Suchergebnisse

Since we introduced the term "middle-income trap" in 2006, it has become popular among policy makers and researchers. In May 2015, a search of Google Scholar returned more than 3,000 articles including the term and about 300 articles with the term in the title. This paper provides a (non-exhaustive) survey of this literature. The paper then discusses what, in retrospect, we missed when we coined the term. Today, based on developments in East Asia, Latin America, and Central Europe during the past decade, we would have paid more attention to demographic factors, entrepreneurship, and external institutional anchors. We would also make it clearer that to us, the term was as much the absence of a satisfactory theory that could inform development policy in middle-income economies as the articulation of a development phenomenon. Three-quarters of the people in the world now live in middle-income economies, but economists have yet to provide a reliable theory of growth to help policy makers navigate the transition from middle- to high-income status. Hybrids of the Solow-Swan and Lucas-Romer models are not unhelpful, but they are poor substitutes for a well-constructed growth framework.

This background paper describes five different tools that can be used for the assessment of tax incentives by governments in low income countries' (LICs). The first tool (an application of cost-benefit analysis) provides an overarching framework for assessment. Evaluations of the various costs and benefits of tax incentives are vital for informed decision making, but are rarely undertaken, partly because it can be a difficult exercise that is demanding in terms of data needs. The next three tools (tax expenditure assessment, corporate micro simulation models, and effective tax rate models) can be used as part of a comprehensive cost-benefit analysis, to shed light on particular aspects. Effective tax rate models shed light on the implications of tax parameters - including targeted tax incentives - on investment returns and help understand the implications of reform for expected investment outcomes. The document presents two tools for assessing the transparency and governance of tax incentives in LICs. These discuss principles in transparency and governance of tax incentives, and allow for benchmarking existing LIC practices against better alternatives.

The Pacific region is in the midst of an information and communications technology (ICT) revolution in which small island countries are increasingly connected to the global economy. The regions improving internet connectivity presents an opportunity for Pacific Island countries (PICs) to overcome their inherent limitations, and help address the long-standing issues of employment and income generation, which is vital to accelerate progress towards ending poverty and creating an inclusive society. The PICs possess unique vulnerabilities that make addressing poverty and development challenges particularly difficult and complex. The purpose of this study is to examine the feasibility of leveraging ICT to help generate job opportunities in the PICs. This is because of the positive experiences that several countries, including small island economies, have had in generating new types of employment opportunities. The study's main focus is on cities and urban areas, given the still low availability of internet infrastructure and services in rural and remote areas and islands in the Pacific region. The study focuses specifically on the information technology (IT) - enabled global outsourcing services (GOS) industry. ICT covers diverse subsectors that include telecommunications and IT hardware and software.

The Pacific region is in the midst of an information and communications technology (ICT) revolution in which small island countries are increasingly connected to the global economy. The regions improving internet connectivity presents an opportunity for Pacific Island countries (PICs) to overcome their inherent limitations, and help address the long-standing issues of employment and income generation, which is vital to accelerate progress towards ending poverty and creating an inclusive society. The PICs possess unique vulnerabilities that make addressing poverty and development challenges particularly difficult and complex. The purpose of this study is to examine the feasibility of leveraging ICT to help generate job opportunities in the PICs. This is because of the positive experiences that several countries, including small island economies, have had in generating new types of employment opportunities. The study's main focus is on cities and urban areas, given the still low availability of internet infrastructure and services in rural and remote areas and islands in the Pacific region. The study focuses specifically on the information technology (IT) - enabled global outsourcing services (GOS) industry. ICT covers diverse subsectors that include telecommunications and IT hardware and software.

Experience shows that there is often ample room for more effective and efficient use of investment tax incentives in low-income countries. Tax incentives generally rank low in investment climate surveys in low-income countries, and there are many examples in which they are reported to be redundant, that is, investment will have been undertaken even without them. And their fiscal cost can be high, reducing opportunities for much-needed public spending on infrastructure, public services or social support, or requiring higher taxes on other activities. This paper responds to a request of the G20 Development Working Group for an exploration of options for low-income countries' effective and efficient use of tax incentives for investment. To that end, it develops principles for the design and governance of tax incentives and provides guidance on good practices in these areas. Since much of the pressure to offer incentives stems from an awareness of those offered by other countries, the paper also discusses options for international coordination to address the risk of mutually damaging spillovers from such tax competition. Finally, a separate background document develops practical tools and models that can help assess the costs and benefits of tax incentives, which is essential for informed decision making. The aim is thus to assist low-income countries (LICs) in reviewing and reforming their tax incentives, so as to better align them with their developmental objectives. This paper relates to other global initiatives aimed at strengthening domestic revenue mobilization in LICs.

This presentation proposes that BPO and other ICT development have a potential to be a major catalysts for economic growth and socio-economic transformation. It claims that IT-BPO sectors development represents major promises that potentially can transform the Philippine economy and also foster inclusive growth. The presentation postulates that the importance of IT-BPO industry development goes beyond the debate of picking industry winners. It argues that the BPO industry is poised to have a substantive impact on the country and that especially so if there simultaneously is major growth in other ICT sectors and the scale and scope local usage of ICTs. It claims that expanded scale and scope of BPO industry in conjunction with further development of IT services, Telecom and other ICTs industries coupled with the advancement in education, science & technology can be principal factors that can transform the Philippine economy and its interface with the rest of the world.

This paper summarizes a new database that sheds light on the impact of trade-related policy developments over the past half century on distortions to agricultural incentives and thus also to consumer prices for food in 75 countries spanning the per capita income spectrum. Price support policies of advanced economies hurt not only domestic consumers and exporters of other products but also foreign producers and traders of farm products, and they reduce national and global economic welfare. On the other hand, the governments of many developing countries have directly taxed their farmers over the past half-century, both directly (e.g., export taxes) and also indirectly via overvaluing their currency and restricting imports of manufactures. Thus the price incentives facing farmers in many developing countries have been depressed by both own-country and other countries' agricultural price and international trade policies. The authors summarize these and realted stylized facts that can be drawn from a new World Bank database that is worthy of the attention of political economy theorists, historians and econometricians. These indicators can be helpful in addressing such questions as the following: where is there still a policy bias against agricultural production? To what extent has there been overshooting in the sense that some developing-country food producers are now being protected from import competition along the lines of the examples of earlier-industrializing Europe and Japan? What are the political economy forces behind the more-successful reformers, and how do they compare with those in less-successful countries where major distortions in agricultural incentives remain? And what explains the pattern of distortions across not only countries but also industries and in the choice of support or tax instruments within the agricultural sector of each country?

This paper argues that cumulative causation processes are fundamental to understanding growth and development. Such processes derive from spatially concentrated increasing returns to scale including thick market effects, knowledge spillovers, sectoral and urban clustering, and self-reinforcing improvements in physical and social infrastructure. These sources of agglomeration have been extensively analyzed in the economic geography literature. They imply that spatial unevenness in economic activity and incomes is an equilibrium outcome. Growth tends to be 'lumpy,' with some sectors in some countries growing fast while other countries lag. The policy challenge is to lift potential new centers of economic activity to the point where they can reap the productivity and investment climate advantages of increasing returns and cumulative causation.

The estimated coefficient of distance on the volume of trade is generally found to increase rather than decrease through time using the traditional gravity model of trade. This distance puzzle proved robust to several ad hoc versions of the model using data for 1962-96 for a large sample of 130 countries. The introduction of an augmented barrier to trade function removes the paradox, yielding a decline in the estimate of the elasticity of trade to distance of about 11 percent over the 35-year period for the whole sample. However, the death of distance is shown to be largely confined to bilateral trade between rich countries, with poor countries becoming marginalized.

