April 2007 witnessed the first gathering of globe’s largest producers of natural gas in Doha, Qatar. While many of dignitaries attending Doha meeting knew each other from meetings of another Cartel; OPEC, there was one new addition to their club: Russia. Many including Qatari minister of oil emphasized that Doha meeting was not a step toward creating a cartel[1]. Still the gathering itself increased the discomfort of those concerned with the consequences of establishing a natural gas cartel similar to OPEC[2]. Are their concerns justifiable?
If one believes the statements of those who attend Doha meeting, they were not intended to create a cartel. However they were seeking to clarify the rules of the game and have a cooperative approach to international market of natural gas. Particularly Russian representative was insisting that his country is not in favor of a natural gas cartel[3]. The author intends to believe him.
During last years Russia has utilized its position as a monopolist supplier of European natural gas market to gain advantages of a political nature. A cartel is formed to increase profitability and to influence market price by determining a profit maximizing output. Its success depends greatly on its member commitment their assigned quota[4]. That commitment would restrain Russia liberal use of its monopolist position in Europe. Thus one wonders why Russia should seek to help in establishing a cartel at all.
On the other hand it cannot be denied that Russia has learnt a lot from its dealing with European buyers and has enjoyed the political advantages of its position. It is a fact that Russia is seeking to expand its presence in international gas market. Recently it was announced that Russian companies will build Iran-Pakistan-India gas pipeline, nicknamed Peace Pipeline. Dominating supplies to West, it seems Russia would like to dominate the supplies to East as well. Thus the main question is not that if a cartel of natural gas producers is in cards. It is what role Russia is preparing itself to play in this market, that of a game player or a Stackelberg leader?
[1] USA TODAY
[2] BBC April 9th 2007
[3] USA TODAY
[4] Carlton D. W. & Perloff J. M., Modern Industrial Organization. 4th Edition Addison Wesley.
Sunday, April 29, 2007
Conservatism and Progressivism
Have you ever asked yourself what makes one progressive and the other conservative? Why we can call some politicians reformers and some conservatives? What is the difference about the individuals belonging to these two seemingly different camps?
Reading history one cannot help noticing the paradoxical nature of individuals who advocate the ideals of these two different streams. For example let’s look at Petian and de Gaulle. One is the ruler of Vichy who advocated the ideals of extreme right, governed as a dictators and collaborated with invaders of his country. The other was a rebellious brigadier who went to exile to fight that invader. Petain joined those who blamed democracy for France’s defeat in 1940. De Gaulle never accepted power from any institution but democratic ones.
Two men could not be more different as individuals. Petain married a divorcee in a government office and his marriage was not blessed by the Church until he became the Head of French state. Although he headed an authoritarian regime that advocated some of Catholic Church principles, he himself could not be considered a devoted son of Church[1]. On the other hand de Gaulle was raised by devoted Catholic parents, married a devoted Catholic woman and lived his life according to standards of a catholic family. Yet he advocated democracy.
Today there are many such individuals in any establishment including socio-economic institutions of Iran. One wonders where is the line that divides progressive forces of a society and the forces that stall its progress and growth. May be it is time to measure them with regards to their accomplishments and achievements, rather than their beliefs. Prejudice from any group and any side is certainly a reactionary attitude.
[1] See Charles Williams, 2005, Petain: How the Hero of France Became a Convicted Traitor and Changed the Course of History, Palgrave Macmillan.
Reading history one cannot help noticing the paradoxical nature of individuals who advocate the ideals of these two different streams. For example let’s look at Petian and de Gaulle. One is the ruler of Vichy who advocated the ideals of extreme right, governed as a dictators and collaborated with invaders of his country. The other was a rebellious brigadier who went to exile to fight that invader. Petain joined those who blamed democracy for France’s defeat in 1940. De Gaulle never accepted power from any institution but democratic ones.
Two men could not be more different as individuals. Petain married a divorcee in a government office and his marriage was not blessed by the Church until he became the Head of French state. Although he headed an authoritarian regime that advocated some of Catholic Church principles, he himself could not be considered a devoted son of Church[1]. On the other hand de Gaulle was raised by devoted Catholic parents, married a devoted Catholic woman and lived his life according to standards of a catholic family. Yet he advocated democracy.
Today there are many such individuals in any establishment including socio-economic institutions of Iran. One wonders where is the line that divides progressive forces of a society and the forces that stall its progress and growth. May be it is time to measure them with regards to their accomplishments and achievements, rather than their beliefs. Prejudice from any group and any side is certainly a reactionary attitude.
[1] See Charles Williams, 2005, Petain: How the Hero of France Became a Convicted Traitor and Changed the Course of History, Palgrave Macmillan.
Friday, April 27, 2007
Boris Nikolayevich Yeltsin
This week Russia said a controversial farewell to one of his most controversial figures. Boris Yeltsin the first elected President of Russia who helped to bring down the soviet system. In State Duma, Russian version of lower house, communist representatives refused to join in the moment of silence calling him the man who betrayed the fatherland. President Putin was full of praise for the man who “sincerely tried to do everything possible to make the lives of millions of Russians better.”
Good or Bad, Yeltsin’s legacy is not limited to Russia. Russian government handling of foreign aids during his tenure has encouraged debating governance and has highlighted the dramatic way that corruption derails growth and development. It also has motivated many to study the role of institutions in transition economies. It also emphasized that a country could move toward free market in ways different than what other imagines. Peter Boettke (1999) studying Post Soviet Russia found out that the reality of Russian economy has diverged at “rules of the game” level as well as “policy within rules” level from what others had expected at first place. Still we are astonished by Russian economy and there is so much to learn about it.
