In the fall of 2019, Democratic Speaker of the US House of Representatives, Nancy Pelosi, went on record saying that competition for resources was turning ecology into a national security issue. A growing number of politicians and experts share her opinion.
While most countries worldwide take a “mixed” picture of the consequences, upsides and downsides of global warming amid an ever-growing rivalry between states, the environmental idea is becoming a convenient and attractive tool to discredit opponents. Moreover, for some pro-Nature organizations, the proclaimed requisite to ensure environmental protection outweighs any objective needs for the development of both individual territories and entire states. Sometimes it becomes almost impossible to draw a line between sincere idealism and “lobbying for a new type of corporate interests.” As a result, criticism of a development model based on the use of hydrocarbons actually becomes an instrument of competition promoting the interests of the “green economy,” which in recent years has often proved to be less than ecologically impeccable.
Russian President Vladimir Putin has repeatedly reminded the international community of what the advocates of an immediate change to the global energy system fail to mention. Paradoxically, climate change and demands for a rash change of political priorities to combat it both threaten to increase inequality between countries.
On the one hand, political instability caused by the increasingly changing climate throws into question the long-term plans for the socio-economic development of entire regions and even continents. According to the UN’s Food and Agriculture Organization (FAO), shortages of drinking water and large-scale human migration in search for a better live will emerge as the most pressing problems mankind will face in the near future. The regions where conflicts provoked by climate change will flare up in the coming years might include, among others, territories south of Russia’s borders and the Arctic.
On the other hand, less diversified economies, technological backwardness and outdated infrastructure put most economically underdeveloped and developing states at a disadvantage to the world’s most developed countries. The former argue, however, and with pretty good reason too, that many of the world’s most affluent countries keep using “dirty” technologies and production facilities in a bid to maintain their economic growth, including tax exemptions and even state subsidies. This is something ordinary citizens are well aware of, as is proved by the “green-oriented” political forces’ modest successes outside the “golden billion” states. In developed economies many people are wary of the high price of current “green” technologies, which promise not so obvious gains and only decades later at that,and politicians just can’t ignore this public sentiment. Finally, widespread forecasts of a global economic slowdown and even a possible recession are putting environmental problems on the back burner.
Besides, the much-trumpeted predictions of the imminent triumph of “green” technologies are not always grounded in reality. In February 2019, The Economist wrote that companies using traditional energy still generate more income compared to renewable energy projects. Global demand for oil continues to grow by an annual 1-2 percent, just like it has done the past 50 years. Most of the nature conservationists still move around in cars with internal combustion engines and fly on airplanes. Relying on some breakthrough developments and technologies whose prospects of mass-scale implementation remain dim would certainly be premature. The $300 billion that is currently being invested in renewable energy worldwide is just a drop in the ocean compared with investments in the development of fossil fuels. Finally, despite all high-profile statements regarding the introduction of electric vehicles, even in 2030, up to 85 percent of cars will still be running on the tried-and-true internal combustion engines.
In 2017, the US withdrew from the Paris climate agreement, and the Trump administration is now trying to breathe new life into the country’s coal industry. Even in many environmentally aware countries, broad sections of the public have not yet been convinced about the benefits of having to pay more for “green” goods and services. For example, the idea of stimulating economic growth by means of tax cuts is not popular with the high and mighty of the world’s leading economies. Meanwhile, experts consider monetary incentives, aimed at encouraging public support for technological and cultural changes aimed at reversing the global warming process as one of the most promising measures able to ease the skeptics’ fears. Therefore, assuring people that measures aimed at reducing harmful emissions will not cause a catastrophic blow to their personal well-being may prove a hard task.
In this regard, many politicians, administrators and experts are wondering just how dramatic changes in the existing economic structure over several decades will be able to reverse the negative climatic phenomena and how much should we focus on political, economic and social measures that would help individual countries and associations of states adapt to the objective trends of nature. And, finally, whether this is not just an attempt by the developed countries to hamper their current and potential rivals’ progress under the guise of solving environmental problems.
