Think there's no alternative? Latin America has a few

Not only have leaders from Ecuador to Venezuela delivered huge social gains – they keep winning elections too

• 
• • Seumas Milne
  • The Guardian, Tuesday 19 February 2013 22.00 GMT

Given what's been delivered to the majority, it's hardly surprising Latin America's social ­democratic and socialist ­governments keep getting re-elected. Illustration: Belle Mellor

 

Ever since the crash of 2008 exposed the rotten core of a failed economic model, we've been told there are no viable alternatives. As Europe sinks deeper into austerity, governing parties of whatever stripe are routinely rejected by disillusioned voters – only to be replaced by others delivering more welfare cuts, privatisation and inequality.

So what should we make of a part of the world where governments have resolutely turned their back on that model, slashed poverty and inequality, taken back industries and resources from corporate control, massively expanded public services and democratic participation – and keep getting re-elected in fiercely contested elections?

That is what has been happening in Latin America for a decade. The latest political leader to underline the trend is the radical economist Rafael Correa, re-elected as president of Ecuador at the weekend with an increased 57% share of the vote, while Correa's party won an outright majority in parliament.

But Ecuador is now part of a well-established pattern. Last October the much reviled but hugely popular Hugo Chávez, who returned home on Monday after two months of cancer treatment in Cuba, was re-elected president of Venezuela with 55% of the vote after 14 years in power in a ballot far more fraud-proof than those in Britain or the US. That followed the re-election of Bolivia's Evo Morales, Latin America's first indigenous president, in 2009; the election of Lula's nominated successor Dilma Rousseff in Brazil in 2010; and of Cristina Fernandez in Argentina in 2011.

Despite their differences, it's not hard to see why. Latin America was the first to experience the disastrous impact of neoliberal dogma and the first to revolt against it. Correa was originally elected in the wake of an economic collapse so devastating that one in 10 left the country. Since then his "citizen's revolution" has cut poverty by nearly a third and extreme poverty by 45%. Unemployment has been slashed, while social security, free health and education have been rapidly expanded – including free higher education, now a constitutional right – while outsourcing has been outlawed.

And that has been achieved not only by using Ecuador's limited oil wealth to benefit the majority, but by making corporations and the well-off pay their taxes (receipts have almost tripled in six years), raising public investment to 15% of national income, extending public ownership, tough renegotiation of oil contracts and re-regulating the banking system to support development.

Many of the things, in fact, that conventional "free market" orthodoxy insists will lead to ruin, but have instead delivered rapid growth and social progress. Correa's government has also closed the US military base at Manta (he'd reconsider, he said, if the US "let us put a military base in Miami"), expanded gay, disability and indigenous rights and adopted some of the most radical environmental policies in the world. Those include the Yasuni initiative, under which Ecuador waives its right to exploit oil in a uniquely biodiverse part of the Amazon in return for international contributions to renewable energy projects.

But what is happening in Ecuador is only part of a progressive tide that has swept Latin America, as social democratic and radical socialist governments have attacked social and racial inequality, challenged US domination and begun to create genuine regional integration and independence for the first time in 500 years. And given what's already been delivered to the majority, it's hardly surprising they keep getting re-elected.

It says more about the western media (and their elite Latin American counterparts) than governments such as Ecuador's and Venezuela's that they are routinely portrayed as dictatorial. Part of that canard is about US hostility. In the case of Ecuador, it's also been fuelled by fury at Correa's decision to give asylum to WikiLeaks founder Julian Assange, who faces sexual assault allegations in Sweden, over the threat of onward extradition to the US. In reality, the real anti-democratic menace comes from the US's own allies, who launched abortive coups against both Chávez and Correa – and successful ones in Honduras in 2009 and Paraguay last year.

Of course, Latin America's left-leaning governments have no shortage of failings, from corruption to crime. In Ecuador and elsewhere, tensions between the demands of development, the environment and indigenous rights have sharpened. And none of these experiences yet offer any kind of ready-made social or economic alternative model.