With the current globalization and intense competition of nations, entrepreneurship is seen as fundamental to wealth and job creation and especially to economic and social development. For this reason, in developing countries the entrepreneurship theme is of particular importance and is receiving growing attention from both politicians and academics. In recent years, the interest in entrepreneurship education, particularly at the higher education level, expanded worldwide. In the context of developing countries, Higher Education Institutions (HEI) are increasingly seen as tools for the development of entrepreneurial culture and as promoters of innovative or systemic entrepreneurship. In the case of Mozambique, in the last decade, initiatives to promote entrepreneurship multiplied. Such interest is reflected in the National Agenda to Combat Poverty, a governmental program for poverty reduction and creation of new jobs for the 2006-2009 period, where one of the main vectors was the promotion of entrepreneurship through the education system with emphasis in entrepreneurship support at the level of HEIs, including new business incubation. Since then, entrepreneurship education and promotion in Mozambican HEI is becoming a reality. Despite the fact that initiatives related to entrepreneurship education are beginning to multiply in developing countries, most studies refer only to developed countries' realities, with few describing and focussing on HEIs entrepreneurship education in other parts of the world. If, as is argued by several authors, in the entrepreneurial phenomena "context matters", a different context can represent a different configuration of factors and processes. Thus, this study intends to contribute to fulfilling this gap. It focuses on the issue of entrepreneurship promotion and the role of HEIs as a support instrument in the context of developing countries. More specifically, based on the Mozambican case, it aims to understand the effectiveness of this instrument, identifying the main progresses and barriers in HEI's entrepreneurship education and the factors that affect its effectiveness. This purpose is translated in the following research questions: I) What factors influence positively and/or negatively entrepreneurial attitudes, intentions and behaviours? and Do these factors differ according to the level of economic development of the countries? II) Are the HEIs cooperation networks decisive for the development of teachers' and students' skills and for the promotion of entrepreneurship? III) What are the main achievements and barriers to the creation of companies promoted/incubated by HEIs? IV) Do entrepreneurship education programmes in HEIs influence students' entrepreneurial (personal) characteristics, attitudes, perceptions and intentions? What other factors affect students' entrepreneurial characteristics, perceptions, attitudes and intentions? The study includes both qualitative and quantitative methodologies. Qualitative methodologies were used to assess aspects related with the organization of HEIs and their entrepreneurship curriculum offer and support. Quantitative methodologies were used to study the importance of the context and the aspects related with the students, namely the impact/effectiveness of entrepreneurship education and other factors that affect students' entrepreneurship. In the first case, secondary data from Global Entrepreneurship Monitor (GEM) 2010 – Adult Population Survey (APS), Global Individual Level Data was used. In the second case, primary data was collected including a survey of 572 students that attended an entrepreneurship course and 149 students that did not attended in a sample of 10 HEI establishments with entrepreneurship education in a universe of 34 establishments. Qualitative analysis included analysis of documental sources, interviews and observation; quantitative analysis was done using Statistic Programme for Social Sciences (SPSS) and several techniques related with multiple regressions, ANOVA and comparison of means (T-test and qui-squared test) The work is organized in three parts. The first provides the justification for the study, introduces the general theoretical framework and the purposes of the study and explains the structure of the thesis. The second part includes four chapters in the format of articles answering to the four research questions. The third part is a general conclusion, including limitations, further lines of research and implications of the study. ; Com a atual globalização e intensa competitividade entre nações, o empreendedorismo, é visto como fundamental para a criação de riqueza e mais postos de trabalho e sobretudo para o desenvolvimento económico e social. Por esta razão, nos países em via de desenvolvimento a temática do empreendedorismo assume particular importância e por isso tem vindo a suscitar um crescente interesse por parte das comunidades académicas e política. Nos últimos anos, o interesse pelo ensino do empreendedorismo, sobretudo ao nível do ensino superior, expandiu-se por quase todo o mundo. No contexto de países em desenvolvimento, as Instituições de Ensino Superior (IES) são cada vez mais vistas como instrumentos para o desenvolvimento da cultura empreendedora e como promotoras de um empreendedorismo sistémico e inovador. No caso de Moçambique, nos últimos anos têm-se multiplicado iniciativas de apoio ao empreendedorismo, quer por parte do Governo que por parte de outras organizações da sociedade civil. Tal interesse reflete-se na Agenda Nacional de Luta Contra a Pobreza, um programa Governamental para a redução da pobreza, para o período de 2006-2009, onde um dos desafios colocados é a promoção do empreendedorismo através do sistema educativo, em que destaca-se o apoio ao empreendedorismo ao nível das Instituições de Ensino Superior, incluindo a incubação de empresas. Desde então, o ensino e promoção do empreendedorismo nas IES tem-se vindo a toirnar uma realidade nas Instituições de Ensino Superior Moçambicanas. Apesar das inicitativas relacionadas com o ensino do empreendedorismo se começarem a multiplicar pelos países em desenvolvimento, a maior parte dos estudos centra-se nas realidades dos países desenvolvidos e poucos estudos descrevem e se focam na educação e promoção do empreendedorismo por via das IES naquela parte do mundo. Se, tal como defendido por vários autores, no fenómeno empreendedor "o contexto importa", um contexto diferente, poderá também significar uma diferente configuração de fatores e processos. Este estudo pretende contribuir para colmatar esta falha. O estudo centra-se na promoção do empreendedorismo e no papel das IES como instrumento de apoio nesse processo, no contexto dos países em desenvolvimento. Mais especificamente, baseado no caso de Moçambique, pretende identificar os principais progressos e barreiras no ensino e promoção do empreendedorismo pelas IES, compreender qual a eficácia deste instrumento e os factores que afetam essa eficácia. Este objetivo traduz-se nas seguintes questões de investigação: i) Que fatores influenciam positiva e/ou negativamente as atitudes, intenções e comportamento empreendedor)? Esses fatores diferem de acordo com o nível de desenvolvimento económico dos países? II) As redes de cooperação das IES são decisivas para o desenvolvimento de competências de docentes e discentes e para a promoção do empreendedorismo? III), quais são as principais realizações e os obstáculos à criação de empresas promovidas/incubadas por IES com educação para o empreendedorismo nos seus currículos? IV) a participação dos estudantes em programas de educação para o empreendedorismo nas IES influencia as sua características (psicológicas), atitudes, percepções e intenções empreendedoras? Que outros fatores afetam as suas características, atitudes, percepções e intenções empreendedoras? O estudo inclui metodologias quantitativas e qualitativas. As metodologias qualitativas foram usadas para estudar os aspetos relacionados com a organização das IES ao nível da oferta curricular e apoio ao empreendedorismo. As metodologias quantitativas foram aplicadas para estudar a importância do contexto, e os aspectos relacionados com os estudantes, nomeadamente o impacto/eficácia da educação empreendedora e outros factores que afectam o empreendedorismo dos estudantes. No primeiro caso, utilizaram-se dados secundários do Global Entrepreneurship Monitor (GEM) 2010 – Inquérito à População Adulta (APS), Dados Globais de Nível Individual. No segundo