Wednesday, 30 April 2014

7 Reasons Why Russia Should Take Over The Crimea

The United States and United Nations continue to intervene with Russia taking over the Crimea. They have imposed sanctions on Russia and demand Russia return the Crimea to the Ukraine. However, Russia has 7 valid reasons to assume control over the Crimea.

Reason 1: Russia and Ukraine transferred the Crimea back and forth over their history. Roughly 50% of Crimea residents identify themselves as Russian. Many residents speak Russian as their primary language and share its culture. Although Ukrainians speak a Slavic language similar to Russian, it is not Russian. Furthermore, some Ukrainians harbor a grudge against the Russians for occupying the Ukraine during the Soviet Union.

Reason 2: Russian government stationed its navy at Sevastopol, Crimea. With the Ukrainian economy sinking into chaos, Russia must protect its naval base. The chaos could spread to the Crimea and the naval base, creating problems for the Russian Black Fleet.

Reason 3: Don't people living in a democracy get to choose which state to belong to? Over 90% of Crimeans voted to leave the Ukraine and join Russia. Of course, the caveat is the world must ensure Russia did not manipulate the vote. On the other hand, the United States have always experienced voting troubles. Illegal aliens vote in elections. In the old days, politicians stuffed the ballot boxes with fraudulent votes after the polling stations closed in the south. On election day in Chicago, the dead rise from their graves and vote at the elections. If the world takes away the people's right to vote in the Crimea, then the politicians dictate policy. Thus, the world's politicians eliminated the Crimeans' right to vote.

Reason 4: The economies of Ukraine and Russia differ. Out of the 15 former states of the Soviet Union, Ukraine made the fewest strives towards a market system while Russia adopted some changes during the 1990s to a market economy. Unfortunately, the Russian government started undoing those changes in the 2000s with President Putin being president for many of those years. Consequently, Russia has a better economy than the Ukraine's. Perhaps the citizens of Crimea want to live in an economy with more markets.

Economists developed measures and rankings to determine how free a country's markets. For example, the Heritage Foundation ranks countries on their economic freedom. The measure includes limited government, efficient regulations, taxation level, business investment freedom, and so on. Nevertheless, the ranking only provides a guide because economists have troubles measuring these things. For example, how do you measure efficient regulations or limited government?

Economic freedom differs from political freedom. United States was always ranked in the top 10 for economic freedom in the past, but we have fallen to the 12th spot in 2014. Government at the federal, state, and local are usurping control and accumulating power. Each year, Americans keep losing their economic freedom, but we still have political freedom. We can choose which idiots to represent us in government. However, the U.S., state, and national governments in the United States restrict us from opening new businesses. They regulate our investments and restrict our property rights. Hence, we continually drop in the rankings for economic freedom.

Reason 5: Heritage Foundation ranked Ukraine as 155 and placed it in the same class with Cuba, Burma, Iran, and North Korea. They ranked Russia a 140. Russia has a tad more freedom than Ukraine even though Heritage Foundation ranked it mostly unfree. Consequently, Crimea could gain a little more economic freedom if it broke away from the Ukraine and joined Russia.

Reason 6: Transparency International compiles the Corruption Perception Index for 177 countries. Economists and analysts have even more problems measuring corruption because corruption entails many forms – bribes, extortion, kickbacks, under the table payments, tax evasion, and so on. In 2013, they ranked Ukraine 144 and Russia at 127. Nevertheless, the United States ties with Uruguay at 19.

Businesses experience trouble growing and thriving in corrupt countries. Regulators and tax inspectors shake down companies for bribes, kickbacks, and extortion payments. Business leaders must form friends and pay bribes to the politicians and bureaucracy leaders. Then the politicians and bureaucrats will help and protect the companies. Consequently, Crimea could lower its corruption by joining Russia.

Many people forget history. Over the United States' history, Americans moved onto Indian lands and stole them. They established farming communities and cities. They also formed a territory government. Once the state had become large enough, they petitioned the U.S. government to join the nation as a state. For example, Puerto Rico, Guam, and U.S. Virgin Islands remain territories of the United States. If the residents vote to join the United States as a state, should Russia and other countries oppose the residents' decision? It is a hypothetical question because it would never happen. Citizens living in a territory receive all the benefits from the U.S. government without paying all the taxes and costs.

Reason 7: U.S. government must have another agenda. U.S. government and the world fear a developing and stronger Russia. Hence, they want to restrict its size and power, so the U.S. government can dictate its policies to the world. The real issue is which country gets to control the world, and the United States does not want to share control with another country. Russia as the Soviet Union was the only country large enough to challenge the United States during the cold war.

The United States and United Nations have imposed sanctions on Russia. These sanctions will push Russia into a recession along with Ukraine and Kazakhstan. Kazakhstan, another former Soviet State, has mineral and petroleum wealth. With more countries entering a recession, the stacked dominoes are tumbling across the world as economies begin crumbling. As the dominoes continue falling, it will bring the recession to the doorsteps of the United States. We, Americans, are experiencing the weakest economic recovery, and a world going into a recession will not help. A world in recession will push us back into an extended recession.

Sunday, 27 April 2014

Analysis Essay for Economics - The Essay


Grammarly score: 88 (Business)
Plagiarism: 3%
Total words: 1,729

This is my economic analysis essay. To help you understand writing, the transition words are in red. Transition words help the text read smoothly. Please note, if you organize your essay well, you only need a transition word here and there. You can find the transition words at:



I also highlighted the passive voice verbs in blue. I learned to reduce passive voice in my writing. I needed passive voice in my essay to eliminate the first person - I. Please note - passive voice arises in many situations. Refer to the Grammar Girl for more information at:


The article is available at:

I am using the Chicago Citation style from:

Make sure you click on the tab for Author-Date. It is hard to see but it is there. Curtin University has a link to a pdf file for the Chicago Reference.

