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Ethics and economics to save society

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Deep rifts are tearing through the body of our society. They cause new anxiety and anger among people and create new currents in politics. The social basis of this anxiety includes geographical, educational and ethical factors.

People are not born to earn a lot of money. Quite the reverse. They just want to live well or as well as they are used to, and earn what they need without wanting to exploit others.

Many thoughts and theories that had a great impact in the world have often been orphaned, and are adopted by other schools of thought. Therefore they cannot avoid criticism.

For example, Jeremy Bentham, the philosopher who laid the ethical foundations of modern capitalism, as well as other thinkers, are not moral giants in the modern sense of the word, but are known for their incompatibility with ethics. Utilitarianism pursues maximum utility and happiness and it is not by chance that it is adopted by the emerging Western economics and, under the constraints of creating an ‘economic man’, can easily be developed with new methods obtained from mathematical statistical calculation (derivative systems).

The maximum value thus satisfies the economy’s urgent need for sophisticated and accurate quantitative systemic tools. This set of amoral ethical thoughts that came out of the pursuit of ‘natural values’ that everyone, not just a few, should obtain, has gradually been forgotten by the critical history of economic thought.

Utilitarianism and liberalism are the two complementary and contradictory pillars in the foundation of market economy. The former separates the standard of moral judgement on personal behaviour from the passion for money accumulation, and changes it to be completely determined by the profit motive. Therefore, only such behaviour can enhance “the greatest happiness for the greatest number of people”, self-referencing itself as ethical and eliminating the instinctive value judgement of every human being who is unable to achieve such happiness due to money. According to this ‘sacred’ standard, the elite group of technocrats should objectively play the role of ‘social guardian’.

Liberalism recognises the goal of utilitarianism, but firmly opposes the inference that it leads to a strong central government. Adam Smith believed that the division of labour and exchange were spontaneous and for free and could promote the general happiness of society and the enhancement of personal wellbeing at the same time. The theorems of welfare economics infer that all the outcomes of spontaneous market equilibrium must result in welfare maximisation. Conversely, the maximisation of overall welfare in practice is achieved by the free will of the individual (the entrepreneur), i.e. by a selfish behaviour of the individual. According to the liberals, the government’s role in it is to make only a few changes to the ‘distribution of initial capital’. Hence no longer Hegel’s Ethical State, but the State as simple administrator, employed by the aforementioned elite. At this point, the ethical project of liberal capitalism is complete.

Free choice and welfare maximisation can theoretically be achieved at the same time. Therefore, what people have to do is to favour State restrictions and at the same time promote full competition, as well as reduce information and external asymmetries through homologation and standardisation. Hence the aim of capitalism is to remove the ethical role of the State.

Ironically, however, the ethical structure of liberal capitalism has never been perfect outside theoretical designs, i.e. it has manifested itself in a particular part of the world by going through devastating crises. The Great Depression ran over the ‘sacred invisible hand’ of the economy like an elephant tramples a clod of earth. World War II pushed the collective will and mobilisation of State capitalism to their limits, through the well-known political and economic examples.

Peoples have different forms of expression, the electoral and the revolutionary ones. Socialism in the aftermath of World War II and, even before, communitarianism became good medicine and correctives for the horrors of capitalism. In major European countries, social democratic parties have brought about major changes in liberal capitalism, the culmination of which are the Scandinavian models.

Paul Collier, Professor at the Oxford Universities and author of The Future of Capitalism: Facing the New Anxieties (2018) took his own hometown, Sheffield, as an example in his book. Sheffield was the first city in the North of England to experience the industrial revolution and was also the first to face the new anxiety caused by that revolution: the polarisation between the rich and the poor, unemployment and the environment.

Following the deterioration of the situation and demographic changes, the citizens’ response was to enhance ties among them and create a sufficiently strong community, as well as use this close relationship to create an organisation establishing charitable cooperatives.

For example, housing cooperatives allow people to save money to buy houses; insurance cooperatives reduce risk, and agricultural and retail cooperatives give farmers and consumers independent bargaining power over large corporations.

