Feb 10 2014

2014 LSE Africa Summit: A Call Home

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In the first of a series of posts on African entrepreneurship in the lead-up to the inaugural LSE Africa Summit, LSE’s Preston Ideh details how the organisers of the Africa Summit are embracing their role as entrepreneurs.

Ashish-Thakkar_bannerAfrican entrepreneurship is a call home.  At the launch of Mara Online, Ugandan multimillionaire Ashish Thakkar flew a chartered plane over Silicon Valley, the world’s technology hub with a banner reading ‘It’s time for Africa’. The call is profound, yet remains unanswered by those gifted with ingenuity. It is very much Africa’s time today, and the answer is simple – Entrepreneurship.

Africa’s role on the world stage is yet to be harnessed, but the world is patiently watching in anticipation. It is a familiar tale of African governments and Foreign Offices to call on Foreign Direct Investment to unlock Africa’s potential, but the answer also lies somewhere even more familiar to us. It lies in our power to dream, to envision and to create. Entrepreneurship is more than running a business and marginal profits; it is about owning something distinct and commercialising an innovation. Innovation itself has always been the driver of progress, and it has never been more necessary. What innovation needs are those entrepreneurs with the knowledge and skills to create the future by thinking now. We all have a desire to see Africa grow, but we must do it ourselves, because what is not started will never get finished.

The biggest mistake foreign investors’ make is to think of Africa as a country rather than a continent. The individual countries in Africa are all distinct, each with its own history, culture, languages and regulations. These are business intricacies that are best understood by Africans themselves, Africans who have grown up understanding their own cultures. This is why Entrepreneurship needs to be born of those who understand their countries best. Indeed, it is a call home for us, because we are best suited to this task. Economics tells us foreign investment will work best if there are entrepreneurs with ideas, businesses to invest in and competition to necessitate innovation. Unarguably, local partners with a strong understanding of market cultures and behavior patterns are the best ways to guide foreign investment. There is little disagreement over an assertion that few people understand African business patterns better than Africans themselves and even fewer can work best with Africans back home. How much more certainty do we require to brace the challenge of answering the call to guide Africa’s economic growth?

There is no doubt that there are risks, hurdles and obstacles to successful African Entrepreneurship, but these are the regular paths of those who have succeeded. Around the world, successful entrepreneurs have learned to embrace the mantra of “no risk, no reward”, or put more aptly “high risk, high reward”. These risks are challenges today, but our tomorrow could make them scars of the past. We may not all be entrepreneurs with million dollar ideas, but there is a role for everyone to play, regardless of age, gender, tribe or socio-economic class and at LSE, we have begun to embrace ours.

LSE’s inaugural Africa Summit is an embodiment of the African desire to streamline entrepreneurial zeal towards our continent. The Summit will challenge business concerns in Africa, guided by African entrepreneurs such as Saran Kaba Jones, Founder of Face Africa and Jim Ovia, Founder of Zenith Bank and Visafone. The call home is one to be answered with full knowledge of the African terrace and challenges, and the Summit is creating a forum for such discussion. Like any other business decision, we cannot undervalue the importance of knowledge and strategy in guiding Africa’s giant step.

So the solution seems rather simple when theoretically outlined. But if Ashish is correct about the time for Africa, it is not enough to have a desire to change things, because to push our continent forward we need to go home and make things happen.

This article was originally posted on the Africa at LSE Blog.

Posted by: Posted on by LSE IDEAS

Jan 31 2014

The EU’s new economic governance is blurring the boundaries between European competences and domestic sovereignty

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As part of the LSE EUROPP series on the Dahrendorf Symposium.

 

logoThe financial crisis has brought about a number of new European initiatives designed to coordinate national economic policies in the name of stability and growth. Alexander Ruser assesses one such initiative: the issuing of country-specific policy recommendations to EU states. Using a qualitative data analysis of the content of these reports, he writes that governments are being urged to follow policy advice that seriously interferes with national sovereignty in order to demonstrate solidarity with their fellow members of the Eurozone.

In my previous EUROPP article, I wondered whether the European Union is losing political influence in international environment negotiations. I argued that because of changing international relations, the EU may become less important as a normative power on the global scale. But what about the EU’s normative basis itself? Have the challenges of recent years affected its core values, such as ‘solidarity’ and ‘equality’?

Political reaction to the global financial crisis, and in particular to the sovereign debt crisis, has focused on making European economic governance more efficient. In addition to immediate emergency action like rescues and bail-out packages, the most important structural reform was the approval of the ‘European Semester’. Its implementation marked a paradigmatic shift in economic governance. Budget surveillance and control mechanisms have replaced voluntary initiatives such as benchmarking and intergovernmental cooperation like the ‘Open Method of Coordination’ (OMC).

