Jan 19 2017

Rerouting Globalisation: from economic to human development

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Βy Lucas Juan Manuel Alonso Alonso

a6538bd8099b94d569c76448ac10e8a6When the different stages of a production process are carried out in different countries, a form of global integration is being developed. The global integration of the production process is usually understood as economic globalisation. This internationalisation process is a result of strategies, such as specialisation, cost-cutting, innovation in manufacturing processes and marketing, outsourcing, sub-contracting, in which only the economic aspects are considered, putting aside human development.

Economic globalisation is largely dependent on the general principles of the division (specialisation) of labour. For example, think about a European printing company that, in order to reduce costs, decides to move part of its production process to Ningbo (China) and keep the rest in Europe. Therefore, the production process is divided between China and Europe. Now, additionally, assume that the company buys an international patent on design stickers—marketing innovation strategy that allows the company to achieve its main competitive advantage: product differentiation—from United States to be used in company’s products. Final assembly and sale of the finished products is carried out in Europe. Through this internationalisation strategy the European printing company can sell cheaper—delocalising part of its production to low-cost production area—its differentiated product—acquisition of international patent on design stickers—and enhance its competitiveness in Europe.

In the above example, we get a glimpse of what is usually understood as globalisation:

  • Delocalisation of part of the production process abroad, which result in a staff reduction in the home country and job creation in the destination country. Obviously, costs of producing abroad will be lower than those for equal production in Europe, consequently implying poorly-paid jobs in the Chinese manufacturing location. Perhaps in the name of competitiveness the European company is employing sweatshop
  • Transfer of money out of Europe to the United States as a fee for intellectual property rights related to the purchase of the international patent.

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Dec 20 2016

President Trump and the Politics of Tragedy


By Roberto Orsi

gloomydayFor someone who tries to think in dialectical terms, the catastrophic handling of the immigration crisis in 2015 raised more than just some concern. It appears simply impossible that this kind of blunder could have not generated some kind of equally powerful reaction, or even more accurately, it is hard to think that this will not end up in tragedy. Tragedy not in an exaggerated or metaphorical sense, but, as the classical Greeks envisaged it, as the series of events leading to the destruction of those who have overstepped the boundaries of divine laws (hybris), thus incurring in the wrath of the gods (phthonos theon or nemesis).

Only about a year later, the gods are closing in. Brexit has prevailed, the EU is in tatters, and finally Mr. Donald J. Trump has been elected President of the United States of America. Without any possible overstatement, the consequences of his ascent to the US presidency cannot be underestimated. It is a veritable game changer for global politics, an unexpected and glorious triumph for some, an unfathomable disaster for others.

In a previous piece, written a few weeks before the EU referendum in Britain, the rise of a strong Brexit movement and of Trump as a new polarizing political figure were explained as manifestations of a great pushback against a social reality which has been built, over the past few decades, on the systematic exclusion of a very large number of people in Western societies. The clearest articulation of this concept came from Hillary Clinton with her inadvertently ironic slogan “better together”: together, but minus about 63 million Americans – the “deplorables” – who eventually voted for Trump. Those excluded folks have now found new and quite effective ways not only to assert their presence and proclaim their dissent, but increasingly to indicate some kind of path forward (whatever the reader may think of that path). That piece concluded with the words

On both sides of the Atlantic fundamental intellectual and political structures are crumbling: it is not a coincidence, and it will not go away anytime soon, even if Trump or the Eurosceptics may fail in this round, but it will continue to re-emerge in many different forms, as time is ripe for a change of direction.

The year 2016, annus mirabilis or horribilis, marks the beginning of a large-scale political transformation, but this is indeed only the start. It is too early to know who Trump the President will be and what kind of policies he will pursue, particularly on the international front. However, a series of considerations are possible.

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Dec 16 2016

Windfall Revenues in Europe: What’s Next?

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By Juergen Braunstein, Marion Labouré and Julius Sen

By Colin Smith, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=13603234

By Colin Smith, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=13603234

European countries need to start thinking of what to do with windfall tax revenues from multinationals. We argue that there is a need to create a structure addressing the risks relating to potential windfall tax revenues. One solution could be the creation of sovereign venture funds.

