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Behind the Berlin Wall: East Germany and the Frontiers of Power by Patrick Major
anti-communist, Berlin Wall, centre right, falling living standards, land reform, Mikhail Gorbachev, mittelstand, open borders, Post-materialism, post-materialism, refrigerator car, rising living standards, Ronald Reagan, Sinatra Doctrine
According to the Volkspolizei, the number of Großbauern leaving in February 1953 was ten times that of the previous September. Yet significant numbers of smallholding ‘new farmers’, beneficiaries of the 1945 land reform, were also heading west.⁴⁴ The Mittelstand felt next in line. Artisans, businessmen, and factory owners left in massive numbers in 1953, following the introduction of Manual Production Collectives. Significantly, neither farmers nor the Mittelstand were natural candidates for flight. Farmers were tied to the land, and the commercial sector to its businesses.⁴⁵ Members of the ‘old’ Mittelstand of artisans and shopkeepers knew there was little call for them in the West, so it was all the more remarkable when these groups departed. When they did, there were sometimes symbolic burnings of bridges, such as the smashing of glasshouses by market gardeners.⁴⁶ Overall, 1953 witnessed massive losses across the board and was a truly exceptional year.
This would support Hirschman’s thesis that areas with greatest potential to exit the GDR were least likely to voice complaint. Yet, as the GDR aged and the outlet to the West was closed, this pattern switched. By 1970 Berlin had reached pole position, at 0.66 per cent, followed by Potsdam at 0.41 per cent, a pattern repeated with minor changes ten years later in 1980. BAB, DA-5/5999. 20 Behind the Berlin Wall intelligentsia, the Mittelstand , and women of all classes, than it was for other groups.¹⁰⁴ Furthermore, the special status of travel petitions is revealed by the fact that from the 1970s the security section of the SED’s Central Committee, in conjunction with the MfS, became the arbiter on travel and emigration. Indeed, the vast majority of its surviving files consist of alphabetized special pleading by citizens to travel west.
Since the abandonment of reunification in favour of ‘peaceful coexistence’ in 1955, however, the communists felt more vulnerable, especially when the Adenauer government paid its own lip service to reunification efforts after 1958. As long as the German question remained open, uncommitted East Germans might harbour hopes that the socioeconomic clock could be turned back. The SED’s Party Information labelled this the ‘it-could-turn-out-different’ attitude, a form of domestic Hallstein doctrine ascribed to wide sections of the rural population, the Mittelstand and intelligentsia. Pre-emptively, therefore, the party would follow each diplomatic initiative with a barrage of media coverage, and its agitators engaged the population in ‘discussions’, at the workplace or on the doorstep, often based on readings of the current diplomatic notes. Invariably, a party spokesperson was on hand to give the official view. The archives are full of foreign policy opinion reports.
Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, moral hazard, mortgage debt, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative ﬁnance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War
These firms generally operate in sectors where customers attach much greater significance to quality than to price. Although there are niche producers such as these in the USA, Italy and Japan, two-thirds of the ‘hidden champions’ come from Germany and the German-speaking areas of Switzerland and Austria. These ‘hidden champions’ are the stars of the Mittelstand, the small and medium-size companies that are the basis of Germany’s extraordinary strength in manufacturing exports. German exports per head are four times those of the USA and more than ten times those of China. The businesses of the Mittelstand are predominantly family-owned. ‘Hidden champions’ have little need of external capital – like quoted companies, they typically generate more than sufficient cash for their investment needs from their internal resources. But all businesses were once start-ups, and in need of early-stage finance.
Oliver Samwer, CEO of Berlin-based Rocket Internet, which both incubates and funds emerging-market technology start-ups, identifies the essential difference between SME activity in the USA and Germany: ‘there are pioneering entrepreneurs and execution entrepreneurs, and maybe we belong more to the execution entrepreneurs’.15 The Mittelstand has shown little interest in being brought to public markets. The normal pattern has been one of continued family ownership, with founders and their families being succeeded by professional management, a structure that fits with the German division between supervisory and executive board. This pattern extends even to larger companies. BMW exists today because Herbert Quandt, a major hereditary shareholder, decided in 1959 to reject the absorption of the failing business into Mercedes and give new management authority to revamp its product range. The reclusive family, and their Quandt Foundation, profited by billions of euros. As noted in Chapter 1, a consequence of this concentrated ownership and governance structure, and of the success of family-controlled Mittelstand companies, is that Germany has a less egalitarian income and wealth distribution than other continental European countries.
