Even though the Chicago Cubs beat the Pittsburgh Pirates in 12 innings in April, Piracy is coming back to haunt Chicago. On Saturday, a Saudi Arabian oil tanker carrying over $100 million worth of oil bound for the United States was captured by Somali pirates off the coast of Kenya. This is the latest in an increasing series of piracy incidents by Somali pirates in the Gulf of Aden and the Indian Ocean. International Piracy hits Chicago in the cost of our gas, the price of goods in stores, and the lives of our military personnel who are fighting terrorists and stationed on ships protecting the sea lanes of transportation. This particular incident might touch a little closer because many of the personnel in the United States 5th Fleet, which is patrolling the region, went through Great Lakes Naval Station before being assigned to their vessals.
Hijackings off the coast of East Africa and the Gulf of Aden, an area of more than one-million square miles, make up one-third of all global piracy incidents this year, according the International Maritime Bureau, a British based organization that tracks maritime issues. There have been at least 83 acknowledged pirate attacks off Somalia and in the Gulf of Aden this year, 33 of them successful enough to command a ransom for the more than 200 crew still being held along the Somali coast. Much of the ransom money from previous hijackings has been used to buy new boats and weapons as well as develop a network across the Horn of Africa.
The success of the pirates may also strengthen the hand of radical Islamists in Somalia if gunmen abandon their poorly paid defense of the feeble transitional Somali government in Mogadishu for the promise of adventures and riches at sea. According to the Economist, “For America, the case of the Sirius Star (Saudi Arabian oil tanker) underlines longstanding concerns that piracy off Somalia, still strictly mercenary, might soon attract jihadist operators.”
Partly because of this threat, and the cost that piracy is having on international trade, the waters off of Somalia are now being patrolled by an international naval force. But given the huge area over which the pirates are now operating, more warships alone are unlikely to solve the problem. Commander Jane Campbell, of the US Navy's 5th Fleet, warned shipping companies that the United States naval presence could "not be everywhere".
The cost to the Chicago consumer comes from shipping companies paying higher insurance premiums and cargo ships taking longer and safer routes to ports, which would cause delays in delivery times. Such delays could even slow Chicago manufacturing and cost jobs as many of the industries in this area rely on parts assembled in different countries being shipped to Chicago for final assembly into a finished product.
Thursday, November 20, 2008
Thursday, November 13, 2008
International Economic Crisis
The world’s second, third and fourth largest economies are, like Chicago, suffering through the international financial and economic crisis. Japan’s economy, which barely recovered from over a decade of zero-growth, is once again heading toward recession. Germany is now officially in recession. China is facing the greatest economic slowdown since reforms launched its opening to international trade over thirty years ago. All three countries are implementing stimulus packages to shore up their domestic markets in the face of slowing international trade and sagging demand for their industrial production.
The stimulus plans implemented by all three countries would look rather familiar to citizens of Chicago, as they share many of the same elements as the stimulus package offered by Washington. Infrastructure, housing, tax cuts, and transfer payments to farmers are the leading elements of each plan. Questions remain about whether these infusions of capital into the system will work and if domestic consumption can be increased enough to off-set decreased demand for exports. In all cases; Chicago, Japan, Germany and China; questions arise if the stimuli are enough to carry people through the hard times. Areas not addressed in any stimulus package are how to meet unexpected medical bills, pay for education, and provide for income during retirement; three of the biggest issues on the minds of Americans.
The result of this economic turmoil in the world’s largest economies will have many repercussions for Chicago. Japan, Germany and China accounted for a total of $8.4 Billion in exports from Chicago in 2007. Over sixty American companies based in Chicago operate in at least one of these countries, while companies from these countries provide Chicago area citizens with multiple thousands of jobs. An economic slowdown in Japan, Germany and China will lead to less work for the people of Chicago and more expensive goods at Wal-Mart, Target, your BMW and Toyota dealers. What is clear is that Chicago is not suffering through the economic crisis alone. The world is suffering with it, and this will challenge every consumer between Lakeshore Drive, Tokyo, Berlin and Beijing.
The stimulus plans implemented by all three countries would look rather familiar to citizens of Chicago, as they share many of the same elements as the stimulus package offered by Washington. Infrastructure, housing, tax cuts, and transfer payments to farmers are the leading elements of each plan. Questions remain about whether these infusions of capital into the system will work and if domestic consumption can be increased enough to off-set decreased demand for exports. In all cases; Chicago, Japan, Germany and China; questions arise if the stimuli are enough to carry people through the hard times. Areas not addressed in any stimulus package are how to meet unexpected medical bills, pay for education, and provide for income during retirement; three of the biggest issues on the minds of Americans.
