I decided to take a look at some historical economic data to see if some of my beliefs were accurate (largely about how well Singapore has done) and learn a bit more while I was at it.

GDP in USD for countries

I just picked countries that interested me and seemed worth looking at. I looked for some around the starting position of Singapore and close to Singapore geographically. And looked at Panama as the closest match to Singapore (for Singapore’s main 1970 asset, convenient for shipping lanes, and very close for GDP per capita).

Malaysia and Singapore were 1 country after independence (from 1963-1965).

I can’t imagine more than a couple countries could reasonably be argued to have had better economic performance from 1970 to 2010 than Singapore (Korea? China? Who else?). Singapore had very little going for it in 1970. They had a good location for shipping and that is about it macro-economically. No natural resources. No huge storage of wealth. No preeminence in science, technology or business.

It seems to me that Singapore actually did have 1 other thing. A government that was to preside over a fantastic economic growth success. You won’t find many textbooks talking about the way to economic success is a very well run government. And there is good reason for that, I believe. Relying on a very well run government will nearly always fail. In some ways Singapore was like Japan but with significantly more government influence on the way economic development played out.

I was surprised how poorly the USA has faired. It isn’t so surprising that we lagged. People forget how rich the USA was in 1970. The USA is still very rich but bunched together with lots of other rich countries instead of way out ahead as they were in 1970. And in 1970 the lead was already contracting, for what it had been earlier. But even knowing the relative performance of the USA had lagged, I was surprised by how much it under-performed.

I was also surprised with India. I knew they have done poorly but I didn’t realize it had been this poor. The failures to greatly improve infrastructure, education and the stifling effect of their bureaucracy have been causing them great harm. They have been doing some good things in the last 10 years especially but still have a long way to go. Their premier education is actually pretty decent. The problem is the other 90% of the education is often poor and many people (especially women) hardly have any education at all. It is very hard to get ahead when you fail to take advantage of the talents of so many of your people.

Related: Singapore and Iskandar Malaysia – Chart of Largest Petroleum Consuming Countries from 1980 to 2010 – Chart of Nuclear Power Production by Country from 1985-2009 – Top Countries For Renewable Energy Capacity

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Welcome to the Curious Cat Investing, Economics and Personal Finance Carnival: find useful recent personal finance, investing and economics blog posts and articles. The carnival is published twice each month. This carnival is different than others in two significant ways. First, I select posts from the blogs I read (instead of just posting those that submit to the carnival). I think this provides readers a better selection of valuable material (many of the best blogs don’t take time to submit to carnivals). And second, I include articles when I think they are interesting. I figure the primary purpose is to provide links to good recent content, so just because something isn’t a blog post doesn’t exclude it from inclusion.

• Recovering Adam Smith’s ethical economics – “He justified commercial society for its tremendous contribution to the prosperity, justice, and freedom of its members, and most particularly for the poor and powerless in society.” [This post covers a topic I think is very important and have written about several times - John]
• A Man. A Van. A Surprising Business Plan. by Zoe Chace – “Adam had tricked out the van to be a mobile solution to Chinese bureaucracy. There are a couple of Mac laptops and a printer, plus an old couch, Christmas lights and bamboo mats. It’s as cozy as a dorm room. And confused visa applicants line up outside.” [wonderful - John]
• Chart of Manufacturing Output from 2000 to 2010 by Country by John Hunter – “Europe has 4 countries in this list (if you exclude Russia) and they do not appear likely to do particularly well in the next decade, in my opinion. I would certainly expect Brazil, India, Korea and Indonesia to out produce Italy, France, UK and Spain in 2020. In 2010 the total was $976 billion by the European 4 to $961 billion by the non-European 4. In 2000 it was $718 billion for the European 4 to $343 billion (remember all the data is in 2010 USD).”
• Ultimate Sustainable Dividend Portfolio – “I would expect the Ultimate Sustainable to do better in difficult times and worse in great times. Why? The USDP is a more stable portfolio that will fluctuate less over time…”

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Nonfarm payroll employment rose by 200,000 in December, and the unemployment rate declined to 8.5% (the lowest rate in 3 years), continuing a downward trend. The change in total nonfarm payroll employment for October was revised from +100,000 to +112,000, and the change for November was revised from +120,000 to +100,000 (which results in total increase of 192,000 with this report: 200,000 – 8,000 lost in revisions).

The number of long-term unemployed (those jobless for 27 weeks or more) continues to be a big problem and was little changed at 5.6 million, accounted for 42.5% of the unemployed (quite a high percentage). While adding 192,000 is better than losing jobs or adding fewer, it is still not enough to make up for the credit crisis job losses. The economy needs to add 125,000 a month to keep up with population growth. Sustained gains over 230,000 month after month are needed to be what I would see as good, and really above 270,000 would be much better – but given the Eurozone problems, staying about 200,000 may really be good news.

