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<title mode="escaped" type="text/html">Charles'  PPE Blog</title>
<tagline mode="escaped" type="text/html">Philosophy, Politics, Economy</tagline>
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<link href="https://www.blogger.com/atom/14383695/112452662907188225" rel="service.edit" title="Stanford AO Summit, July 19-21, 2005" type="application/atom+xml"/>
<author>
<name>Charles Goldfinger</name>
</author>
<issued>2005-07-30T10:30:00+02:00</issued>
<modified>2005-08-20T08:32:12Z</modified>
<created>2005-08-20T08:30:29Z</created>
<link href="http://www.gefma.com/blogger/2005/07/stanford-ao-summit-july-19-21-2005.html" rel="alternate" title="Stanford AO Summit, July 19-21, 2005" type="text/html"/>
<id>tag:blogger.com,1999:blog-14383695.post-112452662907188225</id>
<title mode="escaped" type="text/html">Stanford AO Summit, July 19-21, 2005</title>
<content mode="escaped" type="text/html" xml:base="http://www.gefma.com/blogger/blogessai.html" xml:space="preserve">&lt;em&gt;Overview&lt;/em&gt;&lt;br /&gt;&lt;br /&gt;Very interesting and stimulating conference, aiming to define the broad agenda for the coming years. Wide-ranging program and crowded schedule combined speculative musings of gurus such as Bill Joy, George Gilder or Jason Lanier with assembly-line pitches of CEOs of new companies competing for the CEO Pitch award. Similarly the tone of meetings varied from enthusiastic next big thing hyping of Tim Draper (for Skype) for gimlet eye straight talking of other VCs. Networking opportunities were endless, as everybody was informal, approachable and name cards were all in capital letters. To keep us from getting too pompous and self-important, all proceedings were accompanied by real-time blogging, which provide not only a degree of mischief but also a running and sometimes surprisingly pertinent commentary.&lt;br /&gt;I took in the following messages:&lt;br /&gt;&lt;br /&gt;&lt;ul&gt;&lt;li&gt;Mobile is going mainstream&lt;/li&gt;&lt;br /&gt;&lt;li&gt;Open source is at the tipping point&lt;/li&gt;&lt;br /&gt;&lt;li&gt;Software is dead, long live s-as-services&lt;/li&gt;&lt;br /&gt;&lt;li&gt;Ignore blogging at your own peril&lt;/li&gt;&lt;br /&gt;&lt;li&gt;Business model remains the (unspoken) Holy Grail.&lt;/li&gt;&lt;br /&gt;&lt;li&gt;Business angels have disappeared&lt;/li&gt;&lt;/ul&gt;&lt;em&gt;Mobile is going mainstream&lt;/em&gt;&lt;br /&gt;&lt;br /&gt;Mobile data is no longer a pipedream and the eternal application of the future. Mobile telcos migration to CDMA is well under way (considerably more advanced than in Europe), which means  mobile transmission speeds comparable to DSL or cable. Furthermore, the penetration of high-end smartphones (Motorola) and PDAs (Blackberry and Palms) is high and growing rapidly.&lt;br /&gt;Mobile rated a separate session, which was well attended and focused primarily on content. Three of the mobile panel participants were from large IT companies (Macromedia, ATI and Seagate), which are not usually associated with mobile. It is interesting to note how many big telecom players attended the summit (Vodaphone, Verizon, France Telecom, SwissCom, Qualcomm, Motorola, Nokia among others). As interesting was the importance of mobile among promising new businesses. Thus, the founder of Electronic Arts, Trip Hawkins, has set up a new company, Digital Chocolate, which presents itself a developer of innovative mobile phone applications. There were several mobile-focused companies among those pitching for CEO Pitches award. Among those Enpocket (&lt;a href="http://www.enpocket.com/"&gt;http://www.enpocket.com/&lt;/a&gt;) appears of particular interest.&lt;br /&gt;&lt;br /&gt;&lt;em&gt;Open source is at the tipping point&lt;/em&gt;&lt;br /&gt;&lt;br /&gt;Open source movement has long gone beyond Linux and reflexive anti-Microsoft reaction. It is now seen, at least in that crowd, not only as a robust operating environment but also a preferred development platform. In a striking reversal of roles, defenders of proprietary systems (in this case, Sun Microsystems) are now on the defensive and have to argue the benefits of their solutions.&lt;br /&gt;For a layman such as myself, it is the widespread adoption of open source as the application development that is striking. Thus, Google uses primarily open source tools for their application development. One of the CEO Pitches companies, Jaspersoft, provides open source reporting solutions, which are used by some 10 000 companies in over 50 countries. And of course IBM, is strongly pushing open-source solutions.&lt;br /&gt;&lt;br /&gt;&lt;em&gt;Software is dead, long live s-a-services&lt;/em&gt;&lt;br /&gt;&lt;br /&gt;One of the consequences of the inexorable progression of open source is a radical transformation, maybe even the withering, of traditional software business. Ray Lane, ex-COO of Oracle and now a partner at leading VC house, KPC&amp;B, expounded at such a length on the subject that he took practically a third of panel’s time. He and those panel members who managed to speak all agreed that between the open source and internet on-demand delivery, the traditional and long-time successful way of designing, selling and deploying software no longer works. Why would anybody pay for Oracle DB when one can have MySQL for free? While the software industry is apparently consolidating through mergers and acquisitions, the true dynamic is that of balkanization. A stock response to new challenges is the vision of software as service. However this vision covers a variety of actual offerings, from on-demand delivery, through specialisation in features such as high-performance, scalability of security to outsourcing (which in itself comprises a wide range). The bottom line is a major shift of pricing power but also of responsibility to the user. More and more platforms and solutions will be created in-house. Buy or built dichotomy has now become a closely integrated pair.&lt;br /&gt;&lt;br /&gt;&lt;em&gt;Ignore blogging at your own peril&lt;/em&gt;&lt;br /&gt;&lt;br /&gt;Blogging is ubiquitous. While it was a subject of a dedicated panel, scheduled as a grand finale of the Summit, it was the underlying theme of at least two other sessions. And, as mentioned above, bloggers provided a running lively commentary on all Summit events. Jonathan Schwartz, Sun COO, has it absolutely right when he says that a CEO who does not blog makes the same mistake as one that does not use e-mail and in few years non-blogging CEO will be an extinct species. Few years ago, many journalists used paper publications as a primary channel of expression and blogged only occasionally. Today, an ever increasing number are blogging first and writing classical articles second. This is the case for Dan Gilmor, formerly from San Jose News (and Financial Times) and now from Grassroots media&lt;br /&gt;Blogs resemble e-mail in its viral propagation and ease of use. On the other hand, they are a considerably more complex phenomenon. In addition to the communication function, they are a vector of content and therefore a major influence on the shape and structure of media. Maybe it was a coincidence but during our stay in Palo Alto, both New York Times and Dow Jones announced that their online revenues (and profits) are growing much more quickly than their print revenues. And they have not even begun to comprehend let alone integrate the blog phenomenon.&lt;br /&gt;Clearly, as impressive as it is already, blogging is at a very beginning of its trajectory and its evolution remains quite open. Thetwo big challenges are: the structure and hierarchy of blogs, on the one hand, and the blogging economy on the other hand.