How did you feel when you saw those Chilean miners being pulled out of that hellhole?
Wasn’t it wonderful to see one of the best news stories of recent times unfold in front of your eyes?
As each miner was released from their underground prison, the unbridled joy of their rescuers was infectious.
Rightly, this story has had blanket media coverage with 24hour TV coverage and many millions of column inches of comment.
Chatting to friends, I was taken aback by a casual comment I heard, to the effect of: ‘‘Wasn’t it amazing that a South American country had the resources, skill and wherewithal to mount such a rescue?”.
My friend was just reinforcing our Eurocentric view of the world, where Europeans and North Americans are developed and the rest of the world is in some way backward – or, to use the expression mostly reserved for South American countries, ‘‘basket cases’’.
This view is so outdated as to be dangerous. In reality, it is we who are falling behind.
For Ireland – as we grapple and bitch about the way out – the lesson from the rest of the world is that they are marching ahead.
No one is waiting for the Irish to sort out their house.
They are moving and it is we who will be forced to catch up, not them.
Another story that came out of Chile on Thursday is revealing.
Amid the national euphoria, the Chilean central bank raised the key overnight borrowing rate by 0.25 per cent to 2.75 per cent. In fact, the Chilean central bank has been raising the rate steadily since June, when it was at 0.5 per cent.
This is because the recovery in the Chilean economy has led to inflation worries.
But the point is that the economy is expanding again.
As usual with central banks, the bank statement on Thursday that accompanied the interest rate decision gives a hint of the risk factors they see on the horizon. Their biggest worry is us – the developed world.
This is what the Chileans had to say about us: ‘‘A slower-than-expected recovery in developed countries is an important risk factor in emerging economies.”
Click to view larger chart.
It is fairly obvious why a resource-rich South American economy would see the developed world’s sluggish recovery as a risk, but a chart published by the FTAlphaville blog earlier this month shows that there might be something more fundamental happening to the global economy.
For the first time since the 1870s,when thousands of Irish people left Ireland for Argentina and Chile, the contribution to global GDP of the G12 emerging economies (China, India, South Korea, Indonesia, Saudi Arabia, Russia, Turkey, Mexico, Brazil, Argentina, South Africa and Australia) has surpassed the contribution of the G7 (US, Canada, Germany, Italy, France, Britain and Japan).
It could be argued that the global crisis has passed emerging markets by, and they have had to do little themselves as the developed world fell below them. But this would be a huge over-simplification of the issue.
The chart shows that, yes, the G7 share of global GDP has fallen in recent years. But there has also been massive growth in the G12, as global growth has shifted from the developed world to the developing world.
While Chile is not in the G12, it is a great example of what an emerging market economy can do if it gets its economic policy right.
Chile seems to be getting a lot right at the moment.
In fact, one of the starkest observations is just how virtuous economic policy and behaviour have been within the developing world in recent years.
In contrast, the developed world economies – particularly the US, Britain and Ireland – have behaved like financial delinquents.
We are the ones who have comported ourselves like adolescents, borrowing other people’s money and blowing it. In the meantime, the developing world has saved, invested and done all the ‘‘right things’’.
If you have time to keep up with global economic developments, you may have heard of Andrés Velasco, the economist appointed as finance minister of Chile (imagine that, a Minister of Finance that actually knows something about economics).
He decided in 2006,when the price of Chile’s main export (copper) reached record levels, to save the surplus from the boom, rather than add it to current spending.
This was not an easy decision to stick to, as he came under intense political pressure to spend the extra money.
Had Velasco taken the McCreevy ‘‘if I have it, I’ll spend it’’ approach to economics, Chile wouldn’t be in the position it is today.
Politically, he prevailed.
In the first nine months of his office, he creamed $9.6 billion off the top of the copper price – 5 per cent of GDP – and squirrelled it away. Last year, that copper-based contingency fund amounted to 30 per cent of GDP.
