week 8 article

Message to Ankara, Why Turkey is an economy to worry about

http://www.economist.com/node/21552213


 This article from the economist puts Turkey as an economy that may be in trouble in the near future.  "based on the standard warning signs of trouble—from rapid credit growth and high inflation to a big external deficit—one country stands out. It is Turkey"  The article states that Turkey has too much foreign borrowing and a "growing competitiveness problem and a dangerous addiction to the riskiest types of foreign capital." The Economist suggests that Turkey compensate by saving more. Also, the writer says that Turkeys lack of recognition of the problem will be the economies biggest problem. 

This article did a relatively poor job of explaining the issue to someone who does not fully understand economics.  I think I understand the urge to start saving more and stop relying on foreign money in the current economic situation.  With the Greek economy near default and the success of other economies tied to Greece, I understand the potential risk of relying on foreign money.  

Beware of Greeks Bearing Bonds, Michael Lewis

a. I found this passage to be interesting, 

"But this question of whether Greece will repay its debts is really a question of whether Greece will change its culture, and that will happen only if Greeks want to change. I am told 50 times if I am told once that what Greeks care about is “justice” and what really boils the Greek blood is the feeling of unfairness. Obviously this distinguishes them from no human being on the planet, and ignores what’s interesting: exactly what a Greek finds unfair. It’s clearly not the corruption of their political system. It’s not cheating on their taxes, or taking small bribes in their service to the state. No: what bothers them is when some outside party—someone clearly different from themselves, with motives apart from narrow and easily understood self-interest—comes in and exploits the corruption of their system. Enter the monks."

According to Lewis, the Greeks are people who act on self interest and blame the Monks for their problems.  From this article it was apparent to me that the Greek citizens including the monks all have a drive for self interest seen from tax evasion from nearly everyone to the monk property tycoons.  From the reading I am a little unclear on the morality or legality of the monk's actions.  I gathered feeling that the people of Greece may simply blame the monks because they despise their success.  I also found the last paragraph to be interesting when Lewis hit on the possibility of Greece being doomed because they do not have a desire to govern themselves and lack the "monk's instints".  This situation reminds me of the comparison of cotton industries where the US industry has been so successful due to a innovation driven culture.  It seems that regardless of lack of law and enforcement in Greece's finances, what may have actually been worse is the countries lack of ambition to work as a unit.

b.  Although the Greek economy is very small, it has ties to the success of the rest of Europe.  Lewis writes, "if Greece walks away from $400 billion in debt, then the European banks that lent the money will go down, and other countries now flirting with bankruptcy (Spain, Portugal) might easily follow."  Although the Greek economy has remained relatively isolated as one of its downfalls, it is still part of a larger European economy and a world economy.  Other countries have invested money to help Greece when they believed that Greece's situation was not nearly as bad as it was.  So if Greece fails, there is no prospect of repayment and the banks will lose credibility.  

c.  GDP = C + I + G + NX
If taxes are increased, the public has less money to spend and consumption goes down.  Cuts in government spending as well as a decrease in consumption spending will act to decrease the Greek GDP in the short run. 

How Walmart Is Changing China

 a. I found it very interesting to look see how low environmental standards were effecting both Walmart's image and the stability of the Chinese people from the viewpoint of the government.  The proposal to become a green company was far fetched to both the people of Walmart and the people of China but it became beneficial to both of these parties because of an improvement to their image as polluters. 
Another interesting and unfortunately recurring point was made at the end of the article.  The point was that although the steps taken by Walmart are beneficial to reduce environmental impact, industrial progress is still being made and in the end, the long run is still unsustainable.  After the surprisingly positive account of Walmart, I was hoping for a happy ending, but with most environmental reports on industry, the ending is not so happy. 

b.  Walmart shows a good example of how multinational corporations, economics and culture interact.  The push for higher environmental standards came first from culture.  Walmart had a bad reputation with American culture for being environmentally poor and there also was pressure from the Chinese on the government to have higher standards.  So culture affected Walmart  and then Walmart had a huge effect on the economy by putting pressure on suppliers to change their methods. 

c.  The popularity of brands like Mcdonalds in the US and our love of fast paced things can illustrate an example of how multinational corporations interact with the economy and culture.  I think because our culture is so work orientated and has a desire to be fast paced, organizations like Mcdonalds became hugely succesfull.  At the same time I think the economics of Mcdonalds has contributed to its success, namely its cheap prices.  So our fast paced culture affected corporations like Mcdonalds by making them hugely successful and Mcdonalds affects the economics of food supply by demanding large volumes of cheap food.

seventh week article pos

Asian giants strike deal to start talks on three-way trade pact  

 China, Japan and South Korea area planning to make a three-way trade pact and to agree on a reciprocative investment treaty.  The larger future goal is that of a free trade agreement.  South Korea's president stated that these three countries are essential to helping the global economy economy recover.  Partly because of economic and political disputes between the countries, the process will probably be lengthy.  If the South Korean president is correct, then Turkey will benefit from this East Asia trade agreement.  Since China, Japan, and South Korea make up such a large market of suppliers of goods and services, the agreement may help countries that import, like Turkey, by making the goods and services cheaper.  Free trade generally has a trend of lowering costs by competition.  

