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In Moscow now. New phenomenon: insecurity

I arrived in Moscow on Monday to do some consulting for the coming months. Two months to be precise, unless there is an extension of the contract.

I’m sitting now in the huge space of Crowne Plaza lobby, a facility with an interesting history – or so I was told – but I cannot find it written anywhere (i.e. not on wikipedia). Colleague told me the complex was built in the 70s and became a rare enclave of capitalism within soviet Moscow, where people in western clothes could be seen, prostitutes abound etc. (full fledged capitalist environment in any case).

What else. The weather is shitty and I can hardly mobilize myself to do any work on Ogito side.

There seems to be a new element which came to light after I was last here, as an effect of the crisis.

People I work with, and they would be typical new middle class representatives, talk about feeling insecure in the country, anxiety can clearly be felt, to the point that makes them worry about state of things in Russia.

In the time of prosperity any troubling signs were filtered out before they could reach their consciousness. Things like political killings or corruption were known to exist, but not something successful specialists aiming for new cars and apartments would worry about.

Plus they bought into nationalistic theme, where every unpleasant fact was dismissed as exaggeration driven by hostile external propaganda.

Not anymore. Moscow streets were always a curiosity, where luxurious cars of the elite are mixing seamlessly with working class in ancient Russian ladas. Now, low income workers start to display open hostility towards suits passing by on the street.

Police would be expected to separate the extreme layers of the society, but unfortunately anyone in the uniform is considered rather a potential threat than protection. Men in uniforms look to benefit from their status for extortion and not serve anyone.

Prosperity is over for now and status quo where everyone is paid into submission through oil money may become unsustainable. Things may get ugly then.




Giving ground to the kids

It used to be like this: kids were first to learn new technologies, and then explained them to their less savvy parents.

In my family it was always the case, with stuff like VCR and computers.

I was always curious if that situation will remain with my generation, or if perhaps we are different – world is so much about learning something new all the time, that we simply cannot afford to fall back on getting used to new things quickly.

I got my first feeling that I was behind a kid (10 years old daughter of a friend) a couple of days ago, when we were skyping and she used XD emoticon (written form), and I didn’t know what she meant.

First sparrow?




Meeting Warsaw anticapitalists

Yesterday I decided to spice up my weekend with some extreme flavors. So I visited a meeting organized by Pracownicza Demokracja (“Labor Democracy”), the local leftist movement.

And I quite succeeded with my initial goal, even though I only managed to sustain two hours of the event.

On May 1st PD organized anti-capitalist happening, which I obviously skipped, and on the next day, that is yesterday, a series of lectures and discussions.

What attracted me – other than the morning hour, helping me to mobilize to wake up early – was the first lecture by anthropology professor about organization of prehistoric cultures (which was supposedly close to communist one).

First thing I heard upon arriving was that the lecture was canceled, which was quite disappointing, but decided to stay nevertheless for the replacement presentation delivered by one of the activists.

Not once I regretted this decision in the coming hour or so. The presenter didn’t speak a very good Polish which took away from the content, and there was not much to take away in the first place.

Leaving aside the starting point – based on the assumption that current crisis somehow spells end of the capitalism – the “to be” state of the Marxists seems awfully vaguely defined. Unless by defining the future you can accept listing what’s bad about the current and saying that the promise system will be done with all of it (somehow).

You might say that this kind of living-in-the-past could be expected. And as I listened, it seemed to be the case, it seemed there was no recognition whatsoever about how work is different nowadays, as if majority of population still worked at production lines.

But I still remember the Empire book that I read (in Cuba), by Negri and Hardt, both Marxist philosophers. No need to agree with the whole premise, but I found some ideas inspiring and new.

The idea that I remember from Empire (apologies if my memory distorts it) is that it is no longer useful to analyze “imperialistic” policy of a particular country, as it was done before. What we have now is a global system of capitalist exchange, which expands into all corners of the world and all social spheres. There is no one point of control, but there is “imperial” layer of governance (Empire).