This new framework for economic governance provides important roles for the Council of the European Union and the European Council, while the European Parliament finds itself reduced to an advisory function. It clearly favours intergovernmental decision-making over democratic legitimation at the European level. As a reaction to global financial turmoil, recent government reform in Europe has been driven by a desire to fix the flaws of monetary union, encourage financial sustainability and increase its efficiency and reliability.

Unlike more future-oriented reforms of the past, the new economic governance seems to lack political vision. Instead, it tinkers with the symptoms of the crisis and indicates the EU’s adoption of a more technocratic approach, stressing agreement upon what is ‘necessary’ to save the euro and restore stability. The provision of annual, country-specific policy recommendations is among the most important governance innovations to reach this goal.

Aiming at providing a blueprint of the respective requirements, these reports (which are proposed by the European Commission but are adopted and finalised by the European Council in July of each year) differ considerably from soft law mechanisms like the OMC. As a result of intergovernmental deliberation, the European Semester seeks to increase national responsibility for action. Part of this process is the blurring of European competences and domestic sovereignty. An examination of the county-specific policy recommendations from the past two years reveals that policy coordination under the new governance framework is far from limited to fields of clear European competence.

Qualitative data analysis of the 2012 policy recommendations shows that elected bodies in 15 countries were advised to make significant changes to their pension systems (especially to raise the statutory retirement age). Six governments were advised to reform national healthcare and almost a third were called on to encourage ‘productivity responsive wage-setting’ which could mean substantial changes to collective bargaining traditions. In contrast to policy fields closely affiliated with Brussels (like trade and research politics), policy recommendations on social policy and domestic taxation indicate a de facto reduction of domestic political manoeuvrability.

Table: Policy advice in the 2012 country-specific Council Recommendation

Note: Author’s own calculations, QDA Miner

 These findings may mark the beginning of revolutionary. but consensual changes to the normative basis of the EU. National governments are being urged to follow policy advice that seriously interferes with national sovereignty in order to demonstrate their solidarity with their fellow members of the Eurozone. At the same time, the strong position of intergovernmental institutions under this governance framework makes sure that the creditor Member States can influence specific policy recommendations. Further harmonisation of domestic politics could also make its way in, with national governments lacking the power to resist.

On the European level, insisting on maintaining national sovereignty displays a lack of solidarity. At home, policy recommendations claim the technocratic appeal of being necessary in order to regain economic stability not only within a particular country, but for the Eurozone as a whole. This may lead to a substantial redefinition of the boundaries between domestic and European politics. When national governments are urged to reform social security, collective bargaining or taxation because of a necessity to do so defined elsewhere, the question of the legitimacy of European politics – especially given the limited influence of the European Parliament – has to be addressed again.

Posted by: Posted on by LSE IDEAS

Jan 22 2014

‘A Strategy for Southern Europe’: Lisbon Launch

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By Dr Rui Lopes, Associate at LSE IDEAS and researcher at Instituto de História Contemporânea (IHC).

2013_11_22_Portugal_WEBThe Portuguese launch of the LSE IDEAS Special Report ‘A Strategy for Southern Europe’ – released by the Southern Europe International Affairs Programme at LSE IDEAS – took place on 23 November 2013, at the Teatro Nacional Dona Maria II, in Lisbon. The event was organised in collaboration with the Instituto de História Contemporânea (IHC), based at the Universidade Nova de Lisboa. After being introduced by high-profile academics, the report served as starting point for a roundtable where renowned Portuguese analysts discussed the specific situation of Portugal regarding the themes addressed in the report.

The first panel presented the Special Report and commented on its context and potential.  The session began with a brief introduction by the head of the national theatre, Carlos Vargas, followed by Professor José Maria Brandão de Brito, representing the IHC, who highlighted the overall contribution of the report for public debate

Professor Nuno Severiano Teixeira, speaking both as Vice-Rector of Universidade Nova de Lisboa and as one of the  contributors to the report, emphasised that while the present crisis in Southern Europe partially derives from endogenous factors, some responsibility should also be attributed at a European level. Financial austerity, although necessary, is an insufficient response, as clearly demonstrated in the case of Portugal, where salaries and pensions have been cut and taxes increased, resulting not only in economic recession and higher unemployment but also in a rise of public deficit and debt. According to Severiano Teixeira, these points, illustrated in the report, need to be taken into account in the narrative about the crisis and a new discourse – rooted in serious academic research such as this – should promote political and diplomatic alliances within the EU.

Professor Arne Westad, director of LSE IDEAS, stated that all of Europe is now in a fundamental crisis in terms of direction – not just economically and structurally, but in terms of values such as pluralistic decision-making and respect for sovereignty within a cooperative framework. Westad shares with the report the conviction that, despite enormous differences between the countries of Southern Europe, their situation has enough in common that comparisons can be drawn and solutions worked out beyond a national level.