&lt;br /&gt;Blogs are a do-it-yourself media, incomparably more egalitarian and free-flowing than the editor-controlled content. Nevertheless, unless some of the blogs are read more often than the others and a structure of readership and links emerge, it will remain an atomised and chaotic space. Some of the most interesting initiatives are seeking to act as catalyst to such a structure by providing search and linkages facilities and acting as blog aggregator. This is the case of Technorati or Blogdex. They hope to become the Google of blogosphere. Not surprisingly, Google has the same ambition. One advantage it has, in addition to its formidable brand pull, is it content monetizing expertise. However, this is far from foregone conclusion. Everybody agrees that RSS is a key to blog monetisation and many companies are seeking to acquire and enhance their RSS expertise.&lt;br /&gt;&lt;em&gt;Business model remains the (unspoken) Holy Grail.&lt;/em&gt;&lt;br /&gt;&lt;br /&gt;Although there was no dedicated panel on evolving business models, it was clearly a major theme of discussions about software, services and medias. Growing emphasis on services and medias entail increasing recourse to indirect revenue generation (selling services and advertising rather than access and products). Multiple revenues streams appear as a rule rather an exception.  Moreover, all business models need to be continuously monitored and modified. According to Ray Lane, one cannot sell software today the same way it was sold in the 1990s. Online advertising evolves continuously: search remains a strong vector of growth but new forms are emerging. As we know, leading search services providers, Google and Yahoo, are now looking at new forms of subscription models.&lt;br /&gt;&lt;br /&gt;&lt;em&gt;Business angels have disappeared&lt;/em&gt;&lt;br /&gt;&lt;br /&gt;There were two panels with moneymen. The overriding impression from these panels was the persistence of risk aversion. Venture capitalists continue to be driven by a herd instinct: they all want to be in China and in Life Sciences. They are reluctant to put money into companies that need money and consequently they demand exacting conditions (in particular a controlling equity stake). The only exceptions are companies, such as Google, that do not need money.&lt;br /&gt;CEP Pitch competition was a striking example of this mentality. It was won by a company, Peerflix, which proposes DVD exchange, not through streaming or burning, but by shipping them in paper envelopes. Nice idea but very far from innovative.&lt;br /&gt;Another example was hyping of Skype, the free IP telephone service, a cross between Napster and Hotmail. It is backed by the same VC, Draper and Jurvetson, who invested in Hotmail. I am pretty sure that they will get a very handsome return on their $10 million investment. But from there to assert that Skype will revolutionise the telecom industry (which already starting to deploy VoIP on a large scale) is a mental leap I would not make.&lt;br /&gt;Persistent risk aversion has led to the quasi-disappearance of angels, willing to invest in early, innovative stage ideas. As a result, many entrepreneurs, including those with a previous track record, are now relying on bootstrapping as the primary way of raising capital.&lt;br /&gt;This being said, there are features of the Silicon Valley VC scene, which are worth emulating. One is the CEO Pitch. As usual, the audience is as interesting as the judges or presenting companies. It is a pity that the audience did not have a vote. It might have led to different winners.&lt;br /&gt;Other feature is the entrepreneur in residence, who is hired by leading companies to develop and launch new businesses. We met two such entrepreneurs at the Summit and those were among most interesting contacts.</content>
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<link href="https://www.blogger.com/atom/14383695/112446125434655573" rel="service.edit" title="&#10;Google is not a bubble&#10;&#10;&#10;The strong run-up of Goo..." type="application/atom+xml"/>
<author>
<name>Charles Goldfinger</name>
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<issued>2005-07-25T16:07:00+02:00</issued>
<modified>2005-08-19T22:48:04Z</modified>
<created>2005-08-19T14:20:54Z</created>
<link href="http://www.gefma.com/blogger/2005/07/google-is-not-bubble-strong-run-up-of.html" rel="alternate" title="&#10;Google is not a bubble&#10;&#10;&#10;The strong run-up of Goo..." type="text/html"/>
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Google is not a bubble


The strong run-up of Goo...</title>
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<br/>
<p>
<strong>
<span style="font-size:130%;">Google is not a bubble</span>
</strong>
<br/>
<br/>
<br/>The strong run-up of Google stock price since its IPO last summer - its market cap has increased more than 300% since first listing - has prompted a rash of comments among market watchers. The prevailing view, particularly in Europe, is that Google market performance is just an unwelcome return of the Internet bubble phenomenon of late 1990s and early 2000. I beg to differ. I believe that Google’s meteoric rise reflects a reasoned view of its current position and of its future prospects. This is based on two considerations<br/>
<br/>
<em>Google is a top tier e-commerce company</em>
<br/>
<br/>Some analysts compare Google to companies such Webvan or boo.com or excite, ephemeral stars of the Internet boom. This is a mistaken comparison. Google is a top-tier company: its peers are the Three Musketeers of e-commerce (Yahoo, E-Bay and Amazon). If one looks at their long-term market evolution (since their IPOs), they have very largely outperformed broad market averages (and this takes into account occasional but quite brutal corrections all of them experiences particularly in the aftermath of the NASDAQ crash of 2001-2002). Anybody, who bought these stocks at their respective IPOs has made a return superior to 2000%.<br/>
<br/>Incidentally, this is not an unique phenomenon: if one looks at the top-tier companies of previous generation, such as Microsoft, Oracle, Intel or Dell, one can see a similar price behavior, where market leaders strongly and durably outperform market averages.<br/>
<br/>
<em>Current market is highly selective</em>
<br/>
<br/>During the bubble days, strong tide lifted all boats, solid ones as well as shoddy ones. This is not the case today. The market has become highly selective and discriminating. Google’s performance stands out because:<br/>a. Broad market has been trading in a narrow range<br/>b. Three musketeers have been underperforming recently, Amazon and E-Bay, more than Yahoo. This differentiation also demonstrates that investors are continuously evaluating prospects for each company and form distinct judgments about them.<br/>
<br/>
<br/>
<em>Key performance factor: Google’s business model</em>
<br/>
<br/>From these considerations it follows that a higher ranking of GOOG is not based on a mindless whim or a sheepish investor behavior but on a reasoned judgment.<br/>The question is what are the reasons for such, strongly bullish, judgment?<br/>It is not primarily or exclusively the pertinence or elegance of GOOG search algorithm. Although, it is innovative and sophisticated, it is possible even likely that some lab or a start-up may come with a better mousetrap. Nor is it its popularity among users, always a fickle phenomenon. Nor is even its stellar financial performance (to the extent that this performance is a result rather than a cause of Google’s strategy).<br/>The key explanatory factor is its core business model. It is this model that powered it to the top of online advertising. However for Google, the objective is not to become a biggest advertising agency in the world, although it may attain this position anyway.<br/>In contradistinction to YHOO, it is not a media or eye-ball aggregation company. What Google is all about it is about monetizing information. We have all known for long time that information is the most valuable resource of the web. But, because of a widespread unwillingness to pay and conceptual difficulties of pricing it, the value of information was not being captured. It is in this area, that Google achieved a real practical breakthrough.<br/>Its advertising programs provide not one but a series of mechanisms to fix, extract and transfer the value of information. It does so in full recognition of economic peculiarities of information: elusiveness, volatility, reluctance to pay. Google valuation and transaction mechanisms rely on third party payments (through advertising), dynamic pricing (auction) and pragmatic mixing and matching (paid search, contextual advertising, local advertising, etc).<br/>