What’s characteristic of the Empire is that crises make it stronger. Crises justify the need to ramp up global imperial powers to overcome them. Isn’t current crisis used to push towards more global coordination of all countries? There is even talk about necessity to establish a common global currency.

Anyways, there was not a trace of such stuff on Saturday morning. Perhaps the later material was better, but I didn’t dare to risk another session after the first one.

What was really fun was the discussion after presentation finished. One after another people rose and asked questions. Or made statements. More often statements than questions.

One guy rose and introduced himself as a programmer and an anthropologist and declared that collective doesn’t work at all after a certain threshold.

Senior white haired bearded man explained in a quite low voice how he was taught communism (somewhere), without any obvious conclusion.

Another guy criticized the speaker in four points, of which I remember the stupidity of idea to rotate “unpleasant” jobs between people, for example having doctor doing a physical work for a change.

One peculiar looking lady called Basia – the organizers must have known her – started to explain how crises are embedded into the very nature of the capitalism which she remembers from economy lessons and that she was actually really doing well at these lessons – before organizers hushed her.

There were also a couple of homeless people which I forgot to mention, but they mostly sat looking indifferent or slept. Only the mention that lots of buildings stay unused seemed to resonate somehow with them.

As an ominous sign for revolution prospects in Poland, number of actual marxists in room didn’t seem to exceed much the number of organizers.

All in all the discussion was the greatest value of the whole event (the part I saw).

Maybe Marxist meetings wouldn’t be the first example, but I always thought of Ogito as a way to learn about such things happening around.

50% of ants are slackers?

Just read an article saying that after closer analysis, it turns out that half of supposedly labor-loving ant population may actually not do a thing:

Dr. Dornhaus found that fast ants took one to five minutes to perform a task – collecting a piece of food, fetching a sand-grain stone to build a wall, transporting a brood item – while slow ants took more than an hour, and sometimes two. And she discovered that about 50 percent of the other ants do not do any work at all. In fact, small colonies may sometimes rely on a single hyperactive overachiever.

Quite shocking and may undermine some “hard working like an ant” proverbs.

Thoughts:

Ants just pretended to work and relied on their reputation for so long.

Or maybe: ants who appear not to do any work in fact realize some very important but unrecognizable to us function. Like social media experts.

Sometimes only writing a post forces me to identify why something I read seems significant.

Just in time before Christmas: $50bn fraud

That’s the size of losses estimated by Bernie Madoff, who was just arrested.

Some say it might be less, like $20bn.

So much for “hedge funds are going down with dignity” (FT column a week ago):

In an awful year for everyone, hedge funds have remained a beacon of free market principles. It is small comfort, but it is something.

One amazing detail is that regulator was informed a decade ago that Madoff is running a giant Ponzi scheme:

A wrinkle in the case is the complaint dating back nine years to the SEC by a securities industry executive named Harry Markopolos. He contacted the agency’s Boston office in May 1999, telling SEC staff they should investigate Madoff because it was impossible for the kind of profit he was making to have been gained legally.

First Posche, now this. Not a good month for hedge funds.

Predictions are getting really bleak

From a meeting organized by Sequoia for its startups:

Upin, who knows a thing or two about money and markets, told the room that we are in the beginning of a long cycle, what he called a ?secular bear market.? This could be a 15-year problem, he said. This comment was accompanied by many slides that showed historical charts of previous recessions averaging 17-year cycles. He pointed out that the issue here is not the equity markets but the credit market, and that will take a long time to recover. He was ominous in warning the startups that this is a global issue, it is not a normal time, and is a significant risk not just to growth but to personal wealth.

As reported by gigaom.

Some depressing, but maybe inspiring advice for startups follows.

Banks collapsing, dominos falling ever closer to Poland

In Russia when they were explaining to me why people didn’t trust banks so much (topic was triggered by the low volumes of deposits in commercial privately owned banks) they said: “there’s been a banking crisis every two years, what would you expect. People are afraid that the bank can come down and take their savings with it”.

