Tag Archives: Economics

Misallocation of resources and sharing economy


The world’s population is fast approaching 7.5 billion and many people are still suffering from hunger and a lack of basic needs such as clothing, sanitation and housing.

I always reject the idea that the world’s resources are not enough to feed that many people. We are currently suffering purely from a misallocation of resources, rather than a lack of resources.

According to the UK government, 3,569 people slept rough on any one night in England in 2015. This number is over double that counted in 2010. In addition, 12,330 households applied to their local authority for homelessness assistance in 2014/15, a 26 per cent rise since 2009/10.

  • How many houses in London alone are kept empty most of the year simply because their owners are using them only ten days a year on average?

According to an article published in The Guardian, in London alone there are generally 22,000 empty houses. There are thought to be 700,000 long-term empty houses in the UK.

The World Food Programme, the world’s largest humanitarian agency fighting hunger worldwide, estimates that 795 million people in the world do not have enough food to lead a healthy active lifestyle.

  • How often do you see seeing people throwing away food?

The EU Commission reports that in the EU alone, around 88 million tonnes of food are wasted annually, with associated costs estimated at 143 billion euros.

Transportation is the main source of carbon emissions and we are not good at managing that, either. Business Insider reports that nearly 20 per cent of seats are empty on US flights. According to the same report, the figure is no better in China, Brazil or Japan.

The same challenge applies to cars.

  • How often do you see a single person in a car in which five people can fit comfortably?

No offence to ladies, but this question especially goes to them:

  • How many clothes/shoes do you have in your wardrobe that you haven’t worn for more than six months?

I am not a utopian and I understand that we cannot really achieve full efficiency and allocate 100 per cent of resources—but we can improve a lot.

And that’s where the sharing economy comes into effect.

Uber, AirBnb, Vestier Collective, Carousell, and BookCrossing are some of the sharing economies’ innovative and disruptive companies.

We have to start sharing our unused resources and there is a financial incentive for us to use them too, since you can make money out of your unused resources.

Interestingly, and maybe unsurprisingly, many governments around the world are against these disruptive companies even though the total benefit of using them is greater than the cost element for society.

If not voluntarily, through these companies we should promote the inclusion of idle resources for the common use of human beings.

My main worry for my life span and that of my child is another world war.

Since the inequality level is increasing to levels comparable with those of the world wars and masses are unable to meet their basic needs, this will create much bigger problems than we currently have unless we find an immediate solution.

We represent a very lucky portion of the world population that can travel, read and enjoy living. If you are not interested for other communities, you should start thinking of eliminating this misallocation of resources for your own sake.

All the best from Singapore.

Twitter: @sukru_haskan
Sukru Haskan

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Convergence in Economies, Is it really happening?


In my third year in university in 2004, I followed the Economic Development course delivered by a very good professor, Elif Çepni, in Istanbul. I remember her telling us about the convergence in economies over time.

The concept is pretty simple and logical. It is the hypothesis that the emerging market economies and developed market economies will in the end converge in terms of GDP per capita. The underlying reasoning is that the rate of the growth in the developing world is higher than the rate of the growth in the developed world.

Have developing economies really been catching up with the developed economies since 2004?


The share of the developing world’s population living on less than $1.25 a day (the international definition of poverty) has fallen from 30 per cent in 2000 to below ten per cent according to an estimate by the Centre for Global Development, based on new data published by the World Bank in April 2015.

According to an article in The Economist in 2014, were the emerging world able to maintain a 4.5 percentage point growth advantage over the rich world, then, all other things being equal, its average income per person would converge with that in America in just over 30 years—scarcely a generation.

Unfortunately, since the global financial crisis in 2008, a lot of things have changed. The growth rate of emerging market economies has slowed down and the convergence has faltered.

Growth rate is not the only factor, but it is one of the main reasons that convergence is not happening. Emerging markets have been still dealing with implementing efficient governing policies, productivity levels (technology) and rules of law.

Red tape in emerging markets is very high and corruption does not really help. According to a recent report by Transparency International, emerging markets continue to be more corrupt than the developed world. This reports highlights that Brazil and Turkey have seen the largest fall in terms of cleanliness in the last four years.

Unfortunately, corruption leads to less productivity, and less productivity leads to poor citizens, which in turn leads to less educated communities and bad governing policies along with weakened rule of law.

