Monsanto’s battle with UN over allegedly cancerous herbicide

2 Jun

Monsanto Papers : the battle of information

translated from http://www.lemonde.fr/planete/article/2017/06/02/monsanto-les-moissons-du-fiel_5137487_3244.html

To defend glyphosate, the firm has taken the issue to the United Nations Against Cancer, which has classed its flagship product cancerous. Second section of our inquiry.

It had promised “more inoffensive than the salt on the table”, but that was just in its adverts. Glyphosate, the herbicide most widely used on the planet, the principal ingredient in its flagship product, the Roundup, on which it has based its business model, its fortune and reputation, sold for more than forty years and becoming a best-seller with the development of transgenic seeds called “Roundup ready”, could be in reality cancerous.

On 20 March 2015, Monsanto was visibly affected. On that day, glyphosate was declared genetically toxic (it damages DNA), cancerous to animals and “likely cancerous” to people, according to the International Agency for Research on Cancer (IARC).

The jury: a group of 17 seasoned experts of 11 nationalities, assembled by this official agnec of the UN charged with compiling an inventory of cancerous substances et whose opinion has been the authority for almost half a century. There is therefore no doubt that this will also be the case for their conclusions on glyphosate, published in the form of a report, ‘monograph 112’

Declaration of War

Far from sight, the fury of the American firm crossed the Atlantic by fibre-optic. The same day, a missive amounting to a declaration of war parted for Geneva, in Switzerland, directed to the World Health Organisation, the umbrella body of the IARC

The paper bore at its head the celebrated green branch surrounded by an orange rectangle: the Monsanto logo. “We seem to understand that the members of the CIRC have deliberately chosen to ignore the numerous studies and regulatory evaluations publicly available which support the conclusion that glyphosate does not present a risk to human health”, accused Philip Miller, the vice president of Monsanto charged with regulatory affairs.

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Get paid for face-time: launch of the ‘Uber’ for freelance professionals and tradesmen

9 May

Picture the scenario : you are stranded suddenly with a dinner party emergency, or your boiler has exploded, and you need to consult an expert right away. But although google has managed to put the entire world at our fingertips, tracking down a professional to give their reassuringly expert opinion, face-to-face, is a little more difficult and time-consuming.

Or maybe you want some face time with your therapist while they are on holiday; maybe you want to get some legal advice without paying the prohibitive rates charged by a corporate firm. Plenty of paralegals are fully equipped to give an initial legal consultation.

Hence, 121with, the video conferencing platform with a difference. Seekers of services can upload their card details, before browsing the listed profiles of professional service-providers by their chosen keywords. ‘Why, it’s little more than a skype call that you have to pay for,’ one invitee interjected at the launch event.

Well no, the founders patiently explained. On 121with, payment takes place automatically, almost immediately after the video call has finished. In a real-time payment system similar to Uber’s, the transfer goes through, via Stripe at a rate of T+4 (seconds), which is the UK standard. Moreover, there is a minimum charge of 50p per second, incentivising service-providers to make sure every second counts.

The advantages of the 121with system are obvious and manifold: stress, hassle-free payments, saving administrative costs on invoice issuing and bank transfers; no travel costs; and finally, the platform can act as a productivity boost to existing businesses, which may be “set in an hourly or half-hourly charge mindset”, exhorts Joint Managing Director Tom Stokely. “We think 121with is going to shake that up a bit.”

The site is live now, and 121with is looking for ‘affiliate’ partners for initial profile listing, as the platform’s pioneer professionals will be carefully screened for quality and value for money.

But it is hoped the system will become to an extent self-regulating through the organic growth of the market, as poor quality or overpriced offerings will attract negative customer reviews and fail to compete. There is also, naturally, an arbitration process offered between seeker and provider if a refund becomes necessary.

Before the Vote

26 Apr

Right of asylum, immigration quotas, border controls.. a deep fracture has emerged between the candidates.

It’s a record in French history: France has recorded 85, 700 requests for asylum in 2016. Even if it’s small in relation to its neighbours Italy (121, 200) and Germany (722, 300), this influx of migrants, because of the war in Syria and historic conflicts or humanitarian situations (the Sudan, Afghanistan, Haiti), have forced the question of the welcome that France can or should reserve at the centre of the presidential campaign.