<br/>
<em>Overshooting and undershooting</em>
<br/>
<br/>While the relative ranking of Google appears well-grounded, the questions of speed and magnitude of Google appreciation remain. It is difficult to ascertain whether its current price reflects its fair value. Furthermore, if past experience is any guide, violent price swings can be expected. The evolution of Google’s market price and valuation reflects an intense interplay of available information and constantly evolving expectations. Furthermore, equity markets today are not only anticipatory but they seek to cash in on those anticipations. This creates a continuing risk of overshooting or undershooting (like in the FX markets): the price is either too or too low. However in this case, there is a clear and rational upside trend. </p>
<p>
<span style="font-size:85%;">published on Interactive Investor (</span>
<a href="http://www.iii.co.uk">
<span style="font-size:85%;">www.iii.co.uk</span>
</a>
<span style="font-size:85%;">)</span>
</p>
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<link href="https://www.blogger.com/atom/14383695/112172814388460567" rel="service.edit" title="Israel: Politically incorrect development success ..." type="application/atom+xml"/>
<author>
<name>Charles Goldfinger</name>
</author>
<issued>2005-07-19T01:09:00+02:00</issued>
<modified>2005-07-18T23:14:06Z</modified>
<created>2005-07-18T23:09:03Z</created>
<link href="http://www.gefma.com/blogger/2005/07/israel-politically-incorrect.html" rel="alternate" title="Israel: Politically incorrect development success ..." type="text/html"/>
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<title mode="escaped" type="text/html">Israel: Politically incorrect development success ...</title>
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<strong>Israel: Politically incorrect development success story</strong>
<br/>
<br/>Few weeks ago, I visited Israel, after a seven-year hiatus. As usual, I travelled along the Mediterranean coast and to Jerusalem and met with family and business friends. I must admit I was surprised. I anticipated a country slowly and painfully recovering from the intifada. Instead I found an economic dynamo.  Israel appears to be doing well. My friends are again vibrant and optimistic. And visual impression is striking : starting with a brand new airport, then driving on new roads and highways (not that traffic has improved much) and stopping at huge shopping malls.   Everywhere new buildings, modern offices and an ever increasing variety of residential dwellings. The property and construction is also in apparent in Israeli Arab villages and towns. I am talking about places such as Ben Hanana, Megadim or Nazareth, situated within pre-1967 borders and whose inhabitants are Israeli citizens. Picturesque terrace houses are being replaced by sprawling multistory villas. Village mosques are lavishly renovated.  We are worlds away from the prevailing picture of shantytown squalor.<br/>
<br/>My Israeli friends told me that Israeli Arabs are doing quite well, with growing cadre of professionals, doctors and engineers. Although politically they are predominantly left-wing, with five or six parties to choose from, they are not very keen on being assimilated with Palestinians and dread falling under their jurisdiction. There are practically no volunteers among Israeli Arabs to work in areas under PA jurisdiction and even less to live there permanently. Interestingly, in the post-July 1967 territories, 80% of Palestinians affected by the construction of the security barrier in West Bank choose to live on the Israeli rather than on the Palestinian side of the barrier.<br/>
<br/>As impressions can be misleading, I decided to check data and statistics on the Israeli economy in general and about Israeli Arabs in particular. Factual checks and data perusal not only confirm my impression and make it a clear that Israel is an astonishing development success, on a par with Ireland, Taiwan or Singapore.<br/>At present, Israel is growing at some 4% per annum and its per capita income is raising at an annual rate of over 2% per year. <br/>But that is only a beginning of the story. Israeli GDP/per capita is way above that of its neighbours: Based a Purchasing Power methodology and World Bank data for 2002, it is more than five times that of Egypt and Syria and more than four and half times that of Lebanon and Jordan. In the region, the only countries with a comparable standard of living are Cyprus (whose GDP per capita is about five percent lower), Bahrain, Quatar and Arab Emirates in the Gulf (the last two are the only countries in the region with higher GDP/per capita than Israel). Interestingly, the best-known oil producers, Iran, Libya,  Saudi Arabia all lag far behind Israel in GDP/per capital stakes. By the way of comparison, Israel’s standard of living is higher than that of all new members as well as that of Greece and Portugal.<br/>
<br/>Israel performance is impressive not only in purely economic terms. According to the 2004 Human Development Report produced by the UN Development Program, Israel is part of the group of the 55 countries (out of the total of 177) which achieved a high level of human development. It is ranked 22nd, ahead of Greece, Portugal, Singapore and Korea. Only other countries from the region in the same group are Cyprus, Bahrein, Quatar and Arab emirates.<br/>Israel neigbhours, as well as Palestinian population, are all part of the medium Human Development group, with Lebanon ranked 80th; Jordan, 90th; Palestine territories, 102nd Syria, 106th and Egypt, 120th.<br/>This all looks good for Israelis. But what about Israeli Arabs?  Data from Israel’s Central Bureau of Statistics provide a great deal of info. They paint a mixed picture of a glass half-empty and half-empty. The glass looks half-empty: Israeli Arabs are worse off than their Jewish counterparts on practically every relevant parameter: their infant mortality is higher, their life expectancy shorter. Their average wage is about 70% of Israeli Jews.<br/>However, before screaming about discrimination and racism, one should consider the positive aspects – the glass half full. In particular, while below the Israel average, the average income of Israeli Arabs is considerably, very considerably, higher than that of Egyptians, Jordanians, Syrians or Lebanese. More significantly, it is incommensurably above that of Palestinians. Similarly, while the infant mortality and life expectancy of Israeli Arab lag that of Israeli Jews, they are way ahead of people in Arab countries, particularly as regards infant mortality.<br/>As for the wage differential, these could be explained by two factors: a higher educational level of Israeli labor force (60% of which have more than secondary education compared to 26 % of Israeli Arabs) and a heavy concentration of Arab labor force in low-paying construction jobs (a quarter of all Arab male jobs).  This interest in construction may explain that the dwelling ownership is higher among Arabs (87%) than among Jews (67%).<br/>
<br/>All things considered, Israeli appear to be doing a highly creditable job of integrating Arabs into their economy. On the face of it, they are doing better than the French and can probably give the British a run for their money. It is highly significant that while Israeli Arabs are in their great majority opposed to the Israeli policies, to date not a single suicide bomber has been an Israeli Arab.<br/>
