France’s presidential elections impacting Algeria

by | May 9, 2017

And the prospects of mutual cooperation . . .

The two countries  confronted to their specific challenges ought to have a common vision in order to contribute to a prosperous future as based on genuine co-development and not on obscuring the memory of a shared past for long lasting relationships. The recent France’s presidential elections impacting Algeria, are looked at here as positively as they could be in so many years.
The 187 odd years of very close relationship between the two countries will certainly be in the agendas of each as the renewed French leadership confronted to challenges from all around is settling down shortly for business anew.    
It is about preparing the future through mutual respect; a point that I always made during my various meetings with political and economic personalities, and maintained that Algeria should not be considered as a market only. It is in this context that a co-partnership between Algeria and France, far from prejudice and spirit of domination must be inscribed.
We must be aware that the new international relations are no more based on relationships between heads of State, but on custom networks and on decentralized organizations through the involvement of notably business and civil society cooperation, dialogue of cultures, tolerance and the symbiosis of the contributions of the East and the West.

Because it might be unproductive to be and remain locked in distant positions as the latest events should rather make us think of to how avoid antagonising each other beliefs be it religious.  After all Islam, Christianity or Judaism did contribute to the development of civilization.

Future relations between Algeria and France must also concern the Maghreb-Europe space and more generally the Mediterranean-Europe area. Our two countries can be dynamic agents, because southern Europe and the Maghreb cannot escape adaptation to the current global changes (the present crisis already causing upheaval in both socio-economic and geo-strategic) and more generally throughout the Mediterranean region.

Because it is necessary to go beyond narrow chauvinist nationalism insofar as real nationalism will be defined in the future as the ability to together expand the standard of living of our people by our contribution to the global value.

Today’s world is characterized by interdependence. This does not mean the end of the role of the State but a separation of politics and economics which cannot be the vagaries of the economic climate, the State dedicated to its natural role as regulator of macroeconomic and macro-social life.  I firmly believe and after analysis that the intensification of the cooperation between  Algeria and France not forgetting all other cooperation between Algeria and the USA, all emerging countries such as China, Japan, India, the Brazil, Turkey, South Korea and Russia etc…

And in a more comprehensive way between the Maghreb and Europe as based on a genuine co-development, partnership, the introduction of direct investment would upset the bureaucratic behaviour conservative annuitants and enrol them in a dynamic perspective that is beneficial to the peoples of the region thus helping to  turn the Mediterranean into a lake of peace and prosperity.  The Mediterranean can be that place of rational networking to communicate with distant cultures, encouraging the symbiosis of contributions of the East and the West.

This network should facilitate communication links, freedom insofar as the excesses of the collective voluntarism inhibit any spirit of creativity. It is that the Maghreb and Europe are two geographic areas with an opening on the Latinity millennial experience and the Arab world with natural links and overall culture and Anglo-Saxon influences…

It is essential that Europe developed all actions that can be implemented to achieve a desirable balance within this set. In fact the formation of weak regional economic areas is a step of structural adjustment within the globalized economy with for a goal to promote political democracy, – a humanized, competitive market economy – promotion of ideas through social and cultural debates so as to combat extremism and racism – the implementation of common business whilst never forgetting that these are driven by the logic of profit and not emotions.

Thus, it is necessary to pay special attention to the educational action because human thinking and creation should in the future be the beneficiary and the leading actor in the development process. That’s why I would advocate the creation of a Euro-Maghrebine University as a cultural center as well as a central Euro Mediterranean bank as a facilitator for all Exchange.

It is in this context that a realistic approach must be apprehended so as to the co-partnership between Algeria and France taking into account all potentialities.  At the global level, we are witnessing the evolution of a built-up passed based on a purely material vision, characterized by hierarchical rigid organizations, to a new mode of accumulation based on the mastery of knowledge, of new technologies and flexible organizations as networking around the world, with globally segmented supply chains of production where investment in comparative advantages takes place in sub-segments of these channels.

