International Political Economy - Science topic

Energy security of European countries and the influence of geopolitical economic factors on energy dependence.

Due to the SARS-CoV-2 (Covid-19) coronavirus pandemic, a lot will change in terms of economic globalization. International, intermodal logistics chains of supply and distribution are shortened.

Regards,

Dariusz Prokopowicz

"To win one hundred victories in one hundred battles is not the height of excellence. To subdue the enemy without fighting is the height of excellence."

- Sun Tzu, The Art of War

After American economic sanctioned on Iran, there is huge opportunity for china to sympathize Iran. No doubt, Iran- China relation will be more strengthen after American action. Israel, Saudi Arab and America have thrown Iran into China's court and China will never miss this golden chance to cash.

When they cannot achieve their goals, the rational parties unite to achieve common results. When they do not achieve what they want, associations lose their meaning, become a burden and often fall apart. But along the common path, they build relationships that transcend the boundaries of the rational and build limited rational and even irrational relationships. In conditions of uncertainty and high risk, the role of irrational ideas for establishing aspirations and ambitions prevails. They build the ideas of selfishness and altruism. Nationalism is a kind of selfishness, the fruit of limited rational and, in extreme cases, irrational ideas for exceeding the assessments of one's own image and role. Entering this zone does nothing good for solving specific security cases, as well as for humanity as a whole.

The term nationalism is not acceptable for the case of developing a vaccine for COVID-19, if the competition of the countries leads to a successful result in the fight against the virus.

The current terrorism of the 21st century has a greatly effect on oil production and prices, contributed to the loss of billions of dollars for oil-producing countries, and contributed to oil deals& contracts for certain regions of the world. The sale of weapons has been unprecedented, and it has served certain countries by selling their old expired conventional weapons rather than destroying them. It has also contributed to increasing the poor and misery in quantity and quality. This is to say the least for terrorism.

Rej Kasi feel free to check my bachlor thesis on RG. I made a relatively comprehensive analysis of the economic conceptions rooted in the process of codifying European treaties. Even if the work is in French and applies mainly to Western and Southern Europe, the fundamentals are present. For information purposes, the work corresponds quite amply to the traditional requirements of a Bachelor thesis so it can serve as a structuring framework. To go even further in different forms of capitalism and work in European political economy, I recommend the work of Bruno Amable (2017) and Stafano Palombarini.

So a couple things to offer.

Demonstration effects (as you note) - work when a novel solution is shown to be workable and credible. The surge of power sharing and new peacekeeping in the 1990s may have been self perpetuating. There might be traces of this in peace agreement provisions. Ideally you could find some element that would be theoretically irrelevant but keeps coming up for a couple years and then fades. . . suggesting a demonstration effect.

Interlocking conflict - conflicts often warp incentives and ramp up intervention. The end of the cold war had cascading effects across the international system. On a smaller level, the peace agreement in 2006 in Sudan led to Sudan cutting off support for LRA which pushed LRA to the table. Similarly the abandonment of apartheid in South Africa had cascading effects across all of Southern Africa.

You might apply some filtering (eg. Median - or low-pass) prior searching for local maximums. Depending on the amount of noise present the filter might do the trick.

When she announced the snap election, it seemed to be a sensible strategy. A stronger majority would have helped her take a stronger stance against Brussels in what will be very complex negotiations to take the UK out of the EU. Right now her minority government will have little wiggle room and Brussels should have the upper hand in the negotiations. But, BREXIT will continue. Even the Labour Party has agreed that the UK will be out of the EU.

The question is whether the UK will still be under the European Court of Justice's authority. PM May is not willing to recognize the Court while the EU believes it is necessary to protect the rights of EU citizens living in the UK after its exit and more importantly to settle economic related conflicts that will arise in the next years. Exiting the EU will create many legal problems and an impartial judiciary will be needed to address these disputes. The ECJ has a strong reputation for independence and fairness and the EU is right to make this contingent to the talks. And while May and Tory MPs have been wary of the Court's powers, it is in their interest to have a third party mediate future disputes. Of course, the UK and the EU could create an international tribunal to address potential legal problems but such a body will be very political and may create more conflicts between the UK and the EU.