<br/>It is probably too much to ask of their neighbours to take a close look at Israeli economic policies with the view to see what lessons they could apply to their own economies (and I am sure there are plenty).<br/>
<br/>On the other hand, western media and development institutions, presumably less inhibited by ideological bias and vested interest, should shed their political correctness and devote more attention to the Israeli model. This is after all as good example of ‘knowledge economy’ as one is going to find, built on high-quality mass education and close integration of research and development.<br/>
<br/>It was somewhat ironic that I was in Israel during the G-8 summit, which extensively debated the Africa case. Some time ago, many African countries had close economic relationships with Israel, which focused particularly on agriculture. Then, under political and financial pressure from Arab countries, ties were severed in exchange for promises of huge inflows of aid. As one looks at the results, this looks like a clear case of fool’s bargain.</div>
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<link href="https://www.blogger.com/atom/14383695/112107639126602634" rel="service.edit" title="Le projet de la “Constitution” européenne et les leçons d’histoire" type="application/atom+xml"/>
<author>
<name>Charles Goldfinger</name>
</author>
<issued>2005-06-09T12:04:00+02:00</issued>
<modified>2005-07-12T06:16:44Z</modified>
<created>2005-07-11T10:06:31Z</created>
<link href="http://www.gefma.com/blogger/2005/06/le-projet-de-la-constitution-europenne.html" rel="alternate" title="Le projet de la “Constitution” européenne et les leçons d’histoire" type="text/html"/>
<id>tag:blogger.com,1999:blog-14383695.post-112107639126602634</id>
<title mode="escaped" type="text/html">Le projet de la “Constitution” européenne et les leçons d’histoire</title>
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<a name="CED"/>
<br/>Quel dommage que l’antiaméricanisme ambiant et quasi-pavlovien de nos élites nous empêche de mieux connaître les travaux de George Santayana (1863-1952). Considéré comme un philosophe américain, puisque c’est aux Etats-Unis qu’il a publié ses écrits les plus marquants, il est pourtant né en Espagne et il a gardé sa nationalité espagnole toute sa vie. Il était citoyen du monde avant l’heure.<br/>Je ne veux pas faire ici l'exégèse de son œuvre, riche et foisonnante. Je me contenterai de citer sa phrase la plus célèbre: “Ceux qui oublient l’histoire sont condamnés à la répéter.” En effet, cette expression m'apparaît particulièrement pertinente pour analyser les raisons et les conséquences possibles de l’échec du projet de la “Constitution” européenne. En effet, il existe un précédent dans l’histoire, plus mouvementée que l’on ne le croit généralement, de la construction européenne après la seconde guerre mondiale. Il s’agit du rejet en 1954 par le Parlement français, de l’ambitieux projet de la Communauté européenne de la Défense (CED). Ce rejet est instructif à deux titres: ses origines et ses suites.<br/>Comme celui de la Constitution, le projet de la CED était motivé par la nécessité, articulée par ses partisans, de donner un prolongement politique à un effort économique. Dans le cas d'espèce, il s'agissait de la Communauté économique du charbon et de l'acier (CECA), visant à mettre en commun les moyens et les ressources nécessaires pour restructurer ces secteurs en crise. Encouragés par le progrès de la CECA mais aussi frustrés par ce qu'ils considéraient ses limitations, les visionnaires européens, et notamment les chrétiens démocrates, ont décidé de sortir du champ exclusivement économique de la CECA et d'engager une réforme politique majeure à travers le projet de la CED, lancé en 1950 par le gouvernement René Pleven. Ce projet visait ni plus ni moins la création d’une armée européenne. Le traité instituant la CED a été signé par les six pays membres de la CECA (La France, l’Allemagne, L’Italie, la Belgique, le Luxembourg et les Pays-Bas) en mai 1952. Ensuite, il devait être ratifié par les pays signataires. En France, le traité a suscité un débat passionné sur les questions de l’intégration politique européenne et du transfert de la souveraineté nationale. Le référendum n’étant pas encore considéré comme l’expression courante et légitime de la volonté populaire, le traité fut soumis par le gouvernement Mendès-France, qui le soutenait, à l’Assemblée Nationale en août 1954. Il fut rejeté par une majorité étroite (319 contre 265, 43 députés ne prenant pas part au vote), sans débat, suite au dépôt d’une question préalable. Dans le refus de la CED, l’extrême gauche et les gaullistes faisaient cause commune. Certains de leurs arguments d’alors n’ont visiblement pas vieilli puisque on les retrouve, à peine modernisés, dans le débat plus récent sur le bien-fondé de la Constitution. Laissons de côté la question, fort émotionnelle voire passionnelle, de construire une armée avec les ennemis séculaires, pour nous concentrer sur l’argument qui fut essentiel à l'époque et qui le reste aujourd'hui, celui de l’inexistence pour certains et de l’immaturité pour les autres, de l’Europe politique. Ecoutons ce qu’en disait de Gaulle lui-même en février 1953 : « Je viens de dire que le nom donné à l’armée dite « européenne » est un titre fallacieux. Pour qu’il y ait l’armée européenne, c’est-à-dire l’armée de l’Europe, il faut d’abord que l’Europe existe, en tant qu’entité politique, économique, financière, administrative et, par-dessus tout, morale, que cette entité soit assez vivante, établie, reconnue, pour obtenir le loyalisme congénital de ses sujets, pour avoir une politique qui lui soit propre et, pour que, le cas échéant, des millions d’hommes veuillent mourir pour elle. Est-ce le cas ? Pas un homme sérieux n’oserait répondre oui. »<br/>Substituons le mot de la 'Constitution' a celui de 'l’armée' et interrogeons nous pour savoir si l'interpellation de de Gaulle est toujours d'actualité. Malgré plus de 50 ans d'effort soutenu, peut-on affirmer que l'Europe est une entité morale, vivante, ayant une politique cohérente qui lui soit propre, transcendant les intérêts particuliers et inspirant une loyauté ardente de ces citoyens. Je crains fort, et visiblement je ne suis pas le seul, que nous en sommes encore très loin.<br/>Pour les observateurs avertis de l’époque, l'échec de la CED a montré que les dimensions économiques et politiques de l'intégration européenne sont largement autonomes et ne forment pas un couple symbiotique. Au contraire, elles constituent un mélange volatile, potentiellement explosif. Il est possible, voire même probable, que la coopération économique soit une condition nécessaire du rapprochement politique mais elle n'en est pas une condition suffisante. Celui-ci n'est nullement une conséquence logique et inéluctable de celle-là. En d’autres termes, une succession de petits pas économiques ne constitue pas en soi un grand saut en avant politique.<br/>Les partisans de l’Europe ont apparemment tiré ce type de conclusions de l'échec de la CED. Toujours convaincus de la nécessité de la coopération européenne, ils ont décidé de se concentrer sur la dimension économique.