The future of the BRICs

Today while commuting to school I was browsing the internet searching for news about developing countries, when I saw this video about the BRICs and India’s status in it.

I thought it was very interesting, especially because years ago India was considered to be the most promising country of the BRIC group according to this publication.

It is a big problem because India is a huge country, extremely populated with a not so large infra-structure. As a emerging economy India still does not have a good transportation system, which does not allow a descent logistic for Indian goods to be transported.

India’s problems are the slow growth, a falling currency, high inflation and high interest rates, a bad combination for an emerging country, especially with such a large population of poor.It is such a delicate issue because India could be seemed and invested as an agricultural based country, but It might happen to India exactly what happens to Jamaica. If India produces something, it is probably going to be cheaper to buy it from China or Indonesia. This other article says more about the current disappointment with India in the BRICs.

The investments of companies, like Wal-Mart for example in India would most likely take away from the poor their chances to improve their lives, being that any multinational can sell imported goods for less than they would produce. The question is with problems like this how is the Indian population going to survive?

Bretton Woods and The Euro

One of the subjects we studied the most during the semester was The Bretton Woods agreement and its consequences to the world we live today. The Bretton Woods change the market with the newly instituted currency, the dollar after the gold.

The Bretton Woods is to this day very important and can be compared to many of the modern issues happening throughout the world. For example, Bretton Woods can be used to analyze the current problem with the euro. The following passage from an article explains very well the relationship between both systems:

"The euro can be considered a political attempt to recreate within Europe the effects of the 1944 Bretton Woods agreement that established a stable international monetary system from 1945 to 1971. The Bretton Woods system was complex, addressing every major currency issue to some extent while the euro clearly had holes in it that were never addressed. The biggest difference between the two may be that while the Bretton Woods system design was led by economists, the euro system was designed by politicians.

At Bretton Woods, currency systems designed by John Maynard Keynes (no introduction needed) and Harry Dexter White, chief international economist at the U.S. Treasury in 1942–44, were melded together in an effort to use the best economic thinking to achieve the best international economic outcome. The euro had only one goal: Achieving European currency unity. To achieve this political currency union, many political compromises were accepted that conflicted with both the best economic theory and real world experience.

Using Bretton Woods as an example of a workable real world currency system, we can explore what was missing from the euro when it was set up:

1. An adjustment mechanism for when intra-zone country costs and trade (the current account balance) get lopsided versus other countries, called “fundamental disequilibrium” in Bretton Woodese. In Bretton Woods, the adjustment mechanism was currency devaluation or revaluation upward. There is no adjustment mechanism at all in the euro. Members are expected to use fiscal constraint (AKA austerity) to achieve internal devaluation. In other words, undergo a recession to lower costs and imports.
2. A bank to lend (or give) currency to countries that are in fundamental disequilibrium. Bretton Woods set up the International Monetary Fund (IMF) for this purpose (there were other tasks for the IMF as well). The euro has the European Central Bank (ECB) but doing all the job of the IMF is specifically forbidden by the no-bailout clause in the euro Stability and Growth Pact.
3. A method of making sure that countries’ have enough currency to maintain international stability and trade. Bretton Woods only partially addressed this with the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank. Bretton Woods relied on countries and central banks (in reality, mostly the U.S. Federal Reserve) working in their own best interests to help achieve this. It was a different time when the belief was that strong international cooperation was needed to maximize growth. The Marshall plan was justified in part by the need to lower America’s balance of payment surplus and provide currency needed for international trade. Again, this seems to be specifically forbidden in the euro as the mandate of the ECB is to fight inflation."

From this article.

This is very interesting because it presents the differences between both programs and how the Euro was conceived with a lack of structure compared to the Bretton Woods, and today Europe is in crisis not knowing if the Euro is going to survive. Many of the causes of the Euro crisis could have been avoided if this program was more well structured, for example the European countries had easy credit conditions and were encouraged to practice high risk borrowing and lending money. Right now the Euro is failing and the ones trying to survive are having a hard time maintaining themselves, which makes it almost impossible to rescue the neighbor countries in a worse situation.

The article above explains all the issues with the Euro it uses the Bretton Woods examples from the past making it really easy to understand the intensity of the problem and how can Europe start to think about getting out oh this hole.

Readings 210-249

Continuing on the characteristics practices of globalization as a project: informalization and recolonization.

• Informalization is a growing culture of informal, or marginal, activity. This kind of activity usually involves people performing casual and unregulated labor, working in cooperative arrangements, street vending, or practicing illegal economics activities. In most cases economists and governments make a distinction between formal economy and its legal connotation and informal sector with its illegal connotation, because the national accounting only measures legal cash transactions. By ignoring informal activity, development policy discounts and marginalizes substantial mechanisms of social reproduction, on which the formal "productive economy" depends.
  

I also find it very interesting how this form of informalization is in fact a way of social exclusion. I found this very interesting video on social exclusion/inclusion that seems relevant to the topic.



It is also important to understand how crucial this informal market is a survival mechanism for the poor. Here is another video that can help us understand how the informal activities affects the lives of poor producers and workers.