During 2019, the conflict between West and East European countries over the issue of unification of their environmental policy was heating up threating to further split the European Union. It turned out that “EU subsidies are no longer part of its policy, but rather a kind of gift for loyalty. We are talking about the familiar divide-and-rule policy”, about an almost deliberate separation of EU states and regions, unwilling to unconditionally embrace decisions taken by the bloc’s leading countries and by Brussels. Simultaneously, the East European countries’ skepticism about the requirements of the earliest possible rejection of “dirty” technologies is fueled, among other things, by the example of Germany, where diversification of energy sources has effectively resulted in increased consumption of traditional fuels – coal and gas – with all the political and financial consequences this entails. This is due to the hasty closure of nuclear power plants that “green” generating units can’t fully compensate for.
In hindsight, one will have to admit that climate change has long influenced the fate of states and peoples. Some experts believe that the Late Antique Little Ice Age, “which began in the 5th century AD and lasted about a hundred years” could be a reason why the Byzantine Empire failed to maintain its growth. Today, access to fresh water is viewed as a leading factor that may spark conflicts both between countries and inside individual states. Since the mid-1990s, there have been forecasts that the 21st century wars will not be fought for oil, but for water. A population growth combined with an increase in the number of territories suffering from lack of water resources may lead to a significant increase in the number of refugees and internally displaced persons. This is a problem a number of regions of Africa and Eurasia, including Central Asia, Iran, Afghanistan and Turkey, may soon be grappling with.
Catastrophic climate change is already contributing to an increase in cross-border migration, which is contributing to the rise of political extremism. Poor countries with growing populations are increasingly at risk of “political instability and violence.” The harmful effects of climate change can exacerbate economic turmoil in various parts of the globe. Meanwhile, population growth around the world may significantly outpace global economic growth, which, as many experts already predict, will result in a protracted period of stagnation at best. Overall, similar trends, which Republic.ru pointed to in 2019, give rise to political discourse about “the need to reconsider most of the existing paradigms,” and, very likely, “away from classical capitalism and towards even greater state regulation.”
Climate change, which provokes economic stagnation and intensifies cross-border and internal migration, can further embolden separatist movements in many parts of the world, including Europe. The fragmentation of countries into smaller territorial entities increases the risk of conflict, and sets the stage for outside intervention. Ultimately, the objective need for greater international cooperation in tackling global problems will face an equally objective upward trend in nationalism and isolationism.
For Russia, the Arctic offers a particularly important example of the geopolitical importance of the climate factor, as climate change is making this region increasingly accessible for economic development, while simultaneously making it vulnerable to new geopolitical challenges. Late this past summer, Bloomberg described the Arctic as “a region, whose growing importance is reshaping the world’s geo-economics.” As a result, the growing number of mineral exploration and development projects, as well as a projected increase in shipping volumes, will be ramping up competition, including military, between world powers.
There are other climate-related issues too. Russia also keeps reminding its foreign partners that, unlike the United States, it recently signed up to the Kyoto Protocol and, unlike the EU, has fully met its commitments under this accord. Inconsistencies in the assessment of the Russian forests’ and soil’s ability to absorb carbon dioxide are a matter of strategic importance. As the Expert magazine noted, Russian woodlands are an important factor in this country’s implementation from 2020 of the terms of the Paris Agreement under the UN Framework Convention on Climate Change, regulating measures to reduce carbon dioxide emissions into the atmosphere. The problem is that underestimation by foreign experts of the Russian forests’ CO2 absorption capacity can lead to the introduction by Western countries of a “carbon tax” on exported Russian gas.
Meanwhile, as President Putin noted during his traditional news conference summing up the results of the outgoing year 2019, Russia has “great advantages in the fight against climate change.” A “significant breakthrough” in the development of generating capacities in hydropower combined with vigorous development of gas production, including large-scale high-tech projects for LNG production, makes Russia the greenest in the world energy mix. And Moscow does not intend to stop there. By ratifying the Paris Climate Agreement, Russia reaffirmed its strong commitment to international cooperation in the field of climate change, aimed at creating a paradigm of harmonious relations with nature. Working together, the international community needs to find a balance between a clean and safe environment while simultaneously maintaining the competitiveness of countries, peoples and regions, and the interests of their long-term sustainable development.
