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The Copenhagen Climate Conference: The Trap To Avoid…

The UN climate conference that will be hosted in Copenhagen Denmark this month Dec7 – Dec18 plans to deliver a new climate treaty to replace the Kyoto Protocol. Kyoto Protocol which, by the way, The US, who shares with China the position of the largest emitter of greenhouse gases, signed but did not ratify.

With this Copenhagen summit, along with the turnaround of Washington on the topic, it is becoming clearer that climate change is indisputably the issue of the century. However, I have some reservations about this climate conference with regards to the question of who should normally “pay the price”.

If it is unquestionable that climate change would have a serious impact on both developed & developing nations (for example, recently, two studies were undertaken on the impact of climate changes on China and other major crop producers. The research showed that the world’s number one emitter of greenhouse gases will experience unstable weather and a dramatic drop in major crop production in the future. Furthermore, the Chinese grain production is likely to drop ten percent when temperatures rise by one degree Celsius. The rice growing period of China will generally shorten by seven to eight days if temperature rises one degree Celsius. And, according to Zheng Guoguang, head of the China Meteorological Administration, in an article published on an agency’s website, this will lower the quality of rice, and if the current grain production mechanism does not change up to 2030, the production potential of crop farming will drop between five to 30 percent). However, coming back to the point I was making before the brackets, the notion that emerging economies should somehow be part at the same pace & level of responsibility in the greenhouse gas emission reduction seems unfair to me. Why? Because it is important to remember that developed economies for more than three centuries now have been damaging the ecosystem with their industrialisation that was not in any way low carbon oriented.

Therefore, asking developing or emerging economies to slow down their development process in order to pay the price of the damage caused by developed nations is just absurd to me. Especially since the richest nation in the world, which is also one the largest emitter of greenhouse gases nations, namely US, did not show until recently any will of reducing their carbon emission. It is only lately that the White House revealed that President Obama, who will attend the Copenhagen conference, would pledge to reduce US emissions by 17 percent from 2005 levels by 2020, and that the US would continue that downward path over the following 10 years to reach a 41 percent reduction.

Here is the problem: The richest nation, the nation that caused the damage in the first place and currently one of the greatest emitter would “pledge” to reduce only by 17% by 2020; whereas the UN is pressing developing countries to lower their emissions growth by 15 to 30 % from business as usual, according to the authoritative UN Intergovernmental Panel on Climate Change. Well, no comment…

The World Wildlife Fund declared recently that the US pledge for 2020 translated from 4 to 5 percent below the commonly accepted benchmark year of 1990. “It certainly doesn’t bring us closer to that range of emission reduction levels that we need to see,” said Kim Carstensen, WWF’s climate change director.

Also, the EU environment Commissioner Stavros Dimas said: “The aggregate offers from developed countries still fall well short of the level of ambition needed, so I urge those countries with weak targets to improve them,”

Please judge for yourself…

As usual, in such circumstances, these international institutions always try to make things look fair for everybody and that they are there for developing countries too. In a statement issued lately, UN’s top climate negotiator said: “We can get an agreement that specifies financial support to developing countries”. In other words, financial support to help developing countries adapt to green technology would also be part of the treaty. Good! But wait a minute; does anybody remember the pledge to commit 0.7% of rich-countries’ gross national product (GNP) to Official Development Assistance? Can anybody tell me how many of these rich countries have met that commitment so far? Please not this time… promise, promise, enough is enough!

Rich countries should take their responsibility and “pay the price” of their reckless industrialisation methods. Not that emerging economies should not take part in this, ultimately this is a worldwide issue. But there is no way developed economies should expect emerging economies such as Brazil, South Africa or India not to maximise the use of their capacities and therefore jeopardise their own development while trying to respect the so called “Climate Change Treaty” which is in some respect boycotted by some rich nations. This is what I call “the trap of de-growth” that developing countries must avoid.

