Back soon

The pre-Christmas period is eating up my time and energies. Back to normal and to blogging early January.

See you then.

Forget “Fair Trade”

Calls for “fair trade” and even “trade justice” have become increasingly louder. Drinking fair trade coffee is mainstream - the City of London’s Starbucks sell “fair trade coffee” to soothe the conscience of rich investment bankers. Other multinational firms such as Nestlé have also recently entered the “fair trade” market. Fair trade labelling organisations have flourished and their brands are increasingly visible in rich world’s supermarkets. It naturally follows that, although “fair trade” products still represent only a tiny fraction of the world’s agricultural market, the movement is under increased public scrutiny, and increasingly criticised.

Fundamentalists say the movement lost its soul and has degenerated into a marketing strategy aimed at targeting wealthy wallets with a bad conscience whilst the extra money paid hardly reaches the pockets of those it intends to support, i.e. coffee/banana/sugar etc. plantation workers or small producers. Any mainstream economist would say – indeed, it can’t be otherwise. Non-market-based prices, or artificially raising prices, create rents with no economic sense which mostly do not go to the targeted pockets.

More on this fair trade topic (with the environmental issue I will not be broaching here) in this week’s The Economist. For my French friends who have difficulties with English: “je vous invite à lire ce post excellent et très clair sur le commerce équitable.”

In my view, the “fair trade” movement has three fundamental flaws:

Globalisation fears - where French and US citizens meet

A recent survey commissioned by the German Marshall Fund found that:

“Americans and French apprehensive over open markets: American and French respondents wish to keep trade barriers to protect businesses, even if this means slower growth. They showed the highest levels of opposition to trade liberalization - 55% of French and 31% of American respondents do not favor freer trade. American (59%) and French respondents (58%) say freer trade costs jobs. But French respondents also showed the lowest confidence in freer trade providing consumer benefits (63%), helping poor countries (39%), increasing global prosperity (49%), and supporting democracy (45%). More Americans believe it has consumer benefits (78%), helps poor countries (70%), increases global prosperity (68%), and supports democracy (65%).

China viewed as threatening: Fifty-nine percent of both Americans and Europeans believe that China’s growing economy is a threat because of competition from low-cost Chinese products and U.S. and European firms relocating to China. Seventy percent of French, 67% of Polish, 66% of Italian, and 65% of Slovak respondents expressed fears over China’s emerging economy.”

For once, views converge…. Reviving the Doha Round will not be easy in this context. Will Pascal Lamy’s (Secretary General of the WTO and a Frenchman) recent outcry change matters?

Globalization or globalisation

OK, OK, once and for all I decided . Henceforth in this blog: globalisation. British spelling. Pure….

BRIC countries revisited

All globalizing emerging giants face significant governance challenges.

Today’s comment in the FT by John Lloyd and Alex Turkeltaub entitled “India and China are the only real Brics in the wall” tries to give a strategic view of which of the four BRIC countries are the best options for foreign investors devising a strategy for the future. Their clear message is:

“as political and business leaders devise strategies they would be well advised to focus on China and India”.

The term BRIC countries was forged by global investment bank Goldman Sachs in 2003 which identified Brazil, Russia, India and China as economies that would together overtake the economies of the six richest countries in the world by 2040.

The article’s main message is: India and China are investing in higher education and going for “intellectual capital”, while Russia and Brazil depend too much on the current commodity price boom and are not making the necessary investments in infrastructure and human capital.

Russia currently has a bad reputation for obvious very serious political reasons, and Brazil tends to get lost in the meanders of its democratic politics and corruption scandals. However, in my view, the article goes a bit too rapidly over a few issues. So, here a few remarks, if I may:

French Presidential Elections - Bye Bye la République

In order to identify himself with the capitalist system, the unemployed of today would have completely to forget his personal fate and the politician of today his ambition. Joseph Schumpeter.

Every French person you speak to will agree that his or her so beloved République is going down the drain. The questions of why and of what to do to solve France’s problems and save it will be responded to with a lot of passion and affect yet widely differ from person to person. Generally, though, one will hear that it’s the fault of “la mondialisation”.

France is not in crisis because of globalization itself, but because it hasn’t been able to embrace it positively. Its inability to undertake fundamental reforms in two of the main machineries of growth and prosperity and hence political and social cohesion. i.e., the labour market and education, is currently undermining the foundations of what makes France, namely its core values Liberté, Egalité, Fraternité. La République how it works now is no longer delivering on either of its threefold promise.

“Jo” Schumpeter to analyse French politics?

I am currently trying to write something on the difficulty France is having adapting to globalization as reflected in its current politics. Yet in the meantime, while having in mind, for example, the protests of the French youth against a bill aimed at making firing (and hiring) easier for the under-25s this spring, France’s refusal to back the EU bill on a single market in services, France’s No to the EU constitution, the presidential candidate Segolene Royal’s sentimental approach to economic policy, the following words make a lot of sense. This is Joseph Schumpeter, in Capitalism, Socialism and Democracy:

“The capitalist process rationalizes behaviour and ideas and by so doing chases from our minds, along with mystical belief, mystic and romantic ideas of all sorts. Thus it reshapes not only our methods of attaining our ends but also these ultimate ends themselves. “Free thinking” in the sense of materialistic monism, laicism and pragmatic acceptance of the world this side of the grave follow from this, not indeed by logical necessity, but nevertheless very naturally”.

“As regards the economic performance, it does not follow that men are “happier” or even “better off” in the industrial society of today than they were in a medieval manor or village. As regard the cultural performance, one may accept every word I have written yet hate it – its utilitarianism and wholesale destruction of Meanings incident to it (…).

(…) any pro-capitalist argument must rest on long-run considerations. In the short run, it is profits and inefficiencies that dominate the picture.

In order to identify himself with the capitalist system, the unemployed of today would have completely to forget his personal fate and the politician of today his ambition (…).

“Secular improvement that is taken for granted and coupled with individual insecurity that is acutely resented is of course the best recipe for breeding social unrest.”

“Unlike any other type of society, capitalism inevitably and by virtue of the very logic of its civilization creates, educates and subsidizes a vested interest in social unrest.”

I’ll let you appreciate.