From our partner International Affairs
Future Economy: Micro-Manufacturing & Micro-Exports
Recovery now forces economies to emerge as dynamic entrepreneurial landscapes; today, the massively displaced working citizenry of the world may not return to old jobs, but with little help slowly shifting towards entrepreneurial startups as new frontiers to create economic independence and increased local grassroots prosperity. Today, the latest global influences of trendy entrepreneurialism optimizing available options like high quality “Micro-Manufacturing” and high value added “Micro-Exporting” now common discussions on the main streets of the world. Although, this is not an easy task, but still very doable for so many and promises local uplifts. Smart nations are awakening to such bold notions and entrepreneurial driven agencies mandated to foster local economies are using virtual events to rise up with global rhythm and rich contents.
Therefore, the blueprints and new models of today on upskilling SME exporters and reskilling for better-designed manufacturing, nation-by-nation and city-by-city are mobilization ready ideas to optimize abandoned talents. Nevertheless, such upskilling and reskilling of masses demands already skilled leadership of most of the gatekeepers of local economic development venues.
Furthermore, global competitiveness has raised the bar and now only high quality value added goods and services traded for the wide-open world. The conveyer belts of technology and zoomerang culture of virtual connectivity flourishes platform economies. Missing are the advanced skills, complex problem solving and most importantly national mobilization of entrepreneurialism on digital platforms of upskilling to foster innovative excellence and exportability. SME and Startups must advance on global thinking, optimize access, and maximize image and quality superiority to reach the farthest markets with deeper pockets.
This is not an easy task. Methodical progressions needed. Study how Pentiana Project tabled advanced thinking on such trends during the last decade. Export Promotion Agencies, Chambers of Commerce, Trade Associations and most SME and midsize economic developments bodies all called for bold and open debates. For fast track results, follow the trail of silence and help thought leadership to engage in bold and open debates and give them guidance to overcome their fears of transformation.
Small enterprises must now open to new world of 200 nations and 10,000 cites
Micro-Exporters: Upskilling Startups to think like global exporters; the pandemic recoveries across the world coping with a billion displaced all have now critical needs of both upskilling and reskilling. Upskilling is the process of learning new skills to achieve new thinking. Reskilling is the process of learning new skills to achieve new performances. What is exporting, how to start at micro-levels and how to expand globally with technology are new challenges and promising options.
Micro-Manufacturers: Reskilling Startups to think like smart manufacturers; the real goals for startups to enlarge and base thinking on reskilling for “real value creation” becomes mandatory. How to start by thinking better, design quality with creative global age strategies and advance? Advanced Manufacturing Clusters in various nations will greatly help, but understanding of global-age expansion of value offerings with fine production is a new art and commercialization to 200 nations a new science.
The future of economies, The arrival of Virtual leadership and Zoomerang culture is a gift from pandemic recovery, although at infancy, the sector will not only grow but also alter global commerce for good. Once successful the traditional advertising and marketing models dying, direct access live interaction is now far superior to mass-mailing and social media screaming. The zoomerang impact of global thought leadership now forcing institutions to become armchair Keynote speakers and Panelists to deliberate wisdom from the comfort of their homes round the clock events has arrived.
The Difficult Questions: Nation-by-nation,when 50% of frontline teams need ‘upskilling’ often 50% of the back-up teams need ‘reskilling’ so how do you open discussions leading to workable and productive programs? Each stage challenges competency levels and each stage offers options to up-skill for better performances. Talent gaps need fast track closing and global-age skills need widening. New flat hierarchical models provide wide-open career paths and higher performance rewards in post pandemic recovery phases. When executed properly such exercises match new skills and talents with the right targeted challenges of the business models and market conditions. The ultimate objective of “extreme value creation” in any enterprise must eliminate the practices of ‘extreme value manipulations”.
