Yesterday, LSE held a short presentation on "Austerity and growth: time to shift gear" by the Italian minister for economic development, transport and infrastructure Corrado Passera. This event was pretty much in line with what is going on at the moment, with Hollande coming into power and IMF changing its tune to how the budget deficit is apparently no longer important.
By occupation Mr Passera is a Politician and he stuck by his occupation. Perhaps it was the language barrier or just that I misunderstood him. Regardless. He presented his understanding of the four shifts that are absolutely critical for moving forward. The idea is that if we embrace these shifts then a new dawn will rise in the economic sphere.
Below I will out the four shifts briefly so you get an idea of what he was saying.
1. We must make a shift to credible austerity - so essentially do take some austerity measures so that markets begin to trust you and you have funds for whatever may befall you. He said that in Italy this is being done with the new pension and fiscal reform. At this point I thought there was a fair shift that has actually taken place already in Europe, at varying degrees. For a man who was CEO of four banks, I did feel it was largely generalised I mean anybody could tell you after the 2008 financial crisis shift has been to "credible austerity" to get market support.
2. Shift from pure austerity to sustainable growth. So essentially he tried to say that instead of having pure austerity, it should only be credible so any remaining funds can be used to initiate financially sustainable growth. Here he discussed how globalisation and opening up markets is extremely beneficial to countries. I got the feeling he was trying to say a financially sustainable growth is one which comes from exporting. Which is a fair comment for a country like Italy which has a range of possibilities for exporting. What he didn't say however, is how this sustainable growth was going to happen? And is it even logical, because he was saying these shifts in relation to all euro countries, that Eurozone countries make a shift to exporting. Absolute and Comparative advantage theory tells us otherwise. We cannot all be net exporters it does not work.
3. Now he wants to shift from austerity to growth but on the European level. Exactly same point but just that Europe as a whole can achieve financially sustainable growth through export. Which actually with opportunities becoming clear in India and China I can believe. The problem is just is it likely that Europe can be more competitive than South American or Africa countries? I think not. But a possibility does remain.
4. Now this shift was specifically aimed at LSE, did annoy me a but as a SOAS student as it is something that SOAS has always done and is the reason why I chose SOAS over LSE, it was the shift of top educational institutions to teach multidisciplinary subjects as opposed to pure economics. And of course with my 360 society I totally agree with.
So why was I so negative, what is my problem with him? First, he said nothing new, exciting or high level which he could have done given his tremendous career. Secondly, the shifts - can austerity be backed with growth through international trade? I am not convinced that international trade is enough. Thirdly, the forth shift was a little but unnecessary and seemed just a way to butter up LSE so to speak. And finally, when the Q&A session came his answers weren't clear, consistent or actually contained any content and these are characterises of a true politician, and given his background I expected otherwise. It seems there is no Italian equivalent to Vince Cable!
Thursday, 24 May 2012
Hearing Hugh Allen....
So exams over, summer is here and what am I up to? I have been going to hear various people speak including Jayz!
More interestingly though, a couple of days ago I went to hear the CEO of VSL Associates and what they essentially do is create savings groups so that funds are available for people in developing countries to make investments which is usually by starting their own small-scale product based business.
I really enjoyed hearing him speak because I found him to be direct and simple. There was no unnecessary bombardment of facts, figures and fiddly vocabulary and actually I picked up some interesting facts that I thought I'd share with you. One was that usually when we discuss microfinance here is in West and see figures such as $50 we complain that these loans are tiny and question what productivity can actually be achieved with it. This criticism is usually baring in mind PPP and so I was interested to see what Hugh had to say. What he said is that actually the size of the loans is not the problem, if the size is a problem then it is that they are too big not too small. When loans are too big as many of us know, they become unmanageable and can actually make people worse off than better off. So I thought that was interesting.
Another things I found interesting that the demand for savings is greater than the demand for loans. Personally, I think this comes down to culture and custom. Many of the countries where village savings and loans are implemented are African and Asian. Being a student of SOAS, I can state with confidence that in these countries, culture and custom plays a critical role. As my favourite legal scholar Menski once said while describing the Namibian people that "it is in their bone marrow". In these cultures, even to my own Indian community here in the UK, savings is important and not borrowing or spending above your means. It an embarrassment to your family, community and crucially yourself if you are found not able to manage your finances. So that is probably the most contributing factor behind why people are more inclined to save than borrow in these nations. (Although we must mention especial in India this is all changing with the Nouveau Riche that has been created.)
One of the reasons why I called this post 'Hearing Hugh Allen' because the ease and simplicity with which he spoke meant that it wasn't just a talk you listen to or in some cases pretend to listen to, it is one you actively are aware you are hearing and for that reason makes it all the more powerful!
More info - http://www.vsla.net/whoweare.htm http://savingsgroups.com/
More interestingly though, a couple of days ago I went to hear the CEO of VSL Associates and what they essentially do is create savings groups so that funds are available for people in developing countries to make investments which is usually by starting their own small-scale product based business.
I really enjoyed hearing him speak because I found him to be direct and simple. There was no unnecessary bombardment of facts, figures and fiddly vocabulary and actually I picked up some interesting facts that I thought I'd share with you. One was that usually when we discuss microfinance here is in West and see figures such as $50 we complain that these loans are tiny and question what productivity can actually be achieved with it. This criticism is usually baring in mind PPP and so I was interested to see what Hugh had to say. What he said is that actually the size of the loans is not the problem, if the size is a problem then it is that they are too big not too small. When loans are too big as many of us know, they become unmanageable and can actually make people worse off than better off. So I thought that was interesting.
Another things I found interesting that the demand for savings is greater than the demand for loans. Personally, I think this comes down to culture and custom. Many of the countries where village savings and loans are implemented are African and Asian. Being a student of SOAS, I can state with confidence that in these countries, culture and custom plays a critical role. As my favourite legal scholar Menski once said while describing the Namibian people that "it is in their bone marrow". In these cultures, even to my own Indian community here in the UK, savings is important and not borrowing or spending above your means. It an embarrassment to your family, community and crucially yourself if you are found not able to manage your finances. So that is probably the most contributing factor behind why people are more inclined to save than borrow in these nations. (Although we must mention especial in India this is all changing with the Nouveau Riche that has been created.)
One of the reasons why I called this post 'Hearing Hugh Allen' because the ease and simplicity with which he spoke meant that it wasn't just a talk you listen to or in some cases pretend to listen to, it is one you actively are aware you are hearing and for that reason makes it all the more powerful!
More info - http://www.vsla.net/whoweare.htm http://savingsgroups.com/
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