It helps that the government owns the biggest mine in the country – the mine which mounted last week’s rescue operation. When the economic crisis hit, the war chest meant that Velasco could then spend the money in the economy to cushion the blow, thus preventing Chile from falling into recession.
And what did he spend the money on?
Velasco has won praise from Unicef for continuing to increase investment in early intervention in children’s education all the way through the global recession – he could do this because he had the good sense to save in the good times for the rainy day.
It would be easy to contrast the performance of the authorities in Chile with the authorities here, but that is not the point of this article.
What Chile is doing very well, and what policymakers in the developed world are failing to do, is to manage its economy.
Chile is flexible; its policies are set to meet the current needs of the economy, even if they are sometimes unpopular; and it is willing to move quickly as the need arises.
It may be that the global economy has reached an inflection point, where the countries that have driven growth for the last century will continue to fade.
For billions, this will be a great liberation. It is our challenge.
Are we up for it? If not, could our children again emigrate to South America, as they did 120 years ago? Stranger things have happened.
Always more to it when you care to look beyond the ‘numbers’….. “The accident that trapped the miners is not unusual in Chile and the inevitable consequence of a ruthless economic system that has barely changed since the dictatorship of General Augusto Pinochet. Copper is Chile’s gold, and the frequency of mining disasters keeps pace with prices and profits. There are, on average, 39 fatal accidents every year in Chile’s privatised mines. The San Jose mine, where the men work, became so unsafe in 2007 it had to be closed — but not for long. On 30 July last, a… Read more »
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A lot will depend on whether the USA can rid itself of the purges of deregulation which led to its FIRE economy and reinvent itself to serve better its innovative, creative and resilient population.
If the west follows the route of Ireland Inc, we’re kaput. Huge concern would be the whole question of human rights, democracy in emerging economies.
http://bit.ly/bpWtpk
US now known as North MExico:)
Yes, countries in what we call the Third World are reforming themselves, getting their act together, and they mean business. Our cliques are behaving like the elites of the Third world used to behave previously. They are preventing reform, they are tying the citizens to their gambling losses, and they are preventing younger more agile competitors from taking it away from them. We even have a disgraced big shot hiding out in Switzerland. And he used to work in the tax system. And he is pals with many very prominent tax dodgers. That is the clearest sign that you are… Read more »
A measure of the ability of the state to manage the economy, can be seen in the countless interventions over the past decade, where as a result of lobbying by various groups and interests, the state “got involved”. The costs always went into overrun territory. The specifications were always unrealistic. The design was “bold and adventurous” (read expensive and an eyesore). The contract went to the well connected. It could apply to anything. The awarding of mobile phone licences. The National Conference Centre. The Binge Syringe. Croke Park. The Bertie Bowl, Adamstown Farce. The replacement for Landsdowne road (can we… Read more »
David. Before I go on its interesting to note that the *drill bit* used in rescue innovated in Limerick http://www.limerickpost.ie/index.php/navigation-mainmenu-30/local-news/2212-shannon-expertise-helps-save-chilean-miners.html The *emerging economies* and the developed economies are they working for each other across the spectrum of trade in a symbiotic way. One can only but conclude that they are not. The controlling interests of all countries converge at BASEL and a financial hegemony. And the allocation of wealth produced from countries rich in resources flows upwards into the insiders bank accounts, whether they hold an emerging economy passport or not. The peasents and serfdom class of emerging economies remain… Read more »
In Context: INEQUALITY Concertación, a center-left party coalition governed Chile since 1990 until March 2010 , leaving behind the area of Pinochet’s dictatorship that lasted from 1973-1990. In March Billionaire businessman and technocrat Sebastián Piñera took over While Chile is hailed as a economic success story, it has to be highlighted that income distribution shows rather high inequalities. Bolivia has the highest inequality in the region, followed by Haiti, Brazil, Ecuador, and Chile, which is tied in fifth place with Colombia, Guatemala, Honduras, Panama and Paraguay. So I would like to add something to David’s article from a different angle.… Read more »
P.S. …desperately wishing for an EDIT function of posts!
