Good old times, when economics was simple

The Econoclastes found a little jewel of a video on an unkown non-mainstream economist. Please enjoy.

The EU is 50. Time to think afresh - 1

In this month of March that is coming to a close we celebrated the 50 years of the signing of the Treaty of Rome, which laid the foundation for today’s EU. 50 years already?

Why I chose to talk about the EU’s fiftieth anniversary in a blog dedicated to economic globalisation and its politics? First and foremost because of the economic weight of the EU: about 20% of world trade extra-EU, about 40% of world trade in total, the biggest exporter of services in the world, the originator of modern globalisation with European expansion starting sometime in the end of the Middle Ages, the giant that has not found its place in a world where China, India, and other rival giants are catching up economically. Second: as I am a “European”, this matters to me. Third: As I am a a political observer first and foremost, who likes to look at economics, well: Europe is a topic of choice.

Back to the initial topic: taking stock of the EU. These 50 year-celebrations come in a period of crisis. The Economist published a special survey on the EU on the 17th of March. The cover of that week’s edition was entitled, quite tellingly, “Europe’s mid-life crisis”. Yes, in a sense Europe is having a mid-life crisis. The Dutch and French no-votes to the proposed EU constitution in 2005, the resistance to the Services Directive and its ultimate watering down are only the tips of an iceberg. But crises are also a window of opportunity for renewal, and often something good can come out of them.

Under the auspices of an academic of the London School of Economics, Maurice Fraser, and in collaboration with FT Business, a booklet was published for the occasion entitled “European Union – The Next Fifty Years” Its subtitle: “50+ top thinkers set out their ideas for Europe”*.

As it includes contributions from such eminent people as Nicolas Sarkozy, Ségolene Royal and David Cameron, the term “thinkers” is I think somewhat exaggerated. However, these fifty contributions of people [the list of which you can find here] who have something to say, and generally some agenda to further, do, I think, reflect the state of the current debate. First impression when browsing through the book: “help, what a cacophonia”! Second impression: “aha, there are recurrent themes”.

There are indeed, at the moment, in Europe: 1) one obsession, 2) a genuine concern, 3) two methodological approaches, and 4) one real problem.

In this post, I will concentrate on number 1). I hope in the next posts (1-2 more) to be able to cover the others, as all are interlinked, and I really want to discuss number 4). But, let’s start with the beginning.

The Obsession:

“Identity, Culture and Borders”.

Of chickens, eggs and mayonnaise - amateur cook’s thoughts on economic development

Whilst I am stuck in a post I want to write on Europe to celebrate it’s 50th birthday (hope I’ll make it soon), while having lots of work to get done, please have a look in the meantime at what others write. At the moment Trade Diversion seems to be the blog that is the most up-to-speed on the globalization, trade and aid debate (seem to be having lots of time these days, Jonathan, lucky you! Thanks for all this!).

What struck me in scrolling the last titles Trade Diversion showed on my Google Reader, is the ever-emerging chicken-and-egg question: What makes development - the state or markets?

The EU’s free trade agreement strategy in Asia

Today I attended a seminar on services liberalisation in Asia. We had the privilege of hearing the Deputy Director of the WTO, the Director of the Services Division in the WTO and the Director in charge of bilateral negotiations in the Directorate-General for Trade of the EU Commission, among others.

I am not going to cover the conference, just reflect on what has been said by the representative of EU Commission. Mr Ignacio Garcia Bercero outlined the Commission’s new strategy of venturing into free trade agreements with such important economies as South Korea (which is about to finalise an agreement with the US), ASEAN as a group and, yes, India. The aims for the EU are the following:

Latin American finances: bright, for once?

International investment bankers working with Latin American governments have not much to do at the moment. This is why a global publication such as the good old The Banker from the Financial Times Group published an article this month which explores the possibilities for business that are left. It is entitled “Foraging for yield from scarce sovereign bonds” (it will be available for free online from April; free subscription to the website).

