Getting our priorities right

I am hugely reassured to hear that, in this era of global crisis, British diplomats are focusing on the really important issues:

An agreement has been signed to bring two giant pandas to Edinburgh Zoo, the first to live in the UK for 17 years.

The deal was signed at Lancaster House in London by the Royal Zoological Society of Scotland and the Chinese Wildlife Conservation Association.

It was witnessed by Deputy Prime Minister Nick Clegg and Vice Premier of China Li Keqiang.

Tian Tian and Yangguang, a breeding pair born in 2003, will be under the custodianship of the zoo society.

The project represents the culmination of five years of political and diplomatic negotiation at the highest level and it is anticipated the giant pandas will arrive in their new home as soon as a date is agreed.

The Chinese government is said to charge around $2m a year to rent a pair of pandas. Apparently though, “the Giant Panda Project will be funded through sponsorship, offering unparalleled opportunities in terms of international corporate, commercial and diplomatic relationships between China and the UK.”

Happy days.

From BRICs to PIGS: what’s in a name?

First there was BRICs. Then came CIVETS. Then we were presented with BASIC, CRIM, BRICK, CEMENT, BEM, N11 and the 7% Club. Now barely a week goes by before someone tries to float another ‘useful’ investment acronym.

Behind the dense forest of exotic acronyms is a simple fact: the catch-all classification ‘emerging markets’ has lost much of its usefulness. It was invented in the 1980s, by World Bank economist Antoine van Agtmael, to replace the now-defunct acronym LEDCs (or ‘less economically developed countries’) by which the West had until then blithely referred to the rest of the world. The term ‘emerging markets’ served as a useful way to refer to fast-growing although crisis-prone markets like Russia, China and Mexico.

Within the term ‘emerging markets’ was quite a 1980s-assumption: these markets would follow the development route laid down by ‘developed’ economies, until they arrived in the neo-liberal end point reached by the US, the UK and other western countries. And the phrase also came to have strong associations with the currency and debt crises of the 1980s and 1990s.

But things have changed. The bigger emerging market countries have now overtaken the weaker developed markets, not just in total GDP, but also in the pricing they pay on their sovereign debt. Emerging market countries like China and Russia have accumulated trillions of dollars in foreign exchange reserves, and are now the main creditors of western sovereigns. In the 1980s, emerging markets depended on the west for capital inflows. Now the situation is reversed, and the US and EU depend on China to buy their sovereign debt.

It was partly to recognize this shift in economic power to emerging markets that Goldman Sachs economist Jim O’Neill introduced the now-famous acronym BRICs (Brazil, Russia, India and China) in 2001. It was a runaway success. A decade on, and MSCI has launched a BRIC index, there are several BRIC-focused funds, BRIC-focused blogs, BRIC conferences, and the leaders of the BRIC countries even held their own BRIC summit in 2009. 

However, the success of the acronym, and the increase in capital flows to BRIC markets that followed, quickly led to questions and criticisms of the BRIC tag. In 2008, for example, when Russia’s economy slid into recession following the war with Georgia and the Credit Crunch, some analysts suggested Russia should be dropped from the grouping. This suggestion was sufficiently alarming to Russia that it organized not one but two BRIC summits in Russia in 2009. . (more…)

Russian bear hugs the West tighter?

Two years ago, Georgian forces shelled the capital of the breakaway region of South Ossetia hitting the base of Russian peacekeepers as well as civilian housing. Russia responded immediately with a massive ground and air assault and in five days inflicted a heavy defeat on its tiny neighbour, occupying a band of Georgian territory into the bargain.

The conflict had several immediate results.

Already fraught relations between Moscow and Tbilisi plunged to new depths and diplomatic relations were severed.

Russia and three other countries recognised the independence of the breakaway Georgian regions of South Ossetia and Abkhazia.

And relations between Russia and the West – the US and the EU – deteriorated to their worst level since the collapse of the USSR – there was even talk of a new Cold War from western politicians.

The Cold War analogies led some commentators to argue Russian foreign policy had taken a decisive anti-western turn and things could and/or should never be the same again

Two years later, the one thing that seems unlikely to ever be the same again is the shape and size of Georgia. If recognition from Russia was not enough, the recent International Court of Justice opinion that Kosovo’s unilateral declaration of independence was not against international law, makes it even less probable Tibilsi could regain control of its lost regions. (more…)

On the web: China at home and abroad, Cameron’s foreign policy, and sustainable development…

– Over at The Diplomat, Thomas Wright explores how China’s self-confidence in initial relations with the Obama administration may prove the “catalyst for a more competitive – and geopolitically savvy – US multilateralism.” Der Spiegel, meanwhile, highlights the extent of Chinese soft power, while Charles Grant sees a chance to enhance the EU’s relations with the emerging superpower.

– Focusing on Chinese domestic society, the Economist highlights the growing activism and changing dynamics of the country’s vast labour force, with its associated implications for the global economy. Analysis over at VoxEU, meanwhile, assesses evidence of a potential Chinese property bubble.

– Elsewhere, with David Cameron back from his visit to India, Adrian Hamilton and Geoffrey Wheatcroft offer their views on his approach to international affairs. Kim Sengupta meanwhile remarks that the new Prime Minister “has started his foreign policy journey with a series of very deliberate steps”.

– Finally, Sir John Sulston talks to the New Scientist about the implications of global population change for sustainable development – the subject of a new initiative that he’s leading for The Royal Society.  Prospect Magazine‘s blog, meanwhile, highlights favourable demographic trends in the developing world, while figures this week confirm that the EU’s population has now passed the 500 million mark.

On the web: history and economics, the voice of the BRICs, and the UK’s emerging three-party politics…

– Writing in the The New York Review of Books, Paul Krugman and Robin Wells highlight the importance of historical perspective in understanding the financial crisis. Experience, they suggest, shows that a failure to implement significant post-crisis reforms leads to “a resurgence of financial folly, which always flourishes given a chance.”

Michael Pomerleano explains the need for a new institution with the necessary legitimacy to provide global financial stability, arguing that “[n]ational public policies can no longer be independent of global collective-action problems”. Amartya Sen, meanwhile, explores the continuing significance of the 18th Century ideas of Adam Smith to contemporary global economic troubles.

– Elsewhere, in an interview with The Christian Science Monitor, Henry Kissinger offers his views on Obama’s recent nuclear initiatives, US-China relations, and coherence among the BRICs. Over at World Politics Review, Nikolas Gvosdev reports on the lack of support forthcoming among BRIC countries for strict sanctions on Iran and highlights some of the other options open to the US administration in dealing with Tehran. Jonathan Holslag, meanwhile, assesses China’s recent diplomatic “charm offensive”, concluding that this will yield little over the long-term if words aren’t backed up by meaningful action.

– Finally, two television debates and nearly three weeks into the British general election campaign, David Marquand explains why this is “a moment for careful historical reconnaissance”. Assessing the rise of Nick Clegg and the Liberal Democrats, he explores comparisons with the three-party politics of Britain in the early 1920s. The FT’s Philip Stephens, meanwhile, assesses the impact of the debates and the implications of a hung parliament for the British electoral system.