What role does the organisation have in an era of fracturing multinational alliances and fears of deglobalisation? Andy Bounds in The FT
“Blessed is the nation that doesn’t need heroes" Goethe. “Hero-worship is strongest where there is least regard for human freedom.” Herbert Spencer. "My 80% friend isn't my 20% enemy" Ronald Reagan.
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Monday 13 June 2022
The WTO’s lonely struggle to defend global trade
Monday 24 January 2022
Sunday 16 January 2022
Friday 2 April 2021
Tuesday 22 December 2020
Wednesday 16 December 2020
Does the WTO help a poor nation become rich? Economic History in Small Doses 4
Girish Menon*
Today, when we look at the world that
we live in, we find that Huawei (a Chinese technology company) is being
subjected to a systematic campaign of defamation and discrimination among the
Non-discrimination
A country should not
discriminate between its trading partners and it should not discriminate
between its own and foreign products, services or nationals.
The question this article attempts to explore is whether the WTO’s purpose is compatible with the desire of developing countries to join the ranks of the developed world.
The globalisation rhetoric dictates that countries stick to what they are already good at (theory of comparative advantage). Stated bluntly, this means that poor countries are supposed to continue with their current engagement in low-productivity activities. But their engagement in those activities is exactly what makes them poor. If they wish to leave poverty behind they have do the more difficult things that bring them higher incomes. And the WTO’s non-discrimination principle stops them from improving their earning capabilities.
Unfortunately, poor countries are not allowed to adopt such time frames for developing their industries. The non-discrimination clause of the WTO demands that poor countries compete immediately with more advanced foreign producers, leading to the demise of their domestic firms before they can acquire new capabilities.
Like any other investment, investment in capability building is fraught with risk and does not guarantee success. Some countries make it and some don’t. And even the most successful countries will bungle things in certain areas.
However, economic development without investment in enhancing productive capabilities is a near impossibility.
* Adapted and simplified by the author from Ha Joon Chang's Bad Samaritans - The Guilty Secrets of Rich Nations & The Threat to Global Prosperity
** When GD Birla died his secretary tried to get him a seat in Vaikuntha. The Dwarapalaka (gatekeeper) asked the secretary to state the reason why GD should be let into heaven.
The secretary: ‘GD is one of the biggest industrialists in
Dwarapalaka: ‘Usually that involves doing acts which are not acceptable here. This is Vaikuntha; not some unquestioning tax haven for moneybags! Please let me know what he has done in the name of God’
The secretary: ‘GD has established many Birla temples all
over
Dwarapalaka: ‘Birla is worshipped in these temples. Not good enough!’
The secretary: ‘GD is the owner of Hindustan Motors’
Dwarapalaka: ‘I am confused. How is that a case for entering heaven?’
The secretary: ‘Because whenever someone gets into an Ambassador car he says “Oh God” and whenever someone reaches her destination she says “Thank God”.
Dwarapalaka: That has definitely advanced the cause of God. Please ask him to come in’
This anecdote was first narrated by the late Sharu Rangnekar. It has been modified by the author.
Thursday 18 June 2020
Lying about our history? Now that's something Britain excels at
It was inevitable that some would insist that ripping the statue of slave trader Edward Colston from its plinth and disposing of it in a harbour in Bristol was an act of historical revisionism; that others would argue that its removal was long overdue, and that the act itself was history in the making. After more statues were removed across the United States and Europe, Boris Johnson weighed in, arguing that “to tear [these statues] down would be to lie about our history”.
But lying about our history – and particularly about our late-colonial history – has been a habit of the British state for decades.
In 2013 I discovered that the Foreign and Commonwealth Office had been unlawfully concealing 1.2m historical files at a highly secure government compound at Hanslope Park, north of London.
Those files contained millions upon millions of pages of records stretching back to 1662, spanning the slave trade, the Boer wars, two world wars, the cold war and the UK’s entry into the European Common Market. More than 20,000 files concerned the withdrawal from empire.
There were so many of them that they took up 15 miles of floor-to-ceiling shelving at a specially built repository that a Foreign Office minister had opened in a private ceremony in 1992. Their retention was in breach of the Public Records Acts, and they had effectively been held beyond the reach of the Freedom of Information Act.