The cooperative movement that started and developed in the North of England quickly spread to most of Europe and became the economic basis of the centre-left social democratic parties. It was, however, the centre-left of that time, not today’s political farce with well-known bit-part actors and actresses.

Through the alliance, the community spread across the country and reciprocity within the community extended to mutual commitment between State and citizens. The pragmatic policies of medical insurance, pension, education, unemployment and welfare eased families’ anxiety. Over the years, social democracy has alternately taken power in capitalist countries, and these socialist measures have been long-term and universally maintained – at least so far.

With the decline of the steel industry, cities became typical obsolete and dilapidated centres. In various European countries, the decline of the social democratic parties – which initiated in the 1970s -started to step up at the beginning of the century and has reached its peak over the last ten years. Decline has occurred in France, Germany, Spain and Italy (where the glorious Socialist Party (PSI)has disappeared). Support rates in Norway and the Netherlands have fallen significantly.

It should be noted, however, that the traditional centre-right parties have not benefited from it and have even become a launching pad for movements hetero-directed by stateless financial capital and by vague and inconclusive agendas. Italy is a painful case in point.

Globalised capitalism is clearly responsible for all this – through technology and mass addiction – and raises once again the problem of the incompatibility of rights and duties in the liberal society, at the time when the gap between the rich and the poor is widening. Italy is the worst among the most populous European countries in terms of difference in income between the rich and the poor: in our country, 20% of the population with the highest incomes can count on more than six times the incomes of the 20% with the lowest ones.

The decline of the ethical State and the collapse of social democracy are the contradiction between the actual collapse of mutual obligations (rights-duties) in globalised capitalism and the increasing demand for the aforementioned obligations due to the more complex and asymmetrical economic structure (just consider violence in South America owing to the continuing failures of capitalism).

Fiscal crises with high welfare have also spread to Europe: it should be recalled that the double entendrePIIGS (Portugal, Italy, Ireland, Greece and Spain) was used in 2008-2010, as well as “Rust Belt” (the U.S. region between the Northern Appalachian Mountains and the Great Lakes) to refer to phenomena such as economic decline, depopulation and urban decay due to the contraction of the once very active industrial sector, after the 2008 financial crisis.

Therefore,in the countries where there has been an unprecedented expansion of higher education and wealth that has led to the creation of the middle class, the capitalism crises lead to the dilemma of identity and frustration.

If we do not confine ourselves to the hypothesis of a “rational economic man”, but rather focus on the more realistic “rational social man”, we will have more economic benefits, since the respect for identity is included in the satisfaction of individual needs.

A simple thinking model may suggest an idea. If everyone has two goods or assets, namely work and citizenship, both can lead to a certain respect. Respect for work is reflected in income and respect for citizenship in the country’s prestige. Although everyone cannot choose their identity, they can choose ‘prominence’: choosing a prominent identity indicates a common group to which we proactively belong. The more the common group is respected, the more individuals are encouraged not to prevaricate against each other in pursuit of their own happiness by doing harm to the others.

Conversely, the ethics of liberal capitalism traditionally aims at destroying the State and turning citizens into consumers without identity.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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Emerging Global Market: The Arctic on Sale

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The Arctic Region has been on a journey of geographical transformation induced by Climate Change. There has been an unprecedented percentage of what can be called as ‘Arctic metamorphosis’, witnessed as deterioration of climate twice as rapidly as in any other parts of the globe. There has been a decline in permafrost, sea ice, icesheets on ocean and glaciers in Canada, Alaska and Greenland.  There has been a notable decrease in the snow cover that earlier occupied the land. These alarming changes in the physiography were first recorded in the 1980s, and have been on a surge ever since. Around 1 million sq. miles of sea ice has shrunk over the past 50 years, halving the size of Arctic icecap. The transition has been so dramatic that it actually cut the turf to Asia, revealing the fabled North West Passage that European voyagers sought for shipping, for over centuries. As of now, it is not a matter of ‘if’ but ‘when’ will the Arctic Passageway open for regular marine transportation and when would the exploration of lucrative natural energy-resources deposits be possible.