<br/>A partir de la mi-1955, la construction européenne retrouvait un nouvel élan. En mai, lors d'une réunion des ministres des affaires étrangères à Messine, de nouvelles propositions ont été formulées. La plus importante visait la création d'un marché commun. Moins de deux ans plus tard, en mars 1957, les Six signaient le traité de Rome, instaurant le Marché Commun. Cette-fois, le décollage fut réel. Depuis lors et jusqu' aux referenda constitutionnels en France et aux Pays-Bas, l'intégration européenne a connu une trajectoire fondamentalement ascendante (même s'il y a eu quelques crises - politique agricole, l'entrée de la Grande Bretagne….). Le remarquable succès de la nouvelle approche s'explique, à mon avis, par la combinaison judicieuse de la modestie et de l'ambition. Le projet européen, sous-tendant le traité de Rome, était modeste dans son champ d'application, se limitant au domaine économique. En même temps, il était ambitieux dans sa portée, visant la libre circulation non seulement des marchandises mais aussi des personnes et des entreprises, ainsi que l'élimination des entraves à la libre concurrence. C’est par cette ambition que la Marché Commun s'est différencié victorieusement du projet EFTA, qui ne se voulait d'être qu'une zone de libre-échange. De son côté, la limitation au champ économique facilitait la définition des objectifs, leur assimilation par les décideurs et la résolution des conflits (puisqu'on pouvait tout ramener au calcul des compensations financières).<br/>Toutefois, au fil de temps, l'esprit de Rome a perdu de sa netteté au fur et à mesure des élargissements successifs. Le souvenir de l'échec de Paris s'estompant, la tentation d'un grand saut politique en avant est revenu, surtout après l’introduction de la monnaie unique. Et c’est ainsi qu’un modeste traité des traités est devenu une grandiose Constitution. On est reparti pour une vaste empoignade politique sauf que cette fois elle a été bien plus large et plus touffue qu’en 1954. Le verdict toutefois a été le même: le temps de l'Europe politique n'est pas encore venu.<br/>Ce qui fut la première leçon de l'épisode CED reste donc toujours d'actualité. Mais il y a une autre leçon, plus positive et plus prospective celle-là. La crise crée l'opportunité d'un sursaut et d'un rebond. Il a fallu trois ans de discussions de fond, d'un débat d'idées et de recentrage autour de l’essentiel avant d'arriver à un concept fédérateur du Marché Commun. Peut-on pour autant affirmer que ce furent des années perdues? Aujourd'hui, certains clament haut et fort que le Non référendaire fera perdre plusieurs années à la construction européenne. On comprend la déception des partisans de la « Constitution » mais leurs affirmations paraissent alarmistes et excessives. L’histoire nous montre qu’il faut savoir tirer les leçons d’un échec populaire. Elle nous suggère aussi une grande prudence quant aux tentatives d’une Europe politique. A cet égard, les messages de 2005 et de 1954 sont concordants : l’économie d’abord.<br/>Avant de conclure, il est peut-être utile de s’interroger sur les raisons de cette amnésie collective des élites à propos de la CED. Pour ma part, je pense qu’il y en a deux. Tout d’abord, une inversion complète de la vision de l’Europe. En 1954, le rejet de la CED a été justifié par une vision de l’Europe unie en tant que cheval de Troie américain. Les Américains étaient accusés, et à juste raison, de favoriser l’union européenne, tant au niveau économique (CECA fut la fille naturelle et reconnue du Plan Marshall) que politique. Pour les férus de l’histoire, il était donc intéressant, lors de la campagne référendaire en France, d’entendre les partisans du Oui d’affirmer que les Américains sont des ennemis acharnés de l’Europe et que Bush sera le principal bénéficiaire du Non. Ainsi, d’un cheval de Troie des Américains, L’Europe est devenue le dernier rempart contre leur domination. Je suis sûr que ce revirement est logique et peut être expliqué clairement mais j’ai aussi l’impression qu’il n’y avait pas beaucoup de volontaires, ni à droite ni à gauche, pour une telle explication. Ceci d’autant plus que la question centrale de 1954, celle de la défense européenne reste un sujet difficile. Il semblerait logique que ceux qui veulent une Europe forte et présente au niveau mondial souhaitent qu’elle soit une puissance militaire. Pourtant ce lien est rarement articulé. Le problème est évidemment qu’il est difficile de construire une défense crédible et capable d’une projection globale sans dépenser de l’argent et que les pays européens, y compris la France, ne sont pas prêts à une telle dépense. C’est pour cette raison, que le débat sur la défense européenne est largement occulté. Là comme ailleurs, l’économie prime.</div>
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<br/>Results of French and Dutch referenda took the European political and media elite by surprise. "No" vote has been anticipated, particularly by financial markets but its magnitude and decisiveness: voter participation was high (close to 70% in France and over 60% in Netherlands: this compares with about 30% in the yes vote in Spain last March), and the gap between Yes and No, spectacular.Yet, true to form and engrained habits, learned commentators were quick to belittle the motivation of voters. The success of No was attributed to a coalition of disgruntled, backward-looking, chauvinistic no-hopers. No vote was deemed essentially a protest vote, so heterogeneous as to render it practically meaningless. It is true that in France, voters with lower incomes, reduced educational levels and from poorer regions were more likely to vote against the proposed treaty than their richer, better educated compatriots from wealthier areas. It is also true that practically all the extremist parties, whether from far Left or from far Right, called for the No vote and, on Sunday evening, their leaders were preening and crowing on national television. Similarly in Netherlands, spokesmen for No came primarily from political fringe, and their arguments often lacked political correctness.Yet, convenient as it may be, the "unworkable coalition of extremists and losers" explanation will simply not do. This was a mainstream vote, reflecting a large popular consensus, articulated, for those who took the trouble to listen, around two clear and compelling arguments:- The proposed treaty was badly thought through, sloppily written and conceptually confused. It might have an inadvertent consequence of high unemployment and 35 working hours week, but all observers noted that a very large proportion of French voters actually read the text. And it is certainly not an accident that as the referendum day was getting closer, the percentage of negative vote intention kept growing higher. In other words, familiarity (with the text) bred contempt.The core problem with the treaty was its inherently contradictory nature. Its proponents argued simultaneously that it was merely a tidying up exercise of reconciling various treaties already in force and, at the same time, a major step forward in the political integration of Europe. In the similar vein, we were told that nothing really will change after ratification of the "constitution" and that, in the event of rejection, Europe will collapse.The extent of conceptual confusion has been further demonstrated by reaction of some European leaders, particularly the President of the European Commission, Jose-Manuel Barroso, and the President of the European Council of Ministers. Mr Jean-Claude de Joncker. Before the ratification process started, the official position was that the Constitution has to be approved unanimously. Now, these two gentlemen seem to insist that, despite two countries turning it down, the Constitution is not dead. Do they mean that it will be implemented à la carte, in countries which approved it (in a way similar to the introduction of the euro) or that the rule of unanimity is being changed into a role of majority?- Citizens of France and Netherlands do not consider that the European Union made them better off. Or, to be more precise, they do not believe that the recent major EU advances, particularly the introduction of the common currency and the successive enlargement increased their economic and social welfare. Specific country circumstances differ: France suffers from low growth and high unemployment, while Dutch resent their excessive contribution to the EU and blame the euro for higher prices. Nevertheless, both citizens of both countries share a jaundiced view of EU benefits. And this view is based on uncontestable facts. Not surprisingly, it leads to a widespread skepticism about further EU evolution.Thus, confronted with a bad text, which carried a risk of aggravating an unsatisfactory economic situation, French and Dutch voters reacted in politically and economically rational way, they rejected it. They vividly demonstrated what has been called by an American author, James Surowiecki, the "wisdom of crowds ." Let's hope that, beyond epidermic posturing, the European leaders will adopt a similarly wise attitude and resist already visible temptation to keep the treaty on life support or even to revive it. They asked voters a complex question and received a clear answer. In turn, they should respond to a simple query: "Which part of No you did not understand?"<br/>
