Archive for the 'Europe' Category

The causes of tax evasion

February 28, 2008

Random comment today.

In the context of the current tax evasion row opposing Germany and Liechtenstein: Wolfgang Münchau in his blog said last week that the causes of tax evasion are high taxes. Indeed, Germany has one of the highest marginal tax rates in Europe. And: Crush Liechtenstein and earn votes, but you’ll get the Cayman Islands. Despite the government’s popularity I find it a very sad sight, a government of one of the world’s most sophisticated countries boasting with stolen files- it’s all becoming very dodgy…. It is also very symbolic that Zumwinkel, head of Deutsche Post, the postal monopoly in Germany, who earned credit for imposing a minimum wage not for lofty social reasons but to drive out competitors of the market was the first high-profile tax evader to be caught. This somehow reflects a crumbling social and economic model inherited from the postwar period and the 1970s. 

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Policies towards Russia: reaping what one has sown? [update]

February 27, 2008

It is increasingly clear that “the West” has got Russia badly, very badly, wrong. Europe and the US have accumulated errors towards Russia and are now reaping what they’ve sown. Hard statement, I know.

Dmitri Trenin from the Carnegie Moscow Centre recently wrote one of the first books – entitled “Getting Russia Right” – that tries to undo the mythical fear and loathing in which Russia’s policies are held in the West. Not that the recent slide in both democratic achievements and economic freedoms combined with growing international sabre-rattling is not worrisome: on the contrary! Yet it could be that the West should have been able to see it coming. It even probably could have averted some developments had it acted rightly on time, based on more realistic perceptions. Just a few random illustrating examples: Read the rest of this entry »

Chatty book commentary: for a concentric, fuzzy, and differently democratic European Union

December 29, 2007

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2007, to which we are now saying good-by, celebrated the 50th anniversary of the Treaty of Rome, the founding document of the European Union.

2007 was a year of crisis for the EU: it needed to find a way out of the impasse created by Dutch and French no-votes to the Constitutional treaty back in 2005. With the entry of very poor and still deeply corrupt Romania and Bulgaria in the same year 2007, this foreign-policy-bureaucratic, foreign-investment-economic-convergence machinery called Enlargement has been called into question. Enlargement fatigue is prevailing…. But now, in December 2007, the gloom slowly starts dissipating. Read the rest of this entry »

So, is it the End of History for the former Soviet bloc?

December 8, 2007

It is now almost twenty years since the Berlin Wall was torn down and Francis Fukuyama announced the End of History, a world full of democratic capitalist countries and boring Western-style normality…. So, is the former Soviet bloc there now?

In an authoritative book already mentioned in my recent posts, Anders Aslund from the Peterson Institute undertook a first systematic stocktaking of Transition in Central and Eastern Europe, Russia and Central Asia. The former Soviet bloc has known a great number of convoluted developments since then. The uncertainties surrounding Russia’s future and place in the world, as well as the controversies raised by the accession of Bulgaria and Romania to the European Union make this book a timely contribution to the debate on what went right, and what went wrong. Certainly, Aslund’s book makes a few points that will raise some controversies.

As one cannot be too long in a blog post, I will try to be short on the main conclusion drawn by Aslund on reform: the quicker and more systematic the better. Read the rest of this entry »

Oh, Belgium

November 17, 2007

A tiny country of 10 million inhabitants at the heart of Europe. It hosts the EU’s capital, Brussels: a mere 1 million inhabitants. The country can be crossed in a couple of hours by car or train. It hasn’t had a government for about five months, due to infighting between two native tribes: the Flemish and the Walloons. Everywhere there is talk of a split. The country was founded in 1830 after a revolution uniting two Catholic groups that felt uneasy under Dutch hegemony. Today, apart from religion not much seems to be uniting both parts of the country. In the past the French-speaking Walloons were the richer and culturally dominant group in the country. Belgium was one of the first and most dynamic economies in the 19th century, a pioneer of European industrialization. Now, the Flemish are the richer majority of the country – one just needs to take a 30-minute train ride from run-down Brussels to flourishing Antwerp, and the difference blows into one’s face. Read the rest of this entry »

Europe’s free trade agreement strategy: the road to nowhere?