 The Wall Street Journal wrote,  

The three leaders also signed a trilateral investment agreement, which Wen described as "the first important legal document" between the three countries' economies. The agreement will provide a legal framework to "assure investors of the three countries...when they suffer damage in their host countries," South Korea's Lee said. 

This increase in safe investment will prove to help the economies in the future by  encouraging investment. When investment goes up, GDP goes up.  The WSJ also reports that China is also making free trade agreements with other countries globally.  This global economy should benefit Turkey if it is on board.  If Turkey is a country that stays out of free trade agreements like these, I think it will fall behind as others benefit from lower costs.

 

http://online.wsj.com/article/SB10001424052702304371504577402773076428202.html

http://www.hurriyetdailynews.com/asian-giants-strike-deal-to-start-talks-on-three-way-trade-pact.aspx?pageID=238&nID=20609&NewsCatID=344 

sixth week article post (late)

Turkish Title Winner Celebrates Boom in Product Sales 
http://www.hurriyetdailynews.com/turkish-title-winner-celebrates-boom-in-product-sales.aspx?pageID=238&nID=20662&NewsCatID=345

Galatasaray, a Turkish professional Soccer Club based in Istanbul won the Turkish Leage title and has now seen a jump in team related products with total turnover increasing by 250 percent.  This is a simple case of supply and demand.  Demand for Galatasaray related products is directly related to the performance of the club, and with a successful year leading up to a championship, demand has become very high.  I imagine that with all sports teams, there is a base of faithful fans who will always be customers, but that the most profits are on fans who buy products for teams that are successful at that time.  This must be why coaches are payed so heavily for being successful, because their success leads to huge economic success for the club. 

EGT Consulting: Vehicle Market Executive Summary

 There is potential demand for scooters from the working population, potential demand for sedans from the more wealthy population, and potential demand for limousines from the super wealthy, businesses, and governmental organizations.  All three motor vehicles will be most successful in urban areas, specifically Istanbul, Ankara and similar cities. Shipping to Turkey will be seamless and efficient as it is already a huge industry.  The economy of Turkey shows promise to grow and also expand its container shipping capacity, making the market for all three motor vehicles bigger in the future.  The market for limousines will probably remain unchanged in the future due to its specific consumers.  Turkey has shown an ability to return to stability from periods of unrest and looks to be a safe environment to conduct businesses.  Starting a business in Turkey will be relatively yet costly (percentage of income per capita) (compared to OECD economies).

Reinventing the Bazaar: A natural History of Markets by John McMillan. Chapter 4

A. I found it interesting that McMillan made the point that when information is not free, prices will be set high but not because of collusion.  Prices stay high because of lack of  information and the merchants do not have a need to collude.  These prices are also kept high by search costs which make searching for lower costs not worth it.  I found it surprising that McMillan referred to the market merchants as a "little monopolist" that pulls in large profits because I have always thought of merchants as poor.  I can recall experience with search costs and evaluation costs while trying to shop in the Market in Istanbul.  I recall my family  being approached by a man in the market who persuaded us to come look a shop.  He led us deep into the market to a shop that we would have never bought from because we would have ran into countless other shops on the way to that one.  The man serves as matchmaker to reduce search costs.  But at the same time the man didn't necessarily take us to the cheapest shop, we would have little way to know.  So really the man was exploiting the lack of information in the Turkish Open market.

B. By transaction costs, the author is referring the costs of evaluation of search present in the market.  These costs come together and prevent the consumer from doing extensive research of the price levels in the market.  This keeps price levels high.  For example it is very costly in time and energy to navigate the closed market in Turkey.

C.  Imperfect information leads to market failures of efficiency.  In the example of the market, it is inefficient to look for information so prices are higher than the market price would be if there was perfect information.  In the market, the consumer loses because prices are much higher than they should be.  Also, Mcmillan describes how the suppliers become losers because of lack of info if they try to lower their price.  Because consumers will not recognize the price advantage on a wide scale, the merchant will lose money.  So there is a actual incentive to keep prices high besides trying to overcharge tourists.

Friday May 4

a.) I found it very interesting that the fez is such a taboo to Turkish people but is yet still a commonly seen item that is sold to tourists.  I was actually unaware that the Fez was looked down upon or even illegal to the people of Turkey.  This seems similar to the situation of the hijab in Turkey which I think I am more familiar with.  Ataturk also made the hijab illegal but since then has once again became legal (maybe not in government jobs etc, Im not sure).  While in Turkey, the majority of Turks do not wear a hijab (or at least the places I have been, which may be more liberal then others) but you will see a few.  It seems that if the fez has remained illegal, that the hijab would have also.

b.)  The reading illustrates how economics and culture can interact because we see how it is shameful for Turks to sell a fez, yet the demand and profit possibility overrides the shame.  Also, the whole situation of Pomegranate transforming from a historically great and culturally proud place to a tourist serving city shows how economics can transform culture, at least on the outside, for economic success.  

c.)  My study abroad destination is Turkey and a few tourist destinations are Istanbul, and as we have seen, Pomegranate.  People are drawn to Istanbul because it is a national urban metropolis that also has rich history and beautiful scenery.   Located on the Bosphorus, Istanbul is a great destination for Tourists because of its seaside location, old castles, religious centers, and bustling markets.  Also, Istanbul is very tourist friendly but as I read about with Pomegranate, this may be because of tourism itself.