, in the first place, would a government want to transfer ownership of a business from the public sector to the private sector? If you can answer this, then maybe you can apply the same thinking to why a government would want to (OR NOT WANT TO), transfer law enforcement to the private sector.

So back to the question, what would happen if we were to privatize the RBPF? Do you see better pay for the officers? More equipment and resources becoming available? What about the negative effects, i.e., having a private company providing law enforcement services? If you've got an answer, my e-mail address can be found on the side-bar, alternatively, feel free to leave a comment. Based upon feedback, I will try to dispense my own humble opinion in a week or two, as I'm currently preparing for an exam.

However, I will leave you with one possible result of privatization: I'm pretty sure that our taxes pay for law enforcement (as well as for other social services). Privatization should, in theory, result in less taxes paid to a government, however, it would also mean no law enforcement for society unless you pay a private firm to provide such services (how would the poor be able to pay and should they even have to pay in the first place?).

In conclusion, one of the many roles of government (correct me if I'm wrong), is to provide basic protection of life and property (be you rich or poor). This is a social service. I can't remember where I read it, and I'm probably bastardizing what it is I read, but the essence of it was this: We, as citizens or members of society, in effect give up certain rights and freedoms when we agree to be governed. In return, it is the government's role to protect society from internal as well as external agression, conflicts, threats, etcetera. That is the price we pay for this security and stability.

Food for thought.

Labels: Barbados, economics, law, life, Philosophy, police

2:42 AM 1 Comments Links to this post

The Economist mentions elections in Barbados The Economist, a publication (and website), that I try to read as often as possible, had the following to say with regards to the recently concluded elections in Barbados: (In bold are the bits that I found especially interesting, which as it turns out, made up the majority of their article)

"Barbados

Sweet success
Jan 17th 2008 | PORT OF SPAIN
From The Economist print edition

A change of power in one of the Caribbean's best-run and most stable democracies


IT WAS an all-night party in Barbados after the island's general election on January 15th. “Plenty change,” a Bridgetown bar-owner grinned, and he wasn't just referring to the mounds of cash he was counting. After 13 lonely years in opposition, three election defeats and a series of long-running party-leadership squabbles, David Thompson led his Democratic Labour Party (DLP) triumphantly back to power, with 20 of the 30 parliamentary seats. In the previous election, in 2003, it won just seven seats.

By American standards, the campaign was blissfully short. The election was called on December 20th, leaving just two lively weeks after the Christmas and new-year break to get the voters in. There is no great ideological gulf between Mr Thompson's party and the outgoing Barbados Labour Party (BLP). But from time to time Barbadians like to shake up the political scene. Although Owen Arthur, the BLP leader, was regarded as a good manager, people felt that he had become a little arrogant after his 13 years in power, and some of his party rather too comfortably settled.

Voters also fretted over rising food prices, cost overruns on a road project and property prices jacked up by villa-buying foreigners. Then there was a row over claims by the BLP that Taiwan had funded Mr Thompson's campaign in exchange for a promise of diplomatic recognition. This was hotly denied by the DLP, anxious to avoid a rift with China.

Barbados is one of the Caribbean's oldest and most stable democracies, consistently getting top-drawer rankings for its political and civil liberties. From 1639 an elected House of Assembly—not the British-appointed colonial governor—controlled the island's cash. The first mixed-race member, Samuel Jackman Prescod, won a seat in 1843. Universal suffrage eventually followed in 1951, and independence 15 years later. On a visit to the island in 1859 Anthony Trollope, a British novelist, found it irritatingly well run.

Barbados also tops all other Latin American and Caribbean countries in the UN Development Programme's human-development index. Transparency International, a corruption watchdog, ranks it second cleanest in the region, just behind Chile. In September unemployment hit an all-time low of 7%, down from a peak of 27% in 1993 when the DLP was last in power.

“Change” (of leadership) was the DLP's campaign watchword. The new government, which inherits an uncomfortably big public debt, equal to 88% of GDP, will have other changes to deal with, too. Important business decisions are increasingly likely to be taken in neighbouring Trinidad rather than Barbados. Many big local firms are already majority-owned by Trinidad shareholders. Now two Trinidad companies are fighting for control of Barbados Shipping & Trading, the island's biggest conglomerate.