The other issue, and the ECJ is a connected issue, is how much access the Brits will have to the European single market. Labour is demanding a strong connection to this market but this will come at a cost. Access to this market will not be cheap and the EU will want some big concessions. For instance, Corbyn favors Brexit because the UK will once again have an independent industrial policy that will prop British industry, specially steel. May wants access to the single market of course. But the issue is that the EU wants to preserve freedom of movement for its citizens and guarantees that their citizens will be able to compete for jobs in the UK. Remember that over 3 million EU nationals live in the UK and that close to 1 million of these EU nationals are Polish citizens. EU nationals represent close to 5% of the UK population -- and most of these people are employed, paying taxes, etc.... In comparison, around 1 million UK nationals live in the EU, over 1/3 are retired people living in the Mediterranean - mostly in Spain.

Finally, one of the surprising results was the weakening of the Scottish Nationalists at the expense of the Conservatives. We will not see another Scottish referendum in the near future and dreams that Scotland could negotiate a separate deal with the EU - which was unlikely - are not going to materialize. This does help May, but these Conservative MPs may also complicate things as their views on  a hard BREXIT do not seem to be as strong as their English counterparts. This could be interesting.

Anyhow.... these are my 3 cents.

Dear, thank you for sharing. I think a little retraction is something like a correction of course. There is no turning back, as markets have advanced to levels that do not allow returns, and technological tools allow for all kinds of deals in this "global village." Greetings!.

Dear Krzysztof, Haluk, and Sebastiano,

thank you for your intervention. As this question is addressed to the Weingast and Cox's project Political-Economics of Development below, please read their project and soem of their papers and give your comments or opinions on them.

Dear Andrea,

I have been using another approach to problems like this. It involves valuing the international market value of a country. See

Clark, E. and K. Kassimatis, “An alternative measure of the ‘world market portfolio’: determinants, efficiency, and information content”, JOURNAL OF INTERNATIONAL MONEY AND FINANCE, Vol 30, n° 5, (2011) pp 724-748.

We use the methodology to generate  the "Market Index" in Financial theory, but the values are generated for each country. We use the USD as the base currency. If you are interested and the demo seels long and irritating, just go to the numerical example in the appendix. You can find country values and rates of return from 1980 to 2012 at https://countrymetrics.wordpress.com/blog/

The advantage of this approach is that it gives the values (and returns in international relative prices.

Best,

Ephraim

Scott, J. M., & Carter, R. G. (2016). Promoting democracy in Latin America: foreign policy change and US democracy assistance, 1975–2010. Third World Quarterly, 37(2), 299-320.

Trump articulated the discontent that those dispossessed of jobs and prospects that is experienced as a result of the after-effects of globalization.  It was the policies of the elite, both Republican and Democrat, that produced those after-effects.  The dispossessed wanted someone to blame, and Trump offered immigrants, refugees, outsourcing companies, foreign investors, etc.  The results of the election prove that the dispossessed accepted Trump's "blame mongering!"  BUT, the economic reality is that the factory jobs have gone forever,  THAT is why Trump offered "infrastructure building jobs" as the source of "recovery employment."  BUT, once the infrastructure is built, those jobs will disappear.  This is a short-term solution.  Regrettably, at the moment this is the only time-frame that most people use.  The problem here is not economics but rather social psychology - the public just wants to "re-activate the American Dream," not to change it.  BUT, fundamental change is what is really needed.  What can be done?

I have checked four documents hinted by Jetty Ramadevi. I could read three of them. This post is my comment on the first document:

            Frank D. Graham, 1890-1949.

Jetty linked this to a website in Japan, which is run by a famous columnist and translator Hiroo Yamagata. The original article was written by Gonçalo L. Fonseca and made open in the History of Economic Thought Website, which had been sponsored by the New School for Social Research, of which Fonseca was a graduate student. The website once disappeared but revived under the sponsorship of the Institute for New Economic Thinking. Actual URL:

In the Wikipedia (English), we have an article Frank D. Graham but it is an article on a successful writer with the same name (middle names are different with the same capital D.). I sincerely hope that someone will create an article Frank D. Graham (economist) in Wikipedia.