But if the questions about borders, integration or identity have gained an important place in the campaign, the responses that the candidates have raised in their programmes are sparse (a hundred proposals to more than three thousand in total) and very polarised. A France open or closed, here are the main promises of the 11 candidates for the presidential election.

Borders in and around Europe

According to the Schengen agreement, all citizens can move freely within the eponymous zone (26 states of which 22 are part of the European Union). And on the exterior, the agency Frontex tries to maintain surveillance faced with the influx of migrants.

The borders question is typically an embarrassing one for candidates, outside the extreme right, faced simultaneously with the humanitarian crisis of the migrants, but also by the high-stakes surveillance of terrorist movements.

On the extreme right, the positions have the merit of clarity: Nicolas Dupont-Aignan and Marine Le Pen think that control of immigration is no longer secured by Frontex and that they should exit Schengen to take back national borders, which would consequently be reinforced. They believe therefore six thousand customs posts should also be reinstated, according to the Front National candidate, which demands also the recall of the reservists.

Calling for a double layer of borders, Francois Fillon says he is in favour of staying in Schengen (and in tripling the budget of Frontex), but also to the “temporary reintroduction of controls on the interior borders” (an operation in reality already in place since the events of November 2015).

In opposition, there are those who think the actual borders of Schengen are already sufficient: Benoit Hamon, Emmanuel Macron and Jean-Luc Melenchon. But with certain nuances since Emmanuel Macron wanted to increase the powers of border guards and outposts in Europe, while Jean-Luc Melenchon wanted what he termed the “militarisation of the politics of controlling migration flows.”

The extreme left believes to want to abolish all borders, both on the interior and exterior of the European Union – say Nathalie Arthaud and Philippe Poutou, in a spirit which is “internationalist” and “in solidarity”.

 

The Right to Asylum

In the face of crowds of migrants, the practical application of the right to asylum, a principle enshrined in the preamble of the Constitution, is a question of debate among the political class. It is anyway on this question that ghost of the candidates’ previous promises looms largest: where Nathalie Arthaud and Philippe Poutou supported regularising all the sans-papiers, Marine Le Pen and Nicolas Dupon-Aignan want, in contrast, to make the conditions of asylum harder. The candidate from Debout la France is proposing a dozen measures to allocate a residence to asylum-seekers. The Front National candidate, le Pen, insists on the necessity of “making it impossible to regularise or naturalise foreigners in an illegal situation.”

Between these two opposing poles, two candidates declare they favour welcoming asylum-seekers, notably in instituting a humanitarian visa (Benoit Hamon) and in constructing welcome camps along international norms (Jean-Luc Melenchon). Three other candidates want to shorten the delay in the administrative response (Emmanuel Macron, Jacques Cheminade and Francois Fillon). It is therefore on the specific public services the refugees can access on which the majority of candidates have made promises.

 

On Quotas

In 2016, around 227 500 foreigners gained their first right to stay in France, an increase of 4.6% in relation to 2015. A rise which lies principally in admissions for humanitarian reasons. These permissions were not limited by quotas; France has never applied such a limitation, in contrast to the US for example. A majority of candidates are not in favour ( Nathalie Arthaud, Jacques Cheminade, Benoit Hamon, Emmanuel Macron, Jean-Luc Melenchon and Philippe Poutou).

Among them those who have no fixed position: Jean Lassalle and Francois Asselineau. This last is content to propose a referendum on the whole group of questions lying in various degrees in relation to the volumes of migrants – quotas, familial regroupment, right to own land…

Three candidates are in support of quotas. The most extreme position is, with no surprise, that of Marine Le Pen, who recommends “reducing legal immigration to an annual cap of 10 thousand (persons).” She is following on the platform of Francois Fillon, who wanted to inscribe it in the Constitution, and of Nicolas Dupont-Aignan, who wants “to vote annually in Parliament an immigration ceiling” related to the unemployment rate.

In 2006, Nicolas Sarkozy had already fostered support for establishing quotas, but this ambition faced opposition, risking the censure of the constitutional council, and was adjourned.

 

The Right of Soil

The right of earth consists of conferring French nationality on children born in France More precisely, a child born in France of foreign parents becomes automatically French on their 18th year, if they are in our country and have been more than five years; this has been true since 1515. Certain candidates propose to limit this opportunity (Nicolas Dupont-Aignan, Francois Fillon), or aim to remove it (Marine Le Pen).