Curtin University has some workshops on writing


1.0 Article Summary

The newspaper article, “Sugar Importers keeping prices low for consumers” (Bernama 2010), from the Borneo Post is analyzed. The Malaysian government will reduce sugar subsidies and increase sugar prices (Bernama 2010). Furthermore, manufacturers have entered into long-term contracts for imported raw sugar to keep prices low (Bernama 2010). Thus, consumers will pay low prices for sugar even though the government will increase sugar prices (Bernama 2010).

2.0 Introduction

Producers make raw sugar from sugar beets and sugar cane. Although Malaysia does not produce raw sugar, it imports it from Brazil. Then Malaysian companies refine the raw sugar into white sugar. Subsequently, consumers, food companies, and restaurants add sugar to drinks such as coffee, teas, juices, and sodas or blend the sugar into desserts for pies, cakes, candies, puddings, etc.


In this essay, supply and demand are used to analyze which factors cause raw sugar prices to rise. Then the elasticity for white sugar is examined, and whether firms would earn greater profits by increasing white sugar prices. Finally, the economic impact is studied when a government reduces the sugar subsidies.

3.0 Analysis

The analysis is divided into three sections. First, the demand and supply of white sugar is analyzed using derived demand. Second, the focus switches to price elasticity of demand for white sugar, and whether companies can boost their profits by raising white sugar prices. Finally, the social welfare effects of the government reducing the sugar subsidies are studied.

3.1 Demand and Supply

In the article, “global raw sugar prices continually on the uptrend” (Bernama 2010). Unfortunately, the article was ambiguous because Bernama does not identify the factors that are raising raw sugar prices. The market price for raw sugar is increasing, but Bernama does not report the changes in market quantity.


The analysis begins with derived demand where two markets are side by side - a consumer market and a resource market. Manufacturers supply consumers with the product but demand a critical resource to make the product. Hence, the Malaysian sugar manufacturers supply the consumer market and become the consumers in the resource market.


The white sugar market represents the consumer market in Figure 1. The demand function represents the consumers, restaurants, and food companies because they add white sugar to a variety of products. The demand function has a negative slope that reflects the Law of Demand. As the market price increases, consumers, restaurants, and food companies reduce their quantity demanded, ceteris paribus. On the other hand, the supply function reflects the raw sugar manufacturers. They refine raw sugar into white sugar and obey the Law of Supply - as the market price rises, manufacturers boost their quantity supplied, ceteris paribus. The intersection of the demand and supply functions determine the market price, P* and market quantity, Q*.


Figure 1. Greater demand for white sugar

In Scenario 1, many things could cause a higher demand for raw sugar. For instance, consumers boost their demand for sugar and sugar products because their incomes increase. Then the demand function would increase and shift right in Figure 1 if sugar were a normal good. According to Abler (2010, 20), sugar is a normal and necessity good in Russia, India, and China with an income elasticity of demand ranging between 0.64 and 0.8. Thus, both the white sugar price and quantity rise while sugar manufacturers increase their quantity supplied.


For the sugar manufacturers to raise their quantity supplied, they must process and demand more raw sugar in Figure 2, shifting the demand function rightward for raw sugar. The demand reflects the sugar manufacturers while the supply reflects the sugar mills in Brazil that make the raw sugar. This market also obeys the Law of Supply and the Law of Demand. Consequently, both market price and quantity rise.


Figure 2. Malaysian manufacturers demand more raw sugar

For Scenario 2, many factors could cause the supply function to decrease for raw sugar. For example, Brazil could have experienced a severe drought that wiped out its sugar cane. Subsequently, the supply of raw sugar decreases in Figure 3. The market price rises while market quantity falls.


Figure 3. A drought reduces the supply of raw sugar

Malaysia sugar manufacturers pay higher prices for raw sugar and reduce their purchases because they pay greater prices for a resource input. Malaysian sugar manufacturers would reduce their supply of white sugar in Figure 4. Thus, the market price rises while market quantity falls for white sugar. Then consumers, restaurants, and food companies pay greater prices for white sugar and reduce their quantity demanded.


Figure 4. Malaysian manufacturers reduce their sugar supply because a price of a resource has risen

3.2 Elasticity and Changes in Total Revenue

Article does not provide enough information to calculate the Malaysians' price elasticity of demand for sugar. From the Commodities and Trade Division (2002), the price elasticity of demand for Americans, Japanese, and Europeans are -0.11, -0.81, and -0.12 respectively. Consequently, sugar is an inelastic product.


Elasticity depends on the number of substitutes and income effects. Sugar has few substitutes except artificial sugar. Some consumers refuse to use artificial sugars, such as aspartame, sucralose, and so on. because they may induce health problems in consumers. Moreover, sugar comprises a small fraction of consumers' income, so they may not be sensitive to price changes.


