Adair Turner writes:  It is often assumed that emerging-economy living standards are bound to converge with those in developed countries. But, leaving aside some oil exporters and the city-states of Hong Kong and Singapore, only three countries – Japan, South Korea, and Taiwan – have come from far behind to achieve per capita GDP of at least 70% of the developed-country average over the last 60 years. China hopes to do the same, but it faces a distinctive challenge: its sheer size.

Roman Kilisek writes: The global coal industry continues to expand with new coal-fired power plants planned or being built throughout the developing world, especially in Asia where coal remains the preferred low-cost fuel option for power generation. Building up coal mining operations, constructing new coal-fired power plants and developing infrastructure requires billions of dollars in initial investments. Where countries do not have the financial wherewithal to provide energy access to their populations, global private banks and/or international financial institutions come to the rescue. Nowadays, this occurs despite persistent calls by the international community, for example, by the OECD on its member states to implement and adhere to socially responsible “green” investment standards, which would effectively strip companies of export credits for coal-related infrastructure and technology investments overseas.

While the current US administration is a staunch supporter of such measures in the name of climate protection, Japan and its companies continue to enjoy billions of dollars in annual revenues from superior coal technology exported to developing countries. Climate advocates point to coal’s significant contribution
to the accumulation of harmful carbon dioxide emissions in the atmosphere and other adverse impacts.

However, a persuasive argument can be made that exports of the developed world’s coal technology actually help lower global CO2 emissions because such technology tends to be much more efficient and in environmental terms ‘less harmful’ than indigenous plants constructed using older, less efficient designs. Air pollution in India is deemed worse than in China. “Of the world’s top 20 polluted cities, 13 are in India compared to just three in China,” the Hindustan Times reports.    Investing in Coal

On the Rocky Road to Globalization

Kemal Dervis writes: Nowadays, with the global economy undergoing fundamental transformation, workers worldwide are coming under significant pressure. Particularly in developed economies, social policies must adjust to provide the support that lower-income groups need, while encouraging growth and advancing wellbeing.

The pressure has been unrelenting and inescapable. In the United States, real (inflation-adjusted) compensation for men with only a high school diploma fell by 21% from 1979 to 2013. In much of Europe, which provides stronger wage protection, unemployment has soared, especially since the euro crisis began in 2008. Germany and some Northern European countries remain an exception, although the German labor market contains a large low-wage, mini-jobs segment.

Driving these trends is the changing nature of work. For starters, services have been gaining ground worldwide, especially in developed economies. From 1970 to 2012, the GDP share of services in the OECD countries increased from 53% to 71%.

New technology and “intelligent” machines are not only displacing many types of workers in both the manufacturing and services sectors; they are also facilitating the rise of new business models, in which individuals perform (mostly low-paid service) jobs within loose networks, instead of as dedicated employees of structured organizations.
For example, the ride-sharing service Uber now has 162,000 active drivers in the US alone and is displacing traditional taxi services. The startup Handy hopes that its app achieves similar success in connecting customers to independent contractors providing various household services.

Some people – especially those who acquired valued and flexible skills early in life, as well as those who are already in strong positions because of inherited wealth – can flourish in this new economy. Millions of others, however, are ill-prepared for the new age. And it is their growing anxiety that is fueling the rise of identity politics, with populist leaders and movements appealing to ethnic or religious solidarity in the face of the impersonal forces of change.  Managing Globalization so Workers Count

China’s top legislator Zhang Dejiang on Monday urged the world’s five leading emerging economies to boost cooperation and play a constructive role in addressing global issues and promoting world peace and development.

The chairman of the Standing Committee of the National People’s Congress (NPC) of China made the appeal here at a parliamentary forum of BRICS, a thriving cooperation mechanism that groups Brazil, Russia, India, China and South Africa.

Although the association is still young, BRICS cooperation has enjoyed good momentum.

Under current circumstances, he said, the BRICS nations need to strengthen exchange and cooperation in the spirit of openness, inclusiveness and all-win cooperation and play a constructive role in tackling global political and economic challenges and promoting the peace and development of mankind.

To that end, the BRICS countries should jointly safeguard world peace and stability as well as international equity and justice and help build a fairer and more reasonable international order, Zhang proposed.

They also should make concerted efforts to advance common development and achieve their respective national prosperity and rejuvenation, he suggested, while urging them to boost practical cooperation in various fields and build an all-win community of common interests.

Meanwhile, the BRICS members need to help improve global economic governance and realize common and balanced development of developing and developed countries, Zhang stressed.

With the BRICS partnership growing closer and reciprocal cooperation getting ever deeper, Zhang said, the legislative bodies of the five countries should make long-term parliamentary cooperation plans from a strategic perspective.

The legislatures, he added, should function as a promoter of the BRICS partnership, a builder of favorable development conditions, a practitioner of practical cooperation and a supporter of institutional construction.