caso, recolheram-se dados primários através de questiomários a 572 estudantes que frequentaram disciplinas de empreendeodirsmo e 149 estudantes que não tiveram educação em empreendedorismo nas IES com ensino de empreendedorismo. A análise qualitativa incluiu a análise de fontes documentais, entrevistas e observações; a análise quantitativa foi desenvolvida com a ajuda do Programa Estatístico para as Ciências Sociais (SPSS) envolvendo um conjunto de técnicas relacionadas com regressões múitiplas, ANOVA e testes de comparação de médias (t-test e teste do qui-quadrado). O trabalho está organizado em três partes. A primeira inclui a justificação, introduz o quadro teórico geral para a investigação bem como os propósitos do estudo e explica a estrutura da tese. A segunda parte inclui quatro capítulos no formato de artigos, procurando dar respostas às questões de investigação. A terceira parte, é uma conclusão geral do trabalho, incluindo limitações, linhas para futuras investigações e implicações do estudo. O primeiro capítulo, procura evidenciar a importância do contexto nos processos empreendedores. Usando dados do Global Entrepreneurship Monitor (GEM) 2010 – Inquérito à População Adulta (APS), Dados Globais de Nível Individual - de três países com diferentes níveis de desenvolvimento económico, mas com uma história e uma língua comum; criou-se um índice quantitativo de atitudes, intenção e comportamento empreendedor (Índice Empreendedor), e pela aplicação de regressão linear múltipla, foi possível identificar os determinantes das intenções, atitudes e comportamento empreendedor e sua importância em diferentes contextos, tais como (i) genero, (ii) educação, (iii) redes empreendedoras, (iv) motivação por oportunidade e necessidade, e (v) percepção de oportunidade na área de residência. Mais especificamente, os resultados mostram que os indivíduos do sexo masculino, com níveis de educação mais elevados e com redes pessoais empreendedoras tendem a apresentar índices mais elevados de empreendedorismo. Além disso, o estudo empírico evidencia a importância da percepção de oportunidades para a formação de atitudes, intenções e comportamento empreendedor. Os resultados também mostram que o nível de desenvolvimento económico afeta não só as atitudes, intenções e comportamentos empreendedores, mas também a importância/peso dos seus determinantes. O segundo capítulo, centra-se na identificação dos principais obstáculos à criação de empresas promovidas / incubadas por IES com educação para o empreendedorismo nos seus currículos. O estudo empírico é baseado numa amostra de 10 estabelecimentos das diferentes 5 IES existentes com educação para o empreendedorismo (antes do ano de 2014). A coleta de dados foi feita através de uma entrevista exploratória com os diretores das IES e consulta de fontes documentais. Os resultados mostram que as barreiras estão relacionadas com a falta de professores formados/qualificados em empreendedorismo, as deficientes redes com empresários e outras instituições e má relação com a comunidade empresarial, tanto devido a dificuldades materiais para implementar atividades práticas (por exemplo, visitas a empresas) como pela falta de receptividade do lado da comunidade empresarial. Apesar da existência de algum material educativo, mencionado como o principal recurso para a educação para o empreendedorismo, algumas IES indicam que o material disponível não é suficiente, considerando tanto a quantidade como a qualidade. A inexistência de outros recursos educacionais e infra-estruturas de apoio, como incubadoras, laboratórios e bibliotecas, muitas vezes associada com a falta de recursos financeiros também foi mencionado como um importante obstáculo à criação de empresas por alunos e professores das IES. O ambiente político e de negócios foi também referido como uma importante barreira à criação das empresas, nomeadamente no que diz respeito aos sistemas financeiros e fiscais. O terceiro capítulo centra-se na importância das redes de cooperação entre as IES para o desenvolvimento de competências dos professores e para a promoção do espírito e competências empresariais dos alunos, em especial no contexto dos países em desenvolvimento. São apresentados dois artigos com natureza exploratória e descritiva. Num primeiro artigo, o estudo empírico inclui uma amostra de 10 estabelecimentos das 5 IES com educação para o empreendedorismo (antes do ano 2014) existentes em Moçambique. A recolha de dados foi feita através de entrevista exploratória com os diretores das IES e consulta de fontes documentais. Os resultados mostram que uma estratégia assente em redes de cooperação está presente sobretudo em IES públicas, que, tendem a apresentar melhores resultados em matéria do número de professores com formação específica em empreendedorismo e número de negócios criados. Este estudo também mostra alguns sinais promissores relativos ao desenvolvimento coordenado e global de esforços para promover a qualidade da educação para o empreendedorismo. Destaca-se também o papel dos parceiros públicos no envolvimento de outras organizações privadas nacionais e internacionais no processo. Apesar do fato de que a maioria dessas iniciativas está ainda numa fase inicial e de que não é possível neste momento prever totalmente o que será o seu impacto ou resultado, este estudo representa uma primeira tentativa nesse sentido. O segundo artigo apresenta, com mais algum detalhe, o caso da Escola Superior de Negócios e Empreendedorismo de Chibuto – (ESNEC), uma das cinco escolas da Universidade Eduardo Mondlane e uma das poucas instituições de ensino superior dedicada especificamente a educação para o empreendedorismo em Moçambique. Os dados sobre este estudo de caso resultaram de uma observação participante da pesquisadora e os dados foram coletados entre fevereiro e junho de 2013 através de fontes documentais e uma entrevista exploratória com o diretor da escola. O estudo mostrou que as redes de cooperação universitárias têm sido usadas como ferramentas para o desenvolvimento das competências empresariais de professores e alunos e como veículo de disseminação de conhecimentos dentro da comunidade. Mais especificamente, a cooperação com outras universidades vem sendo usada para promover a mobilidade dos recursos para o propósito específico de melhorar o conhecimento e competencias de empreendedorismo dos professores; outros projetos de cooperação, têm sido implementados, a fim de promover a inovação e a difusão de conhecimento do negócio entre estudantes e empresários da comunidade local envolvente. Finalmente, no quarto capítulo procura-se compreender i) se a participação dos estudantes em programas de educação para o empreendedorismo nas IES influencia as sua características (psicológicas), atitudes, percepções e intenções empreendedoras; e também ii) se existem outros fatores que afetem as suas características, atitudes, percepções e intenções empreendedoras. Mais especificamente, tem como objetivo compreender a influência do género, antecedents familiars, do tipo/fonte de recursos financeiros preferencialmente utilizados e das redes nas suas características, atitudes, percepções e intenções empreendedoras Após uma revisão de literatura focada na educação para o empreendedorismo e determinates da intenção empreendedora, atitudes e comportamentos, o estudo empírico é apresentado. Este inclui uma amostra de 10 estabelecimentos IES, seleccionados a partir de um universo de 34 com a educação para o empreendedorismo. A recolha de dados foi realizada em 2015 por meio de questionários a (n=721) estudantes dos 2º, 3º e 4º anos, dentre os quais (n=572) frequentaram o ensino de empreendedorismo e os restantes (n=149) não participaram em qualquer programa de ensino de empreendedorismo. A análise estatística, incluindo a regressão linear múltipla, ANOVA e comparação de médias (Teste-t e teste qui-qudrado). O estudo conclui que i) a atitude pessoal e o controlo comportamental percebido influenciam a intenção empreendedora; ii) a educação para o empreendedorismo tem influência positiva no controlo comportamental percebido. Quanto aos estudantes com educação para o empreendedorismo, conclui-se que iii) existem diferenças significativas em termos de atitudes, percepções e intenções empreendedoras dos estudantes entre as escolas; iv) o género, os antecedentes familiares e as redes empreendedoras afectam as atitudes, percepções e intenções empreendedoras dos estudantes. ; Fundation Calouste Gulbenkian and by Eduardo Mondlane University.