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<span style="font-size:85%;">published on Interactive Investor (www.iii.co.uk)</span>
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<a name="constitution"/>La 'Constitution': entre Courteline et Feydeau<br/>
<br/>Vu de l'extérieur par un observateur intéressé mais détaché (Français, résidant de longue date à Bruxelles mais sans aucun lien professionnel avec les institutions européennes), la saga de la Constitution et du référendum européens ressemble moins à une tragédie grecque ou à un drame cornélien qu'à une comédie de Courteline ou à une farce de Feydeau.Courtelinesque, la Constitution l’est dans sa genèse et dans sa structure. Elle est le résultat d'un processus propre à l’eurocratie et doté du nom ô combien parlant de « comitologie ». Celle-ci n’est pas la science des comités mais une procédure qui permet, en théorie du moins, de faire travailler ensemble, les bureaucrates (la Commission), les politiques (le Conseil des ministres européen) et les élus (le Parlement) en vue d’élaborer les mesures législatives et réglementaires au niveau européen. Est-il réellement besoin d’ajouter que la procédure ne peut guère prétendre au prix de la transparence et de la simplicité. Elle produit des compromis simultanément fragiles et indigestes, qui ne correspondent que très approximativement aux objectifs et intentions de départ. C’est cette dynamique de comitologie qui explique que ce qui a commencé comme un effort certes indispensable mais prosaïque de toilettage des différents traités régissant le fonctionnement des institutions européennes (Rome, Maastricht, Amsterdam, Nice, etc.) en vue de le rendre plus cohérent, s'est transformé en une grandiose Convention visant a produire un document ambitieux d’une portée politique et donc nécessitant un consentement populaire. Toutefois, selon les règles complexes de la comitologie, la transformation ne pouvait être complète, puisqu'il fallait préserver tout l’acquis administratif dont la consolidation à l’origine de l’exercice. L’inévitable résultat est que ce qui devait être un document simple et intelligible pour un citoyen moyen est devenu un édifice complexe et confus même pour les spécialistes. Longue, excessivement détaillée (ainsi on y trouve dans l’annexe la liste complète des produits agricoles soumis à la législation européenne), couchée dans un langage à la fois ronflant et convenu, faut-il s’étonner qu’elle ne suscite aucun engouement populaire. On est loin des cadences jeffersoniennes de la Constitution américaine ou même de la simplicité déclamatoire de la Constitution soviétique de 1938 (dont on attribue l'écriture à Boukharine plutôt qu'à Staline). Les promoteurs eux-mêmes sont conscients de ce déficit d’enthousiasme et ils se sont engagés dans un effort d’explication et de pédagogie. Mais plutôt que de laisser parler le texte lui-même, ils préfèrent mettre en avant des résumés explicatifs, réduisant ainsi la portée de ce qui devait être une démonstration de démocratie directe. Un autre problème de cet escamotage est que les résumés, comme par exemple celui que l’on trouve sur le site de la Commission, dédié à la Constitution, n'expliquent pas l’essentiel, à savoir quels changements l’approbation du texte introduirait-t-elle dans la réalité européenne. Une telle explication est difficile à formuler dans la mesure où les promoteurs avancent simultanément deux points de vue a priori contradictoires. Selon le premier, la Constitution ne fait que codifier la situation existante, alors que selon le second elle représente une avancée fondamentale dans la construction européenne. D'un côté, on affirme que la Constitution ne modifie pas l'équilibre fondamental entre les pays et les institutions supranationales ni entre celles-ci. Ainsi, le résumé confirme le rôle central et moteur de la Commission dans le processus législatif européen. La ‘Constitution’ consacre aussi l'extraterritorialité de la Commission et l'impunité de ses fonctionnaires, bien établies dans les faits.<br/>De l’autre coté, on crée un poste de Ministre européen des affaires étrangères et prolonge la durée du mandat du Président du Conseil européen. On rabote (très) légèrement les pouvoirs de la Commission, puisque, selon le résumé publié sur le site, celle-ci n'aura plus que le 'quasi-monopole' (plutôt que le monopole complet) de l'initiative législative européenne. Est-ce à dire que le Parlement pourra introduire 5% ou 10% des propositions de lois, ce qu’il ne peut pas faire aujourd'hui? Je n'ai pas trouvé de réponse à cette question dans les 349 pages du texte (ni dans ses exégèses explicatives d'ailleurs).En vertu du principe fondateur de la comitologie d'une recherche constante du compromis, le projet superpose sans trancher. Sans enlever de pouvoirs réels aux structures existantes, il saupoudre ici et là de nouvelles responsabilités et fonctions. Mais on se garde bien de fournir les clés d'arbitrage en cas de conflits que sa mise en œuvre ne manquerait pas de susciter. Qui aura la préséance: le Président de l'Europe ou le Président de la Commission? Que signifie en pratique l'élargissement des compétences du Parlement?La confusion créée par la Constitution n'est pas un phénomène marginal et passager. Elle est inhérente et structurelle. Sans elle, on ne pourrait pas accomplir ce tour de passe-passe conceptuel de la dialectique des contraires.L'omniprésence de la confusion explique pourquoi la campagne référendaire en France ressemble à une comédie de Feydeau pleine de quiproquos, cache-cache, chausse-trappes et faux semblants. Ses protagonistes s'ingénient à cacher leurs identités et convictions réelles, ce qui les amène à développer des arguments de plus en plus échevelés et embrouillés. Dans la cacophonie qui en résulte, aussi bien les convergences que les divergences sonnent faux. Le Président de la République, nominalement de droite, retrouve le ressort de sa jeunesse progressiste et proclame la Constitution le dernier rempart contre la globalisation anglo-saxonne et le pas décisif dans la lutte contre l'hégémonie américaine. Le Président de son parti, et son successeur probable (mais certainement pas l'héritier désigné) mouille sa chemise en faveur d'un projet qu'il présente comme raisonnablement libéral. Toutefois, il ne peut pas empêcher la persistance d'un sentiment diffus qu'il ne serait pas mécontent de voir le projet actuel échouer. En face, la situation est théâtralement symétrique. Les deux leaders socialistes, dont les convictions ont paru plutôt proches par le passé, s'opposent frontalement sur l'attitude à adopter sur le référendum. Le premier secrétaire défend le projet comme la meilleure garantie d'une Europe sociale, alors que le no 2 du parti dénonce ce qu'il considère être le cheval de Troie d'un ultra-libéralisme sournois. Comme dans le cas du leader de l'UMP, sa position publique soulève des doutes sur la sincérité de ses convictions affichées. Tous les deux avanceraient masqués, suivant des agendas personnels.Il semble que les deux camps s'accordent pour considérer le projet comme un mal. Toutefois la convergence n'est qu'apparente, puisque pour ses partisans, le projet est un mal nécessaire alors que pour les opposants elle représente le mal absolu.Au-delà du comportement et du discours des protagonistes de la campagne référendaire française, elle doit son caractère profondément tragi-comique au fait qu'elle est gratuite dans la mesure où son résultat n'aura guère d'importance au niveau international. Soyons clairs, en France, les répercussions du vote référendaire seront séismiques. Quelque soit le résultat, au minimum, le gouvernement va changer et le Parti socialiste devra régler ses comptes. Mais, la situation est très différente en ce qui concerne l enjeu apparent du référendum : l'avenir de la Constitution et de l'Europe. Un vote positif ne signifie nullement que le projet va aboutir. Même si les Pays-Bas acceptent le projet, au Royaume-Uni les chances d'approbation par les électeurs sont, au mieux, négligeables. En clair, toute estimation objective et réaliste ne peut que conclure que dans son état actuel le projet est virtuellement mort.