If sugar manufacturers raise the price for white sugar, then they will collect more revenue (Hubbard et al. 2010, 105). However, changes in profits are ambiguous because the article was not clear how the firm's revenues and costs change (Bernama 2010). First, government will reduce the subsidy, which lowers the firms' revenue. Second, the government raised fossil fuel prices. Thus, manufacturers use energy in production, and they will pay higher energy costs. Third, article stated manufacturers "have to account for capital expenditures" (Bernama 2010). This means the companies are upgrading machinery. Then Bernama added increased labor costs, which are not capital expenditures. Labor costs are included into production costs. Finally, manufacturers entered into contracts to lock in low prices for raw sugar (Bernama 2010). However, if raw sugar prices remain high, Malaysian firms will pay greater raw sugar prices when issuers of contracts for raw sugar rise in the future. This only provides a temporary solution.

3.3 Sugar Subsidies

Malaysian government subsidizes sugar prices (Bernama 2010). It does not impose price ceilings or price floors because a price ceiling could lead to shortages while a price floor could create a surplus. The economics of a subsidy is analyzed.


The Malaysian sugar manufacturers supply the sugar while consumers, restaurants, and food companies demand sugar. The intersection between the supply and demand functions determines the market price and quantity with no government subsidy in Figure 5.


Figure 5. Government pays a subsidy to the sugar manufacturers

The Malaysian government pays a subsidy so Malaysians will pay PS for sugar price. A subsidy is the opposite of a tax and shifts the supply curve rightward (Szulczyk 2012, 57-8). At PS, consumers want to purchase QS units of sugar. For manufacturers to supply that level, they must receive the PS + Subsidy (Szulczyk 2012, 57-8). Consequently, the subsidy creates a price wedge between the consumers and producers. Consumers pay PS while producers receive PS + subsidies (Szulczyk 2012, 57-8).


For social welfare, government must pay producers the total shaded areas in Figure 5 (Szulczyk 2012, 57-8). Thus, consumers receive the medium shaded trapezoid as a benefit of the subsidy while producers receive all the shaded areas (Szulczyk 2012, 57-8). Since the government had interfered with the economy, the black triangle represents the deadweight loss to society (Szulczyk 2012, 57-8).

Malaysia is unique because the government locks the sugar price at PS. Supply and demand functions continually shift that changes the market prices. However, government will adjust the subsidy so the subsidized price always equals PS.

According to the newspaper article, Malaysian government will lower the subsidies to sugar manufacturers as shown in Figure 6. The original lines for the original subsidy were left in the graph for comparison. Consequently, consumers pay a greater price at PN and consume a smaller quantity at QN. They would lose some consumer surplus because the medium shaded trapezoid becomes smaller. Although the small subsidy reduces the deadweight loss, the black triangle, consumers may not be happy about the higher sugar prices. Moreover, sugar manufacturers receive a small subsidy from the Malaysian government. In addition, the producers collect less of all shaded areas as a subsidy.

Figure 6. Government reduces the subsidy to the sugar manufacturers

4.0 Conclusion

The article was confusing because the author did not explain which factors were raising the raw sugar prices. A higher demand or smaller supply would always raise market prices, and many factors can boost the raw sugar demand or reduce the raw sugar supply.


The Malaysian government benefits because it reduces its subsidy payments to sugar manufacturers. Although the deadweight loss shrinks for a smaller subsidy, consumers lose surplus and may not be happy paying higher sugar prices. Thus, the consumers do not benefit from the higher sugar prices.


The analysis was not clear whether the manufacturers would benefit from the sugar price hikes. They benefit because they receive greater prices for white sugar and they reduced their raw sugar cost by using contracts to lock into low prices. However, the sugar manufacturers receive a lower government subsidy and pay greater costs for capital, labor, and operating costs.

5.0 References

  1. Abler, David. 2010. "Demand Growth in Developing Countries." OECD Food, Agriculture and Fisheries Papers, No. 29. OECD Publishing. Accessed April 22, 2014. http://dx.doi.org/10.1787/5km91p2xcsd4-en

  2. Bernama. 2010. "Sugar importers keeping prices low for consumers." Borneo Post Online, August 9. Accessed April 16, 2014. http://www.theborneopost.com/2010/08/09/sugar-importers-keeping-prices-low-for-consumers/

  3. Commodities and Trade Division. 2002. "4. Sugar and beverages." In Agricultural Commodities: Profiles and Relevant WTO Negotiating Issues. Rome: Food and Agriculture Organization of the United Nations. Accessed April 22, 2014. http://www.fao.org/docrep/006/y4343e/y4343e05.htm

  4. Hubbard, Glen, Anne M. Garnett, Philip Lewis, and Anthony Patrick O'Brien. 2010. Essential of Economics. Frenchs Forest: Pearson Australia.

  5. Szulczyk, Kenneth. 2012. The Economics of Government. San Francisco: Scribd. Accessed April 22, 2014. http://www.ken-szulczyk.com/economics_of_government.php

Wednesday, 23 April 2014

Analysis Essay for Economics - The Outline

Outline - important to organize your ideas before writing the essay.

Good technique to demonstrate analysis is to find problems with the article.

The article is available at:

I am using the Chicago Citation style from:

Make sure you click on the tab for Author-Date. It is hard to see, but it is there.

For students who want the instructor's multiple-choice and essay exams, then please click on the Dropbox link for Economics 100. I also converted the Dropbox into a Shared link. If you download and install their software, they will automatically create a folder on your computer that automatically updates when you connect to the internet.

