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Tag Archives: EU

Brexit Reflections

I was taken by surprise last night to learn that the brexit referendum passed.
It makes little sense to me that the UK would quit the EU when they can get what they want while still enjoying membership benefits.

If immigration is what concerns them most, land-locked countries like Hungary with much less influence have been successful in enforcing their own rules while remaining in the EU.  How much easier would it be for the island UK, a major world economy with huge clout to do the same and get away with it.  Whether it’s keeping out/deporting Pakistanis and Poles or avoiding bailing out broke Greeks, the national government can do what it needs to and the rest of Europe can react as it will.  That’s pretty much what Viktor Orban has done in Hungary.
The “bureaucrats in Brussels” so often derided as international tyrants can’t make Britain do anything it doesn’t want to, except threaten them with what they just did to themselves.

That’s what I don’t get.  If the underlying problem is British national leaders failing to act, then quitting the EU will just make things worse and not solve any of their problems.
If this goes through, England will lose Scotland and maybe have new conflict in Northern Ireland. The English will have to renegotiate trade deals across the planet with far less leverage than they had before. I don’t see how anyone, rich or poor gains from this.
This is a huge mistake especially when much smarter strategies were available.
Hopefully they have a revote or it gets hung up in parliament.

I sympathize very much with the people in the UK voting ‘leave’ since they are reacting to so many problems that are tiresomely familiar in the US. I know how it feels to compete for jobs against foreigners who depress wages and who are allowed to hire preferentially while people of my ethnicity are not. The injustice of being sold out by the elites of your own people is infuriating. But I suspect the British public is falling for a scam by scapegoating a council of paper-pushers in Brussels instead of bending their own leaders to their will. They have much in common with the movement growing around Trump and Sanders style populism in the USA, but I don’t see a pragmatic guy like Trump making stupid self-destructive trade moves that defy common sense just to spite “the globalists.”
That said, I hope this serves as a warning to the EU, especially Germany that it has to change its policies if it wants other nations to cooperate. The Germans are the dominant economic power in Europe but they have overplayed their hand nevertheless. I am hoping this will lead to the downfall of Merkel’s equalist enlightenment school of politics and to the emergence of a “Europe first” mentality.
If Germany and Brussels bureaucrats do not change their ways, they may lose the EU and once these kinds of things fall apart, they cannot easily be put back together.
If this situation spirals out of control, with other nations following Britain’s lead, we need only fast forward a few decades to see the re-emergence of wars between European powers.

Brookings Institute Talk on Russia and America

I attended a talk today at the Brookings Institution about the future of Russian-American relations.

Naturally there was considerable focus on current issues such as Syria and Snowden being given asylum, and how it might affect the upcoming G20 summit.

I didn’t wonder about it much, really.  There’s nothing in Syria that’s central to Russian interests and Snowden, while a nasty diplomatic slap in the face, does nothing to change the larger situation.

I was more interested in bigger political and economic developments and where they might be headed.

Interestingly, the experts pretty much all agreed that the present political order in Russia is dependent on Putin’s cult of personality – that without his influence there would be nothing to hold Russia’s oligarchs together.
And – there is no plan for succession should something happen to Putin tomorrow…

They addressed how Putin’s main objective with his anti-American gestures is to boost his popularity at home.   His anti-American posturing has a huge appeal to his base – Russia’s working classes.
The urban middle and upper middle class has little loyalty to Putin, often protesting him in Moscow and St. Petersburg, so it’s only natural Russia’s ruler tailors his image to the vast majority he relies on.

While Syria is, relatively speaking, a sideshow, the fate of former Soviet republics is not.  Since the collapse of the Soviet Union, among Russia’s first concerns is to bring countries like Ukraine closer to Moscow and prevent them from aligning with Western Europe.

If we look at the numbers, though, it seems to me Russia’s agenda is doomed to fail.