The FCO was not alone: at two warehouses in the English midlands, the UK’s Ministry of Defence was at the same time unlawfully hoarding 66,000 historical files, including many about the conflict in Northern Ireland.
When the files concerned with the withdrawal from empire began to be transferred to the UK’s National Archives – where they should have been for years, and where historians and members of the public could finally examine them – it became clear that enormous amounts of documentation had been destroyed during the process of decolonisation.
Helpfully perhaps, colonial officials had completed “destruction certificates”, in which they declared that they had disposed of sensitive papers, and many of these certificates had survived within the secret archive.
Beginning in India in 1947, government officials had incinerated material that would in any way embarrass Her Majesty’s government, her armed forces, or her colonial civil servants. At the end of that year, an Observer correspondent noted large palls of smoke appearing over government offices in Jerusalem.
As decolonisation gathered pace, British officials developed a series of parallel file registries in the colonies: one that was to be handed over to post-independence governments, and one that contained papers that were to be steadily destroyed or flown back to London.
As a consequence, newly independent governments found themselves attempting to administer their territories on the basis of an incomplete record of what had happened before.
In Uganda in March 1961, colonial officials gave this process a new name: Operation Legacy. Before long the term spread to neighbouring colonies, where only “British subjects of European descent” were to be involved in the weeding and destruction of documents, a process that was overseen by police special branch officers. A new security classification, the “W” or “Watch series”, was introduced, and sensitive papers were stamped with a red letter W.
Subsequently, there was the “Guard series” of papers stamped with a letter “G”. These could be shared with officials from Australia, Canada, South Africa and New Zealand, but whenever this happened “the information should be accompanied by an oral warning that it must not be communicated to the Americans”. The Americans, it seems to have been assumed, were likely to be less forgiving of the sins of empire.
In May that year the colonial secretary, Iain Macleod, issued instructions that the documents to be destroyed or smuggled back to London should include anything that might embarrass HMG; embarrass her military, police or public servants; that might compromise sources of intelligence; or which could be used “unethically” by post-independence governments.
By “unethically”, Macleod appears to mean that he did not wish to see the governments of newly independent nations expose, or threaten to expose, some of the more challenging aspects of the end of empire. There was certainly plenty to hide: the torture and murder of rebels in Kenya; the brutal suppression of insurgencies in Cyprus and later Aden; massacres in Malaya; the toppling of a democratically elected government in British Guiana.
Instructions were also issued on the means by which papers should be destroyed: when they were burned, “the waste should be reduced to ash and the ashes broken up”. In Kenya, officials were informed that “it is permissible, as an alternative to destruction by fire, for documents to packed in weighed crates and dumped in very deep and current-free waters at maximum practicable distance from the coast”.
Operation Legacy was, as one colonial official admitted, “an orgy of destruction”, and it was carried out across the globe between the late 1940s and the early 70s.
The operation – and its attempts to conceal and manipulate history in an attempt to sculpt an official narrative – speaks of a certain jitteriness on the part of the British state, as if it feared that interpretations of the past that were based upon its own records would find it difficult to celebrate the “greatness” of British history.
It seems likely that uncertainty about the imperial mission also played a part in the commissioning of Colston’s statue. It was erected in 1895, a full 174 years after his death, at a time when the British were anxious about their rapidly expanded empire. The first Boer war had ended badly for them, exposing the physical weakness of soldiers recruited from urban slums; the United States was emerging as an industrial force; and Germany appeared to be challenging the Royal Navy’s maritime dominance.
The answer, it seems, was the erection of statues, up and down the United Kingdom, of early “heroes” of empire – even slave traders – as an inspiring example to the adventurers and imperialists to come.
Now that’s an act of act of historical revisionism.
