Brazil Brief

Brazil is the world’s fifth largest country both by population and size. It is the largest country in South America and the biggest Portuguese speaking country on the planet. Founded by the Portuguese in the 16^th century Brazil has had a tumultuous past marred by dictators, revolutions and military coups. In the modern era, fueled by direct investment from European countries and the United States, Brazil’s economy has finally started to catch up to its large physical size. Now the world’s seventh largest economy both by nominal GDP and purchasing power Brazil has demanded a spot on the international economic stage. Due to the large amount of both raw and finished products that Brazil exports, and the still fragile nature of its growth Brazil has much interest in the proposals placed forth by this session of the WTO.

Brazil’s foreign policy both economically and militarily is one of non-intervention and self-determination. As a large exporter of raw materials (iron, tin steel), finished products (electronic equipment and automobiles), and agriculture (largest producer of sugar and coffee in the word) Brazil has a lot of interest in maintaining free and open trade among nations. Brazil believes that to maintain a healthy global economy it is important that goods should be treated equally and should not be discriminated against based on country of origin. Brazil also is firmly against non-tariff barriers against all agricultural products since food is a necessity for life and as such should not have its price artificially inflated. Along with agriculture, capital investments should not be hindered by government entities. As a country that was raised on direct investment and currently partakes in foreign aid to multiple African and South American nations, Brazil believes it is important to the growth of underdeveloped nations especially that investment can flow in and out of nations unimpeded. Finally, Brazil fully trusts the international markets to monitor currency rates. Since the adoption of the new Real in the early 90’s Brazil has allowed the market to mandate its value and plans to continue to do so.

Unfortunately there are some issues that Brazil does have to oppose to maintain its economic well-being. First are Brazil’s subsidy programs. In developed countries, like the United States, subsidies (especially in agriculture) undercut poor farmers in developing countries, like Brazil. Unlike big agricultural exporters, Brazil has a large number of farms run by poor families that need subsidies to help fuel innovation and pull them out of poverty instead of large corporate farms that use that government money to lower their prices internationally. Also unlike Brazil’s more developed counterparts, a lot of Brazil’s industries (especially automotive and manufacturing) are still developing thus need protection. As such Brazil has put in place programs such as tax breaks to benefit local manufacturers, increased tariffs, and local content requirements. These measure are to protect our markets from flooding with cheap foreign alternatives, which could destroy the fragile economic growth Brazil has recovered after the recession of 2008. Brazil understands the harm this may cause and agree that they should be removed, but Brazil insists that it must have more time to advance from a developing country to a developed country before doing so.

Thus are Brazil’s views on the proposed resolutions. Brazil wishes to continue on a path to a free and open market, but asks for the ability to keep some restrictions to protecting budding industries. Hopefully by 2020 these goals will be met.

Sources:

http://www.businessweek.com/articles/2013-10-30/brazil-says-yes-to-genetically-modified-foods-dot-mexico-says-no
http://www.theguardian.com/sustainable-business/agricultural-subsidies-reform-government-support

http://www.wto.org/english/thewto_e/countries_e/brazil_e.htm

http://www.nationsencyclopedia.com/economies/Americas/Brazil-INTERNATIONAL-TRADE.html

http://fita.org/countries/brazil.html

http://trade.gov/publications/ita-newsletter/0411/brazil.asp

Click to access CC_BR_DoingBusiness_CCG_PDF_Chap5_TradeRegulations_Latest_eg_br_034997.pdf

Click to access Brazil_0.pdf

Cold War II: The Putining

Alright, let’s talk about Russia. When it comes to any discussion about the global community, outside of Ebola, Russia is bound to come up. A country run by an ex-KGB officer who was warned by Tony Abbott (not the most popular politician himself) to stop “trying to recreate the lost glories of tsarism or the old Soviet Union”  has proven that Russia is trying to reclaim the influence it had as the USSR. A time when economists and politicians alike where declaring the end of the American era and the dawn of Soviet Russia’s. Now Russian president Vladamir Putin is claiming that NATO is resorting to a new cold war in response to Russian action in Ukraine. Contrary to the title, this article is going to be pushing against the idea that we are on the brink of a new cold war. The reason being that the cold war had three major factors of competition between America and Russia: military, economy, and science, and in this day and age Russia can only truly compete on one.

Military wise this might as well be a new cold war. There is a country which could easily fall to Russian or Western influence (Ukraine), and while both sides vehemently deny their involvement both have obviously been providing aid to their preferred side. From aid to weapons to troops both the Ukrainian government and the rebels against it have seen substantial international interest in their cause. A proxy war that no one is acknowledging  is being waged in eastern Europe with pretty dire consequences. Interestingly, unlike in most cold war proxy wars where the US was attempting to dispose a communist leader, it is now the Russians attempting to oust a leader that was put their by the people. On the boarder we have seen a massive arms build up, reminiscent of cold war tactics, yet this is the only part of this new “cold war” that seems accurate.

