Morocco

Interview with the economist, Jean-Paul Betbeze: “The world no longer knows where it is heading”

le 16 October 2019


The modern world is currently afflicted by one crisis after another, by radical technological change and by the challenges of globalisation. This has been the prevailing model of recent decades.

 

Emeritus Professor Jean-Paul Betbeze*, a member of France’s Circle of Economists, renowned for the quality of his analyses, was kind enough to expound his views about the modern world and what he perceives to be Morocco’s position in such a chaotic international environment.

 

An interview that readers of La Nouvelle Tribune and www.lnt.ma will no doubt enjoy …

 

La Nouvelle Tribune: Mr Betbeze, emerging countries have benefited a great deal from the growth of Western countries and robust investment by the latter. Today, however, emerging countries once again find themselves excluded from global economic growth, with some even slipping into under-development. In your opinion, how might they engineer a recovery?

 

Mr Jean-Paul Betbeze

It’s over! Gone are the days when industrialised countries invested and took on staff in emerging countries so as to benefit from lower wages and then import the products manufactured there. This was a major factor in those countries’ development.

Gone are the days of ‘uneven development’ for some and a ‘win-win’ situation for others, meaning, shared growth; the labyrinth of production lines peppering the globe are now under pressure, to some extent due to the arrival of ‘even cheaper’ countries such as Cambodia and Vietnam, but to a much greater extent, because of the technological revolution underway.

Production cycles have been disrupted and are now shorter. Geopolitical tensions have also grown, primarily due to the more or less latent ongoing conflict between the United States and China, a conflict that is spreading and branching out everywhere.

Ever tighter conditions! Economic growth is now increasingly tied to technological capabilities and to major markets, exacerbated by geopolitical tensions.

Production processes are therefore going to be tighter, geographically and technologically.

To engineer a recovery, in a world in which wealth production is becoming more concentrated, economies will need to go back to offering traditionally attractive incentives in the form of taxation, quality standards, legal and financial systems, high living standards and, increasingly, high quality human capital. It is the latter that will make all the difference.

With or without President Trump’s trade war and its consequences, poverty is rising among peoples and countries. Is that not due to the fact that growth has remained sluggish around the world? To what extent is this quantifiable?

The current trend in wealth polarisation is primarily due to the ongoing information and communication revolution.

This revolution is exacerbating competition as well as destroying ‘traditional’ production, distribution and finance networks.

Which is the reason why wages are not rising that much, even in industrialised countries like the United States or Germany, which enjoy full employment. Everywhere, ‘traditional’ production systems are being held to account in a world in which consumers are able to compare prices, choose on a vast scale, place an order in these countries and have their merchandise delivered to them. Above all, automation enables them to do things differently.

As a result, youth unemployment is high, about double the national average. Getting a job is therefore very difficult if the applicant doesn’t have the requisite skills, or perhaps the salary will be very low and job security limited.

At the same time, this revolution is putting pressure on existing structures, bringing disruption and threatening organisations and skills-sets.

Start-ups need to get going quickly so as to attract capital, even if that means exiting at the earliest opportunity.

In fact, regardless of the size of the enterprise, the idea is to gain a key foothold in the market, in order to weaken, if not wipe out the competition.

As a result of the current revolution, we will be left with a number of monopolies in just a few years’ time, which will generate considerable wealth for shareholders and extraordinary salaries for their employees.

 

These monopolies (GAFAM immediately springs to mind) are walking away with the top prize, which has become global. For some time, in Europe, we have been expressing our concern about them. People in the United States are finally beginning to realise the seriousness of the situation!

How should we react? We should be providing corporate training, making it easier to get jobs and monitoring monopolies or, in the very least, taxing them.

What can be done to boost economic growth? In your opinion, are there any innovative economic policies to be able to raise the growth rate?  People talk about a loss of confidence. Is that the cause or rather a consequence of the prevailing sluggish economy?

Technological revolution, a labour market crisis and disruption, energy, food and water crises, political and social crises… the world no longer knows where it is heading. That’s why there is a crisis of confidence. Employment is not as secure as it was before, and that’s also true for the corporate sector and exchange rates… In short, it is not certain that the next generation will live any better than the existing one, a phenomenon that has never occurred since the Second World War.

One suspects that there is no rapid or miraculous cure. What is clear, though, is that without more training, there will forever be disappointment after disappointment. Training is not a panacea for everything, but it does form the basis of everything.

A country like Morocco, which has been working hard over the past twenty years to embrace economic reform, expand foreign trade, deregulate its exchange rate system and bolster its fundamentals, might it now need to change course with globalisation facing something of a crisis, trade barriers being raised again and with Western countries, the Kingdom’s main trading partners, adopting a rather introspective attitude?