Gonçalo’s article is concise and exact except for two points. The first point concerns the circumstance of Graham’s death. Fonseca writes that Graham was professor at the Princeton University “until his retirement.” In fact, Graham died from a fall at Palmer Stadium at eh close of the Princeton-Lafayette football game, when he was still an active professor at the Princeton. (See Richard A. Lester, In Memoriam, American Economic Review 40(2): 585-587, May 1950)

The second point is more controversial. Graham criticized the use of two-sector, two-country models adopted by majority of trade theorists. This is true but it is doubtful if his intention was simply to question the validity of a two-sector, two country model in more general many-commodity, many-country case. Graham criticized the well established tradition since John Stuart Mill to determine the terms of trade by the workings of reciprocal demands. Graham argued instead that, in a general case, there are common goods (link commodities) that are produced by more-than-one countries. The existence of commonly produced goods determines relative wages of linked countries, and by consequence, the product prices that are produced in those countries. He in fact claimed that the international values are determined by the same logic as the classical theory of domestic values. His criticism was not a simple existence of an equilibrium solution for a many-commodity, many-country model.

Fonseca writes also that

It is true that McKenzie (1954) thought that he had provided a proof of existence of a general equilibrium, but this is a half truth because what Graham wanted was not such a solution in general equilibrium framework à la John Stuart Mill.

I cannot blame Fonseca, because his comment is widely accepted one. However, this common understanding reveals how Graham has been long misinterpreted. For the reason of this misunderstanding, I ask readers to read my paper (still in a form of working paper) An Origin of the Neoclassical Economics: Mill’s “Reversion” and its Consequences (the second draft of “Mill’s Reversion and an Origin of Neoclassical Revolution”), which I will upload soon.

Good morning.

Interesting debate, indeed. First, I would say it is important to separate theories from empirics and perceptions.

National politics in developed countries has followed opinions and turned against trade after the 2008-2009 global crisis because of unemployment. Blaming trade was the easiest way and made it easy for politicians to blame unfair competition from developing countries. This may probably not resist a closer analysis, but it is another debate.

I take a theoretical perspective here and will focus on the following part: "Is it true that the trouble attributed to trade is an illusion and the international trade theory is fundamentally right"

First,  we cannot know for sure that a theory (be it on trade or on elementary particles) is fundamentally right. Theories evolve with time, revised and falsified by new data and new evidences (here, I am definitely Popperian . 

Second, even from the neo-classic perspective close to Krugman, the fact that trade is welfare enhancing should not lead to the conclusion that it is without troubles, at least if we take a dynamic perspective and look at transitions between "steady-states".  

Transitions can be long and painful. Besides the traditional gains from trade, trade in long term growth model is expected to boost technological progress (total factor productivity). And economists should know (thanks to Schumpeter, not a neo-classic, but certainly not a protectionist) that progress is also painful: creation is destructive.

My opinion (not backed with data, so it is of very limited value) is that because a series of structural and institutional changes in the world economy, space and time have started collapsing after the late 1980s. The emergence of global supply chains, the convergence of consumption models or the spread of international travel are just one of the indices of this smaller and faster world.

This had positive impacts (faster convergence between developing and developed economies during the 15 glorious 1990-2005 years and sharp reduction in poverty indicators) and negative ones (societies and workers had little time to adjust to the fast transitions, income distribution within countries worsen and structural unemployment --open like in some European countries or hidden through a larger informal economy, like in Latin America).

As physicists know, the damage caused by frictions increases with speed. But theory should not be blamed for the adjustment frictions.

Best regards,

Hubert

Dear Glenn,

when we consider IPE, the sciences on which it is based are political science and economics. However, economics is divided into many fields and economics or political economy within a country is not sufficient, because IPE is mainly concerned conflicts between countries and economic conflicts are among them. We should have at least minimum knowledge of international economics.