The Need for Re-examination of Industry Structure In rapidly changing and complex environment, the rate of change may be overwhelming. Communication within the firm is crucial to assess weaknesses and strength, make sense of the new developments and reconfigure resources to respond adequately. Firms may have to collaborate with other firms, both local and international, to secure the scarce resources that may enable them to compete with the international companies in a timely fashion as opposed to developing them internally. Such resource-acquisition may require learning the necessary know-how for acquiring and deploying the new technology, or gaining the capability for developing them with others, which may also give them additional intangibles such as collaborative advantages, reputation, brand name by association with others. The discussion suggests that smaller firms may seriously explore the option of becoming a part of a network (or networks) to attain the necessary requirements and accomplish their objectives, even though the costs may be high in the short-run; but they will enable increasing returns in the longer term. In this context, the resource-base view (RBV) of the firm provides a useful framework with which to identify valuable, rare, imperfectly inimitable and difficult to substitute resources (Barney, 1991). It also identifies the investments required to pursue international operations. However, the mere fact of identifying VRIN resources may prove insufficient to ensure competitiveness. The strategic process of renewal should emphasize resource reconfiguration, levering and deploying for catching-up with the international competition rather than mere resource selection as prescribed by the RBV. The focus not only should take into consideration the VRIN resources but also to include inimitable processes, transformation paths and positions that ensure SMEs' global competitiveness at the end, which also parallels the development of dynamic capabilities (Teece, Spence and Shuen, 1997) at the same time. The Augmenting Impact of Networks Smaller enterprises in emerging economies face major challenges in reinventing themselves rapidly and securing resources, which are further amplified due in part to the characteristics of emerging markets. Increasingly, networking is seen as a "primarily means of raising required for coordinating economic exchanges that fall in the continuum between market and hierarchies. Firms face increasing foreign competition in their domestic markets and the institutional inefficiencies that favor larger enterprises. In addition, they still do not have the requisite experience and industrial standards needed to expand into international markets. Joining, or operating through, a network can shield small firms as the network, as a whole, can be viewed as a larger firm in remedying, if not removing, some of constraints associated with the smaller and younger firms in terms of relative inexperience, limited flexibility, poor resources and capabilities . Regarding the necessary capability to navigate through macroeconomic and political fluctuations, or at times the unstable circumstances inherent in the emerging economies, Rauch argues that networks are different from markets because "their members are engaged in repeated exchanges that help sustain cooperation–collusion" and because "network members have thorough knowledge of each other's characteristics, which helps them match with each other or to refer each other to outside business opportunities" (Rauch, 200:1179). The ability to access, commercialize, and act as a broker of new resources, especially knowledge, is key to improving the competitive levels. In the case of RGEs, the concepts, and the associate practice, of social networks and the firm operating in a network are so intertwined in that it is difficult to distinguish one from the other. At the individual level, the entrepreneurs, or the owner-manager, who is the critical resource and the driver of business activities, can draw upon his social network to further enable the firm. At the firm level, the individual linkages can reinforce firm-to-firm or firm-to-network linkages. Etemad and Ala-Mutka (2006) report that the entrepreneurs of the fastest-growing firms in Canada called upon their social networks to help reduce, and even remove, barriers facing them, especially at the earlier stages of their life, at both the individual and firm levels. In the emerging countries, however, the above concepts may assume a different shade. The ownership structure of SMEs in the emerging countries economies, as briefly discussed earlier, owner- managers are likely to be personally involved in most aspects of the operations of their firms. In particular, they tend to centralize important decisions and personally manage the relationships with the key players in their environment. Furthermore, SMEs from emerging markets have been insulated from international competition for a long period of time, which has affected the ways in which their managers conducted business. Neither were managers used to highly dynamic and competitive markets, nor were they familiar with collaborating with their international competitors. Consequently, such managers' perception of independence, individualism and trust plays important roles in their decisions in becoming a member of a particular network. However, their personal ties not only may increase the social capital of the networks, it may also reduce the likelihood of opportunistic behaviors, leading to increased cooperative and collaborative behaviours among individuals and their associated firms over time; but such personal ties are likely to be more national than international. Even those who act as brokers in enlarging the SMEs' opportunity set by creating exchange and sharing information among contacts can benefit from the flow of useful information. Such cooperative relations may enable SMEs to reduce, and even remove, the adverse impact of restricted access to information regarding markets standards, international tax systems, international market opportunities, demand and supply condition, among others, which help to compensate for the lower levels of institutional development in emerging economies. According to Burt (1992: 65), the existence of a "relationship of non-redundancy between two contacts" creates social capital for the actor who is able to link up with network member that possesses complementary resources. These discussions suggest that even redundant contacts can benefit firms as they can provide several benefits: a) increase the political leverage of firms at home, b) overcome institutional and managerial constraints, c) increase the SMEs' leverage in input markets and output markets and also d) facilitate SMEs' access to managerial experience and capabilities available in the network. Bridging the Widening Gap between the Developed and Emerging Economies As discussed earlier, technological innovation is taking place at unprecedented rate. A large part of such innovation is path-dependent by nature as they are the results of firm's long-term research and development (R&D), investment and commitments to cutting-edge knowledge and advancing technology for improving upon their knowledge-based assets, productivity, competitiveness and the consequent economic growth. This is in part a way to respond to the increased competition resulting from globalization, pro-market reforms and open-door policies, among others, which are demanding higher productivity and competitiveness from firms and countries alike. No one is immune: the more competitive and productive firms and countries gain higher market share at the cost to those who are less efficient. Firms and countries are subject to a lot of similar external pressures forcing them to experience instability and flux, continuous emergence and rapid change, and overall uncertainty; but they emanate from different sources and forces. For example, firms face the dynamics of rapidly-changing relations with both the external and internal stake-holders, which have their own motivations beyond the firm's control. Similarly, the relative state of flux and instability is inherent in the change and emergence of complexity in the emerging countries due to the ongoing dynamics of global trade and investment not fully controllable by any given country, or firm, regardless of size and stage of development. However, RGEs have shown the capability and resilience in adapting to enable their growth. RGEs are also characterized by having entrepreneurial mindset, being market-oriented and adapting technology to meet their buyers' and suppliers' needs. They are learning organization in the sense that they constantly acquire, disseminate, and share both the information and its interpretation (Sinkula, 1994) with the final goal of sustaining growth in the long term. Furthermore, there is a common recognition that their growth depends on synergistic collaboration with the member of their supply and value chain. As discussed earlier, RGEs and emerging economies share relatively constrained resources and need to secure them to pursue their activities by devising innovative ways such as becoming a part of synergistic networks (Etemad 2004; Etemad, Dana and Wright 2001a), which forces a trade-offs between independent and interdependent modes of operations for securing access to vital resources to enable further growth. The added advantage of such networks is the possibility of learning from and with others through association as the rapid rate of change, emergence and complexity may not allow a firm or a country or learning by doing. Therefore, the above discussion suggests that RGEs not only are attractive models, and even instruments, for closing the gap between emerging economies, they can also grow faster than typical firms in their respective industries for augmenting growth-rates all around them. We have taken advantage of these similarities to propose a conceptual framework for the emerging economies to deploy, and learn from, RGE-like instruments to speed-up the emerging economies' growth rate. This framework is highlighted in Figure 1.Figure 1 Key Characteristics of Rapid Growing Enterprises and Emerging Economies Conclusion In light of characteristics describe in this paper, the necessary condition for a SME to ensure long-term success in international activities is to aim their sights high, transform their organizational structures for responding to challenges ahead and attain the resources required for expanding to international markets at high rates and on sustained basis. It is also crucial that SMEs expand their knowledge base to meet world-class requirements and standards. Naturally, governments can play crucial roles in at least three influential fronts directly aimed at improving upon firms' productivity, competitiveness and internationalization: a) providing adequate education aimed at the basic tools to face the competitiveness and deal with the complexity of a global economy; b) putting infrastructural support systems in place to facilitate SMEs' transition towards networked firms at home and abroad; and c) Instituting transitional subsidies and inducements for SMEs to transform towards knowledge-based assets and increasing internationalization. Although the higher levels of education allow firm managers and investors to draw resources from a pool of qualified individuals and may also increase the likelihood of transforming inventions into innovations, which is another pillar of success in the international market, it takes some time and effort and will only pay-back in the medium to longer-term; but it needs to be done sooner than later, nevertheless. Similarly, infrastructural support systems are the necessary longer-term investments. However, inducements may be very effective in terms of time and costs as well as initiating an emulative process with high and rapid multiplier effects across the population of firms. The sample of RGEs studied in this paper were young, small, pioneering and innovative firms that commercialized innovations not existing before and thus created incremental employment, income and additional wealth as opposed to resulting from shift in investments. Stated in popular terms, the RGEs presented in this paper enlarged the size of previously non-existing pie as opposed to increasing the size of the wedge of the pie at the cost to others. More importantly, their pioneering efforts set the standards for others to be emulated, thus diffusing the innovation in the allied industry. Stated differently, they rapidly constructed a bridge across barriers to unexplored landscapes that enabled further developments. From a country-level perspective, rapidly-growing enterprise may provide a viable model with an important role to play in rapid income- and wealth-creation. They may even have an important short-term impact on the economic growth of emerging economies while shifting the SMEs' emphasis is shifting from short-term aim of reaching profitability to attaining global competitiveness as soon as possible, which is the necessary condition for sustained growth in employment, revenue, income, tax-base and wealth. The distinction is noteworthy: the former is influenced by the local and short-term orientation of the investors and managers to see results, and probably exit, as quickly as possible; as opposed to international and longer orientation in the latter that invests for the long haul and expanded international opportunities, which reflects the operations of RGEs. By favoring the development of the latter-type of firms, governments will also develop an interesting policy instrument for both creating income and employment much more rapidly than the traditional models, while encouraging modernization in the industry and enhancing long-term competitiveness of the economy. The spill-over effects of RGE-type of operations should have a positive impact on the rest of the economy not only in terms of relatively-faster diffusion of knowledge, technology, best managerial practice and information about new market opportunities; but also on improve the subjective "business environment" of a country at a higher pace and in shorter time period. The demonstrative impact of such virtuous operations may even expand to the rest of the supply chain with a snowballing effect in the rest of the economy in term of improved quality-standards on the input side (e.g. intermediate goods, labor force, etc.) first and soon expanding to the entire economy. References Ala-Mutka, Jukka & Etemad, Hamid, (2006). The Strategies of Global Gazelles: A Theoretical Framework and Evidence from Rapidly Growing and Internationalizing Enterprises from Canada, in Johansson, I. (ed.), Entrepreneurship and Development Local Pro33cesses and Global Patterns, University of West Press, Sweden. Barney, J. (1991). Firm Resources and sustained Competitive Advantage. Journal of Management, 17(1), 99-120. Birch, D. & Medoff, J. (1994). Gazelles. In L. C. Solmon and A. R. Levenson (Eds). Labor Markets, Employment Policy and Job Creation, Boulder, CO: Westview Press. Dana, Leo. P., Etemad, H. & Wright, R., (2001a). "Symbiotic Interdependence," in Dianne Welsh & Ilan Alon, Editors, International Franchising in Emerging Markets (119-129). Illinois: CCH Publishing Delmar F., Davidson, P.&. Gartner W .B (2003). Arriving at the High-growth Firm. Journal of Business Venturing, 18, 189–216. Etemad, H. (2004). Internationalization of Small and Medium-sized Enterprises: A Grounded Theoretical Framework and an Overview. Canadian Journal of Administrative Sciences, 21(1), 1-21. Etemad, H. & Keen, C. (Eds.). (2007). Rapidly Growing and Internationalizing Smaller Firms from Canada. Proceedings from 2007 McGill International Entrepreneurship Conference. California: UCLA, Fischer, E. & Reuber A.R. (2003). Support for Rapid-Growth Firms: A Comparison of the Views of Founders, Government Policymakers, and Private Sector Resource Providers. Journal of Small Business Management, 41, 346–365 Kirzner, I. (1973). Competition and Entrepreneurship. Chicago: University of Chicago.*Dr. Christian Keen, Coordinador Académico de Finanzas FACS, Universidad ORT Uruguay