First Three Steps: In order to mobilize a startups revolution along with a small medium business economy, start by identifying 1000 to 10,000 high enterprises anxious to grow for national global markets. To quadruple exportability, select a small leadership team, from local trade Associations, Economic Development Bodies and Chambers of Commerce responsive to calls of upskilling and reskilling as critical steps. Suggest roundtable discussions to reach local, national or global audiences to spread the message. Explore such superior level debates to mobilize local businesses. Most importantly, such mobilizations are not new funding dependent they are deployment hungry and execution starved. Futurism is workless, uplifting mental powers towards better value-added production of goods and services will save economies. Optimize zoomerang culture and use virtual events to raise the bar on thought leadership. The world is moving fast and best to join the pace.
The rest is easy
Portugal’s crisis management: “Economic patriotism” should not be tied to ideological beliefs
The economic policy of the Hungarian government has provoked fierce criticism in the last decade, as it deviated from the neoliberal mainstream and followed a patriotic path, putting Hungarian interests in the foreground. While many link this style of political economy to the conservative position of the Orbán-government, in Portugal, a left-wing administration followed a similarly patriotic line to overcome the symptoms of the Eurozone crisis, showcasing that economic patriotism is not tied to ideologies, but is merely responsible thinking.
The catastrophic path of austerity
According to the theory of austerity, the government by implying austerity measures, “puts its finances in order”, hence the state does not become indebted and consequently investors’ confidence in the economy returns. However, if we think about what we really mean by austerity (tax increases, wage cuts, budget constraints, etc.), even the theory itself sounds counterproductive. Not surprisingly, this theoretical counter productivity has been demonstrated in practice in several cases.
One of the best examples is the case of Portugal, which along with Greece and other Southern-European nations was probably hit the hardest by the financial crunch. While all of the “GIPS” (Greece, Italy, Portugal, Spain) entered a steer recession, Portugal somehow managed to overcome it more successfully than its regional peers, but before that, it felt the bitter taste of neoliberal structural reforms.
Although the case of Portugal was not as traumatic as the ones of its Southern-European counterparts, in order to keep its debt under control, stabilize its banks and introduce “growth-friendly” reforms, Lisbon negotiated a € 78 billion bailout package in 2011, in exchange for a rigid austerity program aimed at the 2011-2014 period, orchestrated by the European Commission (EC), the International Monetary Fund (IMF) and the European Central Bank (ECB), the infamous “Troika”.
The neoliberal recipe did not differ much from that of Greece, and the then ruling Passos Coelho conservative government faithfully followed the structural reforms demanded by the “group of three”: working hours increased, number of bank holidays fell, holiday bonuses were abolished, wages and pensions have also been cut by 20 per cent, while public spending on health and education was drastically cut, and due to escalating privatizations, public assets have also been sold off quickly.
Despite the fact that by 2014 the country’s budget deficit as a share of the GDP had fallen to 4.5 per cent from the staggering11.2 per cent recorded in 2011 and the current account showed a surplus – as domestic demand fell apart, forcing companies to export –Portugal was still on the brink of social and economic collapse.
Public debt soared to more than 130 per cent of the GDP, tens of thousands of businesses went bankrupt, unemployment rose to 17 per cent and skyrocketed to 40 per cent amongst the youth. As a result, many talented Portuguese fled abroad, with an estimated 150,000 nationals emigrating in a single year.
The post-2015 turnaround
Things only began to change in 2015, when the Portuguese elected Anotnio Costa as Prime Minister, who was the mayor of Lisbon under the years of the crunch. Shortly after his election, Merkel encouraged the center-left politician to follow the neoliberal prescription proposed by the “Troika”, while her Finance Minister, Wolfgang Schäuble, underlined that Portugal would make a “serious mistake” if it decided not to follow the neoliberal doctrine and would eventually be forced to negotiate another rescue package.
Not being intimidated by such “threats”, Costa ditched austerity without hesitation, restored working hours, cut taxes and raised the minimum wage by 20 percent in the course of just two years. Obviously, his unpopular position made him crush with Brussels, as his government allowed the budget deficit to reach 4.4 per cent, compared to the agreed 2.7 per cent target. However, in May 2016, the Commission granted Costa another year to comply, and since then Portugal has consistently exceeded its deficit targets.
