Comment, analysis and more from Wednesday’s FT,
Martin Wolf: Hopes in emerging countries
Between 2007 and 2012, the Chinese economy will expand by close to 60 per cent, writes Wolf. Emerging Asia as a whole will grow by almost 50 per cent. Over the same period, economies of high-income countries will grow by a mere 3 per cent. Who can doubt that the world is undergoing a profound transformation? If we look at emerging economies’ growth in detail, we see that Asia is the most dynamic region, and the one least affected by the global crisis in 2008 and 2009. Sub-Saharan Africa came second to Asia, on both points. Latin America and central and eastern Europe were less dynamic and more vulnerable to adverse external shocks. So what now?
Vikram Pandit: Apples vs apples – a new way to measure risk
It is hardly surprising that the financial crisis and ongoing economic turmoil have caused some to question the value of capitalism, writes the chief executive of Citigroup. But in fact the crisis was not an indictment of capitalism. It should be seen, rather, as a call to improve how we practise it. Many remedies have been proposed to shore up the safety of the financial system, including the Dodd-Frank law and the higher capital requirements of the Basel process. I support both. But I also believe a market-driven mechanism would further strengthen the system.
John Kay: Let’s talk about the market economy
Karl Marx never used the word capitalism, writes Kay. But after the publication of Das Kapital, the term came to describe the system of business organisation which had made the industrial revolution possible. The political and economic environment in which Marx wrote was a brief interlude in economic history. Yet the terminology devised by 19th-century critics of business continues to be used by both supporters and opponents of the market economy, although the industrial scene has been transformed.
Martin Fridson: Ratings agency reformers should use scalpel, not axe
A proposal from November last year by the European Commission addressed items that it viewed as problems left unfixed by previous regulatory initiatives, writes the global credit strategist for BNP Paribas Investment Partners. The Commission complained that, among other things, there was limited competition in the market for credit ratings; rating agency independence might be compromised if one agency rated a company over too long a period; and the agencies’ processes and methods were not sound enough. Let us look at these complaints.
Global Insight: Falling currency gives eurozone a lift
Do not expect Mario Draghi, European Central Bank president, to say so after Thursday’s interest-rate setting meeting but the eurozone is being helped significantly by the currency’s weakness, writes the FT’s Ralph Atkins. More falls would be welcomed by businesses across the 17-country region. Exchange rates are important gauges of trust in economic systems, governments, politicians – and central bankers. The euro’s decline, which gathered pace in late 2011 and has continued into the new year, amounts to a vote of no confidence by financial markets in eurozone leaders’ ability to handle the region’s escalating debt crisis.
Editorial on HS2
Britain is not the first country to see railways as a way of bridging a north-south divide, says the FT. When Italy was unified in 1861, the government proceeded to build railway lines down the peninsula that were intended to form the backbone of the new country’s infrastructure. As a symbolic political act, it resonated. The economic return was relatively patchy, however. The minor railway lines built subsequently – economic historians contend – were far more valuable. This week’s decision by the UK government to go ahead with the controversial high-speed rail link between London and Birmingham risks being looked on by future historians with equal puzzlement.
Lex on Tiffany
If Tiffany’s results are an indicator of a slowdown in luxury spending, which has held up well despite gloom elsewhere, the problem looks disconcertingly like a global one, says Lex. Owners of luxury companies such as Tiffany, Richemont and LVMH, which all have returned at least 50 per cent over five years amid a weak period for equities overall, must consider the possibility that the luxury trade has run its course.