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December 3, 2009 Posted by | Articles In English, International Economics | , , , | Leave a comment

Conférence Sur Le Climat A Copenhague : Le Piège A Eviter …

La 15e Conférence des Nations Unies sur le climat aura donc lieu la semaine prochaine du 7 au 18 décembre 2009 à Copenhague. Au centre des débats, finaliser les négociations en vue d’élargir la convention sur les changements climatiques et conclure le nouvel accord sur le climat qui succédera de fait au Protocole de Kyoto, Protocole de Kyoto par ailleurs signé mais pas ratifié par la puissance la plus polluante, les Etats Unis.

S’il est indéniable que le changement climatique est plus que jamais le sujet du siècle et que ses conséquences auront de sérieux impacts aussi bien sur les économies riches que sur celles émergentes, j’ai tout de même quelques réserves en ce qui concerne les responsabilités des uns et des autres et le prix que chacun devrait payer pour lutter contre ce fléau universel.

Mes réserves sont notamment relatives au piège de la « décroissance » dans lequel pourrait tomber les économies émergentes. En effet, les économies dites riches ont pendant plus de trois siècles endommagé l’écosystème avec non seulement l’exploitation abusive des ressources naturelles tant dans le Nord que dans le Sud, mais aussi avec de massifs programmes d’industrialisation basés sur des modèles  polluants qui ont par ailleurs concouru  à leur essor. Alors, il me semble injuste de la part de ces économies riches de demander aujourd’hui aux économies émergentes de participer à la même hauteur et au même rythme au « paiement de l’addition » pour des dégâts qu’elles (riches) ont causés. Surtout que la plus riche d’entre elles et par ailleurs l’une des plus pollueuses (USA) ne montrait aucune volonté jusqu’à très récemment de réduire ses émissions de gaz à effet de serre. Pour sauver la face, Washington a annoncé dans un communiqué que le président Obama promettra lors de la conférence que son pays fera des efforts de réduire à hauteur de 17 % (seulement) à l’horizon 2020 par rapport au niveau de 2005 ses émissions de CO2 ; alors que les Nations Unies pressent les économies émergentes à réduire leurs émissions de 15 à 30 %. De qui se moque-t-on ?

A mon avis, les économies riches devraient prendre leurs responsabilités et surtout qu’elles ne viennent pas nous tenir des discours de promesses d’aides ou transfert de technologie afin d’aider les économies émergentes à s’adapter au vert et à compenser le manque à gagner que cet effort pourrait causer. En passant, où en est-on avec la promesse des 0,7 % du PNB destiné à l’aide au développement ? Combien de pays riches ont jusqu’ici tenu à cet engagement ?

En conclusion, non pas que les économies émergentes doivent se mettre à l’écart du débat, de toute façon elles en souffriront des conséquences puisque le mal est global. Plutôt, le fond de ma pensée est que ces économies (émergentes) doivent rester vigilantes et faire attention au “piège de la décroissance” dans lequel les économies dites riches pourraient les entrainer.

Surtout ne pas baisser la garde !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

December 3, 2009 Posted by | Articles In French, International Economics | , , , | Leave a comment

Is The Free Market Era Over?

Stock market

Are we moving back to the Keynesian economic approach with all these bailouts around the world, or should we define a new paradigm for economics after the world financial crisis has demonstrated the limits of the free market with its invisible hand?

The failure of economists, businesses and politics to predict and manage the recent catastrophic crash of the world’s financial system has triggered a re-evaluation of the whole basis of current economic theories.

Since the end of the 20th century, economics has been dominated by the classical paradigm based on notions of rational consumers making rational choices in a simple supply/demand world of finite resources, with prices constrained by decreasing returns; all driving the economy to an optimal equilibrium point.

So far, this classical economic approach, initially conceived by Adam Smith, has been working well. Indeed, in normal circumstances people are generally rational. The market automatically allocates resources and controls excesses in an optimum way with minimum oversight or outside regulation required. Under this model, the economy has been working as an equilibrium system; a system that moves from one equilibrium point to another, driven by shocks from external disruptions – technological, political, cultural etc- but always coming to rest in a natural equilibrium state.

But in extreme or complex circumstances, people and the system tend to behave/react differently including consumers, banks, financial institutions, stock market traders and governments. And perhaps the most critically flawed assumption of this classical model has been that economic agents are generally rational. Whereas, we observed recently insolvent households taking mortgages that they could not afford, banks lending to insolvent households without conditions etc. leading us to the subprime crisis …we know the result.

