ECB staff to strike over pensions

.. according to FT.

C’mon! Can never figure out the Europeans.

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Norway: Another Socialist Welfare Monarchy, and More

Norway, symbolized by the cute lion with the ax, is yet another low-Gini, Nordic socialist monarchy, like Denmark.

King Harald V and his Council of State taxes 40% of GDP and takes care of his people’s healthcare and pension through the National Insurance Scheme mandate and provide almost free educations.

Even better, there’s oil backyard – life is never fair.

Instead of squandering the oil revenues, the Norwegian politicians decided to save all the money for rainy days in the Government Pension Fund, managed by Norges Bank Investment Management (NBIM), which is under but independent from Norges Bank (the central bank) and the account is somehow consolidated into and reported in the Norges Bank’s balance sheet.

The asset value today has reached NOK 2,300 billion, or around US$ 400 billion, or around 100% of Norway’s GDP. In comparison, the U.S. Social Security and Medicare Trust Funds are …

There’s a glitch, though. Once proudly claiming to owning 0.77% of global equity market – yes, they allocated 50% up into stock markets – the fund was struck hard recently (see chart below, or the report).

Here’s the story: when you have a fund, you invest it in the market; when your fund is big enough (like a sovereign wealth fund), it becomes a market. In this case, national currency is involved (see chart below). A funny, mind-bogging story.

See it as wealth, or a problem. If it’s a problem, China’s got a bigger one. China evidently is stockpiling into commodities – gold, oil, copper, zinc, etc. No fancy-pants derivative-based hedging, just go and buy up things.

 

P.S., the Norwegian must be some quite different species. Rich in oil, no Resource Curse, no Dutch Disease.

Denmark: A Socialist Welfare Monarchy

A lot has been said about how socialist some European countries are. Look at Denmark and you would know why.

The Welfare State

Her Majesty Margrethe II’s Denmark has 5.5 million people, with GDP per capita of $37,000, PPPed. GDP has been growing at around 3% in real term in recent years, and unemployment has been trending down to under 4%.

Besides the wind turbines all over the country supplying 18% of energy use (above map), what sets the economy apart – as well as most other western European countries – is the heavy tax rate.

The government collects and spends almost half of the GDP. The average personal income tax rate is 40%, with the top bracket being 65% (which is facing pressure recently).

BTW, there’s also a slightly less than 1% church tax for Folkekirken members.

Free Healthcare, Free Education, and Income Equality

If that doesn’t scare you away, I should tell you where the tax hike goes.

Healthcare is free

The government foots 81% of total healthcare expenditure. You can go see a doctor for free only with your health insurance card. The healthcare expenditure per capita is PPP int’l $3349 (9.5% GDP), half of the U.S.’s $6714 (15.3% GDP), while all health indicators – health life expectancy, child health, service coverage, etc. - are equivalent to that of the U.S.

According to the Ministry of the Interior and Health, 79% of the population, more aged and of a higher rate of use of alcohol and tobacco than that of the U.S., rated the nation’s healthcare service as “very good” or “good.”

Hospitals are run by the local authorities, and drug prices are reigned in by the government’s negotiation with drug companies and encouraging competition from other EU countries. From 1988-2000, the annual increase of total health expenditure was a mere 1.6%.

Education is also free

Free schooling starts from preschool. The State Education Grant and Loan Scheme grants 18+ student DKK 4400 (above $800) per month for student living away from parents.

The Tertiary-type A (i.e., high school) graduation rates are among the highest of the developed.

More Equal Income

The Danish Gini is the lowest in all OECD countries. In comparison, China is of the Mexican level.

Is It Socialism?

It depends on your definition of socialism.

If it means high-tax-rated, state-welfare type to you, you should add $10,000 family healthcare insurance, another $5,000 education expense per child, pension, unemployment insurance, and whatnot to your tax returns, and recalculate your tax rate.

Then we can talk, unless if you are now priced out from having a healthcare plan and can’t afford sending your kids to school.

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Denmark: Less Farmers, More Foods

A follow-up on the farmer post.

Denmark had over 50% population in agriculture in 1840. Today it’s less than 5% and running a trade surplus in food, under cold temperature.

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The Future of 900 Million Farmers

The United States has one quarter of the world GDP, and China has one quarter of the world population. It says it all about the Chinese economy. Of the one quarter world population or almost 1.4 billion strong in China, 900 million are farmers.

You would have guessed that such a large population would impose tremendous pressure on the food supply. I did some googling and find that China has done quite well on food production.

China, a Big Farm by Figures

China has a smaller share of land and arable land compared to the size of the population.

The population density is one of the highest.

But over years China has established an ample self-supply of cereals (rice, wheat, maize, etc.), and has dramatically increased the production share of meat, fruit, vegetables and fish..

..with a trade surplus.

The food gap is closing and people are eating more everyday. I assume the obesity kid summer camps would soon be overcrowded.

10% More for Food Safety

Now the government now has a not-so-ambitious new plan to hike food production by 10% till 2020. The plan plans to maintain the arable land area at 1.8 billion acres, a part that Mr. Mao, a renowned economist, doesn’t quite agree.

I don’t know too much about farming, so my comment probably wouldn’t help. But I found the public sentiment against Mao disturbingly amusing – if property rights per se is a mass, what’s (or whose) there to argue about?

Anyhoo, there’s plenty of opportunities to improve farming yield comparing to Monsanto America and Syngenta Germany, holding all other variables constant.

Poor Farmers, Rich Farmers

Food safety, local and global, seems not an adjacent problem into 2030. The real issue is how to improve the poor farmers’ income.

• In 2005, 949 million live in villages, of which 299 million (23% pop) are farmers.
• Urban income per capita is RMB 15,781 in 2008, while that of villages is RMB 4,761, or 30% of urban.
• GDP of agriculture, forestry, fishing and hunting, or the so-called Primary Industry, was 11% of total in 2007.

You do the math.

As a comparison, in the U.S. 1.4 million (0.5% pop) works in agriculture, forestry, fishing and hunting – one person per one big farm, farming with GPS guided John Deeres. The GDP share is 1.2%.

Yes, you can get rich being a farmer.

How to Get There? The short answer is it takes time, the long answer ..

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