For the Front National, this represents making a kind of “acquisition of French nationality (is) possible just through filiation or naturalisation, for which the conditions are elsewhere more demanding”… that which can in many more complex cases, looks impossible. Not only for the French whose ancestors came from abroad several generations ago, but also for a number of other cases – pieds-noirs, those from Alsace, whose families were German at the beginning of the last century…

On the other side, Jacques Cheminade, Emmanuel Macron and Jean-Luc Melenchon want to preserve the right of soil. Four candidates have no position on this prickly subject: Nathalie Arthaud, Benoit Hamon, Jean Lassale and Philippe Poutou.

A new breed of banker?

26 Apr

 ‘Difficult but talented’ replaced by ‘Pedestrian but hard-working’.

A slew of regulatory reforms have made banks much safer places – Dodd-Frank in the US, and the Markets in Financial Instruments Directive (Mifids 1 and 2, as they are affectionately known) – have made it harder for banks to market and sell risky securities to ‘unsophisticated’ investors, and regularised professional trading standards to combat volatility.

But now that over-the-counter derivatives and so-called ‘dark pools’, where large trades can be placed anonymously without the onerous reporting obligations of licensed exchanges, have been strait-jacketed by legislation, is there any place for the dashing, risk-loving daredevil of popular stereotype?

According to eFinancial careers, which keeps a close eye on trends in the industry, the typical banker has become almost… boring.

“A lot of people who had successful careers – the most talented people of my generation – have left the industry to do other things,” Kerim Derhalli, the ex-Deutsche MD who himself has quit banking to head Invstr, a social network for amateur investors, told the recruitment firm.

It is certainly true that investment banking still pays the highest starting salary for graduate recruitments, according to a UK survey by graduate recruitment research company High Fliers. Their report, on ‘The Graduate Market in 2016‘, put the welcome package at investment banking firms at £47,000, the top-ranking sector, with banking and finance ranked third at £36,000.

Though the number of positions at banking and finance companies did not increase by even a quarter of the increase seen within IT & Telecommunications, which went up 219% compared to just a 37% rise in finance positions.

The High Fliers report recorded that “The number of entry-level positions available for graduates in IT & telecommunications and in the public sector has more than doubled over the last ten years, whilst recruitment at the top consulting firms has increased by two-thirds.”

This is corroborated by another eFinancial careers source, former head of rate sales at Deutsche Bank Chris Yoshida. “When I went into banking [in 2000] my graduate class was comprised of the best students from the best universities in the world,” said Yoshida, who now advocates for the Kairos Society, an organization that helps young entrepreneurs effect global change. “This is no longer the case – the very top students now want to work for Google and Facebook. Banks are attracting the students who are in the top 50% to 75% (rather than the top quartile).”

 

Even banking interns, such as those enrolled in the Goldman Sachs 2016 ‘summer analyst class’, which prepares those keen on a financial career in its inner workings before they have even graduated, have become less motivated by materialism.

Goldman Sachs, which has a spoof twitter account under the label ‘GSElevator… Straight to Hell’, reported on its blog that its interns were predominantly interested in saving to buy a house (46%), while just 3% wanted to own luxury items. I suppose it might come across as presumptuous before you’d even been offered the highly desired and competitive job to say ‘I just want a Ferrari’, but… the tone of the industry has definitely changed.

Perhaps this is partly due to the emergence of multiple sources of alternative finance like crowdfunding and peer-to-peer lending platforms; and alternative payment systems such as Paypal and now blockchain-linked crypto-currency mechanisms.

Before the Vote: What the Candidates are Proposing on the Subject of Immigration

21 Apr

translated from:

http://www.lemonde.fr/les-decodeurs/article/2017/04/20/avantlevote-ce-que-proposent-les-candidats-en-matiere-d-immigration_5114035_4355770.html

Right of asylum, immigration quotas, border controls.. a deep fracture has emerged between the candidates.

It’s a record in French history: France has recorded 85, 700 requests for asylum in 2016. Even if it’s small in relation to its neighbours Italy (121, 200) and Germany (722, 300), this influx of migrants, because of the war in Syria and historic conflicts or humanitarian situations (the Sudan, Afghanistan, Haiti), have forced the question of the welcome that France can or should reserve at the centre of the presidential campaign.

But if the questions about borders, integration or identity have gained an important place in the campaign, the responses that the candidates have raised in their programmes are sparse (a hundred proposals to more than three thousand in total) and very polarised. A France open or closed, here are the main promises of the 11 candidates for the presidential election.