The civilian labor force participation rate (64.0%) and the employment-population ratio (58.5%) were both unchanged over the month.

Over the past 12 months, nonfarm payroll employment has risen by 1.6 million. Employment in the private sector rose by 212,000 in December and by 1.9 million over the year. Government employment changed little over the month but fell by 280,000 over the year.

Employment in transportation and warehousing rose sharply in December (+50,000). Almost all of the gain occurred in the couriers and messengers industry (+42,000); seasonal hiring was particularly strong in December.

Retail trade continued to add jobs in December, with a gain of 28,000. Employment in the industry has increased by 240,000 over the past 12 months.

In December, manufacturing employment expanded by 23,000, following 4 months of little change. Employment increased in December in transportation equipment (+9,000), fabricated metals (+6,000), and machinery (+5,000).

Related: USA Unemployment Rate Rises to 9.8% (Nov 2010) – USA Unemployment Rate Remains at 9.7% (March 2010) – Over 500,000 Jobs Disappeared in November 2008

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Chart of output by top 10 manufacturing countries from 1980 to 2010. The chart was created by the Curious Cat Economics Blog based on UN data. You may use the chart with attribution.

China has finally actually taken the lead as the largest manufacturer in the world. Reading many news sources and blogs you may have thought the USA lost the lead a couple of decades ago, but you would be wrong. In 1995 it looked like Japan was poised to take the lead in manufacturing production, but they have slumped since then (still they are solidly the 3rd biggest manufacturer). China has been growing manufacturing output enormously for 20 years, and they have now taken the lead from the USA.

As I have been saying for years the biggest economic story about manufacturing is the dramatic and long term increase of productive capacity in China. The next is the continuing global decline in manufacturing employment: increased productivity has seen production rise year after year and employment fall. What is the next most interesting stories is debatable: I would say the continuing failure to appreciate the continuing strong manufacturing production increases by the USA. Another candidate is the the decline in Japan. Another is the increase in several other counties: Korea, Brazil, India, Indonesia…

Looking more closely at some of the long term data shows how much China stands out. From 1980 to 2010 China increased output 1345%. The total top 10 group increased output 302% (all data is in 2010 USD). From 1995 to 2010 China increased output 543%. The group increased 64%. For 1980-2010, the results for the other 3 largest manufacturing countries are: USA up 218%, Japan up 261% and Germany up 148% (other countries doing very well are Korea up 1893% and India up 737%). Looking at the last half of that period, from 1995-2010 the: USA up 44%, Japan down 11% and Germany up 19%.

You can that the other largest manufacturing countries fail to keep up with the increases of the entire group of the top 10. China’s gains are just too large for others to match. If you remove China’s results (just to compare how the non-China countries are doing) from 1980-2010 the increase was 216% (so compared to the other 9 top manufacturers over this period the USA was even and Japan better than the average and Germany was worse). And from 1995-2010 the top 9 group (top 10, less China) increased just 28%: so the USA beat while Japan and Germany did worse than the other 9 as a group.

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There is an increasing trend to move from the USA to another country to work and live. This is not surprising to me. Recently this has picked up quite a bit; I am surprised by the velocity at which this interest in moving (I figured it would be a long term mega trend but not so drastic, so quickly). Economic changes are often quite surprising in how rapidly they move forward.

An interesting survey shows USA investors have become much more interested in relocating in the last two years (the data they show though has tremendous volatility over time, so I am not really sure this means much). I wonder how much of it can be explained by investors wanting to get a deep understanding of very promising markets. I wouldn’t image the actual number that do this is huge, but maybe the number considering it is significant. Billionaire investor, Jim Rodgers moved to Asia because he sees Asia as key to the future. One of the reasons I moved to Malaysia this year was to get a in depth understanding of what South East Asia is like (it is not a deciding reason, at all but maybe the 4th or 5th reason).

I believe the globalization of the employment market is a long term trend that will continue – especially for “knowledge workers.” The USA rested on the post WW II economic domination for nearly 50 years. The policies also helped this continue: investing in science and engineering, favoring entrepreneurship… But other countries have realized the value of these things (and the USA is slipping – not investing nearly as much in science and engineering and favoring large corporations that give politicians large amounts of cash over innovation – see things like the incredibly outdated “intellectual property” system, SOPA, favoring huge financial institutions…

The combination of long term policy weakness, the inevitable decline in the USA to world ratio of economic wealth, and the financial crisis caused by the policy weaknesses have seemingly greatly accelerated the trend. The next 2 or 3 years will determine if that is a permanent acceleration or if we go back to a slower pace – but on the same path. My guess is that we will stay on this path but the pace will not follow the level surveys might indicate (showing interest in such a big change is far different from actually moving).