Currently a number of European countries face windfall tax revenues from multinationals. Economic actors, for-profit organisations and multinationals make their decisions in a context where countries compete for foreign direct investments and headquarters. This article is about the policy responses and potential implications, but not about whether tax minimisation procedures are good or bad.

Now there is a lot of debate about how to recoup these taxes. The prospects have specifically grown with recent EU Commissions investigation of MNCs such as Apple where Apple owes Ireland US 14.5 bn (see Table 1).This would be significantly more than the total of Ireland’s VAT revenues in 2015. Continue reading

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Dec 9 2016

A View on Brexit from Abroad


By Henry Freeman

brexit from abroadPromises of an extra £350m a week, posted on the side of a bus. Doomsday economic predictions from the Remain campaign; the reply, “We’ve had enough of experts!”. Jo Cox MP shot dead in the street, the same day that Nigel Farage unveils an anti-immigration poster which echoes propaganda images from 1930s Nazi Germany. The UK votes to Leave, and the pound collapses. Scotland votes differently, and claims new justification for independence. “What is the European Union?” the second most googled question on the day of the result. A marked increase in hate crimes reported. Boris Johnson calls for a new Royal Yacht. “Hard Brexit” and “Soft Brexit” new terms in public discourse. A country divided. Immigration at the heart of political debate in the UK. Our international reputation damaged, perhaps beyond repair.

These are my impressions of Brexit from abroad. When I left the UK in March this year, and arrived in Nepal, the idea that Britain would vote to leave the European Union was worrying but did not seem realistic. I am troubled by what has happened since, and I’m worried about the UK’s future. In the days after the referendum result several Nepali friends asked me in genuine perplexity as to why so many British people had voted to leave the EU. In particular, one friend asked why were people in the UK so scared of foreigners? Why had immigration dominated the referendum campaign debates, when there were so many wider implications of this decision that affected the UK’s future relationship with its neighbours, and the rest of the world? Continue reading

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Nov 15 2016

European Union’s Key Figures

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by Lucas Juan Manuel Alonso Alonso

With the objective to draw some conclusions about macroeconomic stability and economic structure, this article examines for the 28 Member States of the European Union, the following aspects: GDP and AIC per capita, General Government Gross Debt, Labour Productivity (monetary units and percentages), Average Annual Wages, Annual Hours Worked, Jobless and Average Hourly labour Costs. To develop this analysis, Member States have been divided into three blocks by the number of inhabitants: less than 6 million, between 6 and 17 million and more than 17 million.


Macroeconomic Stability and Economic Structure
european-central-bankAs a result of Brexit, the EU is going to face increasing socio-economic uncertainty. The day after the British referendum result, we have seen sharp falls in European equity markets, particularly of banking shares. In my view, this sharp fall is going to undermine consumer and business confidence and, consequently, and it is very likely to drag down economic growth— this situation is not unique and unusual but we are going to face a turbulent period in financial markets for several months—. Additionally, there is the Syrian refugees’ humanitarian crisis as well as serious social conflicts in many member states. Furthermore the advantage deriving from lower oil price was negated by the abrupt depreciation of the Euro against the U.S. dollar — indeed QE (Quantitative Easing) was a high priority when the exchange rate was about USD 1.5858 in July 2008 straining the socio-economic situation in the Euro area(one may wonder: why does nobody question it?). Now it is of little help to exports because these have already reached the maximum level, while leading to more expensive imports needed to support the domestic economy.

Despite the painful austerity measures, in 2015, general government gross debt (gross public debt as a percentage of the GDP) ratios in the EU-28 remain at a very high level—in Spain, Portugal, Greece is around 100%, Italy has the second highest debt load at 132.7% and in France and Ireland is between 85 and 95 percent. Concerning the volume index of GDP (Gross Domestic Product) per capita in PPS (Purchasing Parity Standards) we find a remarkable dispersion among the EU countries, such as Luxembourg, founder member with a population of 562,958 people, has the highest GDP per capita, 171% higher than the EU-28 average, while Bulgaria, state member since 2007 with a population of 7,202,198 people, records the lowest level of this index, 54% lower than the EU-28 average, but it is important to stress that it showed a steady GDP per capita growth, however still lower than the EU-28 average, from 65% in 2004. We now turn to carefully examine these facts.

