Hate Big Business? Me too! But not for the same reason

Foreign Policy –  usually an interesting magazine publishing refreshing articles came up with a sorry, very sorry article in its latest edition. Robert Reich’s  published on: “How Capitalism is Killing Democracy” Tagline: “Free markets were supposed to lead to free societies. Instead, today’s supercharged global economy is eroding the power of the people in democracies everywhere. Welcome to a world where the bottom line trumps the common good and government takes a back seat to big business.”

Yet this  terribly misguided article is a good excuse for me to get into a few clarifications on what “capitalism” is all about. Definitions of capitalism differ according to the ideological stance one has towards it. Just try to google the term… I for my part defend capitalism. I defend capitalism as an economic order based on market principles. What I don’t defend, however, is Big Business. This because I don’t believe Big Business is “proper” capitalism – it is not a system of “natural liberty” (term inspired from Adam Smith) .

Global backwaters

Foreign Policy just published its Failed States Index 2007.

A bit of a reverse correlation with the countries on the Globalization Index published by the same Foreign Policy.

Dani Rodrik down a dangerous path

I have finally come round to delving into the contribution made by Harvard Professor Dani Rodrik in the Financial Times recently, entitled “The cheerleaders’ threat to global trade”.

It shocked me when I first read it, but I needed to let emotions calm down and more time to go through it. In a letter to the FT, Gary Hufbauer from the Peterson Institute (probably walled for non-subscribers) wrote that Rodrik’s contribution was “unnecessary and regrettable”. I fully agree. And this is why:

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?

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:

Oil industry and global politics – an inevitably explosive mix

 

S. Salgado – Worker in the oil fields set on fire by Iraq in Kuwait, during the 1991 war

 

“Energy is the life-blood of the world’s economy.”

Abdallah S. Jum’ah, President and CEO, Saudi Aramco

Although the oil (& gas) industry is the fuel of today’s booming and ever integrating world economy, and although it is the world’s biggest industry in value, it is paradoxically the least globalised, in the sense of being driven by cross-border market forces. I have four things to say:

1) Despite wide-ranging privatization and de-regulation in the world in the last 20 years, the oil industry is and remains largely state-controlled or under strong political and government influence.

2) Oil is increasingly used for power politics – domestically and on the international scale. Otherwise, oil compounds international conflicts. Only democratic and clean government can limit the damage.

3) For structural physical and economic reasons, this fundamental oil problem is there to stay. It might even worsen given growing scarcity.

4) Well, the only way out is: less reliance on oil. And that one’s a real challenge.

Therefore:

Dubai or: “Die Nation ist tot”

Europe broods over its national identities, is shattered by “Europehood”, post-colonial immigration, the prospect of having Turkey into the EU. National identities all over the world are put into question by global economics, technology, & the web. In the meantime, there is a form of society emerging that does not give a damn about what it is to live outside your cherished nation-state where you as individual only count in the sense that you are a free citizen shaping public life. The preoccupations of eminent German philosopher Juergen Habermas, author of books such as “Die Postnationale Konstellation”, in which a new sense of open, multicultural and inclusive togetherness can be created at supra-national level such as Europe on the basis of a set of commonly agreed upon constitutional values (“constitutional patriotism”) are very very far away from people who thrive in places such as …Dubai

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.