Emerging economies

Thoughts of the day

1. No wonder France is deporting the Roma. How could a country of 60 million people possibly cope with 15,000 Roma migrants?

Interesting article in the New York Times on how the Roma are testing the EU’s open borders policy.

2. Vince Cable says the UK government’s immigration cap is costing jobs and harming the fragile recovery. His honesty is welcome, but now it’s time to do something about it. Otherwise, what’s the point of being in government?

3. The Guardian claims the coalition is to review right-to-buy policy for council homes. Sounds like pre-LibDem conference spin to me.

4. Indonesia defaulted on its debts just over a decade ago yet it can borrow more cheaply than Spain. An emerging market bubble?

5.  Why emerging economies should follow Taiwan’s example and use capital controls to stem hot money flows 

The world won’t stop to let Britain get off

In his column in The Times today, David Aaronovitch uses Aftershock to buttress his arguments:

Legrain is looking at how to fashion policy after the crisis. And he reminds his readers that Britain exists in a world of constant change, one that demands that we keep up. For example, we speak all the time about “immigration” and whether there is too much of it. But the issue for Legrain is the mobility of people — out, as well as in. Many “immigrants” are in fact transitional, as are many “emigrants”, taking their skills and leaving Britain as well as entering it. Our debate is hopelessly out of date.

Legrain reminds us of a world in which the BEEs, the Big Emerging Economies such as China, India, Brazil and South Korea, are not in crisis and their new middle classes are shaping the future. So is this really the time to grumble about how “too many people are in higher education” as Nick Clegg seemed to at the weekend?

How should rich countries respond to emerging giants?

Patrick MesserlinPatrick Messerlin, one of France’s most perceptive economists, has written an interesting piece in the new issue of Europe’s World about how OECD countries should respond to the rise of China, India and other emerging economies.

Brazil, China, India, Korea and Mexico are already playing a key, positive role in the world economy.

First, in trade.

Few people appear to realise the fundamental contribution of the emerging economies to the success of the current world trade regime, something that has been of great benefit to OECD countries as well as to themselves. During the last three decades, the amazing success of China’s trade liberalisation has done much more to convince the other developing countries of the gains from trade than all the OECD countries’ exhortations. China has undertaken over the last 20 years a liberalisation process that it took 40 years for the U.S. and Europe to do. And China is the WTO member that has made the deepest liberalisation commitment on services, while Brazil has been decisive in cracking U.S. and EU agricultural protection and India in raising high the issue of services liberalisation. During key WTO ministerial negotiations in July 2008, Brazil was the most pro-active negotiator. The immediate reasons for the failure of those negotiations are generally attributed to India and the U.S., yet most observers seem to agree that the responsibility of the U.S. was the greater.

Second, through their measures, such as China’s fiscal stimulus, to halt the collapse of the global economy during the crisis.

Third, in environmental issues.

Brazil has improved its forest and agricultural land management while the U.S. and the EU have been massively subsidising production of environmentally-unfriendly (particularly detrimental to forests) first generation bio-fuels.

But other emerging economies have yet to play as constructive a role, Messerlin argues:

The credentials of other G20 countries like Argentina, Indonesia, South Africa, Russia, Saudi Arabia, South Africa and Turkey has been less convincing. These are countries that have been more hesitant in trade matters, more ambiguous in the instruments they have chosen for managing the crisis, and that are still more reluctant to deal with environmental issues. These attitudes also largely echo their less convincing performances on economy.