Political interference in the World Bank by the likes of Britain’s Hilary Benn is bad news for developing countries. While organisations like Transparency International rightly point out the damage corruption does to the fight against global poverty, political pressure means the Bank’s anti-corruption agenda is being seriously undermined. Thankfully, private capital markets are making the World Bank increasingly irrelevant. As the Wall Street Journal reports:
The most disconcerting news for World Bank fans are the sections [from a report] on private credit markets. Developing countries increasingly are borrowing from markets instead of from multilateral institutions. As of 2006, all but 13 of the 135 “developing” countries have borrowed from private banks at least once since 1980, while 40% have issued sovereign bonds during the same period. Ghana, Kenya, Nigeria and Zambia are expected to issue bonds for the first time within the next few years. And corporations are now bigger borrowers than governments, a welcome development because companies are, on balance, more likely to create growth with the money instead of graft.
These findings - which show record private capital inflows into the developing world - advance the case for liberating the World Bank from political interference and seeing it operate on a commercial basis.
The European Union’s most frequent flip-flopper Peter Mandelson is now a protectionist again. Today’s Wall Street Journal Europe says that he is prepared to launch yet further anti-dumping actions against China.
By anti-dumping, he really means anti-competition. Trade Commissioner Mandelson seems not to have learned the lessons of his disastrous 2005 “bra war”. His comments, yet again attacking cheap Chinese imports, will only serve to damage European economic interests and fan the flames of protectionism.
Mr Mandelson’s comments come as new trade figures claim that Europe’s so-called “trade balance” with China has worsened. “Nothing, however,” said Adam Smith, “can be more absurd than this whole doctrine of the balance of trade”. It makes good newspaper copy, but a “trade balance” is a dangerous idea in the hands of a Trade Commissioner.
The real question is: are we, as Europeans, getting richer because of all these cheap Chinese TVs and laser printers, or are we getting poorer? And, when you consider that we’re enjoying positive GDP (and low inflation to boot) in part thanks to China, Mr Mandelson would do better looking at the dirt in Europe’s own eyes first - like being a little less hopeless on the subject of agricultural subsidies.
Tobias Webb (pictured), Editor of Ethical Corporation magazine, has criticised the NGO sector, made up of groups like War on Want and ActionAid, for “methodological murder” in their output. He’s critical of the NGO sector’s use of “a few wide eyed activists to stumble around outside factories”, instead of independent monitoring. He writes:
Everyone supports better working standards in the supply chain, but much of this is relative, and as our Asia editor, Paul French, (who lives in China and goes to factories regularly) points out, many workers simply just want more money and overtime. Not all want less money in their pocket due to an ‘ethical’ crackdown.
Many workers in Chinese export factories come from seven-to-a-room peasant communities, and thanks to globalisation now have DVD players.
He right. Too often activists, wanting heaven on earth, hinder the and wealth creation processes that are vital for increasing living standards in the developing world.
A mock constitutional treaty for the EU has been published by a group of prominent European figures, headed by Giuliano Amato, former Italian prime minister. Fifteen others sat with Mr Amato, including former EU commissioner Chris Patten. The mock treaty incorporates main elements of the rejected 2005 constitution but is much shorter. It drops the section on EU symbols - like the flag and anthem. But it’s largely the same thing - or as French MEP Alain Lamassoure said last month, “We will play the European hymn or fly the flag whether it is mentioned in the new treaty or not.”.
President Sarkozy of France has started lobbying Britain’s Gordon Brown to win his support for the treaty before the summit of heads of government on June 21 and 22. The British position that it would like the treaty to say as little as possible has some traction because it can be argued that a more dramatic treaty would need a referendum. Yet everyone knows the UK will give significant ground during the negotiations (while winning some points). But could the UK government have achieved more by putting forward a mock constitution of its own, proposing a different vision? Sarkozy is very happy to give his views on what should be in the treaty; one gets the impression the British government would rather not talk about it. That’s not always the most effective way to win a debate.
I was recently a speaker at a debate at Southwark Cathedral that looked at the issues of free trade and trade justice. The other speakers were Chirstopher Stephens, Chairman of Traidcraft plc and a Civil Service Commissioner, and Hilary Parsons, Head of Corporate Social Responsibility at Nestle.
I got the distinct impression that many of the people in the audience - churchgoing supporters of fair trade - had never heard many of the arguments that I made in the speech and during the question and answer session.
I argued that far from being bad for developing countries, imports increase living standards, and that exports are not an end in and of themselves but merely a means to pay for imports. So the basic principles behind wealth creation, I said, were well known: free trade combined with reasonably free markets at home, the recognition of private property, the ability to enforce contracts, and of course peace.
Here’s my speech in full:
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Gabriel Nahimana, Economic Affairs Officer for the United Nations Economic Commission for Africa blames low intra-African trade between African nations on mistaken economic policies:
The low level of intraregional trade, despite the SADC and COMESA, reflects several factors, including a range of non-tariff barriers - mainly communication and transport problems, customs procedures and charges, and a lack of market information. Moreover, in the past, southern African countries put their faith in protectionism and import substitution policies. Relying on “infant economy” arguments, major exports were restricted and legal obstacles were erected against foreign participation in the development of natural resources, as well as financial and other services, further impeding regional integration.
This adds weight to the growing support for the need for trade liberalisation in a continent that has largely failed to respond to the dramatic tariff cuts over the past 30 years elsewhere in the world.