Most post-modern societies are being challenged by a widening gap that divides their populations by the classic cleavages of age, class, region and religion. Exacerbated by the forces of globalization and the immediacy of technology, they result in constant clashes that cause an exponential increase in social tensions and insecurity. Even if the Norwegian killer was insane and can not be used as example, he was still a member of the dominant culture failing to accommodate to post-modern circumstances. In the United States this gap is vividly evident in the current debt ceiling debate, which is only a symptom of much serious divisions that threaten the country's social unity and political future.A brief look at recent headlines in the United States can give outsiders and idea of the country's social and political environment.On Sunday July 24th, a new law approving gay marriage came into effect in New York, making it the sixth and largest state in the nation (plus the District of Columbia) to have legalized same-sex marriage. In Manhattan, people celebrated on Fifth Avenue, singing and dancing to the music and well-suited lyrics of New York, New York ("If we can make it here, we'll make it anywhere…"). On July 0th, Republican candidates Michelle Bachman and Rick Santoro a "Marriage Vow" swearing fidelity to their spouses, promising they would "vigorously oppose any redefinition of marriage" and would take steps to amend welfare legislation that did not reinforce conventional marriage. This is only a sample of the extreme polarization the country is facing both economically and socially. It is a critical moment in United States history, one that may require a deep reflection on the basic principles the nation was founded upon and a renewal of the social compact.Prodded by the Tea Party leaders, who presently wield an amount of power disproportionate to their numbers, Republican candidates have been signing pledges on an array of different topics in order to prove their conservative credentials. Both Michelle Bachman and Mitt Romney also signed a no-new-taxes pledge, together with a "cut, cap and balance pledge" to amend the Constitution to require a balanced budget and congressional super majorities to raise taxes. These two pledges, albeit non-enforceable and thus largely symbolic, are now the single most important obstacle to reach a deal in Congress about balancing the budget and avoiding default on the national debt. Tea Party Nation leader Judson Phillips has threatened to recruit candidates to mount primary challenges against any GOP member that votes for a compromise on the debt ceiling that involves any type of revenue increases to balance the budget. The GOP Congressional leadership has been hijacked by intransigent ideologues, represented in the House by 87 freshmen with disproportionate power over the more established professional politicians who understand that democratic governance requires give and take, and that politics in a pluralistic society is the art of the achievable.This country was founded on the premise of compromise, negotiation and cooperation, as it is evident from the history of the Constitution and the layers of governmental power devised mainly to counterbalance one another: states versus federal, legislative versus executive, Senate v. House, and an independent judiciary. It was clear even then, that solutions in what promised to be a huge, diverse society with deep regional and religious cleavages would require compromise. But today, in the "worst Congress ever" as Norman Ornstein calls it in his recent article in Foreign Policy, compromise is a bad word. The House is controlled by a GOP freshmen class that owes its seats to Tea Party ideologues and is refusing to raise the debt ceiling even as President Obama has agreed to cuts in spending that include cuts in entitlements, in exchange for ending subsidies on ethanol and other corporate subsidies (he has even given up on the expiration of the Bush era tax cuts he had included in his first proposal). This package that would represent over 3 trillion dollars in cuts from the federal budget, including reductions in Medicare and other social programs, would have allowed the debt ceiling to be raised so that the US could avoid defaulting on its debt by August 2nd. It was on the table last week and close to being signed on by House Speaker John Boehner but he refused it at the last minute because of pressure from his own caucus. The Tea Party is pushing professional legislators toward the abyss, and with them, the whole country. The Tea Party is a social movement that was born out of frustration and disappointment with government spending over the last twelve years. President George W. Bush inherited a budget surplus from the Clinton-Gingrich years. But that surplus quickly vanished as Bush proposed and got passed serious tax cuts on the wealthy and then embarked on two wars that are still going on today. In response, a large coalition of Independents, Republicans and a few former Democrats formed a protest movement that defines itself for what it is against: big government, big media, big banks, unsustainable deficits and intrusive federal regulation. In spite of some evident intrinsic contradictions in their philosophy (for example some the new regulations they so vehemently oppose such as the Dodd-Frank legislation are meant to constrain the actions of "big banks" they so strongly abhor), the Tea Party has been very successful in focusing the public's attention on the federal budget deficit and on the federal debt that has ballooned in the last two decades. Those are its core concerns, together with a deep-seated contempt for and rejection of, everything the well-educated elites are for the most in favor of: environmental sustainability, a foreign policy based on multilateralism, gay rights and immigration reform legislation that recognizes the realities of the estimated twelve million undocumented workers in the country. After two months of wrangling, neither side has managed to get what it wanted, the US credit rating is about to be downgraded (with the subsequent increase in interest rates and damaging effects on an already slow economy) and the vitriolic Washington environment is alienating people on the Right and on the Left. Pressured by the Tea Partiers and their anti-tax obsession, Republicans have refused to compromise to avoid a default, and in so doing they are sabotaging their own chances for 2012. Most Americans are appalled at the GOP's refusal to endorse Obama's proposal that would cut the deficit by $3.7 trillion through a mix of spending cuts, entitlement reform and ending some corporate subsidies and tax deductions. In so doing, the GOP is alienating independent voters that want to avoid default and are ready for a deal. A new political center of gravity is forming. The number of registered voters that identify themselves as Independent is growing (40% in latest poll), while the numbers of Republicans and Democrats are sinking and there is a new online movement from the grassroots to form a third party.Paradoxically, out of all this Byzantine intrigue in the hallways of Congress, and given the outcome of no deal announced on Monday night, President Obama may come out as the winner. To the dismay of his most progressive base, Obama, intent on finding some common ground with the opposition has shifted to the center-right of the political spectrum on his proposals, daring to sacrifice some cuts on entitlements in exchange for revenue increases, only to see them rejected by the Republicans. He is close to winning a stand-alone debt ceiling increase while having proven to be the only reasonable adult in this struggle. This would gain him the support of many independents and help him avoid a confrontation within his own party. It would also allow him to focus on unemployment, the real immediate crisis that most directly impacts people's lives. However, Democrats in the House and Senate are afraid that concessions on reducing some Medicare benefits, for example, or postponing the eligibility age, would ruin the clarity of their message to seniors during the election. Conversely, Tea Partiers see a compromise involving any sort of revenue increases by the government, even non-tax measures such as ending corporate subsidies, as a betrayal of their principles. The Tea Partiers have brought into focus the spending crisis that has been growing unchecked for a long time, and one the country cannot obviously tax its way out of. Some facts cannot be denied: debt is the result of spending not backed by revenue. Total government spending at all levels has risen to 37% of the GDP today from 27% in 1960. It could reach 50% by 2038. The debt-to-GDP ratio has reached 100% today, from 42% in 1980. The big moral struggle is still ahead. There is no question that the government is spending too much, but the real debate is about priorities and the philosophies that underlie those priorities. The President has recognized that the budget deficit is important to voters, most of which have come to the conclusion that since the stimulus spending did not solve the problem of unemployment, deficit reduction appears to be a better way to improve the economy than investing in education, infrastructure and new energy technologies. Obama must acknowledge this, and make it part of his discourse.But the President must also continue to make a case for the common good ("there are things we can still do together", he said in his last speech), the social safety net and America's future. He can do this by personalizing the budget battles the way Clinton did. Are budget battles about choices or necessities? Why give more tax cuts to the wealthy if their wealth has grown through the recession while the rest saw their wealth diminish? Why subsidize corporate agriculture and ethanol production? Social programs like Medicare serve all Americans, why focus on cutting it while giving a pass to the upper income- and- wealth echelon? General elections are won from the center. Strong strident advocates make for weak candidates. Undoubtedly, the 2012 election will be about money, about fiscal discipline, but it will also be about a more equal distribution, and it will require strong leadership from the two respective philosophical corners to come to a consensus. That is why the Republican establishment is so worried about the lack of gravitas in their field of candidates. That is why some yearn for budget whiz Paul Ryan, or Governor Chris Christie or Rick Perry….or anybody really, that looks and sounds as if he can take on Obama in the intricacies of the budget, the debt ceiling, and social programs reform. That may also be why Jeb Bush was asked on Fox News about his intentions to run for President again two days ago. This time his response was more nuanced: he said that while he doesn't anticipate it, he hasn't ruled it out ("but, he added, "I haven't ruled out being in Dancing with the Stars, either").In the meantime, the Wall Street Journal today announced that, based on the Pew Research Center tabulations of SIPP and Census date, the wealth gap between America's whites and its two largest minorities, Blacks and Hispanics, has widened to unprecedented levels due to the housing crisis and the Great Recession. Alan Greenspan, former President of the Federal Reserve has said repeatedly that the wealth gap that has grown consistently for the last decade is a threat not only to our country but to capitalism itself. Poverty and unemployment are a combustive mix: if fiscal responsibility ends up being based on the back of the poor, social conflict will erupt. It is unconscionable, for example, to think that hedge fund managers pay significantly less taxes than their secretaries.Some Republicans want to abolish every piece of social legislation and re-litigate every progressive judicial decision since the New Deal. As part of pledge game, Michelle Bachman and four other candidates also signed the "Susan B. Anthony pledge "promising to appoint abortion opponents to their cabinets and to deny all funding for Planned Parenthood when they become presidents. The bizarre "Marriage Vow "pledge signed by Bachmann and Santoro not only opposes same-sex marriage and includes a personal promise to be faithful to their spouses, but (most peculiarly yet redundantly) it also rejects Sharia Law (which, by the way, like Bachman, also opposes gay marriage and female adultery, which it punishes by death!)The only candidate that has refused to sign any pledge is Jon Huntsman, who understands the perils of siding too closely with the rebellious Tea Party. Even if some of its main points have successfully brought into focus the deficit issue, the Tea Party is still supported by a minority and resented by most Republicans. Its anti-technocratic, anti-Washington message has resonance, but it may have pushed the GOP too far into a corner. Its message is also becoming blurred when it steps into the social arena: its racist and homophobic overtones do not reflect the spirit of the times and are offensive to the "millenials", the youngest generation of voters born in the 80s and 90s, which Republicans still hope to attract in 2012. Social movements are major vehicles of participation and can re-energize a worn out party. They reflect the spirit of the times, often in an extremist way that is what gives them prominence: their passion for the cause, their original approach, are all important, but their message has to resonate with the public if they are to succeed. They emerge, coalesce, grow and achieve some successes. However, once their main point is made, three things can happen: they can become a party, their main ideas can be incorporated into mainstream politics, or they dissipate and be quickly forgotten. The Tea Party brought into focus the issue of fiscal responsibility, it infused conservatism with new energy and found a natural home in the Republican Party, which had become profligate, and will have to prove from now on that it is sincere about austerity. Its impact is undeniable: it has also attracted Independents and in so doing, has per force moved the Democratic Party to the center-right. Mimicking the "big tent" approach of Republicans, the Tea Party has lately been focusing strategically on fiscal responsibility, limited government and free markets and its main groups have avoided divisive social issues when speaking to the general public. But their demands of ideological purity from their candidates, their emphasis on returning to the strict meaning of the Constitution and the values of the Founding Father, their defense of states rights and gun rights, belie their claims of inclusiveness for all Americans; in its coded language, its contempt for immigrants and its not-so- veiled racism, one senses a strongly reactionary sentiment bordering on uncontainable fanaticism which is completely out of step with most Americans and which will make it very difficult to widen its appeal beyond what it has already achieved.To paraphrase deceased Republican leader Barry Goldwater, the Tea Party's aim isnot to streamline government or make it more efficient, but to get rid of every piece of social legislation and economic regulation passed since the New Deal. Their purpose is not to share the burden of the weakest members of society, nor to educate their children so they can have equality of opportunity, but to defend the individual freedoms of those who can stand on their own. In sum, they are extremists for whom tolerance and moderation are vices, not virtues, and therefore they have no place in a democracy.Senior Lecturer, Department of Political Science and Geography Director, ODU Model United Nations Program Old Dominion University, Norfolk, Virginia