From this flawed assumption, the following question is raised: is it the theory that should be questioned or is it one of its hypotheses (namely the rationality)? Some would argue that questioning the hypothesis is questioning the theory. Anyway…

To tackle this current crisis, Some voices have been suggesting more regulations as this would frame the rationality of economic agents and force them to behave in a more sensible way; some others have been calling for more government intervention in order to set rules and monitor  the whole system (with a big bailout here and there when necessary).

Wait a minute, if I am not mistaken, this would mean going back to the Keynesian approach of economics?

Indeed, according to Keynes, Excesses or deficiencies in aggregate demand are the rule and not the exception. Therefore, for Keynes, government intervention is needed to eliminate recessionary and inflationary gaps: laissez faire, laissez passer policies should be replaced with an active interventionist policy by the central government.  Keynesians believe that monetary and especially fiscal policies are required; otherwise disasters like the Great Depression that followed the First World War or the crisis that we are facing now would certainly reoccur.

There we are! Was Keynes right? Or should I say, is Keynes right?

Not so sure. If the Keynesian prescription for active government involvement in the economy was warranted after the World War I, in the past few decades, government intervention has become less desirable…and some argue, less necessary. Indeed, since the World War II, we have experienced six decades of growing competition. The once oligopolistic market structures in autos, telecommunications, services, etc. have become very competitive, and government policies increasingly have impact across borders. Furthermore, nowadays, banks, financial institutions, manufacturers, energy suppliers are increasingly internationally managed; following Keynesian policies with their fundamentally collectivist, centralized approach would just lead to more trouble. For instance, if a multinational that has networks over the world is centrally managed in the way Keynes suggests, the collapse of one element of the network in one country would easily make the whole system topple like dominoes around the world as we have just experienced.

In short, if the Keynesian approach was likely to work after the First World War, the crash that we are facing now is far more serious than the Great Depression of 1929 as it can not be contained within borders or so easily solved by mass bailout, mass lending or big government investments/ job creation programs.

The need of an evolutionary or new economic model…

Instead of going back to the Lord Keynes School of thought, maybe we should rather think of a new model that would fit with the globalisation of markets, and that would -to some extent- set some global regulations to frame agent behaviours around the world, but ultimately leave the market free.

This new paradigm should be based on the principle that economies, markets, regulations, globalisation, as well as the internet (a new and very important component), consumers, enterprises and the brain all form complex adaptive systems in which agents dynamically and rationally interact, process information and adapt their behaviour to a constantly changing environment- but always reach a final equilibrium.

In this new model, and unlike the strict distinction between the too much and the too little government approach, the market should rather be a combination of an “invisible hand” and necessary regulatory elements (government that would not impede competition and risk) with the mindset that the market is henceforth a small village that needs to adapt to the constantly changing global environment.

To conclude this paper, I strongly believe that free market still has a future, and markets are still perfectly self-regulating systems. They are only becoming enormously complex adaptive networks – too complex and interdependent for economists and governments to control or even understand.

Ultimately, every individual/company is continually exerting himself to find out the most advantageous employment for whatever capital he / it can command. Therefore, by pursuing our own interest we benefit society more than when we directly attempt to benefit society. According to Adam Smith, we are all led by an “invisible hand” to benefit society even as our intent is to benefit ourselves.

Invisible Hand Theory proposed by Adam Smith in the 18th century, really helps to explain how the market economy works even with its chaotic nature.

Personally, I view the Invisible Hand theory as the economic counterpart of democratic theory. Just as, in a democracy, people are supposed to choose the best leaders for themselves, the Invisible Hand theory presumes that people chose to produce and consume in the most efficient manner when given a free hand.

So in practice, markets may still end up being little bit chaotic due to the irrationality of agents or inadequate information shared within the system, but that is not because the Invisible Hand theory or the free market model is inaccurate.