Wednesday 30 October 2019
If we’re serious about changing the world, we need a better kind of economics to do it
In 2017, a poll in the UK asked: “Whose opinion do you trust the most when they talk about their field of expertise?” Nurses came first – 84% trust them. Politicians came last. Economists were second from bottom on 25%.This trust deficit is mirrored by the fact that the consensus of economists (when it exists) is often systematically different from the views of ordinary citizens. The Booth School of Business at the University of Chicago regularly asks a group of about 40 prominent academic economists their views on core economic topics. Working with the economist Stefanie Stantcheva, we ran a survey: we selected 10 of the questions that were asked of the Booth panel and put them to 10,000 Americans.
On most of these issues, our respondents were sharply at odds with economists. For example, every single member of the Booth panel disagreed with the proposition that “imposing new US tariffs on steel and aluminium will improve Americans’ wellbeing”. Only a third of our respondents shared their view. And the gap is not only because people are not informed of what economists think: telling them does not seem to change their opinion one bit.
Economists are often too wrapped up in models and methods, and sometimes forget where science ends and ideology begins
This is troubling, because questions of economics and economic policy are central to the present crisis. Is migration actually threatening the livelihoods of poor workers? Has international trade worsened inequality? Should we worry about the rise of artificial intelligence or celebrate it? Why are our societies becoming increasingly unequal, and what can we (or should we) do about it? How can society help all those people whom the markets leave behind?
Economists have a lot to say about these big issues: they study immigration to see what it does to wages, taxation to determine if it discourages enterprise, redistribution through social programmes to figure out whether it encourages sloth. They have long worried about what happens when nations trade. They have worked hard to understand why some countries grow and others don’t, and what, if anything, governments can do to help. They gather data on what makes people generous or wary, what makes a man leave home and migrate to a strange place, how social media plays on our prejudices. The most recent research often has surprising things to say about all these issues – especially to those used to the pat answers coming from old high school textbooks and TV “economists”.
It’s not that when economists and the public have different views the economists are always right. We, the economists, are often too wrapped up in our models and methods and sometimes forget where science ends and ideology begins. But good economics can be a source of hope – a way to understand what went wrong but also to explain how our world can be put back together, as long as we are honest in our diagnosis of the problems.
‘How can society help all those people whom the markets leave behind?’ A child wait for a plate of food at a soup kitchen in Salta province, Argentina. Photograph: Javier Corbalan/AP
For that to happen, we need to understand what undermines trust in economists. Part of the problem is that there is plenty of bad economics around. The self-proclaimed economists on TV and in the press – chief economist of Bank X or Firm Y – are, with important exceptions, primarily spokespeople for their firms’ economic interests, who often feel free to ignore the weight of the evidence. Moreover, they have a relatively predictable slant towards market optimism at all costs, which is what the public associates with economists in general. It does not help that there is a class of economists who make predictions about broad trends in the economy, which often turn out to be wrong.
Another part of the problem is that, especially in the UK and the US, a lot of the economics that has filtered into government thinking is the most beholden to orthodoxy, and the least able to pay attention to any fact that does not square with it. Economists are therefore naturally seen as those who keep repeating that regulations, taxes, and public spending all need to be slashed to let the market be, and that eventually everything will all “trickle down” to the poor, even as we watch inequality exploding.
But good economics is much less strident, and quite different. It is less like the hard sciences and more like engineering or plumbing: it breaks big problems into manageable chunks and tries to solve them with a pragmatic approach – a combination of intuition and theory, trial and acknowledged errors. Good economics starts with some facts that are troubling, makes some guesses based on what we already know about human behaviour and theories that have been shown to work, uses data to test those guesses, refines (or radically alters) its line of attack based on the new set of facts and, eventually, with some luck, gets to a solution.
We have spent our careers studying the poor, trying to apply this kind of experimental approach to the problems they face. Instead of relying on our intuition, or that of others, we set up large-scale, rigorous randomised controlled trials to understand what works, what does not work, and why. We are not alone: this movement has taken hold in economics. The Abdul Latif Jameel Poverty Action Lab (J-PAL), the network we co-founded in 2013, has 400 affiliated or invited researchers, and together they have finished or are working on nearly a thousand projects on topics as different as the impact of sleep on productivity and happiness, and the role of incentives for tax collectors.