The regressing ecosystem has been the least of the concerns of our capitalist, market-oriented, energy-hungry world economy. The melting ice caps and glaciers are paving way to access the 13% of globe’s undiscovered oil and 30% of globe’s undiscovered natural gas lying at the Arctic Ocean seabed, a home for world’s largest unexplored hydrocarbon resources. These percentages translate to 1,669 trillion cubic ft. of natural gas and 90 billion barrels of oil. The economic potential for these energy resources exceeds $2.7 trillion for Russian and American Arctic claims alone. Moreover, there are massive reserve potential for rare mineral resources also referred to as “strategic minerals” including palladium, nickel and iron-ore which might prove to be a greater economic driver than the energy resources. Apart from these, Arctic has tremendous new opportunities for high sea fisheries. The Ocean has vast stocks of marine resources including shrimp, pollock, crab, pacific salmon, squid, scallop and halibut. It would prove to be a new arena of industrial-scale commercial fisheries.

Whether the sought resources are hydrocarbon or mineral, they must procure their route via pipelines or shipping routes to the receptive markets. Along with the transitory passageways, there would be need for improved icebreakers, satellite and communication and navigation, deep water ports, double-hulled shipping vessels, operational search and aviation infrastructure development.

An even better incentive would be the inception of new sea-lanes initiated by the great Arctic melt. The shipping shortcuts of Northwest Passage and Northern Sea Route would reduce the nautical transit times by days, saving the shipping corporations thousands of miles. The sailing distance between Yokohama and Rotterdam on the Northern Route would be reduced from over 11,200 nautical miles to 6,500 nautical miles, in comparison with the current Suez Canal Route which would amount to the savings of up to 40 percent of shipping expenses. Likewise, the voyage from Rotterdam to Seattle would be trimmed by the North West Passage by over 2000 nautical miles, reducing the distance up to 25 percent in comparison with the current Panama route.

Taking into consideration the fuel costs, canal fees and various other miscellaneous charges that amount to lofty freight rates, these alternative passages will cutback the charges of a single voyage down to at least 20%, saving around $17.5 million, saving billions of dollars per annum for the shipping industry. These savings would be far greater for the megaships that have to sail all the way down to Cape Horn and Cape of Good Hope.

The world’s shipyard’s have already started building ice-capable ships, beginning with the groundwork for the navigation through these sea-lanes and for the transport of Arctic’s natural gas and oil. Billions of dollars are being invested by the private sector for the fleet of Arctic tankers. As of now, around 496 ice-class ships have been built worldwide. The gas and oil markets are investing in development of the avant-garde technology and assemblage of advanced ships, possessing double-acting tankers, that have the dual technology of steam bowing through open waters and proceed stern to smash through deep ice. These ships are capable of sailing unobstructed to Arctic’s burgeoning gas and oil fields independent of ice-breakers. These breakthroughs will turn previously unviable commercial projects into booming businesses.

Of all the Arctic States, the largest stakeholder with greatest intrinsic interests in the region is Russia. A significant 20% of Russia’s GDP comes of Russian North, and accounts for 22% of all exports. The resources of Arctic are of strategic importance for Russia; therefore, it has been so far the largest investor in the region. It has invested in the fleet of nuclear-icebreakers, the only of their kind in the world. Further, Russia is planning on increasing this fleet of 4 to 13 with a cost of over $1.5 billion. Moreover, Russia has endeavored to aim for 92.6 million ton of cargo by 2030. These hefty investments indicate the importance of Arctic as a market. Russia aims at charging for providing the sea-routes since it has the largest geographical proximity to the ocean as well as providing shipping and infrastructure in the region. The claims of oil and gas reserves are only an addition to the gains Russia has planned to make.

Considering the economic and strategic importance of Arctic and its potential to add to the world’s oil, gas, minerals, fisheries and shipping reserves makes it an alluring marketplace. The region itself has been divided among the ‘Arctic States’ that include Russia, Denmark, Iceland, Finland, Sweden, Norway, Iceland, and United States. Instead of making efforts to preserve the deteriorating environmental conditions and the physiographic challenges, these states are only in a race of dividing the resources among themselves and reaping as much assets as they can. All domains of Arctic are on sale; including the sea, land, sea-life, mineral resources, and fossil fuels. The world has turned a blind eye towards the environmental consequences for the region of the planet which will surely cost more than the gains. Putting nature’s commodities on sale have never worked in anyone’s favor.