Historically there is one ironic point about Boris Nikolayevich. Building Soviet system Stalin ensured that no one could ever become a threat to its existence. In his paranoia Stalin murdered opposition intellectuals and Communist party ideologists alike. At the end that robustly built system with KGB in charge of its checks and controls, with so many bright minds in its service and so much influence over sources of power was brought down partially by a drunkard. If that is not ironic I do not know what it is. It sure is very Russian.
Good or Bad, Yeltsin’s legacy is not limited to Russia. Russian government handling of foreign aids during his tenure has encouraged debating governance and has highlighted the dramatic way that corruption derails growth and development. It also has motivated many to study the role of institutions in transition economies. It also emphasized that a country could move toward free market in ways different than what other imagines. Peter Boettke (1999) studying Post Soviet Russia found out that the reality of Russian economy has diverged at “rules of the game” level as well as “policy within rules” level from what others had expected at first place. Still we are astonished by Russian economy and there is so much to learn about it.
Historically there is one ironic point about Boris Nikolayevich. Building Soviet system Stalin ensured that no one could ever become a threat to its existence. In his paranoia Stalin murdered opposition intellectuals and Communist party ideologists alike. At the end that robustly built system with KGB in charge of its checks and controls, with so many bright minds in its service and so much influence over sources of power was brought down partially by a drunkard. If that is not ironic I do not know what it is. It sure is very Russian.
Wednesday, April 25, 2007
Resign!
European Union Parliament called for his resignation:
even The Economist is asking for his resignation:
Also 40 former executives from the World Bank:
And I love The Economist KAL's Cartoon.
Wednesday, April 18, 2007
Milton Friedman's Comments on The World Bank & IMF
I recently read one of Milton Friedman’s s speeches. “Why Government is the Problem” adopted from his 1991 Wriston Lecture published by Hoover Institution in 1993. In highlighting the differences between public endeavors and private enterprises and why government is actually the problem he mentioned IMF and the World Bank as examples. I quote:
“The general rule is that government undertakes an activity that seems desirable at the time. Once the activity begins, where it proves desirable or not, people in both government and the private sector acquires a vested interest in it. If the initial reason for undertaking for undertaking the activity disappears, they have a strong incentive to find another justification for its continued existence.
A clear example in the international sphere is the International Monetary Fund (IMF), which was established to administer a system of fixed exchange rates, whether that is a good system or a bad system beside the point. In 1971, after President Nixon closed the gold window, the fixed exchange rate system collapsed and was replaced by a system of floating exchange rate. The IMF’s function disappeared, yet, instead of being disbanded, it changed its function and expanded. It became a relief agency for backward countries and proceeded to dig deeper into the pockets of its sponsors to finance its new activities. At Bretton Woods, two agencies were established: one to administer a fixed exchange rate system and the other, the World Bank, to perform the function of promoting development. Now you have two agencies to promote development, both of them, in my opinion doing far more harm than good.[1]”
One wonders if the public sector’s love for its institutes is extended to the agents, whom it appointed to oversee them. Right now it seems public sector’s reason to appoint Dr. Wolfowitz as the president of the World Bank has vanished. However the question is if public sector has a “vested interest” in his person as the president of this organization. Financial Times recent story is interesting: Wolfowitz deputy urges him to quit.
[1] It is Friedman’s idea. Many would disagree.
“The general rule is that government undertakes an activity that seems desirable at the time. Once the activity begins, where it proves desirable or not, people in both government and the private sector acquires a vested interest in it. If the initial reason for undertaking for undertaking the activity disappears, they have a strong incentive to find another justification for its continued existence.
A clear example in the international sphere is the International Monetary Fund (IMF), which was established to administer a system of fixed exchange rates, whether that is a good system or a bad system beside the point. In 1971, after President Nixon closed the gold window, the fixed exchange rate system collapsed and was replaced by a system of floating exchange rate. The IMF’s function disappeared, yet, instead of being disbanded, it changed its function and expanded. It became a relief agency for backward countries and proceeded to dig deeper into the pockets of its sponsors to finance its new activities. At Bretton Woods, two agencies were established: one to administer a fixed exchange rate system and the other, the World Bank, to perform the function of promoting development. Now you have two agencies to promote development, both of them, in my opinion doing far more harm than good.[1]”
One wonders if the public sector’s love for its institutes is extended to the agents, whom it appointed to oversee them. Right now it seems public sector’s reason to appoint Dr. Wolfowitz as the president of the World Bank has vanished. However the question is if public sector has a “vested interest” in his person as the president of this organization. Financial Times recent story is interesting: Wolfowitz deputy urges him to quit.
[1] It is Friedman’s idea. Many would disagree.
A Documentary on Texan Muslims
I found this movie on Google, about Texan Muslims. I found it very interesting.
Tuesday, April 17, 2007
Virginia Tech
Virginia Tech, I still remember its magnificent buildings, Drill Field and Pamplin Hall, where Economics department is located. It is such a horrible day to learn that these places so glamorously associated with so many innocent and fond memories for generations of students will remind many of horrors of April 16, 2007. As an alumnus my thoughts are with families and I pray for them to find peace.
Subscribe to:
Posts (Atom)