Tourism also largely assisted the post-15 recovery, to which the government placed great emphasis, so that in 2017 the number of visitors rose to a record high, reaching 12.7 million. Concurrently, Portugal has significantly improved the international reputation of its businesses and products, which contributed to increasing the country’s export revenues and attracting foreign investment.
Furthermore, Costa has raised social spending and at the same time planned to invest state revenues in transport, environmental infrastructure and energy, initiatives that could be extremely beneficial, as they would not only significantly improve the country’s sustainability, but also boost job creation, something that yet again indicates how important public investment is to an economy.
Additionally, Portugal has become an undervalued tech-hub, with plenty of start-ups offering good employment opportunities in addition to fostering innovation. The government with several initiatives, seeks to create a business-friendly ecosystem for them, under which they can thrive and boost the economy to the largest extent. It is thus not surprising, that Portugal has been the fastest growing country in Europe when it comes to the number of programmers.
Finally, one of the Costa’s top priorities, has been to lure back emigrated Portuguese who moved abroad during the crisis. To this end, tax cuts are offered to Portuguese citizens who choose to return home.
In a sum, since Costa stepped into office, Portugal has undergone a rapid recovery: economic growth has returned, unemployment has fallen radically, the public debt was also set on a downgrading path, while the budget remained well-balanced despite the increased spending, with Costa himself explaining that “sound public accounts are compatible with social cohesion”. Even Schäuble acknowledged Portugal’scrisis management, by actually calling Mário Centeno – the finance minister of the Costa government – the “Cristiano Ronaldo” of finance ministers.
Of course, not everything is bright and wonderful, as the country has emerged from a large crisis, the effects of which cannot be eliminated in just a few years. Public debt is still amongst the highest in the EU and several other challenges lie ahead for the South-European nation, especially by taking into consideration that the world economy just entered yet another crisis.
Furthermore, according to many, it was not Costa who led the recovery, but Portugal passively benefited from a strong recovery in Europe, falling oil prices, an explosion in tourism and a sharp drop in debt repayment costs. Indeed, it has to be taken into account that Portugal entered the recession in a relatively better position than many of its spatial counterparts and the relatively high quality of its domestic institutional infrastructure and policy-adaptation capacity aided the previous government to efficiently complete the memorandum of understanding (MoU) as early as 2015. Nevertheless, this is not a sufficient reason to discredit the post-2015 government’s efforts and justify the harsh austerity measures implied by the Troika. Taking into account that austerity never really provided decent results, it becomes evident that Costa’s policies were quite effective.
Economic patriotism should not be connected to ideologies
While in the case of Hungary and Poland “economic patriotism” has been fiercely criticized despite its prosperous results, this spite tendency has been an outcome of strong politicization in economic policy analysis. Even though the political context is verily important, it is also crucial to interpret economic policy independently, in order to take away valuable lessons and identify mistakes. Political bias is not a fortunate thing, as it is absolute and nullifies debate and hence development.
The case of Portugal is a perfect example, as it provides sound evidence, that a patriotic economic policy can be exercised by governments from all across the political spectrum and that the notion should not be connected to political and ideological beliefs. The left-wing Costa-government with its policy-making demonstrated that a solution always exists and that requires a brave, strong and decisive government, that pursues its own plan in the interests of the ‘patrie’, regardless of its positioning.
The Question Of Prosperity
Galloping economic woes, prejudice, injustice, poverty, low literacy rate, gender disparity and women rights, deteriorating health system, corruption, nepotism, terrorism, political instability, insecure property rights, looming energy crisis and various other similar hindrances constrain any state or country to be retrograded. Here questions arise that how do these obstacles take place? How do they affect the prosperity of any country? No history, geography, or culture spawns them. Simply the answer is institutions that a country possesses.
