October 30, 2014

In an unequal world, poorer countries need more than entrepreneurial spirit

Posted in Irish Independent · 37 comments ·
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In a world of increasing inequality – not only within countries but also between countries – the age-old question remains to be solved: why are some countries poor and others rich?

This is particularly relevant for poor countries in 2014. A huge amount of foreign capital has flooded out of the world’s poorer countries because rich people have become worried about risk in these countries.

When international money leaves a poor country, at the push of a button in a trading floor in New York or London, all sorts of dilemmas are thrown up for the poor locals.

This is one of the massive drawbacks of globalisation. Capital flows are amplified and they are driven by greed and fear.

Sipping a coffee in the medina of Marrakesh, the local effect of international outflows of capital is being felt.

Everyone is stocking up. Today, there is a general strike here because the government proposes raising taxes on almost everything to reduce the national debt. It is worried that it won’t be able to finance itself next year.

Moroccan GDP per head is 10pc of ours and its debt is minuscule by our standards, yet traders in New York and London want to be on the safe side before Christmas and this is having a huge impact here.

Welcome to globalisation 2014!

When you find yourself somewhere like this, the economic inequality conundrum appears ever more baffling. Many ideologues argue that the key to wealth is trade, hard work and entrepreneurial spirit. This is the accepted narrative. If only poorer people could be more entrepreneurial, they argue, all would be fine.

But would it?

There are fewer more entrepreneurial places in the world then Marrakesh. Everything is for sale, everything has its price; trade and commerce are ubiquitous in the souk. In fact, so synonymous with trade is this place, that an early Irish internet trading platform was called Marrakesh. Remember that?

The souk draws you in. It seduces you with the sensuality of the strange. It is confusing, disorienting, exotic, enticing and deeply attractive. It is a trading hub for everything.

Straight away your senses are assaulted.

What’s that smell? Is it mint, liquorice, aniseed, cardamom? What’s down this alley – the dark one – past the beautiful girl in the turquoise headscarf with henna tattoos?

No, sir, I don’t want a carpet. Tea would be nice, thanks.

On you go, deeper into the labyrinth. Watch out – mind the undernourished donkey with cart pulling a mountain of brightly coloured scarves – 20 dirhams my friend?

Tinny Arab pop music vies with the call to prayer from the myriad minarets which fortify the ancient medina.

Mind your step there. It’s a bit slippery. The marble has been brushed smooth by centuries of walking, shopping, bargaining, mooching, hiding and slouching. Today, water from the melting ice of the fresh orange juice is making the path treacherous.

The locals are extraordinarily welcoming and, as you negotiate your way around, they are constantly looking out for you in a mixture of French, English and the international language of the face, the hand and the gesture. This is the historic medium of commerce.

It’s a bargain hunter’s paradise.

Even the most frugal are battered down. Maybe it’s the aroma of freshly baked bread and grilled lamb, but curiosity and the sense of a deal will get the better of you. Try some falafel or some hummus, maybe?

Marrakesh spans the ancient with the modern and is like stepping back 500 years while still remaining part of the i-generation. Just across from me a young observant Muslim woman with dark eyes under thick black mascara, scrolled down to show me verses of the Koran on her iPhone 6 while a raunchy Nicki Minaj video played on the blaring TV behind her.

Marrakesh is where the Middle Ages meets the internet, where Africa meets Europe and where Berber, Arab, European, African, Jew and Bedouin live cheek by jowl. These people came here to trade. It was the traditional trading hub where the caravan routes of north and south intersected.

Fruit and salt from the Mediterranean were exchanged for gold and slaves from the Kingdom of Timbuktu.

The place buzzes with the humming indignation of the haggle. Crestfallen sellers gesticulate wildly at playful buyers as both grope their way to a deal.

Yet despite all this activity, despite all the commerce, the place, although rich by African standards, is years behind Europe economically. Given the trade going on, there is a much greater mercantile instinct here than in Western Europe, where so many people work in large bureaucracies and won’t know a deal from a kick in the head.

But there is something flimsy about the commerce here, something fragile. It is buying and selling but it’s not the solid process of making and building. Trading is very different to processing. There’s a significant difference between pocketing margin and truly adding value.

This fragility is something that many emerging countries share and it makes them susceptible to the mood swings of traders. It’s not that they are any worse governed than us. Obviously some are, some aren’t. Some are bureaucratic but then so too is Belgium.

However, fragility, mainly institutional fragility, might be at the root of the inability to translate trading nous into globally competitive companies.

The global free trading system is also designed in a way that helps companies that are already dominant. This doesn’t make it easy for poorer countries.