Sugar, the economic mainstay until the 1960s, will lose its guaranteed European market by 2015, and is already suffering EU price cuts. Costs are among the world's highest, but cane keeps the landscape in good order. Shutting down sugar would dent the country's confidence, too. Mr Arthur had proposed a new $156m sugar factory, using cane for electricity and biofuel, and exporting pricey premium-brand Plantation Reserve sugar. The DLP called the plan a “mishmash”, but has yet to come up with a better one.

Meanwhile, the island's medium-sized independent hotels, the backbone of its tourist industry, are facing rising costs and increasing competition from cruise ships; some have closed. High oil prices will push up air fares this year. Further ahead, global (over)warming may cut the pulling power of Barbados's tropical beaches, now attracting over half a million tourists a year.

On the upside, there may be oil. In 2004 Barbados faced down Trinidad in a dispute over their maritime boundaries, and two years later won a big slice of seabed, which America's Geological Service believes may contain some generous deposits, though the waters are deep and the geology complex. A bid round for exploration rights, which has already sparked interest from several big oil companies, closes in April. Over to you, Mr Thompson."

Labels: Barbados, business, economics, life, politics

8:14 PM 3 Comments Links to this post

A few words on MNCs, China and India... A few words on MNCs, China and India, can be found on the China India Blog.

Labels: China, economics, India, World

10:08 PM 0 Comments Links to this post

Question(s) for the People's Democratic Congress (PDC) UPDATE, Jan/5/08: Finished the post.

DISCLAIMER: IANAE, I Am Not An Economist.

DISCLAIMER: IANAP, I Am Not A Politician.

DISCLAIMER: IAJAQAATPACOB, I Am Just Asking Question(s) As A Tax Payer And Citizen Of Barbados.

DISCLAIMER: IAJAQAACIWNPA, I Am Just Asking Question(s) As A Curious Individual With No Political Agenda.

The last disclaimer is important. This is a non-partisan (non political) post. I am not interested in the BLP, DLP, nor PEP. I am only interested in what the PDC recently had to say (at the time of this post, I cannot recall the exact date of The Nation's article which carried the PDC's comments), with regards to their goal of abolishing taxes (as well as interest rates and foreign land ownership, but I am interested in their abolition of taxes proposition and I will be focusing primarily on that).

My interests are purely academic. Not political. With respect to politics, I ask that reader's take note that, as far as I can recall (but correct me if I'm wrong), none of the other political parties (BLP, DLP and PEP), have ever discussed abolishing taxes.

It is only the PDC that has made this statement.

Now, why am I asking the PDC this question? Because (oops, sentences are not supposed to start with 'because', are they?), I am genuinely interested and curious, in trying to understand:

1) Why the PDC would want to abolish taxes and

2) How they (the PDC), intend on paying for and providing social services to the public if their party were ever to come into power.

Remember folks, I'm just a layman, seeking a little clarification and knowledge. That's all. No harm, no foul.

Before we go any further, what are taxes? From Wikipedia (albeit, not the most professional, nor academic site to reference, but a quick and easy one to use nonetheless):

"A tax may be defined as a "pecuniary burden laid upon individuals or property to support the government […] a payment exacted by legislative authority."[1] A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."[1]"

I underlined 'support the government' because the government needs support in providing certain social services (police, fire, health, education, etcetera). The economists, politicians and academics can debate this definition and my addition, further. I however, will not. I will use the above definition as a suffice explanation of what a tax is.

NOTE: I am not saying that taxes are fair, or unfair, or that they are easy to pay, or that they are equally distributed amongst all of the different classes of society (i.e., low, mid and upper class, and everything in between). I am not interested in that. I'm not even interested in debating the tax rate in Barbados (for companies and individuals), nor am I interested in comparing it with other countries. No, take that discussion elsewhere, please. Better yet, go and debate it with a Tax Attorney or an Accountant :-)

To the PDC, I say unto thee: This, as far as I understand it from a layman's point of view, is why taxes are necessary and what they pay for: (Anyone out there is free to offer a counter arguement)

1. Roads. Taxes pay for the roads that we drive, walk, cycle and drive our donkey carts on. The roads may or may not be perfect (leave the politics out of this), but if the government decided to let a private sector company (i.e., companies that exist primarily to increase shareholder value, and to generate profits), take over the development and maintenance of the island's road network, what do you think will happen, PDC? Who do you think the bulk of the burden fall upon? The low, middle or upper income classes, PDC?

