The recent global economic crisis has affected the poor in developing countries most, in part because they are the weakest to deal with such a crisis. Their weakness is partly due to the practices of neo-liberal ideas imposed on them by international financial institution (IFI) during the last couple of decades. The emergence of the crisis raises a fundamental question: is there any hope that the lessons learned will lead to a turning point in favour of “development”? It should, but I doubt whether it will, and the danger is that the next global crisis would emerge in the trading system.
The great depression of 1930s was a turning point as the Keynesian macroeconomic policies dominated the scene for a couple of decades. By contrast, Keynes’ ideas on international development policies, presented after the Second World War, were turned down. So was his proposal for the creation of ITO in favour of the Bretton Woods institutions and WTO.
Brazil and the United States may have settled, for now, their long-running WTO dispute over U.S. cotton subsidies, but the issues it raised remain. After all, Brazilian producers were not the only ones hurt by U.S. dumping of its highly subsidized cotton on world markets, which not only took market share from competing producers, it depressed the international price for all producers.
How much does agricultural dumping cost farmers in developing countries? I recently completed a study for a Woodrow Wilson Center project that highlights just how high the cost of dumping can be. I benefited from the somewhat controlled experiment represented by U.S.-Mexico agricultural trade under the North American Free Trade Agreement (NAFTA). I call it a controlled experiment because NAFTA liberalized agricultural trade dramatically over a short period of time, Mexico imports most basic grains and meats almost exclusively from the United States, and Mexican farmers grow many of the crops that compete with the imports. In such a case, one can easily see the increase in U.S. exports, the drop in Mexican producer prices, and it is reasonable to assume that the U.S. export price is the reference price for these products in Mexico.
In the Western press the conventional wisdom holds that China is emerging as a new colonial power in Africa. American University professor Deborah Brautigam has written a provacative new book, “The Dragon’s Gift: The Real Story of China in Africa,” that challenges that view. Indeed, Brautigam contends that China’s “idea” of development may in the end prevail over the often fadish Western approaches to aid and development in Africa. Triple Crisis blogger Kevin P. Gallagher interviewed professor Brautigam on China’s role in Africa.
Responding to Jeff Madrick’s recent post on the US financial regulation legislation, Triple Crisis guest blogger Robert Wade argues for the need to consider “external” causes of the global financial crisis.
I agree with and admire the lucidity of Jeff Madrick’s post — as far as it goes. But (for understandable reasons) it keeps the spotlight trained on microeconomic financial regulation, as does most of the debate. My concern is that the focus on financial regulation obscures the important role of “external” causes in contributing to financial instability (external to national financial systems), and obscures the pressing need for policy reforms to curb these external causes. I highlight two external causes: (1) national income inequality; and (2) international payments imbalances. I argue that if high income inequality and large international payments imbalances are not curbed, we run a serious risk of repeat crises – because the microeconomic efforts to re-regulate and re-structure national financial systems will be eroded or swamped by the force of these more macroeconomic external causes.
Paul Volcker says the financial reregulation bill passed to much hoopla by Congress in mid-July deserves only a grade of B. Sheila Bair, head of the Federal Deposit Insurance Corporation, says the Basel committee of the Bank for International Settlements is already backing off stern capital requirements for banks that the bill was supposed to establish. Michael Mandel, the former chief economist of Business Week, says he cannot even tell you what the financial regulation bill is trying to accomplish.
To most people, the new financial reregulation package must look like the work of a bunch of Congressmen, along with the President’s economic team, plugging holes in a dam. The Obama Treasury got the nation off on the wrong track when it issued its June 2009 white paper. It basically listed a series of problems that had to be dealt with. Does anyone have a sense which are the biggest holes, how many there are, and whether we’ve really plugged them? Or why there were holes in the first place?
“In one of the more memorable moments of the 2008 presidential campaign, candidate Barack Obama explained why he rejected John McCain’s call to postpone their September debate in Oxford, Mississippi, during the negotiations on the first financial bailout package. “It’s going to be part of the president’s job,” Obama declared, “to be able to deal with more than one thing at once.””
“Something similar can be said about climate policy. A variety of proposals – for public investment, carbon pricing, regulatory standards – are cooking in Washington’s political stew. Sometimes the proponents of specific policies are tempted to oversell their merits, while dismissing other policies as unnecessary or even counterproductive. But if Congress and the Obama administration are going to get smart on climate change, part of their job is to deal with more than one policy at once…”
In an interview with Newsclick, Triple Crisis blogger Martin Khor looks back at the Copenhagen Climate Change conference and discusses opportunities that were missed and the way forward to take negotiations to a positive conclusion.
In the immediate aftermath of the global financial crisis even the deepest market fundamentalists embraced the core Keynesian insight that when in deep recession, monetary policy will be ineffective and fiscal stimulus is required. They have now abandoned that view as calls for fiscal austerity abound regardless of the increasingly fragile nature of the global recovery.
While economists and policy-makers debate the short and medium-term remedies to the crisis, there is an incredibly surprising and under-discussed consensus emerging for the longer run. From the Financial Times to the South Centre there is agreement that the United States and East Asia (notably China) have to change the ‘structures’ of their economies.