There is also a question whether the momentum of continental change can be maintained now that Chávez, who spearheaded it, is expected to stand down in the next few weeks. His anointed successor, the former trade unionist Nicolás Maduro, is in a strong position to win new elections. But neither he nor the charismatic Correa is likely to be able to match Chávez's catalytic regional role.
Latin America's transformation is nevertheless deeply rooted and popular, while a discredited right has little to offer. For the rest of the world, it makes a nonsense of the idea that five years into the crisis nothing can be done but more of the same. True, these are economies and societies at a very different stage of development, and their experiences can't simply be replicated elsewhere. But they have certainly shown there are multiple alternatives to neoliberal masochism – which win elections, too.

Brics miracle over as world faces decade-long slump

US Conference Board fears Brics miracle over as world faces decade-long slump

The catch-up boom in China, India, Brazil is largely over and will be followed by a drastic slowdown over the next decade, according to a grim report by America’s top forecasting body.

Image 1 of 3

China’s double-digit expansion rates will soon face, fallng to 3.7pc from 2019-2025 as the aging crisis hits. 

By Ambrose Evans-Pritchard

7:37PM GMT 13 Nov 2012

377 Comments

Europe's prognosis is even worse, with France trapped in depression with near zero growth as far as 2025 and Britain struggling to raise its speed limit to 1pc over the next three Parliaments.

The US Conference Board’s global economic outlook calls into question the "BRICs" miracle (Brazil, Russia, India, China), arguing that the low-hanging fruit from cheap labour and imported technology has already been picked.

China’s double-digit expansion rates will soon be a romantic memory. Growth will fall to 6.9pc next year, then to 5.5pc from 2014-2018, and 3.7pc from 2019-2025 as the aging crisis hits and investment returns go into "rapid decline".

Growth in India - where the reform agenda has been "largely derailed" - will fall to 4.7pc to 2018, and then to 3.9pc. Brazil will slip to 3pc and then 2.7pc. Such growth rates will leave these countries stuck in the "middle income trap", dashing hopes for a quick jump into the affluent league.

"As China, India, Brazil, and others mature from rapid, investment-intensive ‘catch-up’ growth, the structural ‘speed limits’ of their economies are likely to decline," said the Board. 

The fizzling emerging market story is a key reason why the West has relapsed this year. The world is now facing a synchronized downturn all fronts, with little scope for fiscal and monetary stimulus.

^{France slumps to bottom of the class, with Britain close behind}

"Mature economies are still healing the scars of the 2008-2009 crisis. But unlike in 2010 and 2011, emerging markets did not pick up the slack in 2012, and won’t do so in 2013," it said.

The Conference Board says Europe’s demographic crunch and poor productivity has reduced trend growth to near 1pc, though it could be worse if the region makes a hash of monetary policy and follows Japan into a "structural deflation trap". Large numbers of people may be shut out of the jobs market forever.

Germany will outperform Italy and France massively over the next five years, implying a bitter conflict within EMU over control of the policy levers. While the report does not analyze debt-dynamics, it is hard to see how the Club Med bloc could keep its head above water in such a grim scenario or stop political revolt coming to the boil.

Bert Colijn, the Board’s Europe economist, said France’s woes stem from low investment, as well as delayed austerity and reform. The reckoning will now come.

He thinks Spain will fare better since it has already taken its bitter medicine. It is expected to grow at 1.8pc for the next decade as "Schumpeterian" creative destruction clears away dead wood and unleashes fresh energy - a contentious point since labour economists argue that unemployment of 25.6pc is doing permanent damage to parts of the workforce, and therefore to economic potential.

America has a younger age profile and should eke out 2.5pc to 3pc growth until 2018, and 2pc thereafter. It has a big "output gap" of 6pc of GDP to close before it hits any speed limit, so part of this is just the effect of elastic snapping back.

^{Emerging markets deflate}

The Board said lack of demand lies behind the current global malaise, but the fading technology cycle may prove a greater threat over the long-term.

The thesis is based on work by professor Robert Gordon from Northwestern University, who argues that the great innovation burst of the last 250 years is a "unique episode in human history" and may be fading. His claims challenge the work of Nobel laureate Robert Solow - orthodoxy since the 1950s - that economic growth is a perpetual process once the right legal and market framework is in place.