The result of this economic turmoil in the world’s largest economies will have many repercussions for Chicago. Japan, Germany and China accounted for a total of $8.4 Billion in exports from Chicago in 2007. Over sixty American companies based in Chicago operate in at least one of these countries, while companies from these countries provide Chicago area citizens with multiple thousands of jobs. An economic slowdown in Japan, Germany and China will lead to less work for the people of Chicago and more expensive goods at Wal-Mart, Target, your BMW and Toyota dealers. What is clear is that Chicago is not suffering through the economic crisis alone. The world is suffering with it, and this will challenge every consumer between Lakeshore Drive, Tokyo, Berlin and Beijing.
Wednesday, November 12, 2008
Pakistan's Finances
The people of Chicago know a thing or two about how to handle personal finances during a time of economic trouble. With local institutions like Northern Trust, Bank of America and The Center for Financial Services Innovation, Chicago is one of America’s leading financial centers. Therefore, when an American ally goes hat in hand to the International Monetary Fund in search of a bridge loan, the people of Chicago take notice.
The government of Pakistan is practically broke and will be approaching the International Monetary Fund to get a loan. Although loans have been promised by the United States, China, and other countries in the next few years, Pakistan cannot wait to see that money. It will run out of cash within 10-15 days. This announcement comes on the same day as an attack on an American aid worker, two days after a suicide attack at a sports stadium, a terrorist hijacking of military supply trucks, and shortly after the latest United States bombing inside this nominal ally in the War on Terrorism.
Pakistan’s pending bankruptcy is of concern to Chicagoans on many fronts. In what is credibly being labeled the bleakest moment in Pakistan’s history, the crisis in this fragile ally is touching the people of Chicago on personal, economic and security levels. There are over 30,000 Pakistani immigrants in the State of Illinois, not to mention many thousands more American citizens of Pakistani descent. These people, with ties back to Pakistan, contribute millions of dollars to the Chicago economy while sending their families financial support. Chicago’s exports to Pakistan in 2007 amounted to $60,114,578, contributing to several hundred jobs for the city’s residents and tax revenues for the state. Instability within Pakistan is leading to lower levels of external trade as the economic situation in the country worsens.
At the same time, the political situation is deteriorating. The government of the country barely controls vast swaths of land on the Afghanistan border and is under assault from terrorists in the urban areas of the country. A nuclear armed Pakistan is the most powerful unstable country in the world, threatening regional stability with its neighbors Afghanistan, India, and Iran. In all of these places, the United States has security interests that will not be well served if Pakistan’s government loses control over its country; a fate made far more likely if the government defaults on its debts.
Chicagoans will be asked to serve in any further American deployment of military personnel to the region, donate food aid offered to help those suffering from strife, and possibly take in refugees from potential political instability that may result. Knowing our way around a financial crisis may help the people of Chicago endure the consequences of such turmoil in Pakistan.
The government of Pakistan is practically broke and will be approaching the International Monetary Fund to get a loan. Although loans have been promised by the United States, China, and other countries in the next few years, Pakistan cannot wait to see that money. It will run out of cash within 10-15 days. This announcement comes on the same day as an attack on an American aid worker, two days after a suicide attack at a sports stadium, a terrorist hijacking of military supply trucks, and shortly after the latest United States bombing inside this nominal ally in the War on Terrorism.
Pakistan’s pending bankruptcy is of concern to Chicagoans on many fronts. In what is credibly being labeled the bleakest moment in Pakistan’s history, the crisis in this fragile ally is touching the people of Chicago on personal, economic and security levels. There are over 30,000 Pakistani immigrants in the State of Illinois, not to mention many thousands more American citizens of Pakistani descent. These people, with ties back to Pakistan, contribute millions of dollars to the Chicago economy while sending their families financial support. Chicago’s exports to Pakistan in 2007 amounted to $60,114,578, contributing to several hundred jobs for the city’s residents and tax revenues for the state. Instability within Pakistan is leading to lower levels of external trade as the economic situation in the country worsens.
At the same time, the political situation is deteriorating. The government of the country barely controls vast swaths of land on the Afghanistan border and is under assault from terrorists in the urban areas of the country. A nuclear armed Pakistan is the most powerful unstable country in the world, threatening regional stability with its neighbors Afghanistan, India, and Iran. In all of these places, the United States has security interests that will not be well served if Pakistan’s government loses control over its country; a fate made far more likely if the government defaults on its debts.
Chicagoans will be asked to serve in any further American deployment of military personnel to the region, donate food aid offered to help those suffering from strife, and possibly take in refugees from potential political instability that may result. Knowing our way around a financial crisis may help the people of Chicago endure the consequences of such turmoil in Pakistan.