The Message from the Miners to the world is that THEY got themselves out of the Hole .
We in Ireland have REFUSED to do the same .
This is a National Tragedy that the world finds very hard to understand .
We don’t seem to care and unlikely to do so.
I know South America from tip to toe, so a few words of advice are in order for those who aspire to emigrate there. Firstly, the upper echelons in SA are far more sophisticated than 90% of our gombeen ‘leaders’. Secondly, don’t go to work there except in some sort of professional capacity, they already have an abundance of good tradesmen. Thirdly, don’t expect many people to speak English. Those who do will prefer to practice their skills on you rather than allow you to practice your language skills on them. Fourthly, life is precious and hazards many. Fifthly, the… Read more »
As young man, still living in Germany, I was a member in this organization, which still continues their good work to highlight important issues around the globe here:
http://www.gfbv.de/index.php?change_lang=english
Economics and human rights should go together, some info here:
The chapter of the Compass Education Platform on legal protection of Human Rights
http://eycb.coe.int/compass/en/chapter_4/4_3.html
Basic information on the European Union and Human Rights
http://europa.eu/pol/rights/index_en.htm
4. The history of human rights in Europe
In addition, you should be aware of the history of human rights in Europe.
This brief essay offers an excellent summary:
https://www.stiftung-vz.de/w/files/mr_bilden/human-rights-and-history/human.rights.historykjaerum.
hr.and.their.history.pdf
In addition, the Council of Europe offers again an excellent overview:
http://www.eycb.coe.int/compass/en/chapter_4/4_1.html#412
Above links from EYP(European Youth Parliament) docs, who like to debate issues around the above.
My list of human rights links ‘is awaiting moderation’ Really?
David Your use of the recent mine drama to make a basic point about the realities of global economics (as opposed to the unreality of Irish policy) has been waylaid by ideologically-motivated posts, which I’m afraid I have to agree with! So I hope you don’t mind me adding to these with a quote from Crotty’s Ireland in Crisis (c1986). In an appendix he gives very brief descriptions of the typical patterns of agricultural inefficienty found in post-capitalist-colonial countries. (“The manner in which people’s lives are devalued and land is used inefficiently is considered next for different categories of former… Read more »
@coldblow, Re your comment: “Malcolm made a point in a recent post about the absence in Ireland (I think) of an amateur tinkering-in-the-garage engineering culture as once developed in Birmingham, an innovating kind of environment that must be bliss for any boys or teenagers lucky to get involved in it. This surely thrives only under certain favourable social, political and economic environments…” Hold on there, we’ve moved way beyond the tinkering movement and now produce graduates of outstanding engineering talent who’ve got scientific qualifications to phd level and beyond. Taxpayers money has been spent in educating them. This talent is… Read more »
Just reposting this, think it of interest and relevanc….
“Got to give it to Iceland, for a small country they are showing some leadership
Iceland’s government will this week present a bill allowing debtors to walk away from obligations that exceed asset values and to nullify personal bankruptcies after four years, Internal Affairs Minister Ogmundur Jonasson said.”
