TripleCrisis

Macri’s First Year in Office: Welcome to 21st Century Neoliberalism

Alan Cibils

Alan Cibils is an Argentine economist and Professor of Political Economy at the Universidad Nacional de General Sarmiento in Buenos Aires, Argentina.

As the United States and the world grapple with the potential implications of a Trump presidency, Argentina is evaluating the results of Mauricio Macri’s first year in office. Macri’s electoral victory on November 22, 2015, marked the end of 12 years of populist, expansionary economic policies and the return to neoliberalism. While government officials and supporters deny this, a close look at the Macri administration’s discourse on economic issues and policies implemented force the conclusion that this is neoliberalism—again.

From campaign rhetoric to economic policy

Macri campaigned as an outsider to politics (despite two consecutive 4-year terms as mayor of the City of Buenos Aires), whose main goal was to solve ordinary people’s problems. His message was that he would keep those policies of kirchnerismo (the previous two presidents were Néstor Kirchner and Cristina Fernández de Kirchner) that had worked and improve or change those that hadn’t.

However, when Macri took office it became clear that his program was a major rollback of the populist legacy and a return to neoliberalism. Macri stacked key ministries with corporate CEOs, leading some to state that Argentina was now a CEO-cracy, rather than a democracy. Bloomberg heralded Macri’s arrival to office with an eloquent “Wall Street Is in Charge in Argentina (Again).” Argentine Treasury Minister Alfonso Prat Gay stated the Macri government’s intentions clearly at a G7 minister meeting: “The world is threatened by protectionism and populism, and Macri was elected to emancipate Argentina from these evils.” In other words, Macri would do away with the populist legacy and open the economy to the world.

So, what have been Macri’s main economic policies in his first year in office?

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Keeping America’s Promises: The Green-State Climate Agreement

Frank Ackerman

In January Donald Trump will endorse climate denial, renouncing the Clean Power Plan and climate targets in general. This will damage the fragile global momentum toward emission reduction, established in last year’s Paris agreement. If the United States refuses to cooperate, why should much poorer, reluctant participants such as India do anything to cut back on carbon?

But among many things that this dreadful election did not represent, it was not a statement of (dis)belief about climate change. Large parts of the country recognize the validity of modern science, understand the urgency of the problem, and remain committed to ambitious carbon reduction targets.

Suppose that many of our state governments got together and told the rest of the world about our continuing commitment to action: we are still abiding by the U.S. pledges under the Paris agreement, or even planning to do more. Not just NGO reports, blog posts, or individual signatures, but an official, coordinated announcement from government bodies with decision-making power over emissions – primarily states, perhaps joined by Indian tribes and major city governments.

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Possible Priorities of the 2017 German G20 Presidency

Nancy Alexander

Nancy Alexander is Director of the Economic Governance Program at Heinrich-Böll-Stiftung.

Even though the German G20 Presidency does not formally begin until December 1, 2016, it has already begun preparations for the 2017 Summit process. In addition to Germany (2017 President), the new Troika consists of; China (2016 President); and Argentina (2018 President). The G20 is likely to hold some 70 ministerial and working group meetings before the next Summit takes place in Hamburg, Germany in July 2017.

2017 G20 German Presidency will focus on the three themes, or pillars: Resilience; Responsibility;and Sustainability.

Each pillar will include a list of policy priorities, which Chancellor Merkel will announce ton December 1, 2016. This blog only conveys the impressions we have gathered from German and U.S. sources; the China G20 Summit process; and InterAction.[i] What we understand is that the Presidency will promote three pillars, as shown below.

RESILIENCE PILLAR

The German G20 will not introduce new issues onto the already full G20 finance agenda; instead, it will focus on implementation of existing commitments with an emphasis on the policies in the table (above).

It will continue the G20’s long-term work on the Framework for Strong, Sustainable and Balanced Growth. The G20’s “Framework Working Group” manages this important work stream.

Due to contested fiscal and monetary policies, the G20 relies heavily on the anticipated potential for attracting private sector investment when countries adopt the new Enhanced Structural Reform Agenda. A revision of this 9-point Agenda should incorporate sustainable development (e.g., labor, environment) and address the valid claims made by those involved in a popular backlash against globalization and free trade. (See critique here.)

RESILIENCE…. Enhancing resilience of economies to withstand shocks

DEBT. Germany has an important goal – namely reducing unsustainable debt burdens. Debt overhang and “fixing the balance sheet” are key issues, as the piles of public/private debt must be addressed in order to have fiscal leeway. In addition to the rise in sovereign debt levels, there is evidence of rising corporate debt in Emerging Market Economies (tripling bond issuance), which is noted here. Some corporate debt is widely considered unpayable. The private sector holds two-thirds of total world debt which stands at $152 trillion (225% of world GDP in 2015). Therefore special efforts to reduce public and private debt are needed to make the real economy more robust. Insurance solutions are also viewed as crucial to building resilience.

