Sunder’s List: The Economist Edition

German Logo of the ECB.


India went through its own version of socialist hell post-independence. We are still bearing the consequences spawned by our embrace of a misguided ideology. The young don’t remember it. But now, thanks to the French Socialists, they can get a run-by-run on what happens when socialism afflicts a country. “Mr Hollande seems to want to put a break on the Schumpeterian forces of creative destruction in order to conserve the country’s business landscape in aspic. Michel Sapin, the labour minister, has promised to make it so expensive for companies to lay off workers that it will no longer be worth their while. Among the party’s most popular campaign promises was to tax incomes of more than €1m at a marginal rate of 75%. The Socialists are unlikely to be terribly successful at preventing the destruction of jobs, but they may be all too effective, however unintentionally, at stifling job creation. Already, top foreign executives no longer want to join French firms. Why would anyone want to start a business, invest and succeed in the most taxed country in the world?” (Economist)

The Euro crisis explained by a simple question: What stands behind the euro? Germany, the European Central Bank (ECB), or nothing at all? The euro is a single currency without a single government, and the ECB cannot lend to sovereigns. European countries must surrender much economic sovereignty before Germans will trust them to share their bank account. The Germans are already debating the future of the European project, including how to make it more democratically accountable. Others would be wise to think beyond just begging them for more unconditional support. (Economist)

On why the US Fed did not launch QE3: The pessimistic answer is that it cannot do more. In theory, QE allows unlimited purchases of debt, of many different flavours but risks a bigger balance-sheet that is harder to shrink later; impaired markets; and financial instability, a euphemism for bubbles. (Economist)

Is Philippines the new back-office of the world? Last year the Philippines even overtook India, long the biggest call-centre operator in the world, in “voice-related services”. The country now employs about 400,000 people at call centres, India only 350,000. Infosys and Wipro, as well as scores of other Indian firms, now have substantial operations there. And they aren’t drawn to Manila by cheap labour. Wages in the Philippines are slightly higher than in India since the Filipino accent commands a premium. (Economist)

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