Term Limits
Several countries throughout the world are taking steps to be like Chicago. They are doing away with term limits on their elected leaders. Algeria, Venezuela and Russia have each voted, or will vote soon, on the removal of term limits on Presidents and Prime Ministers. Even New York City, not a country, although bigger than many economically, is taking a page from Chicago’s book by extending the term of its mayor.
Term limits are neither inherently good nor bad. As Chicagoans know, the right or wrong leader is the issue, not the limit on the length of time s/he is in office. Chicago does not have term limits on its mayor. Richard M. Daley won election to a sixth term in February 2007, swamping two opponents with more than 70 percent of the vote.
Yet, this move toward the removal of term limits internationally will have repercussions here in Chicago. Two of the countries doing away with term limits, Russia and Venezuela, are in what the Economist magazine calls The Axis of Oil, with Iran. Algeria, although generally friendly toward the United States, is dealing with a homegrown terrorism problem that is causing instability throughout the country. As these countries move toward more long-term political leadership in search of stability, the threat to democracy and the rule of law will rise.
The Russian and Venezuelan leadership is blaming the United States for economic and political problems. This effort at blame by a political leadership that may not leave power in the near future can potentially lead to a reduction in trade and deterioration in relations between these countries and The United States of America. Russia accounted for $101,993,377 in exports by the Chicago Customs Area in 2007, and the figure for Venezuela was $10,820,756. (U.S. Census Bureau, Foreign Trade Division) Loss of this revenue could cost Chicagoans jobs and the city tax revenues to fund schools and other services. Imports into Chicago from Russia and Venezuela were $71,060,679 and $18,779,554 respectively in 2007. (U.S. Census Bureau, Foreign Trade Division). These goods are mainly oil, food, and other raw materials.
Possibilities exist for the price of oil to be adversely effected by the greater authoritarian tendencies of leaders in Russia and Venezuela. Historically, hard-handed clamp downs by authoritarian regimes, such as the one developing in Algeria, against domestic insurgencies have led to greater suffering and prolonged conflict. We will likely see such an outcome in that country if leadership there takes this approach toward terrorism. Therefore, the price of oil and potentially the cost of domestic terrorism could lead toward greater outlays of resources by the United States.
Chicago is a debatably well-run city, with one of the most popular American mayors. Despite this fact, Chicago will potentially be losing jobs and paying more at the pump, grocery store, and through the lives of its sons and daughters because other parts of the world are attempting to follow its political system lead.
Term limits are neither inherently good nor bad. As Chicagoans know, the right or wrong leader is the issue, not the limit on the length of time s/he is in office. Chicago does not have term limits on its mayor. Richard M. Daley won election to a sixth term in February 2007, swamping two opponents with more than 70 percent of the vote.
Yet, this move toward the removal of term limits internationally will have repercussions here in Chicago. Two of the countries doing away with term limits, Russia and Venezuela, are in what the Economist magazine calls The Axis of Oil, with Iran. Algeria, although generally friendly toward the United States, is dealing with a homegrown terrorism problem that is causing instability throughout the country. As these countries move toward more long-term political leadership in search of stability, the threat to democracy and the rule of law will rise.
The Russian and Venezuelan leadership is blaming the United States for economic and political problems. This effort at blame by a political leadership that may not leave power in the near future can potentially lead to a reduction in trade and deterioration in relations between these countries and The United States of America. Russia accounted for $101,993,377 in exports by the Chicago Customs Area in 2007, and the figure for Venezuela was $10,820,756. (U.S. Census Bureau, Foreign Trade Division) Loss of this revenue could cost Chicagoans jobs and the city tax revenues to fund schools and other services. Imports into Chicago from Russia and Venezuela were $71,060,679 and $18,779,554 respectively in 2007. (U.S. Census Bureau, Foreign Trade Division). These goods are mainly oil, food, and other raw materials.
Possibilities exist for the price of oil to be adversely effected by the greater authoritarian tendencies of leaders in Russia and Venezuela. Historically, hard-handed clamp downs by authoritarian regimes, such as the one developing in Algeria, against domestic insurgencies have led to greater suffering and prolonged conflict. We will likely see such an outcome in that country if leadership there takes this approach toward terrorism. Therefore, the price of oil and potentially the cost of domestic terrorism could lead toward greater outlays of resources by the United States.
Chicago is a debatably well-run city, with one of the most popular American mayors. Despite this fact, Chicago will potentially be losing jobs and paying more at the pump, grocery store, and through the lives of its sons and daughters because other parts of the world are attempting to follow its political system lead.
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