I have no intention of assuming the moral high-ground! But I note that Morocco has been fostering, first and foremost, a ‘culture of stability’, as one would say in Germany, which is rare as far as this region is concerned. I also note that it is playing an important role as intermediary between Europe and sub-Saharan Africa (production, banking, training etc.), a role that it alone can assume and one which is decisive, and that its ‘special economic zones’ are very effective.

I don’t believe that globalisation needs to be called into question, as such, but, rather, a certain form of globalisation. By that I mean compartmentalised and extended production chains.

The global economy is undergoing a wave of regionalisation – America, Asia, Europe-Africa – in which cultural and geographical proximities will play an increasing role around sizeable and standardised markets.

We must be careful here not to think that every Western nation has the same policy as Donald Trump. Although security and migration issues are important, these cannot be resolved by simply erecting walls or by turning inwards but, rather, through closer market integration. Training and the proximities mentioned above will be decisive in this new world, a world in which the United States no longer wishes to be the superpower-guarantor of freedoms but instead frets about Asia. Europe, on the other hand, has not yet understood that it must become a superpower and, therefore, become more united and much closer to its neighbours, especially on the other side of the Mediterranean. Turning inwards is a risk that we run, too.

Achieving a budget balanced, despite the fiscal austerity that results from it, is the golden rule that the IMF, World Bank and international creditors, like to impose. Do you not think, though, that these policies are counter-productive to promoting and generating wealth in ‘young developing countries’ like ours?

When interest rates fall due to an abundance of savings and a quest for ‘safe havens’, budgetary constraint is not an issue, if there is a clear and credible strategy for managing the country.

There is even a window of opportunity to invest in communication and training infrastructure, provide a fillip to the development of new skills-sets and forge new ties, within the country and with neighbouring countries.

In this ‘new globalisation’, synonymous with ‘new regionalisation’, what really needs to be done is to forge solid and close alliances, and then rates will fall!

Why is there a ban on government borrowing at a time when interest rates are very low? Shouldn’t policy-makers instead be taking advantage of a low interest-rate environment?

MMT: Modern Monetary Theory is a macroeconomic theory that states that if long-term interest rates are lower than nominal GDP growth (unadjusted for inflation), if the country borrows in its own currency and makes the investments needed to boost growth, then the burden of the debt relative to GDP will decrease. It’s mathematical, but it depends on ‘ifs’!

The ‘if’ determinant is monetary. The United States is issuing debt like never before, but in dollars!

Eurozone countries like France and Italy are also issuing debt, but in euros. In their own currencies.

The worst-case scenario is that if there is a crisis in a Eurozone country, the ECB will intervene, as it did before. If the euro holds up, everything is fine. We cannot even imagine there being a dollar crisis, even if it is a cause for concern.

Then comes the second ‘if’, which is how effectively do countries make use of the borrowed sums.

And that is indeed the case for Greece, with 1.3% growth and a government debt-to-GDP ratio of 181% or Italy, in near-recession, with a debt-to-GDP ratio of 131%.

Simply put, rates are low because growth is weak. In reality, we already know how to “take advantage”.

In other words, issuing debt in one’s own currency is bad enough, but it would be far worse in a foreign currency!

The theme for the 19th meeting of the Circle of Economists held in early July in Aix-en-Provence was ‘How to restore confidence?’. Do you think that pragmatic solutions were found?

Asking this question is more a message of hope in that it shows that the solutions will be human and relationship-based, in what is a singularly distended world.

There can be no solution or growth without confidence, without an understanding of the technological and (hence) geopolitical changes underway, without training and learning everywhere, in a context of closer regional cooperation, especially between our two countries and between Europe and countries to the south of the Mediterranean.

Pragmatics solutions will depend on such choices.

Interview conducted by

Afifa Dassouli

 


*Jean-Paul Betbeze

Emeritus Professor of Economics, University of Paris II Panthéon-Assas and Member of the Circle of Economists

Jean-Paul BETBEZE’s CV

Professor Jean-Paul BETBEZE is a Member of the Circle of Economists and honorary university professor at the University of Paris II Panthéon-Assas. Previous posts include Founder of Betbeze Conseil SAS in 2013, Economic Advisor to Deloitte, Member of the National Council for Statistical Information (Cnis), Chairman of the Robert Schumann Foundation’s Scientific Council, Chief Economist at Crédit Lyonnais, Chief Economist & Director of Economic Research and Member of the Executive Committee at Crédit Agricole SA, Member of the Prime Minister’s Economic Analysis Council for six years and Member of the Economic Commission of the Nation (CEN).