2. Water. Taxes pay for the water you use. Who will be able to afford, or have access to water supplies if there are no taxes to pay to the government (which uses tax revenue to provide these services)? Yes, I know that our water 'services' may or may not be the best (leave the politics out of this), but they are being subsidized and/or provided for, by the government. Can you imagine a privatized (or non-nationalized) water company? I recall from my CXC POB (Principles Of Business) studies that private companies exist to make a profit. I further recall from my MBA studies that private companies, of all shapes and sizes, are primarily interested in increasing shareholder value (shareholders are the people that own the company). The have to have increase the value that the shareholders made in the company, else they will investment in another business. Do you, the PDC, think that shareholders of a private water company (unless they are very morally and ethetically minded) are interested in the good of the people, or are they more interested in the bottom line?

3. Police. PDC, the taxes that you want to abolish help pay for the protection and security of life and property. The police also maintain law and order in society. (Leave the politics out please, remember this is purely an academic discussion). How, PDC, do you plan on maintaining law and order in society, as well as protecting life and property, when there are no taxes to pay for the police force? Do we then depend on private security firms, firms like Blackwater?

4. Fire. PDC, a government typically provides a fire service (leave the politics out of this please), do they not? What happens when someone's house or business burns down. Without taxes to pay for that fire service and the people that operate the fire service, who will put out the fires and protect life and property? Or are you, PDC, saying that this sort of service is best left in the hands of a private sector company? What if the less fortunate cannot afford to pay the bill after having a private fire company put out the blaze, what then? Or better yet, when someone's house or business is burning, they call the private fire company and negotiate a rate before putting out the fire. Remember, a private company is interested in their bottom line. Maybe it would be more competitive and beneficial to the public if there was more than one private fire company. That way, you'd have competition and one could always go to 'the other guy' for a cheaper price (you better hope that your house doesn't completely burn down while you haggle over price).

In conlusion, PDC, consider what I've said above, and apply it in turn to other issues like: Education, NIS, Health Care and whatever other government provided services you can think of (please leave the politics out). When you abolish taxes, let me know what you intend to substitute them with in order for Barbadians to have access to social services.

P.S., I'd like to wish everyone all the best for the new year!

Labels: Barbados, economics, humour, life, Philosophy, politics

12:39 AM 1 Comments Links to this post

I Am Not An Economist (IANAE) (DISCLAIMER: IANAE, I Am Not An Economist).

A few readers of this blog may recall how I sometimes prefix posts based on a random thought (e.g., the similarities between traffic lights and the different types of economic systems), with the infamous letters: IANAE.

The fact that I am not an economist has never stopped me from trying to think like one, or from trying to think of things (like life), from an economic point of view: opportunity cost, incentives, motives, externality and so on and so forth.

There are others who do the same. A few of these folks are 'proper' economists that have expressed, in economic terms and concepts, things that we take for granted. Folks like Tim Harford, author of: The Undercover Economist. Harford also writes the 'Dear Economist', column for the Financial Times. The Dec 28 'DE' column had this to say in response to concerns about drunks on the road during the Christmas season:

"Dear Economist,
This Christmas and new year, I expect to encounter a lot of drunks on the road. In fact, I may well be one of them. Should I feel guilty? And should I be worried?
Mr F Jones, London

Dear Mr Jones,

It has always been difficult to test the effect of alcohol on drivers let loose on the roads. The difficulty is this: if half of all crashes involve drunks, that may be because drinking impairs your driving or it may be because there are a lot of drunks on the road – and we can only guess at how many drunk drivers there are.

But the economists Steven Levitt and Jack Porter realised that it was possible to say more, by looking at how often drunk drivers crashed into each other. If 10 per cent of drivers drink, and if drunk drivers are as safe as any other kind of driver and randomly mixed among the sober drivers, then only 1 per cent of two-vehicle crashes should involve two drunks.

Drunk-on-drunk crashes are much more common than one would expect, given the number of drunk-on-sober crashes, allowing Levitt and Porter to reach firm conclusions about the risks of drink driving.

They find a very large effect. Drivers who have been drinking are seven times more likely to cause a fatal crash; those who have drunk over the legal limit (in the US) are 13 times more likely to cause a fatal crash. You might also bear in mind another finding from the paper: “The great majority of alcohol-related driving fatalities occur to the drinking drivers themselves and their passengers.” That should be sobering.

economist@ft.com"

Source: FT.com / Weekend columnists / Tim Harford - Dear Economist...