It is a vicious circle for emerging markets.

I personally believe India has very much potential, but with the current red tape level (opening a business is one of the hardest), the potential of the country is still not being realised. President Modi has been elected to change this, but easier said than done: it will take time.

A paper written by Harvard economist Dani Rodrik in 2011 argues that generalized, rapid convergence is possible in principle, but unlikely in practice. His baseline scenario has to be one in which high growth remains episodic. Sustained convergence is likely to remain restricted to a relatively small number of countries. I totally agree with his conclusions.

According to an Oxfam report, the combined wealth of the richest one per cent will overtake that of the other 99 per cent of people next year unless the current trend of rising inequality is checked. Oxfam made headlines at Davos last year in 2015 with the revelation that the 85 richest people on the planet have the same wealth as the poorest 50 per cent (3.5 billion people). That figure is now 80—a dramatic fall from 388 people in 2010. The wealth of the richest 80 doubled in cash terms between 2009 and 2014.


A prominent Turkish conglomerate, Ali Koc, has mentioned in a conference that we have to sort out the inequality in the system in order not to face bigger problems in the near future. The existence of large inequalities always open the door for correction, which may lead to a global war. The migrant crisis, for example, is an early symptom of this.

Sustainable growth is unlikely, so it will remain just a hypothesis. It is true that we have more middle class now, but we have still one in nine people living below the poverty line (less than $1.25 per day).

On the other hand, there are some voices claiming that the emerging markets’ catch-up with the developed markets will continue into the 2020s. A prominent economist, Kemal Dervis, believes it is not the end of the party for the emerging markets yet.

As a final note, I would like to share with you Dani Rodrik’s 2013 slides about the subject, with which I completely agree.

With low commodity prices; capital flowing back to the mainland; the Chinese slowdown and discussion about whether the landing will be soft or hard; geopolitical developments in the Middle East and Russia, it is likely that the growth rate of the emerging markets will be surpassed in the near future.

This weekend I am in Bintan, a beautiful island just one hour away from Singapore. I will write my observations about the island and my short journey next week.

All the best from Indonesia.

Sukru Haskan

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New Silk Road: One Belt, One Road

Chinese President, Mr. Xi Jinping, made a four day official visit to the UK last week. This was the first visit since 2005 and the UK was definitely well prepared to ensure that the Chinese President left the UK with a good impression and, more importantly, that he left with many infrastructure and trade projects signed.


As we all well know, China is becoming more powerful and China has a lot of ambitions. One of the most important is its ambition to revitalize the Silk Road under the One Belt, One Road project.

The Silk Road is an ancient route facilitating trade and cultural exchange from east to west. The Great Wall of China was built to protect this route—in a way, to protect the continuation of trade between the east and the west. The development of this route enabled China, Persia, India and many countries in the past to benefit from cultural and economic development.

The length of the route is 6,000 km. The name Silk Road comes from the famous Chinese silk, which was a major attraction in building this route. Nowadays, thanks to the development of technology and fast transportation options, this route can be utilized more efficiently.

Following the global financial crisis in 2008, we are still not out of the woods. More importantly, we are losing our patience and our hopes for the future. When under 25 unemployment hits 50% in some developed countries, that is not only telling us about a single problem. It is signalling a much bigger problem: a lost generation.

The New Silk Road is being worked on in such an environment, and it excites everyone as it did in the past. And obviously everybody wants to get their share.

In the EU, the UK is lagging behind Germany with its trade volume with China. Obviously, Germany sells its cars and manufactured goods whereas the UK is not very competitive, actually not producing many exportation goods at all.

However, the UK is the leading country in the service sector in the EU. That’s where the internationalization of RMB could play an important role, as London can be the main clearing centre for renminbi.

In addition, the UK is where ideas of the future are turning into reality. It is the country where you can freely discuss with intellectuals and implement your ideas. Most importantly, the UK has a global talent pool which may only be compared with the USA.

Of course, it is not only Germany and the UK that are competing for a share in this big cake. Japanese president, Mr. Abe, has been travelling in Central Asia this week to secure better relationships with Central Asian countries. Given that Central Asia is the main connecting point, it is the main artery for the New Silk Road, pumping blood into its heart.

In my opinion, this visit is too late for Japan. Chinese companies, with the support of the Chinese Exim Bank, have been working on this region for many years now.