FISCAL POLICY. There are many ways to promote growth. As noted above, the G20 member countries do not agree on the question of whether or how to use fiscal stimulus, as the G20 did in 2009 to help recover from the global financial crisis. To little avail, the U.S. and others have pressured Germany to adopt a strategic approach to using fiscal stimulus to promote growth. Germany has emphasized that fiscal coordination will not be on the G20 agenda, although there are individual country initiatives such as larger deficits (Canada, U.S.); reducing surpluses (Germany) or delayed deficit reduction (France, Italy, Japan). Fiscal consolidation is occurring in Latin America and Russia.[ii]

REGULATION. With regard to financial regulation, the emphasis is on implementation and monitoring. The financial regulatory response to the Global Financial Crisis is the largest legal effort ever, so implementation is key. Shadow banking has been renamed “Non-regulated Market based Banking” or “Activities formerly known as Shadow Banking” and there is tension over whether or how to regulate these huge shadow flows. There are still major concerns with Central Counterparties that are “Too Big to Fail”, despite the work by the Australian G20 on “Total Loss Absorbing Capacity”, which helps ensure that global, systemically important banks have sufficient resources to absorb losses and be recapitalized if they fail.

EVALUATION. The Bundesbank will develop a structured framework of the evaluation of the results of financial regulation. This could be a very worthwhile contribution.

PRODUCT SAFETY. The civil society proposal for a financial product safety commission might be explored.

INCLUSIVE FINANCE AND DIGITIZATION (FinTech)

FINTECH. According to McKinsey Global Institute, 12% of the global goods trade conducted via international electronic commerce (e-commerce). Such trade is one aspect of the term “FinTech,” which refers to any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even blogchain based crypto-currencies like bitcoin.

Given the speed at which FinTech is governing financial transactions, an array of public policy questions become key, such as: how to tax businesses that exist in the “Cloud”, how to ensure that the innovations do not destabilize the global financial system (especially given problems such as state-led, or backed, commercial cyberespionage), or how to ensure that technologies are harnessed to lead a new industrial revolution.

TRADE AND DIGITIZATION. At this point, it is unclear whether Germany will seek to make digital trade a feature of its trade agenda. In a recent speech, U.S. Trade Representative Michael Froman declared the effective end of the Doha Development Round of trade talks which began in 2001. Froman said that „when Doha was launched, the Internet was a novelty, global supply chains were beginning to emerge and smart phones were just a dream. Today, the digital economy is revolutionizing everything from advanced manufacturing to the way in which services are traded across the world.” The United States and its partners from around the world will focus on “pragmatic multilateralism” that focuses on not only digital trade and digital economy, but also, fisheries subsidies, Micro-, Small- and Medium-Sized Enterprises, and domestic regulation in services, according to the “South-North Development Monitor (SUNS).[iii]

Digitalization will also be taken up in the G20 Development Working Group agenda as it relates to taxation, industrialization and other priorities.

Other priorities may relate to

Anti-corruption
International Financial Architecture
Remittances
Trade and transparent global value chains (GVCs) to improve health and safety at work

RESPONSIBILITY PILLAR

The priorities include: Agenda 2030; Participation, particularly for women; refugees and migration; and the Africa Compact. Health is a significant priority for Chancellor Merkel, possibly including support for ongoing G20 work on Antimicrobial Resistance (AMR) and the fight of pandemic diseases, which implies exploring measures to address potential market failures. The Science 20 will explore options related to publically funded research, particularly at its March 22, 2017 meeting in Halle.

Comments on three priorities follow.

AFRICAN COMPACT FOR INVESTMENT, especially in infrastructure. Chancellor Merkel’s recent speech in Ethiopia highlights three priorities for her G20 Presidency: the role of the private sector, infrastructure and vocational training. Germany will host a major African Partnership conference on June 12 – 13th.

The idea is to execute investment compacts with African governments that would represent frameworks for infrastructure and pave the way for private industry. (Compacts may be designed with the United Nations “Global Compact”.) Perhaps Germany will also revive aspects of its “investment for development” initiative which was advanced during its G8 presidency of the 2007 Heiligendamm Summit.

The question remains how to make infrastructure investment coherent with sustainable development and climate goals? It is worrisome that some Finance Ministers view this as the concern of the G20 Development Working Group, not of their “Finance Track”, but there are signs that this may change for the better as Finance and Development ministers are supposed to meet back-to-back with the African Compact Conference.

The Finance Ministries are concerned about African debt. In that regard, the big question is: how could-large scale borrowing for infrastructure be justified given the fact that many African countries are highly indebted? Is it realistic to hope that investment will generate productivity and growth to facilitate repayment? Optimism will be tempered with some realism given not only the debt, but also low growth, a potential banking crisis, a slowdown in China (Africa’s major trading partner), depreciating currencies, and expanding deficits (especially given the decline in export revenues due to low commodity prices).