International economics is normally divided into tow: international trade theory and international finance. One people call the first "micro" and the latter "macro" but I do not think they are good terminology.  Now the trouble with the theory of international trade is there are at least two strands of theories and conclusions are  quite different. Economic conflicts that the mainstream theory (Heckscher-Ohlin, Krugman, etc.)  admits are change of relative prices of production factors. This means, in a simple case,  ratio between wage rate and profit rate of a country may change when trade is liberated (conflict type I). However, this mainstream  theory does not admit unemployment  by its starting hypothesis and theoretically there are no trade conflicts such as export flood or job loss because of  trade liberalization (conflict type II). In the past, it is rare to observe any type I conflicts. Almost all trade conflicts are type II.  

Then, in my opinion, IPE cannot rely on the mainstream trade theory, because it does not admit theoretical existence of major trade conflicts, i.e. conflicts type II. Fortunately, there are another strand of trade theory called theory of international values. This theory can treat the emergence of unemployment.

When you consider a combination of two disciplines: political science and economics, you should choose a good combination. If not, your theory will be confused, because you risk to argue trade conflicts of type II basing your argument on the mainstream trade theory.  In this argument, there is no metaphysics. 

Dear Abou Oussama Mohammed Chouchani,

It is logical to assume that translation opens an aperture into unpredictable horizons where  foreign cultural and ideological differences can be introduced to specific target recipients with clearly different sociocultural norms. The whole issue has been extensively portrayed by professor Lawrence Venuti the founder of domestication and foreignization strategies in translation.

In my opinion, the answer is yes. Eurasia, including the Pacific rim, is the suitable destination for the India's energy diplomacy at least during the coming decades.

It would be useful to overhaul the state of the art on studies of international political economy (IPE) in Russia. It is possible to find conceptual approaches on financial internationalization.

It is worth remembering that the mainstream of international political economy (IPE) is concentrated in the US and UK, and Russia is a country with its peculiarities in the international system.

I believe that the person asking the question should be more specific in what he or she is seeking to measure. For example, do you want to compare the European countries (which ones?), Japan, and the United States on, say, economic performance, political governance, economic freedom, income inequality, levels of human development, educational attainment, management of diversity, receptivity to refugees/migrants, civil and political rights, etc.? 

You may want to look at existing comparative studies of these countries, such as those undertaken by Transparency International (corruption perceptions); The Fraser Institute, Vancouver, Canada & The Cato Institute, Washington, D.C.  (economic freedom); Freedom House, New York (civil and political rights); World Bank (Worldwide Governance Indicators); and so on. By consulting the documents published by these organizations, you can determine the methodology that they use.

I would be able to suggest a theoretical framework for analysis if you were more specific. 

Methodologically, I believe that the connection between military expenses and GDP growth is very weak if you are looking at the effects of armed conflicts and economic performance. First, as some already pointed out, using military expenses as proxy for armed conflicts is not a good selection. Besides, the U.S. do not face an armed conflict as many other countries actually do. These conflicts are beyojnd their borders. So, it would be very interesting to develop a theoretical model that shows this connection and see if theoretically this effect is significant. And second, you need to define what armed conflicts are. For instance, there are several countries in Latin America and Africa with extreme violence and many thousands of people killed per year; so are these events counted as armed conflicts? Besides, some countries do not spend much money on arms. So, it would be very important to have first a precise definition of armed conflict and try to model it theoretically to have a look at your hypotheses.

You may want to try Mercer Capital in the U.S.

British Petrolium statistical report (see for 2015 http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2015/bp-statistical-review-of-world-energy-2015-full-report.pdf ) provides detailed data about reserves, extraction, consumption, export for oil and gas producing countries.

It declined because of the limited scope and narrowed vision. While, formulating the policies they should have taken various stakeholders, not only the beneficiaries. May be they forgot the slogan "Sabka Saath, Sabka Vikas".

My hunch is that the European Social Survey is probably indeed the best bet for you. You might also want to have a look at the World Values Survey. These are the only other major comparative surveys of this nature apart from Eurobarometer, EES and CSES that I am aware of.

