Shifting power equations: Russia and the IMF

Today, an innocent press release from the IMF following the visit of its Managing Director to Russia, reveals a lot about Russia’s position and the IMF’s standing in the world…

Towards a new position for Europe in the world

This year 2007 the EU celebrates its 50th anniversary. European integration is overall an unprecedented success on a grand scale – achieving both lasting peace on a traditionally war-prone continent, and high levels of prosperity thanks to the progressive creation of a Common, then Single Market. With the recent accession of Central and Eastern European countries Europe is, finally, united. Except where it really matters in today’s world. What is more, Europe at 50 is brooding. Brooding over its relative “decline”. And it suffers from a sense of not really performing on the world stage as it could.

Recently, a powerful product was put onto the market of ideas on how to make things move forward for our good old Europe.

How fighting monopolies at home can help fight monopolies abroad

EU Energy market liberalisation, relations with Russia and Gazprom, the merger between Suez and Gaz de France - interesting stories coming up….

The EU’s current plans to open up the internal European market for energy displeases the national champions Eon and GdF. But they also displease Gazprom.

The future of Europe: what about relaxing?

 

Are you suffering from anxiety? According to Princeton University’s online dictionary, anxiety is

 “a vague unpleasant emotion that is experienced in anticipation of some (usually ill-defined) misfortune”.

Anxiety can quickly become stifling and paralyse people’s ability to think clearly and act rationally. Anxiety can be combated by a two-way action: toward oneself, mainly via relaxation techniques, and outwardly, by taking the appropriate action to prevent the anticipated ill-fortune to set in. It generally involves a change of attitude towards oneself and the outside world. Good relaxation generally supports clear thoughts, better ability to rationally assess risks, and to positively act on your environment. When one is relaxed, one generally displays more openness to new ideas and methods to solve problems. Good relaxation also often leads to recognizing that the anticipated misfortune is not that much of a threat. The same Princeton University’s online dictionary, defines relaxation thus:

• “(physiology) the gradual lengthening of inactive muscle or muscle fibers
• (physics) the exponential return of a system to equilibrium after a disturbance
• easiness: a feeling of refreshing tranquility and an absence of tension or worry
• an occurrence of control or strength weakening;
• rest: freedom from activity (work or strain or responsibility);
• a method of solving simultaneous equations by guessing a solution and then reducing the errors that result by successive approximations until all the errors are less than some specified amount
• liberalization: the act of making less strict”

I have been wondering if I could one day say something sensible about “The Future of Europe” (after all there is a category entitled “Europe” in this blog), and “What-Europe- needs-to-do” to be on top of globalization, instead of always seeing it as a threat. It all was becoming much too complicated, and boring. To start with “Europe” is so diverse. Not all Europeans see for example immigration and trade with China as a threat. It is Estonia vs France, Sweden vs Italy. I gave up on the idea and chose instead to simply relax on the matter.

While relaxing, however, I noted that, metaphorically speaking, relaxing is exactly what Europe needs to do – especially the big continental countries that make or break it all. Small free-market Estonia is cool, but it can’t decide on overall policies alone. What Europe needs to do then, is to “return [its] system to equilibrium after a disturbance”.

Waiting for… Marco Polo. Or the revival of the Silk Road

Another consequence of the rise of China:

The FT reports:

“China and seven countries in and around central Asia have reached a preliminary agreement to build a $19.2bn (£9.6bn) modern-day equivalent to the historic “Silk Road” trade route between China and Europe. “

Incroyable

La gauche en France serait-elle sérieusement en train de se refonder?

Le Manifeste des Graques est paru officiellement aujourdhui. Le passage-clé est le suivant:

Nooooo, really?

Change of tone in the presidential discourse on Europe’s agricultural policy.

Nicolas Sarkozy warns French farmers that he will push for a reform of the common agricultural policy when France takes over the presidency of the EU in 2008. Substance, and the real job on proposals by the relevant ministers to follow, of course….In English in the FT:

“He told farmers at a cattle fair in Rennes, Britanny, they had to learn to make a living from market prices rather than subsidies. But he framed a partly free-market message with a demand for greater Europe-wide protection for a sector he described as an “essential pillar” of the French economy. The EU should set a goal of “stabilising markets” in agricultural goods. It would do this by reestablishing the CAP on the principle of “community preference”, although he did not spell out what this would mean in practice.