During the original cold war not only did Russia’s economy rival the United State’s, it was threatening to pass it. In a modern day China situation, many economists were predicting the end of the American dynasty of economic control and forecasting a move to a communist country, based on incredible rate at which the USSR economy was growing. This “cold war”, on the other hand, places Russia on a much lower economic base than the old USSR. No longer does Russia challenge the US (or England, Germany, France, etc.) as a major economic power, in fact their economy almost solely relies on their energy (oil and gas) exports, and the decline in prices of both those resources has pushed Russia to the brink. Due to embargoes from the west that have raised food prices, lowered the value of the Ruble (Russian currency), and restricted the ability of Russian businesses from lending the Russian economy is falling on hard times. This lack of economic power really discredits the idea of a new power struggle between the worlds two largest powers.

Finally one of the most crucial parts of the original Cold War was the technological race. After the fall of Nazi Germany the US and the USSR competed for scientists that innovated for the Third Reich. This lead to the space race and advanced weapon development as each country tried to prove its superiority through innovation. In this day and age, innovation has moved away from large public projects (like space programs) and is now driven by private business. If Russia is planning for a new cold war they should be looking to incentive local business and get loans flowing back in from foreign markets instead of invading Ukraine.

I think its safe to say that we are not looking at a new cold war. A difficult international diplomatic situation? Yes, but a cold war? No. While Putin may wish for a day that the world fears and respects Russia the way it did 40 years ago, it doesn’t seem like a realistic scenario. I will admit that I do not have an answer of how we should respond to Russian aggression in Europe, but I can say that we should not fear a new Russian threat to the west. Hopefully our leaders can figure out a peaceful solution to this quagmire, but until then it is just a work in progress.

Sources:

http://www.themoscowtimes.com/news/article/10-kremlin-moves-that-hurt-russia-s-economy/511375.html

http://www.theguardian.com/world/2014/nov/17/putin-claims-west-provoking-russia-new-cold-war-spies-deported

A New Type of Aid

In class today we talked about governments of wealthy nations giving aid to countries that are not as fortunate. There is a lot of controversy over these subsidies, because of how hard they are to track once they are acquired by poor countries. We talked about different ways to alleviate these worries, like giving aid to more stable and less corrupt governments, both as reinforcement to productive governments and as encouragement to less successful governments to start to be more like those that are receiving aid. Another popular method is investing the money directly into infrastructure in the country and bypassing the government as a whole. I want to throw a different idea into the ring, service aid.

Service aid is the idea that instead of giving money to poor countries, give people and ideas. This would lower risk of corruption and theft of national aid, hopefully. This idea isn’t new and private groups and individuals have been doing it for a while, and a lot of the time the costs are very low, especially compared to the billions we spend currently. I’ll go through a couple examples bellow.

(Source: http://www.fut-science.com/farming-future-toshibas-clean-factory/) Toshiba has recently discovered a way to mass produce vegetables without sunlight or soil. This could be a windfall for people in countries that have poor soil quality and food shortages. It would also cost less than a dollar to produce and could sell for less then two US dollars. The issue is that it is currently operated by a private company, Toshiba. If a government would work with them or buy it from them they could save incredible amounts of money by opening and helping operate center and really help developing countries with a serious problem.

Another example is the famous the Bill Gates condom initiative. One of the largest problems in poor countries is overpopulation so Bill Gates announced a reward for someone who could figure out a birth control method for men that was less cumbersome than a condom, basically harnessing the free market to develop an idea for charity. Why couldn’t the government do something like this for cheaper energy or cleaner water? Gates offered $100,000 to the winner which is a tiny fraction of the $56 billion spends on foreign aid.

There are tons of other private organizations that do great services to poor countries like doctors without borders or water for all, with fractions of the budget the US runs on. Obviously its not the same as giving money for infrastructure, but it is a lot harder to steal and there is no doubt that clean water, a healthy population, and a steady cheap food supply would help move a developing country into a better position to succeed. It’s not perfect so for now we will call it a work in progress.

Why Nations Fail, Maybe

Let me start this critique of Why Nations Fail by Daron Acemoglu and James A Robinson by saying I loved this book. It was a roller coaster through continents and centuries. It was like a combination of a history lesson, an economic lecture, and a political discourse. Honestly, if there were any professors teaching political economy classes out there that needed a book to add to the syllabus, this would be a great choice. It is unfortunate this is a critique, not a talk about how awesome this book is, but it is even more unfortunately there is a lot to critique about this book.

Why Nations Fail tries to answer one of the hardest questions that faces international political economics: why are some nations rich and others poor? There were many theories before Acemoglu and Robinson came along and dismissed them in their second chapter including the geography theory (depends where you are), culture theory (depends on how you ancestors did it), and ignorance theory (depends if your leaders knew what they were doing). Acemoglu and Robinson cast these aside and propose that the reason rich countries because they have inclusive political and economic systems, while poor countries have extractive political and economic policies.