1.0 Article Summary

  • Borneo Post, "Sugar Importers keeping prices low for consumers" (Bernama 2010)
    • Government is reducing subsidies (Bernama 2010)
    • Manufacturers have entered into long-term contracts for imported raw sugar to keep price low (Bernama 2010)
    • Consumers will pay low prices for sugar even though the Malaysian government is raising sugar prices (Bernama 2010)

2.0 Introduction

  • Producers make raw sugar from sugar beets and sugar cane
    • Malaysia does not produce sugar but imports raw sugar from Brazil
    • Malaysian companies process the raw sugar into white, refined sugar
    • Consumers, food companies, and restaurant cooks add sugar to drinks such as coffee, teas, juices, and sodas and add sugar to desserts for pies, cakes, candies, puddings, etc.

  • Thesis statement: (I will switch to passive voice to eliminate first person)
    • I use supply and demand to analyze which factors cause raw sugar prices to rise
    • I examine the elasticity for white sugar, and whether firms would earn greater profits by increasing white sugar prices
    • I study the economic impact when a government reduces the sugar subsidies

3.0 Analysis


Note - I do not add any new information here. This connects everything together. Normally, we always write at least one sentence under each heading.
  • In this paper, I analyze the demand and supply of white sugar using derived demand.
  • Then I analyze the price elasticity of demand for white sugar and whether companies can raise their profits by raising white sugar prices.
  • Subsequently, I analyze when a government reduces the sugar subsidies
Note – I wrote these statements in first person, which is not permitted for formal writing. I will switch this to passive voice. (I trained myself to avoid writing in passive voice).

3.1 Demand and Supply

  • In the article, "global raw sugar prices continually on the uptrend" (Bernama 2010)
    • Does not identify what is raising raw sugar prices
    • Article was ambiguous
    • I do not know what happened to market quantity
    • I only know the market price rises
  • I have two markets side by side, called derived demand
    • A consumer market and a resource market
    • Manufacturers are the suppliers in the consumer market and the consumers in the resource market
    • Manufacturers supply consumers with the product but demands a critical resource to make the product
  • Consumer market - white sugar market
    • Demand function represents the consumers, restaurants, and food companies
      • They add white sugar to a variety of products
      • Law of Demand – as the market price increases, consumers, restaurant cooks, and food companies reduce their quantity demanded, ceteris paribus.
    • Supply function reflects the raw sugar manufacturers
      • They refine raw sugar into white sugar
      • Law of Supply - as the market price rises, manufacturers boost their quantity supplied, ceteris paribus.
  • Scenario 1 - Many things can cause a greater demand for raw sugar
    • For example, if consumers raise their demand for sugar and sugar products because their incomes rise
      • Many other things could cause a greater demand
      • We assume sugar is a normal good
      • According to Abler (2010, 20), sugar is a normal and necessity good in Russia, India, and China with income elasticity of demand ranging between 0.64 and 0.8.
      • Demand function increases and shifts right in Figure 1
      • Both white sugar price and quantity rise
      • Sugar manufacturers increase their quantity supplied


Figure 1. Greater demand for white sugar

  • For the sugar manufacturers to raise their quantity supplied
    • They must demand more raw sugar in Figure 2
      • Demand reflects the sugar manufacturers
      • Supply reflects the sugar mills that make the raw sugar
      • This market also obeys the Law of Supply and the Law of Demand
    • Demand for raw sugar would rise
      • Both market price and quantity rise


Figure 2. Malaysian manufacturers demand more raw sugar
  • Scenario 2 - Many factors can decrease the supply function for raw sugar
  • For example, Brazil could have experienced a severe drought that wiped out its sugar cane
    • The supply of raw sugar decreases in Figure 3
    • Market price would rise while market quantity falls

Figure 3. A drought reduces the supply of raw sugar
  • Malaysia sugar manufacturers pay greater prices for raw sugar and reduce their purchases
    • The resource price has increased
    • Malaysian sugar manufacturers would reduce their supply of white sugar in Figure 4
      • Market price rises while market quantity falls for white sugar
    • Consumers, restaurant cooks, and food companies pay greater prices for white sugar and reduce their quantity demanded.

Figure 4. Malaysian manufacturers reduce their sugar supply because a price of a resource has risen

Note: If you have a derived demand, demand or supply usually shift in the same direction in both markets

3.2 Elasticity and Changes in Total Revenue

  • Article does not provide enough information to calculate the Malaysians' price elasticity of demand for sugar
  • From the Commodities and Trade Division (2002)
    • Price elasticity of demand
      • Americans -0.11
      • Japan -0.81
      • Europeans -0.12
    • Sugar is inelastic
      • Few substitutes for sugar except artificial sugar
      • Some consumers refuse to use artificial sugars, such as aspartame, sucralose, etc. because they may induce health problems in consumers
    • Sugar comprises a small fraction of income
  • Sugar manufacturers raise the price for white sugar, then their total revenue will increase (Hubbard et al. 2010, 105)
    • Changes in profits are ambiguous because we do not know how a firm's costs change
    • We do not know how the manufacturing costs will change.
    • Article was not clear about how the firm's cost change (Bernama 2010)
      • Government reduces subsidy, which reduces the firms' revenue.
      • We know the government raised fossil fuel prices, so if manufacturers use energy, they will pay greater energy costs.
    • It stated manufacturers "have to account for capital expenditures" (Bernama 2010)
      • Upgrading machinery
      • Then they added the following which are not capital expenditures
        • Labor costs
        • Production costs (which includes labor)
    • Manufacturers entered into contracts to lock in low prices for raw sugar (Bernama 2010)
      • The problem – if raw sugar prices stay high, when Malaysian firms buy new contracts for raw sugar, the issuers of the contracts will raise the raw sugar price
      • Only a temporary solution