October 3, 2009 Posted by | Articles In English, Economics, International Economics, International Finance | , , , , , | 3 Comments

« Pourquoi Je Crois Aux Progrès de l’Afrique »

Mulongo« Pourquoi je crois aux progrès de l’Afrique »
Ces propos ne sont pas de moi mais du président de l’Association des Banques Centrales africaines et gouverneur de la Banque Centrale de la RDC, Mr Jean-Claude Masangu Mulongo qui vient de publier chez Hachette son dernier livre intitulé ″pourquoi je crois aux progrès de l’Afrique″. Mr Mulongo qui travaille aussi actuellement à la création d’une Banque Centrale et d’une monnaie commune à l’échelle de l’Afrique, se donne pour cela l’horizon 2021.

Il faut dire que je suis particulièrement admirateur de cet optimisme de monsieur le président de l’ABCA …mais entre nous, revenons un tout petit peu sur terre là. Est-ce que le terrain y est propice? Est-ce que les économies du continent ont atteint un niveau de convergence suffisamment avancé ? Et cette monnaie commune à l’échelle de l’Afrique, qu’en est-il de ses aspects purement techniques (sa convertibilité sur le marché des changes, sa parité avec les multiples monnaies déjà existantes sur le continent, sa gestion, etc.)? Bon…arrêtons avec les questions. Encourageons tout simplement le courage et l’optimisme de ce gouverneur qui a quand même, par les mesures qu’il a prises, permis le passage du ″zaïre″ au ″franc congolais″ en RDC. Mais qui a surtout fait baisser de manière drastique l’inflation dans son pays, elle est passée de 500% à 10%. C’est un exploit même si le franc congolais n’est pas convertible.
Au moins un leader africain qui nous rappelle la belle époque des Kwame Nkrumah, Patrice Emery Lumumba, Sékou Touré etc. des figures qui nous ont fait rêver…aujourd’hui Mr Masangu Mulongo pourrait apparaitre aux yeux des cyniques comme un déconnecté de l’économie réelle. Pourtant il peint juste l’image d’une Afrique qui croit à son éveil et qui se tient débout pour braver tous les obstacles au progrès. Alors, soutenons-le !

October 2, 2009 Posted by | Articles In French, International Economics | , , , , , , , | 1 Comment

Gaddafi, the new everybody’s best friend!

Everything started in December 2007 when the Libyan leader Muammar Gaddafi, with his first visit to France in 34 years, took a serious step towards rebuilding his status around the world.

Unlike other countries, France did not hide its ambition as the deal with the French president Nicolas Sarkozy was clear: On one hand demonstrate Gaddafi’s new respectability, and on the other hand offer the French leader a chance to secure lucrative contracts in a relatively untapped market.

Frustrated, the USA reacted by sending the Secretary of State Condoleezza Rice to an official visit (the African tour was the official reason) in Libya in September 2008 (by the way, the last secretary of state who made such a trip was John Foster Dulles in 1953, before Rice was born).

Then , it was the turn of the Italian Prime Minister Silvio Berlusconi who accorded a red-carpet welcome to the Libyan leader Gaddafi in June 2009 (officially, the visit was to sign a deal under which Italy will pay five billion dollars in compensation for the colonial period). Well…

To crown it all, the UK has recently realeased the Lockerbie bomber Megrahi (a Libyan). But, while the Libyan leader Muammar Gaddafi was thanking and praising his “courageous friend” Gordon Brown for releasing the bomber, Lord Mandelson (the business secretary) was denying any “blood money” or “trade deal” behind the release. Who to believe? !!!

Whatever the case, what it’s certain is that, nobody wants to stay behind. The  Libyan oil is attracting all leaders around the world and Gaddafi, once qualified by Reagan as a “Mad dog”, can now be called the “New Everybody’s Best Friend”.

Business is business!!!

October 1, 2009 Posted by | Articles In English, International Politics | 2 Comments

Civil Society Organisations: The Game-changer?

It was reported last week that civil society engagement in the World Bank operations has been evolving from being institutionally based to being more issue oriented.

Indeed, increasingly, civil society organisations that have been interacting with the World Bank seem to have shifted their advocacy stance from a do-no-harm to a do-good approach that seeks to influence the World Bank to further adopt socially and environmentally sustainable development approaches.

