Cameron and Europe

[Brendan]

Perhaps we should apply those principles domestically and then we will all get rich and be happy forever.

[Magpie]

The EU does a great job of keeping poor countries poor, by constructing barriers against imports from developing countries and by subsidising domestic production, particularly in agriculture. Poor countries are not poor because rich countries are rich, but because they are badly governed.

[Brendan]

Oh of course. Silly me. Just like people.

[mockney piers]

I'd paraphrase that to say

"Poor countries are poor because rich trading blocs are powerful and unscrupulous, AND because [poor countries] are usually badly governed."

to make it more accurate, in my opinion of course.

Even well governed poor countries tend to remain so.

Badly governed rich countries are poor too to be fair.

[Magpie]

in 1962 Ghana and South Korea has similar populations and the same level of GDP per capita. Yet one managed to get rich, while the other is still poor - the difference? Well i think you can guess - institutions, rule of law, enforcement of property rights etc namely the foundations required for stable economic growth.

[Brendan]

I?ll stop being facetious for a moment shall I.

Poor countries are poor for many reasons. Some because they were victims of political experiments, some because they were/are blatantly exploited by other countries some because they have very few natural recourses, or they have only existed for a few decades or any number of other reasons.

It?s not always the fault of richer nations just like the poor people in our community are not always the fault of the richer ones. This doesn?t mean though on both counts that the welfare of the poorer isn?t in some way the responsibility of the richer. (I?m not talking about socialism or handouts here. Those are just emergency solutions to severe problems in my opinion.) But even if it isn?t within your moral code to feel that everyone/country should have a fair go (I realise some people just aren?t hardwired this way) from a purely pragmatic point of view guarding against exploitation and inequality makes sense. Inequality especially on a large scale will always cause conflict.

Unless of course it isn?t within your moral code to see the avoidance of conflict at all costs as the ultimate end. Which I?m starting to realise also seems, inexplicably in my opinion, to be an accepted point of view in some circles.

[mockney piers]

Of course it didn't hurt that South Korea was considered one of the great lynch pins against communism in the cold war world of asian domino theories, and a tenacious and loyal military ally in the cold war's hotter bushfires; that US investment in the country was huge, compared to negligible investment in Ghana, a strategic backwater.

You also do the history of South Korea a disservice with its weak governments, military coups and penchant for serious civil unrest.

Meanwhile many kleptocracies are encouraged, both by western governments and multinationals to remain in power to keep the open doors of trade imbalances and resource exploitation going. I do recall (not at the time you understand) poor Guatemala's attempt to achieve good governance being somewhat undermined by the CIA at the behest of a certain orange company.

But yes, that good governance encourages progress and growth while bad governance does the opposite does, understandably and largely, hold true.

[silverfox]

America's support for South Korea against the communist north and Chinese influence had much to do with it's prosperity.

[mockney piers]

Piers and silverfox in agreement about something shcok, leaving alone the uncanny cross-postage!

[Magpie]

Clearly outside factors are important, and some countries are just luckier than others in terms of geography, climate, proximity to other countries etc but the fact remains that well governed countries do better than poorly governed ones, and that well governed poor countries do get rich. Ignoring any moral considerations it makes commercial sense for rich countries to help poor countries to get rich, most trade is between countries on similar levels of income. In my view the way to do this is through encouragement of good governance and through free trade - the alternatives such as aid, or preferential trade agreements tend not to work as they maintain the establishment and status quo in poorer countries.

You could argue that the involvement of the US in SK was just as likely to result in disaster, as it did in Vietnam or indeed, in much of South America.

[Brendan]

I agree, handouts are a short term solution and can, as is the case in much of Africa, cause long term dependency.

Although I think I'm going off topic.

[silverfox]

There is a danger we're straying off topic slightly but to bring us back on topic there are very few handouts given to poorer countries. Rather one of the biggest problems for poorer countries has been loans from the IMF and other sources where the compound interest has crippled the country and, ironically, perpetuated the poverty in those countries, whether well governed or with despotic leaders.

The EU, I would maintain, is also a victim of its loans to itself. By lending money to other members states to help them modernise it now finds itself in a very precarious position which is not simply a result of the global financial crisis.

There's two interesting articles in The Telegraph which are slighly worrying.

The first is that 'European banks need to roll over ?1 trillion (?877bn) of debt over the next two years at a much higher cost and in direct competition with hungry sovereign states, according to a report by Morgan Stanley...Roughly ?560bn of EU bank debt matures in 2010 and ?540bn in 2011. The banks will have to roll over loans at a time when unprecedented bond issuance by governments worldwide risks saturating the debt markets. European states alone must raise ?1.6 trillion this year...' http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7294624/European-banks-face-showdown-over-1-trillion-of-debt.html

The second is a warning that 'Failure to save East Europe will lead to worldwide meltdown. The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point... Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus.

Under a "Taylor Rule" analysis, the European Central Bank already needs to cut rates to zero and then purchase bonds and Pfandbriefe on a huge scale. It is constrained by geopolitics ? a German-Dutch veto ? and the Maastricht Treaty...' http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4623525/Failure-to-save-East-Europe-will-lead-to-worldwide-meltdown.html

Worrying indeed.

(PS Mockney, I've put you back on my Christmas card list - but only in pencil for now)

Edited so urls work

[Huguenot]

The first Telegraph quote is silly billy. It's not new debt creation, it's simply reviewing and sustaining existing debt. The banks fookin love it, they only complain to drive up the interest.

Magpie's assertions on poor countries getting their just deserts for governance is weak.

Rich corporations (nor governments) exploit and sustain bad governance against the wishes of the electorate because multi-million pay-offs to a coterie of narcissists is cheaper than paying off a nation.