Acemoglu and Robinson define inclusive policies as “those that slow and encourage participation by the great mass of people in economic activites that make best use of their talents and skills and that enable individuals to make the choices they wish.” They then describe that extractive policies “are designed to extract incomes and wealth from one subject of society to benefit a different subject.” Putting them in more basic terms inclusive governments allow for an American-style capitalism and exclusive governments follow a USSR-style communism. In fact the authors love of the idea of the American dream is evident throughout the book. They constantly point to America as the perfect subject of a inclusive government that should last forever if it doesn’t change, and apparently has been since Jamestown was founded. They also constantly use examples of America’s enemies as examples of governments that failed (USSR, North Korea) or will fail (Middle East, China) and they examples of America’s allies as examples of good governments (Europe, Japan, South Korea).

Unlike the other authors we have read so far Acemoglu and Robinson believe that governmental inclusive programs are more important than economic programs. As they put it, “while economic institutions are critical for determining whether a country is poor or prosperous, it is politics and political institutions that determine what economic institutions a country has.” They exemplify through the history Venice. Around the time of Charlemagne the Venetians started to accept more inclusive political and economic changes including moving from a king-like Doge to a more assembly based government. This allowed for the rise of a middle class and the spread of government participation to those who had never been there before. During this time the Venetian economy ruled the Mediterranean, but the elite back home grew nervous of the newcomers in their government. The elite started to pass laws to limit entry into their assemblies to other members of the elite, and the economy quickly started to slide, even though the economy stayed inclusive while the government turned extractive. This is why Venice now a museum instead of a world power. This, according to the authors, is also why China is doomed to fail even though their economy is becoming more and more inclusive. Since their government refuses to allow more liberty to its people China will eventually collapse. This is a pretty sweeping assertion, arguing that China will fail before a country like Brazil seems outrageous. This is also a problem with this book, it tells stories of all these nations that have been around for millennia yet declares these relatively young regimes either successful or failed after only a few centuries.

Overall this is a great book to read, but seems to overextend itself it spends a bit too much time telling stories instead of explaining its theory. It takes a very difficult question and tries to simplify it to a single explanation. I would highly recommend reading this book but with a grain of salt.

theinternet.com

Hi internet! Did you notice that you are reading this on a web browser? It might be Firefox, Safari, Crome, let’s all hope it’s not Internet Explorer, but you are here because you typed the right keys and clicked the right links to put you on this page right here. When it comes to globalization no tool is better to look at than the internet. In just a couple clicks I can talk to some one in Europe or help crowd-fund a farm in Brazil and when it doesn’t work I will talk to someone in India to try to fix it. The internet is its own community both politically and economically.

On the Politics side the best examples come from the more oppressed areas in the world. The most obvious example comes from the famous China vs. Google fight a.k.a who is going to take over the world first. When Google found out about Chinese hackers in its system, they decided to end the censorship of searches in China to the joy of New York Times readers all over the mainland. The Chinese government, not to be cowed, responded by banning Google in all of mainland China. Here we see a great example of political beliefs (freedom of information) coming over economic profits and standing in the way of a more globalized planet. Of course like any good company, once that they saw the economic pain that the ban would cause them, Google reversed its decision, and of course like any good communist country, China quickly censored any news of the incident. The Internet also played a large part in the middle eastern revolutions during the Arab Spring. Protesters who could not get any voice in local newspapers or television turned to the internet to gain support for their causes. YouTube videos from Egypt and blog posts from Syria let the world know what was occurring in these countries.The support these posts garnered in western countries, helped put international support behind regime change.

Economics also has been revolutionized by the internet. It has allowed for easier investment opportunities through instant purchase of stock and products. Sites allowing for micro-loans can allow an everyday person to invest in Africa or India, places like indigogo  and kickstarter can allow us to fund projects in Europe and Asia, and marketplaces like eBay and Amazon make the world our shopping center. The internet has even created its own currency. The rise of bit coin, though volatile in nature, is used for purchases every day and has even sponsored a NASCAR racer, which has dramatically raised awareness of the currency in the south eastern United States. Still it is impossible to discount (get it?) the internet’s impact on the global economy.

The internet has become a tool of government, business, and individual alike to gain access to the world. Issues like cyber security and internet censorship will continue to be topics of economic and political turmoil for years to come. At the same time we should see an even greater rate of business taking place over the internet which continues to shrink the world for us all. Maybe, but for now it its all a work in progress.

A Work In Progress

Hi internet, ever have a project that no matter how much work you put into it, it is never quite finished? A paper that you can never get just right, or a car that just always has one thing that needs to be fixed? Well if you do, you know how half the politicians and economists on this planet feel. Every bill that is passed and every global event that occurs fixes a problem but creates ten more, and in a world that seems to be growing smaller every day these problems multiply across boarders and oceans. Here on this blog (which is probably going up a little later than my professor would like) I will look at these bills and events in hopefully different ways. From Ukraine to Israel to the USA to China this blog will look into world events that affect the politics and economics of the world and how they intertwine. We will watch the actions of world leaders and see if they can fix the planet. But until then we will watch the global work in progress.