The NPC stands ready to beef up parliamentary cooperation within the BRICS framework, especially in strengthening the rule of law, so as to continuously infuse fresh vigor into BRICS cooperation, Zhang added.

In the final document of the conference, the five countries pledged to put parliamentary cooperation into full play so as to make positive contribution to the deepening of BRICS cooperation.

As this year marks the 70th anniversary of the founding of the United Nations and the victory of the World Anti-Fascist War, all sides agreed to work closely with each other and enable the bloc to play a bigger role in safeguarding the outcome of World War II, improving global governance and boosting multilateralism in and democratization of international relations, said Chong.

Reserve Bank of India (RBI) Deputy Governor S S Mundra stressed on the need for a stronger regulatory framework to deal with the menace of Ponzi schemes across the country. He agreed the system also needs to shoulder the blame for such fraudulent investment schemes.

“The banking system plays a very important role and it has to share a fair share of the blame as ultimately, whatever the shape and size of the scheme, ultimately, the money goes through the banking system,” said Mundra at the Multidisciplinary School of Economic Intelligence at National Academy of Customs, Excise and Narcotics.

He added the new small and payments banks will help in furthering the case of financial inclusion, which will reduce the number of people falling prey to such schemes. The increased reliance on business correspondents in reaching out to people has also helped in expanding the ambit of people who can bank through authorised channels.
The need for a stronger regulatory framework to ensure such schemes can be nipped in the initial days was also stressed.

“One important thing we have seen in recent deliberations is that many Ponzi schemes are falling under a regulatory vacuum, as there is no clarity on whose regulatory turf it falls in, and therefore remains a grey area,” said Mundra.
In April, Anil Sinha, director, Central Bureau of Investigation (CBI) had said around Rs 80,000 crore of public money was locked in only those Ponzi scams that was being investigated by CBI.

Financial illiteracy, apart from greed, was another important factor that has led people to invest in Ponzi schemes. In order to correct this, the regulator has been reaching out to people via advertisements and workshops. He added there was a case for strengthening the State Level Coordination Committee (SLCCs).
“There is a need to make the SLCCs more active and effective. The project is already underway whereby a website within the overall website of RBI for the SLCCs members will be there. The idea is that it should be interactive, so that anything that comes to someone’s notice can be reported on the site and then action can be taken,” added Mundra.

Sanjay Jog writes: The cooperative sugar industry in Maharashtra is not amused by the Centre’s decision to provide interest-free loans of Rs 6,000 crore.
Mills have instead made a fresh appeal to the Centre to provide financial support of Rs 850 a ton, create a buffer stock of five million tons, and extend till 2019-20 the Rs 4,000 a ton raw sugar incentive announced recently.

Cooperative sugar industry leaders, belonging to the Congress and the Nationalist Congress Party, argued the interest-free loan of Rs 6,000 crore would not address the issue of cane arrears to farmers and repayment of debts and working capital for the crushing season 2014-15.

Maharashtra’s sugar mills have Rs 3,400 crore of cane arrears. Of this, cooperative factories owe Rs 1,900 crore. They have blamed their condition on the fact that the prevailing sugar price is Rs 2,100-2,300 a quintal against a cost of production of Rs 3,200-3,400 a quintal.

Maha co-operative sugar factories to meet CM on June 10 for aid In all, 178 sugar factories participated in the crushing season 2014-15 and produced more than 10.5 million tonnes of sugar.  “The government’s decision to provide an interest-free loan of Rs 6,000 crore will not provide much relief to cooperative sugar mills. The balance sheet of the most of these mills will continue to be in the red. The government needs to provide financial support of Rs 850 a tonne and also take steps for restructuring of loans,” Sanjeev Babar, managing director of the Federation of Cooperative Sugar Factories in Maharashtra, told Business Standard.

He added a large number of cooperative sugar mills feared banks would not lend them money because of their negative net worth.

Meanwhile, cooperative sugar mills await the release of Rs 2,000 crore interest-free loans announced by Maharashtra Chief Minister Devendra Fadnavis in April. The state government has indicated that the sugar industry should not expect further subsidy from it.

Philip Pilkington writes: The financial economist Fischer Black – a mathematics PhD and founder of the popular Black-Scholes model of options-pricing that is much used today. In 1986 Black published a paper entitled simple “Noise” that is well-nigh unreadable. One gets the sense that “noise” for Black is a sort of ontological category that disturbs his sense of reality. “Noise” for Black is the equivalent to what “Sin” is to Christians. Everything bad in the otherwise harmonious world can be attributed to this ontological category “noise”. In this regard it is worth quoting from the abstract – which, it will be seen, is so poorly written as to be barely readable.

The effects of noise on the world, and on our view of the world, are profound… Noise in the form of expectations that need not follow rational rules causes inflation to be what it is… Most generally, noise makes it very difficult to test either practical or academic theories about the way that financial or economic markets work. We are forced to act largely in the dark.   Noise in Finance