Borders in and around Europe

According to the Schengen agreement, all citizens can move freely within the eponymous zone (26 states of which 22 are part of the European Union). And on the exterior, the agency Frontex tries to maintain surveillance faced with the influx of migrants.

The borders question is typically an embarrassing one for candidates, outside the extreme right, faced simultaneously with the humanitarian crisis of the migrants, but also by the high-stakes surveillance of terrorist movements.

On the extreme right, the positions have the merit of clarity: Nicolas Dupont-Aignan and Marine Le Pen think that control of immigration is no longer secured by Frontex and that they should exit Schengen to take back national borders, which would consequently be reinforced. They believe therefore six thousand customs posts should also be reinstated, according to the Front National candidate, which demands also the recall of the reservists.

Calling for a double layer of borders, Francois Fillon says he is in favour of staying in Schengen (and in tripling the budget of Frontex), but also to the “temporary reintroduction of controls on the interior borders” (an operation in reality already in place since the events of November 2015).

In opposition, there are those who think the actual borders of Schengen are already sufficient: Benoit Hamon, Emmanuel Macron and Jean-Luc Melenchon. But with certain nuances since Emmanuel Macron wanted to increase the powers of border guards and outposts in Europe, while Jean-Luc Melenchon wanted what he termed the “militarisation of the politics of controlling migration flows.”

The extreme left believes to want to abolish all borders, both on the interior and exterior of the European Union – say Nathalie Arthaud and Philippe Poutou, in a spirit which is “internationalist” and “in solidarity”.

 

The Right to Asylum

In the face of crowds of migrants, the practical application of the right to asylum, a principle enshrined in the preamble of the Constitution, is a question of debate among the political class. It is anyway on this question that ghost of the candidates’ previous promises looms largest: where Nathalie Arthaud and Philippe Poutou supported regularising all the sans-papiers, Marine Le Pen and Nicolas Dupon-Aignan want, in contrast, to make the conditions of asylum harder. The candidate from Debout la France is proposing a dozen measures to allocate a residence to asylum-seekers. The Front National candidate, le Pen, insists on the necessity of “making it impossible to regularise or naturalise foreigners in an illegal situation.”

Between these two opposing poles, two candidates declare they favour welcoming asylum-seekers, notably in instituting a humanitarian visa (Benoit Hamon) and in constructing welcome camps along international norms (Jean-Luc Melenchon). Three other candidates want to shorten the delay in the administrative response (Emmanuel Macron, Jacques Cheminade and Francois Fillon). It is therefore on the specific public services the refugees can access on which the majority of candidates have made promises.

 

On Quotas

In 2016, around 227 500 foreigners gained their first right to stay in France, an increase of 4.6% in relation to 2015. A rise which lies principally in admissions for humanitarian reasons. These permissions were not limited by quotas; France has never applied such a limitation, in contrast to the US for example. A majority of candidates are not in favour ( Nathalie Arthaud, Jacques Cheminade, Benoit Hamon, Emmanuel Macron, Jean-Luc Melenchon and Philippe Poutou).

Among them those who have no fixed position: Jean Lassalle and Francois Asselineau. This last is content to propose a referendum on the whole group of questions lying in various degrees in relation to the volumes of migrants – quotas, familial regroupment, right to own land…

Three candidates are in support of quotas. The most extreme position is, with no surprise, that of Marine Le Pen, who recommends “reducing legal immigration to an annual cap of 10 thousand (persons).” She is following on the platform of Francois Fillon, who wanted to inscribe it in the Constitution, and of Nicolas Dupont-Aignan, who wants “to vote annually in Parliament an immigration ceiling” related to the unemployment rate.

In 2006, Nicolas Sarkozy had already fostered support for establishing quotas, but this ambition faced opposition, risking the censure of the constitutional council, and was adjourned.

 

The Right of Soil

The right of earth consists of conferring French nationality on children born in France More precisely, a child born in France of foreign parents becomes automatically French on their 18th year, if they are in our country and have been more than five years; this has been true since 1515. Certain candidates propose to limit this opportunity (Nicolas Dupont-Aignan, Francois Fillon), or aim to remove it (Marine Le Pen).