As Fig. 2 shows, by 1970 the share of the top 1 per cent had fallen by around half, and the share of the top 0.1 per cent had diminished even more sharply. Since these figures relate to gross income, and benefits and top rates of taxation increased everywhere, the equalising effect was even greater than these figures suggest. Many people may be surprised that Germany in 1970 was significantly less equal than Britain, France or the USA. The main explanation is the success of that country’s largely family-owned Mittelstand, or medium-size business sector, which I will discuss further in Chapter 5. The egalitarian trends did not continue. In France and Germany they simply came to an end; these measures of income inequality have not changed since 1970. In Britain and the USA incomes of the top 1 per cent and 0.1 per cent have increased sharply. The reversal is particularly marked in the USA. The share of ‘the 1 per cent’ there is now greater than it was a century ago, and US income distribution is now by some margin the most unequal of the four countries.
Albert Einstein, anti-communist, banking crisis, Berlin Wall, British Empire, central bank independence, centre right, collective bargaining, falling living standards, fiat currency, full employment, German hyperinflation, housing crisis, Internet Archive, Johann Wolfgang von Goethe, mittelstand, offshore financial centre, Plutocrats, plutocrats, quantitative easing, rent control, risk/return, strikebreaker, trade route
The state and the communities must guard against letting the officials feel that they are being given up to the storms of economic developments without protection. The same went for white-collar staff in industry, who, unlike their manual co-workers, were unwilling to compromise their hard-won and precious social standing by going on strike for higher wages. As for small businessmen and craftsmen, the backbone of the much-admired German Mittelstand, many found their businesses shut down as inessential to the war effort, starved of raw materials diverted to more vital sectors or simply bereft of customers.22 They represented millions more Germans subjected to dramatically reduced incomes and loss of status – and accordingly ripe to blame those seen as profiteering. Again, the one thing that could be seen by such victims of the war economy as providing possible recompense for their suffering – and even enabling restoration of their previous way of life – was the promise of victory.
A sample of working-class families’ living costs, for instance, reveals that rent made up 19.7 per cent of expenditure in 1907, 8 per cent in 1917, 7.3 per cent in 1919, and, at the climax of the inflation, a mere 0.3 per cent!22 This was, of course, bad news for landlords. While it might be that they were able to pay off mortgages quickly because of the inflation, the financial return on their properties was miserable. Landlords, often not wealthy people but simply once-prosperous members of the Mittelstand – skilled artisans, shopkeepers, small tradesmen – who had invested in rental property as a form of saving and supplementary income, made up yet another aggrieved class in Weimar Germany. Given the virtual cessation of residential construction during the war, and the lack of incentive to build for rent after peace came, the housing shortages, particularly in the big cities, became even more chronic.
3D printing, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labor-force participation, Malacca Straits, Mark Zuckerberg, market bubble, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Peter Thiel, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population
In these cases, blood ties may not be the enemy of clean and open corporate governance, particularly in cases where the family has stepped back to play an ownership and oversight role in a publicly traded company, leaving the management of the company in professional hands. This can be a strong combination because the family keeps the company focused on the long term, and the market keeps it open to scrutiny. This, for example, is the model in Germany, were billionaire families control some of the world’s most productive companies, including many of the Mittelstand companies that drive the flourishing manufactured export sector and are more a source of pride than resentment. This also seems to be the case in Italy and France, which have seen quite a few new names appearing on recent billionaire lists. Many of these new entrants derive their wealth from old family companies and have risen slowly from the multimillionaire ranks to the billionaire lists. Since 2010, twenty-eight new billionaires have emerged in Italy, with more than half coming from the fashion and luxury goods industries.