He said a reformed CAP needed to meet four objectives: ensure “food security” for Europe; contribute to a growing global demand for food; preserve rural economies and landscapes; and help combat climate change.”

Typical Sarko style - more markets + more national preference or protection. What the final result will be is to be seen.

Are economic reforms in France going to happen?

The activity of the new French president Nicolas Sarkozy since his election last May has been frenetic. It is hard to follow all the speeches held, measures taken,  talks held, positions defended, trips undertaken, working groups set up under his new leadership. The major shrewdness he has been able to demonstrate is his co-optation of top figures from the socialist party who now collaborate with him in some form or another - as head of the French diplomacy (Bernard Kouchner), or of the new “Growth Commission” presided by former advisor to president Mitterrand, the sulfurous character Jacques Attali. Jack Lang, major figure of the socialist party is looking into institutional and constitutional reform.

For those who understand French, I warmly recommend to listen to last Saturday’s edition of the radio programme “La Rumeur du Monde” on France Culture radio. It is moderated by the head of Le Monde newspaper, Jean-Marie Colombani and the very respected economist and scholar Jean-Claude Casanova, a French liberal (who would believe this exists?). Last Saturday they invited Eric Le Boucher, Economics journalist for Le Monde, and author of a book entitled “Economiquement Incorrect”. The second speaker was Daniel Cohen, eminent French economist author of various books appealing for substantial economic reforms in France.

The question asked by Mr Colombani to launch the discussions were: “What are the main trends of Sarkozism”? Is his tenure going to be “social-liberal”, “colbertist”, or “simply French” - combining state interventionism with liberalism?

Shrewd politician… but is he really qualified?

There are now two offical candidates for the nomination of a successor to the IMF’s Managing Director Rodrigo de Rato.

Watch DSK’s blog dedicated to his bid to succeed him - political comunication is his strength. If anybody has any statements made by the alternative candidate Tosovsky, nominated by the Russians, please make them known. Is Tosovksy a symbol and a puppet? The Financial Times had a harsh opinion on Strauss Kahn:

The Fund, then, needs an intellectually credible head. But nobody could argue that Mr Strauss-Kahn is the best-qualified candidate in the world by his experience, intellect or training. His insistence that bridging the gap between rich and poor would be one of his priorities shows this. Macroeconomic stability is the Fund’s job. He seems to be running for president of the World Bank, a job taken, again, by a US candidate.

Yet even if Mr Strauss-Kahn were the ideal candidate, the method of his selection would undermine his presidency.

Emerging countries no longer understand why Europeans should determine who might dictate to them in any crisis, as if their old empires still existed. The IMF is either a global institution with a head chosen by the world, or it is an expression of Europe’s will to cling on to every scrap of its prestige and power. In this latter guise, the Fund will be shorn of all ­legitimacy.

Worst of all, no genuine European interest is served by forcing on the Fund a man who is neither qualified nor legitimate. Europe’s insistence on the old carve-up of the Fund and the World Bank with the US is as arrogant as it is foolish. The only interests served are those of politicians determined to preserve a time-worn droit de seigneur.”

What to watch out for this autumn

Slowly but steadily the world’s decision-makers are coming back from their summer breaks. While the summer remained busy in terms of trends and events that are related to this blog, the hot economic globalisation topics for this autumn will probably be the following:/font>