http://www.bloomberg.com/news/2010-10-13/iceland-to-present-bill-to-wipe-out-personal-debt-minister-jonasson-says.html
One of the key differences between the development of the United States/Canada and the rest of the Americas in the 19th century was based on control of the resource base. In particular in the Northern states of the US, there was a more egalitarean feel to society, as there were few large landowners. Instead there were many small farmers and many farms, with most existing at subsistence level. This resulted in a push towards industrial development, and being able to afford to educate their children and generate a more equal society. The concept of American Liberty, is the defining difference.… Read more »
“This view is so outdated as to be dangerous. In reality, it is we who are falling behind” While we are preoccupied with Irish corruption and the mechanics of the money system the rest of the world is moving on. Ireland is irrelevant. “In fact, one of the starkest observations is just how virtuous economic policy and behaviour have been within the developing world in recent years” Many South American govenments are adopting socialist ideas and attempting to gear economic policies towards the needs of society rather than blood sucking capitalists “In fact, one of the starkest observations is just… Read more »
Afternoon, I should have realized that an article about Latin America would cause controversy. As an aside a few years ago in The Pope’s Children I wondered aloud why we Irish – maybe more than most others – have a fascination with South American politics and why most discussions on Latin America get ideological very quickly. I should have re-read that chapter before writing this piece. The point of today’s article to is illustrate the falling importance of the old world and the rise of emerging markets. This trend is not going away and their capital balance is in such… Read more »
Today’s Schumpeter column in The Economist complements @DavidMcW’s & is also worth a read:
Some quotes:
Subheaded “Emerging markets are teeming with young entrepreneurs”
“..the emerging world will stay young while the rich world ages. In 2020 the median age in India will be 28, compared with 38 in America, 45 in western Europe.”
“..entrepreneurial energies are moving eastward.”
“The next Facebook is increasingly likely to be founded in India or Indonesia rather than middle-aged America or doddery old Europe.”
http://goo.gl/zC3V
Regards,
@BriMcS
David.
Emerging markets resources are servicing the developed markets economies and its leading to buoyant economy, good, but, thats the first half.
To what degree are the riches and spoils of this trade off reaching the general worker.
No matter how busy and bouyant the emerging market economies are where is the wealth flowing toward the wealth generated, who is at the end of it?
For those of you that missed the most important rumour currently doing the rounds on the internet…. http://www.politics.ie/economy/140523-anglo-irish-bank-bondholders-revealed-15.html For some commentator by a technical expert attached to prominent insiders, click on the next link and then search for the word “Tiger”. http://www.politics.ie/economy/140523-anglo-irish-bank-bondholders-revealed-8.html I found that fairly descriptive. A lot of the leading movers of this clique get detailed analysis in “Who really runs Ireland” by Matt Cooper, and “the Bankers” by Senator Shane Ross. You should make it your business to know who is in charge in your country, so that you will know how to not pay for their… Read more »
Defining South Korea as an emerging economy is something that is long past the sell-by date. I mean South Korea has passed out many of the so called rich economies, in many metrics.
South Korea is already in a highly developed state.
Fascism going from strength to strength
Since I contribute here on David’s site, which is only since April, I am trying to warn on the emerging fascism that is happening throughout Europe.
It is often marginalized as a Nazi nostalgic extreme phenomenon which would not affect Europe as a whole. This is not correct, people such as Geert Wilders in the Netherlands or the Jobbik party in Hungary explain why this new fascism is going from strength to strength.
http://www.spiegel.de/international/europe/0,1518,722880,00.html
More than ten years ago I read an interview to a Chilean economist, in which he talked about a plan to make Chile a developed country in 20 years. In order to do that, they had to grow at 5% every year. I was surprised that they had a plan, and being Latin American, I wished them well, but was rather skeptical. Seems like things are going according to plan, and now I read that they have a date: 2018. I find the idea of being able to call a country “developed” judging only by the GDP per capita difficult… Read more »