As rightly noted by Jean-Louis Guigou, President of IPEMED (Institute of Prospective Economic of the Mediterranean world, in Paris), it should be that, in the interest of both of the Algerians and of the French, and more generally of the Maghreb and the Europeans as well as all South-Mediterranean populations, the boundaries of the common market of the future, the borders of Schengen in the future, the borders of social protection in the future the borders of the environmental requirements of tomorrow, must be South of the Morocco, the Tunisia and Algeria, South and East of the Lebanon, Syria, of the Jordan and the Turkey, through a lasting peace in the Middle East, Arab and Jewish populations with a thousand-year history of peaceful coexistence.

Specifically, Algeria and France have economically other strengths and potential for the promotion of diverse activities and this experience can be an example of this global partnership becoming the privileged axis of the re-balancing of the South of Europe by amplification and the tightening of links and exchanges in different forms. Per the official foreign trade balance of Algeria in 2016, the countries of the European Union are still its main partners, with the respective proportions of 47.47% and 57.95% of exports and imports.  Italy is the main customer and France the main supplier.

Between France and Algeria, trade can be intensified in all areas, i.e.: agriculture, industry, services, tourism, education, not to mention cooperation in the military field, where Algeria can be an active player, as shown by its efforts to bring stability to the region.

Also, let’s not forget the diaspora with residents of Algerian origin in France that would exceed 4 million, including more than 2 million bi-nationals. This regardless of the numbers is an essential element of reconciliation between Algeria and France, because it holds significant intellectual, economic and financial potential. The promotion of the relations between Algeria and its emigrant community should be mobilized in various stages of intervention initiatives of all the parties concerned, namely the Government, diplomatic missions, universities, entrepreneurs and civil society.

Hence, any intensification of this cooperation won’t possible – whilst not forgetting the duty of memory – if Algeria and France have a realistic approach to the co-partnership for a win-win partnership away from any mercantilism and spirit of domination. The two countries must have a common vision of their future.

Algeria can overcome its current difficulties but the success of national and international industrial partnerships is not feasible without a total renovation of all central and local governance systems with a coherent vision based on both political, social, economic structural reforms including financial market, land and property market, labour and especially reform of the socio-educational system, at the dawn of the fourth technological revolution.

The objective for Algeria is to commit for structural reform, whilst assuming a broad internal mobilization of the social front, tolerating the different sensitivities, in the face of the many challenges in order to allow Algeria to emerge, in the medium and long term.  For this, the dominance of the bureaucratic approach must give way to economic operational approach, with positive social and economic impacts. Also, in the face of the new global changes, Algeria undergoing this transition towards a productive economy closely tied to its energy transition, needs an accumulation of technological and management expertise with assistance from its foreign partners.

In short, Algeria and France are key actors for the stability of the region, and that any destabilization of Algeria would have negative geo-strategic repercussions throughout the Mediterranean and African region, as I pointed out in my interview on December 28, 2016, the American Herald Tribune (3).

And of course, subject to Algeria furthering into the rule of law, democratization of society and that it’s reorienting its economic policy in order to achieve sustainable development. The current tensions between Algeria and France are only temporary, as per information gathered with friends of mine in France.

It is only in this context that cooperation must return for a win-win partnership far from all prejudice and in mutual respect.