Russia’s entire economy is worth 1.8 trillion.  This is enough to make it one of the world’s bigger economies, but to put Russia’s imperial goals in perspective, Italy’s economy is considerably bigger at 2.2 trillion with 1/3rd the population.

Let’s pretend we are Ukraine for a moment:

Which would we align with:  A 1.8 trillion Russia or a 17 trillion European Union?!

Not to mention, Russia’s economy to this day is based heavily on commodities like natural gas rather than skills or tech.
Indeed, one subject to arise during the question and answer session with the experts was brain drain from Russia…

With no Soviet Union any more that can keep their best talent captive, skilled Russians are increasingly ditching their home country for places like Silicon Valley.  And Russia itself with its feudal oligarchs and powerful crime lords tends to be very unfriendly to commerce.
So long as Russian small businessmen are parasitized by protection rackets and foreign investors are confronted with corruption, their economy is not likely to become truly “modern” any time soon.

A main theme of the talk was to ask what Putin really wants and how to get Russia to work more closely with US objectives.  Even the experts seemed to regard Putin as a mystic, inscrutable, Eastern Czar.
If we look at the numbers, though, it seems clear why the US can’t seem to get Russia to budge.

Relatively speaking, the US really is not that important to Russian interests so it simply doesn’t have that much leverage.
The vast majority of Russia’s foreign trade is with the European Union and with China in a distant second place.   Commerce with the US takes a comparatively puny 4th or 5th place with just a few percent of the total.  Also, the US is just about on the other side of the planet from Russia’s major cities while China and Europe are much more immediate neighbors.
It really shouldn’t come as a surprise that US requests take a back seat compared to more immediate concerns.  What decisive advantage does America offer in exchange for Putin’s cooperation?  Putin is a pragmatist, so clearly what he’s being offered isn’t worth as much as he gets from slighting the US to boost his domestic approval ratings.

The economic reality on the ground is that Russia is already just a big commodity provider for the EU, and thus in every meaningful sense, already part of Europe.
If we look at the facts, Russia as a modern great power, is pure fantasy.

During the talk, there was mention of a new, more Western generation of Russians just waiting for the older oligarchs to die off.  Such a generation is bound to reconcile Russia’s political reality with the economic reality.
Instead of trying to keep states like Ukraine from being sucked into Europe, Russia will itself be sucked into the Euro zone.

Even if Russia somehow remains an aloof oligarchic kleptocracy, it will still be useful for its resources as a lesser partner of Europe.

Graph Russia Trade Partners

Argentina: Defy the Creditors and Get Away With It

Rising Cost Of Electricity In EU

Europe’s manufacturers are rapidly losing ground to US rivals because of soaring energy costs and the failure of the continent’s governments to be “rational” about nuclear power and shale gas, the head of one of the world’s biggest chemicals groups has warned. Link

The result is chaos to the economic well-being of the EU nations. Even in rock-solid Germany, up to 15% of the populace is now believed to be in “fuel poverty” — defined by governments as needing to spend more than 10% of the total household income on electricity and gas. Some 600,000 low-income Germans are now being cut off by their power companies annually, a number expected to increase as a never-ending stream of global-warming projects in the pipeline wallops customers. In the U.K., which has laboured under the most politically correct climate leadership in the world, some 12 million people are already in fuel poverty, 900,000 of them in wind-infested Scotland alone, and the U.K. has now entered a double-dip recession.

The U.S., in contrast, will see power rates decline starting next year, according to the U.S. Energy Information Administration, dropping by more than 22% by the end of the decade and then staying flat to 2035. Why the fall? Mainly because the U.S. will rely overwhelmingly on fossil fuels in the years ahead, not just coal, which dominates the current power system, but increasingly natural gas, which is expected to account for 60% of all new generating capacity in the future. Thanks to fracking, the U.S. effectively has limitless amounts of inexpensive natural gas to add to its limitless coal. Link

Concern over rising energy bills has prompted a surge in interest in energy efficient measures among home buyers in the UK, it is claimed.