The Conference Board’s forecast is starkly at odds with a report by the OECD last week predicting that China would keep growing at 6.6pc until 2030, and India at 6.7pc -- propelling the two rising powers to global dominance.

Apostles of the BRICS revolution are certain to dispute the claims. Yet there could be no clearer sign that the emerging market euphoria of the last decade has fully deflated.

Why shouldn't three people get married?

As three Brazilians are legally joined as a 'thruple' it starts to look illiberal to insist that marriage must be between two people

• 
• • Jean Hannah Edelstein
  • guardian.co.uk, Thursday 30 August 2012 12.47 BST

'If three, or four, or 17 people want to marry each other simultaneously and equally, why should they not be granted the same status as two people who want to become a legal family?' Photograph: Stone/Getty Images

Three Brazilians in love have their nation up in arms over whether their relationship, now enshrined in a three-way marriage, is legal. The public notary who conducted their marriage says there's no reason the threesome – or "thruple", as the internet has charmingly labelled it – shouldn't enjoy the same kinds of rights imparted upon two people who get hitched. But traditionalists are not impressed: lawyer Regina Beatriz Tavares da Silva, of the Commission for the Rights of the Family, has it "absurd and totally illegal".

Speaking of absurd, shall we take a moment to consider traditional marriage? We do adore it: in the UK, just under half the population has chosen to pledge to love another person as long as they both shall live, or as long as they don't get divorced. And yet as we shoehorn ourselves into two-by-two formation, we're not that good at keeping our promises: as Helen Croydon has pointed out, breaking the boundaries of monogamy is far from unusual. Plenty of marriages have three people in them. They're just not legal ones.

A good old-fashioned monogamous marriage works beautifully for some. But even the most successful marriages are special and unique and incredibly weird. For much as we have a sweet collective imagining of what a happy union entails, the reality is that they all deviate from the fantasy norm, pretty much from the time that the certificate is signed, the chicken is noshed and the bouquet is chucked. The government can dictate that two people should be in a marriage, but it can't legislate what will make them feel happy or stable or emotionally complete together. And if we accept that, as we do every time we allow anyone the freedom to make a decision about who they'll marry, and furthermore allow them the freedom to call each other by execrable pet names in public, then does it not begin to seem strange, just a bit, that we do allow the government to dictate how many people are allowed to pledge to be together forever? Perhaps even as strange as it is for government to dictate who can do it based on their gender?

This is not about the advocacy of patriarchal polygamy that regards wives as unequal to, or property of, their husbands. But if three, or four, or 17 people want to marry each other simultaneously and equally, why should they not be granted the same status as two people who want to become a legal family? Without reverting to religious arguments, or logistical ones (does Ikea manufacture a big enough bed to accommodate this union?), it begins to feel a bit illiberal.

Is it possible that if we allowed more people to marry simultaneously that more marriages might be successful? Fewer breakups over infidelity might occur, for example, if those who found themselves in love with more than one person didn't have to choose or conceal their feelings. And relaxing the expectation that one partner should fulfil all of one's needs – good sex, complementary taste in television and shared preference for dogs over cats may just be too much to ask for – might mean that people who opt for a portfolio of other halves (or thirds) could outdo the rest of us in happiness.

Legalisation wouldn't send stampedes of people to the registry office in five-aside squads; for many of us, monogamy does feel the most comfortable option, whether it's because our brains aren't wired to love more than one person or because the prospect of making multiple people happy is too complex. But three's not a crowd for everyone. And as long as everyone is entering a marriage equally, as long as everyone is really going to make an effort to be open and honest to everyone else, it's probably not the government's job to tell them how many of them there should be.