However, one thing is certain when you look around Marrakesh: there’s no lack of entrepreneurial spirit. They have it in spades.

I’m off now. There’s the imam calling the faithful to prayer. Noisy chap, so he is. Could that have something to do with it? Maybe, but that’s for another day!

Inshallah.


  1. Lius

    Still on the ball Adam. First up is best dressed.

  2. Only the Donkey was mentioned and he is a beast of burden .The beast of Trade where it really matters is the Camel .

    Camel Traders are mainly in commodities and some with value added products such as handcrafts .

    Velocity of a Camel is a bet depending if you are racing it or going a long journey in a desert .In the first instance you might win and in the second you might die but the camel will arrive anyway at the destination with or without you and your goods .

  3. Gearoid O Dubhain

    “It’s not that they are any worse governed than us. ”
    Irelands public debt for 2014 is estimated at 110% of GDP, Morocco’s public for 2013 was 62.5% ! Morroco is ranked 5th largest African economy by GDP and apparently the World Economic Forum placed Morocco as the first msot competitive economy in Africa. Not bad for a semi arid country with just 8.8% unemployment !
    A real problem for countries like this is the loss of assets that the immigration of their well educated young represents.

  4. michaelcoughlan

    Hi David,

    I want to respond respectfully to the article because it shows a fundamental misunderstanding of why trade originated aeons ago.

    But first of all;

    “Yet despite all this activity, despite all the commerce, the place, although rich by African standards, is years behind Europe economically”

    Really? I think you should be smelling the coffee instead of drinking it. It should read “Morocco is years AHEAD of Europe economically if not infrastructurally”. From the article “Moroccan GDP per head is 10pc of ours and its debt is minuscule by our standard”. Rich defined is “abounding in wealth or natural resources”. So it seems even though Morocco only has a GDP of say 10bn they must be in substantial surplus because you say “debt is minuscule by our standards” meaning they must be a very rich country indeed abounding in wealth. Thats something worth considering when you land at Heathrow on the way home knowing how bankrupt the UK is.

    “traders in New York and London want to be on the safe side before Christmas and this is having a huge impact here”

    No the don’t. They CEO’s in the US are using money borrowed at zero percentage rates to get their companies to buy back their own shares which drives up the value of the share in the short term and the CEO gets his Christmas bonus but destroys the capital base of his organisation because he is miss-allocating the capital available to him to enrich himself at the expense of the shareholders and employees. Max explains it better here; from 5:10 to 10.00

    https://www.youtube.com/watch?v=_bRz3lkUiBc

    “There are fewer more entrepreneurial places in the world then Marrakesh”. Marrakesh isn’t a place of entrepreneurial activity it’s a place of mercantile activity. Did you see any of the carpets on sale there produced there?

    “This fragility is something that many emerging countries share and it makes them susceptible to the mood swings of traders”

    No and No David.

    China for example is flying and will sort its debt and burst problems with aplomb. They are solving the trader problem by setting up their own gold backed currency to trade with the other brics by passing the dollar.

    Finally David trade evolved where one person skilled at shoe making for example could trade his wares for meat say from a butcher AFTER the wealth was created. “Traders” in NewYork engage in buying and selling to disposes other traders in a zero sum game fuelled by unfettered access to the creators of currency, currencies borrowed into existence which have corresponding bonds with coupons paid for on bonds through taxation of citizens in other words a one way transfer of wealth from citizen to “Trader”.

    Traders in NewYork are not traders they are feaudilists.

    regards,

    Michael.

    • “Many ideologues argue that the key to wealth is trade, hard work and entrepreneurial spirit. ”

      you are correct Michael. Wealth is created with the creation of items and objects that can be sold to others at a price in excess of the costs of production. Originally wealth is created without the benefit of money as a means of accounting or medium of exchange. There was just an exchange of goods. But first there had to be the production.

      Then comes the marketplace to meet those who require the efforts of your production. There the trade takes place to each’s advantage. With the creation of money came a further enhancement of trade as one can sell produce and hold an account of that in the form of money. Banks were institutions formed to hold that money in security until needed to be exchanged for other goods in the future. Banks had to be trusted organizations.

      Government stepped in to “insure” deposits up to 100,000 and thus guarantee the security of that money.

      Recently governments in the G-20 nations agreed to “bail in ” depositors in the event of bank failures. Our money in excess of 100,000 is no longer secure in a bank as it is subject to seizure.

      The trust in our money is failing (too much random production of money by the central banks is destroying its value as a means of saving). The form of our money is suspect. (note that these less developed peoples traded goods for gold.) Gold traded as a commodity in exchange for goods, better than any other commodity, and thus became money.

