From a small northwestern observatory…

Finance and economics generally focused on real estate

Archive for October 2016

A great little September

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Following up on Renaissance Weekend at Aspen, Lynnda and I took off with some friends for Europe for a couple of weeks.  It was wonderfully relaxing (albeit my office found out I had wifi most days) and a great way to dip into the culture and economies of some countries I’d either never visited (Hungary, Slovenia, Austria) or hadn’t visited in a few years (Germany, The Netherlands).

First, it’s interesting that the river valleys we visited (Rhine, Main, and Danube) appear to enjoy a tremendous economy off of tourism.  The proliferation of river cruise ships (we were on Viking) means that a lot of cities and towns can make money selling low-capital, high-profit items (beer, wine, food, and tourist paraphernalia) without investing in high-capital, low-profit infrastructure (parking lots, hotels).  They seem to have focused their attention on fixing up cathedrals and castles, all of which are quite lovely.

I was also terrifically impressed with how much commercial vessel traffic uses the Rhine River.  I didn’t try a head count, but I’m guessing commercial vessels outnumbered tourists by 10-1.  The Main and Danube weren’t quite so busy, but the traffic was still there.  Unlike the U.S., where our very few locks are frequently public infrastructure, the vessels we were on paid an average of 1,000 Euros per lock (times 68 locks between Amsterdam and Budapest!).  I presume the commercial cargo haulers paid something similar.  That said, the cargo haulers generally transported low-value, time-insensitive cargo (grain, aggregate, scrap metal) and each cargo hauler was able to replace quite a few trucks.  Thus, the benefit of these 10-knot, fairly efficient cargo vessels, was not only in cost but also in using a natural infrastructure (the river) to replace one that would have to be built (highways and bridges).  Add to this the environmental concerns (I’m told that the cargo vessels are significantly more environmentally friendly on a “per ton of cargo” basis) and it all seems to add up quite nicely.

One of the biggest economic problems facing Europe is the aging population.  Indigenous populations (e.g. — native Germans) are living long and not breeding very much.  To put it in simple terms, if Germany makes money selling Mercedes to other people, then how are they going to build them when all the Germans retire?  Many industries — not only in Europe but elsewhere — deal with this problem thru advanced automation.  Indeed, the advances in productivity in Europe, North America, Japan, etc., can be tied directly to automation.  However, there is a limit to replacing people, particularly in the service industry.   Up to this point, “First and Second World” countries (that is, us and them) have partially staved off the problem by importing labor.  That, of course, has its own problem, not just the crowding out effect (immigrants allegedly taking jobs from natives) but also results in a shortage of labor in some skill areas in the countries which source the immigrants.  For example, nurses are flooding into Europe and the U.S. from India, leaving a shortage of nurses in India.  The opposition argument to the crowding out effect is that natives are often unwilling or untrained to take certain jobs.  One German engineer pointed out to me that it’s impossible to get a German to collect garbage.  Here in the U.S., there is a huge demand for nurses, computer programmers, etc.  Sadly, we seem to churn out an excess of poets.

Sigh…. you’d think I could tour the Danube and the Rhine without thinking about such things, but here we are….

Written by johnkilpatrick

October 15, 2016 at 12:46 pm

Posted in Economy, Finance