Harford's writing also appears on Slate Magazine. A recent article asks (and answers) the question: Can economics make you a better person? So, if you've got some disposable income rolling around, I suggest you consider adding The Undercover Economist, as well as Freakonomics, to your bookshelf. Both books may end up revealing things about the World that you never considered and always took for granted.

Labels: blogging, economics, life, World

9:19 PM 0 Comments Links to this post

In case you missed it... have a look at:

"Coming soon to an airport near you: Williams Air(?)"

and

"The similarities between economic systems, traffic lights, junctions and roundabouts"

Labels: Barbados, blogging, economics, funny, life, money, politics

1:28 PM 0 Comments Links to this post

Coming soon to an airport near you: Williams Air(?) (DISCLAIMER: IANAE, I Am Not An Economist)

(DISCLAIMER: IANAAIE, I Am Not An Airline Industry Expert)

(DISCLAIMER: IANAA, I Am Not An Accountant)

(DISCLAIMER: IANAP, I Am Not A Politician)

I'm going to go out on a wing here (a wing, get it? LOL) and make a bold prediction. I predict that within ten years (maybe less), the Williams brothers (Sir Charles O. Williams and Ralph 'Bizzy' Williams) will provide an airline service to Barbadians and eventually, Caribbean citizens as well.

What am I basing this prediction on? Have a look at today's Nation newspaper and you might see why (and possibly disagree with me). The front page headline, 'SIR CHARLES' WINGS,' gives details on the Williams' brothers plans to purchase their own plane to transport them and their employees across the region (for business meetings, etcetera).

The newspaper article starts off by landing a powerful blow square on LIAT's jaw. After all, when you have two of the region's most successful entrepreneurs identify and complain about the service and performance levels of your company, what do you expect to happen next?

Simple. They find a solution. In this case, they bought their own plane. Where some see problems, others, in particular the Williams' brothers, see opportunity. With their own plane, they and their staff should, in theory, be able to get around a lot more efficiently.

As for the costs, I'm sure they've done all of their homework. The plane, and associated expenses, will probably payback for itself within a few years in terms of the time and money saved in having to NOT depend on LIAT. Else, why bother purchasing a plane in the first place?

Savvy business people do not (usually) throw good money behind bad money, and if they do, it's only for a very short period of time. A airplane purchase is not a 'short time' kind of purchase. It's a major investment.

I'm also guessing that they will not treat the plane as a 'company vehicle,' so to speak. They'll setup a new, seperate company, let's call it Williams Air Inc., for the purpose of this article. This new company will charge the other Williams' companies for the use of the plane and related services.

For example, if Sir Charles wants to travel to St. Lucia, Williams Air will bill C. O. Williams Construction. Williams Air probably won't make a lot of profit (running a plane isn't cheap), if any at all, so it won't be paying a lot of taxes, but then again, remember, IANAA (I Am Not An Accountant).

Over time, WA (Williams Air) may not do as much travelling as it used to in its earlier days. Maybe the business interests of the Williams' brothers across the Caribbean may decline (doubtful). So, what to do with the airplane and all of the related bits? Ante up lots of cash, buy (or lease) another two planes and start a public airline.

In the past (if I remember correctly), Ralph 'Bizzy' Williams has spoken about an island-to-island ferry service. Why bother with a ferry service when you can offer an airline service? And with the Williams' brothers running the business as a PRIVATE concern (that is, no Government ownership) you can be quite sure that there will be no wastage, red tape and inefficiencies. It will be profit driven, as most private sector based enterprises usually are. It may even end up being a 'no frills' type airline, or one geared for executive travel only.

CSME (or the advent of it, as I'm not well versed on the subject) and the free movement of labour throughout the region may also be an incentive for a new, privately owned, airline. If, in theory, there is an increase in the flow of labour (and I mean skilled as well as unskilled) between the islands, then an efficient and affordable airline service will be an important requirement.

But then again, what do I know? I'm certain that there are dozens upon dozens of factors that I haven't even considered. As I stated at the begnning of this post: IANAE, IANAAIE, IANAA and IANAP.