      Gold still is money in less advanced nations and people but is derided in the western advanced nations as a “barbarous relic”.

      Wealth is measured in things and not as a number on a piece of paper. A person with a large estate is wealthy but not necessarily those who have high numbers on a piece of paper.

      The developing nations are yet to teach the ‘advanced” nations a thing or two about the acquisition wealth.

      Once the banking system is subject, and the money system corrupted then wealth is destroyed. Hard work, creativity and entrepreneurship mean nothing anymore. Just nepotism, connections, connivery, trickery and deceit rule.

      Until we return to an honest system of money all else is in vain. The huge discrepancies in wealth will grow ever wider if we retain the current central banking debt based system of money we have.

      Welcome to the western world we are so lucky to live in!!

  5. Gearoid O Dubhain

    The Devil is in the detail, they say and I just spotted one important detail on a reread !
    ” There’s the imam calling the faithful to prayer. Noisy chap, so he is. Could that have something to do with it? Maybe, but that’s for another day!”

    Do you agree with UK historian Niall Ferguson in his book ‘ Civilization’ as regards Christianity’s important contribution to the economic and social development of Europe and US vis a vis the rest of the world ?

    • It would seem that the Christian principal that all people are created equal in the eyes of God has a major impact on the formation of governance that was conducive to democracy and individual entrepreneurship.
      The principal of a sovereign person flows from there.
      It was also according to my limited reading a principal of the Celtic Druidic philosophy. The western heritage has deep roots all the way past ancient Greece, Persia, Minoan and the first dynasties of the Pharaohs of Egypt.
      The Irish history can be traced back to the places still called Galicia or the home of the Gaels. Iberia, Poland/Ukraine, Middle East etc.

      https://www.google.ca/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=places%20in%20the%20world%20called%20Galicia

      “How the Irish saved Civilization” is a wonderful, informative read, by Thomas Cahill.

      You will marvel at the account of how The Irish scholars carried the legacy of western civilization through the “dark ages”,from the fall of Rome to the beginnings of the Medieval period.

      Your own glorious history accounted by one of your own!!

    • mcsean2163

      Nicaragua

  6. DB4545

    I don’t doubt for a minute the trading skills of the Arab world. What they appear to lack is trust in their Civic and Financial Institutions (much like this part of our little Island). If you lodge money in a bank in Geneva, Frankfurt, Vancouver, Sydney or the Bahamas an Institutional trust has been built up over generations that your money is safe. That trust is instinctive and has been hard won. I don’t think people would have that trust in Financial Institutions in Morocco whatever other positive attributes the Country has. I think International finance operates in Irish Financial Institutions purely because they know we are held on a very short leash from Frankfurt and Berlin. The people we elected and (trusted) to protect our State conspired to destroy it. None of them are in jail. We still don’t have open democratic accountable Civic and Financial Institutions several years on from the acts of treason that they engaged in. Will we ever?

  7. Halloween

    I really enjoyed this article . I am surprised that more readers have not contributed .

    The prose used to demonstrate ‘institutional fragility to translate into global competitiveness’ is the key to the message written.

    The insight shown into ‘ pocketing margins and added value ‘ is a revelation .

    Earlier in the article expressions used variate the fun reading this serious economic message ‘ accepted narrative – a place of seduction – ( crossroad)of ancient culture – commodity exchange ‘ .

    Imagination does sell .

    • John, another spaceship down (on Halloween of all days) and you missed that one too, I’m starting to lose faith!

      2 spaceships lost in a week, what a shambles the road to space is these days.

  8. cjmurray

    Blaming the victim (lazy, stupid, ignorant, wrong culture, religion, sex, age) is a handy gambit. Rich idealogues, following a long line of empire builders and colonists, do it to avoid any residual guilt feelings, and for PR/propaganda.

    The rich feel that they themselves deserve every penny of their riches, and that the poor deserve their poverty. It is a psychological mechanism that has the benefit of simplicity, and enables the hypocrisy and obscenity of grabbing large bonuses (take a bow, Irish Water) to help the rich work harder, while implementing cuts to encourage the poor to work harder.

    I actually agree with the need for hard work, and entrepreneurship, and the intelligent application of knowledge and technology (as well as creativity, freedom, democracy, and joy), but, in a world where millions still starve (even if they call it “malnutrition-related disease”), and billions are impoverished, the rewards must be capped, at a democratically decided maxima for both income and wealth (My vote is for 100,000 and one million euros in Ireland, to start with. Everyone else can vote how they like).