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Covid-19 and food crisis

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COVID-19 has hit at a time when food crisis and malnutrition are on the rise. According to the most recent UN projections, the pandemic-induced economic slump would cause as many as 132 million people to be hungry. This would be in addition to the 690 million people going hungry now. At the same time, 135 million people suffer from acute food insecurity and in need of urgent humanitarian assistance. Although the pandemic’s transmission has slowed in certain countries and cases have decreased, COVID-19 has resurfaced or is spreading rapidly in others. This is still a global issue that needs a worldwide solution.

This epidemic threatens both lives and livelihoods. COVID-19 has had a wide-ranging and disruptive influence on the agriculture system. We fear a worldwide food crisis unless we act quickly, which may have long-term consequences for hundreds of millions of children and adults. This is mostly due to a lack of food availability — as wages decline, remittances decline, and in certain cases, food prices rise. Food insecurity is increasingly becoming a food production concern in nations that already have high levels of acute food insecurity.

Agriculture continues to serve a reliable and major part in world economy and stability, and it remains the primary source of food, income, and work for rural communities, even in the face of a pandemic. The impact of the COVID-19 pandemic on the agricultural system and sector has been wide-ranging, causing unprecedented uncertainty in global food supply chains, including potential bottlenecks in labor markets, input industries, agriculture production, food processing, transportation and logistics, as well as shifts in demand for food and food services.

The COVID-19 epidemic not only created a new sort of agricultural catastrophe, but it also occurred at a difficult moment for farmers. In most years during the last few years, global commodity output has exceeded demand, resulting in lower prices. In 2013, the Food and Agricultural Organization (FAO) predicted decreased global agricultural output growth due to limited agricultural land development, rising production costs, expanding resource restrictions, and increasing environmental concerns.

An expanding global population remains the main driver of demand growth, although the consumption patterns and projected trends vary across countries in line with their level of income and development. Average per capita food availability is projected to reach about 3,000 kcal and 85 g of protein per day by 2029. Due to the ongoing transition in global diets towards higher consumption of animal products, fats and other foods, the share of staples in the food basket is projected to decline by 2029 for all income groups. In particular, consumers in middle-income countries are expected to use their additional income to shift their diets away from staples towards higher value products. Meanwhile, environmental and health concerns in high-income countries are expected to support a transition from animal-based protein towards alternative sources of protein.

When people suffer from hunger or chronic undernourishment, it means that they are unable to meet their food requirements – consume enough calories to lead a normal, active life – over a prolonged period. This has long-term implications for their future, and continues to present a setback to global efforts to reach Zero Hunger. When people experience crisis-level, acute food insecurity, it means they have limited access to food in the short-term due to sporadic, sudden crises that may put their lives and livelihoods at risk.

However, if people facing crisis-level acute food insecurity get the assistance they need, they will not join the ranks of the hungry, and their situation will not become chronic

It is clear: although globally there is enough food for everyone, too many people are still suffering from hunger. Our food systems are failing, and the pandemic is making things worse.

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How Bangladesh became Standout Star in South Asia Amidst Covid-19

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Bangladesh, the shining model of development in South Asia, becomes everyone’s economic darling amidst Covid-19. The per capita income of Bangladesh in the fiscal year 2020-21 is higher than that of many neighbouring countries including India and Pakistan. Recently, Bangladesh has agreed to lend $200 million to debt-ridden Sri Lanka to bail out through currency swap. Bangladesh, once one of the most vulnerable economies, has now substantiated itself as the most successful economy of South Asia. How Bangladesh successfully managed Covid-19 and became top performing economy of South Asia?