:-)

Labels: Barbados, business, economics, life, money

1:46 PM 0 Comments Links to this post

And In Other News... Alarm is growing about rising food prices

"“THE world’s most vulnerable who spend 60% of their income on food have been priced out of the food market,” is the alarming warning from Josette Sheeran, head of the United Nations’ World Food Programme (WFP). As the price of wheat, maize, corn and other commodities that make up the world’s basic foodstuffs is soaring the poorest people in the poorest countries are the hardest hit." [via Economist.com]

Super-spiked. The oil price should fall-eventually

"BACK in 2005, in an apparent flight of fancy, analysts at Goldman Sachs predicted a “super-spike” in the oil price to $105 a barrel. On Wednesday October 31st, the prediction came as close as it ever has to fulfilment, when the price of West Texas Intermediate reached $94.74 during the New York day and breached $96 after hours." [via Economist.com]

Labels: economics, food, health, life, World

12:02 PM 0 Comments Links to this post

The similarities between economic systems, traffic lights, junctions and roundabouts UPDATE: Oct 22, 9:10 PM. The post is now finished.

(DISCLAIMER: IANAE, I Am Not An Economist)

(DISCLAIMER: IANATE, I Am Not A Transport Engineer)

(DISCLAIMER: IANAP, I Am Not A Politician)

And no, I am not crazy. The long commute to the office does, on occasion, give me plenty of time to think about all sorts of things. In this case, identifying the similarities between economic systems (open, closed and mixed), traffic lights, junctions and roundabouts.

An Open Economy (Capitalism) = Four-Way Junction Without Working Traffic Lights

In a nutshell, an open economy is one where there is practically little, or no involvement by the State with regards to the running, or regulation, of the economy. The market is free to operate as efficiently as possible. The laws of supply and demand rule supreme. There are no price controls, regulations, state-owned or subsidised enterprises (like our very own CBC, QEH, BWA). The factors of production are all privately owned and operated with the goal of making a profit.

If a company is the sole provider of a good or service (a monopoly), it is free to charge whatever it wants. Dissatisfaction may lead to another company entering the market and providing the same goods at a better price. The consumer now has a choice, competition ensues and he/she is usually better off. The government stands by the sidelines and does not get involved.

There are several advantages and disadvantages to this type of economic system. One advantage is that the business owner is free to run his/her business, as best as they see fit. The lure of profit and a healthy return on investment, are typical reasons for persons starting a business in the first place.

However, a notable disadvantage exists as well. How do we protect those citizens who are less fortunate? Those in society who cannot afford the costs of a good or service (like education). Who will look after their basic needs if the market is only interested in running as efficiently as possible, and profit is the primary driving force behind all actions.

Now let's look at a typical four-way junction and motor traffic. Most Barbadians are familiar with the junction at Redmans, St. Michael (A Shell gas station operates at one of the corners of this junction).

What happens when the traffic lights are not working? Many people will argue that traffic flows freely. I believe that this is a good example of an open economy at work. The traffic lights represent Government regulation and control. This can potentially restrict the performance of the economy (or, the flow of traffic).

Motorists heading to either the north of the island (St. Lucy for example), or the south (that is, back to Warrens) enjoy a clear advantage over those drivers who are stuck on the east or west sides of the junction, who want to go either north or south. They have to wait for someone to let them join the main flow of north and south-bound traffic. These drivers are at a disadvantage, similar to the poor in an open economy with no Government protection, subsidies, or access to basic or affordable social services (like education or health care).

The motorists who are heading north or south, are free and are mostly unconcerned about the other motorists who have to look for a lucky break in order to join the main flow. And just like many businesses (the world over), most of them may not be concerned with the other 'motorists,' or with those less fortunate members of society, unless it has the potential to negatively affect their bottom-line.

These north and south-bound motorists are using their unique advantage, non-working traffic lights (or an open economy in the case of a business), to the utmost extreme, and are profiting by not having to sit in traffic and by therefore arriving at their respective destinations in a timely fashion.

Similarly, businesses who are not concerned about Government intervention in setting prices, controlling the types of businesses, restriction of foreign investment, will clearly enjoy these advantages. There is room for competition as other businesses spring up to offer a better, cheaper product. Increased competition and liberalisation of a market (for example, telecommunications) brings the benefit of choice to the consumer. There are no 'traffic lights', (no Government involvement) to slow them down. It's a free for all.

A brief note on increased competition, liberalisation of the local market, and the admittance of foreign companies into a country, especially a small one like Barbados. While the consumer may end up benefiting by having a wide variety of choice and access to cheaper goods and services, locally owned and operated companies may end up suffering over the longer term.

