SWPL at LSE – I like it!

A lot of serious people come through LSE to give talks. Last week, the Hungarian Prime Minister was here. Last spring the Russian president was here; this summer, academic Dani Rodrik was on campus. Paul Krugman is often here and many politicians, policy makers, journalists and other notables pass through. Tickets are almost always on a first come first serve basis, and often sell out within 2 minutes of them being available online. The combination of my child care responsibilities and my bad luck in never being quite quick enough to request a ticket means that, unfortunately, I don’t get to see many of the public speakers that come to LSE.

Some not so serious people also give talks at the LSE. Later this month, one such person will be here: the author of a very funny blog called “Stuff White People Like.”  While usual LSE speakers tell us what Keynes would have thought about the ongoing financial crisis, what to do about terrorism or about the politics of oil, Christian Lander of SWPL will tell us why the urban middle classes (i.e. LSE students and faculty) like camping, buy sea salt or are interested in political prisoners (if you’ve got some time, it’s well worth browsing through some of the others – there are too many funny ones to cite). I’m sure that just by posting this, I’m marginally reducing my likelihood of getting a ticket, as free tickets to quirky presentations are one of the things that white people like…

Tear-Free Economics

Last night I was going through a fortnightly ritual: wandering through the kitchen and bathroom to determine what we needed from the virtual grocery store. Seeing as we are still (though perhaps not for long) a car free household (which marginally balances our flight related carbon footprint) we do almost all of our grocery shopping online. Among the things that I noticed was running low was N.’s baby shampoo. He’ll be two at the end of November, and though I’ve shampooed his hair dutifully every other night since he was born, the bottle of baby shampoo I bought with my mom just before he was born still has about 10% left.

This got me to thinking: maybe baby shampoo is a natural monopoly. In other words, an industry in which its most efficient to have just one producer.   While usually applied to utilities or transport because of the large cost of infrastructure, baby shampoo might just be the same kind of industry. The average newborn has about enough hair to warrant the application of a half a pea-sized amount of shampoo, and not even every day as their little heads dry out quickly. Even a toddler has a relatively small amount of hair (though perhaps if I had a two year old daughter rather than a son I would be washing more hair than I am now).  Thus, why would you want to make a very low-cost cosmetic product that needs to be replenished only once every two years?

You wouldn’t really, unless you had cornered the market.  And given that the cost of producing baby shampoo is almost nothing, the question is how do you do that? By a clever, and timeless, marketing strategy. The “No More Tears” on every bottle of Johnson & Johnson Baby Shampoo is so familiar that I remember musing as a child about what the ” secret ingredient” was that made it tear free. The brand leader is so well established that the generic version available in the online supermarket was the same canary yellow colour.

I literally can’t name a single other children’s shampoo (though a quick search at the supermarket revealed that there are lots of fancy organic ones that I probably should be using instead of Johnson & Johnson).  This is relatively rare for a cosmetic / household product: try an experiment. Toothpaste? At least three major brands. Adult shampoo? Countless. Cleaning products? Ditto. The natural monopoly like nature of this product might just mean that one day N.’s children are using J&J Baby Shampoo as well.  Somehow that makes me feel like the world is just a little bit smaller… and less tearful.

Betting the house on China

It’s well known that the US / Western spending splurge that proceeded the current financial meltdown was largely financed by China, along with other Asian and developing economies.  By investing in US debt, the Chinese financed a period of low interest rates and high credit, while at the same time plunking their massive trade surplus and foreign exchange reserves into what seemed to be a safe asset.  Now the fragile edifice has collapsed, but the Chinese are still holding more than two trillion dollars of, well, dollars.  Which means the US is indebted to China (for a humorous take on this, see this link which I discussed in my last post).

All of this spending and borrowing has generated the first signs that the future monetary order might be dominated by the Chinese instead of the Americans.  Chinese officials have on several occasions (including at the recent G8 meeting in Italy) said that they are interested in a future monetary system where the dollar plays a less dominant role, and have agreed with Brazil to denominate trade between the two nations in their own respective national currencies.  All of this has caused people that study the things that I study to wonder if the transition has already started towards a future in which China plays an equal, if not larger, role in the international political economy of money than they do now.

Given all of this context, and the fact that M. and I are actively looking to buy a house in London, this morning’s news that the Bank of China (the world’s third largest bank) is planning on offering mortgages to UK home buyers really caught my attention. Just think, I could be personally indebted to China, rather than just generically indebted to China through my government’s (and my adopted home government’s) borrowing habits!

