End of Economic Crisis? You choose

From the U.S. we have some numbers and various interpretations.

reported unemployment figures for every month since begining of recesssion

National Public Radio | July 5 2009:
Is The Worst Over? Most Economists Say Yes

Nouriel Roubini | Jul 2, 2009
U.S. Job Report Suggests that Green Shoots are Mostly Yellow Weeds
“The June employment report suggests that the alleged ‘green shoots’ are mostly yellow weeds that may eventually turn into brown manure…”
(I read this quote and I started laughing)

The Festival of Tordenskjold 2009

In my last post I said I was going to the Festival of Tordenskjold. Here is a little more about who was this guy Tordenskiold. I have to say I had a great weekend. I found it very interesting because I have been following the preparation for several days. I have talked to over 40 people and learn many things about their networks and how they work. I aim at publishing the results if you’re interested.
I calculated myself in the three days and I think there were 35.000 visitors, but I don’t have the official data. But I know there were around 1000 volunteers, the majority of them dressed for the occasion in 18th century clothes.
Here is me and great Tordenskjold, I (and my wife, now shown in picture) were dressed as peasants.

Tordenskjold and me at the end of Friday's play

Here are more pictures of the festival. In photo doesn’t look that big, but the big boat a replica of the time, was really impressive. At least for a non-ocean guy like me.

Can a festival save you?

Yesterday I spent the day doing some qualitative research in Frederikshavn. They’re preparing the Tordenskjold Festival. I think it’s going to be pretty cool. I will be there. I interviewed and talked to a dozen of people. People love this city project. It’s the whole community engaged. I might give you a summary next week. For this 12th edition, they expect 40.000 visitors.

Looking at other numbers, the picture does not look that good. We all know that tourism figures all around the world are doing bad. Here the thing seems to come in the worse moment. Since 2003 the tourists coming by ferry (most Norwegians and Swedish) has been declining from 3.545.000 to a around 2.000.000, with a steady yearly decrease. This year will probably be the worse.

A worker in a downtown restaurant was telling me that the last year they made, 35-40.000 dkk (5.000 €) a day. Now they’re down to 7.000 dkk a day. That’s quite a thumping. Needless to say, they’re quite excited about the Tordenskiold Festival starting tomorrow.

1st Year Presentation

At Aalborg University PhD students are required to give a 1 Year progress report. A professor (different from the supervisor/s) acts as opponent. A discussion about the project usually follows with other professors and students. In my case there were 15 people and I obtained critical feedback for my project, from professors and students. For these I’m very grateful.

Here it is my presentation, not all slides were presented as I didn’t want to surpass the 25 minutes. I had some technical problems, but of course with presentations, we always have to count on Murphy’s Law.

Anyways, I welcome any other idea.

Economic crisis… blame the MBA’s?

This week I listened to an article on NPR (American public radio) which suggests that the MBA’s were highly implicated in this economic crisis (click on “listen now” 7 min. article). If you consider that all CEO’s, CFO’s, economic planners, and many influential politicians (including presidents) had earned their MBA’s from these prestigious schools, have they not been infected with some type of hard core capitalist virus? Have they not been thinking about making profits instead of creating real wealth for the society?
Of course, the professors of business schools declare in their interviews how stupid it is to put the blame on them. Actually for me, it does not make a lot of sense to blame their education to what has been happening all around the world and all types of industries. However I would say they are guilty of something.
First of all, I should say I probably have a bias. My background is in business studies and economics, however I mingle with many economist, who having been disenchant with the mainstream economic have entered the realm of Economic Geography. When I could have done an MBA in United States or Spain, I preferred to go to Scandinavia to do a Masters of Innovation and Entrepreneurship, with a good dosage of Evolutionary Economics.
Where I think they’re guilty is on not having told their student enough about economic cycles (see my previous post to get an idea). That businesses and economies come and go, surge and plunge. I have several friend in the US and Spain with MBA’s, I know their classes and I believe this is somewhat missing. I mean, it’s something really basic. You don’t grow in a linear way. Economic growth, should be more understood as Economic evolution. You can’t make a business plan of how a business it’s going to evolve. Stories that have been told for ever (the 7 fat and 7 lean cows anyone?) were discontinued. This never ending economic growth mentality, not only happened in the mentality all across the industries, also happened with the Goverments, and the majority of the citizens.
So NPR’s article while is wrong, goes in the right direction. However, many blame the economists for having created all this bubble, and not having predicted it. But I actually believe the problem is that we don’t have, in our business schools, society and government, enough real economics.