Notes : See recent contributions and international interviews of Professor Abderrahmane Mebtoul

  1. -«Wahl in Algerien Der Graben ist tief – wer stimmt ab?» – www.tagesschau.de –ARD-  04/05/2017
  2. -« Après Glavany et Macron… « Dépassionner les relations entre l’Algérie et la France » quotidien financier  français la Tribune .Fr 19 février 2017 – (“After Glavany and Macron…» “Take the heat out the relationship between Algeria and France” by French financial daily la Tribune.fr  19 February 2017)
  3.  – American Herald Tribune 28/12/2016 «  Prof. Abderrahmane Mebtoul: Any Destabilization of Algeria would have Geo-strategic Repercussions on all the Mediterranean and African Space
  4.  -Interviews with the weekly Point Afrique (Paris-24/03/2016) and the Express (07/04/2016, Paris) on the prospects for co-operation Algeria-France.
  5.  -This theme was developed by Prof. Abderrahmane Mebtoul, on 7 April 2016 in Marseille at the Mediterranean Villa

 

Return to protectionism, in this day and age, is it feasible ?

by | Jan 19, 2017 |

Return to protectionism, in this day and age, is it feasible ?

Let’s ponder October 1929 and October 2008

For the Chinese president, Xi Jinping, who during the World Economic Forum in Davos, paradoxically seeming to be defending Free Trade, threw at the new American president, Donald Trump on January 17th, 2017 that no one would emerge as the winner of a trade war, or as he put it, a Return to protectionism, in this day and age, is it feasible ?

“It doesn’t help to blame globalization. Any attempt to stop trade in capital, technology, and products between countries is impossible and contrary to history. We must remain committed to the development of free trade and investment (transnational), and say no to protectionism. We got to ‘rebalance’ globalization, and make it stronger, more inclusive and more sustainable”. In this context it is useful to recall the fundamentals of the crisis of 1929 and 2008.

The 1929 Crisis.

The 1929 crash is caused by a speculative bubble, whose genesis dates back to 1927. It was a new system of credit purchase of shares based on investors buying securities with 10% coverage that started it all. It was ‘Black Thursday’ October 24th, 1929 that the famous crisis broke out in the United States.

le krach boursier de Wall street plongeant l’économie américaine et l’économie mondiale, dans la tourmente et ce malgré l’apparente santé de l’économie américaine dont les bases de sa croissance étaient pourtant faibles.

The stock crash of Wall Street plunged the American and the global economy in turmoil, and this despite the apparent health of the U.S. economy of which bases of its growth, were however weak.

October 2008

There are many similarities between the crisis of October 1929 and October 2008. Economic boom prior to the crisis, rising debt and divorce between the real and financial impact on the real economy with the fall of technology stocks.

But in contrast with 1929, it is the interconnection of economies with stronger global regulation where the developed countries economies being in deflation (low inflation, unemployment, negative growth) and not stagflation (inflation and unemployment decline) that characterised 2008.

As evidenced by the socialization of losses of some banks, the rapid response of the central banks of the US Fed., the European Central Bank, the Bank of England, Japanese, Russian, and even Chinese and Indian banks in coordination so as to break the vicious circle in the lack of confidence and the blocked interbank lending that is the lifeblood of the functioning of the global economy.

All economic and reliable financial system is based on trust. With repeated bankruptcies, interbank credit source of the expansion of the global economy has tended to dry out especially at the investment banks that have experienced an unparalleled expansion in the contemporary period.

However, unlike a universal bank, a Merchant Bank has not the possibility, in case of difficult market conditions, to rely on deposits of individuals to raise money for the short term, although they continue to issue short-term debt to finance their business.

However, more financial institutions from which investment banking sourced finance do refuse in times of crisis to lend for lack of confidence in the ability of repayment of these banks. Generally the essence of the crisis of both 1929 as of 2008 are a distortion of the Foundation of capitalism as describing by the founders of political economy based on the enterprising creators of wealth, Karl Marx did not write about Socialism but the Capital.

This crisis is therefore related to the increasing financialisation in disconnection with the real economy and not in symbiosis of any economic and social dynamics forgetting that labour is certainly a price but also creator of value and growth through consumption. Indeed, with this increasing financialisation, we have two types of shares ownership.

The direct holding (those who own directly) and the indirect holding (those who own through an intermediary such as management, life insurance companies, pension funds, etc.). The new fact is changing fast and important type of shares held by households. The direct holding of shares becomes a minority whereas the indirect holding grew strong.