The power shift has already begun. The UK decided to sign for the foundation of the Asian Infrastructure Investment Bank, where many hesitant countries followed the UK. This should be a warning bell for the US.

I think we have to give credit to Cameron’s chancellor, George Osborne, for this courageous move.

The UK media criticized David Cameron for not discussing in detail China’s human rights track record and its steel pricing policy. On top of that, it was unfortunate timing that the UK steel industry announced job cuts during the visit of the Chinese president to the UK.

I believe David Cameron is following the right strategy with China.

How would it be possible to cooperate with someone on social issues without establishing the right relationship?

History might be bloody between the UK and China, but the future definitely looks bright.

All the best from Singapore.

Sukru Haskan
Twitter: @sukru_haskan

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Hike the Interest Rate, Please!


There is a FOMC meeting scheduled for next week and September, 17th is the date when Janet Yellen will hold a press conference. Everybody is waiting for that date in the financial sector as Janet Yellen will convey the decision on whether they will hike the interest rate or not.

For those of you without a finance background, FOMC stands for Federal Open Market Committee.

FOMC consists of 12 members and it holds eight meetings per year. September is one of the last three meeting dates for this year.

This invaluable group of people are responsible for designing the United States’ monetary policy.

The last FED interest rate hike was in 2006.

Yellen, FED chairwoman, has indicated many times that they are data driven and not market driven.

The data are good. Unfortunately, the markets are not.

There has been huge volatility since early June. It started with Greece and now continues with China.

If Yellen delays the rate hike decision, it will once more contradict FED previous statements.

What happens when you contradict your statements continually?

You lose your credibility. 

And it is not good when you have competitors willing to replace you in the system.

Many will discuss that FED has a global role to stabilize the markets, I do not really agree with this point.

The fundamentals of different economies have recently changed dramatically.

The US is growing and its unemployment level is now back to pre-2008 levels.

In my opinion, we will continue to see divergent policies rather than convergent policies among central banks.

And it creates problems…


Because we got used to seeing convergent policies after 2008 and now that policies around the globe will be mixed, it will be harder to predict future moves in many markets.

There are many valuable economists and bankers that do not share my view.

A reputable columnist in FT, Martin Wolf, wrote an article this week entitled ‘Keep rates low – the world is abnormal’.

Andy Haldane of the Bank of England said “The act of raising the yield curve would itself increase the probability of recession”.

The World Bank has warned FED not to increase the rate as the world is not out of the woods yet.

Emerging markets will be affected dramatically by a rate hike. The rate hike will accelerate the outflows from emerging markets and it will create further turbulence.

This is an inevitable fact…

But some, surprisingly, are in favour of a rate hike.

Indonesian central banker, Mirza Adityaswara, is one of them. Another is Peru’s central banker.

Unsurprisingly, Swiss National Bank is praying for a rate hike. They want to abolish their negative interest policy as soon as possible. They know that it is unsustainable.

No matter what the decision is, the time for a rate hike is coming closer and closer…

There is no escape!

We will shortly experience the end of the cheap money era.

And I think it will start on September, 17th…

Good luck!

Best from Singapore,
Sukru Haskan
Twitter: @sukru_haskan

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Women in work force MATTER!


We absolutely need more women in the labour participation…

It is not only because of diversity benefits but also for economical growth of the nation and raising well-rounded children.

Diversity benefits of increasing women in the labour participation is well known and well discussed. I would like to focus more on the economical benefits and its positive effects on the children development.


Let’s begin with analyzing where women are given economic opportunities.

It is not a big surprise that Scandinavian countries are giving more opportunities to women so that they are top of the list above. It is not also a surprise that Middle Eastern and African countries are well at the bottom.

France and Britain are lagging behind many developed countries but they are showing good progress.

According to an article published in Financial Times this week, after years of lagging, Britain and France has almost caught up in terms of female participation in the labour force, with 54% of working age women in employment with 43% in 1990.


Coincidentally The Economist published a piece on “Society in Latin America” and there is a graph above published in the article which is showing the progress on the women labour force participation along with women CEOs of the public listed companies and women in the parliament.

There is definitely a progress on the women labour participation except East Asia & the Pacific. We see the huge jump in Latin America which is encouraging as these countries are developing countries and this jump is necessary for them to catch up with the developed world.

