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Bashing Tesco

It’s fashionable to have a go at Tesco, so it’s no surprise
that David Cameron has joined in. Keen to show that he’s not in the pocket of
big business, the Tory leader recently warned Britain’s biggest supermarket chain
to “behave responsibly.” Worse, on the same day, the Office of Fair Trading (OFT)
announced that it would refer the supermarket sector to the Competition
Commission—less than a year after ruling that Britain’s £125-bn-a-year groceries
market was sufficiently competitive.

The OFT claims its about-turn has come out since more evidence
came to light. More likely its new boss John Fingleton is bowing to pressure from
lobby groups which hate supermarkets. But while bashing Tesco may be clever
politics, it is not sound economics. And it makes a mockery of government competition-policy
reforms, which were meant to take politics out of antitrust decisions. Although
farmers, environmentalists and small shopkeepers may not like it, shoppers use
Tesco because it gives them what they want: an ever wider range of ever more
affordable food. Judging by the performance of its overseas ventures, Tesco is
also an international success story. Cameron may regret his opportunism; the
OFT’s boss certainly should.


The IMF proves a good spinner

Rarely have the IMF’s spring meetings enjoyed such coverage.
A “breakthrough in the governance of the global economy,” splashed the FT; the
IMF, said the Guardian, is becoming a “world economic watchdog.” Gordon Brown, who
chairs the fund’s key policymaking committee, knows how to spin.

The IMF has been rather idle lately: there haven’t been any
big financial crises recently and Asian governments, notably China’s, have
been piling up vast reserves of foreign currencies to insure themselves against
such a calamity—doing away with the need to borrow from the fund, and all the
conditions it entails. But the Asian countries have achieved this by holding down
their currencies, thus propping up the US dollar and swelling America’s already
vast trade deficit. With exchange rates out of kilter and trade imbalances growing perilously large, many have suggested
that the IMF should rediscover its original Keynesian vocation as global
economic policeman.

Cue finance ministers’ much-hyped decision to ask the IMF to
examine how various countries’ policies contribute to these global imbalances
and suggest how they might act together to resolve them. The fund already reviews
individual countries’ economic policies periodically; by monitoring several
collectively, it will now be able to make suggestions in a more joined-up fashion. Big deal. While the
IMF has huge power over developing countries to which it has lent money, it has
little sway over the US, China or Britain. Just ask the chancellor:
for years, he has roundly ignored the Fund’s advice to raise taxes to plug the government’s budget deficit. The
global imbalances will only be corrected when governments choose to mend their
ways—or when markets force their hand.

Rich-country governments also put off a decision to give
rising economic powers such as Brazil,
China and India more say
at the IMF. Although its economy is over ten times bigger, India currently has fewer votes than Belgium.


Energy politics I

Not since Che Guevara died fighting there nearly 40 years
ago has Bolivia been on the frontline of the global struggle against capitalism. So the anti-globalisation
brigade cheered on May Day as new president Evo Morales marched his troops into
the country’s foreign-owned gasfields carrying banners declaring them “Nationalised:
property of the Bolivians.” Among the victims of the expropriation were Britain’s BP and BG, France’s
Total, Spain’s
Repsol and Brazil’s
Petrobras. The seizure of foreign assets by the government of Bolivia—GDP $22.3bn—should
nail once and for all the myth that big global companies such as BP, with an
operating income of $32.7bn last year, run the world. But Bolivia was
unwise to flex its muscles in this way. It will be in a pickle if foreign gas
companies refuse to stay on as contractors, taking their know-how with them. International
investors will think twice about investing in the small Andean country, and Brazil, the main customer for Bolivia’s gas,
will doubtless seek more reliable suppliers in future.


Energy politics II

Governments are rarely right to block foreign takeovers. But
European governments would do well to limit Russia’s
stranglehold over their gas supplies—by blocking state-owned Gazprom from snapping
up Centrica, Britain’s main gas distributor.
Gazprom demonstrated it was the pawn of a Kremlin potentially hostile to Europe
when it cut off supplies to Ukraine
earlier this year. And its boss has warned European governments not to block
its expansion ambitions on the continent, lest it pipe its gas east to China instead.
It is bad enough that Gazprom could exploit Europe’s
dependence on its gas supplies to pump up prices; far worse that it is
threatening to abuse its power for political purposes. Far from allowing the
Russian monopolist to tighten its grip over European gas supplies, EU countries
should be building pipelines that bypass Russia to alternative producers in
the Caspian and seeking supplies of liquefied natural gas from further afield.

Posted 23 May 2006 in Global Economy, Prospect, Published articles

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