(fot. rosendahl@flickr)

I kind of took it in as a valid explanation but never fully internalized the notion – in Poland, when selecting a bank, hardly anyone actually considers whether it’s gonna go bankrupt or not. You never hear banks falling in Poland, except for some obscure “pocket banks” in the distant past of the early days of the market economy.

Even with the lest prestigious and smallest banks, trust used not to be really the major decision factor.

Maybe that is going to change soon. Just in (gazeta.pl):

Investors wondered who would be the next candidates for bankruptcy. Commerzbank, owner of the Polish BRE Group, fell almost 23 percent on the Frankfurt stock exchange. Trading of UniCredit (strategic shareholder of Pekao) was suspended altogether on the Milan stock exchange, after they fell 9%.

In December 2007 I quoted this passage I found in FT:

(…) two giant and interlinked bubbles burst simultaneously – one in property, one in credit – leaving banks and investors on the brink of bankruptcy, some hanging on by their fingertips

That was before the balls started to drop, and the mood was cautiously optimistic then.

It sure feels like something similar with regards to banking situation in Poland right now. Things are falling apart abroad, but at home everything is supposed to be in order, except for the performance of investment funds, which keep looking for the bottom – but this is generally accepted as an isolated and contained phenomenon.

Looking into the future of Polish financial sector in the next 6 to 12 months, maybe it’s time now to calculate in some turbulence.

China not in position to dominate the world

The buzz around China set to dominate the world sounds similar to previous predictions viewing Japan as the next superpower, in the not so distant past. China got a couple of things right, and all the others wrong. There is an insightful article in Washington Post by John Pomfret, who spent there 28 years. He highlights the most important issues facing the future growth.

Demographic trends will undermine China’s main competitive advantage:

No country is aging faster than the People’s Republic, which is on track to become the first nation in the world to get old before it gets rich. Because of the Communist Party’s notorious one-child-per-family policy, the average number of children born to a Chinese woman has dropped from 5.8 in the 1970s to 1.8 today — below the rate of 2.1 that would keep the population stable. Meanwhile, life expectancy has shot up, from just 35 in 1949 to more than 73 today. Economists worry that as the working-age population shrinks, labor costs will rise, significantly eroding one of China’s key competitive advantages.

China’s economy is going to be big by the virtue of size of its population, but living standards are low:

One important nuance we keep forgetting is the sheer size of China’s population: about 1.3 billion, more than four times that of the United States. China should have a big economy. But on a per capita basis, the country isn’t a dragon; it’s a medium-size lizard, sitting in 109th place on the International Monetary Fund’s World Economic Outlook Database, squarely between Swaziland and Morocco.

Environmental issues are out of hand:

By 2030, the nation will face a water shortage equal to the amount it consumes today; factories in the northwest have already been forced out of business because there just isn’t any water. Even Chinese government economists estimate that environmental troubles shave 10 percent off the country’s gross domestic product each year.

The environment is not innovation-friendly:

The place remains an authoritarian state run by a party that limits the free flow of information, stifles ingenuity and doesn’t understand how to self-correct. Blockbusters don’t grow out of the barrel of a gun. Neither do superpowers in the age of globalization.

These rather serious challenges should give everyone a pause before extrapolating China’s past growth to the infinite future.

Report: social lending in Poland

Report from our research on social lending in Poland is now publicly available.

You can download it from Gemius webpage:

English version of the report

Polish version of the report

The research was an idea I had after February Bootstrap meeting devoted to social lending. Initially I thought of writing a simple article, but then decided that it would be cool to have some original primary data. So I asked Gemius (leading Internet research agency in Poland) to participate, and then involved Accenture as well.

Below a couple of comments and slides from the report. (read more…)

US no longer the largest economy

GDP of Euro zone is now higher than the US due to sinking dollar. Goldman Sachs (Reuters):

Taking the gross domestic product of both economies in 2007, the combined GDP of the 15 countries which use the euro overtook that of the United States when the European currency surged to a record high of more than $1.56 per euro.

