Emerging Economies Forum

Forums

The Emerging Economies forum meets to discuss issues raised by the growth of emerging economies and their economic, political and cultural impact on the world.

These forums require preparation and suggested readings are circulated to attendees in advance. Participants are encouraged to add to these from their own findings. To submit reading material click here.

For further recommended reading visit Research Links.

If you would like to join the forum, or would like further information, please contact Stuart Simpson or Angus Kennedy at EmergingEconomies@instituteofideas.com.

Audio recordings of introductions at selected past forums are available here and some summaries of discussions are available below.

Past Forums

Sunday 6 December 2009

Angus Kennedy chaired a discussion reflecting on differing perspectives on the future of capitalism as revealed by a recent debate between Martin Wolf and Alex Callinicos.

Sunday 27 September 2009

Rob Lyons introduced a discussion on the state and the recession.

Sunday 23 August 2009

Michael Savage introduced on the New Philanthropy: Philanthropy has become a talking point. Vast fortunes have been made recently, and philanthropists like Bill Gates are giving on a huge scale. What is the new philanthropy and what could we say about it? The new philanthropy is amorphous. Debates about it are often vague and there is no agreed definition. But we can make sense of some overlapping ideas. Celebrity philanthropists are raising awareness, billionaires are demanding more bang for their philanthropic buck and social entrepreneurs like George Soros are engaged in political interventions.

There are several distinct features of the new philanthropy. Old-fashioned philanthropists often left fortunes in their wills, and gave money for others to spend. Today many philanthropists are giving earlier and maintaining involvement in how their money is spent. There was some discussion of the extent to which philanthropists are uncomfortable with being capitalists. Whilst there is celebration of capitalist giving, it was noted that entrepreneurship rather than capitalism is being celebrated. The undemocratic character of rejecting popular/political action in favour of rich people doing the right thing was noted.

Meanwhile, Stuart Simpson introduced on Financial Engineering, focusing on three key areas.

Risk: The trading of risk in financial markets must first be understood as a method of allocating capital. The term 'risk' has a specific meaning in the context of financial markets that is not directly transferable a wider social discussion of risk. Many functions performed by trading risk through the use of derivative products free up capital for other uses. The purchase of a commodity futures contract may reduce the requirement for a firm to hold large stocks of a commodity to protect against the volatility of commodities markets. Many of the largest derivative markets exist due to the withdrawal by the state from managing these risks directly, such as the ForEx markets. However, many states still significantly control the value of the domestic currency. The Chinese state, through controlling the value of RMB, removes the requirement for individual firms to manage their own foreign exchange risk through the financial markets or otherwise.

Financialisation: The use of financial products by non-financial firms is not sufficient evidence of a move towards increased financialisation. The purchase of financial products on the part of non-financial firms is often evidence of hedging activity, whereby non-financial firms limit their exposure to volatile financial markets in order to focus on the core business of the firm. Legal precedent makes it extremely unlikely that treasury departments of non-financial companies or public bodies such as councils are able to engage in speculative activity. Contracts that do not conform to strict definitions of a hedge – involving an underlying position that results in the net position that cancels out speculation – may be declared ultra vires, resulting in a lose-lose situation for any counterparty to the transaction. A specific point was raised regarding the profits made by car firms through financing the purchase of their own products. This type of activity is best understood as a pricing/sales policy on the part of car firms. Any profits made through financing are ultimately derived from the production of the product financed. It is not clear to what extent non-financial firms are involved in markets for more recent credit products.

