EU-DIGEST

Why Intel was fined in Europe -- but not the U.S.

How come enticements Intel has used to get PC makers to install its chips over AMD's earned it a record fine from European antitrust regulators, yet are viewed as hunky dory by U.S. authorities? It comes down to differing philosophies about how a free market should function, says Luke Froeb, a former Federal Trade Commission official, and author of this economics text book. Europe maintains a strong belief in "ordoliberalism" -- which holds that many suppliers of a given product lead to healthy competition and a robust economy. But the USA believes corporations should be largely left alone to achieve economies of scale, and thus drive down prices, which ultimately benefits consumers. "Ordoliberalism is about the form of competition, whereas the U.S. approach is more about the effects of competition, " says Froeb, a professor at Vanderbilt's Owen Graduate School of Management. "The EU wants more competitors; whereas the US wants lower prices." By offering discounts to PC makers for shunning AMD chips, Intel drives down prices -- and hinders competition -- at least in the short run. "If AMD is forced out of business, then Intel may stop giving discounts, leading to consumer harm in the long run," says Froeb. "The EU is content to stop its analysis at the short run -- competitors are harmed -- whereas the US would want to see a good likelihood of long run harm to consumers to bring a case."

Labels: Economics, EU, Intel, Ordoliberalism, US

Economics: Depression, War, and Cold War - Challenging the Myths of Conflict and Prosperity - by Robert Higgs

*President Franklin D. Roosevelt’s New Deal did not end the Great Depression—it prolonged it. By shaking investors’ confidence in the security of their private property rights, the president’s laws and regulations discouraged the long-term private investment needed to revive the economy. Private investment remained low during World War II and only began to rise—for the first time since the 1920s—after the transition to a new administration in 1945. **The belief that World War II created prosperity is a historical myth that stems from the misinterpretation that war or large defense spending benefits the civilian economy. The draft might have reduced official unemployment numbers, but military service yielded little pay under harsh conditions and cannot be reasonably equated with jobs in the civilian sector. Moreover, few durable and non-defense capital goods were produced by the new labor force, and real personal consumption, adjusted for population growth, changed very little between 1941 and 1944.

Labels: Capitalism, Economics

Reverse Henry-Fordism-"There are no sellers without buyers"- by Ernest Partridge

That's the first law of practical economics. Everyone knows this to be true, whether or not one has ever taken a course in Economics. Everyone except, apparently, a few Ph.D economists who seem to forget this rule when they are hired by the Heritage Foundation, the American Enterprise Institute, etc., from which they migrate, back and forth, between offices in Republican/conservative administrations and these right-wing think tanks.

For these worthies, the "first law" is replaced by the dogmas of deregulation, "trickle-down" and market fundamentalism: impoverish the masses, throw money at the rich who will then invest it, and then "the invisible hand" of the unregulated free market will bring forth a cornucopia of goods and services. Never mind that there will be few if any buyers for these consumer goodies. Henry Ford saw the fallacy of such a policy when he raised the wages of his workers. His competitors in the auto industry were aghast. "Why did you do that?," they asked. Ford is said to have replied, "If I don't pay them more, who will buy my cars?"

Labels: Economics, EU, Globalization, US

Chaos US Economy - Central Banks Try To Bail Out US with $ 110 BILLION - BUT ITS ALL BAND-AID ECONOMICS - COMPLETE US CREDIT LOCKUP LOOMS

Stock markets swung violently overnight as traders digested the news of a linked, $US100 billion move by major central banks to try and stave off the tightening US credit crunch.Overnight word was leaked of the planned joint approach from the central banks and it appeared in the major financial media in Europe and the US before the market opened, hence the very sharp rise. But as the day wore on, investors had second thoughts, and at one stage the Dow fell back into the red to be down more than 50 points. It closed with a small gain of 41 points on the Dow. Driving the rethinking was news from three major US banks that they will be making bigger than expected write-downs and reporting losses on sub-prime mortgages and related debt in the fourth quarter. Bank of America, First Wachovia and PNC all said their fourth quarter results would lower after the bigger write-downs.Bank of America's new forecast contradicted a previous statement a few weeks ago that it got its write-downs right. The three joined UBS and Washington Mutual which this week announced write downs and losses of $US10.5 billion and $US1.6 billion respectively and revealed they had raised or were looking for $US15 billion and $US2.5 billion in new capital and capital saving deals (such as converting dividends to shares or cutting payouts). The reports told traders that whatever the central banks did, the problems remained, so sentiment switched.