Krzysztof Rybinski on crisis in the US:

To cut the long story short, the Fed is trapped between the short-term need to support proper functioning of money and capital markets, and on the other hand it is aware of the potential moral hazard problem in the long run. I am finishing a book with my former NBP colleagues called “Gordian knots of the 21st century”. Among many conclusions in the book we offer this one:

US has committed a crime of short-termism. It will pay the price: US will lose global leadership, and the dollar will lose the global reserve currency status. Panic and ad hoc moves to weather the present storm make me more and more confident that the above scenario will happen faster than most people expect.

Yeah it was quite fast.

Poland reduced unemployment rate faster than anyone

This according to Gazeta Prawna, which quotes Jan Rutkowski, economist at World Bank.

Unemployment fell from 20.7% in 2004 to 8.5% lately. Spain, apparently, took 20 years to lower their high jobless rate.

I made a nice chart about labor market once, maybe I should update it.

“So the message from last week is that central banks have no game plan”

Comment in FT by Wolfgang Münchau:

It is a fully fledged solvency crisis that has arisen because two giant and interlinked bubbles burst simultaneously – one in property, one in credit – leaving banks and investors on the brink of bankruptcy, some hanging on by their fingertips. Yet there is nothing the central banks are offering at this stage to alleviate a solvency crisis.

Sounds rather dramatic – “some hanging on by their fingertips” – doesn’t it. Maybe we are currently going towards the edge macro-wise and we only start to realize.

Salaries quickly increasing, but for some quicker than for others

An article in Rzeczpospolita by Anna Cieślak. For some time I thought the income distribution would be getting more equal – it was an intuition based on the fact that many lower-paid jobs became understaffed, because people went to work abroad.

Construction workers, waiters, and others were in short supply and their salaries were raising fast. On the other hand, specialists are earning quite a lot already compared to the West, so there seems to be a smaller salary gap.

But the article suggests that the polar brackets of income are getting larger, meaning more people are earning both much less and much more than the average.

Share of people who earn 50% or less of an average salary increase to 19.9% in 2006, from 17.4% in 2002 and 13.4% in 1999.

On the other hand, share of people who earn 250% or more of an average salary increased to 3.8% in 2006 from 3.4% in 2002 and 3% in 1999.

However, the data is from 2006 and doesn’t reflect the latest revolution on the labor market due to emigration. The experts who are quoted say that the trend is actually against the low earners – these are specialists and middle-earners that are able to demand higher wages.

Also there is a note, though not elaborated, that taking into account non-labor income, the increase of discrepancies is now slower than before.

Warsaw Stock Exchange: record number of IPOs

63 IPOs this year, more than a record 1997. Importantly, it includes 8 foreign companies, and more are to debut till the end of this year. In Europe, WSE is second only to London market as far as number of IPOs are concerned.

And this not counting New Connect, a fast-track market for small but hot companies which opened in August and already lists 13 companies.

Poland edges towards stock-based development model (anglosaxon) instead of bank-centered (German), which I personally find very positive – more dynamism, openness and free market access to capital.

Education in Poland found better than in the UK

At least based on one small case study of a Polish boy, who after two years at British school, choose to return to Lodz. Average in Poland, he was considered a genius among UK peers and got tired of being “dumbed down”. Reported in Daily Mail.

I would have never expected that Polish education system would serve as a benchmark for any other country. But take one of the commenters in Daily Mail:

I’ve been teaching English in Poland for nearly 11 years now and can attest to the high standard of education here. My students know more about British history than I do and they’ve also read more of the British classics than I have. The system isn’t perfect – if cheating was an Olympic sport they’d take gold, silver and bronze – but it’s streaks ahead of the British system.

After school here kids don’t go home and veg out in front of the TV, they get extra lessons in English, French, or German, or in the run up to their “Matura” (high school leaving certificate) they can be found at the weekend getting private lessons in the sciences just so they can be sure of doing well and going on to the university of their choice.

Additionally, there are bilingual schools where pupils study the whole curriculum in French or English, or in some schools that aren’t completely bilingual, they offer certain classes, i.e. physics, in English. Can you imagine such a thing in the UK?

What’s best with it is that it’s totally true. Yet in Poland we’ve been complaining about education for ages.

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