"The news from Delaware is crystal clear: it's Sarah Palin's party now." Senator John Kerry The Tea Party insurrection against the establishment is causing some headaches for the Republican leadership. Republican primary elections everywhere are being won by Tea Party candidates, some of which are credible and electable in national contests (Marco Rubio in Florida, Joe Miller in Alaska), but many of which are an embarrassment to the party. Christine O'Donnell, who won the Delaware primary, last week, falls into the latter category. The Republican Party had fielded a very strong candidate, Mike Castle, who had already been elected seven times to Congress, and would most likely have won the coveted seat in the national election. But he was considered "too liberal" and "too wedded to the establishment" by the Tea Party. Instead, victory went to Tea Party candidate O'Donnell, who had been endorsed by Sarah Palin. During her campaigning the 41-year old O'Donnell, fresh faced and attractive, adopted the dress style, body language and folksy speech of her flashy mentor, lending some credence to Senator John Kerry's claim that the GOP "is Sarah Palin's party now." O'Donnell had been signed out as not credible by the GOP: not only does she lack any experience and qualifications, but she has a questionable personal finance history and a bizarre background that includes having "practiced witchcraft" before becoming a Christian youth counselor and defender of sexual abstinence. She had run for a House seat twice before and lost, getting only about 4.5% of the vote statewide. Her story brings into focus the dire position the GOP finds itself in: by stirring up the anger and frustration of a public deeply affected by the Great Recession and worried about their economic future, and by using the Tea Party movement's energy and populism to mobilize the electorate, Republicans now find themselves in the awkward situation of having to support and fund fringe candidates for the November election. The Tea Party upheaval has been compared to the Reagan Revolution of 1980. Ronald Reagan transformed the Republican Party by creating a new coalition of social and fiscal conservatives and foreign policy hawks. He brought in the Southern Democrats and the Christian Right, and many moderates from the North East were purged from the party. He forged a new majority, renewed the party's cadre and dominated the national political agenda at least for a decade. Similarly, the Tea Party is imposing a "purity test" on Republicans that includes long-held party principles such as fiscal discipline, balanced budgets and low taxes. But it also demands adherence to more intrusive social dogmas such as opposition to abortion and gay marriage, and blatantly reactionary ideas against immigration and free trade, and in favor of the right to carry guns. With its populist, nativist rhetoric it is feeding the frenzy and anger prevalent in certain sectors of the country today to the point of rendering it ungovernable. Indeed, in order to win, Republican candidates everywhere find that they have to adopt Tea party language and principles even when some of these run counter to the realities of governing. In deep contrast with their extreme views of closed borders, Reagan gave amnesty to a huge mass of illegal immigrants, and was a staunch supporter of free trade, a central tenet of the conservative business class that is anathema to the Tea Party insurgents. Their brand of rampant populism was quite absent from the Reagan revolution: he was a leader who understood where the country was historically and emotionally, and he had the convictions and the policies to move it forwards. His philosophy of hard work, sacrifice, fiscal responsibility and smaller government has endured and influenced many conservative and moderate politicians around the world. In addition, he had the great gift of communication and persuasion, and knew how to use history and logic to back up his actions. Few would compare the Great Communicator with the grammatically challenged elements that lead the Tea party: they tend to speak in sound bites, have poor syntax and grammar, and make obscure, often absurd references that few people are able to follow (for example, Sarah Palin's 2008 comment that "as Putin rears his head and enters U.S airspace, the first thing he sees is Alaska" as an justification of why being governor of that state gave her some foreign policy experience; or Christine O'Donnell's "mice with human brains" reference when explaining her opposition to stem cell research). Their inexperience, rampant populism, and contempt for intellect and knowledge do not bode well for next Congress. Others consider late Senator Barry Goldwater, a blunt-spoken conservative libertarian from Arizona, as the predecessor of the Tea Party. Goldwater, who ran for president in the 1960s against Lyndon Johnson, wanted to abolish the whole welfare state established by the New Deal, and advocated the use of nuclear weapons in Vietnam. He lost to LBJ by a landslide, bringing the Republican Party down with him. But he was a libertarian and this put him at odds with the Christian right agenda of the 1970s. Although it is true that there is a libertarian, Goldwater-like element in some groups of the Tea Party, most of its members embrace an ultra-conservative social agenda of government intrusiveness into people's lives, and that is already a source of contention and conflict within the movement. Given its grassroots, decentralized approach, its platform is a hybrid of sometimes conflicting ideas, but at its core, it is an anti-federalist movement. It officially appeared in the political map on tax-filing day, April 15 of 2009, when "tea parties" were organized in several states to protest against government spending. It grew as a bottom-up organization but, as it gathered strength, it was courted by the GOP as an instrument to revive the party and mobilize its supporters. The Tea Party in its nature and its approach to politics is more reminiscent of the movement that coalesced around Ross Perot in the 1990s. He was against the expansion of the federal government, against free trade and open borders, against Washington "insiders" of both parties, and in favor of balanced budgets and lower taxes. The main difference is that the Tea Party is trying to transform the Republican Party from the inside, instead of running against it as a third party, as Perot did in 1992, thereby preventing the re-election of President Bush senior, and delivering a victory to the Democrats. The question is whether the Tea Party movement will succeed and, whether, by moving the party to the Right, it will have a "corrective" effect, or whether, due to its populist excesses, it will self destroy and bring the party down with it. The Perot movement dissolved because of its internal dissent and lack of leadership, and the Tea Party may encounter the same fate. What the Tea Party movement has in vigor and energy, it lacks in logic, organization and cohesiveness. They would most certainly not have been so successful if they had had to find their own moneys to fund their campaigns. Unfortunately for the GOP, there are at least two Political Action Committees (PACs) that are giving financial support to these fringe-quality candidates: Sarah Palin's own PAC, and the Tea Party Express run by old Republican political operative and entrepreneur Sal Russo, who identifies "promising" candidates that can attract contributions and bring treasure into his own formerly moribund PAC. A third PAC, FreedomWorks, run by former Representative Dick Armey, has been more selective in the Tea Party candidates it supports. It refused to fund Christine O'Donnell, who instead received substantial campaign funds from the other two. Some serious conservative voices are being raised against the Tea Party, but it may be too late. Charles Krauthammer, one of the leading conservative intellectuals, called O'Donnell's triumph a "stunning but pyrrhic victory" that will prevent the Republicans from regaining control of the Senate. While conceding that the Tea Party itself was "the most vigorous and salutary grass-roots movement of our time" and a "source of electoral energy", he still cautioned Republicans that they had to be selective. He said that O'Donnell was problematic and most likely unelectable. Showing his frustration with the defeat of Mike Castle, he stated that the so-called "Buckley rule"-"Support the most conservative candidate that is electable" -had been violated. Also, Karl Rove from his new column in the Wall Street journal called her "unfit for office" and "not a credible" candidate. O'Donnell was the seventh Tea Party candidate to defeat an incumbent, so now the National Republican Committee will most likely have to fund their national campaigns. Not all are unelectable, but the question is, once in power, will they follow the party line or their own? As the GOP moves to the extreme Right to please the Tea Party supporters, it is the moderates that are left out of place. In Florida, the unstoppable Senate race of Tea Party candidate Marco Rubio has forced his opponent Charlie Crist, whom Rubio defeated in the primary, to leave the GOP and run as an Independent. Unlike O'Donnell, Rubio is a very credible candidate who may some day run for president, while Crist has been too much of a moderate for the present political climate, and as governor has supported several of Obama's initiatives. Tea Party Senate candidate Joe Miller, who beat incumbent Republican Senator Lisa Murkowski in the Alaska primary, is also a candidate with solid credentials (WestPoint graduate, then Yale Law), but he is still outside the mainstream on basic issues such as Social Security, which he considers "unconstitutional, because it is not in the Constitution". This is what most worries the party moderates: that a huge part of the electorate, frustrated with the expansion of US government, debt and deficits, will feel so disgruntled as to elect a Republican Congress majority populated with extremist candidates that will ignore the party line, and will try to impose their simplistic, atavistic views of government, turning the clock back one or even two centuries. Unquestionably, not all is said and done in this election, and the Republican primary results are cautiously being watched by Democratic candidates who now see an opening to regain the moderate Independents' vote. But the generalized anger against incumbents in the electoral may very well lead many of them to vote for Tea party newcomers all the same, no matter how extreme and erratic they may seem. Objectively, one can understand and respect philosophical differences and the traditions of this country's two-party politics. In order to survive in the post-Bush era, the Republican Party needed to undergo a correction towards smaller government and balanced budgets, which are the core principles of their ideology. During his eight years in power, Republican George Bush oversaw the biggest expansion of the federal government since the 1960s; he made the decision to fight two wars while at the same time lowering taxes across the board and deregulating private financial institutions. It should thus come as no surprise that his course of action brought about the biggest economic crisis since the Great Depression, and that a public backlash against government spending ensued. A year and a half of frantic efforts by the Obama White House and Congress, which obviously demanded more government spending for the short-term, have not delivered palpable results and, although the Recession has officially ended, unemployment is still at 10%. The popular outcry against big government is to be expected. But some groups have used this opportunity to propose hare-brained schemes based on ignorance, nescience and prejudice. Whether they are railing against immigrants, taxes and social welfare programs, or in favor of armed insurrection against the federal government, quite often, to legitimize their demands, they refer their critics to the US Constitution of 1787. To the extent that the Constitution established the federal government and its relative power over the states, their claims have little merit. Perhaps they confuse it with the Articles of Confederation that preceded it and vested power in the states. In any case, the infantile worship of a three centuries old document in an era of globalization, interdependence and a communications revolution speaks for itself: the Tea Party is reactionary, regressive, and irritating to mainstream Americans. But given the level of anger and disenchantment with Washington, they may linger in the political landscape longer than initially predicted. Tea Party supporters tend to confuse their candidates' folksiness with authenticity, their simple- mindedness with sincerity and their populist slogans with serious policy proposals. The truth is that the United States, for all its failures, has governmental institutions that have endured, and is governed by the rule of law and not by mob rule. It is normal and healthy in a democracy to protest against an unresponsive government. It is quite a different thing to put opportunistic, unproven, inexperienced people at the helm in order to role back institutions that took years to build and that the newcomers in their ignorance scorn upon. There is no telling that they would be less greedy or more competent than those they replace. More likely, a Tea-Party-dominated Congress would be a complete disaster as they focus on their petty interests and ideological vendettas; they repeal existing social legislation and refuse to fund the federal government; they start handing out subpoenas to investigate made-up claims against the Executive, and they do not address any of the real problems facing the country. Their narrow-mindedness, their disdain for the realities of democracy and their disinterest in the welfare of others is quite alarming. It may come back to haunt the other Republicans in Congress, who will realize too late that they have to rely on Democrats in order to pass any spending bill and that anger cannot be turned into an agenda for governing. Ironically, this week has been proclaimed Education Week in America, as the White House unveils its new plan to reform the public school system and to bring American students up to par with other advanced democracies. Although the new emphasis will be on science, math and a longer school year, one can only hope there is room in the curriculum for more civic education, a better understanding of American History and a greater appreciation for democracy and its institutions. Only when that happens will this kind of movement be forever confined to the fringes of society, where it belongs. Senior Lecturer, Department of Political Science and Geography Director, ODU Model United Nations Program Old Dominion University, Norfolk, Virginia