Institutions ramify into two types: inclusive and extractive. Inclusive political institutions make power broadly distributed in country or state and constrain its arbitrary exercise. Such political institutions also make it harder for others to usurp rights and undermine the cornerstone of inclusive institutions, which create inclusive economic institutions that feature secure property rights, an unbiased system of law, and a provision of public services that provide a level playing field in which people can exchange and contract; it also permits the entry of new businesses and allow people to choose their career. On the contrary, extractive political institutions accord clout in hands of few narrow elite and they have few constrains to exert their clout and engineer extractive economic institutions that can specifically benefit few people of the ruling elite or few people in the country.
Inclusive institutions are proportional to the prosperity and social and economic development. Multifarious countries in the world are great examples of this. Taking North and South Korea; both countries garnered their sovereignty in same year 1945, but they adopted different ways to govern the countries. North Korea under the stewardship of Kim Il-sung established dictatorship by 1947, and rolled out a rigid form of centrally planned economy as part of the so-called Juche system; private property was outlawed, markets were banned, and freedoms were curtailed not only in marketplace but also in every sphere of North Korea’s lives- besides those who used to be part of the very small ruling elite around Kim Il-sung and later his son and his successor Kim Jong-Il. Contrariwise, South Korea was led and its preliminary politico-economic institutions were orchestrated by the Harvard and Princeton-educated. Staunchly anticommunist Rhee and his successor General Park Chung-Hee secured their places in history as authoritarian presidents, but both governed a market economy where private property was recognised. After 1961, Park effectively taken measures that caused the state behind rapid economic growth; he established inclusive institutions which encouraged investment and trade. South Korean politicians prioritised to invest in most crucial segment of advancement that is education. South Korean companies were quick to take advantage of educated population; the policies encouraged investment and industrialisation, exports and the transfer of technology. South Korea quickly became a “Miracle Economy” and one of the most rapidly growing nations of the world. Just in fifty years there was conspicuous distinction between both countries not because of their culture, geography, or history but only due to institutions both countries had adopted.
Moreover, another model to gauge role of institutions in prosperity is comparison of Nogales of US and Mexico. US Nogales earn handsome annual income; they are highly educated; they possess up to the mark health system with high life expectancy by global standards; they are facilitated with better infrastructure, low crime rate, privilege to vote and safety of life. By contrast, the Mexican Nogales earn one-third of annual income of US Nogales; they have low literacy rate, high rate of infant mortality; they have roads in bad condition, law and order in worse condition, high crime rate and corruption. Here also the institutions formed by the Nogales of both countries are main reason for the differences in economic prosperity on the two sides of the border.
Similarly, Pakistan tackles with issues of institutions. Mostly, pro-colonial countries are predominantly inheritors of unco extractive politico-economic institutions, and colonialism is perhaps germane to Pakistan’s tailoring of institutions. Regretfully, Pakistan is inherited with colossally extractive institutions at birth. The new elite, comprising civilian-military complex and handful aristocrats, has managed to prolong colonial-era institutional legacy, which has led Pakistan to political instability, consequently, political instability begot inadequacy of incentives which are proportional to retro gradation of the country.
Additionally, a recent research of Economic Freedom of the World (WEF) by Fraser Institute depicts that the countries with inclusive institutions and most economic freedom are more developed and prosperous than the least economic free countries; countries were divided into four groups. Comparing most free quartile and least free quartile of the countries, the research portrayed that most free quartile earns even nine times more than least free quartile; most free quartile has two times more political and civil rights than least free quartile; most free quartile owes three times less gender disparity than least free quartile; life expectancy tops at 79. 40 years in most free quartile, whereas number stands at 65.20 in least free quartile. To conclude this, the economic freedom is sine quo non for any country to be prosperous, and economic freedom comes from inclusive institutions. Unfortunately, Pakistan has managed to get place in least free quartile.
In a nutshell, the institutions play pivotal role in prosperity and advancement, and are game changer for any country. Thereby, our current government should focus on institutions rather than other issues, so that Pakistan can shine among the world’s better economies. For accomplishing this highly necessary task government should take conducive measures right now.
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