For the Front National, this represents making a kind of “acquisition of French nationality (is) possible just through filiation or naturalisation, for which the conditions are elsewhere more demanding”… that which can in many more complex cases, looks impossible. Not only for the French whose ancestors came from abroad several generations ago, but also for a number of other cases – pieds-noirs, those from Alsace, whose families were German at the beginning of the last century…

On the other side, Jacques Cheminade, Emmanuel Macron and Jean-Luc Melenchon want to preserve the right of soil. Four candidates have no position on this prickly subject: Nathalie Arthaud, Benoit Hamon, Jean Lassale and Philippe Poutou.

The French Justice Department demands lifting of the immunity of Marine Le Pen at the European Parliament

14 Apr

translated from http://www.lemonde.fr/election-presidentielle-2017/article/2017/04/14/la-justice-francaise-a-demande-au-parlement-europeen-la-levee-de-l-immunite-de-marine-le-pen_5111132_4854003.html

The French justice department has demanded that the European Parliament lifts the parliamentary immunity of Marine Le Pen and of Marie-Christine Boutonnet, targets of an enquiry into suspected fictional employment of parliamentary assistants by the Front National (FN), Agence France-Presse (AFP) learned on Friday 14th April from a judiciary source.

The judges at the preliminary hearing addressed their demands to lift the parliamentary immunity of the FN European delegates on 29 and 30 March, specified this source, confirming the information relayed by Europe 1. These demands have been issued from the Paris Bench to the Bench General**, which transfers it, according to the procedure, to the chancellery before being sent to the European Parliament.

The extreme-right candidate in the presidential election has retreated behind her parliamentary immunity in order to block the judges’ summons issued in February and in March. She promises to attend the judiciary hearing after the electoral period. Marie-Christine Boutonnet has not responded to the summons of the ‘financial’ judges at the beginning of March.

 

Vote in an open session

The demand to lift the immunity that the French justice? Has addressed to the European Parliament is ‘standard procedure’, Marine Le Pen said on Friday.

Examining this demand to lift their immunity could take several months as it needs to be the subject of a vote in open session of the European Parliament. A debate would therefore happen in session, on the issue of which each European Deputy would be called to place an individual vote.

“The European deputy will keep their seat, but they will lose their immunity,” it is explained on the website of the European Parliament, reporting that the revocation of immunity is not a punishment but that “it simply authorises a national authority to investigate and pursue an inquiry.

“The preliminary hearing judges do not expect they will be successful before the presidential election,” France Inter stated with assurance.

The preliminary hearing judges are not able to compel a European Deputy to stand before them like anyone else who is answerable to judiciary authority. For each coercive measure, they have to first achieve the lifting of the immunity granted by the European Parliament. This was the same issue in another case presided over by the preliminary hearing judges at Nanterre, where they reproached Mme Le Pen for having distributed over Twitter images of executions by the jihadist group Islamic State.

 

Two parliamentary assistants put under scrutiny

A preliminary hearing has been opened by the Paris bench, which follows a parliamentary inquiry underway since 2015. The presiding judges are trying to determine if the Front National has created a system to remunerate its executives and employees with public funds of the European Union through contracts for assistants to deputies.

Following a police search at the FN head office, in February 2017, investigators seized a document leading them to believe that the ‘fraudulent’ was thought to have been established since 2012, and known by Marine Le Pen.

The European Parliament, which plays a civilian part in this affair, had informed the French justice department about the 29 parliamentary assistants. The trigger was their presence in positions listed in the last information chart for France, which throws doubt on their effective employment at the assembly sitting at Strasbourg.

 

 

Credit Suisse Scoped for a Tax Investigation

31 Mar

translated from

http://www.lemonde.fr/entreprises/article/2017/03/31/credit-suisse-vise-par-une-enquete-fiscale_5103855_1656994.html

The tax authorities have returned to the second Helvetic bank at Paris, London and Amsterdam.

Credit Suisse announced, Friday 31 March in a statement, that its offices in Paris, London and Amsterdam had become the object of a tax investigation and had received ‘the visit’ from the tax authorities of the countries concerned.

The second Helvetic bank is clear that it is cooperating with the inquiry which is ongoing. According to the Swiss press, the affair started in the Netherlands, where the tax authorities have received documents showing the existence of hidden accounts for purposes of tax evasion, in the opinion of a Swiss bank.

According to the Zurich-based publication ‘Tages Anzeiger,’ the locals of Credit Suisse became the object of a ‘raid’ like paintings and gold ingots were seized in several countries.