From the introduction: Global changes of the worldwide economy and free markets offer many business opportunities and advantages for multinational corporations (MNC), but also a lot of social challenges and ecological threats. In the last decades many scandals hit various industries for different casualities, for instance the oil industry for several oil spills, the mining industry for colaboration with corrupt governments and exposing workers to unsafe labor conditions, the clothing industry for exploiting employees or using child labor in sweatshops, the toy industry and other industries for importing tainted and unsecure products from China. As corporations have reaped the benefits of globalization and international trade, they are now, more than ever, demanded to take responsibility for the consequences resulting from their business activities. Due to the risk of a damaged reputation, loosing consumers and hence decreasing profits and as a result of public criticism, more and more corporations are pushed to change their business strategy in a way that fosters sustainable development. As the business world becomes smaller and more transparent, an increasing number of corporations are embracing Corporate Social Responsibility (CSR) to demonstrate their stewardship. CSR is a concept that demands corporations to adress the economic, social and environmental impacts of their global operations while generating profits. The idea of CSR has become a concept that is growing in its importance and it is not only endorsed by corporations and organizations but also by individual consumer and governments. Henry Ford quoted once 'If there is any one secret of success, it lies in the ability to get the other person's point of view and see things form that person's angle as well as from your own.' This statement shows that companies striving to be economically successful are also demanded to consider the interests of all its multiple stakeholders. As corporations are gaining an increasing power and have an enourmous impact on the society in industrialized and developing countries, they are expected to respond to the societal demands and ecological concerns of all those who are affected by a company's business practices. The aim of this paper is to give a detailed overview of CSR with all its components and its implementation process into the overall business strategy. It analyzes the role corporations play or should play in fostering sustainable development and improve the welfare of the community where they operate. In the latter case, the focus will be on how CSR activities can be linked to international development and how they help to address the biggest challenge of the 21st century – to eradicate poverty. Chapter 2 describes the relation between corporations with its stakeholder versus its shareholders. Shareholders are at the same time stakeholders who have a stake in a company, but they have different interests in a corporation. This could lead to potential conflicts between short-term shareholders' expectations and long-term stakeholders' interests. An appropriate Corporate Governance (CG) practice is necessary to address these conflicts and to conciliate the interests of corporations' key stakeholders. CSR is seen as a corporation's obligation to respond to all stakeholders' expectations - not just to those of shareholders. To give a more detailed understanding of CSR, Chapter 3 outlines the historical evolution of corporate ethics and shows recent global economic trends that led to the fact that CSR has become so important in the 21st century. Furthermore, this chapter represents the main issues of CSR and the incorporation of this concept into the strategic management process. It highlights the importance of CSR communication and an effective Public Relation (PR) strategy for creating awareness about a company's CSR activities. Additionally, the different types of CSR programs – also known as Corporate Social Initiatives – are elaborated that help to support and create public awareness about social causes. Chapter 4 and 5 link CSR with international development and question corporations' role in fostering development. Chapter 4 focuses on the impact corporations have on the poor in developing countries and examines how CSR can help to create wealth and hence reduce global poverty. It further shows how corporations can address development challenges collectively by engaging in Public-Private Partnerships (PPP). It still exist a huge gap between CSR activities in industrialized and developing countries, which implies an additional challenge on promoting CSR standards on a national and international level. As the concept of CSR is often questioned by critics and free marketeers, the last chapter elaborates on the case against CSR and hightlights the different critic points that arise when companies claim to be socially responsible. These criticism has to be addressed in order to handle threats and opportunities in markets of great importance to organizations as well as in areas where problems occur.Inhaltsverzeichnis:Table of Contents: Table of ContentsI Table of IllustrationsII List of AbbreviationsIII 1.Introduction1 2.Shareholder Value vs. Stakeholder Value3 3.Corporate Social Responsibility6 3.1The Evolution of CSR6 3.2Trends in the Global Economy12 3.3Main Issues of CSR17 3.3.1Corporate Governance17 3.3.2Stakeholder Management18 3.3.3Competitive Advantage22 3.3.4Marketplace26 3.3.5Workplace28 3.3.6Environment34 3.4The Strategy Context of CSR39 3.4.1CSR Implementation Process39 3.4.2CSR as a Public Relations Strategy48 3.4.3Corporate Social Initiatives51 4.The Importance of CSR for International Development65 4.1CSR - A useful concept for poverty reduction?66 4.1.1The Supply Side67 4.1.2The Demand Side70 4.1.3The Government Side72 4.2The importance of PPP74 5.Critiques of CSR79 6.Conclusion86 AppendicesIV Appendix 1: Different ChartsIV Appendix 2: International Organizations promoting CSRX Appendix 3: International CSR Instruments and InitiativesXIII Appendix 4: International CSR StandardsXV Appendix 5: International CSR Rating InstitutionsXVII ReferencesXVIIITextprobe:Text Sample: Chapter 4.1, CSR – A useful concept for poverty reduction? Almost half of the world's population (2,7 billion people) lives on less than US2$ a day and another 1,2 billion people have not even US$1 a day to survive. Eleven million children under the age of five die every year from malnutrition and preventable diseases. Everyday over 6,000 people die from and another 8,200 people are infected with HIV/AIDS. Every minute a woman in the world dies in pregnancy or childbirth. Every 3,6 seconds a person somewhere dies of starvation and the lack of access to clean water. It is against these facts and due to the failure of governments and their international arms to address questions of underdevelopment that the corporate sector with its economic power is increasingly demanded to cope with key global challenges of the 21st century. Axel Hesse, a consultant for Sustainable Development Management, ascertained in his dissertation the 'six most important global challenges for sustainable development' are: climate change, water shortage and pollution, deforestation and desertification, biodiversity loss, population growth and migration – all which have an huge impact on poverty in the world. Altough poverty alleviation is not an explicit component of CSR, this section analyses to what extent multinational corporations are able to reduce global poverty with CSR programs. Here the focus will be on multinational corporations who have a wholly owned subsidiary, a joint venture or a major supplier in developing countries. Hence, not the private sector as such will be examinated but rather multinational corporations and the impacts of their FDIs on poverty in the developing world. A direct relationship between FDIs and poverty allevation cannot be established as FDIs in host countries create economic growth which in turn is recognized as a powerful force to fight global poverty. However, MNCs foreign direct investment in developing countries depends on prevailing conditions in the host country in terms of stability, tax regulations, corruption, infrastructure and local foreign policies, laws and regulations. Even if corporations decide to make their investments in developing countries, the location of investment is a crucial factor for development since investments are often made in wealthier regions of host countries. The opportunities for and impacts on poor countries resulting from investments by MNCs and the incorporation of CSR in all their worldwide operations are analyzed in the following from the supply side (poor as producer) and the demand side (poor as consumers) as well as the government side of host countries. The Supply Side: Considering the poor as producer, MNCs can contribute to poverty alleviation by having both a direct effect on the poor through supplying jobs and income opportunities in their foreign affiliates and an indirect effect through creating a linkage to local firms and suppliers. First of all, an association will be drawn between MNCs and their direct impacts on poor communities. In the later case, it will be elaborated on the indirect impact MNCs have on the private sector in developing countries. Even if the total number of people employed in foreign affiliates of MNCs has increased three times, from more than 25 million in 1990 to 73 million workers in 2006, these numbers account only for a small proportion of the total number of poor people living on less than US$2 or US$1 a day. The problem with this is, furthermore, that mainly skilled workers are in these employments which means that the poor do not benefit from FDIs to such an extent. So, in which way can CSR contribute to address poverty considering that just some of the poor work directly for MNCs? MNCs can help to tackle poverty and development issues through carrying out core business activities in a proactive and responsible way which decreases negative impacts of business activities and increases its positive impacts. This can be done by generating income through creating jobs, developing capabilities of human resources, building local business linkages and other economic multipliers that are directed to poor communities in host countries. Other CSR strategies which companies can apply in their core business activities and which address poverty issues include the compliance with international norms, standards, codes of conduct and principles throughout the value chain. These principles include amongst others to treat employees fairly, to cover minimum marketplace standards if government laws are not available, to take actions that do no harm to the environment and to contribute to the welfare of the (poor) community. However, as the poor benefit more from jobs that are created indirectly by suppliers and suppliers of suppliers of MNCs, it is more essential to focus attention on the linkages of MNCs to the private sector of developing countries. The private sector is also the main area of economic growth which provides most job opportunities in developing countries. These are often jobs provided to the poor by small and medium-sized entreprises (SMEs), agricultural smallholders or those in self-employment. MNCs and international agencies have realized the SME potential in developing countries and have begun in their development efforts to contribute to SME development by providing credit and entrepreneurial training as well as by enhancing responsible business practices in supply chains. CSR in the supply chain of MNCs plays an important role for development as suppliers are the main connection between a corporation and the developing world. This is because many corporations outsourced or 'offshored' services and the manufacturing operations, which were usually produced onshore, to suppliers in developing countries. Many designer clothes and branded goods, for example, are basically produced in developing countries. Similarly, basic IT Services, back-office work and call centres were transfered to developing (emerging) countries like India or China. As a great impact of MNCs on the poor takes place through its supply chains, it is more essential to question: how far down the supply chain MNCs should go to ensure responsible business practices in all stages of the product buying process? As supply chains are long and complex, it poses real ethical challenges to corporations to identify abuses of any kind in suppliers' operations. MNCs often demand that their direct suppliers apply the same standards as they do, however, do not go farer down the supply chain. In this new business environment, where corporations and retailers face operational and reputational risks, if exploitative practices are discovered in their supply chains, MNCs have begun to map out their supply chains and to identify countries, suppliers that pose the greatest risk. More and more corporations establish auditing systems and adhere to international standards for their supply chains such as AA1000, SA8000 or FLA. These standards and the ILO core labor standards (ICLS) cover mainly labor issues typically included in corporate codes of conduct. In addition, the OECD Guidelines for Multinational Enterprises and Supply Chain Responsibility, an expansion of the OECD Guidelines for Multinational Enterprises are standards for responsible business practices in the supply chains of MNCs. They are voluntary instruments promoted by governments among MNCs operating in their countries and serve as a tool to hold companies accountable for their global business and supply chain operations. Since these standards are voluntary, many companies still ignore to apply such standards in their supply chains. This was the result of a survey by Integrity-Interactive, a risk consultancy where 2000 big companies where surveyed on their supply chain practices. More than half of the respondents admitted that they are still lacking to apply ethic codes in their supply chains, but 42 % asserted that they are regularly assessing ethical risks in their supply chain. However, it more crucial to ask if not corporate buying practices and their expectations for greater efficiency put pressure on suppliers in the developing world to meet buying requirements which in turn cause exploitation of labor? For example, suppliers are often confronted with issues around flexibility (to respond quickly to costumers' demand) and seasonality (to cover demand for certain seasonal products) on the one hand, and price pressure on the other hand. Are not these factors drivers that lead to coercive and exploitative labor practices where workers have to work excessive overtime hours for minimal wages? The CSR aspect here is to ensure an ethical sourcing or trading by following the subsequent steps. In the first place, it is necessary to review a corporation's own purchasing and pricing practices which have negative effects on suppliers who then in turn cannot meet supply chain labor standards. Key labor standards in the supply chain could be covered by establishing a code of conduct developed by the corporation on its own or by an external organization such as the Ethical Trading Initiative (ETI). The ETI is an initiative that sets minimum standards for labor and human rights practices within supply chains. By offering on-going training programs, buyers and employees can be trained on ethical buying practices. At the same time, it is necessary to carry out a risk assessment which identifies suppliers who do not comply with ethical standards. An audit management systems that involves visiting suppliers on side helps to assess suppliers' compliance with the established code of conduct. By drawing up improvement plans, corporations can ideally work together with their suppliers to implement the required standards. Finally, it is important to be transparent and to disclose responsible supply chain practices openly.