In fact, the article mentioned that Bank of China mortgages would have two advantages vis-a-vis those offered by more traditional UK outfits: they would be more conservative, and therefore less risky (for the bank and for the borrower); and they would be cheaper.  Sounds like a great combination.

I was so taken with the idea of personally contributing to the up and coming dominance of Chinese finance (being the Sinophile that I am), that I suggested to M. that we check it out.   He agreed, and  I’ve requested an appointment with our local Bank of China – located where else but in London’s Chinatown! – to discuss mortgages.   If the Bank of China manages to woo us away from our current bank, HSBC  – otherwise known as the Hong Kong Shanghai Banking Corporation, established by the British colonisers in the 19th century to finance Chinese / European trade – it will be a transition from one monetary hegemon to another in more ways than one.  And whether banking with (and therefore on) the new hegemon is scary or reassuring, well… that sort of depends on your point of view.

The Onion: Made in China

While bored on maternity leave, I once did a little experiment to see what percentage of my newborn son’s clothes, toys and paraphernalia were made in China.  The short answer was all of them (the longer answer can be read here). It took the satirical US newspaper, The Onion, just a little longer to realise that almost everything is made in China these days, but they have turned their absurd humour to the trend.  The joke: they’ve sold The Onion to the Chinese.  A sample of the headlines: “Toddler chokes to death on Tawainese made toy;” “Grandfather disrepected in own home,” and my personal favourite “Star Athlete Signs Contract for Millions of Weak U.S. Dollars.” Very funny, and also very politically incorrect.

What’s in a ring? Power and dialing codes

For people who live in the US and aren’t frequent makers of international phone calls, you might not know that all countries have an international dialing code.  And you might not know that the US international dialing code is 1,  as in, “we’re number 1.”  France’s is 33.  Germany’s is 49.  Brazil’s is 55.  The fact that the US is 1 has always struck me as a particularly blatant claim to  super-power status.  Why would we be 33 if we could be 1?

Yesterday I picked up the phone to call a Canadian colleague from my office in the UK.  Without thinking, I dialed 1 plus the area code.  It rang through.  Only today did it strike me as tremendously odd that I did not use an international dialing code to call Canada, or to put it another way, that I used the US international dialing code to call Canada.  Though I do occasionally enjoy a joke at Canada’s expense (an unappealing American habit of mine), assuming that Canada was essentially a telecom extension of the US was a sub-conscious, rather than conscious action.

It turns out that Canada, alone amongst major nations, does share an international dialing code with the US.  Poor Canada: could we not have spared them that indignity?   And noticing this made me realise that there is a definate relationship between a country’s dialing code and its power and status in the international political economy.  Only two countries have one digit calling codes: the US (1) and Russia (7).  These codes were in place during the Cold War (the USSR was 7 as well);  I don’t beleive that it’s coincidental that the only two super-powers possessed the only 1 digit calling codes.

On the second tier, what might be called great powers and regional powers, it’s 2 digit codes all around.  All of the major nations of Europe have two digit codes: as noted above France and Germany are 33 and 49, the UK is 44 and Italy is 39. Large Latin American, African and Asian countries also have two digit codes: Brazil, 55; Mexico, 52; China 86; India 91; Egypt 20; South Africa 27.  All G20 countries, with the exception of Saudi Arabia, the US and Russia, have two digit codes.

But alas, non-powers are relegated to the ignominy of three digit codes.  Nicaragua? 505.  Laos? 856.  Burkina Faso? 266.  Even less powerful European countries, though wealthy in global terms, are not spared:  Finland, with its 358 or Estonia with 372.

Indeed, the trend appeared to be so strong on first glance that I wanted to run some regressions to see how predictive international dialing codes were of some metric of power (e.g. GDP or military size).  However, I ran into two problems.  With a smaller data set (the G20, for example) the fact that the starting number is determined by the region (3 and 4 for Europe, 2 for Africa, 8 and 9 for Asia) means that you obscure the power element because you restrict yourself to two digit codes.  And secondly, though I was interested in the phenomenon, I wasn’t interested enough to spend several hours coding hundreds of countries, so you’ll have to just deal with anecdotal, rather than hard statistical, empirics.

All of this made me think: as international power begins to shift away from Western economies and towards large emerging countries, and especially Asian economies who are stuck with country codes beginning with 8s and 9s, will those countries want “better” dialing codes, just like they want more representation in the IMF?   All I can say is that if  China launches a campaign to change its international dialing code from 86 to 2, you’ll know that you heard it predicted here first.