The second panel was a roundtable discussion entitled ‘Portugal and the Crisis in Southern Europe’, chaired by journalist Nicolau Santos, from the newspaper Expresso.

Ambassador Francisco Seixas da Costa, Executive Director of the North-South Centre of the Council of Europe, outlined that in Portugal’s historical geostrategic triangle – based on strong relations with America, Africa and Europe – the European corner has been privileged since the decolonisation of the Portuguese empire, which explains the current frustration with the EU’s lack of solution for the crisis. Seixas da Costa acknowledged the value of working closely with the rest of Southern Europe – as well as with northern Africa – but expressed scepticism over the report’s proposal for a regional alliance, at least in the short-term. The answer, for Seixas da Costa, can still be found above all in the EU institutions, hence the need for a serious debate preceding the European parliamentary elections in April 2014.

Professor José Reis, from the economics department of the Coimbra University, postulated that Southern European countries are undergoing the institutionalisation of a new social and political European model that places them at the negative pole of an increasingly asymmetrical EU. The first stage of Europeanisation, which sought to temper a liberal approach towards the market with investment in a strong welfare state, was interrupted in the mid-1990s, creating serious problems of competitiveness in Greece, Portugal and Spain. This produced a surplus of financial capital in the founding members and a deficit in the countries that had joined the EU more recently, with the former channelling their surplus into the credit boom that became the main basis of Southern European economic growth. Now the new model for Southern Europe has become an austerity-based political economy that targets the region’s welfare state and labour costs. Reis criticised this option, pointing out in particular that the alleged need to adjust labour costs is a profound fallacy, as in practice the region’s economic evolution has not been limited or pressured by the weight of salaries.

Dr António Costa Silva, of Partex Oil and Gas, focused on the topic of energy, claiming that Southern Europe will not be able to overcome the present crisis without reducing expenses and supporting sectors that can generate wealth.  He explained that Portugal is spending considerably less on the import of oil, gas and coal than it did 10 years ago, as a result of both its investment on renewable energies since 2005 and the crisis’s effect in declining consumption. Nevertheless, according to Costa Silva, the country is still paying an unsustainable energy bill, particularly in the field of transportation, which accounts for 36% of national energy consumption due to the lack of meaningful public transport policies and the exponential expansion of private car ownership since the early 1990s. Professor João Peixoto, based at the economics and management institute ISEG, began by supporting the report’s conclusions regarding migration towards Southern Europe. Focusing on the Portuguese case, Peixoto called attention to the fact that emigration levels have surpassed those of the 1960s – when political and socio-economic conditions drove away 1 million Portuguese – and that for the first time the number of people emigrating is larger than the number of births, thus enhancing the country’s already existing demographic crisis to new extremes. He explained that for Portuguese migrants, as for Spaniards and Greeks, the main destinations are EU countries above the Pyrenees – particularly in the case of the more qualified youth. While Southern Europe loses experts needed to jump-start its economy, host countries benefit from migrants that help solve their demographic problems and relative lack of qualified labour, with the added advantage that in northern European societies there is less xenophobic resistance to Southern European migrants than to other population groups. The process therefore reinforces the stark regional asymmetries within the EU, leading Peixoto to conclude that the current trend needs to be offset, namely through investment in Southern Europe.

Professor Brandão de Brito, based at ISEG and IHC, focused on the failure of the austerity programme as applied to Portugal, where despite the government’s public refutation preparations are already underway for the possibility of a second bailout. Although the programme was scrupulously undertaken – earning nine positive evaluations by the Troika – public finances and the deficit have not come under control. Unemployment and poverty remain at unsustainable levels as a result of the violent economic contraction imposed by the memorandum negotiated with the Troika behind closed doors. Besides Lisbon’s passive acceptance of the memorandum’s ultra-liberal approach, Brandão de Brito denounced the document’s punitive dimension. Under the notion that Portugal lived above its means, a policy of harsh impoverishment is being followed. Brandão de Brito also expressed concern over the off-hand and obscurely negotiated privatisation of valuable and strategic assets like energy companies, airports and the postal serviceThe situation is aggravated by the lack of understanding regarding the need to pursuit an alternative path – the only options put on the table are either a second bailout or a precautionary programme along the same lines, which would mean turning austerity into the norm and further postponing economic growth. Besides endorsing the Special Report’s proposal, Brandão de Brito suggested the creation of a European financial union, as well as an internal rescue mechanism that could replace the IMF and stay closer to the rules and spirit of the European treaties. He stressed that he does not demand the debt be pardoned, but asks for time to recover and to establish a framework of shared economic sovereignty more suited to the dignity and self-esteem of all European countries.

A Strategy for Southern Europe was launched on the Monday 14th October at The EU in the Eye of the Storm.

For more information about this report please contact Zoi Koustoumpardi here.

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