‘Economists have a tendency to adopt a notion of wellbeing that is often too narrow – some version of income or material consumption.’ A homeless man outside Victoria Station in London. Photograph: Victoria Jones/PA
This work is starting to make a difference. To date, 400 million people have been touched by policies that J-PAL affiliates have shown to be effective. Just as importantly, although no single project offers a definitive answer, together they allow us to understand much better some of the mechanisms behind the persistence of poverty. While our own beat has mostly been the poor countries, there are many others doing good economics in countries like the US, which can help shed light on the big issues our societies are grappling with.
Economists have a tendency to adopt a notion of wellbeing that is often too narrow – some version of income or material consumption. Yet we know in our guts that a fulfilling life needs much more than that: the respect of the community, the comforts of family and friends, dignity, lightness, pleasure. The focus on income alone is not just a convenient shortcut – it is a distorting lens that has often led the smartest economists down the wrong path, and policymakers to the wrong decisions. This is a big part of what persuades so many of us that the whole world is waiting at the door to steal our well-paying jobs. It is what has led to a single-minded focus on restoring the western nations to some glorious past of rapid economic growth. It is also what makes the trade-off between the growth of the economy and the survival of the planet seem so stark.
A better conversation must start by acknowledging the deep human desire for dignity and human contact – and treating it not as a distraction but as a better way to understand each other, and to set ourselves free from what may appear to be unresolvable contradictions.
Restoring human dignity to its central place has the potential to set off a profound rethinking of economic priorities and the ways in which societies care for their members, particularly when they are in need. At the very least, this should help persuade some of the disaffected that economics is about them as well, and that we economists have useful contributions to make to the rebuilding that must happen.
Thursday 26 September 2019
Wednesday 9 January 2019
Volatility: how ‘algos’ changed the rhythm of the market
Saturday 9 June 2018
Tangled in Brexit, the Tories are failing their business supporters
The single market is absolutely vital to Lucas,” declared Brian Pearse, chairman of the engineering group. “We have to be very much a global company.” Deeply concerned by the seeming hostility of much of the Conservative government’s attitude towards Europe, Sir Brian cancelled Lucas’s donation to the party.
That was in 1995. Much has changed since then. Lucas industries now trades only as an offshoot of a German company. Since 2000, legislation has demanded that shareholders should approve corporate donations to political parties and such donations are effectively outlawed for quoted companies. But the issue of the UK’s relationship with the EU remains troublesome. On Tuesday it will reach another crisis point as the House of Commons votes on whether to avoid the hardest of Brexits.
Sir Brian feared the government was not listening to the concerns of business 20 years ago, but in recent years the sound barrier seems to have become almost impenetrable. Business has been cast as the political pantomime villain. In July 2016, as she set out her personal manifesto for party leadership, Theresa May attacked “unscrupulous bosses” and “corporate irresponsibility” and was adamant that: “Under my leadership, the Conservative party will put itself completely, absolutely, unequivocally at the service of ordinary working people.” The trade union bosses of old would have applauded the resurrection of such “us and them” language.
It has become commonplace for ministers. Only this week, Michael Gove was roundly condemning “crony capitalists who have rigged the system in their favour and against the rest of us”. The secretary of state for environment, food and rural affairs managed glancing references to the water industry and sustainability in his speech to the Policy Exchange think-tank, but it was largely a tirade against the corporate world.
Few would argue that modern capitalism is without failings. From the financial crisis of 2008 to the collapse of Carillion (according to the National Audit Office, this will cost the taxpayer at least £148m), colossal mistakes have been made. Executive remuneration is widely, and not unjustly, perceived to be unfairly generous. That perception has been the driving force behind the rise of populism on both sides of the Atlantic. It is a big reason why the UK is mired in a potentially disastrous breach from Europe.
Yet, for all its inadequacies, business remains a force for good. Politicians on all sides are now loath to even whisper such a thought. Business leaders, conscious of the zeitgeist, have not been keen to make the defence case publicly for fear of being shot down as stooges for the transgressors. So their efforts towards being responsible corporate citizens go unremarked, except in annual reports. Businesses are still perceived as using charitable giving as a cover for securing tickets for the opera rather than providing training and jobs for ex-offenders or breakfasts for children in deprived areas. Apart from the small matter of wealth creation, business today has extensive involvement in education, fosters volunteering among its staff and generally, in the interests of longer term survival, endeavours to keep its customers happy.