So, what has been the real contribution of these civil society organisations?

Coming soon…still thinking

October 1, 2009 Posted by | Articles In English, International Economics | , | Leave a comment

MTN: Info ou Intox?

MTN_logo

Plus que 7 jours et MTN, la firme panafricaine, sera peut être l’un des géants mondiaux de la téléphonie mobile!!!

En préparation des négociations qui se tiendront le 1ier octobre 2009 entre les firmes de téléphonie mobile MTN la sud-africaine et Bharti l’indienne, le ministre indien des finances Pranab Mukherjee a présidé hier mercredi 23 septembre 2009, une réunion d’évaluation des clauses légales du deal.

Un an après avoir échoué à trouver un accord avec l’opérateur panafricain MTN, Bharti le géant indien de téléphonie mobile, a annoncé très récemment être entré dans une nouvelle phase de négociations exclusives avec le groupe basé en Afrique du Sud.

Il y a en effet un an, l’une des plus importantes fusions de l’histoire des télécoms avait échoué. Les deux groupes, Bharti et MTN ne parvenant pas à se mettre d’accord. Les négociations reprennent donc et pourraient aboutir à l’émergence d’un  futur géant mondial, troisième opérateur de téléphonie au monde d’après le Wall Street journal.

Les deux partenaires se donnent maintenant jusqu’à début Octobre pour finaliser l’accord.

Si les deux opérateurs semblent déjà bien avancés dans les modalités financières de l’opération, reste à savoir maintenant s’ils arriveront à se mettre d’accord sur l’organisation opérationnelle du futur groupe. Il y a un an, les deux groupes avaient échoué sur ces modalités pratiques : Bharti, comme MTN, réclamait la direction du nouveau groupe. L’opérateur africain voulant même faire de son alter-ego indien une simple division.

Si l’accord est conclu, Bharti acquerra 49 % du capital de MTN, et ce dernier recevra en contrepartie 36 % du capital de Bharti Airtel. L’opération est évaluée à 20 milliards de dollars (14 milliards d’euro). La fusion regorgerait 200 millions d’abonnés en Afrique et en Asie. Bharti, dont la seule présence hors d’Inde est au Sri Lanka, serait en effet la plateforme d’investissements du groupe en Asie Pacifique, MTN devant lui, se consacrer aux marchés africains.

Bien qu’il y ait encore quelques soucis relevant de l’organisation opérationnelle, les deux opérateurs se sont néanmoins déjà  mis d’accord pour réaliser leur rapprochement en deux étapes : une première purement capitalistique, puis une fusion des deux opérateurs dans un second temps. Selon le communiqué de l’opérateur Bharti, « l’objectif final est de réaliser une fusion complète de Bharti et MTN dès que possible ». Une façon de renvoyer à plus tard l’épineux problème du partage des pouvoirs et de l’organisation opérationnelle du nouvel ensemble.
Depuis, les deux opérateurs ont continué à se renforcer : Bharti a annoncé, à l’occasion de la publication de ses comptes du premier trimestre 2009 (son quatrième trimestre fiscal), avoir atteint la barre des 100 millions d’opérateurs, un cap lui aussi franchi dans la même période par MTN. En termes de capacité donc, les deux groupes sont très proches.

September 24, 2009 Posted by | International Business | Leave a comment

WTO: A Global Trade Regulator or A Secret Weapon for Rich Countries?

OMC

It was revealed on September 14th by the French Press Agency (AFP) that, China has lodged a complaint against US excessive tariffs on Chinese tyres at the World Trade Organisation.

According to Washington, these tariffs aim at preserving American companies and they would be spread over three years: 35 percent in the first year, 30 percent in the second and 25 percent in the third.

In a statement issued by the Chinese commerce ministry, Beijing describes these measures as protective and as a clear violation of WTO rules, undermining the early recovery of the world economy.

Without surprise, at least from my side, and as usual, the WTO issued a statement giving Beijing and Washington 60 days to hold bilateral consultations on the issue. If it is not resolved at the end of the period, the WTO will rule on the issue.