LGC appoints Ryder to oversee high-rise in Newcastle’s new science hub – ‘Silicon Square’?

17 Mar

Legal and General Capital, which bought a £350million stake in Newcastle’s exciting new science and technology development hub in June 2016, has announced award-winning international firm Ryder Architecture to oversee the first of its grade A office buildings at Newcastle Science Central.

Newcastle Science Central is a site linked both geographically and academically with Newcastle University, which is situated on the 24-acre plot. Commercial space so far is restricted to the 30 businesses operating from the Core, which include among their number a nation-leading computer science institute. Businesses have been selected on the basis of their “positive impact economically, environmentally and socially.”

Also in the pipeline is Newcastle Laboratory, 76,000 sq ft of commercial lab space with supporting office accommodation for science-based companies, which is scheduled to open spring 2018. It will add to the ripe environment for invention fostered by Newcastle University centres such as the National Institute for Smart Data Innovation, and the National Innovation Centre for Ageing.

More vital office space will be provided through a development partnership between LGC, Newcastle City Council and Newcastle University, which aims to raise 100,000 sq ft of Grade A office space, then a second office adding another 100,000 sq ft to the site. A spokesperson envisioned it becoming the ‘gateway’ to the site, and the area enclosed by the three buildings will become a public square, providing a hub and meeting place for workers, residents and visitors to congregate.

Richard Wise, partner at Ryder, said: “Building A promises to deliver a high quality, timeless piece of architecture which will provide unique, much needed flexible office space on one of the most prominent gateway sites in Newcastle.  It will set the tone for the subsequent developments.  Ryder is delighted to have this opportunity to build upon the success enjoyed to date on Science Central.”

Ryder Architecture, alongside Aura, have together been appointed as the design team to deliver the Newcastle Laboratory on Newcastle Science Central. This state-of the art building will provide over 70,000 sq ft of specialist facilities for the flourishing life sciences and healthcare sector in the region, offering high quality, incubation and grow-on space to meet the needs of innovative businesses in this sector. Construction is due to start on site in Spring 2017 and the facility is due to open in Spring/Summer 2018.

Why Value Investing? Or ‘Why not follow the rest of the herd off the cliff?’

15 Mar

Investors, like cows, sheep, zebra and other herding animals, like to do what they see everybody else doing. If the rest of the herd jumps off a cliff, many other investors will follow the herd even if they suspect a hard landing awaits. Because if everyone else is doing it, it must be the right thing to do.

A prime example of this tendency is the recent Snapchat IPO, which we’re sure you’ve heard about but we’ll revisit for illustrative purposes. Despite having access to detailed information about the company’s fundamentals and history – it has never before made a profit – investors piled in when open trading began, leading the share price to rise 44%, from an initial $17 to $24.48. The opening price of $17 was itself above the range predicted by analysts.

There are no words for what Snapchat the company represents. Literally. It cannot even categorise itself correctly. In its IPO prospectus it described itself as a ‘camera company’, which as it has never to public knowledge made and sold a camera is not strictly accurate.

Go in the Other Direction

Value investing defies this ‘herding behaviour’ by taking a contrarian bet on the stock the market undervalues. Value investors look for assets, particularly shares, whose low market price belies the underlying fundamentals. They take a 3-5 year view on the company based on factors like the general outlook for the sector, the company’s debt to equity ratio, sales and revenue history, and sales and revenue projections.

They might dig deeper, and look at how secure a hold the company has over its primary assets – for example, whether they are overhung by a fixed or floating charge. A fixed charge means the item in question is clearly put up as collateral to a single defined investor, whereas with a floating charge the hierarchy of entitlement is less clearly defined.

All of these contrarian bets will be placed within a portfolio which is risk-optimised for the desired minimum return. When we say ‘risk-optimised’, essentially we are treating risk, or volatility, as a tradable item which though we cannot exactly quantify it, we are counting on its yielding us a premium in the long-term. We like risk, when we think we can control it.

Portfolio investors will almost always diversify this risk across several sectors or regions, analysing groups of stocks or indices to see their level of correlation, and choosing those which have historically not been highly correlated. For example, automobile sales and hotel visits might be correlated, if inversely, with the price of oil, or petrol; cheap fuel encourages more travel.