Exports have expanded to 46 percent of GDP from 26 percent in 1995, driven in part by the well-known Hartz reforms, which have gutted the power of unions and restrained labor costs. This move has been attacked as a “beggar thy neighbor policy” by fellow members of the Eurozone, who now share a continental currency with Germany and can no longer respond to falling German labor costs by allowing their own national currencies to fall. But Germany has also pushed reform in many other ways: It has a core of medium-size industrial companies known as the Mittelstand, whose family owners are known for thinking in the long term, and they have made smart strategic use of the abundant supply of cheap, well-educated labor that opened up to them after the fall of the Berlin Wall. Many have invested in new factories in Poland and the Czech Republic, as well as in the United States and China, effectively exporting the German industrial model. 2010 was the first year in which German car companies made more cars abroad than at home, helping to forge what is arguably the leading global industrial power.
Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, British Empire, capital controls, carbon footprint, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, credit crunch, Credit Default Swap, crony capitalism, dark matter, deindustrialization, Deng Xiaoping, disintermediation, energy security, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, financial repression, floating exchange rates, forensic accounting, forward guidance, full employment, ghettoisation, global rebalancing, global reserve currency, hiring and firing, inflation targeting, Irish property bubble, Just-in-time delivery, labour market flexibility, London Whale, Long Term Capital Management, margin call, market clearing, megacity, Mikhail Gorbachev, mini-job, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, North Sea oil, Northern Rock, offshore financial centre, open economy, paradox of thrift, pension reform, price mechanism, price stability, profit motive, quantitative easing, quantitative trading / quantitative ﬁnance, race to the bottom, regulatory arbitrage, reserve currency, reshoring, rising living standards, Ronald Reagan, savings glut, shareholder value, sovereign wealth fund, The Chicago School, the payments system, too big to fail, trade route, transaction costs, two tier labour market, unorthodox policies, uranium enrichment, urban planning, value at risk, working-age population
And with the world economy coming back now, the dividends of all this effort are paying out.’ The success in forklift trucks was replicated in other industries and across their supply chains. Germany has been brilliant at identifying and exploiting specialist high-quality export niches with a global market, and has spawned a range of medium-sized companies, the so-called Mittelstand, to supply these markets with items ranging from conveyor belts to industrial springs. One company has cornered the world market in antennae for skyscrapers. The top Mittelstand companies adhere to the ‘80 per cent model’ – an 80 per cent global market share, and 80 per cent of production exported. Such products are rarely glamorous, but all, in retrospect, are rather obvious commercial bets as emerging economies develop. Rather brilliantly, whether China or India wins the global industrial race for cars, or motorbikes or missiles, German companies will be on hand to equip the factories.
Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge
affirmative action, barriers to entry, Bonfire of the Vanities, borderless world, business process, Corn Laws, corporate governance, corporate social responsibility, credit crunch, crony capitalism, double entry bookkeeping, Etonian, hiring and firing, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, mittelstand, new economy, North Sea oil, race to the bottom, railway mania, Ronald Coase, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, tulip mania, wage slave, William Shockley: the traitorous eight
The biggest were the “universal banks” that managed to be commercial banks, investment banks, and investment trusts all rolled into one. (J. P. Morgan achieved something similar, but only by getting around state laws, rather than being encouraged by them.) Deutsche Bank (formed in 1870) and Dresdner Bank (1872) concentrated on financing large-scale industry, leaving smaller banks to concentrate on the Mittelstand of medium-sized family firms that also powered the country’s success. In 1913, seventeen of the biggest twenty-five joint-stock companies were banks. Universal banks financed almost half of the country’s net investment. Bankers also sat on the supervisory boards of all Germany’s great industrial companies, providing advice and contacts as well as capital (it was the bankers that organized Siemens’s merger with German Edison in 1883).
Albert Einstein, barriers to entry, Bernie Madoff, collapse of Lehman Brothers, corporate governance, corporate social responsibility, credit crunch, Grace Hopper, happiness index / gross national happiness, high net worth, James Dyson, Jarndyce and Jarndyce, Jarndyce and Jarndyce, mittelstand, Network effects, North Sea oil, Northern Rock, patent troll, Plutocrats, plutocrats, Ponzi scheme, profit motive, Ralph Waldo Emerson, Silicon Valley, software patent, stealth mode startup, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, traveling salesman, tulip mania
I was told of the chief executive of a large publisher who, when the fire alarm went off accidentally, would summon his chauffeur to pick him up so he could circle the building ensconced in his limousine rather than stand on the pavement and mingle with the troops. Not surprisingly, the business underperformed and he was replaced. Another characteristic of top managers is that they manage for the long term. Sudden strategic moves to suit quarterly targets or shorter-term bonus measures are damaging. Family stewardship often beats publicly traded or private equity as a form of ownership for this reason. Germany’s Mittelstand companies, which are principally family owned, are the backbone of their economy: often world-class operations that adopt prudent financing, and invest in capital expenditure and research and development. Incentives at all levels tend to be long term. The best managers have real domain knowledge. This means they understand their industry and are experts in their field. It allows them to command the respect of their colleagues, and means they have genuine insight into the vital economics of their profession or niche.