Credit derivative products: Recent developments in credit derivative products are a significant departure from more traditional derivatives markets, although some important common features are shared. 'Default is not a probabilistic event, a coin toss, it is a business decision.' (Paul Wilmott). The use of mathematical models to construct default probabilities was identified as significantly different from the construction of more traditional models, such as Black-Scholes option pricing. The existence of an asset price bubble was regarded as a more significant feature leading to the acceptance of such models, than complex mathematics. The models allowed banks to make a profit. Credit derivative products can be understood as a method of increasing leverage and taking on more risk during an asset bubble. Credit derivative products allowed banks to lend increasing amounts supported by relatively decreasing capital reserve – they were a method of gaming capital adequacy regulations. In addition, US banks were able to use credit derivative products to circumvent the spirit of the depression era Glass-Steagal act, which was subsequently repealed after the fact. Hyman Minsky was recommended as a useful starting point in understanding the development of a asset bubble in the context of a complex financial system.

Sunday 2 August 2009

Angus Kennedy, IT Consultant and web master Battle of Ideas and Culture Wars websites, introduced on 'UK – the productive economy': It has become commonplace to put the blame for the current recession on the shoulders of greedy bankers, on the increased financialisation of the British economy over the last twenty years. In some ways, however, this is unfair since there has been a much longer term decline in British manufacturing industry. Leaving a hole, it could be argued, which the growth in financial services and public spending has been attempting to plug. Although some commentators now call for a return to productive investment and a regeneration of manufacturing to set the balance right, is this at all realistic? Is there something intrinsically wrong with an economy based on services and high levels of consumption? Is an economy based on 'production' somehow better and sounder? What should the balance be?

Thursday 16 October 2008

Norman Lewis, chief strategy officer, Wireless Grids Corporation; author, Digital Kids will introduce A Brave New World: Are the emerging economies the new technological innovators?

QQ, Tudou, Mixi and CyWorld are not familiar names in the West, but these websites based in China, Japan and South Korea are more popular, profitable and technically innovative than their Western counterparts, MySpace, Facebook and YouTube. South Korea and Japan are the most advanced internet markets in the world, with China and India rapidly catching up. Yet we in the West seem oblivious to the development of such technologies in Asia. What, if anything, can the West learn from technical innovation coming out of the emerging economies?

Norman Lewis will be speaking at a session on this topic at the Battle of Ideas 2008. Click here for more.

For readings or more information, email EmergingEconomies@instituteofideas.com.

Sunday 14 September 2008

Patrick Hayes, Henley Business School MBA candidate and Promotions Manager of the Battle of Ideas, will introduce Can India compete with China as an economic superpower?

China's growth and potential as a future superpower is currently dominating the headlines. However, with sustained annual economic growth of 8-9% and a growing population that has been estimated to overtake China's by 2050, India is in many ways developing as spectacularly. In preparation for the session "China and India: Catching up with the West?", part of the Battle for Prosperity strand at this year's Battle of Ideas festival, this forum will examine the extent to which India can remain on its current growth path to become one of the leading economic superpowers of the 21st Century.

Sunday 3 August 2008

John Pender, who has published articles on World Bank development policy, introduced the Commission on Growth and Development Report

In August 2008 the Commission on Growth and Development will release its final report. The Commission headed by the Nobel Laureate Michael Spence attempts to draw lessons for development from looking at the experience of the 13 most successful developing economies in the post war period. Some have said that the report finally puts the Washington Consensus to bed, that the state is back on the agenda, and that one size fits all solutions are out. What insights does the report offer, and what are its limitations?

Wednesday 28 May 2008

Sheila Lewis, director of Volanti Consulting and co-producer of the Battle for China, introduced "Is China the economic saviour of the 21st century?"

For the past 30 years, China has been consistently growing at double or triple the rate found in the developed world. In 2007 China contributed more to the growth of the world economy than the US. The budget for the 2008 Beijing Olympics is 2.5 times that for the London Olympics in 2012. It sometimes seems that China is becoming more economically dynamic than the West. Some commentators fear competition from this new economic superpower, and even worry that China is about to 'take over' from the West. But is there more to the story of Chinese economic power than hits the headlines?