3.3 Sugar Subsidies

  • Malaysian government subsidizes sugar prices (Bernama 2010)
    • Malaysian government does not use price ceilings or price floors because a price ceiling could lead to shortages while a price floor could create a surplus.
  • I analyze the subsidy
    • The Malaysian sugar manufacturers supply the sugar while consumers, restaurants and food companies demand sugar.
    • The intersection between the supply and demand functions determines the market price and quantity with no government subsidy.
    • Malaysian government pays a subsidy so Malaysians will pay PS for sugar price.
      • Subsidy is the opposite of a tax and shifts the supply curve to the right (Szulczyk 2012, 57-8)
      • At PS, consumers want to purchase QS units of sugar (Szulczyk 2012, 57-8)
      • For manufacturers to supply that amount, they must receive the PS + Subsidy (Szulczyk 2012, 57-8)
        • Subsidy creates a price wedge between the consumers and producers (Szulczyk 2012, 57-8)
        • Consumers pay PS while producers receive PS + subsidies (Szulczyk 2012, 57-8)
  • Social welfare
    • Government must pay producers the total shaded areas in Figure 5 (Szulczyk 2012, 57-8).
      • Consumers receive the medium shaded trapezoid as a benefit of the subsidy (Szulczyk 2012, 57-8)
      • Producers receive all the shaded areas (Szulczyk 2012, 57-8)
      • Since government interfered with the economy, the black triangle represents the deadweight loss to society (Szulczyk 2012, 57-8)

Figure 5. Government pays a subsidy to the sugar manufacturers
  • What makes Malaysia unique is the government locks the sugar price at PS.
    • Supply and demand functions continually shift, changing the market prices
    • However, government will adjust the subsidy so the subsidized price always equals PS.
  • Malaysian government reduces the subsidies to sugar manufacturers, shown in Figure 6
    • I left the original lines for the original subsidy for comparison
    • Consumers pay a greater price at PN and consume a smaller quantity at QN
      • Consumers would lose some consumer surplus because the medium shaded trapezoid is smaller
      • Although the small subsidy reduces the deadweight loss, black triangle, consumers may not be happy about the rising sugar prices.
    • Sugar manufacturers receive a small subsidy from the Malaysian government
      • The collect less of all shaded areas

Figure 6. Government reduces the subsidy to the sugar manufacturers

4.0 Conclusion

  • What makes the article confusing?
    • We do not know what is causing the raise in raw sugar prices – greater demand or smaller supply.
    • Then many factors can boost the raw sugar demand or reduce the raw sugar supply
  • The Malaysian government benefits
    • It reduces its subsidy payments to sugar manufacturers.
    • The deadweight loss shrinks for a smaller subsidy
  • Consumers lose surplus and may not be happy paying higher sugar prices.
    • Consumers do not benefit from the higher sugar prices.
  • The analysis was not clear whether the manufacturers would benefit from the sugar price hikes.
    • They benefit
      • They receive greater prices for white sugar
      • They reduced their raw sugar cost by using contracts to lock into low prices.
    • They do not benefit
      • Sugar manufacturers receive a lower government subsidy
      • Pay greater costs for capital, labor, and operating costs.

5.0 References

  1. Abler, David. 2010. "Demand Growth in Developing Countries." OECD Food, Agriculture and Fisheries Papers, No. 29. OECD Publishing. Accessed April 22, 2014. http://dx.doi.org/10.1787/5km91p2xcsd4-en

  2. Bernama. 2010. "Sugar importers keeping prices low for consumers." Borneo Post Online, August 9. Accessed April 16, 2014. http://www.theborneopost.com/2010/08/09/sugar-importers-keeping-prices-low-for-consumers/

  3. Commodities and Trade Division. 2002. "4. Sugar and beverages." In Agricultural Commodities: Profiles and Relevant WTO Negotiating Issues. Rome: Food and Agriculture Organization of the United Nations. Accessed April 22, 2014. http://www.fao.org/docrep/006/y4343e/y4343e05.htm

  4. Hubbard, Glen, Anne M. Garnett, Philip Lewis, and Anthony Patrick O'Brien. 2010. Essential of Economics. Frenchs Forest: Pearson Australia.

  5. Szulczyk, Kenneth. 2012. The Economics of Government. San Francisco: Scribd. Accessed April 22, 2014. http://www.ken-szulczyk.com/economics_of_government.php

Wednesday, 16 April 2014

The Dead Economic Recovery

World went into recession after the 2008 Financial Crisis had struck the world. In 2014, news reporters, business analysts, and politicians keep talking about the economic recovery. Where is the recovery? It has been seven years, and the U.S. economy still has not recovered. Unfortunately, everybody forgets history.


I listed the last five U.S. recessions because every recovery has become weaker and weaker.


Name Time Peak Unemployment
Early 1980 recessions January 1980 to July 1980
July 1981 to November 1982
7.8%
10.8%
Early 1990s July 1990 – March 1991 7.8%
Dot Com Bust March 2001 – November 2001 6.3%
The Great Recession December 2007 – June 2009 10%


Starting in the early 1980s, we experienced two recessions back to back. Federal Reserve, our central bank, triggered the first recession. It stomped the breaks on the economy because the economy grew too fast and created inflation. Central bank contracted the money supply to combat the high inflation rates from the 1970s. A contracting money supply removes money from the economy, reducing consumers' spending. Unfortunately, a contracting money supply raises interest rates, and short-term interest rates soared to 20% over night.