Even though there is a progress in Middle East, it is not enough at all…

Number of women in the workforce strongly influences women’s parliamentary representation as illustrated in the same graph.

As Rae Blumberg concluded in her paper ‘A General Theory of Gender Satisfaction‘ in 1984, economic power in the form visibility in the professional world is an important variable in women’s status and access to political power. There is no wonder why women in the Latin America & Europe held the most seats compared to rest of their peers.

In other words, being active in work force makes females more visible in the political arena as well.

Another study by Daniel Stockemer and Maeve Byrne in 2011 shows that Jordan has the lowest participation in the workforce (only 13.6% than that of men.) Same paper concludes every 10 points women narrow the gap in how much they contribute to a country’s GDP per capita, women’s representation increases by 2 percentage points. Given that on a world average, women only contribute approximately half than men to countries’ GDP per capita, increases in women’s labour force participation can have a strong positive impact on further development.

The Economist mentioned in its article that if the gap in the participation rate between men and women were closed, Latin America’s GDP per person would be 16% higher, estimate David Cuberes of Clark University in Massachusetts and Marc Teignier of the University of Barcelona.

Another interesting point is that; woman increased employment earnings provide her with greater bargaining power within her household which leads to greater savings and economic growth.

Moreover, there is an inverse correlation between women in the parliament and increase in corruption.

More importantly, a study data from rural China by Phil Brown (2006) concluded that the education of mothers – compared to that of fathers – has a higher effect on the investment on the education for their children.

I do not have much empirical evidence to prove this point but I believe this is the most important point and it is valid world wide rather than only in rural China.

Education of a child is being influenced by their mother rather than the father and the messages conveyed from the mother is the key for raising well-rounded children.

An article by Claire Cain Miller published last May in New York Times mentions that 69 studies over 50 years found that in general, children whose mothers worked when they were young had no major learning, behavior or social problems, and tended to be high achievers in school and have less depression and anxiety.

Conclusion is very clear; we need more mothers in the labour force to have successful, happy, mentally healthy and richer generations ahead.

Best from Singapore,
Sukru Haskan
Twitter: @sukru_haskan

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China: What’s next?


It is all started when China had released its exports numbers on August, 7th.

Chinese exports were tumbled by 8.3% in July and China was registering its worst export decline in the last four months.

Most importantly, the market was not expecting these figures to be that bad!

Along with the release of the figures, Chinese central bank (People’s Bank of China) published a report warning of further economic weakness.

The following week, People’s Bank of China shocked the market by changing the way the yuan’s trading band is calculated. This led to 1.9% depreciation in the first day (August, 11th).

When yuan opened down a further 1.6% on Wednesday (August, 12th) and then rose 1% at the end of the same day trading. Another fall in the following day’s opening was quickly intervened by People’s Bank of China. (August, 13th)

The week between August, 10th and August, 17th, the global markets had shaken up substantially all across the board.

European equity markets were almost down 5%, commodities had fallen through the roof and volatility picked up dramatically.


History repeats itself?: On 1 January 1994, China announced a reformed system of foreign exchange and devalued yuan to 8.7 to the dollar. This move had happened after a series of six devaluations over ten years and by 1993, the yuan was trading 5.32 to the dollar.

As a result of this action, U.S labelled China as a “currency manipulator.”

So Why China is doing this again? 

  • China has an ambition to include the yuan in the select group of currencies that IMF uses to calculate the SDR, its unit of account. Inclusion to basket of SDR means yuan to become a global reserve currency. To achieve this, China needs to allow free float of its currency and by allowing market makers to submit prices for the reference rate based on the previous day’s closing spot rate is one way.
    – By the way, IMF “cautiously” welcomed this move!
  • More importantly, strong yuan makes Chinese goods less competitive!It is not a secret that China will not grow over 7% from now on and its export oriented economy becomes less competitive with strong yuan.
    In fact, the recent IMF report forecasts 6.8% GDP growth in 2015 and 6.3% in 2016.

The real question to ask is whether China would allow depreciation of their currency if its GDP growth would not falter and export growth was in place.


What shall we expect going forward? 

I expect a lot more of volatility ahead for all markets for the rest of the year.

According to the Economist, the devaluation only undid the previous ten days’ worth of appreciation in trade-weighted terms. The yuan remains more than 10% stronger against the currencies of China’s trading partners than it was a year ago.

