Heritage Foundation, Economic Freedom, and Greece P

 

By: inoljt, http://mypolitikal.com/

(Note: I strongly encourage you to click the image links on this post when reading; they're essential to understanding what I'm saying.)

What country cut government spending the most in 2011?

Most people would generally agree that the answer is Greece. Smack in the middle of a debt crisis, Greece’s government has been forced to take an axe to government spending. Month after month has been marked by budget cut after budget cut.

The Heritage Foundation is a conservative think tank which publishes a ranking of economic freedom according to each country. These rankings are based on conservative economic values, such as low government spending. According to the Heritage Foundation, the less your government spends, the more economically free your country is.

So, after three years of cutting government spending to the bone, how’s Greece doing on the Heritage Foundation’s ranking of economic freedom?

Pretty Poorly.

In fact, the Heritage Foundation states that Greece has recorded the “largest score decline in the 2012 Index.” Why is this? Well:

Greece’s economic freedom score is 55.4, making its economy the 119th freest in the 2012 Index. Its score is 4.9 points lower than last year, reflecting declines in six of the 10 economic freedoms with particularly acute problems in labor freedom, monetary freedom, and the control of government spending.

This pattern is not only limited to Greece. The four other Eurozone countries in trouble (Ireland, Italy, Portugal, and Spain) have all been slashing their budgets to the bone. Austerity and cuts in government spending have been the main preoccupation of their governments and will continue to be for probably all of next year.

Unfortunately, all of these countries have also suffered corresponding declines in the Heritage Foundation’s rank of economic freedom. Here is Ireland:

Here is Ireland.

Italy.

Portugal.

And Spain.

Why has this happened?

Well, the answer is kind of ironic. Here’s what the Heritage Foundation says:

Ireland’s economic freedom score is 76.9, making its economy the 9th freest in the 2012 Index. Its score has decreased by 1.8 points from last year, reflecting poorer management of government spending and reduced monetary freedom.

Italy’s economic freedom score is 58.8, making its economy the 92nd freest in the 2012 Index. Its overall score is 1.5 points lower than last year, with significant declines in freedom from corruption and the control of government spending.

Portugal’s economic freedom score is 63.0, making its economy the 68th freest in the 2012 Index. Its score is 1.0 point worse than last year, mainly due to deterioration in the management of government spending, labor freedom, and fiscal freedom.

Spain’s economic freedom score is 69.1, making its economy the 36th freest in the 2012 Index. Its score is 1.1 points lower than last year, with a significant deterioration in the management of government spending overwhelming a modest gain in business freedom.

After cutting government spending by enormous amounts, the scores of these five European countries have gotten worse…because they can’t control government spending.

Indeed, the vast majority of the decline in economic freedom of Italy, Ireland, Portugal, and Spain occurs due to lower scores on government spending. Here’s a table that specifically shows how much worse their scores on government spending have gotten since 2011:

Score Changes Since 2011 Country Government Spending Greece -18.1 Ireland -16.7 Italy -9.2 Portugal -10.7 Spain -12.2

It’s pretty undeniable that these countries have been cutting government spending. And yet their scores on the control of government spending keep on getting worse. What gives?

Well, it has to do with the way that Heritage Foundation measures government spending. Specifically it uses government spending as a percentage of GDP; as a government spends more relative to GDP, its score gets exponentially worse.

What’s happening with these five European countries is that while they have indeed cut government spending, their economies have fallen into recession (coincidence?). So government spending, while numerically less, ends up composing a larger percentage of their GDP (which is declining even faster than spending).

Poor Greece. It cuts government spending to the bone for three years, falls into a depression that will be remembered for one hundred years, only to default on its debt anyways. And worst of all, its score on the conservative Heritage Foundation’s economic freedom ranking falls more than any other country because – wait for it – Greece has failed to control government spending adequately.

 

The European Union will enhance their students to travel

 

 

 

There's more...

Global Expansion of High-speed Railroads Gains Steam

Interest in high-speed rail (HSR) is growing around the world and the number of countries running these trains is expected to nearly double over the next few years, according to new research by the Worldwatch Institute for Vital Signs Online. By 2014, high-speed trains will be operating in nearly 24 countries, including China, France, Italy, Japan, Spain, and the United States, up from only 14 countries today. The increase in HSR is due largely to its reliability and ability to cover vast geographic distances in a short time, to investments aimed at connecting once-isolated regions, and to the diminishing appeal of air travel, which is becoming more cumbersome because of security concerns.