We have a theory called Cyclical Asymmetry. A central bank contracting a money supply always slows an economy, and it could trigger a recession. However, a central bank boosting the money supply should spur economic growth as the central bank injects money into the economy. Consumers, businesses, and government spend more money, prodding economic growth. (Interest rates also fall that lets banks lend loans with low interest rates). According to Cyclical Asymmetry, boosting the money supply does not always expand the economy.


Then the Ayatollah Ali Khamenei staged the Iranian Revolution and overthrew the Shah in 1979. New government stopped selling petroleum to the United States, causing petroleum prices to spike. Unfortunately, the U.S. economy relied on cheap, fossil energy to power its economy and factories. Soaring petroleum price triggered the second recession, and the unemployment rate peaked at 10.8% in 1981.


Everyone forgets history especially the politicians and news reporters. The United States government, i.e. CIA, helped overthrow a democratically elected Prime Minister, Mohammad Mosaddegh, in 1953 to support the Shah of Iran. Prime Minister wanted to nationalize its petroleum industry and to keep the petroleum profits for his country. On the other hand, the Shah signed over 40% of its oil fields to U.S. companies after it took power. Perhaps the U.S. should stop trying to help the world. Our interference into foreign countries continues to backfire that creates future problems.


Experts debate whether the 1980s recession was the worst since the Great Depression. Although the 1980s recession had a greater unemployment rate, the 2007 Great Recession lasted much longer. Then the computer industry lit the United States on fire and created high paying jobs as businesses, government, and households invested in computer technology.


The United States entered a recession in 1990. The Federal Reserve tightened the money supply to reduce the inflation rate while Iraq invaded Kuwait, causing the petroleum price to soar to new heights (Similar to the early 1980s).


President Bush senior invaded Iraq and freed Kuwait. Then he withdrew the troops because he feared a long, arduous occupation of Iraq. Unfortunately, President Bush junior had started the decade long occupation of Iraq, costing the U.S. government in trillions of dollars.


U.S. economy entered a recession with unemployment rate peaking at 7.8% in 1990. Recovery had become weaker. As the economy recovered, they called it the jobless recovery. Although the U.S. economy recovered, the U.S. economy did not create new jobs. In the old days, economic recoveries always created jobs.


Then the internet and communications industries ignited the economy in the mid-1990s. Businesses and government adopted e-commerce, designed websites, and expanded communications, creating thousands of new jobs in the process. Many consider 1999 to be the best year for the workers because the United States had the greatest portion of its citizens in the workforce with low unemployment rate. I remember a gallon of gas cost less than a $1.


Then many internet companies bankrupted during Dot Com Bust in 2001. George Soros, one of the world's richest men, asked one question – how do these companies make money? We discovered the answer – they didn't make money. Subsequently, everyone learned about the fraud and illegal activities of Enron and WorldCom.


According to Table 1, we experienced a relatively mild recession with the unemployment rate peaking at 6.3%. This recovery was weaker than the previous recovery. They called it the job-loss recovery – the economy recovered, but employers kept shedding jobs. Did you notice the play on words - the jobless recovery versus the job-loss recovery? Of course, George Bush junior became president in 2000 while his father was president during the last recession.


An economic recovery should create jobs. Some experts claim the U.S. manufacturing never had recovered. Strong U.S. property bubble lifted the whole economy by creating jobs in the banking and construction industries. Then the housing bubble popped in 2007, triggering the Great Recession. Many consider the Great Recession as the most severe recession to hit the U.S. economy since the Great Depression. Although the unemployment rate peaked at 10%, the people are still feeling the recession in 2014. On the other hand, the economy rebounded strongly after the early 1980 recessions.


Remember the theory - Cyclical Asymmetry? Shrinking the money supply always contracts the economy while boosting the money supply may not expand the economy. Federal Reserve dumped trillions into the U.S economy to revive it. The Fed did not release precise details so estimates range between $2 trillion and $8 trillion. It provided emergency loans to banks teetering on bankruptcy. It bought bad mortgages from the banks. Consequently, we have witnessed the weakest recovery ever in the United States.


U.S. government dumped trillions into the U.S. economy. Federal government lent $700 billion to bail out the banks and financial institutions. President Obama signed the American Recovery and Reinvestment Act in 2009 to provide $831 billion for creating jobs. After dumping trillions into the economy, what have we seen – a nonexistent recovery?


When we study the history of the United States in the 19th century, the U.S. experienced a recession or financial panic every ten years. After every crisis, the U.S. economy came back stronger and grew faster. After the last three recessions, the recoveries became weaker as the United States has aged into an old man struggling to get out of bed in the morning.


Did you notice the number of years between recessions? United States experiences a recession every 7 to 10 years. We are in 2014, seven years after the Great Recession. We still have not recovered, but we should expect a new recession to the hit the United States between now and three years. If we never recover from the Great Recession, we will not recover from the next recession that will hit the economy anytime soon. Unfortunately, the United States has no industries to lift the economy out of its doldrums, because we have entered a period of stagnation.


P.S.: Japan entered two decades of weak economic growth after the bubbles in its real estate and stock markets collapsed in the early 1990s. Japanese government and central bank bailed out the banking industry and injected trillions of yen into their economy.

Friday, 4 April 2014

7 Reasons To Avoid Becoming a Professor

At one time, professors had the easiest profession working for the academe. Although professors did not earn high salaries, they received excellent benefits. Once students left the university for break, the professors could leave too and go on vacation. Professors worked light schedules, taught from two to four courses per semester, pursued research that interested them, and received health care and retirement plans. Nevertheless, the academe began changing similarly to private companies in the information age. I list seven reasons why the academe has become a poor choice for a career.