Much of the hype about the Chinese economy seems over-stated, distorted by both fear and jealousy. For example, America's economy is currently four times the size of China's and Chinese productivity is still far behind Western countries. Chinese industry is dominated by low-productivity, labour-intensive manufacture. Rather than simply competing against Western economies, China is increasingly integrated into a global economy, benefitting from access to the developed markets of the West, while the developed world benefits from cheaper products. Similarly, the vast funds China is accumulating from exports are also supporting investments in the developed world. It is also argued that the West has the trump hand on 'ingenuity', and retains a grip on capital and knowledge intensive sectors like the pharmaceutical industry. But will a growing China begin to upset the global division of labour, and challenge the West on its own terms? As the West becomes more risk-averse and regulated, will China's dynamism spur it on to scientific and technological breakthroughs we could only dream of? Is China playing catch up, or might it begin to take a lead in the global economy?

Sunday 27 April 2008

Joe Kaplinsky, co-author of Energise!, introduced 'Food and Commodities Inflation'

The world has recently witnessed continued inflation in the prices for many of the commodities that are increasingly demanded in greater supply by the world's emerging economies. What will the effect be for the global economy, and for the world's most vulnerable people if food price inflation is here to stay?

Commodity prices have spiralled dramatically over recent years. The world's poorest economies have generally benefited from increased demand for and prices of their exports, at the expense of the rich world. Does the prospect of inflation of food prices threaten to hit the world's poorest economies hardest while leaving the wealthy untouched?

Recent inflation in food prices has led some to warn of the impact of rising prosperity of consumers in the world's developing nations. How much does the current bout of inflation have to do with increased affluence in the world's emerging economies, or even the increased use of farm land for biofuels?

'Recent price jumps appear to have more in common with historic factors, such as poor harvests or animal disease, than they do with 21st century phenomena'

Should we take the current inflation of prices as a warning of things to come? Is now the time to asses the consequences of coming affluence amongst the world's poor?

Sunday 30 March 2008 (View attachment on Inequality here)

Daniel Ben-Ami, finance and economics journalist and author, Cowardly Capitalism: The Myth of the Global Financial Casino introduced 'Global Equality'

The growth of the emerging economies has captivated imaginations, leading to speculation that the gap between the rich world and the poor may finally be closing. But away from the headline figures is there a more complex story to be understood?

Growth remains uneven, both within and between the economies of the developing world. Commentators point to those that are being left behind. Many countries remain trapped in poverty and are seeing their way out blocked by fierce competition from their more dynamic neighbours around the globe. Are the new textile factories in China increasing poverty in Nigeria?

The largest of the world's emerging economies, India and China, have populations greater than the population of the African continent. If these continental economies are viewed more closely the pattern of uneven development we see globally can be seen repeated within their boarders. Various regions, with populations larger than most nations have yet to be touched by the dynamism seen in Mumbai or Shanghai.

Do those who draw attention to such failings merely detract from the benefits of growth, or should their complaints be at the forefront of debate on the nature of development?

Sunday 2 March 2008

Michael Savage, Head of Credit Policy, FMD Credit Risk, Lloyds TSB Corporate Markets, introduced 'The Credit Crunch'

The 'credit crunch' has focused attention on the financial markets and brought into relief the imbalances between emerging economies that create more than they consume, and the developed economies that consume more than they create. Is it a problem that developed economies are so reliant on cheap debt from the east? How might balance be restored? And what is the relationship between the financial economy, which is prone to crashes and crises, and the real economy that seems consistently to be producing more and more stuff?

Sunday 27 January 2008

Stuart Simpson, convenor of the Emerging Economies Forum, introduced 'Understanding Future Shifts'

The emerging economies will be a major theme for discussion at the January 2008 World Economic Forum in Davos. The potential economic, political and cultural impact of the emerging economies will be discussed under the heading 'Understanding Future Shifts'. The debates that take place in and around Davos will provide the focus for the first Emerging Economies Forum.

View attachment: Will China and India conquer the world?

Essay: We should celebrate the spread of wealth and modernity in the developing world, while recognising that a great shift in global power is not imminent. By Stuart Simpson