Wednesday, 26 August 2009

The need for a tourism consumer price index?

I was reading the Independent today when i was struck with the recommended prices for the newspaper outside the UK.
Cyprus 4.20 Euro
Greece 3.5 Euro
Austria 3 Euro
Germany 3 Euro
Italy 3 Euro
Luxembourg 3 Euro
Spain 3 Euro
Malta 2.95 Euro

Now if one ranks these countries in terms of how rich is the average citizen (i.e. per capita GNP in purchasing power parity terms) the ranking is vastly different. With the EU-27 as 100 the richest per capita countries are:

Luxembourg 252.8
Austria 123
Germany 116
Spain 103.9
Italy 100.5
Greece 95.3
Cyprus 94.6
Malta 76.4

I think this shows that the implicit feeling in Cyprus is a very expensive tourist destination can be seen by such articles such as a foreign newspaper. Many tourist oriented products that are not included in the basket of products that is used to estimate the consumer price index. Yet prices of tourist friendly products in Cyprus are prices in complete disregard of income or transport costs. And once again this implicitly shows that Malta is doing something right when it comes to tourism - cost does not come up as worry nearly as much in tourist surveys as it does in the case of Cyprus.

Monday, 24 August 2009

Τα λογία και πάλι περιπτά

Ο Ρομπέν των καμένων δασών
Περίδης Ορφέας
Μουσική/Στίχοι: Περίδης Ορφέας/Περίδης Ορφέας

Γεννήθηκα μεσ’ την κοιλιά του τσιμεντένιου δράκου
Που απ’ το στόμα του ξερνάει τις φλόγες του θανάτου
Στένεψε ο κόσμος στένεψε, στένεψε το μυαλό μου
Η πολιτεία πιο μικρή απ’ το δωμάτιο μου
Σπίτι τους φίλους στη δουλειά όλους θα τους αφήσω
Δίχως βοήθεια καμιά μόνος θα πολεμήσω

Θα πάρω κράνος διχτυωτό απ’ το Μοναστηράκι
Θα βάλω πάνω ένα φτερό μαύρο από κοράκι
Θα πάρω φτυάρι και κασμά και πετσετέ φουλάρι
Θα πάρω δρόμους και βουνά πάνω σ’ ένα μουλάρι
Είμαι ο Ρομπέν των καμένων δασών και των πολυκατοικιών
Είμαι ο Ρομπέν των καμένων δασών και των πολυκατοικιών
Γεννήθηκα μέσα στη γη μια ντάλα μεσημέρι
Και σε πλατεία φύτρωσα σ’ ένα μικρό παρτέρι
Στένεψε ο κόσμος στένεψε στέρεψε η έμπνευση μου
Ο αέρας μου λιγότερος απ’ την αναπνοή μου
Είμαι ένα φαλακρό βουνό, γη καταπατημένη
Μπουλντόζα ακυβέρνητη από κλωστή δεμένη
Είμαι εδώ δεν είμαι εδώ δεν ξέρω δεν κρατιέμαι
Θηρίο είμαι ακέφαλο θηρίο που καταριέμαι
Φτάνει ως εδώ βγάλτε για μένα ένα νόμο
Βάλτε με να περνάω γέρους απ’ το δρόμο
Είμαι ο Ρομπέν των καμένων δασών και των πολυκατοικιών
Είμαι ο Ρομπέν των καμένων δασών και των πολυκατοικιών
Είμαι ο Ρομπέν...
Είμαι ο Ρομπέν...

Wednesday, 19 August 2009

The horrors of nationalism

Gurgen Margaryan died a brutal death in 19th of Febuary 2004. While attending a NATO training class in Budapest, Gurgen was brutally murdered in his sleep by classmate by his Azerbaijani classmate. The post mortem indicated that the murderer did not stop until he severed his victim's head from his body.

The murderer claimed that the murder was justified due to the defeat of Azerbaijan in the Nagorno-Karabach war in 1994, and that he was suffering from post traumatic stress disorder because of it. He was condemned to life imprisonment in Budapest in 2006.

The brutal murder is sadly the least disturbing aspect of this case. What is more disturbing is the reaction of the press in Azerbaijan. The murderer is celebrated in sections of the political elite of Azerbaijan. The Permanent Representative of Azerbaijan to the Council of Europe warned that he "does not advise Armenians to sleep safely until the Karabakh conflict is settled. The ombudsman of Azerbaijan stated that R. Safarov [the murderer] must become an example of patriotism for the Azerbaijani youth."

Sadly 2 years on the Azerbaijan elite are still doing this. The authorities are set to prosecute everybody who voted for Armenia in last years Eurovision. Such hatred seems surreal to us in Western Europe, but someone must put their foot down and tell Azerbaijan that this behaviour will not get them into Europe.

Another poor but nessesary descision?

Another bad decision by the government in terms of economics. Phileleitheros reports today that the government is suspending all major investment works until after the crisis. This is undoubtedly due to the fact that the projection for GDP this year will be negative.

The problem is that at a time that the revenues from tax are shrinking and the expenditure on unemployment benefits is rising, the government deficit needs to remain within 3% of GDP. Thus when GDP is shrinking the government is in trouble even if it does not increase expenditure in the economy. This will put into trouble with the European central bank, with the possibility of a huge fine.

However the problem is that recessions are exactly the time when large infrastructure project should take place. The construction industry is alleviated from its crisis by government funding, while the government can get a good price because of the distress of the building companies.
Large investment projects also help the country move out of recession since investment is the basis of continued economic growth. It is true that Cyprus has investment bottlenecks that can only be solved by the government: the harbour is in a dreadful condition with outdated technology, and the ICT depth of the government bureaucracy is woeful. Stopping such projects in order to stay within the Maastrict limits not only prevent a faster recovery but also compromises economic growth in the future.