Inhaltsangabe: Introduction and Course of Work: In 2007, at their meeting in Tanzania, the central bank governors of the Southern African Development Community (SADC) laid out a strategy to strengthen regional integration, containing the development of a common market by 2015, fixed exchange rates by 2016, and, ultimately, a monetary union with a single currency in 2018. In pursuit of this agenda, a free trade area absent of intra-regional tariffs was arranged in August 2008 with a regional customs union to follow this year. The currently fourteen member countries of the SADC committed themselves towards achieving economic convergence and to deepen monetary cooperation. In the 21st century, Africa finds itself increasingly separated from economic developments in the remaining world and fails to prosper from increased globalization. Despite a large abundance in natural resources, many countries have suffered from an extremely poor economic performance, which mainly originated from internal strives and weak and distortionary policies. Inward looking governments, conducting clientele policies, are focused on reaping economic rents rather than on fostering growth. Furthermore, tribal conflicts and civil war have sparked recurring border conflicts with neighboring countries. Although Africa has seen a large number of regional arrangements and trading blocs throughout the continent, the overall success for growth and trade expansion was limited. Against this background, the formation of a monetary union is believed to counteract economic and political weaknesses, to improve regional cooperation and to enhance both the political and economic standing in the world. A monetary union and a common currency entails both gains and losses for its members. On the cost side, countries in a monetary union effectively loose the ability to pursue independent monetary policies and to use the exchange rate as adjustment instrument to stabilize the economy. On the other hand, countries inside a monetary union benefit from reduced transaction costs and the elimination of internal exchange rate volatility. Furthermore, countries which suffer from weak internal stability and high inflation rates benefit by using the fixed exchange rate in a monetary union as external anchor. By transferring the power over monetary policy to a supranational central bank, the risk of homegrown inflation and currency devaluations is banished and economic agents are able to borrow at more favorable interest rates. Both the gains and losses from a monetary union are determined by structural characteristics inside the countries. If, in total, the benefits from a single currency exceed the costs in that the constraints imposed by fixed exchange rates are not harmful to the economy, the countries constitute an optimum currency area. In essence, the theory of optimum currency areas considers the desirability for each country to join a monetary union. The trade off between costs and benefits is affected by three features: First, the degree of intra-country trade influences the gains in efficiency and reduced uncertainty from fixing the exchange rate. Second, the degree of correlation in output fluctuations determines whether a common monetary policy is adequate for all countries. And third, the response to output shocks is eased by several adjustment mechanisms, including price flexibility and factor mobility, which restore the initial equilibrium. The purpose of this study is to evaluate whether a monetary union in Southern Africa is both desirable and feasible from an economic point of view, to discuss institutional challenges and requirements, and to give direction for which countries are best candidates to form a monetary union. Both the motivation and requirements for a successful monetary union are drawn from the theory of optimum currency areas. Unfortunately, the various aspects of the theory have been gradually developed over time and are often confounded and fragmentary in theoretical work. The aim is therefore to first derive a framework that includes relevant benefits and costs, which are subsequently related to country-specific structural criteria. Since economic integration is an important aspect for Africa, emphasis will be put on the endogenous trade effects of monetary integration. Similarly, special attention is given to fiscal distortions and weak institutions, which are sources of high inflation rates and low monetary credibility. Next, the theoretical foundations are applied to the SADC to examine the suitability of countries to form a monetary union. Although a number of studies have discussed monetary integration in various parts of Africa (Masson and Pattillo 2001, Debrun, Masson and Pattillo 2005, and Houssa 2008, for instance, cover monetary unification in West Africa while Kishor and Ssozi 2009 analyze the East African Community), relatively little has been done concerning the SADC in particular. Relevant exceptions are Agbeyegbe, Bayoumi and Ostry, Buigut and Valev, Karras and Khamfula and Huizinga. However, while the studies mentioned typically focus on one aspect of the theory of optimum currency areas, there are very few attempts so far to include all relevant aspects in one framework. Overall, the findings suggest that a monetary union encompassing the whole SADC is infeasible at this stage, and unlikely in the foreseeable future. However, there is evidence for a monetary union consisting of a smaller group of countries, based on the long standing CMA arrangement. In addition to South Africa, Lesotho, Namibia and Swaziland, countries proposed for a monetary union are Botswana, Mozambique and Zambia. On the other hand, there is little evidence that the remaining countries would benefit from monetary unification in any time soon. Countries in the SADC generally differ much in their economic and political development. While some countries, namely South Africa, feature a relatively advanced economy, other countries like Congo and Zimbabwe experienced economic deterioration and high inflation rates. Especially the findings of low regional trade intensities do not hold much promise of large gains from transaction cost savings. Furthermore, both the comovement of business cycles and the correlation of output disturbances are strikingly low, indicating that a common monetary policy is unsuited for most countries. For a small number of countries with a history of high and volatile inflation rates, a common, stable currency would be however attractive in giving higher price stability and an institutional framework to insulate monetary policy from domestic fiscal pressures. Nevertheless, this path is unrealistic since it will be impossible to merge the interests of undisciplined countries with those of low inflation countries like South Africa. In sum, it is inadvisable to proceed with monetary unification to rashly. A monetary union is far from certain to promote regional integration and should not be seen as substitute for political initiatives to solve regional problems and restraining poor fiscal policies. The analysis is divided into three main sections: Section 2 reviews the theoretical implications from the theory of optimum currency areas. After introducing the benefits and costs from monetary unification, both the traditional and endogenous criteria are described to judge the desirability of a monetary union. Next, two models of monetary policy are presented so as to formalize the concept of monetary cooperation. Section 3 subsequently applies the criteria to the SADC. Special attention is given to the correlation of business cycles and comovement of output shocks. A structural vector autoregression analysis is carried out in order to separate underlying supply and demand shocks from output disturbances. Section 4 evaluates the feasibility of a monetary union in the SADC by drawing lessons from the CMA and EMU. Finally, further challenges in the transition to a monetary union are pointed out. Section 5 summarizes and concludes.Inhaltsverzeichnis:Table of Contents: List of Figuresiii List of Tablesiii List of Abbreviationsiii 1.Introduction1 2.Theoretical Foundations of the Optimum Currency Area Theory5 2.1Benefits and Costs of Monetary Integration7 2.1.1Benefits of Monetary Integration8 2.1.2Costs of Monetary Integration11 2.2Criteria of Optimum Currency Areas12 2.3Endogenous Effects in Monetary Integration17 2.4Policy Implications20 2.5Fiscal Distortions and Monetary Credibility22 2.6Theoretical Conclusions27 3.Theory and Empirical Evidence in the Southern African Development Community28 3.1The Economic Situation and Convergence in Southern Africa29 3.2Empirical Approaches of the Optimum Currency Area Theory and Evidence in Southern Africa38 3.3Correlation and Structure of Output Shocks and Business Cycles46 3.4Results52 4.Evaluating the feasibility of the SADC as a Monetary Union and future Prospects54 4.1The Experience of the Common Monetary Area56 4.2Lessons from the European Monetary Union58 4.3The role of Monetary and Fiscal Policies in Southern Africa60 4.4Challenges and the Path to a Monetary Union62 5.Summary and Conclusion68 AAppendix70 A.1Appendix for Section 2.570 A.2Appendix for Section 3.372Textprobe:Text Sample: Chapter 3, Theory and Empirical Evidence in the Southern African Development Community: To recapitulate: The main criteria which have been identified in the optimum currency area theory are (i) the correlation of output shocks, (ii) the extent of regional trade and production diversification, (iii) financial integration, (iv) price flexibility and factor mobility, and (v), inflation differentials and fiscal distortions. It is generally accepted that the formation of a monetary union requires participants to first achieve convergence in a variety of criteria. In this respect, fiscal and institutional convergence and low debt burdens are of special interest since both are a measure of sustainable economic policy. Furthermore, a similar level of per capita income indicates that countries have comparable institutional developments and interests. A monetary union that fails to satisfy these preconditions tends to be instable and may lack credibility from the very beginning. Over the last years however, a number countries in the SADC have experienced an increasing rate of divergence. The transition process in the SADC towards a monetary union is supported by a number of preceding arrangements. The Southern African Customs Union between South Africa, Botswana, Namibia, Lesotho and Swaziland has promoted a certain degree of regional trade. Economic integration has been however limited since the main objective of the customs union was to ease the collection of customs duties rather than industrial cooperation. Regional integration within the SADC advanced in 2008 with the Free Trade Area, which established zero tariffs for 85% of traded goods. However, for goods that have been declared as import-sensitive, most notably food and clothing, liberalization has been deferred. The overall impact on regional trade is therefore uncertain. Despite various efforts for trade liberalization in the past, political commitment has been low so far. Financial relations in the SADC are mainly limited to foreign direct investments. Nevertheless, some recent efforts have been made to harmonize national payment systems. Moreover, the SADC has agreed to work towards full currency convertibility. Since microeconomic data for Africa is scarce, the empirical evidence on optimum currency areas is mainly based on the correlation of output shocks and inflation or exchange rate differentials. Of the other criteria, factor mobility and price flexibility are especially hard to measure and estimates rely on very few observations. Not all of the criteria can therefore be analyzed in similar depth or for the same set of countries. Data was obtained from the World Bank World Development Indicators, the United Nations statistics division, the International Monetary Fund and the African Economic Outlook Database. 3.1, The Economic Situation and Convergence in Southern Africa: The SADC is unique among all regional arrangements in Africa due to the dominant role of South Africa. With a share of over 65% in real GDP (USD at 2000 prices) and 18% of the total population, South Africa is by far the largest and most industrialized economy in the region. In comparison, the remaining countries differ remarkably in size, income and economic structure. The Seychelles, the smallest country with little more than 85,000 residents, is the richest country with a real per capita income (in PPP) of over 19,000 USD in 2008 while Congo and Zimbabwe are among the poorest countries in the world with a real per capita income of approximately 290 USD and 185 USD respectively (see table 1). Life expectancy is low for most countries with an average of 53 years (ranging from 44 years in Zimbabwe to 73 years in the Seychelles) which is an indicator for the high poverty rate among the population. Income inequality as measured by the GINI Index varies considerably across contries, where South Africa (58), Angola (58) and Namibia (70) display one of the highest inequalities worldwide. Economic growth was robust for almost all countries since 1990 except in Congo and Zimbabwe and accelerated in Angola, Mauritius, Tanzania and Mozambique in recent years. Average annual GDP growth from 1990-2008 was highest for Angola (6.2%) due to increasing oil export revenues, but also the most volatile with a standard deviation of 10.5. In the four countries of the CMA, the growth performance was driven by the end of Apartheid in South Africa in 1994 and averaged to 3.7% from 1990-2008. The reeintegration of the South African economy in the world market attracted new foreign investors and trade, and more than tripled growth rates in the post-Apartheid period (from 1980-1992 the average was 1.1. On the other hand, Zimbabwe and until recently Congo experienced a drastic fall in income levels. While Congo still suffers from the aftermath of the civil war and political instability, Zimbabwe was run down by the Mugabe regime. Since at the same time these countries also have the lowest per capita income levels, it appears that the economies in the SADC diverge. Figure (4) illustrates the relationship between average per capita growth rates and relative income for 14 SADC members in the period 1990-2008. The results show that most countries with an initially high income level also had the highest average growth rates, which led to a widening of the income gap (striking examples are Botswana and Mauritius). The ambiguous relationship is a sign that positive developments in individual countries were determined by external factors rather than by improved regional cooperation. Production structure and trade: Production and export structures vary to a large extent among the SADC. While South Africa, Lesotho, Zimbabwe and Swaziland have a relatively advanced manufacturing sector, most other countries depend on primary goods production (except for Mauritius which is specialized in financial services). In the rural countries Malawi, Tanzania, Congo, Mozambique and Madagascar, agriculture still accounts for a large, although declining production share. Raw materials (mining and oil) are a main income source for Angola, Botswana, Zambia, Congo and Namibia and contribute to a large part of foreign reserves. Accordingly, those countries usually exhibit surpluses in their trade and current account (see table 1). Similar to production structures, the composition of merchandise trade reported in table (2) differs considerably across countries. A higher income level is generally associated with high export shares in manufacturing and primary products, while low income countries tend to export food products and import manufactures. As a result of different production and trade structures, the ratio of intra-industry trade are ineffectual small for all countries except South Africa, reflecting the low degree of industrialization. Regional trade in the SADC is dominated by South Africa, which exports high value manufactures in return for small amounts of raw material imports. Especially countries inside the SACU maintain important trade connections to South Africa. Commodity imports from South Africa represent on average over 44% of total imports in other SADC countries and account for approximately 80% of total imports in Lesotho, Swaziland, Namibia and Botswana (see table 3). On the other hand, export shares from the SADC towards South Africa amounts to only 15% on average with Swaziland (38%), Namibia and Lesotho (both 27%) having the strongest trade linkages. As a result, South Africa typically generates substantial regional trade surpluses. In contrast, trade integration among the remaining SADC countries is at very low levels, also because of a shortage in infrastructure. The only substantial trade flows are between neighboring Namibia and Angola (10% of Namibias exports), Zimbabwe and neighboring Zambia (14% of Zimbabwes exports) and landlocked Swaziland and Mozambique (9% of Swazilands exports). Although informal trade is assumed to account for a large proportion of total trade, most of the regional trade flows are negligible. To promote intra-regional trade, various efforts have been started in recent years. Overall trade has been substantially liberalized in the past and import restrictions reduced so that effective tariff protection rates declined in most countries. Accordingly, the average share of regional merchandise exports in percent to total merchandise exports increased from 8% in 1990 to 19% in 2008, and overall merchandise exports have grown on average by 10% per year since 1990.