Labels: Economic Crises, Economics, US

Dar es Salaam Meeting Nov 5 - 9: Church consultation to address ethics of economic growth

The consultation is a continuation of a process which was started at the World Council of Churches' (WCC) 8th assembly in Harare in 1998 and became known as Alternative Globalization Addressing People and Earth (AGAPE) since the 9th assembly in Porto Alegre. Ten years later, the issue of socio-economic justice is no less pressing, said the WCC. Especially in Africa, the gap between the rich and the poor has widened, with destructive consequences for peace and for the environment.

Discussions in Dar es Salaam will help to draw a "greed line" as practical guidance to Christians regarding sources of growth - such as speculation or expropriation - and the level or ratio of wealth accumulation that are unethical.

Labels: Christianity, Economics, Tanzania

Europe's Economic Choice: Hard or Soft? - by Honor Mahony

EU policy based on competitiveness will result in higher environmental and social costs in the future, while a cohesion-oriented policy will have a softer territorial impact but fewer economic benefits, a new study shows.

The competitiveness policy mix foresees Brussels further pursuing liberalisation of public services, supporting regions with the strongest potential, promoting more immigration to boost the work force and re-targeting the EU's budget away from farmers and towards R&D. Under this scenario, protection of the environment would be dictated by market forces.

Labels: Economics, EU

Russia: After Samara

EU leaders travel to Samara, Russia on May 18th in an attempt to resolve serious differences with Russia across a range of issues. A new EU-Russia treaty has been ruled out; any agreement that does come out of the meeting will be limited; and the best hope is for relations not to deteriorate further. Germany, which as president of the EU will lead discussions, will increasingly face a major foreign policy dilemma of its own: whether to pursue stronger bilateral relations with Russia, or to continue seeking a more complex EU-based policy over the coming years, but risk weakening Germany's own special relationship.

Labels: Economics, EU, Russia

EU constitution can help meet challenges - - by HANS-GERT PÖTTERING

"From the vantage point of 50 years on from the Rome treaties, I look back with pride, and I look forward with cautious optimism. From the modest beginnings of European unification's pioneering days, there has emerged, with unprecedented rapidity, a European Union of 27 states and almost 500 million people."

Labels: Economics, EU 50, Europe, Political

EU Economy 22 Years Behind U.S. - by Lucia Kubosova

The EU is 22 years behind the US on economic growth according to a new study, with several other economic indicators showing further gaps despite Europe's ambitious reform agenda to be praised by leaders at this week's summit. A report by Eurochambers, the Brussels-based business lobby, published on Monday (5 March) argues that the US reached the current EU rate of GDP per capita in 1985 and its levels in employment and research investment almost 30 years ago.

Economic growth, jobs and innovation feature as top priorities of the so-called Lisbon Agenda - agreed by EU leaders in 2000 - with the original aim for Europe to become the most competitive economy by 2010 and with the US seen as its key competitor. Note EU-Digest: One should always question the motives behind such studies and the criteria used to arrive at its outcome.

Labels: Economics

G7 may short-change Europe again -- up to Japan - by Brian Love

The Europeans go into G7 talks in Essen next weekend looking to put a stop to the yen's slide but could leave the German industrial city with even less than the last time they tried, in Singapore in September. The ball is now in Japan's court, and Tokyo has good reason to do something about the yen, though it has as much freedom as it needs not to do so at the talks on Friday and Saturday in Essen, economists and currency market strategists say.

The yen slide versus the euro in the last year alone is four times as big as the decline against the dollar, making the loss of European price-competitiveness in world markets potentially far bigger than for the United States, for now in any case. Europe has a valid case and the yen's slide will become more of an issue if it hurts the United States, but Europe has done a poor job of providing evidence to justify collective action now by the G7, Jen and many others say.

Labels: Economics