Thursday, 13 August 2009

Abandoned Towns

There was an article in politis yesterday about a family who managed to see pictures of its house in Famagusta through pictures taken by a UN member who entered their house to clear a large nest.

I could find the article on politis but i found this amazing site which collects pictures of the 10 most famous ghost towns of the world. Truly hair raising stuff.

Tuesday, 11 August 2009

Interesting History – How the victory of the Fascists in the Spanish civil war saved Cyprus from invasion during the Second World War.

On 17th of July, 1936 the nationalist generals attempted to wrest control from the democratic socialist government in Spain. The result was one of the bloodiest civil wars in modern Europe, seen by many as a proxy war to the sides that would eventually fight in the Second World War. The war dragged on until the 1st of April in 1939, after much bloodshed. The reprisals of the Franco against its former enemies were awful, representing some of the most notorious crimes against humanity. As a result of the war Spain was ruled by the iron hand of dictatorship until 1975, and only became a democracy in 1978; it is noteworthy to see how far Spain managed to progress in economic, artistic and cultural spheres after decades of repression and state sponsored violence.

The nationalist side took an increasingly fascist ideology during the war. This was partly because of the increasing power of the falangist movement within the ranks of the nationalist army but mostly due to the fact that the generals were aided (in terms of men, materiel, tanks and air force) by Hitler and Mussolini, making a mockery of international agreements that prevented military aid to the combatants. Without the aid the generals attempt to wrest control from the government would have surely failed. However the aid came at a price: companies such as HISMA, ROWAK and SOFINDUS plundered Spain for raw materials both before and during the Second War World. Spain had to provide ore at bargain prices during the duration of the Second World War.

In the words of the historian Charles E. Harvey the Nazi regime of Germany was desperately trying to achieve autarky in raw materials, in order to be able to wage a sustained military campaign without facing the shortages of raw materials faced in the First World War. Out of most raw materials, Germany could not be self sufficient in four key materials: Oil, iron, copper, and sulphur (used in explosives production), as Germany simply did not have these elements in its territory.

Spain delivered over 9.4% of iron ore, 50% of copper pyrites and 85% of sulphur prior to the civil war, and the establishment of a friendly regime ensured that the supplies of these crucial raw materials would continue until well after d-day in 1944.

This undoubtedly saved Cyprus in 1941. With the start of the Spanish civil war, Spanish supplies to German chemical producers and smelters was halted; Cyprus, with the energetic American company, the Cyprus Mining Corporation at the forefront, filled the gap. The amounts of ore sent to Germany were tremendous, with up to 80% of all ore being sent to maintain Hitler’s drive to re-arm. Thus the copper sulfate ore from Cyprus ensured that the German re-militarization could continue at breakneck speed.

The invasion of Crete in May 1941 a costly success for Hitler. Since Germany could not control the seas, but controlled the skies in the Agean. Hitler launched the largest airdrop operation to that date; although the Germans took control of Crete, Hitler saw his crack paratroopers decimated. This put him off plans to invade Cyprus and Malta by air.

However if the Spanish civil war was won by the republicans, the situation might have been different. An invasion of Cyprus in order to gain crucial deposits iron, copper and sulfur ore might have been more tempting that an invasion of a militarized and victorious republican Spain. It was not unusual for Germany to invade territories for its resources: Polesti in Romania was occupied by the Germans to secure their oil supply, while vital manpower was diverted away from the attempt to capture Moscow in an attempt to wrest control of the oil and ore producing are of Baku in the Soviet Union.

For me this example shows that the history of one country can have a profound effect on the history of another, and that history can be taught to be a interesting and dynamic subject.

Monday, 10 August 2009

NY TIMES OP-ed misses the point about GDP.

Every two years there is somebody who claims the death of GDP as a tool in understanding wellbeing and measuring performance. Now even the New York Times has joined the band wagon.

As a person who has spent the last 4 year reconstructing the GDP I can tell you that a lot of what this article is saying is bull. One of the biggest criticisms is that DIY and household work is not included in the GDP. Yet that is a political decision and a decision of national accountants: household chores can be included if politicians agree that it is a worthwhile activity and Sweden has already included it in its GDP (and i agree with Sweden).

The author goes on and moans that drying your clothes does not increase GDP, while taking it to the dry cleaners increases output - failing to see that the difference is that in the first case there no increase in income, while in the other someone gets paid for the services thus creating a multiplier effect that makes the income of the country just a tiny bit better off.

The author then goes on to argue that an increase in GDP does nessesarily make people better off and argues the aftermath of Katerina shows that. That is simply a misunderstanding of GDP- since the income of individual in based how the income is divided among the people. Thus in the US case GDP has been rising but only the income of the top 1% has been rising due to increasing income inequality and the lack of redistribution of income by the government.

Basically the author is annoyed that despite prediction of a recovery, the GDP data showed a continuing downturn. People forget that long recessions (or day i say it depressions) are not an up / down process - there a is lot weak recovery and sudden reversals. The author also does not tell us that there are alternatives to GDP, such as the Human development index, that take a persons welfare into account - the author does not mention them since they show the problems of the USA, which falls from first to the 20th country in the world when education and life expectancy is added to the income per capita indicator.

New instruments such using advanced econometrical analysis that are capable in identifying weaknesses in the economy much more quickly are needed, but that is not what the author is demanding. Sadly I expected more from the NY times in terms of leading the global discussion about the need to change economic thought.