November 14, 2007

In November 2006, the EU launched a new project entitled “Global Europe” which aims at linking external trade policy with the so-called Lisbon Agenda, a programme designed to turn Europe into “the world’s most competitive economy” by 2010. Fundamentally Global Europe announces a shift towards negotiating more bilateral free trade agreements – FTAs – directly with partners in Asia: South Korea, ASEAN, India. It is also about getting more hands-on with China, now the EU’s second trading partner in goods after the US, and integrating other ongoing bilateral trade negotiations with, say the Gulf countries and Mercosur into the broader picture of a shining new Europe in an Era of Globalisation. [Or rather: “as a protector, a life-enhancer, as a magnifier of strength, and as a shining cultural and political example”, as Mr Sarkozy put it?.]

In fact Europe’s practice of signing bilateral agreements is not new, by far. But so far it has concentrated on: countries in the European periphery with potential prospect of joining the EU (Neighbourhood Policy – today enlargement is in crisis, however); or countries with special interests in linking up economically with the EU and where the EU has big political stakes (Mediterranean, or “Euromed” countries). So-called EPAs with African, Pacific and Caribbean countries are trade-and-aid agreements that need to become reciprocal on trade issues to be compatible with WTO requirements: let’s call them post-colonial political beasts. What is new Read the rest of this entry »

Infrastructure determines Superstructure, or what?

October 23, 2007

Karl Marx’ saying was that when it comes to opinions, culture, and ideas, as well as laws and institutions, the “infrastructure” determines the “superstructure”. Your position in the economy (production relations) and society (class) determines what you think and all the related output – from art to law. Economy-society is the Infrastructure and culture-ideas-institutions are the Superstructure.

Recent polls in Western Europe suggest that opinions related to globalisation and the market economy vary widely across countries. It is striking to notice how the countries that have better adapted their economies and societies to globalisation are also the countries where positive attitudes to globalisation prevail, or attitudes towards globalisation are the least negative. This mainly the Nordics (I know my Swedish colleagues here at ECIPE will slightly disagree, but they are not Italians), and the Anglo-Saxons. Where support wanes most is where economic stagnation prevails – Italy is the worst case.

For example:

Attitudes towards free trade:

According to the German Marshall Fund: [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%).

Attitudes towards entrepreneurship, innovation:

Edmund Phelps, in a study on entrepreneurial culture, showed:
“The values that might impact dynamism are of special interest here. Relatively few in the Big Three report that they want jobs offering opportunities for achievement (42% in France and 54% in Italy, versus an average of 73% in Canada and the U.S.); chances for initiative in the job (38% in France and 47% in Italy, as against an average of 53% in Canada and the U.S.), and even interesting work (59% in France and Italy, versus an average of 71.5% in Canada and the U.K). Relatively few are keen on taking responsibility, or freedom (57% in Germany and 58% in France as against 61% in the U.S. and 65% in Canada), and relatively few are happy about taking orders (Italy 1.03, of a possible 3.0, and Germany 1.13, as against 1.34 in Canada and 1.47 in the U.S.).”

Attitudes towards the single currency:
An FT/Harris poll showed recently that “More than two-thirds of the French, Italians and Spanish – and more than half of Germans – believe the single currency has had a “negative impact “. In France, just 5 per cent said the euro has had a positive effect on the French economy.”

It is interesting to note how this persistence of negative attitudes is more pervasive in the “Mediterranean” and “Continental” countries. Read the rest of this entry »

Very quick tour d’horizon – trade, migration, China

October 16, 2007

I’ve been a bit short and bluntly political lately in my blog.  No time to write longer, more reflective piece these days. Gearing up in a new job swallows lots of energy! But let me try and share what I’ve been trying to keep up with.