There don’t seem to be any decent estimates of Americans living abroad. The US State Department claims releasing their estimates would be a national security risk? And the Census bureau says it would cost too much to try. Wild guesses seem to be between 4 and 6 million.

Related: I want out (subreddit) – Why Investing is Safer Overseas – USA Heath Care System Needs Reform – Copywrong

The unemployment rate fell from 9.0% to 8.6% in November, however that is not an accurate representation of employment in the USA. The news is good, but very mildly good, while a decrease in the unemployment rate by 40 basis points would lead you to believe the improvement was dramatic. Nonfarm payroll employment rose by 120,000 which is about the number needed to keep up with population growth each month. Employment continued to trend up in retail trade, leisure and hospitality, professional and business services, and health care. Government employment continued to trend down.

The change in total nonfarm payroll employment for September was revised from +158,000 to +210,000, and the change for October was revised from +80,000 to +100,000. This means this report shows an increase of 192,000 jobs which is pretty good news (especially for those that think the economy has been in a recession – it has not).

One year ago the unemployment rate stood at 9.6%.

The number of unemployed persons, at 13.3 million, was down by 594,000 in November. The labor force, which is the sum of the unemployed and employed, was down by a little more than half that amount. What this means is the reduction in the unemployment rate was largely due to the decrease in those actively looking for jobs.

Among the major worker groups, the unemployment rate for adult men fell to 8.3% in November. The jobless rate rates for adult women (7.8%), teenagers (23.7%), African-Americans (15.5%), and Hispanics (11.4%) showed little or no change. The jobless rate for Asians was 6.5%.

The number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 5.7 million and accounted for 43.0% of the unemployed. This is one of the numbers that has to come down drastically for the job situation to really show good improvement.

Related: Jobs News in the USA is not Good, Unemployment Remains at 9.1% (Aug 2011) – USA Economy Adds 151,000 Jobs in October, Unemployment Rate Steady at 9.6% (Oct 2010) – Unemployment Rate Reached 10.2% (Oct 2009) – Over 500,000 Jobs Disappeared in November (2008)

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Georgetown University Center on Education and the Workforce has produced a new report looking at the value of different college degrees in the USA. I have seen a great increase in discussions of the “bubble” in education. Those articles often say a college degree doesn’t assure the success it used to. The data I review seems to show extremely large benefits for those with a college degree (higher salaries but, much more importantly, in my opinion, they also have much lower unemployment rates).

Those benefits are greatest for several majors including science, math and engineering. The problem I see is not so much that significant benefits are lacking for college degrees but the huge increases in costs of getting a degree are so large that for some majors the cost is just so large that even with the benefits it is arguable whether it is worth the cost (while a few decades ago the benefits were universal and so large the economic benefit was not debatable).

The authors of the report found that all undergraduate majors are worthwhile, even taking into account the cost of college and lost earnings. However, the lifetime advantage ranges from $1,090,000 for Engineering majors to $241,000 for Education majors. As I have written frequently on the Curious Cat Science and Engineering blog, engineering degrees are very financially rewarding.

The top 10 majors with the highest median earnings for new graduates are:

• Petroleum Engineer ($120,000)
• Pharmacy/pharmaceutical Sciences and Administration ($105,000)
• Mathematics and Computer Sciences ($98,000)
• Aerospace Engineering ($87,000)
• Chemical Engineering ($86,000)
• Electrical Engineering ($85,000)
• Naval Architecture and Marine Engineering ($82,000)
• Mechanical Engineering, Metallurgical Engineering and Mining and Mineral Engineering (each with median earnings of $80,000)

Chart of salaries (25th and 75th percentile) by major in the USA based on data from 2009

Related: 10 Jobs That Provide a Great Return on Investment – Mathematicians Top List of Best Occupations – New Graduates Should Live Frugally

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Chart showing loan delinquency rates from 2000-2011, shows seasonally adjusted data for all banks for consumer and real estate loans. The chart is available for use with attribution. Data from the Federal Reserve.

Residential real estate delinquency rates increased in the first half of 2011 in the USA. Other debt delinquency rates decreased. Credit card delinquency rates have actually reached a 17 year low.

While the job market remains poor and the serious long term problems created by governments spending beyond their means (for decades) and allowing too big to fail institutions to destroy economic wealth and create great risk for world economic stability the USA economy does exhibit positive signs. The economy continues to grow – slowly but still growing. And the reduction in delinquency rates is a good sign. Though the residential and business real estate rates are far far too high.

Related: Consumer and Real Estate Loan Delinquency Rates 2000-2010 – Real Estate and Consumer Loan Delinquency Rates 1998-2009 – Government Debt as Percent of GDP 1998-2010 for OECD

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After World War II essentially the only significantly large industrial base was in the USA. The USA was emerging as a national power in the early 1900′s. The wake of World War I and World War II left a very odd situation. You had many formerly very rich countries that were devastated and one rich country that wasn’t. Devastation is not easy to overcome in even 20 years. So for a good 2 decades the USA got wealthier and wealthier even while other formerly rich countries were re-developing there countries rapidly.