Were You Born on the Wrong Continent? by Thomas Geoghegan
Albert Einstein, American Society of Civil Engineers: Report Card, banking crisis, Berlin Wall, collective bargaining, corporate governance, cross-subsidies, dark matter, David Brooks, declining real wages, deindustrialization, ending welfare as we know it, facts on the ground, Gini coefficient, haute cuisine, income inequality, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, labour market flexibility, laissez-faire capitalism, low skilled workers, Martin Wolf, McJob, minimum wage unemployment, mittelstand, offshore financial centre, payday loans, pensions crisis, Plutocrats, plutocrats, purchasing power parity, Ralph Waldo Emerson, Robert Gordon, Ronald Reagan: Tear down this wall, Saturday Night Live, Silicon Valley, The Wealth of Nations by Adam Smith, Thorstein Veblen, union organizing, Wolfgang Streeck, women in the workforce
It’s not that it’s impossible for these subjects to come up in the U.S. in a political context—they do—but if it happens, it’s usually smothered in People magazine chatter or nasty talk-radio attacks. Here, it’s whether Obama or Pelosi or Reid is “winning” or “losing,” without all that much interest as to what exactly is being won or lost. Here I could talk politics with H. and S. and many others without anyone ever mentioning the name of “Schroeder” or “Kohl.” Ah, I wish I could explain it. Well, let me try an example from that first night. We were talking about the Mittelstand, the middle-sized manufacturers. “They’re being cut out by the government,” S. said. “Cut out of what?” I said. “Research. Basic research. Now the global companies get it all.” “Do the two of you—do you really think this will affect your lives?” “Of course,” S. said, and looked annoyed. “The problem is, Germany is not interested in research—” “Who is?” “The French are; they’re more interested in basic research—” S. said.
The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley
banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business process, call centre, capital controls, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, Tyler Cowen: Great Stagnation, Washington Consensus, Winter of Discontent, working-age population
In the UK, and to a lesser extent the US, the investment process was much more dominated by impersonal institutions obsessed with short-term returns and with little interest in the individual companies in which they invest.328 In continental Europe, in contrast, companies have been under less pressure for short-term performance from their shareholders and the banks that have supported them. A large chunk of Germany’s banking system consists of a network of regional banks aimed at supporting the Mittelstand, local small and medium-sized businesses. In the UK, small firms have suffered from the increasing concentration of financial power in the large London-based boardrooms. An empirical study of the United States found, for the period from 1973 to 2003, a negative relationship between the growth of ‘financialisation’—the growing importance of financial markets—and the real economy, leading to a decline in real investment at the firm level.
3D printing, Airbnb, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidity trap, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, working-age population, Zipcar
That said, many German giants are big because their home market is Europe’s largest, rather than because they are particularly successful. Lufthansa is Europe’s biggest airline by passengers, but lags far behind Easyjet by profits.469 Majority-state-owned Deutsche Bahn, which owns Arriva in Britain, is Europe’s biggest railway operator, but far from its best. While Germany has plenty of big companies, it is perhaps best known for its mid-sized ones, the Mittelstand. These are mostly manufacturers which focus on machinery, auto parts, chemicals and electrical equipment. Many have carved out specialised niches so narrow that they face little global competition. Their perceived virtues – notably the patient, long-term view that these often family-owned firms can take – contrast with the adrenaline-rush, rollercoaster ride of Anglo-American financial capitalism.