The Great Indian Hope Trick - Brazil and India

In the late 1800s, the story of a startling magic trick emerged from India and spread. In its fullblown version, the story describes a street performer who begins to play his flute over a coiled rope, which climbs dancing like a cobra to a great height. The boy assistant scrambles to the top of the rope and disappears. The magician calls for the boy, grows impatient, grabs a large knife and scrambles up the rope, vanishing too. Then limbs, a torso, and a head fall out of the sky. The magician reappears, reassembles and covers the body parts, and from under a bloody sheet the boy reappears , grinning. It would be one hundred years before "the great Indian rope trick" was fully exposed as a hoax: a composite pasted together in the imagination of Western visitors from the full menu of tricks performed by Indian street magicians. Magic societies offered rewards, but no one ever performed "the world's greatest illusion."

In recent years visitors have been returning from India in a similar state of awe, overwhelmingly impressed by the nation that perhaps has been most deeply transformed by the emerging-market levitation act of the last decade. But India now risks falling for its own hype, based largely on the assumption that it is repeating a trick pioneered by China - a seemingly endless stretch of 8 to 9 percent growth - and is therefore destined to be the fastest-growing economy over the next decade. At least until the last months of 2011, when growth forecasts dipped below 7 percent and rattled investor confidence, the Indian elite seemed more focused on how to spend the boom's windfall than on working to make sure the rapid growth actually happens.

The best example of this rosy thinking was the way the ongoing baby boom in India has been transformed from a "population time bomb" into a "demographic dividend" . Until the 1990s the Indian government was still working hard to rally the nation against the dangers of overpopulation, but that fear has melted away, based on the argument that a baby-boom generation of newworkers helped fuel China's rise and will do the same for India. India's confidence ignores the postwar experience of many countries in Africa and the Middle East, where a flood of young people into the labor market produced unemployment , unrest, and more mouths to feed. I put the probability of India's continuing its journey as a breakout nation this decade at closer to 50 percent, owing to a whole series of risks that are underappreciated, including bloated government, crony capitalism, falling turnover among the rich and powerful, and a disturbing tendency of farmers to stay on the farm.

The next decade is full of bright spots, but you can't find them by looking back at the nations that got the most hype in the last decade, and hope they will hit new highs going forward. The stars of this decade will be the breakout nations, by which I mean the nations that can sustain rapid growth, beating or at least matching high expectations and the average growth rates of their income class; for the richer emerging markets with average incomes of $20,000 to $25,000 (like the Czech Republic or South Korea) breaking out will mean 3 to 4 percent growth in GDP, while for China, in the class of $5,000 and less, anything less than 6 to 7 percent will feel like a recession. Similarly, it makes no sense to think of India ($1,500 per capita income, with a high-growth population) in the same way as Russia ($13,000, with a shrinking population ). The richer the country the tougher the growth challenge.

The growth game is above all about expectations. People are always asking me, "So what if India slows from 9 percent to 6 to 7 percent - that is still three times faster than growth in the West, right?" Well, for India that slip would initially feel like a recession, because it is one of the poorer nations in the low-income group - the economies with per capita income under $5,000 - and every Indian has come to enjoy the levitating sensation of rising fast from a low base. Last year, New Delhi built its budget based on the revenue it could expect at 9 percent growth, and the prices in the Mumbai stock market were based on what Indian companies would be worth down the road if the economy continued to grow at a pace of at least 8 percent. In 2011, therefore, a growth rate of 7 percent was enough to trigger a bear market in Indian stocks.

India's 'Silent Cal'

Signs of an unraveling have begun to emerge under the administration of Prime Minister Manmohan Singh, but not really because of it. When Singh was tapped to become prime minister in 2004, many hoped that he could continue to push reform, but in reality he became more of a figurehead, presiding over an economic boom unleashed by global rather than local forces, particularly the tide of easy money that was flooding out of the United States, stirring an unprecedented boom across all emerging markets.

Singh could not force reform on a political class and culture that had grown deeply complacent, and he now reminds me of U.S. President Calvin Coolidge, the nondescript leader who was in office during the boom of the 1920s but did not use his power to correct fault lines that would bring down the U.S. economy in the 1930s. A man of few words, Coolidge earned the moniker "Silent Cal," and Singh too is known for keeping his mouth shut..

Brazil, Not China

China is not the only possible model for India. Culturally and politically India has far more in common with the confusion of modern Brazil than with the command-and-control environment that defines China.