THE 2030 AGENDA FOR SUSTAINABLE DEVELOPMENT. According to the 2016 G20 Communiqué, the G20 will work on the Agenda “based on [its] comparative advantage and the added value” and in accordance with [its] national circumstances. A review of the G20’s Action Plan on the 2030 Agenda shows that the Action Plans of many of the individualG20 member countries are half-hearted, at best.

For its collective work on the 2030 Agenda, the G20 has defined 15 “Sustainable Development Sectors” (SDSs) and identified how its work in each “sector” (e.g., infrastructure) or “theme” (e.g., growth, trade, investment) will contribute to the Sustainable Development Goals (SDGs). The main problem with the G20’s Action Plan is that it is unclear what the causal connection is between the G20’s SDSs, on the one hand, and their achievement of SDGs, on the other.

As this analysis shows (see the appendices here), the G20 SDSs focus primarily on seven SDGs – namely, No Poverty (#1); Decent Work and Economic Growth (#8); Industry, Innovation and Infrastructure (#9); Reduced Inequalities (#10); Responsible Consumption and Production (#12); Climate Action (#13) and Partnerships for the Goals (#17).

Finally, The German G20 Presidency is likely to initiate a system to help monitor progress on this universal 2030 Agenda.

EDUCATION, TRAINING AND EMPLOYMENT. Each G20 member country may update its Employment Plan in 2017. There will be an emphasis on vocational training, especially for girls and women in developing countries (aiding overall reduction in poverty and inequality). Civil society is also calling for a focus on childhood and primary school education.

SUSTAINABILITY PILLAR

This pillar will focus on:

Climate policy (the Paris Agreement), removal of fossil fuel subsidies, carbon pricing
Sustainable Growth
Agenda 2030 (see above)
Marine protection

“Sustainable Growth” and “Agenda 2030” also appear under the “Resilience” and “Responsibility” pillars, respectively.

An “Energy, Environment & Sustainability Working Group” may be created to focus on climate-related financial disclosures, development of green bonds, clean infrastructure investment, climate finance, and energy efficiency. Previously, there was an “Energy Sustainability Working Group” which may have had a narrower mandate than the one envisioned for 2017.

[i] Thanks to Soniya Sharma, InterAction, US.

[ii] Robert Kahn, “The G20 Disappoints on Policy,” Global Economics Monthly, Council on Foreign Relations, September 2016.

[iii] See: Third World Network, www.twn.my, “US, partners to bury Doha, focus on new trade agenda at Oslo?” Published in SUNS #8335 dated 18 October 2016.

Originally published at Just Governance blog.

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The Global Industrial Working Class

Immanuel Ness

Immanuel Ness is Professor of Political Science at Brooklyn College the City University of New York and the author of Southern Insurgency: The Coming of the Global Working Class.

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TRIPS: The Story of How Intellectual Property Became Linked to Trade, Part 3

This is the third part of a seven-part series with Peter Drahos, a Professor in the RegNet School of Regulation and Global Governance at the Australian National University. He holds a Chair in Intellectual Property at Queen Mary, University of London and is a member of the Academy of Social Sciences in Australia. In 2004 he and his co-author Professor John Braithwaite won the Grawemeyer Award in Ideas Improving World Order for their book Global Business Regulation. Prof. Drahos is interviewed by Lynn Fries, producer at The Real News Network. Find the whole series here.

Full text below the break.

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Prospects for the Spanish Left, Part 3

William Saas, Jorge Amar, David Glotzer, and Scott Ferguson

This is the final part of a three-part series on Spain’s economic crisis, the program of the new leftist political party Podemos, and both the limitations and potential of the Spanish left today. This installment focuses on a possible recomposition of Podemos that could lead to the “left turn” in economic policy—including exit from the euro and the jobs guarantee—that the authors advocate. Parts 1 and 2 are available here and here.

William O. Saas is an assistant professor of rhetoric at Louisiana State University. His work has appeared in symplokē and Rhetoric & Public Affairs.

Jorge Amar is a Spanish economist, president of Asociación por el Pleno Empleo y la Estabilidad de Precios, or Full Employment and Price Stability Association), and a doctoral candidate in applied economics at the Universidad Valencia. Recently, Amar served as economic advisor for Spain’s Unidad Popular party.

David Glotzer is a valuation analyst at Solidifi, and freelance writer whose background is in Economics and Mathematics. His writings have appeared in CounterPunch, Investig’Action, Strategic Culture Foundation, and Young Progressive Voices.

Scott Ferguson is an assistant professor of humanities and cultural studies at the University of South Florida. He is also a Research Scholar at the Binzagr Institute for Sustainable Prosperity. His essays have appeared in CounterPunch, Naked Capitalism, and Flassbeck Economics International.

The Way Forward

In order to escape its cycle of debt deflation, Spain must ultimately do what its counterparts on the European “periphery” have so far failed to do: exit the eurozone. To proceed otherwise—to continue to acquiesce to the destructive rules of the institutions—is to guarantee the continued immiseration of the Spanish working class.
It is time for leaders within Unidos Podemos to pledge, in no uncertain terms, to take the steps that are necessary to restore Spain to prosperity. The most controversial of these steps will be the Spanish Left-exit, or “lexit.” Path-breakers in a lexit-oriented Unidos Podemos must anticipate and account for popular reluctance to depart the euro. With the example of UKIP’s noxious campaign for Brexit fresh in their minds, some Spaniards will doubtless view Spanish lexit as an inherently reactionary proposal. In stark contrast with UKIP, however, a lexit-oriented Unidos Podemos will be able to supplement its proposal with a roadmap for a prosperous post-euro Spanish economy, as well as a leadership that is prepared to execute the requisite sharp left-turn.

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Prospects for the Spanish Left, Part 2

William Saas, Jorge Amar, David Glotzer, and Scott Ferguson

This is the second part of a three-part series on Spain’s economic crisis, the program of the new leftist political party Podemos, and both the limitations and potential of the Spanish left today. This installment focuses on the relevance of Modern Monetary Theory (MMT) in transcending conventional balanced-budget thinking. Part 1 is available here.

William O. Saas is an assistant professor of rhetoric at Louisiana State University. His work has appeared in symplokē and Rhetoric & Public Affairs.

When one shifts focus from the public spectacle of political discord to the more vital behind-the-scenes debate over political economy, the prospects for the Spanish left look a lot more promising. Several major figures in Unidos Podemos, besides Garzón, do understand that the fiscal strictures forced upon Spain by the Troika institutions foreclose any hope for true economic recovery. Informed by the insights of Modern Monetary Theory (MMT), a select and well-placed few clearly see that monetary union without fiscal union is a tried-and-true recipe for endless austerity (see Alejandro Reuss, “Eurpoean Social Democracy and the Roots of the Eurozone Crisis: Part 1—Monetary Union and Fiscal Disunion,” D&S, July/August 2016). They recognize that jobs and demand, not equilibrium and “confidence,” are the key ingredients of economic well-being. Most importantly, they understand that the last best hope for Spain is to again become sovereign in its own currency.

The impending collapse of PSOE will leave masses of Spanish voters alienated and in search of alternatives to the newly formed PP-led government. While some voters might prefer the familiar feel of PP’s austere embrace, it is a safe bet that many more will defect to the parties that make up the Unidos Podemos coalition. This is, we feel, a very promising development. But in order for a reinvigorated Unidos Podemos to follow through on its promise to deliver the Spanish working class from austerity, the coalition must finally disavow, without apology or regret, the utopian dream of a single-currency Europe.

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Land Grab Update: Mozambique, Africa Still in the Crosshairs

Timothy A. Wise

On October 12, the government of Mozambique quietly announced that it would close its Agriculture Promotion Centre (CEPAGRI), the agency created in 2006 to promote large-scale foreign investment in the country’s agricultural sector. In a terse statement, government spokesman Mouzinho Saide gave no reason for the closure, saying only that its functions would be subsumed under a different agency in the Ministry of Agriculture.

Longtime Mozambique analyst Joseph Hanlon was not so shy, reporting in his October 18 Mozambique News Report that CEPAGRI was finished because those large-scale projects it was supposed to broker: “none of them have succeeded.”

Hyperbole aside, Mozambique’s grand visions of foreign capital modernizing its agricultural sector have indeed proven grandiose. Nowhere is this clearer than in the rich Nacala Corridor in northern Mozambique, where the ProSAVANA project promoted by Brazil, Japan, and Mozambique was going to transform 35 million hectares—nearly 100 million acres—into soybean plantations modeled on Brazil’s cerrado region.

Brazilian agribusinessmen walked away, seeing land that was hardly “unoccupied,” resistance from the communities occupying that land, and poor infrastructure to get any product to its intended markets in China and Japan. ProSAVANA lives on in name at least—and as an ongoing threat to farmers in the region—but so far, the project’s largest product is hubris. (See my previous articles here and here.)

But is land-grabbing over, in Mozambique and across Africa and the rest of the developing world? Now that crop and food prices have returned to their usual punishingly low levels, is the pressure off from foreign buyers looking to acquire large tracts of agricultural lands?

Not according to new data from the Land Matrix Initiative, which has been tracking such deals since the land rush took off in 2007. A large number of formerly announced deals have failed to materialize, as with ProSAVANA, but many that remain are now under contract and coming into production.

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