• World financial markets, what next? The subprime mortgage crisis in the US has had interesting ramifications. Hedge fund and investment vehicles bankrupt or in crisis, German banks stumbling, central bank interventions on money markets including a big one by the European Central Bank today, etc. After several years of relative calm and buoyant growth, the current turbulences could still become a hurricane. I am not a specialist, and it seems that for the moment the crisis is being weathered not too badly. Yet who knows? 
• World trade – growth trends. China continues growing, EU economies, except France’s are still doing well, commodity markets boom. The autumn will see the release of new world trade figures by the WTO (here the latest available). We’ll see what is really happening on the ground. 
• World trade – Doha round and future of the multilateral system. Sounds incredible, but Doha talks are still going ahead (the ICTSD newsletter confirming this will soon be online). Can anybody believe that people still believe it’s going to happen? One never knows after all. 
• World trade – EU policies. The EU is changing tack in many areas, and especially Asia. It is going further down the bilateral path and launched negotiations with South Korea, ASEAN, India. (Here a post, here more on the strategy on EU Commission’s website), Economic Partnership Agreements with African and Caribbean Countries should normally be concluded by the end of the year to replace the preferential Cotonou-Agreements. The negotiations are in dire straits. For nerds, to note, the EU is changing its anti-dumping policies. Very important in terms of clarification of how it deals with its imports from poor countries and namely China. The first time I actually started to understand something about is was when I read this paper.
• World trade - US policies. The US isn’t giving in on agricultural subsidies. Hillary Clinton does not want to extend the Trade Promotion Authority to the Bush administration which could help finalise the Doha Round. US-Americans and the Democrats are trade-sceptics at best. The climate in the US is one of anti-China, anti-trade, and anti-immigration hysteria (not only France, hey, is having its crisis..!). As it is a pre-election year things will not be getting better.
• Geopolitical consequences of globalisation – emerging powers. China and Russia. This blog has written quite extensively on the matter, to be monitored closely. The German Die Zeit had an interesting analysis last week-end on the matter. Turkey – Turkey’s recent election and the rise of Abdullah Gul as president with an Islamist background is actually very good news: a new prosperous if very conservative middle-class has emerged as Turkey integrates with Europe and the world and plays by the rules of democracy, the role of the military is dwindling. This bodes well in many ways: integration into world markets and economic growth is good for democracy and stability in appears in the case of Turkey, and Islam can be compatible with democracy and modernity. Let’s see where things will ultimately be heading in this crucial country. Maybe Sarkozy will end up wanting Turkey into the EU (he he)?
• The global economic fuel - Energy geopolitics. The EU is revising its strategy and integrating energy into its Neighbourhood policy. Oil countries are tightening their grip on their oil reserves (see Kazakhstan recently. Russia, Venezuela have received coverage in the blog), and generally also on their populations.
• Global institutions and globalisation – the controversies over the successions of Wolfowitz at the World Bank and of De Rato at the IMF reflect a profound malaise over the discrepancies between a changing economic power balance and the institutional setting governing the economy based on a post-1945 order. The malaise is going to last. Will anything happen? Surely not this autumn, but the debate will need to be followed closely.
• Europe’s political, economic policy, social and welfare systems adapting to globalisation – watch out for reforms (or not) happening in France. Will Germany and Italy ever be able to shake themselves up? EU-level policis. In 2008 – i.e., in a few months, we will celebrate ten years of the so-called Lisbon agenda that pledged to make Europe the world’s most competitive economy by 2010. Anybody seeing it happening?
• Keeping open minds, borders and political systems – the current globalisation backlash in the rich countries, and the revisionist trends within the rich-country-based economics profession (even Paul Krugman is going down the path of pop-antiglobalism…!) are a sign of the deeper sense of crisis of a part of the world that feels it no longer is in control. There is no reason to think one is doomed. It is about reinventing oneself. On the other side of the spectrum, the current emerging nations could go down a dangerous path of militarisation, and reversal of political democratisation. Russia comes to mind. But China isn’t reassuring either. The middle-income countries haven’t found yet a way out of their impasse. There must be shrewd methods to climb up the economic ladder. In Latin America especially: Chavismo, US-FTA-“ismo”, or a Chileanismo (the most effective so far) - what will prevail? A book I am currently enjoying reading at the moment for the description of the political mental state and a turn to pragmatism in economic policies in Latin America is Santiso’s Latin America’s Political Economy of the Possible published last year at the MIT press.
• Africa – it will certainly not join the global era this autumn. But its marginalisation needs to be tackled. Urgently.