19
Apr

J.Pozuelo-Monfort, MSc candidate in economic development at LSE
Jaime PM.jpg
Recent articles on the Financial Times and Cinco Dias show how western Europe is still lagging behind the current reality of a developing world. J.Pozuelo-Monfort comments on both articles.
The western world increasingly looks like a cage holding westerners and unwilling to receive individuals and produce from the developing world. A cage that has set barriers to trade and to labour mobility, a cage that has established severe restrictions on the variety of produce the developing world can export.
Produce versus products because the developing world excels in one particular industry: agriculture. The western world needs to stop subsidizing farmers, needs to improve its productivity and move up the ladder to consider higher-value industries that require higher levels of education and skill.
If we outsource our call-centers to India, why do we still keep considerable tariffs on basic agricultural produce, which exports could make a huge difference in the developing world?
The principle of productivity gain first explained by economist David Ricardo no longer holds in Europe, or Europe refuses to make it work as many economists claim it should. In the original example Ricardo argues that the England should focus its efforts in manufacturing clothing, whereas Portugal should focus its efforts in growing wineries. Both England and Portugal have competitive advantages and Englad is better off manufacturing clothing and exporting it in exchange for Portuguese wine and vice versa.
However this principle, that on paper works so well, no longer holds. We should let developing economies become agricultural suppliers of an industry that is unfairly subsidized in the western world. Almost half of the current EU budget is spent on subsidies to the farming and agricultural industry. The measure of opening our borders to produce from the developing world would only be politically incorrect. Politicians cannot afford, in the end, to lose the critical support of our farmers that they need to remain in power. But farmers ought to know the reality of a western world that seems to be in the XXIst century for some issues, and in the XIXth century for other. We choose where we want to set our barriers to trade, because we have the power of doing so, call the power political or economical. Other countries simply cannot choose. We choose to set and define the rules of the game that apply to everyone, because we have the power of doing so. Other countries simply cannot choose.
It is an unfair and unequal world. But sometimes, I must admit, it looks like the first world is only willing to stress the level of unfairness and inequality, as opposed to what a rational person would expect from our political class.

Comments

social network May 1, 2013 - 1:00 am

Hello there! This blog post could not be written much better!
Reading through this post reminds me of my previous roommate!
He continually kept talking about this. I will forward this article to him.
Fairly certain he will have a good read. Many thanks for sharing!

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