Many of these foreign-owned businesses have extremely deep pockets, and can easily enter into a country, reduce the prices of their goods and services drastically, capture the market, and effectively wipe out or greatly reduce the amount of competing businesses. As a result, it may become unprofitable and impractical for local companies to maintain their respective levels of unemployment, and as such, many may have to downsize their operations. (Downsizing is a nice word for lay-offs or having to 'let people go').

But go where? Unless the foreign-owned companies are willing to hire these employees, they may remain unemployed and will not be able to purchase most goods and services. What then? The foreign-owned companies may end up closing down and heading back home. After all, without any consumers for their goods or services, it means no revenue. The overseas parent companies will probably not accept this and may end up pulling out of the country in search of greener pastures elsewhere.

Trade restrictions, tariffs, subsidies and other related measures (think traffic lights, control and regulation), can be instituted by Government and can help protect local businesses and industries by placing limits on who can setup shop and what they can offer in a country.

A Closed Economy (Communism & Socialism) = Four-Way Junction With Working Traffic Lights

Switch on the traffic lights and you've got instant Government involvement and control. The motorists sitting on the east and west sides of the junction now enjoy the same advantage that north and south-bound motorists enjoy. They just have to wait for about thirty seconds for the light to change green. The traffic light (Government) is the great equalizer.

With this control, however, certain limitations and restrictions on how businesses can operate will come into play. Government's involvement in the economy may hamper its potential for growth or expansion. After all, one of the primary roles of a Government is to provide for, and look after its citizens (especially the poor or less fortunate).

As a result of their involvment, high costs (paid for by tax payers who are usually middle-class), inefficiencies and less-than-ideal goods or services are made available to the poor. But remember, something is better than nothing, and Government is primarily interested in providing services for the greater good, not in turning over a profit.

Some private individuals and businesses may not be willing to setup a business, expand an existing one, or invest in a new one, simply because of this high level of Government involvement in the affairs of the economy. It makes it highly unattractive for would-be capitalists and budding entrepreneurs. Furthermore, overseas investors would be reluctant to investment in the country. Similarly, some north and south-bound motorists may avoid the Redman's junction all together and look for an alternate route, one that does not involve traffic lights.

A Mixed Economy (Capitalism + Communism & Socialism) = Roundabout

A mixed economy is one where there is a good mixture of both private and public sector enterprises. There is a 'reasonable' amount of Government involvement in the affairs of the economy, but not as much as a true planned or closed economy. Barbados is a good example of a country with a mixed economy.

The mixed economy, it would seem, offers the best of both worlds. There are private sector interests that are concerned with creating wealth, profit and return on investment, as well as public sector interests that exist to serve the public by way of providing essential services (like a police force, a water authority and basic health care). For those who can afford it, private health care exists, as do private schools. Society has a choice, if you can afford the best, you can have it. If you cannot afford the best, then you'll have to make do with what the Government can provide for you.

The roundabout looks, to me, like a good example of the mixed economy. There are no traffic lights, yet there still exists a basic, controlled flow of traffic. Motorists are not disadvantaged. As long as there is no traffic approaching from the right (or slowly approaching), they are free to enter and exit the roundabout whenever they feel like. There is an element of choice, although somewhat controlled, present. As a motorist, you only have to slow down or stop to give way to traffic approaching from the right. You are not being controlled by traffic lights, nor are you stuck waiting for someone to 'let you out' so that you can join the major flow of traffic.

This post is by no means an accurate or even semi-accurate analysis of the similarities between economic systems and traffic signals, etcetera and should not be treated as such. For example, there are currently major traffic issues in the Warrens area as a result of the highway expansion project. These issues affect the performance of the roundabout(s), traffic lights and junctions.

In conclusion, remember the disclaimers at the beginning of this post: IANAE, IANATE, IANAP.

;-)

Labels: Barbados, blogging, economics, funny, life, politics

3:06 PM 0 Comments Links to this post

Parking Lots And Food And Drink Establishments (DISCLAIMER: IANAE and/or IANAA, I Am Not An Economist and/or I Am Not An Accountant.)

Last Sunday, while on my way to Jumbies, I took the south coast road and drove past TGI Friday's, Bubba's and Cheffette. As I drove past these establishments, I stole a quick glance at each of their parking lots. Most of them were full. Big deal, right? Maybe, maybe not. If we assume (yes, I know what they say about the word 'assume' and about assumptions in general) that the cars parked in each of the establishments' respective parking spaces belonged to patrons of said establishment, then a casual observer may quickly conclude two things: 1) that people have money to spend, that is, they have disposable income (better yet, discretionary income) and 2) that business is booming for these particular establishments.

