Friday, September 30, 2005

Taiwan’s independence movement

From a 50-year separate rule and a Japanese heritage from the colonial time, Taiwan is gradually discovering and asserting her identity as a country. Only with a huge obstacle: the opposition of the Chinese.

It is instrumental to consider the independence movement around the world. Use as case studies, I think people who are interested in either side of the argument should look at the case of Quebec in Canada, East Timor in Indonesia, Basque in Spain, Latvia, Estonia and Lithuania in Russia, Tibet in China, Mongolia in China, Xinjiang in China, Porto Rico in the US, Northern Ireland in the UK, William Wallace story of Scotland, and many more.

Some succeeded, some failed, in their aspiration to become a country. Many are violent and some very bloody. In each case, a desire to self-rule and freedom from an upper government is evident. Cultural difference usually justifies the request to self-rule, so cultural assimilation is used as an important tool for the federalists. Economic interest is certainly in the mind of the leaders. Better governance is hoped but not always realized.

Small countries are usually better governed. Homogeneous culture reduces infighting. Large area usually guarantees different regional interest. Different life style almost always points to different value. Religious belief plays an important role, too. If a large country is to remain integral, either a high degree of autonomy and democracy, as in the case of the US, or a high degree of cultural assimilation, as in the case of Japan, or a high degree of military and central control, as in the case of China, will be needed.

Armed forces usually play an important part of the independence movement. Timing is also important, as in the case of the three Baltic countries and Mongolia. Separation or union, the utmost goal should be better governance and happier people. But I am aware I am idealistic.

Business volatility and Voyage volatility

It is interesting how similar a business venture and a voyage in the sea is. With business the CEO and the rank and file workers have to face business cycles. With a voyage the captain and the crew has to face the wave of the sea. Usually with a larger ship, such as a cruise ship, the passenger feel less volatile ride. People going up and down in sync but the movement is usually gentler. With a small ship, however, the ride can be bumpy and seasick inducing. Two near by small ships may experience the opposite: while one is at the peak of the wave the other is at the trough. What would happen if we join the two small ships to form a larger ship? Take a look at the following research from Fed Reserve NY branch.

“Bank Integration and Business Volatility,” with Bertrand Rime and Philip Strahan (Staff Report no. 129, May 2001)
The authors investigate how bank migration across state lines over the last quarter century has affected the size and covariance of business fluctuations within states. Starting with a two-state version of the unit banking model in Holmstrom and Tirole (1997), they conclude that the theoretical effect of integration on business cycle size is ambiguous, because some shocks are dampened by integration while others are amplified. Empirically, Morgan, Rime, and Strahan find that integration diminishes employment growth fluctuations within states and decreases the deviations in employment growth across states. In other words, business cycles within states become smaller with integration but more alike. Their results for the United States bear on the financial convergence under way in Europe, where banks remain highly fragmented across nations.

We can learn some wisdom from the seafaring fellows.