Connectography: Mapping the Future of Global Civilization by Parag Khanna
1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, charter city, clean water, cloud computing, collateralized debt obligation, complexity theory, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, forward guidance, global supply chain, global value chain, global village, Google Earth, Hernando de Soto, high net worth, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, labour market flexibility, labour mobility, LNG terminal, low cost carrier, manufacturing employment, mass affluent, megacity, Mercator projection, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Peace of Westphalia, peak oil, Peter Thiel, Plutocrats, plutocrats, post-oil, post-Panamax, private military company, purchasing power parity, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, TaskRabbit, telepresence, the built environment, Tim Cook: Apple, trade route, transaction costs, UNCLOS, uranium enrichment, urban planning, urban sprawl, WikiLeaks, young professional, zero day
According to the WTO, 80 percent of global trade is supported by financial institutions, but postcrisis regulations (such as Basel III, which requires banks to hold more capital onshore) inadvertently choked this crucial conduit between the financial sector and the real economy that helps companies produce exportable goods and has proven to be a reliable investment given its low default rate. Funds such as the European Investment Bank and the Abraaj Group have stepped in to back region-wide funding exchanges for the Middle East and Africa so that SMEs can more easily raise capital. Germany has five times more such Mittelstand companies than the entire United States (which has four times as many people), indicating a much greater emphasis on rooted entrepreneurs such as toolmakers who can benefit from trade finance to expand to growth markets in Asia. The spread of European SMEs into Asia and ASEAN SMEs into the rest of Asia, Africa, and back to Europe is a testament to how channeling global capital to local companies creates real and productive new flows.
Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen
Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, Bernie Madoff, Black Swan, Bretton Woods, buy low sell high, capital asset pricing model, capital controls, Carmen Reinhart, central bank independence, collateralized debt obligation, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, George Akerlof, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, interest rate swap, invisible hand, Kenneth Rogoff, laissez-faire capitalism, law of one price, Long Term Capital Management, loss aversion, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, New Journalism, oil shock, p-value, passive investing, performance metric, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, purchasing power parity, quantitative easing, quantitative trading / quantitative ﬁnance, random walk, reserve currency, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, Robert Shiller, savings glut, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, systematic trading, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond
This share excluded many emerging market stocks that remain inaccessible to global investors and remains well below the 30% share of emerging countries in global GDP. • Privately held enterprises may, on aggregate, be as valuable as publicly traded stocks. Vissing-Jorgensen–Moskowitz (2002) estimate that in the 1990s nonpublicly held equity by U.S. entrepreneurs was similar in size to the public equity market. Asian family enterprises, German “Mittelstand”, and sovereign assets are global examples of wealth not captured in listed equities, but I have not seen good estimates. The values could be very high, but in any case these are not investable. • Combining major fixed income market indices, the global bond markets amounted to $40.3 trillion in December 2009. Over half was government or government-related debt; this share will likely increase in coming years.
Trust: The Social Virtue and the Creation of Prosperity by Francis Fukuyama
barriers to entry, Berlin Wall, blue-collar work, business climate, capital controls, collective bargaining, corporate governance, deindustrialization, Deng Xiaoping, deskilling, double entry bookkeeping, equal pay for equal work, European colonialism, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global village, hiring and firing, industrial robot, Jane Jacobs, job satisfaction, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, labour market flexibility, labour mobility, land reform, low skilled workers, manufacturing employment, mittelstand, price mechanism, profit maximization, RAND corporation, rent-seeking, Ronald Coase, Silicon Valley, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, transfer pricing, traveling salesman, union organizing
Unlike American firms, whose competitive world often began and ended completely inside the United States, German companies had a much stronger sense of national identity in a world of strong international competitors. Because they were export oriented, the potential inefficiencies of domestic monopoly were minimized; large German firms were kept honest by large firms in other countries rather than by each other. Although the German economy is dominated by large firms, it (like Japan) also has a large and dynamic small-firm sector, the so-called Mittelstand. Family businesses are as prevalent and important in Germany as anywhere else; indeed, there are more cases of families’ retaining management control of large businesses in Germany than in the United States.12 But the family has never constrained the creation of large, professionally managed firms to the degree it has in China, Italy, France, or even Britain. Although large, formal industrial combines like cartels or IGs were broken up during the Allied occupation after the war, their place has been taken in a more informal way by the powerful German trade associations, or Verbände.