Reason 1: The days are long gone when a university hired a professor and kept him or her to retirement. Many universities have thrown job security out the window. (Another casualty of the information economy). They boost hiring of adjuncts and contingent teachers who have no job security. University also does not pay benefits such as health care insurance and retirement plans. Under the new Obama healthcare plan, adjuncts must pay for health insurance out of their own salary. Universities pay adjuncts and contingent labor an hourly rate for contact hours in the classroom, where the adjuncts stand in front of the class and teach the students. Furthermore, some universities demand adjuncts hold office hours, perform research, and advise students without compensation.


A person can start a good career by taking an administrative position in a university. Careers in the university bureaucracies continue flourishing. Administrators continually expand their bureaucracies and hire more bureaucrats. Subsequently, they work full time and receive health insurance and retirement plans. They also can take out their wrath on the professors by imposing more rules and forcing them to write more reports.


Reason 2: Leaders' moods and temperaments change radically daily at a university. For example, a private university in Australia, plunged in its 2013 rankings. University took a beating for employing professors who contributed little to research. Administration started purging and eliminating the unproductive faculty during 2014. Unfortunately, the university has fired some of its older faculty including tenured professors in their 40s and 50s. The university has thrown them into the unemployment market as the professors search for new employment along with young people.


University administrators have lost their dedication to the professors and view them as commodities. Imagine you work for a university for 20 years and the university dismisses you. Many employers refuse to hire workers over 40 years old. Either the employers must pay a greater salary for their experience, or they have difficulties training the new employees. Without question, young people learn technology quicker than older people.


Reason 3: Many universities lost sight of their business. Public universities receive funding from the state to educate the state's citizens. Governments subsidize universities to reduce students' cost of receiving an education and to ensure their country and state have educated citizens to attract the high-tech industries. Furthermore, universities being nonprofit organizations may not pay income taxes to the government.


Many universities, unfortunately, place a low priority on teaching. Universities reward professors who engage in research while administrators look the other way if a professor teaches poorly. Day after day, I hear – research, research, and more research. That becomes the crux – research brings in limited funding for most universities but reflects a university's prestige. (Research also helps a university get accredited). Although teaching is the university's primary money maker, many universities view teaching as secondary. Unfortunately, professors who teach well win few accolades from the administration.


Many PhDs and professors are generating and writing research paper after research paper. Therefore, the number of journals and research articles has exploded, and this knowledge has inundated universities and researchers with too much information. Universities have taken the next step to make sense of this excessive information. Administrators know the majority of research is shit. Now, they started ranking journals, calculating a journal's and a research article's impact on scientific knowledge. In the old days, everyone could easily spot excellent research.


Reason 4: Universities are expanding online learning, where the students do not meet the professors face to face. Universities can hire adjuncts, graduate students, and staff to manage and grade the online courses. Thus, the universities make the professors develop the programs and then let the non-professors teach the course.


Reason 5: Many professors in the United States have delayed their retirement after their retirement plans experienced beatings from the 2001 and 2007 recessions. Many professors lost half the value of their retirement plans after the 2007 Great Recession. Furthermore, people cannot afford to retire in the Bush or Obama economy (depending on your view which president had damaged the economy the most). Many retirees complain they thought they saved and invested enough, but they started paying many unexpected costs and expenses. Even if professors do retire in large numbers, universities can hire retired professors to teach part time.


Reason 6: Many universities and colleges will shrink in size because they dumped thousands upon thousands of college graduates onto the market. For example, the United States has 25% of the population over age 25 who have at least four years of college. What would happen if the United States raises this rate to 50%? United States will still employ janitors, store clerks, fast food workers, street cleaners, farm hands, etc. These jobs do not require a college degree. Moreover, many employers require skilled workers for auto mechanics, plumbers, electricians, air conditioning/heating techs, etc. Universities do not teach these skills, but tech colleges do. Our .society could crumble and fall apart because our citizens have the wrong skills to make our society function well.


How do we know we have too many college graduates in the United States? Only 40% of graduating students find jobs directly related to their college major. Young people will start viewing higher education as a bad investment. Thus, universities will lay off professors as student enrollment plummets.


Reason 7: The last reason relates to graduating too many students. The college bubble has reached its climax in the United States, and is on the verge of bursting. Universities cannot trick students in taking out massive loans to finance their education. Students applying for student loans have made a vital decision that impacts their living standard and incomes for decades. If they chose the wrong program or university, their decision will haunt them for decades and will ruin them financially. In 2014, students have borrowed $26,000 on average to pay for their college while PhDs and law school graduates can accumulate over $100,000 in loans.


After the 2007 Great Recession, many students are entering an abysmal job market. Some students cannot find employment while others find low paying jobs. Unfortunately, some students have defaulted on their loans. Over time, the U.S. government will tighten student loan standards as the default rate soars while students graduating from high school avoid student loans by not enrolling into the universities. Again, universities will lay off professors as student enrollments plunge.


I am not against people who want to improve themselves by pursuing higher education. I was fortunate and earned my PhD from a national public university. Moreover, I worked full time for several universities and repaid my student loans in full. (I accepted some lucrative contracts). However, I have no job security as I float from university to university across the world. I am riding this awesome wave that I know will crash. Thus, I am saving for a rainy day that is coming, and it will pour.