    We and David are very lucky he lives in the west. Other peoples need to be careful raising these questions, utterly central as they are. Archbishop Romero of El Salvador is quoted as saying “When I feed the poor, they call me a saint. When I ask why they are poor, they call me a communist.” (originally attributed to Archbishop Camara). Romero, when he got too influential, was murdered by the right.

  9. cjmurray

    “We and David are very lucky he lives in the west.” should read “We and David are very lucky we live in the west.”

  10. Here is Putin’s call to prayer.
    All the world needs to listen to this message.

    http://cluborlov.blogspot.ca/2014/10/putin-to-western-elites-play-time-is.html

    • DB4545

      Thanks for the link Tony. It was very informative. I just wish he could edit and condense without diluting his views. My concerns about Russia are the same as my concerns about the US. A sound and transparent financial system to provide a framework for a market economy and decent standards of living for its people. The Soviet Union collapsed because a centralised command economy couldn’t deliver decent goods and services to most people while an elite lived in luxury. The US seems to want to remove any social security protections for its people. It seems intent on destroying a broad middle class and grinding the poor into the dirt and again have an elite living in luxury. It can’t fly for the same reasons that the Soviet Union couldn’t. People will tolerate nonsense for a while until some event(usually something trivial) drives them to a tipping point. Those tipping points (the Peasants revolt, the French Revolution, the American War of Independence, the October Revolution etc) produce profound social change but also chaos and destruction. When will we ever learn from history?

      • It appears that the BRICS nations are intent on creating a money system that is based on a commodity value. That being gold.
        gold is not to be counted in any particular currency but by weight alone. How many ounces does one have.
        This is the measuring post, yardstick, to measure the value of an individual currency.
        The current system has no yardstick but measures each currency against each other. All currencies measured against commodities are being seen to be devalued daily.(your cost of living increases) Hence the rising “price” of all goods and services.
        The central bankers and their lackeys and spitlikles detest gold as it is the measuring post of the value of the currency.

        Everything that can be done to devalue gold is being done as we chat here. Hundreds of tonnes of gold are sold yearly in the paper markets that do not exist. It is called bare naked shorting and is illegal in any market but the regulators turn a blind eye. Corruption rules. So far.

        Corruption distorts reality and leads to confusion and dismay. Lack of confidence in our institutions will be prevalent and result in the destruction of society.

        As has been noted here. Only the entrepreneurial crooks and charlatans make hay in this climate.

        • michaelcoughlan

          re gold,

          The Chineese know the story with the yanks tony. They have no intention of running up the price of gold against themselves. Better to wait and see if the comex keeps giving them the stuff at a knockdown rate.

          • Not only do they know the story but are likely actively engaged supporting US policy on gold.
            They likely use derivative contracts to drive down the price with the paper market using pennies on the dollar and then scooping up the bullion at as lower price.
            They will not stop this until there is no more bullion to be bought.
            Then it becomes easy to stop the presses and the gold is revalued over night. This helps both the US (if they have any gold left) and the Chinese. The US will be better able to balance the books with a 20,000 dollar label and the Chinese will hold more bullion than anyone else.
            In exchange for an equal place at the table the Chinese will allow the US to stay in the game but they will not be allowed to play King Kong any more.
            The Chinese will allow the US to save face but at the same time they will move over and give the Chinese room.
            Russia is aligned with the Chinese but still wants good relations with Europe and the US. Russia also accumulates gold as fast as possible but Russian strength comes from being the Largest oil producer in the world with the largest reserves and that is not counting the vast reserves in the Arctic region.
            Geo politics are more interesting than playing Monopoly!!
            How much is farmland in your neck of the woods?

          • Michael, more gold is delivered from London to China than anywhere else.
            London delivers to Switzerland where 4 refineries work 24 hours to re-refine the bullion bars (no tungsten wanted thank you) in grams which is preferred by China.
            current consumption by consumers and government in china exceeds 2000 tonnes a year.
            80% of all annual mined weight world wide. India is close to a 1000 a year, Russia several hundred plus central banks at 400 tonnes a year and all the other players. The gold is not coming from recycling so must be from other staches. The ETF GLD is suspect as it has less gold now than last year and several hundred tonnes are gone. The only other places are central banks (now buyers) and the IMF and BIS.
            this is in the endgame but how long it can go no one knows. When you have access to unlimited cash by owning the press it might go a little longer than thought. But when it does break it will be a sudden event.

          • michaelcoughlan

            “How much is farmland in your neck of the woods?”

            10k an acre for the good stuff. Commercial values substantially less.

        • DB4545

          Tony,
          Ho Chi Minh spent several years in France and was asked what he thought of the French Revolution. His response was that it was too early to tell. Asia thinks in centuries and the US, Europe and Russia thinks in soundbites. Western Civilisation needs to think coherently and act fast or we won’t have one.