Shambolic, magpie, go to the back of the class.

[Magpie]

You clearly don't understand the point - it is not the fault of the occupants of poor countries that they have bad governance (and in any case rarely is there a true electorate), it is the fault of their government.

Bad governance is maintained for a number of reasons, but primarily through the self interest of those in power. Multinationals operate within the legal framework of the countries they operate in. They may try to influence, but they cannot dictate. In any case multinationals pay better, and treat their workforce better, than domestic companies.

Further, you single out rich corporations, well international governments and aid agencies have just as much interest in maintaining politcal status quos.

[????]

Come On Huge, I didn't think that you believed in conspiracy theories? Thats's 1980s Sociology lecturer at a Poly in the Midlands stuff.

Even dismissing the moral issues, and yes many companies do have these, proper investment in countries is encouraged mainly by

A reasonable seperate and independent legal system - to uphold contract/copyright etc

Safety of investment - both in terms of security ownership and actual infrastructure (plant etc) and safety of workforce

Clear realatively predictable revenus straems and investment ie not a whole load of mandatory unexpected 'drinks'

Now, of course some companies (oil and arnamnets spring to mind) are happy to bypass or build in the risks of poor governace on the basis of potential ROI but to say that poor governance isn't a major (and in some cases the major contributor) to a countries poverty is cloud cukoo stuff from a 1980s SWP march.

[mockney piers]

The problem of course being that many of these countries have less rigorous legal frameworks and that proxies are often used.

It's not so much about conspiracies as that people cut corners or fudge things when they can, multinationals often operate in this manner.

If HM constabulary (not to mention the FBI) thought that BAe were bribing the Saudis to buy our weapons, how much worse do you think things get when bunging sweeteners for oil surveying rights or to get the contracts to dig the stuff out of the ground. Alot of competition for those rights you know.

Then there's criminality within organisations. How many FSA lectures on money laundering have you been to? Lots I'm guessing, me too, because there are trillions of ???? of dirty money from drugs and arms and prostitution and oligarchal funds and kleptocratic governments being laundered through the City of London alone.

All of these bits of blind-eyeing from foreign offices and company management, negligence, white lies, moral grey areas and outright criminality all add up. Those in power in countries with dodgy governance (usually military) have vested interests in staying in power lest they be held up for their own criminality if the framework exists, or just to keep the money flowing.

That's just simple reality in more countries thatn I have fingers and toes and potatoes in my larder to count on.

This happens everyday. To call it "1980s Sociology lecturer at a Poly in the Midlands stuff" is dismissive and frankly not a little dense.

It's not blaming bad govenance entirely on outside forces, but noones doing anything to discourage it, and it's this outside corruption that allows the dodgy governance to survive comfortably. There are usually small amounts of bleatings that IMF loans are contingent on, but these are toothless and despite no progress the loans are usually repeated to countries that have failed to improve poor governance.

Again, as Huguenot suggested, the real conspiracy is one of silence by all of us; we don't like to think about Colombian government corruption and torture, or the civil war in Mexico when we snort our lines (assuming anyone does of course) of cheap cocaine, we don't think about the desperate plight of the Nigerian river delta people as whinge about a 2p price rise in our petrol..etc etc

[Magpie]

Mockney - you are effectively agreeing with me and quids - firms, governments, aid agencies etc work within the system. The system is set by those in power. If you have a corrupt/flawed system then ultimately the people suffer.

[mockney piers]

Well if the system is a tacit acknowledgement of semilegal activities, inneffective international legal frameworks, corruption and a blind eye to criminality, both by governments, corporations and the wider global public at large in order to maintain profits, a certain lifestyle and access to cheap goods and energy at the cost of others' suffering then yes, I completely agree.

In fact I think that's exactly what it is.

[mockney piers]

I think we may have offtopicated again of cuorse, just goes to show how easy all this breaking the rules is ;)

[The Chair]

It hasn't gone un-noticed!

Whilst the Chair will not resort to BAe style bribes to ensure discussions remain on topic, they may resort to Saudi-style law-enforcement techniques.

Gentlemen, please, I implore you.....Cameron & Europe.....

[????]

Eat the Rich PJ O'Rourke - Very good on all of this

*extends wrist for slapping*

[vinceayre]

As Huguenot pointed out unless their is political unity as well as economic unity the Euro will fail at some point. It may not fail in this case because Greece is a non entity when it comes to economic power but it will fail when the likes of Italy or Spain defaults on its debt. I believe by then though there will be a unified political government any way so it will be academic.

Oh and the real danger is not in re jigging the debt of the banks but in the credit default swaps market which has the potential to be totally destructive. This was the sole reason why the Fed has so far given AIG over 200 billion dollars of loans and are still happy to cash out whenever AIG asks for it.

[Brendan]

I don?t know. Why can?t a common currency (even a work currency) still work even if a common market doesn?t?

[Huguenot]

I think the question is posed the wrong way round.

There's only one upside to a common currency, and that's free trade.

The downsides of a common currency are extensive, as fiscal policy is such an important lever for controlling the state - everything from economic growth to employment and commercial competitiveness.

So those countries that have pooled their currencies have done so because they think that the benefits of a trade boost outstrip the benefits of domestic control. It's not becausem they're commies, it because they're capitalists.

There's no way you'd want to hand over that power to an international institution if you didn't have political convergence. Look at Greece now, the old way of dealing with their excessive labour costs in government would simply be to devalue the drachma, game over and everyone goes to bed happy.

[vinceayre]

The only true capitalist government at the moment is the Chinese one. They are willing to let companies fail. as the Chinese PM quipped to all the western leaders at a G whatever meeting a year or so ago he has had to re-read his Adam Smith just to check he was following the right path. Re-read being the salient point.