It is very likely that we will see a continuation of gradual depreciation of yuan which is unlikely to help the slowing Chinese GDP and its exports.

The spill over effect has already felt quite substantially on commodity prices along with commodity export oriented economies such as Australia and Indonesia. This pressure is very likely to remain for the rest of the year.

As many economists call it as a “currency war”, we will continue to see “at all time lows or highs” in many pairs.

A very possible FED interest hike in September will make things even more complicated.

Finally, I believe yuan will be added to basket of SDR in a relatively short period of time. Otherwise IMF may become irrelevant.

Book recommendation: The author of Currency Wars and Death Of Money, James Rickards, has been talking about the ongoing play for sometime now. Some quotes from his book “Currency Wars” are as per below.

“The U.S view that everyone -Europe, North America and Latin America -would gain exports and growth if China revalued the yuan and increased domestic consumption.” 

“The stimulus spending would increase the deficit and waste valuable resources, but not do much else.”

“As of April 2011, the FED had a net worth of approximately $60 billion and assets approaching $3 trillion. If the FED’s assets declined in value by 2 percent, a fairly small event in the volatile markets, the 2 percent decline applied to $3 trillion in assets produces a $60 billion loss – enough to wipe out FED’s capital. The FED would then be insolvent. Could this happen? It has happened already, but the FED does not report it because it is not required to revalue its assets to market value.”

“From its creation in 1913, the most important FED mandate has been to maintain the purchasing power of the dollar; however, since 1913 the dollar has lost over 95 percent of its value.” 


Best from Singapore,
Sukru Haskan
Twitter: @sukru_haskan

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Happy 50th Birthday Singapore!

NDP 2014 135

Singapore became independent on 9 August 1965 and this year marks its 50th birthday. There are many events happening all along this tiny cute island to celebrate its well deserved 50th birthday this week.

I have been living in Singapore slightly over 2 years now and I should say that I feel really privileged to live in this country. Having lived in Turkey, United Kingdom and Switzerland (for a short period of time), Singapore is really unique in many ways.

Imagine a country which was established only 50 years ago and it ranks at the top of the tables for many important aspects of the life such as education, health system, ease of doing business, etc.

To be honest with you – I was not aware of many of these positive attributes of Singapore before coming and living here. (I should say it was a nice surprise to find out!)

Singapore is a small country with 5.3 million habitants. The population is quite diverse with primarily Chinese, Malay and Indian ethnicities and its first official language is English.

Singapore is only 714.3 square km but it attracted almost USD 850 billion foreign direct investment whilst USD 500 billion of Singapore’s investments is invested abroad. Its sovereign wealth funds, Temasek and GIC, are the vehicles to invest abroad. It should not be a big surprise why Singapore tops the list of ease of doing business!


According to OECD global education report, Singapore is number 1 in education. Same report puts Sweden number 35, United Kingdom number 20 and United States number 28! You may be wondering who is the 2nd and 3rd; they are Hong Kong and South Korea respectively! No wonder why this millennium is Asia’s time!

Singapore healthcare system is ranked 1st in the world by Bloomberg in 2014. Of course, it comes at a cost! If you are brave enough not to have a private insurance in Singapore, you are definitely pushing your luck.

Singapore is one of the least corrupt countries on earth. According to Transparency International, it ranks 7th out of 175 countries in 2014. Same report ranks Turkey 64th, UK 14th and Switzerland 5th.

Singapore is running constant current account surplus (21.3% of the GDP 2015) and it has a very low level of unemployment. World Happiness Report ranks Singapore 24th in 2015.

Statistics are important but nothing can be more important than the people. Singapore is full of hard-working, intellectual and warm people.

Lee Kuan Yew, the founding father of Singapore, will be remembered for generations to come not only by Singaporeans but also by the world. He proved the humanity a leader with the right skills, can build a country from scratch up to a very high level.

I strongly suggest you to come and visit this beautiful country!


It is a very nice coincidence that my first blog post happened to be an article on Singapore. Through this blog, I am planning to be writing on economics, politics, finance, life style, history and travel.

I will be updating my blog regularly every Saturday and you can follow me on twitter (@sukru_haskan).

Best from beautiful Singapore!
Sukru Haskan
Twitter: @sukru_haskan

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