ON A PEROSNAL NOTE: I wish I were a little red boat! http://dl.dropbox.com/u/4914840/redboat.jpg I will be off the grid here for some time, and just wanted to thank all of you and of course David, for a most interesting information exchange! The fight against my own Bank, Bank of Ireland, is taking the better of me at the moment and is exhausting me personally on all levels since December 2009. I will eventually out myself in public with all the details on purpose to highlight to other people with what methods Banksters are working from my own perspective as a… Read more »
Watched Frontline this evening, should be renamed Zombie TV. Woeful, appalling. Highlight was Dermot Martin telling us the church was not there to promote social justice, that was the role of politics. What a damp squid, turncoat zombie, Martin has turned out to be. While Martin dodged questions on his quest for resignations, Kenny and Martin were both plonkers skipping around soporific nonsense that went nowhere slowly. In contrast later caught the homage to Mary Robinson, one of Ireland’s greatest, proposed by David. Excellent, refreshing program. Camera work excellent. David had the presentation skills, grace, confidence and expertise, ease of… Read more »
On the bus (never again) from Arica to Santiago in Chile last year I got to know a local lady (long journey) based in Europe but had come back to Chile to settle an inheritance. She told me when she was growing up people were happy even though they were poor. But now even though people have some money the place is littered with drugs and crime and people are very unhappy, feel very unsafe. And this reminds me on Australia TV a few months ago Cathy Kelly was being interviewed on morning TV. Her latest book RE some group… Read more »
Full Moon Friday >>>>>> Go Slow
@colin, Just as ‘christianity’ has its intolerant fascist and racist extremists, Islam has its extremists also eg The Mahdi militia who took over Basra, Iraq during the occupation who executed and terrorised the local Moslem population with killings and other terrorist acts. Most religions perform a Darwinian service to mankind bringing order, justice, social cohesion that help people survive in otherwise turbulent circumstances. They should be respected for this. You might be surprised to discover that just as Americans had problems with the secret society of the Ku Klux Klan after the American Civil War, Islamic peoples have suffered the… Read more »
Time for heads to roll,
when are we going to get f*&Kin agnry?
When is the soma going to wear off??
When are we going to act like real MEN???
When it’s too feckin late, that’s when!!!!!
Hi David, I hope things are well with you as we watch the ‘Irish car crash’ in slow motion being played out. Interesting about that chart of G7 and G12 as it looks at the ‘old’ and ‘new economy’ groups. If you add them both up, they are around 80% of global output in 1820 and about 80% of global output in 2010! And not much of a change really in those intervening periods either. So its more a slicing of the pie really. Plus, if factors such as population changes are taken into account, and trade blocks and agreements,… Read more »
Merkel’s rejection of muticulturalism seems to be a precursor for a resurgence of nationalism in Germany and its possible withdrawal from the European Union.
Anyone else believe not touching corporation tax has become a sacred cow in Ireland? http://bit.ly/69BZhi “The standard rate of Germany corporate tax in 2010 is 15%. There is a reduced rate for part of a corporation’s income. An additional tax has been imposed to help the merger of the two Germanys. This is “solidarity tax” which is 5.5% of the normal rate payable. The tax is levied on corporations and individuals, subject to the conditions specified in the law. In 2010 the effective corporate tax rate, including trade tax and solidarity tax is about 30%-33%.” Perhaps in our time of… Read more »
Just a couple of random thoughts. If anyone wants to see a good thriller, then Missing, starring Jack Lemmon, is a fine film and conveys the menace which existed at the time of Pinochet’s coup. When I say ‘the menace which existed at the time’ I have to admit that this is more or less all that I know about that event. Lemmon’s son is one of the missing, he was apparently an idealistic young American caught up in the excitement of the previous regime. This may not speak well of me, but I did thin he and them were… Read more »
On the Sarf American them and having mentioned Naipaul above I can’t help posting this extract again from another of his essays, about his Trinidad homeland. Does this quote from V.S. Naipaul remind you of anywhere familiar? “The enemy is the past, of slavery and colonial neglect and a society uneducated from top to bottom; the enemy is the smallness of the islands and the absence of resources. Opportunism or borrowed jargon may define phantom enemies… But at the end the problems will be the same, of dignity and identity. “In the United States Black Power may have its victories.… Read more »
Lest we forget – and for a laugh:
http://www.independent.ie/national-news/black-mark-for-german-envoy-over-irish-jibes-1081495.html
I thought it was a piece of satire until I got half way through.
