Tag: Economic policy

China: A Partner for the Development of Latin America?

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Courtesy Diego Wyllie/flickr

This Expert Commentary was published by the Elcano Royal Institute on 11 July 2016. It also appeared in the discussion paper “EU-China Relations: New Directions, New Priorities” by Friends of Europe.

China’s re-emergence over the last few decades coincides chronologically with the process of diversification in Latin America’s pattern of international insertion. We have witnessed Beijing grow from a marginal factor in Latin America, to become a key player in shaping the evolution of countries in the region and their process of regional integration. Deepening relations with non-traditional partners has opened a more pluralistic scenario for Latin American countries, extending the range of their international cooperation options in all spheres.

The economic dimension of Chinese-Latin American relations has blossomed in the areas of trade and finance. Beijing has become the second largest trade partner and the main source of international public finance for Latin America. With that being said, the economic development of some Latin American countries is so dependent on the performance of the Chinese economy that a fall of one percentage point in the growth rate of Chinese GDP would reduce Latin American growth by 0.6%, according to the World Bank. Therefore, it is particularly relevant to analyse whether engagement with China is healthy for the economic development of Latin America or not.

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How to Prevent Economic Crises

G20 Summit, courtesy of The Prime Minister's Office/flickr (Crown Copyright)
G20 Summit, courtesy of The Prime Minister's Office/flickr (Crown Copyright)

The global economy is strongly integrated, and domestic economic policies are strongly… well, domestic.

A landmark report by Chatham House and the Centre for International Governance Innovation (CIGI) argues that the way in which nations design their economic policies is woefully inadequate to prevent financial and economic crises.

Entitled “Preventing Crises and Promoting Economic Growth: A Framework for International Policy Cooperation“, the report is the outcome of a nine-month international research project. Authors Paola Subacchi and Paul Jenkins consulted with finance and foreign affairs ministries, multilateral institutions and research institutes in Europe, Asia and North America.

They call for national policy-makers to recognize the spillover effects of their policies on other countries as well on the wider economic system. In practice, this would mean accompanying internationally relevant domestic policies by “international impact assessments”.

The report also proposes a new framework for G20 policy cooperation. Indeed, cooperation tends to be “only feasible when interdependencies are made clear by incidents of instability and volatility as happens during crises, i.e. when the costs of non-cooperation are painfully evident“.

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The Push for Pensions

Marching for work and retirement, photo: marcovdz/flickr

Europeans are talking about retirement. Yet, in France at least, it’s the youth who are most angry. Today the biggest protest movement since President Sarkozy took office continued for a tenth day. Airports have been disrupted, health risks have reached ‘pre-epidemic levels’ with refuse collectors on strike, even the Louvre was closed as staff blockaded the museum entrance.

The cynical readers among you will view this tête-à-tête as more déjà vu than coup d’état. Nonetheless, there remains a fundamental question in the developed world over how to balance the right to a ‘long and happy retirement’ against the gerontological and economic realities of modern times.

In financial terms it’s hard to argue with the figures. According to Allianz, a leading German financial services company, public pension expenditure for the European Union as a whole will increase to 12.8 percent by 2050. Compare this with France, Greece, or even Italy – where expenditure will increase to 25 percent of GDP by 2050 – and it seems inevitable that the budgetary axe should fall at this time of fiscal ‘belt-tightening’ across the continent. In Britain, for instance, the new measures are projected to save £5 billion a year. Furthermore the financial crisis has hit one rather traditional quirk of European retirement rights, namely that of a gender-based pension entitlement, with both the UK and Greece removing a woman’s prerogative to beat her husband to the pension pot.

However, this is one problem we can’t blame on the bankers. Aging populations are a direct result of our successful economic development – as the social, technological and cultural effects of modernization and urbanization mean lives are lengthened and people have fewer children to keep their populations youthful. As the New York Times put it in response to the protests, “it is hard to conjure a situation in which people move back to the countryside and again have larger families.” In fact, the Oxford Institute of Ageing – which published the seminal 2008 Global Ageing Survey – predicts that the West’s future search for a younger workforce will be instrumental at improving lives in the developing world, where in Africa only five percent are projected to be 65 or older in 2050 – compared to 29 percent in Europe.

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UK Foreign Policy After Brown

UK Conservative Party leader David Cameron at the 2010 World Economic Forum in Davos, Switzerland / Remy Steinegger, flickr

Their campaign slogan is “Vote for Change.” But in terms of foreign policy, if David Cameron’s Conservative Party maintain their opinion poll lead over Labour and go on to take office after the British general election on 6 May, change is likely to be conspicuous mostly by its absence. As The Economist pointed out last week, with the notable exception of Britain’s relations with the EU, “foreign policy is distinguished by the broad agreement it commands in Westminster […]. For the time being, politics, to a degree that some find heartening and others worryingly complacent, still stops at the water’s edge.”

Take Afghanistan, a war that bleeds popular support with every British fatality (281 now since 2001) but one that neither the Conservatives nor the Liberal Democrats – the UK’s third largest party (and possible kingmakers if voting ends in a stalemated ‘hung’ parliament)  – offer to end Britain’s military involvement with any time soon. Indeed, and quite apart from any security fallout, a hasty withdrawal would deal a serious blow to the UK’s longstanding ‘special relationship’ with the US, which the Conservatives are (uncontroversially) committed to upholding.

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