In March 1971, Sheikh Mujibur Rahman declared their independence from richer and more powerful Pakistan. The country was born through war and famine. Shortly after the independence of Bangladesh, Henry Kissinger, then the U.S. national security advisor, derisively referred to the country as a “Basket Case of Misery.” But after fifty years, recently, Bangladesh’s Cabinet Secretary reported that per capita income has risen to $2,227. Pakistan’s per capita income, meanwhile, is $1,543. In 1971, Pakistan was 70% richer than Bangladesh; today, Bangladesh is 45% richer than Pakistan. Pakistani economist Abid Hasan, former World Bank Adviser, stated that “If Pakistan continues its dismal performance, it is in the realm of possibility that we could be seeking aid from Bangladesh in 2030,”. On the other hand, India, the economic superpower of South Asia, is also lagging behind Bangladesh in terms of per capita income worth of $1,947. This also elucidates that the economic decisions of Bangladesh are better than that of any other South Asian countries.

Bangladesh’s economic growth leans-on three pillars: exports competitiveness, social progress and fiscal prudence. Between 2011 and 2019, Bangladesh’s exports grew at 8.6% every year, compared to the world average of 0.4%. This godsend is substantially due to the country’s hard-hearted focus on products, such as apparel, in which it possesses a comparative advantage.

The variegated investment plans pursued by the Bangladesh government contributes to the escalation of the country’s per capita income. The government has attracted investments in education, health, connectivity and infrastructure both from home and abroad. As a long-term implication, investing in these sectors helped Bangladesh to facilitate space for businesses and created skilled manpower to run them swiftly. Meanwhile, the share of Bangladeshi women in the labor force has consistently grown, unlike in India and Pakistan, where it has decreased. And Bangladesh has maintained a public debt-to-GDP ratio between 30% and 40%. India and Pakistan will both emerge from the pandemic with public debt close to 90% of GDP.

Bangladesh’s economy and industry management strategy during Covid-19 is also worth mentioning here since the country till now has successfully protected its economy from impact of pandemic. At the outset of pandemic, lockdowns and restrictions hampered the country’s overall productivity for a while. To tackle the pandemic effect, Bangladesh introduced improvised monetary policy and fiscal stimuli to bring them under the safety net which lifted the situation from worsening. Government introduced stimulus package which is equivalent to 4.3 percent of total GDP and covers all necessary sectors such as industry, SMEs and agriculture. These packages are not only a one-time deal, new packages are also being announced in course of time. For instance, in January 2021, government announced two new packages for small and medium entrepreneurs and grass roots populations. Apart from economic interventions, the government also chose the path of targeted interventions. The government, after first wave, abandoned widespread lockdown and adopted the policy of targeted intervention which is found to be effective as it allows socio-economic activities to carry on under certain protocols and helps the industries to fight back against the pandemic effect.

Another pivotal key to success was the management of migrant labor force and keeping the domestic production active amidst the pandemic. According to KNOMAD report, amidst the Covid-19, Bangladesh’s remittance grew by 18.4 percent crossing 21 billion per annum inflow where many remittance dependent countries experienced negative growth rate. Because of the massive inflow of remittance, the Forex reserve of Bangladesh reached at 45.1 billion US dollar.

Bangladesh’s success in managing COVID19 and its economy has been reflected in a recent report “Bangladesh Development Update- Moving Forward: Connectivity and Logistics to strengthen Competitiveness,” published by World Bank. Bangladesh’s economy is showing nascent signs of recovery backed by a rebound in exports, strong remittance inflows, and the ongoing vaccination program. Through financial assistance to Sri Lanka and Covid relief aid to India, Bangladesh is showcasing its rise as an emerging superpower in South Asia. That is why Mihir Sharma, Director of Centre for Economy and Growth Programme at the Observer Research Foundation, wrote in an article at Bloomberg that, “Today, the country’s 160 million-plus people, packed into a fertile delta that’s more densely populated than the Vatican City, seem destined to be South Asia’s standout success”. Back in 2017, PwC (PricewaterhouseCoopers) report also predicted the same that Bangladesh will become the largest economy by 2030 and an economic powerhouse in South Asia. And this is how Bangladesh, a development paragon, offers lessons for the other struggling countries of world after 50 years of its independence.

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