Politicians, however, tend to make a distinction between big business, equating it to crony capitalism, and plucky entrepreneurs who deserve support and encouragement. Knowing this, most big businesses ask little of government beyond a stable environment, an educated and skilled workforce, effective infrastructure and a degree of regulatory and legal certainty. That enables them to get on with creating jobs and generating tax revenue to keep the country going.
Traditionally, they have found the Conservative party the most supportive of these needs, although the Blair administration, with its embrace of free markets, was an exception. What now causes real concern is that the May government also confounds the norm. According to Paul Drechsler, president of the CBI employers group: “There are more anti-business Conservatives in the party than at any time in recent history.” Fortunately, he adds, there have been enough in the cabinet, including the prime minister, “to do just enough to prevent immense damage so far”.
But significant damage has already been inflicted. The long-delayed decision over a third runway for Heathrow means that transport links to foster trade with China, for instance, will be inadequate for many years to come. The difficulty in obtaining visas for skilled workers is a problem for business, just as it is for a National Health Service desperate to recruit doctors.
Above all, though, we face Brexit. It is glaringly apparent that the government triggered Article 50 and the process of EU withdrawal without any inkling of the implications. What was true for Lucas in 1995 is even more the case today, when business has integrated European supply chains and multinational workforces. Without the frictionless trade that membership of the single market and customs union provides, our economy will shrink drastically.
For many months, business leaders tried to get that message across to government but they could barely get over the threshold of Downing Street. Only as they have become more vocal, and the difficulties of engineering a smooth Brexit become apparent, have some ministers begun to pay attention.
Mrs May would not wish to be perceived as making the Conservatives the party of business, but perhaps there is just time for the government to realise that unless business thrives, everyone will suffer.
Thursday 7 June 2018
The Brexit myth of no-strings frictionless trade
Take a wooden pallet and stick two sets of mundane goods on to it — Chinese plastic cutlery and British cuddly toys. As it trucks towards Dover, ask yourself the following question: how will this consignment enter the EU after Brexit?
Sunday 1 April 2018
Columbus shows Trump how to thrive in the new world order
Rana Foroohar in The Financial Times
A day or two after Donald Trump announced tariffs on a spate of Chinese goods, the world was gripped by fears of a trade war. More than a week later, there is a storyline building that perhaps the US president had the right idea. China is negotiating with the US; the US and South Korea will probably cut a new trade deal. While the administration is right to call China out over unfair trade practices, however, there is also a risk of taking away the wrong message, which is that tariffs are the best way to protect the US Rust Belt.
Friday 27 October 2017
My fantasy Corbyn speech: ‘I can no longer go along with a ruinous Brexit’
Last week I wrote a speech for Theresa May, which concluded with an announcement that she had decided Brexit was impossible to deliver. Sadly she didn’t listen, and so onwards she leads us towards the cliff edge. I am hoping for better luck with Jeremy Corbyn, fantasising that he delivers this speech to a rally of his faithful Momentum followers …
“Thank you for that wonderful reception. Yes, yes, I know my name. ‘Oh Jeremy Corbyn’. Yes, that’s me. Now please stop singing and sit down. Please.
“I will be honest with you. I didn’t want the job. I didn’t think I would get the job. I wasn’t sure I could do the job. But thanks to you I got it. Thanks to you I now have the confidence to do it. I approach the challenge of being prime minister not with fear or trepidation but with confidence that our time is coming. That it is our duty now to serve. Protest is one thing. Government is another. And we must now prepare, genuinely prepare, as a government in waiting.
“If I become prime minister it is Brexit that will define my leadership. As a result of what happened on 23 June 2016 I have no choice in the matter. The people’s choice dictates that it is so.
I have concluded that rejecting this vision of Brexit is the only route to the vision of the world that drives us
“It is clear to me the constructive ambiguity of our position on Brexit is no longer tenable. It is fine for a party of protest. It is not good enough for a party one step away from government.