<br/>Ce qui implique aussi qu'un un vote négatif ne doit pas être présenté comme présage d'une catastrophe politique et/ou économique. L'échec du projet constitutionnel n'entraînera pas l'éclatement de l'Union européenne. Il est très peu probable que l'on assiste à une réapparition des tarifs douaniers ou d'autres obstacles à la mobilité économique, la principale raison et l'acquis essentiel de l'intégration européenne. Tout au plus on peut s'attendre à un refroidissement de l'ardeur légifératrice des institutions européennes, notamment de la Commission. Un tel refroidissement est déjà perceptible. Les consommateurs et encore plus les entrepreneurs bombardés par un feu nourri de directives et de réglementations souvent tatillonnes ne s'en offusqueront pas. Si le sort de la ‘Constitution’ entraîne une réflexion sur les limites de la comitologie et un recentrage de l'attention des responsables politiques sur le défi de la faible croissance au cœur historique de l'Europe, alors tous les efforts et la passion investis dans ce projet n'auraient pas été vains.</div>
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<div xmlns="http://www.w3.org/1999/xhtml">Economic consequences of “No” vote<br/>What will happen to the European economy, should the French or the Dutch (or both) vote No in the forthcoming referenda on the European ‘Constitution”? One of the arguments of proponents of Yes is that the No vote will have dire economic consequences and may lead to reversal of integration gains, protectionism and who knows the break-up of the Union.  Barometers of financial sentiments, bonds markets are showing a degree of nervousness about the outcome, with some sovereign bond yields, particularly in Central Europe, rising strongly.<br/>Yet, a cold-headed analysis shows that such dark vision and dire warnings are not only misleading self-serving (as a part of Yes campaign) but basically unwarranted.  As a matter of fact, a case can be made that the defeat of the Constitution initiative could have beneficial economic consequences both in short and in medium-term.<br/>In the short-term, the market consensus is the No vote should lead to the weakening of the euro. But isn't the current parity of the euro too high? The drop in the value of the euro would make European experts more competitive, and this would stimulate eurozone growth, which need all the help it can get.<br/>Another short-term impact would a greater differentiation between capital markets of various EU countries and widening of euro-bonds spreads. Some analysts <a href="http://www.blogger.com/post-create.g?blogID=14383695#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1" title="">*</a>believe that the markets will become less tolerant of countries, which transgress Stability Pact criteria and lack fiscal discipline.  Given the signal failure of the political arrangements to police fiscal sinners, particularly the big ones, it is difficult to see how a greater dose of market discipline could be harmful to European macro-economic equilibriums.<br/>To the extent that the No vote will preserve the existing institutional status quo, there is no reasons to believe that it will trigger a return of trade barriers or raise obstacles to free movement of people within the EU countries. Clearly, the defeat of the 'Constitution' would substantially slowdown European legislative and regulatory process and discourage any new large-scale initiatives. While it could be argued that there is still a great deal of unfinished business to be enacted, many proposals in the European policy pipeline appear as a costly and cumbersome. All EU economic actors, from high-tech entrepreneurs to large multinationals, suffer from acute case of regulatory fatigue. Recent pronouncement of Charles McGreevy in favor of a pause in the implementation of the Financial Services Action Plan was universally greeted with relief.<br/>Potentially the most beneficial effect of the No vote would be a psychological shock it would provoke among the EU policymakers. Hopefully, it would make them realize that traditional EU way of making policy decisions, through complex, opaque and confused procedures really does not work.<br/>More fundamentally, it might end the confusion between economic and political integration and put an end to a persistent and counterproductive illusion that a political union can be introduced through a back-door maneuvering by clever penholders and shaky compromises between fundamentally irreconcilable views.<br/>Let's face it, the entire ‘Constitution’ exercise has been a huge and costly distraction. While obscure points of fisheries policy (see Section III, chapter 4, articles III- 225 through 232 as well as Annex I) and other such momentous items were being debated at the Constitutional Convention by the best and the brightest of the European elite, the European economy continued to underperform relative to the US and to Asia. Two largest EU economies, France and Germany, have been suffering from large unemployment and slow growth for a decade and their prospects are far from bright. Earlier this year, EU had to admit that the ringing promises of making Europe the world's most competitive and modern economy by 2010 will not be achieved and that the Lisbon agenda has to be substantially adjusted to more modest but more realistic goals.<br/>Approval of the ‘Constitution’ by the French and the Dutch voters would only prolong the distraction. It will also perpetuate the political uncertainty as other EU countries still need to approve the text. With chances of the approval by the UK votes being somewhere between negligible and nil, the future of the ‘Constitution’ will remain cloudy for at least several months. <br/>For those of us, who would like to see Europe improve its economic performance both in short and medium-term, a clear No vote by the French and Dutch is the best possible outcome. Sooner the Constitution is abandoned, sooner the EU policy-makers can concentrate on real issues that have been holding back the European growth.<br/>
<a href="http://www.blogger.com/post-create.g?blogID=14383695#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1" title="">*</a>  Henderson Strategy Advisors, Life in EU after  the French referendum, April 25, 2005</div>
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<link href="https://www.blogger.com/atom/14383695/112114782760522951" rel="service.edit" title="Wolfowitz in the World Bank: Do not go native!&#10;Thi..." type="application/atom+xml"/>
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<name>Charles Goldfinger</name>
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<issued>2005-04-28T07:56:00+02:00</issued>
<modified>2005-07-12T05:57:07Z</modified>
<created>2005-07-12T05:57:07Z</created>
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<title mode="escaped" type="text/html">Wolfowitz in the World Bank: Do not go native!