I thought this video was very interesting and it relates to all the ideas discussed in the book. This video also made me think about how to improve this peoples lives and give them opportunities to not only survive, but actually transform their informal activities into a legal business. I know in Brazil a huge parcel of the working population earn their living in the informal sector, so the government created programs that makes possible for informal workers to regulate their situation and have their own business. In Brazil is very common for housewives for example to work ate home, they produce cakes, pastries, artisanal stuff and sell to friends and family. So this people can now have their own business, of course that the main idea of this action was to make it easier for this people to legitimize their own business so the process is very easy. I thought this was very interesting , I took a look at the government website and it explains step-by-step how to become a formal microentrepreuner and I think that is definitely a great incentive from the government.

• Global Recolonization poorer states, with borrowed funds earmarked to promote exports to service debt, are unable to subdize sectors and communities on the margins. Like in the Sub-Saharan Africa , whre the total debt servicing amounts to four times the amount spent on health and education. Post colonial states in Africa have generally served as instruments of wealth extraction. Today there is a different form of colonization happening, restoring a colonial division of labor at the expense of coherent national institutions and societies, representing a new form of recolonization. The book also talks about China recolonizing Africa today and how different it is from the "classic colonization" idea from the past. I found this article and it talks about China's actions in Africa and its extraction of resources. I think is really unfair that China is appropriating of all the resources from Africa of course, but like the books says :"Africa is designated as an "extractive resource," via agenda of recolonization." Besides Africa has a history of tribal authorities and ethnic conflicts, which generates a more vulnerable goverment, facilitating the exploitation of resources.

Readings 169-210

The main ideas I got from the readings were:

• The Trade-Related Investment Measures attempting to reduce “performance requirements” imposed on foreign investment by host government. The point of the TRIMs is to secure investor rights at the expense of domestic development measures and also enhance conditions for transnational investment by reducing the friction of local regulation. I found two recent examples of Trade Related Investment Measure happening in Brazil and India.
• Trade Related Aspects of Intellectual Property Rights is defined by the WTO as "rights given to persons over the creator an exclusive right over the use of his/her creation for a certain period of time." There is lots of arguments about this idea, specially when it comes to bio-diverse and generic. The problem is that, corporations usually patent genetic material obtained from Southern countries without any payment, and then turns it into a commodity such as a medicine, charging a fee for use of the genetic resource in local production, even to the country where the material was originated. Some people like to call this appropriation of genetic material by foreigners as biopiracy. The books case study on page 176 talks about the production of generic antiretroviral drugs to treat HIV/AIDS patients and how Brazil has been producing generic medicines even before the TRIPS agreement in 1996. I also found a very recent article on how Brazil is no longer allowed to produce and exports HIV generic medicine while India is now responsible for producing 3 different types of generic. Brazil and other countries like China, Mexico were excluded for being considered "Middle Class" countries.

• The characteristics of globalization as a project: The main ones are outsourcing, displacement, informalization and recolonization.
  

1. Outsourcing it involves the relocation of goods and services production as a cost-reduction strategy and a means to increase operational flexibility of an organization. On page 193 the author talks about how outsourcing the public health system to a private health system, which maintain the public system inefficient. Like access to health care for the poor shrinking, outsources and cutbacks in public sector budgets reducing preventing programs. Like in Brazil for example with the reemerged dengue fever epidemics. Outsourcing is not only a corporation practice, government outsource services contracts to reduce public expenditure and privilege the private sector.
2. Displacement, automation and/or outsourcing of work sheds stable jobs and where redundant workers cease rotating into new jobs. Agriculture is the main source of food and income for the majority of the world's poor, more than half of the south population is agrarian. Agricultural tends to be very important for women, who have the main responsibility for feeding their family. But what we can see today is that economic integration in agriculture does not help nations to import cheap food and solve the hunger issue. Most farmers in poor countries can not sell their own farm products on the markets because of cheap imports from Europe, Canada and the U.S..

• Labor the new export: The author talks about the circulation of labor and people looking for new opportunities weather they are legal, illegal or slave/bonded labor. The main difference between colonialism migration and today's migration is that big part of the displaced persons are women and children. In fact most of these women in migration are part of a sad reality, human trafficking which is the fastest growing form of labor in today's market and also the leading human rights violation.

Human Trafficking: Retrieving Women and Children from Modern Day Slavery from abolishslavery on Vimeo.

Capitalism, a love story

In Capitalism: A love story, Michael Moore talks about capitalism and its relationship to the current economic crisis. The movie starts with some interesting, even funny, propaganda films praising "free enterprise" and the "profit motive", which are strongly connected to the current crisis and the role of Wall St., Bank of America, Lehman Brothers and other corporations. The movie shows clearly how the American people's "love affair" with Capitalism ended up right with the end of the famous American Dream.
Moore also emphasize the diea of what kind of democracy Americans are living in right now, a democracy in which the government serves the people or a democracy in which the government works to make top corporations in control of the nation?
Many manifestations are presented throughout the movie, like the family from North Carolina who refuses to leave their home and the Union workers occupation in Chicago. People are taking action and I believe that is probably one of the main ideas of the movie.
I believe that the best way to analyze this film, is to consider the contradictions between democracy and capitalism. Is democracy for capitalists, bankers, business people and investors, or is democracy for working people and the poor?
Following the same directions as the ideas presented on this movie is the recent Occuppy Wall Street movement, which is definitely a strong reaction to the giant corporations and capitalism.