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Oct 27 2016

The EU-Turkey Deal: Ambiguities and Future Scenarios

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By Pınar Dinç and Irem Aydemir 

The Arab Spring started the fire in 2011, and ever since the whole MENA region has been turkey-syria-refugeesin turmoil. The civil war in Syria has quickly become a global one with the ongoing war against the Islamic State (ISIL)–a terror organization and a self-proclaimed state at the same time— on the one hand, and the refugee crisis, on the other. The war against ISIL largely continues in the global sphere, with the involvement of the United States, Russia, Iran, the Gulf States, and Israel with geopolitical aims in the region. The refugee crisis, meanwhile, is a major issue to tackle primarily for neighboring countries like Turkey, Lebanon, and Jordan, as well as European countries.

The number of Syrian refugees in Turkey has increased from an estimated 25,000 in 2011 to nearly  3 million in 2016. The number of asylum applications from Syrians in European countries was 25,665 in 2012, and this number increased to 104,300 for 2016. At the end of June 2016, there were almost 1.1 million pending applications for asylum protection in the EU member states. Between March 2011 and March 2016, 250,000 people died in the Syrian war. So far in 2016, 414 people have lost their lives as they were trying to cross the Aegean Sea, 366 of them before the Turkey-EU deal. The living conditions for those who made it to Turkey or Greece are also worrying.

turkey-merkelOne year ago German Chancellor Angela Merkel appeared on TV show Anne Will and announced her plan for the refugee issue, which depended not only on Germany but also on Turkey. Merkel’s plan originally belonged to the European Stability Initiative (ESI) and its founding chairman Gerald Knaus. This initial plan included asylum grants for some 500,000 Syrian refugees in one year. It suggested that not only Germany but also other European states should accept claims for asylum directly from Turkey to avoid unsafe routes, Turkey should take back immigrants who made it to Greece in order to discourage people to cross the Aegean via smugglers, and that Germany should help Turkey to achieve visa liberalization.

Clearly, Merkel saw Turkey as a key partner in dealing with this refugee crisis, but she had to convince her European counterparts, too. Despite the ESI’s insistance “to move quickly” in implementing their plan, “the European leaders handed over responsibility to the notoriously slow-moving and less influential European Commission.” Merkel convinced the EU to take joint action in solving the refugee crisis. The Turkey-EU Deal was finally formulated almost half a year later when Merkel announced her version of the plan on March 18, 2016. But the main trick was in the implementation of this plan. In their policy brief in June 2016, Toygür and Benvenuti were already hinting at major problems and a potential Plan B in dealing with the refugee crisis. Continue reading

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Oct 20 2016

Democracy Between Compromise and Control

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By Henry Radice

The slogan ‘take back control’ was widely credited as a key factor in the UK’s vote to leave the EU on June 23rd.  That vote revealed many cleavages in how we understand our democracy. One significant one lies between understandings of democracy as the control of power by the majority, and a more subtle notion of democracy as the art of compromise. This latter understanding appears to be in retreat throughout the liberal democratic parts of the world, to say nothing of more fragile political environments.

2016619_174727The contrast between control and compromise is important, and the lesson it yields sobering. In an ‘interdependent, globalised world’, to recycle the cliché – more-or-less accurate as it happens – the notion of control intervenes as a comforting delusion. It soothes the angst of those who would stop the world in order to get off. But it also appeals to the individual scale, and evokes domestic analogies in which control is seen as something achievable.