Two sectors which are less likely to be correlated are consumer durables – ie. fridges, microwaves, toasters – and food and toiletries. People will always need to buy groceries, but deciding whether to buy a new microwave or pair of Jimmy Choos is a discretionary choice and likely to bear little relation to how many ready meals they choose to buy.

 

 

Gottfried Haberler’s contribution to trade theory

17 Feb

Gottfried Haberler was a member of what is loosely termed the ‘Austrian’ school of economics, to denote the group of theorists who opposed centralised – government – intervention in money creation, which they argued artificially distorted capital flows and created structural inefficiencies.

He was more closely tied to the Austrian school at the beginning of his career, when while in that country he was a regular contributor to the seminars organised by Austrian economist Ludwig von Mises; as part of the Mises-Kreis, the celebrated group of economic, sociological and philosophical thinkers.

In what was, for the time, a departure from the orthodox theory of value, quantified it in terms of labour and output, the Austrian theory of value focused on the process of production itself. And how in electing to lend part of the finite amount of money to certain industries over others, there was a danger of creating structural inefficiencies which would self-correct over the course of the business cycle.

A Pioneer in Trade Theory

In the 1930s Haberler was instrumental in creating an alternative framework for analysing cost and value, moving away from the theory of comparative costs (advantage) on the single-product model which had underpinned trade theory since Ricardo. Haberler’s framework mapped out the relationship between the opportunity cost of producing two competing goods, under a given supply of productive factors. This he performed both for constant and fluctuating opportunity costs.

Previously orthodox theory had been based on the ‘real-cost’ theory of value, which saw prices as quantified largely in units of labor. The new approach enabled the determination of relative prices to be analysed under more realistic production circumstances as variable factor productions, in a much simpler and more direct manner than under a real-cost approach.

This paradigm shift triggered a wave of writings by other academics, which incorporated and expanded Haberler’s theory, like Lerner (1932, 1933, and 1934), Leontief (1933)  and Viner (1937), who introduced ‘social’ or ‘community indifference’ curves. When these two curves – those of opportunity cost and social indifference – are plotted together – Marshall’s reciprocal demand curves can be derived; and most general equilibrium effects of trade on relative commodity prices, production, and consumption then shown.

What Haberler’s analysis did not include was an attempt to model consumer preferences for the commodities being produced. Nor an explanation of how productive factors evolve as an economy moves along its production-possibilities curve. This would have to wait until Stolper and Samuelson (disciples of Haberler) published their ground-breaking article in 1941, which elucidated more fully the way the production-possibilities curve is determined, and how factor proportions fluctuate along the curve.

 Where Trade Theory Fails

Haberler’s 1950 work, ‘Some Problems in the Pure Theory of International Trade’, examined the less-than-ideal situation of real wage rigidity, which can be caused by insufficient mobility of labour between a developed and less developed sector; one of the scenarios examined by economists who later expanded his model. This article formed the precursor for an extensive body of literature on ‘domestic distortions’ in which orthodox theories of trade relations might be non-applicable.

The consensus that in the majority of situations free, unimpeded trade has a net benefit did not change dramatically. The theory so-called Hicksian optimism rehabilitated the argument for free trade largely on the basis that wider availability of goods and increased competition leading to cheaper prices would yield a welfare gain; the need for protection arises only when there is a market failure in the domestic economy. Where there is a domestic divergence between prices and marginal costs, foreign competition can hurt some domestic industries.

In the event of real wage rigidity, the opening-up of trade – whether in a full customs union or a free trade area – could cause loss of output. Industries which for whatever reason are unable to pay a competitive rate which attracts new workers would be threatened by removing tariff barriers, which would allow unimpeded entry of competing products.

As the marginal return on these products became unviable, but wages were not flexible enough to change accordingly, labour would move out of these struggling industries and into more competitive ones. Often the industries that suffer are those at the breaking edge of new technology and development, which lacks a mature labour pool with the necessary skill set.

Let’s Get Technical

In his econometric model Haberler demonstrated that increased availability of products and a wider market to stimulate output had a net benefit, provided this increase was to the right of the domestic indifference curve.

In trade theory the state of ‘autarky’ is where the factors of production are deployed to their maximum potential, accounting for the limiting factors of the opportunity cost of manufacturing that product over another, which are assumed to increase; and a community indifference curve which has an inverse relationship to the opportunity cost curve, (increasing where there is scarcity of a particular good’.