Both India and Brazil are "highcontext" societies, a term popularized by the anthropologist Edward Hall to describe cultures in which people are noisy, quick to make promises that cannot always be relied on, and a bit casual about meeting deadlines. These societies tend to be built on close ties built over long periods of time, creating an environment in which a lot goes unsaid-or is said very briefly-because much is implicitly understood from context. The spoken word is often flowery and vague; apologies are long and formal. Such societies believe deeply in tradition, history, and favoring the in-group , whether it is one's family or business circle, and thus they are vulnerable to corruption.

"Low context," in contrast, describes societies like the United States and Germany in which people are individual oriented, care about privacy, and are more likely to stick to timelines and their word. People tend to be on the move, to have many brief relationships, and thus rely on simple, open communications and codified rules to guide behavior.

The most popular soap opera in Brazil in recent times has been A Passage to India, a Brazilian-Indian love story filmed in the Indian cities of Agra and Jodhpur in which Brazilian actors play the Indian roles and pass easily for North Indians. To Indians who have seen it, the show is a dead ringer, in terms of look and mood, for the style of the Indian producer Ekta Kapoor, who has turned out some of the most popular serial dramas in Indian TV history.

In politics there is also a distinct Indo-Brazilian connection: a desire for state protection from life's risks - social welfare for the nation as one big in-group-to a degree rarely found in other highcontext societies. The political elites of India and Brazil are fond of welfare-state liberalism, and both populations demand high levels of income support even though the economies do not yet generate the revenue to support a welfare state. Per capita income is about $12,000 in Brazil and $1,500 in India.

It was easy for India to increase spending in the midst of a global boom, but the spending has continued to rise in the post-crisis period. If this continues, India may meet the same fate as Brazil in the late 1970s, when excessive government spending set off hyperinflation and crowded out private investment, ending the country's economic boom.

Crony Capitalism

Crony capitalism is a cancer that undermines competition and slows economic growth. That is why the United States moved to take down the robber barons by passing anti-trust laws in the 1920s. Ever since, the American economy has seen constant change in its ranks of the rich and powerful, including both people and companies. On average , the Dow index of the top-thirty U.S. industrial companies replaces half its members every fifteen years. India's market used to generate heavy turnover too, but in late 2011, twenty-seven - 90 percent - of the top-thirty companies tracked by the benchmark Sensex index were holdovers from 2006. Back in 2006 the comparable figure was just 68 percent. Further, the top-ten stocks on the Sensex now account for twothirds of the total value, while the top ten on the Dow account for just half the total value, showing a higher concentration of corporate wealth in India.

Like most emerging nations India celebrates when its companies "go global," but this is not necessarily a good sign. To hit its 8 to 9 percent growth target India needs its businesses to reinvest at home, but they are looking abroad. Investment by Indian businesses has declined from 17 percent of GDP in 2008 to 13 percent now. Overseas operations of all Indian companies now account for more than 10 percent of overall corporate profitability, compared with just 2 percent five years ago. Given the boom in the Indian middle class, Indian companies should see huge opportunity at home: they are leaving because of the growing resentment against the domestic operating environment.

In the global media India is closely associated with its dynamic technology entrepreneurs, who often grace the covers of international magazines. But this misses the retreat inward, the high-context side of India. Lately the enterprising moguls are getting replaced on the billionaire list by a new group: provincial tycoons who have built fortunes based on sweetheart deals with state governments to corner the market in location-based industries like mining and real estate. India has always been top-heavy with billionaires, which is partly a function of the way ingroups work to horde the economic pie for themselves.

Political Chameleon

India's boom has also sparked a rise in inequality, which to some extent is natural in the early stages of economic development; however, inequality can stall growth if it goes unchecked. Over the last decade, consumption levels have grown dramatically for all Indians, but 6 percentage points faster per year for the richest 10 percent than for the poorest 10 percent. Political leaders have been working to contain social tensions, mainly by increasing government handouts rather than by widening business and job opportunities. The Gandhi family has continued to show its trademark sensitivity to the poor, but in ways that may backfire against economic growth by running up deficits.