Migration and Immigration. A lot is going on here in Europe. France is introducing a restrictive bill on immigration. It will be imposing DNA tests for family members of immigrants who want to join their relatives in France. This is creating a national uproar. There’s enough on this blog about this topic (see this, and this a bit too long post in French)For my French friends: do have a look at Liberation. Alexandre Delaigue has a good post on one of Libe’s blogs too).

At EU level a lot is happeing on migration these days as well (an excellent FT article gives an overview): EU trends on integration are being assessed by the Migration Integration Policy Index. Do have a look! The country that scores best on everything from non-discrimination to access to nationality of immigrants is Sweden. While the Nordics tend to score well in general, when browsing the maps on the website, Denmark clearly stands out as the black sheep. Eastern European countries will need to make some efforts. I was surprised to learn that Germany makes access to its nationality easier than France. The index is managed by the Migration Policy Group in Brussels. In terms of relatively constrictive approaches to immigration, there have been moves this summer by Spain to allow for legal but managed immigration of workers from Africa. The EU Commission is set to launch a “blue card” for skilled migrants next week, so the FT. More background here and here. A very far way off what others propose: see Dolado and Legrain.

International trade. The US is growing more protectionist (see this post). Ben Muse posted Hillary Clinton’s proposals on trade policy as candidate for the US presidency. Trade Diversion has something on how much trade protection has actually cost the US. The EU is going to be sued because its recent decision to raise tariffs on energy efficient lightbulbs from China (how deliciously ironic!). The WTO ruled against the US’s cotton subsidies: efforts on reducing them are insufficient. Oxfam is campaigning in the US against agricultural subsidies (courtesy of the Econoclastes and Trade Diversion).

China. The annual Communist Party Congress usually leads to a flurry of media coverage on already extremely media-covered China. Two pieces I recommend: the recent Analysis by Richard McGregor in the FT, A piece in Die Zeit. China is growing richer and climbing up the value-added ladder. It is now starting to tackle its huge challenges: growing inequality and the environment.

European left is supporting the well-connected and privileged [update: unwillingly, of course]

October 12, 2007

Vox.EU recently published an article by Alberto Alesina and Francesco Giavazzi on Why the left should learn to love liberalism. It is based on a book that came out last year (again, one of those I wanted to read but never came round to!), The Future of Europe: Reform or Decline.

Continental Europe is in the midst of a burning discussion about the pros and cons of market-friendly reforms and greater economic liberalism. We all know what the package contains – competition, labour-market flexibility, liberalisation of services, lower taxes, and privatisations.

The traditional debate runs as follows. These reforms are “right wing” policies. They may increase efficiency – perhaps even economic growth – but they also tend to increase inequality and to be detrimental for the poorest in society. Therefore – and here comes the typical “socially compassionate” European argument – be very careful moving in that direction. Governments should proceed cautiously and be ready to backtrack at any point.

Much of this reasoning is fundamentally wrong. Labour-market flexibility, deregulation of the service industry, pension reforms and greater competition in university funding is not anti-equality. Such reforms shift financing from taxpayers to the users themselves and, as such, tend to eliminate rents. They tend to increase productivity by basing rewards on merit rather than on being an insider. They tend to open up opportunities for younger workers who are not yet well-connected. Pursuing pro-market reforms does not imply facing a trade-off between efficiency and social justice. In this sense, pro-market policies are “left wing”, if that means reducing the economic privileges enjoyed by “insiders”.

The debate is already a few years old. The British Labour Party is practically over it. Germany’s SPD is reversing the moves made by Schroeder, the French Left is in a coma because of its refusal to accept this. I am not commenting on the Italian Left, which Alesina and his colleague are targeting in particular. Come on guys, wake up! Don’t leave reform and its electoral rewards to the right-wingers!

Shifting power equations: Russia and the IMF

September 26, 2007

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… Read the rest of this entry »