The material gains from trade are represented in graphical form by the international trade ratio. In a model comprising two exchangeable commodities, this describes the amount of commodity A that can be exchanged for commodity B. If commodity A buys two of commodity B abroad, but at home you need two of commodity A to get one of B, then domestically A is more valuable. Therefore B should be exported.

However, Haberler has a caveat. If T, the international trade ratio representing the increased availability of goods from trade, is such that there is a net outflow of goods, that “these imperfections are persistent, … and that they persistently operate in such a direction as to weaken (rather than to strengthen) the case for free trade,” protection might be justified.

His idea of a desirable welfare position is not an overly naive one in which all individuals are necessarily better off, but “it is sufficient that everybody could be better off.” He distances himself from the idea that “perfect mobility of factors within each country is a necessary condition for the ideal classical model”, going on to assert that “what really causes trouble and may make trade detrimental and justify protection is rigidity of factor prices, which may or may not be associated with immobility of factors.” The most likely factor to experience difficulty transitioning between industries is that of labour.

Expanding this theory further, Brecher (1974) examined a number of scenarios involving real wage rigidity, starting with one in which free trade was combined with unemployment; he analysed the consequences of using different policy instruments. If the importable is labour-intensive to produce, a tariff would increase employment and output, by shielding domestic industry. But capital and labour would move disproportionately into the protected industry; also there would be a by-product consumption distortion.

When the demand for a product, reflected in its price, is proportionate to the marginal cost for each firm and product, there is zero distortion. But protectionism can mean the output swells beyond sustainable consumer demand, as that industry is protected from foreign competition and, more indirectly, may benefit from tariff revenue.

The Austrian school holds that distortions of this kind inevitably self-correct over the course of the business cycle, and ‘creative destruction’ can mean boom-time companies do not survive when they lose policy protection.

The second scenario Brecher modelled was polarised between a subsistence, and an advanced sector, where high skills and/or costly technology necessitated a wage rate in excess of the opportunity cost of labour – i.e. higher than the marginal product of labour in the subsistence sector. To phrase it in plain English, these advanced sectors would have trouble attracting capital which could be profitably employed in more basic industries.

This form of domestic distortion, he argued, necessitates subsidies in place of tariffs or taxes on trade. Because the revenue effect is negative and so higher distorting consumption taxes are needed, he acknowledges the extent of the offsetting subsidies may have to be incomplete.

The distortions not offset are weighed against the new distortions created as a consequence of financing the subsidies. While not a perfect solution, he concludes it is ‘first-best’, the most beneficial option, to deal with distortions in this way.

This theory of ‘domestic distortions’, which Haberler led the field in, is admittedly a far cry away from his origins as an Austrian School disciple, a staunch defender of the principle of unimpeded trade. This just goes to demonstrate his intellectual versatility and ability to break with orthodoxy and form new approaches.

But today it might be time for a new school of thought on the subject. As is so often the case in institutions where collective decision-making is skewed by relative economic and political weight, the WTO is governed to a large extent by the vested interests of the countries with the biggest economic muscle. Trade or customs unions like that existing within the EU and the proposed Trans-Pacific Partnership (TRIPS) which Trump made guillotining one of his first official presidential acts, only yield a net benefit to those participating in them.

For those countries outside the golden circle, they can face significant obstacles to equitable trade not limited to tariffs; customs’ scrutiny of imports is far lower, for example, within the EU which has a unified legislative framework to enforce commercial and legal standards. Trump’s announcement of his intention to renew the North American Free Trade Agreement is another step towards his avowed position as a champion of ‘free trade’[1] and greater competitiveness.

 

Bibliography

http://www.pressherald.com/2017/01/23/trump-signs-order-to-withdraw-from-trans-pacific-partnership/

‘The Normative Theory of International Trade’ – W. M. Corden, Australian National University, Canberra  (Seminar Paper no.230)

‘Gottfried Haberler (1900 – 1995)’ – Joseph T. Salerno.   https://mises.org/profile/gottfried-haberler

‘Some Problems in the Pure Theory of International Trade’ – Gottfried Haberler, 1950

‘Gottfried Haberler’s Contributions to International Trade Theory and Policy’ – Robert E. Baldwin, The Quarterly Journal of Economics vol. 97, No. 1 (Feb 1982), p.141-48

 

[1] http://www.pressherald.com/2017/01/23/trump-signs-order-to-withdraw-from-trans-pacific-partnership/