This habit - deficit spending in good times as well as bad - was a major contributor to the current debt problems in the United States and Western Europe, and India can ill afford it. What's more, welfare schemes such as the rural employment guarantees create a perverse incentive for villagers to stay on the farm. China was able to convert its growing labor force into an economic miracle by encouraging a rapid mass migration of inland farmers to the more productive coastal cities. Over the past decade the share of the Chinese population living in urban areas rose from 35 to 46 percent. During the same period India's urban population grew much more slowly-from 26 percent to 30 percent of the whole.

Why it is 50-50

No other large economy has so many stars aligned in its favor, from its demographic profile to its entrepreneurial energy and, perhaps most important, an annual per capita income that is only onefourth of China's . But Indian policy makers cannot assume that demographics will triumph and that problems such as rising crony capitalism and increased welfare spending are just sideshows instead of major challenges . These are exactly the factors that have prematurely choked growth in other emerging markets.

The wild card for India is its freewheeling democracy, an environment in which the zeitgeist can change very quickly. It was only in the last decade that India came to see itself as the next China, and came to see its growing population as a competitive advantage rather than as a threat. The recent case of national overconfidence could give way just as fast to a healthy sense of urgency, with new state-level leaders who see the complex picture of India for what it is.

The great Indian rope trick may be impossible, in its mythical form, but Indian leaders don't need to come up with something that dazzling. An economy with low per capita income is relatively easy to levitate. And lesser versions of the rope trick - with no one disappearing into the sky and no falling body parts - are still impressive enough to keep audiences riveted to the show.



Excerpts from Ruchir Sharma's new book, Breakout Nations: In Pursuit of the Next Economic Miracles, published by Allen Lane/Penguin. The author is head of Emerging Markets and Global Macro at Morgan Stanley Investment Management

In praise of Public Sector Banks

Black sheep of finance
By Ellen Brown in Asia Times Online

Once the black sheep of high finance, government owned banks can reassure depositors about the safety of their savings and can help maintain a focus on productive investment in a world in which effective financial regulation remains more of an aspiration than a reality. - Centre for Economic Policy Research, VoxEU.org (January 2010). [1]

Public sector banking is a concept that is relatively unknown in the United States. Only one state - North Dakota - owns its own bank. North Dakota is also the only state to escape the credit crisis of 2008, sporting a budget surplus every year since; but skeptics write this off to coincidence or other factors.

The common perception is that government bureaucrats are bad businessmen. To determine whether government-owned banks are assets or liabilities, then, we need to look farther afield.

When we remove our myopic US blinders, it turns out that globally, not only are publicly owned banks quite common but that countries with strong public banking sectors generally have strong, stable economies.

According to an Inter-American Development Bank paper presented in 2005, the percentage of state ownership in the banking industry globally by the mid-nineties was over 40%. [2] The BRIC countries - Brazil, Russia, India, and China - contain nearly three billion of the world’s seven billion people, or 40% of the global population. The BRICs all make heavy use of public sector banks, which compose about 75% of the banks in India, 69% or more in China, 45% in Brazil, and 60% in Russia.

The BRICs have been the main locus of world economic growth in the last decade. China Daily reports, "Between 2000 and 2010, BRIC's GDP grew by an incredible 92.7%, compared to a global GDP growth of just 32%, with industrialized economies having a very modest 15.5%."

All the leading banks in the BRIC half of the globe are state-owned. [3] In fact the largest banks globally are state-owned, including:

The two largest banks by market capitalization (ICBC and China Construction Bank); The largest bank by deposits (Japan Post Bank); The largest bank by assets (Royal Bank of Scotland, now nationalized); The world's largest development bank (BNDES in Brazil). [4] A May 2010 article in The Economist noted that the strong and stable publicly owned banks of India, China and Brazil helped those countries weather the banking crisis afflicting most of the rest of the world in the last few years. [5] According to Professor Kurt von Mettenheim of the Sao Paulo Business School of Brazil: Government banks provided counter cyclical credit and policy options to counter the effects of the recent financial crisis, while realizing competitive advantage over private and foreign banks. Greater client confidence and official deposits reinforced liability base and lending capacity. The credit policies of BRIC government banks help explain why these countries experienced shorter and milder economic downturns during 2007-2008. [6] Surprising findings In a 2010 research paper summarized on VoxEU.org, economists Svetlana Andrianova, et al, wrote that the post-2008 nationalization of a number of very large banks, including the Royal Bank of Scotland, "offers an opportune moment to reduce the political power of bankers and to carry out much needed financial reforms." [7] But "there are concerns that governments may be unable to run nationalized banks efficiently." Not to worry, say the authors: Follow-on research we have carried out (Andrianova et al, 2009) ... shows that government ownership of banks has, if anything, been robustly associated with higher long run growth rates. Using data from a large number of countries for 1995-2007, we find that, other things equal, countries with high degrees of government ownership of banking have grown faster than countries with little government ownership of banks. We show that this finding is robust to a battery of econometric tests. Expanding on this theme in their research paper, the authors write: While many countries in continental Europe, including Germany and France, have had a fair amount of experience with government-owned banks, the UK and the USA have found themselves in unfamiliar territory. It is therefore perhaps not surprising that there is deeply ingrained hostility in these countries towards the notion that governments can run banks effectively. ... Hostility towards government-owned banks reflects the hypothesis ... that these banks are established by politicians who use them to shore up their power by instructing them to lend to political supporters and government-owned enterprises. In return, politicians receive votes and other favours. This hypothesis also postulates that politically motivated banks make bad lending decisions, resulting in non-performing loans, financial fragility and slower growth. But that is not what the data of these researchers showed: [W]e have found that ... countries with government-owned banks have, on average, grown faster than countries with no or little government ownership of banks. ... This is, of course, a surprising result, especially in light of the widespread belief - typically supported by anecdotal evidence - that " ... bureaucrats are generally bad bankers" ... What accounts for their surprising findings? The authors provide a novel explanation: We suggest that politicians may actually prefer banks not to be in the public sector. ... Conditions of weak corporate governance in banks provide fertile ground for quick enrichment for both bankers and politicians - at the expense ultimately of the taxpayer. In such circumstances politicians can offer bankers a system of weak regulation in exchange for party political contributions, positions on the boards of banks or lucrative consultancies. Activities that are more likely to provide both sides with quick returns are the more speculative ones, especially if they are sufficiently opaque as not to be well understood by the shareholders such as complex derivatives trading. Government-owned banks, on the other hand, have less freedom to engage in speculative strategies that result in quick enrichment for bank insiders and politicians. Moreover, politicians tend to be held accountable for wrongdoings or bad management in the public sector but are typically only indirectly blamed, if at all, for the misdemeanors of private banks. It is the shareholders who are expected to prevent these but lack of transparency and weak governance stops them from doing so in practice. On the other hand, when it comes to banks that are in the public sector, democratic accountability of politicians is more likely to discourage them from engaging in speculation. In such banks, top managers are more likely to be compelled to focus on the more mundane job of financing real businesses and economic growth. The BRICs as a global power Focusing on the financing of real businesses and economic growth seems to be the secret of the BRICs, which are leading the world in economic development today. But the BRIC phenomenon is more than just a growth trend identified by an economist. It is now an international organization, an alliance of countries representing the common interests and goals of its members. The first BRIC meeting, held in 2008, was called a triumph for Russian leader Vladimir Putin's policy of promoting multilateral arrangements that would challenge the United States' concept of a unipolar world. [8] The BRIC countries had their first official summit and became a formal organization in Yekaterinburg, Russia, in 2009. They met in Brazil in 2010 and in China in 2011, and they will meet in India in 2012. In 2010, at China's invitation, South Africa joined the group, making it "BRICS" and adding a strategic presence on the African continent. The BRICS seek more voice in the United Nations, the International Monetary Fund, and the World Bank. They are even discussing their own multicultural bank to fund projects within their own nations, in direct competition with the IMF. They oppose the dollar as global reserve currency. After the Yekaterinburg summit, they called for a new global reserve currency, one that was diversified, stable and predictable; and they have the clout to get it. [9] According to Liam Halligan, writing in The UK's Telegraph: The BRICs account for ... around three-quarters of total currency reserves. They have few serious fiscal issues and all are net external creditors. [10] Western financial interests have long fought to maintain the dollar as global reserve currency, but they are losing that battle, despite economic and military coercion. Russia, China and India are now nuclear powers. The BRICS will have to be negotiated with, and the first step to forming a working relationship is to understand how their economies work.