Obviously, the issue would not be resolved after the 60 days and the WTO litigation committee would appoint, naturally, a special group to rule on the issue. As usual, sanctions would be taken against USA, and as usual the USA would ignore them.

Can anybody tell me what happened to the WTO sanctions against Europeans and Americans over cotton subsidies? What about the sanctions against Europeans for abusive tariffs on Chinese textile?

It seems to me that, the WTO with its philosophy of globalisation such as free trade amongst member states, reduction/annulation of tariffs in developing countries to help these last integrate into the global trade etc. It seems to me that, the WTO is only there to help rich countries evacuate their products “free of tariffs” to developing countries (never the other way around), and to give hope to developing countries that, one day they would be part of the world trade if they keep on following the so called free trade. Well done!!!

So, is this the regulation of the world trade?

September 20, 2009 Posted by | Articles In English, International Trade | , , , , , , | Leave a comment

OMC: Régulateur du commerce international ou alors arme secrète des pays dits riches?

OMC

Il a été rapporté par l’AFP le 14 septembre 2009, que la Chine avait déposé une plainte officielle contre les Etats-Unis auprès de l’Organisation Mondiale du Commerce (OMC). Pékin jugeant ″abusive″ l’imposition par Washington de droits de douane supplémentaires sur ses importations de pneus chinois.

Comme l’expliquait un communiqué de Pékin, le président américain Barack Obama aurait signé un décret imposant des droits de douane supplémentaires sur toutes les importations de pneus pour véhicules de tourisme et véhicules légers en provenance de Chine pour une période de trois ans afin de préserver les entreprises américaines. Ces droits s’élèveraient à 35% la première année, 30% la deuxième et 25% la troisième.

La chine considère donc que ces nouvelles mesures américaines constituent des “pratiques abusives” qui vont “contre les règles” du commerce international.

Ce qui du coup m’amène à me poser la question suivante: ne sont ils pas ces mêmes américains qui prônant le libre échange et le commerce international, encouragent la chute des barrières douanières notamment dans les pays dits en voie de développement afin de faciliter l’intégration de ces derniers dans les échanges mondiaux?

Bon, ils me diront, faites ce que je vous demande de faire et non ce que je fais! Bon, no comment…

Sans surprise, du moins de ma part, Dame OMC, comme d’habitude, dans un communiqué, a reconnu que la crise économique actuelle et surtout la menace grandissante du chômage dans les pays développés, maintenaient très présente la tentation protectionniste. Appelant donc les pays du G20 à “rester vigilants” face à cette menace qui risque de ralentir la reprise économique. Puis le bla bla habituel énonçant les règles de l’OMC, pour finir avec la fameuse formule des consultations entre les deux parties qui, si elles échouent au bout de 60 jours, conduiront l’organe de règlement des différends de l’OMC à constituer un groupe spécial chargé de statuer.
Et bien sûr, comme de coutume, le dit groupe spécial produira un autre rapport détaillant les sanctions contre les Etats-Unis; lesquelles sanctions seront (et on commence à s’y habituer) balayées du revers de la main par la puissance “soucieuse” du développement des pays pauvres.  “Soucieuse”, du moins à en croire son nouveau président, Obama.

Quelqu’un pourrait –il me dire ce que sont devenues les sanctions de l’OMC contre les subventions européennes et américaines de leurs cotonculteurs? Ou encore de l’affaire des droits de douane européens abusifs sur le textile chinois ?

C’est à se demander si l’OMC n’est pas là  pour imposer ses règles de mondialisation et de libre échange (baisse et annulation des droits de douanes) dans les pays pauvres, afin de favoriser l’écoulement des produits du Nord vers le Sud ; et surtout pas l’inverse!

Alors, OMC, régulateur du commerce international ou arme secrète des pays dits riches?

A vous de juger!

September 19, 2009 Posted by | Articles In French, International Trade | , , , , , | 3 Comments

Towards An Economic Recovery?

Do the big profits of Barclays and HSBC (almost £3bn each) revealed today, prefigure the end of, if not the economic crisis, at least the financial crisis?

August 3, 2009 Posted by | Articles In English, Economics, International Economics, International Finance | Leave a comment