Hungary, the IMF and the EU

Jayati Ghosh

The more things change, the more they really do stay the same. For a while after the global crisis, we were told that the IMF had changed its position with respect to the strict and generally pro-cyclical measures it had been suggesting to countries in the throes of financial or balance of payments crisis. Their economists openly accepted the need for fiscal stimuli and generally counter-cyclical macroeconomic policies to combat the recession.

According its own internal review in September 2009, the IMF has really changed in this respect: “Internalizing lessons from the past, (IMF) programs have responded to country conditions and adapted to worsening economic circumstances to attenuate contractionary forces…The stance of fiscal policy in most cases has been accommodative and adjusted to evolving conditions. Deficits were allowed to rise in response to falling revenues and, in cases where domestic and external financing was lacking, this was facilitated by channeling Fund resources directly to the budget.”

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Bankers’ Pay: What Economics has to Say

Sanjay Reddy

The recent global debate over the pay of bankers has raised issues that are basic to economic theory, and to moral and political philosophy, simultaneously. One question concerns what level of pay is necessary in order to attract people to do a certain job, and to do it effectively. Another question concerns what level of pay would be appropriate, fair, or just to pay people to do that job. Both are entailed in the current debate on the pay of bankers (particularly investment bankers).

The G-20, and more recently the European Parliament, as well as individual countries (especially Germany, France and the UK) have promoted the institution of new norms to govern the pay of bankers, requiring for example that their pay should be spread over a number of years, or be provided in part in the form of shares or other instruments, the return of which will depend on the success of the bankers’ strategies over a longer period than previously.

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Is De-Growth Compatible with Capitalism?

Alejandro Nadal

A serious campaign in favor of “de-growth” has been going on for some time and has made important contributions. This movement has opened new avenues for debate and analysis on technology, credit, education and other important areas. It’s an effort that needs support and attention, and we must applaud their initiators and promoters for their boldness and dedication.

De-growth is defined as “a reduction of production and consumption in physical terms through down-scaling and not only through efficiency improvements”. Kallis-Schneider-Martínez Alier explain that de-growth is a smooth, voluntary and equitable downscaling of production and consumption that insures human wellbeing and ecological sustainability locally as well as globally on the short and long term. Thus, de-growth is not limited to a technological dimension.

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Capital controls: “The new normal” (Part II)

Ilene Grabel

In a recent post, I argued that capital controls have become the new normal. This is welcome news to progressives who have long argued that developing countries should have the right to deploy capital controls.  A reasonable question for progressives to ask at this point is why are capital controls breaking out all over?

There are several possible (and no doubt, mutually reinforcing) reasons for the resurgence of controls.

First, on a practical level, they are needed in many countries. Policymakers in the developing economies that are performing well now are using these policies to contain the asset bubbles (and attendant inflationary pressures and currency appreciation) stimulated by the foreign investment that is flooding developing economy markets (itself the consequence of the low interest rates and dim economic prospects of the USA and Europe).

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What Can Proponents of a Green New Deal Learn from the German Presidential Election?

Gerhard Schick

As of Friday, July 2, Mr. Wulff became Germany’s new Federal President, the state’s highest office. The election electrified the German public even though the German President has little power and is chosen by the members of the German Parliament and representatives of each of the sixteen states rather than by public vote.

It has been a long time since the German public was as captivated as they were by Mr. Wulff’s opponent, Mr. Gauck.  Despite the great enthusiasm for his candidacy, he was, at last, defeated by the conservative majority of electoral delegates.  But one can learn a lot from Gauck’s one-month campaign: He was able to inspire people to become politically active.  Broad-based activism is needed to transform society and achieve a socially and ecologically sustainable economy.

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Capital controls: “The new normal” (Part I)

Ilene Grabel

Like many progressive economists, I’m addicted to economics and business news. These days one phrase is repeated constantly—“The new normal.” Indeed, National Public Radio’s show, “Planet Money” recently featured a story on this omnipresent phrase.  The new normal is shorthand for features of a dismal new economic reality to which the (investing) public must adjust. The new realities of our era include lower rates of return on stocks, bonds and real estate; larger government budget deficits which precipitate higher inflation rates; sluggish (and even negative) rates of growth in rich countries; and a shift in economic (and political) power to the world’s dynamic developing countries.

But another new normal has flown in under the pundit’s radar screen. This new normal is the proliferation of capital controls, which are being implemented rather widely across the developing world.

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Korea-US trade deal would outlaw capital controls

Following up on Kevin Gallagher’s Triple Crisis post on the proposed US-China investment treaty, Gallagher has outlined in a recent column in The Guardian how the pending Korea-US Free Trade Agreement would prevent the Korean government from doing precisely what it is now doing to manage the financial crisis: control the flow of foreign currencies.

“South Korea will join the growing group of nations that have recently resorted to currency controls in the wake of the global financial crisis. As a rash of new research has shown, such controls are legitimate tools to prevent and mitigate financial crises.

“Yet if the pending South Korea-US free trade agreement that the US just agreed to expedite at the G20 meetings had been ratified by now, South Korea’s actions would be deemed illegal.

“As the Obama administration works to put Bush-era trade policy behind and forge a ’21st century trade policy’ it should fix this flaw that could be fatal to South Korea’s financial stability….”

Read the full Guardian column.

Climate Change: Are People the Problem?

James K. Boyce

There is no doubt about it: people are changing the Earth’s climate. The evidence for what scientists call “anthropogenic climate change” is overwhelming, notwithstanding the obfuscation efforts of the climate change denial industry kept on life-support with infusions of corporate money.

But to say that our emissions of greenhouse gases are causing climate change is not to say that every extra person automatically multiplies the problem. Nor does it imply that population control is the ultimate solution – a view espoused by some on the Malthusian fringe of the environmental movement.

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Offshore Oil Drilling and Hurricane Risks

Frank Ackerman

It’s time to stop blaming BP – alone. At least four other oil companies hired the same firm to write their plans for handling spills in the Gulf of Mexico. They ended up with nearly identical plans, complete with thoughtful concern about impacts on walruses. The CEO of ExxonMobil called it “unfortunate” and “embarrassing” that the plan included walruses, which have not been present in the Gulf region for millions of years.

On the other hand, according to U.S. Rep. Ed Markey, the oil industry’s standard plan for Gulf spills never mentions hurricanes or tropical storms, which do appear in the region on an annual basis. This makes perfect sense under only one interpretation: the oil companies were certain that accidents never happen. If there are no oil spills, your spill response plan can talk about unicorns, and no one will be the wiser.

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