Over four fifths, 82%, of buyers now actively look for energy efficient features in a new home, according to research by Smart New Homes.

The vast majority of those, some 77%, said that saving money on their energy bills is their main motivation, compared to just 12% who prioritise concern over the environment. Link

But now it’s all over. Despite the signs, protests and pickets, ThyssenKrupp, Germany’s largest steelmaker, sold its Krefeld stainless steel mill to Finnish competitor Outukumpu two weeks ago. The new owner plans to shut down production by the end of next year, leaving more than 400 workers without a job. The economic loss to this stricken city on the lower Rhine will be significant.

The closing of the Krefeld mill cannot be blamed on low-wage competition from the Far East or mismanagement at ThyssenKrupp’s Essen headquarters, but rather on the misguided policies of the German government. That, at least, is the view held by those affected by the closing. Since Chancellor Angela Merkel’s government abruptly decided to phase out nuclear energy last spring in the wake of the nuclear disaster in Fukushima, Japan, the situation for industries that consume a lot of electricity has become much more tenuous.

Energy prices are rising and the risk of power outages is growing. But the urgently needed expansion of the grid, as well as the development of replacement power plants and renewable energy sources is progressing very slowly. A growing number of economic experts, business executives and union leaders are putting the blame squarely on the shoulders of Merkel’s coalition, which pairs her conservatives with the business-friendly Free Democrats (FDP). The government, they say, has expedited de-industrialization.

Since Merkel’s new energy policy was introduced, aluminum manufacturer Norsk Hydro has registered half a million euros in losses at its German plants because of power fluctuations. Even minimal power outages can cause the company’s sensitive rollers to seize up.

The losses could have been even greater if Hydro hadn’t already substantially cut back production in Neuss, near Düsseldorf. For more than two years, two production lines have been shut down completely, and many of the plant’s 450 workers have been working reduced hours since then. It is not, however, the result of fewer orders being placed with the Neuss plant.

Electricity and CO2-emissions costs are so high that the energy-intensive processes in the aluminum smelters is no longer profitable. Energy eats up about 50 percent of costs.

Link

European Wind Energy Association 2010-2050 Link

European brain drain: European workers living in the US

What’s not so funny for European policymakers is that this lab isn’t in Brussels or Paris or any other E.U. capital. It’s at the New York University (N.Y.U.) School of Medicine. All over the U.S., such research facilities are teeming with bright, young Europeans, lured by America’s generous funding, better facilities and meritocratic culture. “In Italy,” says Dorrello, “I’d be earning maybe €900 a month.” At N.Y.U., he gets nearly three times that. “The U.S. is a place where you can do very good science, and if you’re a scientist, you try to go to the best place,” says Pagano, who likens researcher migration to football transfers. “In soccer, if you’re great, another team can buy you.” Science is the same, and the big buyer is the U.S.: in 2000, the U.S. spent €287 billion on research and development, €121 billion more than the E.U. No wonder the U.S. has 78% more high-tech patents per capita than Europe, which is especially weak in the IT and biotech sectors.

Three years ago, E.U. leaders vowed to make the union “the most competitive and dynamic knowledge-based economy in the world” by 2010. But one of the most worrying signs of their failure is the continued drain of Europe’s best and brightest scientific brains, who finish their degrees and pursue careers in the U.S. Some 400,000 European science and technology graduates now live in the U.S. and thousands more leave each year. A survey released in November by the European Commission found that only 13% of European science professionals working abroad currently intend to return home.  Link

Link with statistics

One of the many reasons I have no faith in the EU:

EU bans claim that water can prevent dehydration

EU officials concluded that, following a three-year investigation, there was no evidence to prove the previously undisputed fact.

The original study is here, and yes we do get fluids from things other than water. The point is that innovation, adaption and commerce is difficult in an environment where it takes a special commission 3 years to figure out what people have known for centuries

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