“Let’s imagine this entirely credible scenario. As the current chaos inside the government continues, Mrs May falls. The Tories try to foist another prime minister on us, chosen by their ageing membership. But we and the public won’t wear it. We force an election. We win an election. I am prime minister. Now the hard part begins.
“What does our ‘jobs-first’ Brexit mean then, in power? What is a jobs-first Brexit if our leaving the single market hurts growth, as every analysis in the world says it will? What is a jobs-first Brexit dependent on trade if trade slows and even grinds to a halt with the absence of a proper customs infrastructure at our ports, the absence of good trade deals not just with the EU but with the 66 countries with whom we have deals as part of the EU? What is a jobs-first Brexit if firms decide that if the UK leaves the EU, they leave the UK, and take their jobs and their tax take with them?
“And how can we fund all the things in our election manifesto that we need and want to fund in the future if our economy tanks?
“At Labour’s party conference, I said that our continued membership of the EU would prevent us from implementing many of the plans in our manifesto. I am grateful to the New European, which sought legal advice in Brussels and established this was not the case. So the question becomes, not ‘What do we lose by staying in?’, but ‘What do we lose by coming out?’
“The dominance of the hard right is clear in their pressing Mrs May to walk away from the negotiations, crash out of the EU, into the World Trade Organisation. I am of the internationalist left. We exist to fight the nationalist right, not to dance to its tune. We believe in support for the many, not the prosperity of the few. It is the nationalist right that is leading the Brexit Mrs May is pursuing, whatever the cost. It is their only route to the vision of the world that drives them. And, today I want to tell you – I have concluded that rejecting this vision of Brexit is the only route to the vision of the world that drives us. In this debate, they are the reactionaries, we and the Europeans the progressives.
“Take back control, they said. But what kind of control? Their control. Their right to dump decades of law with their ‘great repeal bill’, and bring about their vision of a low-tax, low-regulation economy, public services there for profit not public, employment and environmental rights shredded, one of the great powers of the world reduced to a gigantic Cayman Islands. That is their dream. And many of those who voted for Brexit, in the poorest areas, the places we represent, they will be the hardest hit. As the reality of power nears, I must tell you, candidly, that I can no longer go along with it. Not now. Not in two years. Not ever.
“No deal, I must warn you, would be a catastrophe. So if Mrs May is still prime minister, and presents the no-deal option to parliament, be in no doubt – we will vote against it. We will press for a deal with keeps us in the single market and the customs union, to protect trade and avoid chaos.
“But today I want to go further. The referendum was close. It was not, contrary to the claims of the Brextremists, ‘clear’, let alone ‘overwhelming’. Millions are deeply concerned about what is happening to our country. I believe people have a right to change their minds as this all unfolds. And politicians have a duty to reflect that, and to give proper vent to the debate it represents.
“Democracy is a process, not a moment in time. If the government falls, and we win an election, then we can put a different vision of Brexit to the country, and we will. If we can bring about a fresh election, this is the Brexit policy you will be voting for.
“We will take over the negotiations from Mrs May and her hapless, hopeless team. We will review what progress has been made and assess whether Brexit can be delivered on the timescale set out under the article 50 process she triggered.
“If we conclude, as on any current assessment seems likely, that Brexit cannot be delivered without real damage to our economy, that a jobs-first Brexit is impossible, that it will mean lower growth, higher prices, higher unemployment, more austerity, cuts to public services, customs chaos, the return of a hard border in Ireland and the potential undoing of the Good Friday agreement, the loss of security cooperation with our partners, then I will revoke article 50.
“I am clear that a referendum decision can only be overturned by another one, and so we will legislate for a new referendum, and the choice we will put before the British people is between staying in, or leaving on the terms then on offer.
“If, as I believe they will, the British people opt to reverse their decision of last June, that will put us in a strong position then to succeed where David Cameron failed, and win the argument for a reformed EU that works for all.
“Comrades, this has been a lot to take in. But I believe it is the right course for our party, for our movement, and most important of all, for the country.
“This is our country too. This is our time. Let’s take back control of our destiny, and build a country future generations will be proud to call home. Thank you.”