It seems to me that the answer to your question may lie in corporatist systems. In Small States and World Markets, Katzenstein argues fairly strongly that the small states of Europe (Switzerland among them) were able to navigate economic crises and come out stronger because of their corporatist systems, which allowed them to adapt well in a situation where capital and labor had different incentives. These incentives should have pulled in different directions but, according to Katzenstein, corporatist institutions allowed the states of Europe to balance the needs of all the groups around the table. It seems to me that by providing a clear path to influence, as well as generating a legitimate sense among the wealthy and business classes that they have a direct stake in policy-making, corporatism may be a way to mitigate the influence of dark money from offshore sources.

Yes it is an ethical poblem, but not exactly in the sense expressed by Peter Prischi. Capitalism cannot exist without debts: it is a monetary economy of production, Money-Commodity-Money' (where Money'>Money).

As Keynes wrote: "Planned investment—i.e. investment ex-ante—may have to secure its “financial provision” before the investment takes place; that is to say, before the corresponding saving has taken place… There has, therefore, to be a technique to bridge this gap between the time when the decision to invest is taken and the time when the correlative investment and saving actually occur. (Keynes 1937b: 246)"

Public debt is just the way in which public planned investments may be funded, and in a recession public investments do not crowd out private investments. It is true instead that they may reduce radical uncertainty in favour of private sector too. Here is the ethical problem!

What are the conditions in which public debt is sustainable? The public debt is defined as sustainable when the ratio D/Y decreases or, at least, remains constant. (Conversely it is defined as unsustainable when the ratio D/Y is increasing). It may well happen that the financial markets interpret a high (D/Y) ratio as a risk factor and impose an even higher (i-g) differential. It is by this route that a high (D/Y) ratio may contribute (even without objective reasons) to generate fragility in the public financial sector. Consequently to have a fiscal policy that curbs unemployment (also in the long run) we should have that the rate of growth (g) is higher than the rate of interest (i) and well regualetd financial markets .

See on this point http://www.siecon.org/online/wp-content/uploads/2011/11/The-Myth-or-Folly-of-the-Maastricht-Parameter.pdf

I am rather doubtful if VOC approach (Hall and Soskice type) has anything concrete to analyse global financialization. I will explain in the subsequent post that VOC approach has a serious theory defect that prevents it analyse and examine globalization phenomenon.

Financialization has been a big topic for Regulationists since 1980's, for they considered finacialization as successor to Fordist regime of accumulation.  They have many books and papers on this theme.

It will be helpful and informative for you to read a review paper like van der Zwan's  

STATE OF THE ART: Making sense of financialization. Socio-Economic Review (2014) 12: 99–129. (see the link below)

It contains major survey on three major approaches: accumulation approach, share value approach and everyday life approach.  

The word-society literature, spearheaded by sociologist John W. Meyer, tries to quantify the diffusion of models via global civil society, yet the neo-institutionalism is ad-hoc and too phenomenological, ignoring not only the effects of cultural imperialism (in the Gramscian sense), but the material structural contradictions of power, social inequality, and geopolitical/socioeconomic conflict...which are certainly not mutually exclusive...

 David,

I would suggest a conceptual approach: profit is related to an economic concept, while interest is linked to a financial one.

You have a profit (or margin) by making the difference between the price of the product or service you sell and the cost  related to the production, and transaction, you make.

When you do it, there is the creation of "economic value".

You have an interest when you refer to the financial side of your balance sheet..

If you borrow money you have negative interest in favour of your Bank or financial system.

If you have excess money and you borrow it to others (e.g. bonds) then you get a positive interest. 

In both cases (positive or negative interest situation) there is not  a creation of economic value but only of financial one. 

I wonder, in the case of a Company, if the shareholders would be satisfied of having the excess money utilized by the Company to generate financial "profits" in absence of a clear and well structured investment plan and strategy!

I deem not!

In fact, the excess value created (in excess to the one related to the necessary or planned investments) should be returned to the shareholders in my opinion. Financially "fat" Companies are not necessarily healthy or safe,  from the competitive and strategic point of view.

Ending my answer to the question, I would see a contraddiction  then, only if there is confusion between the two concepts: economic and financial.

Finance is related to funding a business (assets - liabilities equilibrium), while profit (and loss) is the dinamic result of a business.