The article actually tells us good news

Nicolas Sarkozy is not a liberal, he is purely and simply a hard right-wing politician

This is a post on France’s presidential election campaign. I consider it an interesting topic in the observation of “politics in an era of globalization” this blog is about. I also write it because it will help me take a crucial decision when I will vote in six weeks. But it is first and foremost a needed clarification for my “liberal” colleagues and friends outside France on the “true” nature of the candidates. If you are not French, then you will need to be a bit informed on what is going on in France. The Financial Times is not bad in covering the presidential elections, Le Monde is better, of course, for an overview if your read French.

In the professional circles I am involved in here in London, the idea that Nicolas Sarkozy is one of the few “liberals” in France, a reformer, more eager to push through France’s badly needed economic reforms than any other politician is still pervasive. Still a few months ago, an eminent publication such as the FT was publishing articles on Sarkozy portraying him almost exclusively under this light, leaving out what worries many people in France: his social right-wingness. Please, dear readers, please do not believe Nicolas Sarkozy is a liberal. He is purely and simply a right-wing politician. He says he is a “liberal” but he isn’t. Here a few points on why:

Globalisation, workers and the poor

One of my favourite bloggers Ben Muse published recently two interesting posts on globalisation and working conditions and on globalisation and poverty alleviation.

Two important findings:

Political shifts in Western politics - Left, Right and Centre

When there are major shifts in national and international economic or political equilibria, the notions of political Right and Left tend to undergo fundamental changes. This is happening today too. Today I read an article on what the UK’s conservative candidate David Cameron is wanting to do about reducing carbon emissions to protext the environment - a tax on flights! A few years ago I would have thought such a proposal to be naturally from the Left, and namely the Green left, in the style of Die Gruenen in Germany and some less successful imitators elsewhere in Europe. I thougt the moment where I would post something on the fate of Right and Left Today - an old idea of mine - has finally come.

The new oil majors

This is just a complement to my recent post on the oil industry and global politics. The FT published today a new ranking of the world’s biggest oil majors entitled “The new seven sisters: oil and gas giants that dwarf the west’s top producers”. While after 1945, the oil world was dominated by seven Western companies called the “seven sisters”, today, these have been overtaken in size and revenue by majors coming from emerging markets. The ranking goes thus:

1) Saudi Aramco - in charge of 25% of the world’s oil reserves

2) Gazprom - Russia

3) CNPC/Petro China

4) NIOC - Iran

5) PDVSA - Venezuela

6) Petrobas - Brazil

7) Petronas - Malaysia

Carola Hoyos, Energy Editor of the FT and author of the article published today, writes:

Overwhelmingly state-owned, they control almost one-third of the world’s oil and gas production and more than one-third of its total oil and gas reserves. In contrast, the old seven sisters – which shrank to four in the industry consolidation of the 1990s – produce about 10 per cent of the world’s oil and gas and hold just 3 per cent of reserves. Even so, their integrated status – which means they sell not only oil and gas, but also gasoline, diesel and petrochemicals – push their revenues notably higher than those of the newcomers.

Robin West, chairman of PFC Energy, an industry consultancy, says: “The reason the original seven sisters were so important was that they were the rule makers; they controlled the industry and the markets. Now, these new seven sisters are the rule makers and the international oil companies are the rule takers.”

Venezuela and Russia or the Rise of 21st Century “State-Capitalism”

Hugo Chavez knows very well that pure “socialismo”, i.e., centralised economic planning and 100% state ownership of the production apparatus doesn’t work. So how can you still be a socialist in the 21st Century? By practising “21st Century Socialism”. This means:

• Reverse the trend to ever-more market-based economic solutions by increasing the role of the state in the economy, but do not abolish the market economy as a whole. Leave the market economy in peace where you are not politically in danger.

• Use “market-friendly” moves in the assets you want to nationalise (example here)- see the recent increase in stakes in oil fields by the Venezuelan government

• Strike deals with privately-owned sectors - such as banking (which is booming in Venezuela)- in which you leave them in private ownership but acquire a say in their board decisions.

• If you can’t abolish the market - you can at least undermine democracy by taking control of the media, and managing tightly your populist one-man show.

This is exactly what is also happening under Putin in Russia (please see previous posts on recent trends in Russia and on the relationship between the oil industry and governments today). The only differences: