Triple Crisis blogger Kevin P. Gallagher was recently interviewed by GlobalPolicyTV on the new economics of capital controls and how they are helping correct international markets. The interview is based on his new PERI Working Paper, “The Myth of Financial Protectionism: The New (and Old) Economics of Capital Controls.”
What We’re Reading
Robert Skidelsky,Does Debt Matter?
Jeffrey Frankel,Will Emerging Markets Fall in 2012?
Olivier De Schutter, Taking Back Globalization
Bill Moyers on Occupy Wall Street
Milford Bateman and Ha-Joon Chang, Microfinance and the Illusion of Development: from Hubris to Nemesis in Thirty Years
Luiz Carlos Bresser-Pereira, Perverse dependence on Asia
Martin Wolf, The world’s hunger for public goods
What We’re Writing
Kevin P. Gallagher, Capital controls are not beggar thy neighbor based on his PERI Working Paper, “The Myth of Financial Protectionism: The New (and Old) Economics of Capital Controls”
Kevin P. Gallagher on capital controls on Global Policy TV
Jayati Ghosh, Could Ecuador be the most radical and exciting place on Earth?
Jeff Madrick, Obama Makes the Case for Government
Stephany Griffith-Jones, Michael Lipton and Robert Wade, guest bloggers
What should protesters protest for? They rightly oppose the many faults of the current economic system, but what is the alternative? What ground should occupiers occupy? What can politicians who reject corporatist politics-as-usual, and economists who reject wrong economic thinking do in response to justified protest? How can the economy be transformed to serve the 99%, instead of the 1%?
Capitalism can work if reformed, and history can teach us much. In the period 1940-80, the Keynesian, mixed-economic models of north-west Europe, North America and many developing regions delivered to the poor and weak, while not frightening the strong. The financial sector was fairly small, well-regulated and simple; it financed the real economy, as it is supposed to. Growth, employment and security were high, poverty was reduced and liberty preserved, partly because social democracy helped both to moderate capitalism and to oppose communism.
Norbert Häring, guest blogger
The World Economics Association’s forum for the open review of proposed articles for the World Economics Journal and for Economic Thought is now open. 19 submissions have been posted so far. It is located at http://discussion.worldeconomicsassociation.org/.
The World Economics Association has been founded in spring 2011 and has so far attracted more than 7000 members from around 120 countries. The Journals of the association are committed to a policy of inclusiveness, openness and transparency. You are encouraged to read and comment on submitted papers that interest you. Editors will also make public comments to make their final decision making process transparent and to allow readers and authors to react and interact.
Papers submitted to the World Economics Journal include:
Microfinance and the Illusion of Development: from Hubris to Nemesis in Thirty Years, by Milford Bateman and Ha-Joon Chang
Incorporating the Rentier Sectors Into a Financial Model, by Michael Hudson
External Fragility or Deindustrialization: What is the Main Threat to Latin American Countries in the 2010s? by Roberto Frenkel and Martín Rapetti
Emerging markets have fallen victim to unstable capital flows in the wake of the financial crisis. In an attempt to mitigate the accompanying asset bubbles and exchange rate pressures that come with such volatility, a number of emerging markets resorted to capital controls. Although these actions have largely been supported by the International Monetary Fund, some policy-makers and economists have decried capital controls as protectionist measures that can cause spillovers that unduly harm other nations.
Recently-published research shows that these claims are unfounded. According to the new welfare economics of capital controls, unstable capital flows to emerging markets can be viewed as negative externalities on recipient countries. Therefore regulations on cross-border capital flows are tools to correct for market failures that can make markets work better and enhance growth, not worsen it.
Growth in China, it is said, is slowing. GDP growth has reportedly fallen from 9.7 per cent in the first quarter of 2011, to 9.5 per cent in the second quarter, 9.1 per cent in the third and 8.9 per cent in the fourth. Much is being made of these numbers, though the 9.2 per cent average over 2011 is still high and the government has itself attempted to slow the system to rein in inflation.
One can sense an element of schadenfreude here. For too long now China has been showing up the rest of the world with its high rates of growth. This is especially true of the United States, which imports much from China, depends on inflows of capital from that country to finance its deficits, and is always looking for the next country to challenge its global supremacy.
However, if China’s growth is indeed slowing, this is no cause for even the US government to celebrate. A poorly performing China can drag the US down as well. Not just because China, with its large geographical size and population, is the growth pole that prevents the multi-speed global economy from sinking into another crisis. But because China is too important a market for the large multinational corporations that symbolise US economic power.
The Obama administration has launched a “21st Century” trade negotiation with a number of pacific-rim nations referred to as the Trans-Pacific Partnership (TPP). While the full details of the proposed treaty are yet to be made public, early estimates show that the economic benefits of the agreement will be relatively small and the regulatory costs could be significantly high—especially for the emerging market and developing countries engaged in the negotiations.
The gains of the agreement may be a mere $20 billion, or just over one percent of GDP on average for the nations involved. To get those small gains nations will have to trade away the ability to use measures to prevent and mitigate financial crises, to develop a growth-based innovation system, to protect public health and the environment, and more.
Triple Crisis blogger Gerald Epstein was recently interviewed by Olaf Storbeck of Economics Intelligence on the American Economic Association’s (AEA) new guidelines requiring economists to disclose conflicts of interest. In 2011, Epstein and Jessica Carrick-Hagenbarth spearheaded an effort to get the AEA to adopt an ethics code for economists with a sign-on letter that garnered the support of over 300 economists.
One year ago, Gerald Epstein and Jessica Carrick-Hagenbarth, two economists at the University of Massachusetts Amherst, organised an open letter to the American Economic Association urging the organisation to
“adopt a code of ethics that requires disclosure of potential conflicts of interest that can arise between economists’ roles as economic experts and as paid consultants, principals or agents for private firms”.
More than 300 economists signed the letter, among them Nobel laureate George Akerlof and Christina Romer, a former advisor to US president Barack Obama.
Almost exactly one year later, the American Economic Association in fact agreed on a new disclosure codex. (Luigi Zingales also presented an interesting paper on the “Capture of Economists”.)
What do the authors of the open letter make of the new guidelines? I did an interview with Gerald Epstein, who wasn’t involved in the discussions about the new rules.
What We’re Reading
Dani Rodrik, Leaderless Global Governance
Navroz K. Dubash, Looking beyond Durban: Where to from here?
Dean Baker on the Crisis
Robert J. Shiller, Does Austerity Promote Economic Growth?
Mark Thoma, Should We Feel Sorry for the Wealthy?
Kimberly Ann Elliot, Why Is Opening the U.S. Market to Poor Countries So Hard?
Wall Street Journal, Economists Set Rules on Ethics
Roberto Sansón Mizrahi, Much more than Keynesian policies to face the global crisis
What We’re Writing
Timothy A. Wise and Sophia Murphy, Resolving the Food Crisis: Assessing Global Policy Reforms Since 2007
Gerald Epstein on the new AEA disclosure guidelines
Jeff Madrick, Have Economists Become Something More Dangerous — Policy Wonks?
Martin Khor, Fiscal austerity causing new recession
Jayati Ghosh, Year of Centenaries
For nearly a decade, Goldcorp’s Marlin gold and silver mine in the Guatemalan altiplano has been at the center of intense local conflict and international scrutiny. The conflict was ignited in 2005 when local Mayan communities overwhelmingly rejected mining in popular plebiscites called consultas. Chief among their concerns was the potential for water contamination in the agricultural areas.
Virtually every international human rights organization—from the ILO to the UN Special Rapporteur – has weighed in, urging Goldcorp and the Guatemalan government to suspend mine operations to ensure protection of the rights, health and livelihoods of the indigenous people. In mid-2010, the Inter-American Commission on Human Rights of the Organization of American States (IACHR) went one step further and issued precautionary measures ordering the Guatemalan government to suspend operations at the Marlin mine.