Memory Lane cuid a dó – just to brighten your evening:
http://www.independent.ie/opinion/letters/the-world-does-not-love-the-irish-1479352.html
And the point of your links and Naipaul meditation?
http://www.youtube.com/watch?v=LXhvdHrC1RM
German racist, nazi, overbearing, short tempered, unfriendly, rigid, strict, stern, mean, beer, lots of meat, east german women change their gender due to doping steroids, cars, good scientists, militaristic, holocaust engineers, polka dancing, suasage saurkraut eaters…?
http://bit.ly/bvsSFA
British lager lout, football hooligans
Stereotypes have more to go with blind ignorance than much else. Lots TO laugh at, but there can be a nastier side:-(
Further to the American foreclosure story:
http://www.nytimes.com/2010/10/19/business/19mortgage.html?_r=1&partner=rss&emc=rss
Bank of America announced on Monday that it would resume home foreclosures in nearly two dozen states, despite the running controversy over how banks handled tens of thousands of cases of homeowners facing eviction.
Still, it is far from certain that banks will be able to calm the public controversy easily or quickly.
Michael Hudson on the bank baleouts
http://www.youtube.com/watch?v=3pwAFohWBL4&feature=player_embedded#!
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Off the topic, but how many reading this forum get paid milage when they travel more than 6 miles to their work place. Greedy Judges, thank God I’m now living in a State where this would not happen.
Wake up Ireland.
Interesting article below: From Global Depression to Global Governance The role of the corporate elites’ secretive global think tanks Quote So while things have never seemed quite so bleak, there is a dim and growing beacon of hope, in what Zbigniew Brzezinski has termed as the greatest threat to elite interests everywhere — the ‘global political awakening’. The global political awakening is representative of the fact that for the first time in all of human history, mankind is politically awakened and stirring, activated and aware, and that generally — as Zbigniew Brzezinski explains — generally is aware of global inequalities,… Read more »
I was glad you wrote about Chile David and some of the comments from the guys have been illuminating. South America has a lot of left leaning governments and I wanted to know why this was the case. Everyone knows about Pinochet and the Caravan of Death and all the other dark forces that have been at work in Central and Southern America in the past. We also know that Thatcher was one of Pinochets bum kissers and that Chile was used as a bolt hole for Nazis escaping justice. We also know that conservative politicians in England in the… Read more »
Interesting snippets from the above link: “The Chicago School’s catastrophic programme pushed almost half the population below the poverty line and left Chile with one of the world’s highest rates of inequality” “The poor world’s debt crisis was used by the IMF and the World Bank to impose Chicago School programmes on countries that had no option but to accept their help. The US hit Iraq with economic shock and awe — privatisation, a flat tax, massive deregulation — even as the bombs were still falling. After Hurricane Katrina wrecked New Orleans, Friedman described it as “an opportunity to radically… Read more »
Food is a good short term play. Ireland is blessed with good farmland. The global population is falling – but plenty demand from the East in the meantime. From what I have seen agribusiness in NZ is much more productive/efficient. Maybe we can learn from our cuzzy bros. What about energy – harness the oceans (just don’t impact the waves), wind. Reduce Europe’s dependency on the Russian gas valve. That has to be considered – I’m not sure what investment has been put in place to date. I saw lots of wnd turbines on my last visit. Ireland should still… Read more »
Fintan O’Toole’s article says it all for me. http://www.irishtimes.com/newspaper/opinion/2010/1019/1224281440930.html
We are getting the mushroom treatment. What we see going on in France is harmless compared to what might explode from the depths here in Ireland. Irish people are being subject to a criminal level of psychological abuse.
Re: CORPORATION TAX I think that we need to have a system where taxes on businesses are close to that of the individual. And that taxes should be ‘progressive’ to reward companies that do not ‘fleece’ their market position and that who employ as many people as possible. As a small nation (population-wise) we definitely want to keep MNC and FDI in this country so need to attract companies based on tax reasons, plus other reasons of course. A flat tax rate whilst being simpleton to apply in calculations is not serving us very well and doesnt make any reference… Read more »