The Horrible Maxis Broadband

I started a new teaching contract in Miri, Malaysia - on the exotic island of Borneo. Unfortunately, foreigners have few choices for an internet provider. Some internet companies require foreigners pay a 1,000-ringgit deposit (or roughly $313) or sign a two-year contract.


I talked to a colleague who bought prepaid broadband from Maxis. He pays 30 ringgits (or roughly $9) per month with a maximum 1-gigabyte data download per month. Of course, he bought a new modem. I also saw the online comments and surveys where people said Maxis Hotlink has the best broadband.


I marveled over the technology. The modem plugs into a laptop's USB port and uses the cellphone's airwaves to transfer data. I thought it would be awesome to try Maxis Broadband. I strolled to the nearest store at my university to pay for the modem and signed up for Maxis Hotlink broadband.


The salesperson pulled out the first modem box, and I shook my head no. The box appeared old as if someone has already opened it. Then the salesperson grabbed another box that appeared new. Then I paid 100 ringgits for the modem, 10 ringgits for a SIM card (Yes, the modem has a cellphone number), and 30 ringgits for my first month. The whole adventure set me back by 140 ringgits (or roughly $44).


I returned to my office to try Maxis and came across my first problem. I plugged the Maxis modem into my computer, and it installed the connection manager onto my computer. However, the model would not connect. At the bottom of the connection manager, it stated – no device plugged in.


I almost returned to the store to complain about the modem, but I remembered during the install process, one driver did not install. I removed the modem from the computer and uninstalled the modem. Then I plugged the device back into the computer and reinstalled the program.


This fixed the problem. The modem began working and connected to the internet.


I remember my colleague said he had fast download speeds. Really? Compared to what - a turtle race? When I used an ADSL modem from TM in northern Malaysia, I could watch low-resolution Youtube videos. Unfortunately, Malaysia differs from the United States, where Americans can watch high definition movies online at home, even paying the same price as Malaysians for the internet.


Maxis Hotlink's download speed ranges between a dial-up phone and the ADSL. I did not expect too much and planned to use the modem to check my email and Facebook account. I thought broadband implied fast downloads. Maxis should tell the truth and call it narrow-band or slow-band. Company misleads its customers by calling it broadband. Occasionally, I would lose the connection and the device would reconnect after several seconds.


After a week, I was writing a blog online when the modem stopped working. I unplugged the device and plugged the device into different USB ports on my laptop – nothing happened.


I took the Maxis modem to work and plugged it into my new, office computer – nothing. The device had died. I tried two techniques to extend the life of a USB device. 


  1. Over time, the USB plug widens as the connections on the USB device do not touch the pins in the computer socket firmly. I pushed the metal on the top of the USB device inward. That way, the USB device plugs into the socket to make a tighter connection. However, that trick had failed.
  2. Humidity can corrode the metal, and Malaysia can be extremely humid. Corrosion prevents the pins and connectors from forming a good contact. I bought a can of WD-40. Then I sprayed the pins in the laptop and the modem's connectors and wiped them clean, removing the corrosion from the metal. Nevertheless, the device still did not work. It had broken.

I took apart the device to examine it and posted the pictures below:

Modem's Top View

Modem's Bottom View


I should have known better. ZTE Corporation, a Chinese company, manufactures the modems for Maxis. ZTE fabricates the $50 Android smart phones that the discount retailers sell in the United States. This corporation is a step above the Chinese companies that manufacture the fake Samsung Galaxy phones circulating across Malaysia.


I walked around the large mall in downtown Miri. I asked one vendor the price of a Maxis modem. She quoted 180 ringgits (or roughly $56). I shook my head in disgust because I paid 100 ringgits (about $31) for the first modem. She said she must charge full price for the second modem even though the first had broken.


I saw a Hotlink stand at the mall and noticed a stack of Maxis modems on the counter. This same stand manages the store branch at the college campus, where I bought my defective modem. Then I asked the salesman at the Maxis stand how much for a replacement modem. He replied, "these modems are for monthly payment plans only. We cannot sell them for prepaid. However, we can give you one for free if you sign up for a contract."


That raises a good question. If Maxis Hotlink were the best, why would I give this company my credit card or debit card information. Then this company would stick me with a shoddy modem and would keep charging my card every month. Then Maxis would charge me broadband prices for snail download speeds. At least with prepaid, I can stop paying its service without breaking any contracts and incurring excessive fees.


Many companies forget the memorial adage – once a company burns a customer, it loses that customer forever. Still they buy these cheap, electronic devices and push them onto their customers. I experienced the same problem with the Malaysian company - TM. After every thunderstorm or power outage, the ADSL modem shorted out. TM replaced the modem three times until I bought a new modem at the store. I paid $50 for the modem and never experienced further problems with the Wi-Fi until the monkeys damaged the phone line. (The Wi-Fi device still worked.).


I eventually found a vendor who sold me a D-link model for 70 ringgits (nearly $22) to replace the broken Maxis modem. The device continues to work after three weeks, but I continue having slow-band. During weekdays, I can check my email and Facebook and lose the connection three or more times. However, on weekend nights, I cannot even connect to the internet. Even if I do connect, I suffer from incredibly slow speeds as people congest the cellphone lines in Malaysia. I will try another broadband service.


I shake my head in disgust at these Malaysian companies. They stick their customers with terrible service and sell them this cheap electronic junk. If consumers experience any problems, then tough luck. That's their problem! Welcome to Malaysia – the land of the incredibly slow broadband.