This made the USA even richer as selling to all those around the world was pretty easy, just creating enough stuff was the hardest part. Almost none of the current emerging markets were doing much of anything economically. This resulted in the USA being able to live incredibly well and generate enormous wealth.

The main legacy of this is a huge benefit to the USA – enormous wealth and experience. However, it seems to have left people thinking the USA is just suppose to be enormously wealthy always no matter if we throw away hundreds of billions a year on a broken health care system, provide huge benefits to political donors (farmers or bankers or phone oligopolists or robbers of the public domain [preventing innovation through repressive, outdated "intellectual property" regimes]), spending many hundreds of billions yearly on military expenditures far beyond those of any other country… It doesn’t work that way.

You can waste huge amounts of economic benefit when you are the dominant economic power globally. And when you were as rich as the USA was in the 1950s and 1960s more and more people felt they deserved to be favored with economic gifts. So for a a few decades the USA used the excess wealth to pay off all sorts of special interests and still do very well economically. The only thing surprising is how long we have been able to keep this up.

It isn’t rational to base expectations on periods when we were granted economic wealth largely by virtue of the world industrial production, other than ours, being destroyed. This isn’t the only reason we were wealthy, we do many things very well (compared to other countries) entrepreneurship, less corruption (still way too much but less than average), from 1950 to about 1990 an equitable distribution of economic gains, until recently a good advanced education system, a brilliant system to turn science and engineering breakthroughs into economic profit (that in the last few decades other countries are starting to do, but they are still way behind)…

From 1970s until say the 2000s we could use our accumulate wealth to live off and not allow huge inefficiencies to continue (lousy job of regulating banks, lousy job of subsidizing farming, lousy job of subsidizing lousy food [making it cheap to eat unhealthy food and expensive to eat healthy food], lousy job of controlling the costs of higher education, lousy job of getting people to realize they cannot expect to live far beyond most everyone else in the world just because they were born in the USA…
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Manuel De Jesus, miller and farmer in El Salvador, will use his loan to buy parts for this milling euipment.

There is a great deal focus recently on the “99%” (via occupy wall street and the like). The truth is these are mainly about the 5% or 10% (those rich, but not quite as rich as the richest 1% – and much further from the richest than they were a few decades ago). As I have written before, most of those in the USA (also Europe, Japan…) are rich (though this is changing, a greater percentage of the USA is not rich, looking globally, than maybe any point since the 1930s).

We get confused because many near us are even richer and think that means the rest of us are very poor. But those in the USA are often in the 5% or 10% – not the 30% or 60% or 90% they seem to think they are. $50,000 in annual income puts you in the top 1% globally. $25,000 puts you in the top 10%.

I agree with the desire to reduce the political and market corruption, as I have written for years.

For the 99% (or the 90% anyway), I really think the best things are government policies that reduce corruption and increase market forces. Letting actually capitalism work instead of political and corporate cronyism failing to let markets work as they should. Also giving education and the chance to build a better life for yourself are important. Thankfully many countries have been doing very well on this front: Singapore, Korea, Brazil, Ghana, China… That doesn’t mean there are not huge issues to still address for most of the 90%, there are.

Microfinance in general, and Kiva in particular, are one great way to help. Again it isn’t perfect. And those getting the loans are not given an easy life. They are given a chance to try and build there business to improve there economic condition. This isn’t a certain success. And I do worry that taking on too high an interest rate, or loan amount, can leave people worse off than before. But when looking at the system of microfinance I really like the opportunity it gives people, who haven’t been given many.

Those getting loans have to make smart personal finance and business decisions. If they do well they can greatly improve their financial situation. I made several more loans today, using money repaid by previous borrowers. I try to find loans where I am able to help fund a investment that will improve capacity (but that isn’t always possible) – a new machine that makes them more efficient for example. I also try to avoid loans where the interest rate is over 30% (which might seem very high, but rates below 20% are very rare given the economics of these loans – they are very costly to service). What Kiva does is provide the funds people like me lend as interest free loans to the partner banks. The idea is that this allows partner banks to provide more capital for loans (obviously) and at a lower rate because the bank isn’t having to pay interest on the funds.

My loans today went to: Mali, Honduras, Senegal, Ecuador, Togo, Philippines and in the photo above El Salvador. The Curious Cat Kivans group has now lent $12,925 in 320 loans. We now have 11 members, join up and help give people an opportunity to improve their economic condition.

Related: More Kiva Entrepreneur Loans: Kenya, Honduras, Armenia… – Using Capitalism in Mali to Create Better Lives – Funding Entrepreneurs in Nicaragua, Ghana, Viet Nam, Togo and Tanzania

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