 

The rise in HSR has been very rapid—in just three years, between January 2008 and January 2011, the operational fleet grew from 1,737 high-speed trainsets worldwide to 2,517. Two-thirds of this fleet is found in just five countries: France, China, Japan, Germany, and Spain. By 2014, the global fleet is expected to total more than 3,700 units.

 

Not only is HSR reliable, but it also can be more friendly than cars or airplanes. A 2006 comparison of greenhouse gas emissions by travel mode, released by the Center for Neighborhood Technologies, found that HSR lines in Europe and Japan released 30–70 grams of carbon dioxide per passenger-kilometer, versus 150 grams for automobiles and 170 grams for airplanes.

 

Although there is no universal speed definition for HSR, the threshold is typically set at 250 kilometers per hour on new tracks and 200 kilometers per hour on existing, upgraded tracks. The length of HSR tracks worldwide is undergoing explosive growth in order to meet increasing demand. Between 2009 and 2011, the total length of operational track has grown from some 10,700 kilometers to nearly 17,000 kilometers. Another 8,000 kilometers is currently under construction, and some 17,700 kilometers more is planned, for a combined total of close to 43,000 kilometers. That is equivalent to about 4 percent of all rail lines—passenger and freight—in the world today.

 

By track length, the current high-speed leaders are China, Japan, Spain, France, and Germany. Other countries are joining the high-speed league as well. Turkey has ambitious plans to reach 2,424 kilometers and surpass the length of Germany’s network. Italy, Portugal, and the United States all hope to reach track lengths of more than 1,000 kilometers. Another 15 countries have plans for shorter networks.

 

But in Europe, France continues to account for about half of all European high-speed rail travel. HSR reached an astounding 62 percent of the country’s passenger rail travel volume in 2008, up from just 23 percent in 1990, thanks to affordable ticket prices, an impressive network, and reliability. And in Japan, the Shinkansen trains are known for their exceedingly high degree of reliability. JR Central, the largest of the Japanese rail operating companies, reports that the average delay per high-speed train throughout a year is just half a minute. On all routes in Japan where both air and high-speed rail connections are available, rail has captured a 75 percent market share.

 

Further highlights from the research:

 

  • A draft plan for French transportation infrastructure investments for the next two decades allocates 52 percent of a total of $236 billion to HSR.
  • In 2005, the Spanish government announced an ambitious plan for some 10,000 kilometers of high-speed track by 2020, which would allow 90 percent of Spaniards to live within 50 kilometers of an HSR station.
  • Currently, China is investing about $100 billion annually in railway construction. The share of the country’s railway infrastructure investment allocated to HSR has risen from less than 10 percent in 2005 to a stunning 60 percent in 2010.
  • Intercity rail in Japan accounts for 18 percent of total domestic passenger-kilometers by all travel modes—compared with just 5 to 8 percent in major European countries and less than 1 percent in the United States.
  • In France, rail’s market share of the Paris-Marseille route rose from 22 percent in 2001 (before the introduction of high-speed service) to 69 percent in 2006. In Spain, the Madrid-Seville rail route’s share rose from 33 to 84 percent.

Global Expansion of High-speed Railroads Gains Steam

Interest in high-speed rail (HSR) is growing around the world and the number of countries running these trains is expected to nearly double over the next few years, according to new research by the Worldwatch Institute for Vital Signs Online. By 2014, high-speed trains will be operating in nearly 24 countries, including China, France, Italy, Japan, Spain, and the United States, up from only 14 countries today. The increase in HSR is due largely to its reliability and ability to cover vast geographic distances in a short time, to investments aimed at connecting once-isolated regions, and to the diminishing appeal of air travel, which is becoming more cumbersome because of security concerns.

 

The rise in HSR has been very rapid—in just three years, between January 2008 and January 2011, the operational fleet grew from 1,737 high-speed trainsets worldwide to 2,517. Two-thirds of this fleet is found in just five countries: France, China, Japan, Germany, and Spain. By 2014, the global fleet is expected to total more than 3,700 units.

 

Not only is HSR reliable, but it also can be more friendly than cars or airplanes. A 2006 comparison of greenhouse gas emissions by travel mode, released by the Center for Neighborhood Technologies, found that HSR lines in Europe and Japan released 30–70 grams of carbon dioxide per passenger-kilometer, versus 150 grams for automobiles and 170 grams for airplanes.