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<div xmlns="http://www.w3.org/1999/xhtml">Wolfowitz in the World Bank: Do not go native!<br/>This is a rather personal blog. I am a World Bank alumnus. I worked there between 1975 and 1980, when Robert McNamara was President.  After I left the ''Bank” (there was only one), I did occasional consultancy work not only on specific projects but also on broader policy issues. In 1982, I wrote an essay on the long McNamara reign and the challenges facing the two Bretton Woods institutions in the era of the crushing developing countries debt. All this to say that I have a long standing interest in Bank matters and held strong views on those.<br/>Thus I believe that the World Bank has long lost its conceptual leadership and policy influence. Its words and deeds are increasingly irrelevant to the major challenges facing the developing world.<br/>This may sound like an exaggeration. After all, Bank’s lending program is growing, as are its profits. Bank’s pronouncement receive large press coverage and its senior staff is treated with all due respect by media and the policy establishment. Yet, like in an old gold-mining town, this is little more than a make-believe façade, behind which the structure is slowly but surely crumbling.<br/>Lest you think this is just a rant of a reactionary old-timer, consider the following. McNamara, widely seen as the best President in the history, defined in the late 1970s rehabilitation of Africa and poverty eradication as the two priorities of the Bank. A quarter of a century later, the outgoing President James Wolfensohn spelled out the two major global development issues: Africa and poverty elimination. Despite all the efforts of “the best and the brightest” among the Bank staff (and they are really smart and dedicated), innumerable reports, high-level meetings and impressive studies, on the ground, where it really counts, few concrete results can be claimed. Actually, not only Africa’s growth continues to lag but its human right record worsened considerably (Rwanda genocide is the worst since the World War II and Congo remains a mass slaughterhouse) and AIDS exploded from an epidemic into a pandemic, threatening the very social fabric of South Africa.<br/>As for the conceptual leadership, it would seem that over the last few years James Wolfensohn did little more than to cling to the coattails of Bono and Bob Geldof. Their words are heartfelt and their involvement can only be praiseworthy. However, it is doubtful whether the development policy should be reduced to debt reduction and increase in official assistance.<br/> <br/>It should be clear by now that the problem goes well beyond the shortsightedness of governments and the general egoism of the Western public opinion. It is the entire international development policy apparatus that is structurally deficient. The Bretton Woods set-up of international financial institutions, including the IMF, the World Bank and the regional development banks, has long outlived its usefulness.  Paradoxically, this view is both widely shared and commonly ignored.<br/>The great and the good generally recognize the magnitude of changes in the world economy. Trade, monetary and capital flows are now largely unimpeded and broadly integrated. Private direct investment and financial inflows dwarf public aid and official assistance. They reach practically every corner of the globe in all sectors and all business sizes.  Information about and knowledge of opportunities and risks in the developing world is no longer confined to few official institutions and elite universities but it is widely distributed across financial sector, NGOs, specialized service providers, academia and, last but not the least, global and local medias. Yet somehow, our cognoscenti have curious blind spot when it comes to drawing specific conclusions about the international financial institutions. Some seven years ago, I asked Larry Summers, then a Treasury Secretary, during a small policy seminar, whether the time has not come for a root-branch re-appraisal of the IMF and the World Bank. He told me that this was not the time as the global financial system was in crisis and crisis management took precedence. Yet he knew as well as anybody that the inadequacy of the two institutions contributed to and most likely exacerbated the crisis. And since our “exchange”, things have not improved: financial crisis remain endemic and international financial institutions under sustained fire from ever increasing army of critics.<br/> <br/>There is no convincing explanation for this blind spot. After all, international financial institutions are controlled by financial authorities, which have overseen not one but a whole series of fundamental reforms of financial services. Today’s commercial and investment banks as well as financial markets bear little resemblance to their forebears of fifty years ago. There is no logical reason why the development banks should have remained the same.<br/> <br/>What is urgently needed is not just another reorganization, a traditional gambit of any new Bank President, but a fundamental re-appraisal of the international financial institutions set up: the questioning of their basic objectives, their positioning within the global financial system, their governance and their modus operandi. Here are some of the key questions that need to be addressed:<br/>-         Is the rationale for a separate existence of IMF and the World Bank? Why not merge the two organizations?<br/>-         What are the respective role and responsibilities of global and regional development institutions? What can be done to transform them into a coherent network?<br/>-         What can be done to make international institutions more cost-effective?  This is not just a question of staff costs but also of the whole administrative oversight by present shareholders.<br/>-         What lessons can be learned from the tsunami solidarity movement? At the least, it demonstrated that public opinion can be rapidly and massively mobilized for a development cause.<br/>-         How to integrate the notion of political development into the strategies and operations of international financial institutions (EBRD experience could provide an useful guide in this area).<br/> <br/>A frequently leveled accusation against Wolfowitz is that he is not a bona fide member of the development policy establishment. In light of the track record, both conceptual and operational, of the latter, this is not necessarily a liability. I would even venture to say that this is actually an asset. In the past, Wolfowitz has shown the willingness to challenge the conventional wisdom and question long-established and widely held views and approaches. Let’s hope that he will not succumb to temptation to “go native” and retain his ability as a change agent.</div>
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