Socrates - Requiem for a wise man!

 

Nirmal Shekar

AP Former Brazil's soccer player Socrates

The Socrates persona was as contradictory as it was compelling

HE was a hard-drinking, chain-smoking free thinker grappling with the higher reaches of truth passed on to posterity by Friedrich Nietzsche and Karl Marx in an awesome Victorian auditorium of a Rio de Janerio University.

He was a head-banded, flamboyant young man with curly brown locks unlocking the splendour of Brazilian country music to an entranced audience.

He was a fiery-eyed left-wing activist, a Che Guevara-type radical spouting slogans while leading a student march to restore democracy in his country.

He was a professional paediatrician hugging sick children at a UNICEF health camp with the missionary zeal of a Mother Teresa.

Socrates Brasilero Sampio de Souza de Oliviera, who passed away on Sunday in Brazil, was all of these…and more. He was one of the most gifted players produced by the greatest of soccer-playing nations, Brazil, in the post-Pele era.

Rebel with a cause

A rebel with a cause, Socrates had a stupendous ability to combine stardom with creative ability on the field. His one-two passing symphony with his team-mate and friend Zico had a Mozartian magnificence.

As the eldest of a middle-rung government official's 10 sons, as a brilliant young medical student, Socrates was intensely in search of an identity in the fragmented world of the late 1970s.

“I am not a footballer. I am a human being,” he screamed at mediapersons early in his career, apparently fed up with their one-track line of questioning. It was the cry of a man trying to free himself from the chains of a media-manufactured image, the struggle of a very intelligent human being trying to shake off a straitjacket.

It is this protean quality that set Socrates apart from some of the most brilliant players of his era. Deeply rebellious against the over-ordering of life, on and off the football field, he was quintessential nonconformist.

“He would sing a song and all of us wound enjoy it. Then, almost suddenly, Socrates would go into a shell, an impenetrable shell of his own. We knew him, yet we did not know him,” said a team-mate of his when Socrates was playing for the Sao Paulo giant Corinthians.

 

Multi-faceted persona

To be sure, it would take more than an average footballer to have come to terms with Socrates' multi-faceted personality. For, the Socrates persona was as contradictory as it was compelling. He was a man in search of individual freedom in an age ruled by conformity and organisation, both in and out of football.

If you ever saw a cold-blooded master of life's capriciousness — someone with knowledge of Nietzsche's amor fati — then you can picture Socrates striding back nonchalantly after missing a crucial penalty in a World Cup semifinal against France in Mexico.

It is not as if Socrates was an incurable eccentric with a finger on the self-destruct button. He loved the game as much as he loved anything else in life. But he knew sport was just sport, not a matter of life or death. He would have been more devastated by the death of a child in a Rio health facility than a missed World Cup penalty.

 

Doctor for the poor

Never one to beat around the bush, Socrates admitted early in his career that it was for big money that he temporarily abandoned his life as a doctor to become a footballer. “As a footballer, I get much quicker to the financial stability I need to be what I want to be: a doctor for the poor,” he said.

On the field, he was a master. With Zico and Falcao, he was part of a midfield that was rarely matched in the entire history of the game. So confident were these men about their own skills that they ignored their defensive weaknesses as a resurgent Paolo Rossi of Italy claimed a hat-trick to dump them from the 1982 World Cup.

He made his presence felt in the 1986 World Cup too, but soon the game was up for Doc. But another one, perhaps more rewarding — serving the poor as a doctor and becoming a sagacious commentator on television — began.

“Life is not about quantity. It is about quality,” Socrates said over 30 years ago. By modern standards, he died young.

He drank his way to his grave, like so many other sportspersons. But the difference is, he was a wise man who did know exactly what he was doing. It was his hemlock.