Institutions, Innovation and Development… now

A few days ago, I joined the Workshop Institutions, Innovation and Development. I missed some sessions, but overall I can say it was an outstanding activity. I enjoyed the paper of Lundvall et al. on how looking at the systems of innovation, this was presented by Cristina Chaminade (she’s from Spain too!). The following discussion seemed very stimulating too.
Also J. Fansberg made an engaging presentation of his findings, linking the relationship between some indicators and economic development. Education, Finance, Tech, and other usual suspects were there. Two that seemed interesting to me were the importance of social cohesion (trust, tolerance, civic engagement, etc.) and that “openess to trade” has no relationship with economic development. As he said that’s a blow to the Washington Consensus. There were other geographical and sociological indicators that I would not mention until are published. But I would say that they were quite controversial.
Overall there were good presentations as you can see in the link I provided above. But probably the best one was the one form Carlota Perez. (another Spanish one!, ok Venezuela)
She focused on the financial crisis linked to her famous techno-economic paradigms. I included some of these graphs in a paper conference I participated a year ago. It’s still so relevant that I’m going to put her whole presentation, this was for and ICT conference in San Francisco. The one she did last week in this workshop focused more on the financial aspects, such as the “financial casino” vs. “real wealth creation”. As J. Fansberg pointed out, it can not be a coincidence that we have at the same time all these crises all across the public and private sector, including for example the car industry. We’re in a turning point in history. You can see slides 24-27 to better have a picture.

Spain hits 4 million unemployed

Today, my native country Spain, officially reaches for the first time in its history the 4 Million figure of unemployed.  This is a devastating number of people, no matter if this is just a psychological number or if is correctly measured.

I remember in the early 90’s when it reached the 3 million mark. It was a shock for the nation, it was a pretty scary moment. I was in high-school so it did not affect me directly but I knew that the family business was going through a hard time.

Now we reach 4 million. There has been a lot of immigration increasing the total population, so maybe it’s around the same percentage we had, although it’s hard to measure as methodologies have changed.

Spain until recently has been admired in Europe. It was seen as one of the fastest growing and most dynamic economies. Now it’s becoming the ugly duck of western Europe. For some analysts might even be the canary in the coalmine of deflation (perhaps a little exaggerated article for my taste). Reading the commentaries in the Spanish newspapers, now it’s all critics for the Government, which I positioned in the political right (with a little flavor of the left). Everyone is mad at Zapatero now. Some are saying go left, other go right.

For my part, instead of criticizing I would give to suggest two concrete policy suggestions for Spain. I might be wrong, many times I am, but this is what I feel today:
1. Try to adapt some type of flexicurity model. The concept was originated here in Denmark, and after living here almost 2 years I have been convinced of the wonders of it. Of course you can’t “cut & paste” it, you have to adapt it to the Spanish socioeconomic background, but I think it should be worth to explore the possibility of trying it. In fact I wish some researchers or policy makers could come here to my University where they have the Centre for Labour Market Research at Aalborg University (CARMA). I’m convinced that Spain needs some flexibility for the labour market. As I said, I come from a family who has been involved in the creation of several businesses. I’m not saying we’re the perfect firms, but we have created overtime good services for the people and employment. We have also suffered tremendously when the businesses were not doing good. Some times it came for the difficult to hire someone or fire someone. In Spain, compared to other countries it’s quite hard to layout someone, even with more than accepted reasons in other countries. Another leg of the flexicurity tripod, it’s the embarrassing the Spanish official “Oficina de Empleo”, which it’s just a bureaucrat machine, that in many cases has very nice civil servants, but it provides the worst service for everyone. They should be able to find employment in an effective way. I wonder what kind of incentives should be given to the ones running the show. Also it’s important that the unemployed (especially the recently) received economic support until they find another job. I also find useful that the employed buy some type of subsidised insurance in case they loose their job (in Denmark this was used to do through the unions).