The problem with both of these conclusions is that they may be somewhat misleading. Regarding the second conclusion, unless you had direct access to the sales figures of the establishment for a particular day, like Sunday, there would be no accurate way to tell if the establishment was making money (as in a profit). Even with these figures, it doesn't reveal much. The establishment may do ten thousand dollars in sales that night, however, this figure might only be representative of gross sales (the figure before overheads and expenses, etcetera, are deducted) and may not immediately show how much was pure profit (the figure after overheads and expenses, etecetra, have been deducted).

As for the first conclusion, just because people are spending money, it doesn't automatically mean that they can always afford to do so. Some people live beyond their means and, according to an old saying: "Have champagne tastes, but mauby pockets." Other people may have been invited to dinner by someone else and therefore do not have to pay for the food/drink they are consuming. It may also be a special occasion and people are celebrating by going out for dinner. It may even be a once-a-month kind of affair where a family, a couple or friends treat themselves to a night out on the town.

Thus, we can see that just because the parking lot of a food and drink establishment is full, it doesn't always mean that the business is making money (profit) and also, just because people appear to eat or drink out alot, it doesn't always mean that they can really afford to.

Labels: Barbados, economics, life, money

11:46 PM 0 Comments Links to this post

Brother, Can You Spare A Couple Of Billion Dollars? After reading this article: "Clive Thompson Explains Why We Can Count on Geeks to Rescue the Earth," I started thinking about how difficult it is for some of us to process large numbers and quantities.

Every other day we hear a "hundred thousand this," or "a million that," or even "a billion," this and "a trillion that." But can we really appreciate the true size of these numbers? In particular, can we appreciate and process large numbers like these when it comes to something that, as Barbadians, we should all be concerned about, like our national debt?

Maybe some of us can (like economists or those of you who are numerically inclined), but for the average man (or woman) on the street, how do we help him or her, process and appreciate how much money our country owes? Simple. We must try to use terms and figures that the average man or woman on the street can easily understand and appreciate.

But before we do that, remember IANAE (I Am Not An Economist). Next, let's make sure we understand each other: If I borrow five dollars from you, I am a debtor and sooner or later, I have to pay you back (maybe with interest). From your perspective, you are a creditor. You have extended credit to me and you hope to collect your five dollars (the debt) sooner or later with interest (if you were smart). Now look at the big picture. Governments borrowing and lending, IMFs, World Banks, central banks, commercial banks, so on and so forth.

Okay, so what exactly is our current national debt? I haven't a clue. However, I did find a web-based article from The Nation newspaper, dated August 19, 2006. In it, the writer mentions that the national debt was almost $5bil ($5,000,000,000) at the end of December (2005 presumably). I also posted a comment on BFP asking if anyone knew what the current national debt was, or at least, a figure that a lay person could use, I recalled $4bil as a figure from somewhere and a "Jerome Hinds" seems to be in agreement with my guess. I also asked another source, and he/she told me, that as of March 2007, our national debt (internal + external) was OVER $5bil.

(Let's temporarily forget 'hard' and 'soft' debts and concentrate on the fact that a debt is still a debt no matter how hard or soft it is. Let's also put aside party politics for the time being.)

So, back to putting things into perspective for the benefit of the average man or woman on the street (and for whoever else is interested):

What Can You Get For Five Billion (BDS) Dollars? I'll tell you (hopefully my figures are reasonably accurate):

1) At $2.00 each for a plastic bottle of Coca-Cola (the price I pay at the canteen at my office), you could buy 2.5 billion bottles of the stuff. Divide that by the population of Barbados (280,946 July 2007 est.) and that's about 8,898 bottles of Coke PER PERSON.

2) The same canteen at work charges $1.50 BDS for a Pine Hill Dairy "box juice." So, with $5b, I could buy around 3.3 billion of these box juices. Again, using the population of Barbados, that's about 11,864 box juices PER PERSON.

3) At $2.25 each for a cheese cutter (a Barbadian classic and readily available), I could buy 2.2 billion cheese cutters! (CHEESE ON BREAD, MAN!) That works out to about 7,909 cheese cutters for every man, woman and child in Barbados.

4) At $4.00 each for a flying-fish cutter, I could buy around 1.2 billion cutters. That works out to about 4,449 flying fish cutters for every man, woman and child in Barbados (by then, T&T and BDS would've hopefully sorted out all of their fishing issues, although, there may not be enough fish to go around!)