The gross profit  should be capable of financing the Company development, the interest  cost on liabilities and (after Tax) , hopefully, the shareholders equity.

These are the relations I see and the contraddictions would materialize, in my opinion, only neglecting,  or failing to satisfy properly, the need of  :

Structuring competitive Company development and related  Investments

Leveraging wisely the investments (risk factors on Company financial structure)

Rewarding the equity investment of the Company Shareholders

My kind regards

Alberto

Gwen, I think one of the important factors to consider in this respect is the possibility of majority voting or, differently stated, the possibility that a sub-group of members of an organization imposes its will on all members. This is very much a feature of the EU, both via (qualified) majority voting in the legislative procedures at the Council, the decisions taken by the Commission, for example in anti-trust or state aid cases, and the judgments of the European Court of Justice. All of these are binding on the Member States whether or not they agree to a particular case. One term of art used to describe this feature of the EU is its "supranationality", i.e. the EU has powers ABOVE the state level.

By contrast, most other organizations either do not have such powers at all and have to take any and all decisions by unanimous vote or by consensus (for example the EFTA) or they have only very narrow powers that could bind a state against its wishes, for example via judgments of the European Court of Human Rights or in the context of decisions taken by the UN Security Council under Chapter VII of the Charter.

The next question in this context is the enforceability of the decisions. Even if an international organization does have some supranational powers, it is not very "scary" for the (potential) members, if the enforcement powers are weak. As you surely know, public international law has very few options at enforcement, chiefly among them the naming and shaming of perpetrators/violators and the idea of tit-for-tat, i.e. retaliation in kind. For example, if a country is found by the WTO Dispute Settlement Body to be in violation of the rules, it has to rectify this breach (for the future only, no retroactive obligations to pay damages or the like). If it does not do so, the worst thing that can happen to it is pretty much retaliation in kind, i.e. the complaining or injured country can get permission from the WTO to suspend trade concessions roughly equal to the losses incurred because of the initial breach. This is not very scare for a country and they can make a cold calculation whether a certain breach is worthwhile maintaining. It is also not affecting countries equally because, for example, a trade embargo from the US against New Zealand will be much more damaging than the other way around.

Similarly, in the ECHR system, the worst thing that can happen to a country found in breach of the Convention by the Court is that it will be named and shamed (not very effective if it happens a lot, since public and international opinion tires easily, see Russia) and that it is convicted to pay damages. Since member states of the Council of Europe have been reluctant to pay large amounts in damages - they simply won't comply - the EuCtHR is nowadays imposing very modest amounts that countries will pay without much hesitation. For example, Italy has been convicted many many times over many years for undue length of criminal trials. Instead of fixing the problem, the country just pays a few thousand Euros to every complainant who makes it all the way to a judgment in Strasbourg.

However, the EU is a very different animal altogether. First, it administers a large budget and more than half of the Member States are net recipients and they can simply see their allocations withheld if they do not follow the rules (example Greece). This is more powerful than another tool, suspending voting rights. Second, and most important, the European Court of Justice, via the procedure of Article 267, has a tool of ensuring compliance with its judgments that no other court on the planet comes even close to. In the end, Member States of the EU have to follow EU law in very nearly every case, whether they voted for it or against, and whether they like it or not. This is unique and not comparable to other international organizations.

You may not like this proposal but I think that it would be too simplistic to look merely whether something is economic integration or not. You should also look whether it is purely international (between states) or whether it has at least some supranational elements and real enforcement powers.

Hi Hamideh,

Actually, it could be seen much easier. Not to forget that all (numerical) values in economics are calculated using a basic equation of P*Q.

In this case,  you should first calculate what the real GDP might be if there was no sanction at all in place. It is actually calculated through a simple projection of the previous trend of real GDP (before the sanctions).

Then you need to calculate the impact that the sanctions have had on the general consumer price index. The final step consists of calculating how much more the consumers have to pay (with the sanctions) to achieve the real GDP estimated with the assumption of no sanction.

Good chance,

J.A.

Dear Giovanni,

Thanks for the correction. It was Britain that officially adopted gold standard first in 1816. Germany adopted it in 1873. The last country to follow silver standard was China, till 1935.