  11. Colin

    ‘However, one thing is certain when you look around Marrakesh: there’s no lack of entrepreneurial spirit. They have it in spades.’

    hmmmmmm…..

    Can I just add that you also find wonderful entrepreneurial spirit in the mafia, traveller gangs, paedophile gangs, the gambling industry (who now prefer to be called ‘the gaming industry’), the escort agency industry, the human trafficking industry…..just to name a few.

  12. Use your entrepreneurial spirit to give yourself the self governance you need to have the freedom to be successful, before it is too late!!

    http://directdemocracyireland.ie/today-oireachtas-plan-cede-sovereignty-comes-effect/

  13. Ron Paul 10 years ago predicted the current chaos. Without expressly saying so he outlines one of the reasons poor nations remain poor. We destroy them and their infrastructure.

    http://www.youtube.com/watch?v=zGDisyWkIBM

  14. Worth a read:

    “David Cameron’s tax credo is incoherent, immoral and economically illiterate”

    http://www.theguardian.com/commentisfree/2014/nov/02/david-cameron-is-immoral-not-our-tax-system

    • This is a socialistic rant. Stating the case that collecting taxes is the moral high ground as the distribution is for all. Each must pay a fair share is the cry.

      The author has no idea nor does he mention that the government already spends way more than it collects and so en-debts all citizens. The monetary policies create inflation, a stealth tax punishing the prudent. what is moral about that?

      The money is borrowed from banks who create it out of thin air and then charge interest on an imaginative ethereal money that does not exist and has no value. What is moral about that?

      Our whole monetary system is immoral being created by loan sharks and ponzi scam artists.

      What is sad is that few will recognize this as their nests are feathered by the system. Societies moral structure is decaying and the root cause is the corrupt monetary system.

      When a society has more people benefiting from public handouts be they welfare, subsidy or bailout, than people contributing, The clamour grows for more handouts while the productive move elsewhere or stop producing. such a society will grind its way to poverty. It is not a moral society and by laws of nature will die.

      I am not a particular fan of Cameron but he is defamed by headlines plastered in a socialistic mouthpiece who can not see the woods for the trees.

      What is worse is that many esteemed economists will not discuss this issue either. What is moral about that?

      Just for the record. When my marginal income tax rate went to 52% and with the hidden taxes on what I spent, such as duties, VAT, and other assorted taxes my total tax rate was in fact 66% I quit work and stopped producing. If I add capital gains taxes it was 66% plus by a wide margin. What is moral about that level of taxation?

      Capital gains taxes are largely a tax on inflation. There being no increase in relative wealth just monetary accounting.

      The over all problem with society is that it is become amoral. Nobody understands. Black is white, right is wrong. It all starts with allowing our money system to be controlled by crooks and shysters. The lies and deceit permeate society.

      We have to return to an honest monetary system. Meanwhile we all get what we deserve as we refuse the change. I guess, after all, that is a moral action!!

      (Yesterday was a beautiful calm, cool, sunny day. Socializing down at the sailing club dock was pleasant. Today is a sailing race and we will have 10-12 boats out. It will probably rain some, but no one will mind.
      The sailing community are unique today in that all are masters of their own vessels but each looks out for the other. I have rescued others from certain drowning, and others have towed me home when needed. There is no coercion but each knows it is in their own self interest to be mutually supportive.
      We need to apply these principles to economic and social life just as we used to “down on the farm”. We have lost a lot in the industrial age of mega cities.
      Have a great day and enjoy. Peace.:)

  15. Alistair Darling to stand down as MP

    http://www.bbc.co.uk/news/uk-scotland-29873595

    So much for Alistair becoming a benevolent dictator for the next 20 years – Mr. Andrew G. Mooney?!

    Jesus, lads, you are way off with the predictions these days, I’d better off consulting Mystic Meg.

    As for the fantasies of gold, Tony I hope you live till you are 150 but if you do you’ll still be waiting for your gold dream to come through.

    You are pining for a historical time that is never coming back. Still if it’s your hobby then fair enough, that’s your business – just don’t ‘bank’ (pardon the pun) your life on it.

  16. Tell that to the Chinese or Indians and see them laugh!! But you are correct, it is irrelevant to you.
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  17. http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/10/30_Powers_That_Be_Have_Frozen_Money_For_Swiss_Gold_Initiative.html

    ‘The public has generously donated because of KWN and other sites. But that came to a stop two days ago when Paypal closed the account for donations and they froze the funds that were in that account without any warning.’

    The dirty tricks to hinder the yes vote in the Swiss referendum have started!!

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