It is the pension funds that control Wall Street whilst managing more than one third of the market capitalization of the USA today. These malfunctions have been materialised with the mortgage crisis of the Subprime in August 2007; a crisis that has spread across the global stock markets with great losses which I summarize in five steps:

  1. The banks made mortgages available to insolvent households or with few guarantees, at high interest rates;
  2. Dissemination of bad debt in the market: to evacuate the risks, banks “securitised” their debts, meaning that they cut their debt in financial products to resell them on the market. Globalisation did the rest, by disseminating these risky securities in the portfolios of investors from all over the world. Hedge funds have been big buyers of Subprimes, often on credit to boost their yields (up to 30% per year), and played the leverage effect, hedge funds borrow up to 90% of the sums required;
  3. Reversal of the U.S. real estate market: towards the end of 2005, U.S. interest rates began to rise while the financial market has faltered. Thousands of households have been unable to honour their payments causing losses for banks and investors who bought bonds saw their value collapse:
  4. Confidence crisis: the banks found themselves in a situation where as in a poker game, they know what they have on their balance sheet, but not what is in that of others because these bad mortgages were bought everywhere in the world and we don’t know what is the distribution of risk where a serious crisis of confidence and since July 2007, this situation causes the exchanges to fall and paralyzes the interbank market; banks are paying more or very little fearing that their counterparts are in a red line;
  5. Intervention of central banks: facing the paralysis in the market, the Central Banks intervened massively in early August 2007 by injecting hundreds of billions of Dollars and Euros in cash.

November 15th, 2008 : G20 crisis meeting in Washington, USA.

Elle s’est articulée autour de  cinq objectifs dont  le renforcement du système de régulation qui ne saurait signifier protectionnisme. Premièrement de dégager une réponse commune à la crise financière-deuxièmement ouvrir les pistes d’une réforme en profondeur du système financier international -troisièmement prendre de nouvelles initiatives pour parer à d’éventuelles faillites bancaires et imposer aux banques de nouvelles normes comptables -quatrièmement des règles plus strictes sur les agences de notation, la titrisation et les parachutes dorés

This meeting focused on five objectives, including the strengthening of the system of regulation which does not mean protectionism.

  • First to identify a common response to the financial crisis;
  • Second to open tracks for a reform of the international financial system;
  • Third to take new initiatives to counter possible bank failures and impose on the banks of new accounting standards;
  • Fourth to adopt stricter rules on credit rating agencies, securitisation and the Golden parachutes;
  • Finally, in fifth to increase public spending through coordinated budget deficits, but for the benefit of energy savings for the building and infrastructure development and clean auto technology, questioning the European stability pact (3% of GDP and spending on / GDP less than 60%.)

But it is clear that in this month of January 2017, the global economy is still characterized by turbulence with protectionist options but in a framework of unbridled internal liberalization wanting back in vogue Adam Smith’s invisible hand of the market, which is likely to repeat the scenario of the 1929.  However, the strategic goal is to rethink the current global economic system that promotes bipolarisation North / South, poverty detrimental to the future of humanity, which is also accelerated by the most questionable governance on behalf of most of the leaders of the South.

In short, the return to global protectionism is a chimera and realism will prevail in the end.

In the meantime, let us meditate the crisis of October 1929 and that of October 2008. The large deficit of the American balance of payments, which will be accentuated with the new spending program announced by the new president (with the risk of a loss in value of the Dollar), is currently offset by the large flows of capital from outside the US. . Let us for the sake for humanity, put aside all nationalism, chauvinism that are source of tensions, hatred and war and meditate this quote that is sometimes attributed to French president Charles de Gaulle, under the title “Patriotism is loving his country, Nationalism, is hate of others’” and sometimes to Romain Garyn in his book “European Education” published in 1945 under the title “Patriotism is the love of one’s kin Nationalism is hatred of others”.    ademmebtoul@gmail.com