 

Although there is no universal speed definition for HSR, the threshold is typically set at 250 kilometers per hour on new tracks and 200 kilometers per hour on existing, upgraded tracks. The length of HSR tracks worldwide is undergoing explosive growth in order to meet increasing demand. Between 2009 and 2011, the total length of operational track has grown from some 10,700 kilometers to nearly 17,000 kilometers. Another 8,000 kilometers is currently under construction, and some 17,700 kilometers more is planned, for a combined total of close to 43,000 kilometers. That is equivalent to about 4 percent of all rail lines—passenger and freight—in the world today.

 

By track length, the current high-speed leaders are China, Japan, Spain, France, and Germany. Other countries are joining the high-speed league as well. Turkey has ambitious plans to reach 2,424 kilometers and surpass the length of Germany’s network. Italy, Portugal, and the United States all hope to reach track lengths of more than 1,000 kilometers. Another 15 countries have plans for shorter networks.

 

But in Europe, France continues to account for about half of all European high-speed rail travel. HSR reached an astounding 62 percent of the country’s passenger rail travel volume in 2008, up from just 23 percent in 1990, thanks to affordable ticket prices, an impressive network, and reliability. And in Japan, the Shinkansen trains are known for their exceedingly high degree of reliability. JR Central, the largest of the Japanese rail operating companies, reports that the average delay per high-speed train throughout a year is just half a minute. On all routes in Japan where both air and high-speed rail connections are available, rail has captured a 75 percent market share.

 

Further highlights from the research:

 

  • A draft plan for French transportation infrastructure investments for the next two decades allocates 52 percent of a total of $236 billion to HSR.
  • In 2005, the Spanish government announced an ambitious plan for some 10,000 kilometers of high-speed track by 2020, which would allow 90 percent of Spaniards to live within 50 kilometers of an HSR station.
  • Currently, China is investing about $100 billion annually in railway construction. The share of the country’s railway infrastructure investment allocated to HSR has risen from less than 10 percent in 2005 to a stunning 60 percent in 2010.
  • Intercity rail in Japan accounts for 18 percent of total domestic passenger-kilometers by all travel modes—compared with just 5 to 8 percent in major European countries and less than 1 percent in the United States.
  • In France, rail’s market share of the Paris-Marseille route rose from 22 percent in 2001 (before the introduction of high-speed service) to 69 percent in 2006. In Spain, the Madrid-Seville rail route’s share rose from 33 to 84 percent.

What Comes After the Bailout of Portugal

By: Inoljt, http://mypolitikal.com/

Sometimes reviewing past news events can yield unexpected irony. Here, for instance, is the New York Times’ page on Portugal News. The second-to-last article, dated on January 12th is titled, Portugal Says It Needs No Bailout and Won’t Seek One. After that there is a series of optimistic articles titled, respectively, Portugal’s Bond Sale Better Than Expected, Bond Sale A Success In Portugal, Optimistic Outlook Eases Portugal’s Borrowing Costs.

Two days ago, however, came this gem: Portugal to Ask Europe For Bailout.

This bailout comes after the previous bailouts of Greece and then Ireland. The European Union has detailed a bail-out fund of approximately one trillion dollars, which can be lent to countries at lower than at-market interest rates. Originally this was meant to stop the market panic over the European sovereign debt crisis. To some extent it has succeeded in alleviating the panic.

On the other hand, it has obviously failed to contain the contagion to Greece alone.

By itself Portugal is not too big of a problem for the fund. Its economy is smaller than Greece’s; so is its population. The fund will be able to deal with Portugal, as it did with Greece and Ireland.

The question is, however, what comes next. With the bailout of Portugal, all eyes are looking towards Spain. This is the market’s next target.

A bailout of Spain would be a magnitude more difficult than the previous bailouts. Its economy is far bigger; more than a trillion dollars in GDP. This is four to five times bigger than Greece. It has a population of 46 million, several times that of Greece.

It would be very difficult and extremely expensive to rescue Spain’s 1.4 trillion dollar economy, unlike the relatively cheap rescues so far enacted. The bailout might perhaps or probably be impossible.

In other words, the eurozone has almost reached the end of its line. In the summer of 2010, during the height of the Greek crisis, analysts worried not about Greece but about Spain (and Italy after Spain). Spain was the big fish, the debt-ridden country in a recession big enough to pull down the euro. The fear was that Greek bankruptcy would set off a chain reaction, moving from Greece to Ireland to Portugal and finally to Spain.

Well, Greece, Ireland, and Portugal have asked for a rescue, and it has come down to Spain. Spain must not fall.

 

 

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