You are also right that we should rather think about the dollar than gold/silver. There are two reasons for the question: one, I was trying to re-imagine history, something like traveling back in the time machine. Two, more important, is actually the lessons that history teaches are marvelous. We may have discontinued gold/silver but the forces of free market economy works on the same principle - the more foreign investments, the more goes abroad. Unless the bedrock of domestic economy are strengthened parallely, we will find growing unemployment and lowering of per capita incomes in real terms among the mass of people who subsist on domestic economic activities.

Having generally stated my reasons, I do hope you would appreciate that re-imagining history helps in learning lessons for the future.

Have a great day!!

Although each country has its own unique developmental trajectory, the historical record suggests there is indeed an appropriate time and place for temporary periods of financial repression. Restrictions and controls on capital flows (esp. outflows) can help countries preserve scarce foreign exchange and use it only for needed capital inputs (machinery, technology, etc.) for priority sectors in the course of early industrialization stages. Restrictions and controls on inward FDI can steer investment capital to priority sectors. And technology-transfer requirements on FDI can facilitate industrial development in developing countries. There is a long and rich tradition of the strategic use of such policies over time by almost every country that has successfully industrialized. Unfortunately, in the last 30 years, the dominant logic of free markets has deemed such policies as bad state intervention. The new idea is that consumers ought to be free to use their foreign exchange on whatever they and whenever (in the course of a country's national economic development) despite all other considerations. Additionally, although research shows what actually attracts FDI (skilled, healthy and literate workforce, good infrastructure) the myth persist that requirements on technology transfer from foreign investors would scare away potential FDI. The term "financial repression" was the derogatory rallying cry for those who favoured financial deregulation and liberalization, and who supported Reagan and Thatcher and IMF loan conditions to enforce this in borrowing countries. With growing income and wealth inequality and increased frequency of financial crises in the last 30 years (compared to the previous 30-year period under financial repression), it ought to be self-evident that there is an important role for adequately regulating finance. As inequality and financial crises continue to become more acute and damaging, this ought to become even more self-evident (as it did both in pre-French Revolution and across Europe in the 1840s - when financial liberalization ultimately crashed and burned). If that means "repression" of financiers then so be it. Finance is supposed to serve the real economy, not the other way around as we have now, yet under financial liberalization finance has become an end in itself, divorced from the health of the real sector, in which speculative activity is incentivized over investing in actual jobs, goods and services. This used to be considered a bad thing, but alas it appears we will need even worse financial crises than we had in 2008 before we are forced to re-learn these lessons again -- the hard way.

Dear Zoheir,

Three things, in my opinion, are fundamental to resolving the Egyptian situation: Objective, Reconciliation and Compromise.

Objective: what do people of Egypt want? Irrespective of the agenda of the elite and high political class, is there any thing that the so called common people of Egypt want? Are they seeing this as an opportunity to make for themselves a new future with clear objectives? Bringing down a dictatorial rule was a good objective but that is not an end by itself. A path needs to be chalked out from chaos to clarity through participation and leadership.

Reconciliation: MB and various other groups came together, split again and are coming together again in spurts and spits. Nation building, particularly from that of a forcibly created vacuum needs reconciliation of the differences for the time being till an established government born of people's will is firmly established. The lesser the strength of reconciliation, the more differences will arise making reconciliation impossible at a certain stage. How much are the 'powerful' groups in Egypt willing to set aside their differences and build a nation on consensus?

Compromise: No society, like Egypt, that has multifarious cultural and contextual issues can build consensus unless there is a will on the part of the powerful groups to accept and abide by certain compromises in power sharing. The future of Egypt will depend on how its political parties, MB and the Armed Forces workout compromise formulas keeping Egypt and its people in their mind. If they keep identity, ideology or hunger for power non-negotiable, it would take a long long time before we can hope for peace and stability in Egypt.

Borrowing and expanding from what noted Indian Sociologist Dan A Chekki said in one of his books, I would like to say: Nations are not like plants. They do not grow by themselves. You need to nurture them, strengthen their roots and protect them from predation; then only they grow to be nations.

I hope my answer at least propels some thoughts!