5) At $2.00 each for a "bread-and-two" (two fish cakes in a salt fish bun), I could buy 2.5 billion bread-and-two's. That works out to about 8,898 for every man, woman and child in Barbados.

6) Tonight, I had a beer (Heineken) at Jumbie's in St. Lawrence Gap. With $5 billion, I could buy 714,285 beers, or (using the population of Bim) about 2,542 beers PER PERSON.

7) How about a new motor vehicle? No problem. Let's say a pick-up (I like pick-ups), a Mitsubish L200 costs around $90,000 BDS. (DISCLAIMER: I don't work for the local agents, this is just a rough figure). With $5 billion, I could buy 55,555 of them.

8) Better yet, how about a nice house and land deal? Nothing west coast-ish, something comfortable with at least 3 bedrooms and 2 bathrooms and a nice yard for the kiddies to run around in. Let's say it costs around $450,000 (DISCLAIMER: I Am Not A Real Estate Agent). With $5 billion, I could buy about 11,000+ of these.

9) What if the entire population of Barbados had to pay off $5 billion in national debt? It means that every man, woman and child would have to pay $17,797.

Why does any of this matter? After all, the debt collector isn't going to go knocking on your door asking you to pay up (don't forget those interest payments!) The debt has to be paid by the Government (be it BLP, DLP or XYZ). Where will Government get this money from? Simple, YOU. Your children. Possibly your children's children. How? (Remember IANAE) Probably via taxes, duties, etcetera.

What does the Government do with all this money? I don't work for the Government, so I don't have specific details. However, the Government has to provide and pay for education, police/fire, roads, infrastructure, transport, health care, water utilities, subsidies and host of the other services. These services cost money. So, can you spare a couple of billion dollars?

Labels: Barbados, economics, life, money, politics

6:59 PM 1 Comments Links to this post

The World Bank Meets Wall Street (DISCLAIMER: IANAE, I Am Not An Economist.)

They say that imitation is the sincerest form of flattery. So it should come as no suprise then that Robert Zoellick, the new World Bank president, would like the bank to behave more like a Wall Street investment firm. After all, Mr. Zoellick was once vice chairman of Goldman Sachs.

Most of us, if not everyone, have heard of the World Bank and quite possibly, the IMF (International Monetary Fund). Especially those of you living in developing countries. Both entities are sometimes referred to as the Bretton Woods Institutions.

The About Us page of The World Bank has the following to say:

"The World Bank is a vital source of financial and technical assistance to developing countries around the world. We are not a bank in the common sense. We are made up of two unique development institutions owned by 185 member countries—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).

Each institution plays a different but supportive role in our mission of global poverty reduction and the improvement of living standards. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. Together we provide low-interest loans, interest-free credit and grants to developing countries for education, health, infrastructure, communications and many other purposes."

Thus, after taking Mr. Zoellick's comments into consideration, it should be interesting to see if he will still be able to accomplish what the bank has stated on their About Us page and still make itself more Wall Street-ish.

If I may risk making a connection (and an extremely poor one at that) it appears to me (remember IANAE), that we may be seeing the beginning of a subprime type problem/situation with regards to his new vision.

From what little I know, subprime lending was the type of lending geared towards borrowers who had poor credit histories and found themselves in murky financial situations (sounds a bit like developing nations to me). Despite these factors, lending still occurred. This was good for the borrowers and good for the lenders. However, it appears that this fell apart around July 2007, during the subprime mortgage financial crisis where (among other things) home owners failed to meet their financial commitments and foreclosures ran rampant.

Enter Mr. Zoellick and his vision to make the World Bank more like Wall Street. In particular, offering developing nations and/or countries with poor credit profiles, financial products that they cannot get in the private market. So, what happens if and when these countries default?

However, Mr. Zoellick appears, at least on the surface, to have something interesting to offer to some Caribbean countries. He cites an example relating to hurricane insurance whereby several Caribbean nations formed a group, pooled risk and cut their premiums by 40 percent . That's not bad, is it?

As I said earlier, I Am Not An Economist (IANAE). My post focused on only a small part of the IHT article. Do your own research, draw your own conclusions and form your own opinions.

[World Bank mimics Wall Street as it looks for a new role via International Herald Tribune]

Labels: Barbados, Caribbean, economics, life, money, politics

10:25 AM 0 Comments Links to this post