2. Incentive the renting in the housing market. In Spain we have the highest rate of home owners in the world. In order to do it, for some this could be very unpopular measures such as taxing empty housing in bigger cities (specially among banks, ha!), besides other measures. The other possibility of course (very reasonable too) it’s to let the banks and housing developers to bankrupt so the market stabilizes. That means not a single cent for any type of corporate bailouts. Anyways, helping to boost the housing market with rent could cover several possibilities: a) People would be more flexible to move to find a job, b) Speculation would decrease which highly has affected the economy-employment c) many people could save their homes upon renting a place they can’t afford (for that it would be more than helpful to have some agreements with the bank (giving the mortgage) and government as some type of collateral), d) many young people could start their own families and this would revert in the economy. I talked a little bit more about this in a past post also talking about housing in Spain and America.

American Association of Geographers 2009 Las Vegas Conference

AAG Conference 2009. This week (22-27 March) has been an excellent learning and networking experience. All imaginable subjects related to geography had their opportunity to show their state-of-the-art. I enjoyed many good presentations and debates in the field of economic geography, and many other interesting areas. There were 6500 geographers, from 60 countries (1500 non-American).
The only thing that I missed was that this year in Las Vegas (2008 Boston, 2010 Washington D.C.) there were not enough entertainment activities in the area. Just kidding.
This was my presentation, I was one of the 15 people who presented on the strand of Entrepreneurship and Geography, part of the Economic Geography section.
I have learnt many things, and I will give you a summary of things that impressed me the most, especially for my research area. But this will be in 2 weeks, right now I’m on vacation. I’m in California visiting good friends.

A Theory of Local Entrepreneurship in the Knowledge Economy by P.A. Julien (2007)

I’m co-teaching the class of “Theories of the Firm and of Entrepreneurship” with Søren Kerndrup. Actually he’s the professor and I’m the apprentice. He always has the right readings, and suggested this book for the two classes I teach. This class is directed for engineers or geographers without a limited education on economics and business studies. So, my job is trying to teach them some of it, and I think this book is very good to do that.
I was about to comment on this book in Amazon, but I had cold feet when I saw that no one has commented yet, and I did not want to do it anonymously. This is what I was going to say:

4 starts (out of 5)
Title: Thorough & objective about entrepreneurship and local development
Text: In my opinion Julien gets to the core of entrepreneurship with this book. He presents theoretical concepts in a clear way and it’s probably one of the best books to understand entrepreneurship. I don’t fully agree with some of the conclusions of the book, but he has really made me think about many things I had never considered. Overall very good.

By the way, you can find it in Google books or even better in Scribd, which is REALLY nice in order to cut and paste the graphs for the power point presentations (using ctrl+prt sc and pasting it in microsoft paint).

This semester I’m not teaching too much, compared with the last semester when I thought a dozen of classes. This is nice as I can concentrate more on the PhD project.

How the Crash Will Reshape America by Richard Florida

It’s always nice to stop by Creative Class by the Richard Florida squad. Following links I hit the “How the Crash Will Reshape America” published in the Atlantic in the March 2009 issue.

As I have said sometimes, I like Florida. It seems to be kind of funny that all academics related to the discipline of economic geography say “Florida’s ideas are good, BUT…” It seems that they have to say that in order to show their academic credentials.
So, I of course have to say the same. However, for this last document I admit I have very little objection or none.
He clearly explains the change of economic paradigms and how the American cities have to evolve. He quotes Schumpeter, Jacobs, Romer, Glaeser, Lucas, Krugman among some of the key fellows. His final proposals to change the housing market towards a more renting instead of owning are bold. Which is exactly what the U.S., and great part of the world needs now. Not so much Denmark, but this will be especially fit for my home country Spain.

The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy—the sectors and products that could drive U.S. growth and exports in the coming years. Artificial demand for bigger houses also skews residential patterns, leading to excessive low-density suburban growth. The measures that prop up this demand should be eliminated.

If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.

Once again I have to say, thank you Richard!