Indeed, the use of domestic analogies has become both widespread and problematic in both national and international political discourse. Witness the success in the UK of the frequent comparisons between the UK economy and a putatively overstretched, finite household budget. ‘Taking back control’ evokes a world in which borders can be as solid and straightforward as the walls of a house, where an Englishman’s home is his castle and it is his right to raise the drawbridge when feeling besieged (though he would be wise in such circumstances to have an adequate stock of provisions, or, in other words, a plan…). Continue reading

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Oct 14 2016

The Rise of Populism Could Persist as Western society and its Academic Institutions Fail to Promote Critical Thought

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By Athanasios Gkoutzioulis

On the 4th of May, Donald Trump became the Republican presidential nominee while on the 23rd of June, Nigel Farage’s (and Arron Bank’s) campaign largely contributed to Brexit to the surprise of international public opinion. Trump’s or Farage’s triumph does not necessarily reflect the rise of populism or demagogy – the spectre of this has always lurked within societies to a greater or a lesser extent. It simply shows how Trump and Farage capitalized on the absence of critical thinking and the uncritical digestion  of their electoral campaign messages.

Donald Trump in Manchester NH February 8, 2016 Cropped This can strongly influence our fast moving world, where the media ‘rule’ and information is not carefully assessed. This lack of critical thinking can also threaten democracy since voters can be lured to adopt misleading approaches to politics and vote without scrutinizing complex political issues.

Academia cannot sufficiently help to protect democracy or insulate society from the shortcomings emerging from the absence of critical thought. Universities today accommodate a rich curriculum. Nevertheless, lately they appear to put more emphasis on improving their facilities and their student’s employment prospects, neglecting the enrichment of their students’ critical skills.

Critical thought, however, can be very important in today’s world in two ways: Continue reading

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Oct 4 2016

The Great Stagnation

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By Marion Labouré and Juergen Braunstein

The recent Brexit vote, as well as high uncertainty around a number of upcoming elections (e.g., the 2016 US and 2017 French presidential elections), are only symptoms of a larger underlying problem. Voting for populist and extremist campaigns is a mean of expressing discontent with the status quo, but with far reaching implications. We believe there is a critical urgency to refocus the debate back to the structural drivers behind this international phenomenon.

Day 3 Occupy Wall Street 2011 Shankbone 5For a large part of the population in Western countries the current economic situation is characterized by increasing inequality, job-insecurity, and income disparity. This stands in strong contrast to what our parents and grandparents have experienced. Few decades ago, the majorities of citizens’ residents in advanced economies thought that their children will be wealthier and better off than themselves. Until the financial crisis, the majority of households in Western countries had benefited from strong economic growth and sustained employment. Specifically, the baby boomer generation had not only benefited from increasing revenue but also from social benefits.

Over the last decade, the income of the middle class, which represents the largest share of the population in developed countries, has stagnated or declined. The financial crisis has been global and the current political environment does not seem to suggest a significant improvement. Other structural factors have put additional pressure on these developments including demographic and labor market pressures, combined with fiscal problems.
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Sep 9 2016

Fantastic Mr President: The Hyperrealities of Putin and Trump

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By Maria Brock

Vladmir_Putin_fishing_toplessIn July 2016 – more than 15 years into his time in office – Vladimir Vladimirovich Putin’s approval rating was at 82%, a figure made all the more remarkable by the fact that the country is experiencing a palpable and lengthy economic downturn. Some commentators have favoured an explanation that treats this as proof that a larger-than-life president is more in line with ‘what Russians want’, as Putin “satisfied a yearning for a strong leader who could make the Russian family proud”. However, concretising a Russian ‘national desire’ is less than helpful if we seek to understand the reasons behind Putin’s continued popularity. Equating a historical past with an inherent propensity to follow strong-men is an exercise in oversimplification, as it treats nations and groups as essentially static, prone to repeat the same historical patterns over and over again. Similarly, a focus on the more overt parallels with the earlier ‘Cults of Personality’ neglects the fact that the underlying ‘conditions of possibility’ that produced the two phenomena are different. Such comparisons also fail to explain the appeal of similarly larger-than-life politicians in countries with a longer democratic tradition. Clearly, an emphasis on national psychological propensities is not productive. Instead, an analysis of the appeal of such leader figures that taps into less conscious mechanisms is worthwhile. By simultaneously looking at the phenomenon of Donald Trump’s remarkable rise, a number of parallels pertaining to the creation of their public personae become apparent. In fact, such an analysis can serve to illuminate overarching principles structuring the successful creation of their outsized public personae. Continue reading

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