It is fairly obvious that in the immediate future, and probably for some time to come, the United States cannot continue to be the engine of growth for the world economy. For various reasons, consumption demand (especially that emanating from wage incomes broadly defined) is likely to remain suppressed for some time, and this will prevent a more balanced recovery. Household savings rates have already started rising from their very low levels. It was expected that increased public spending would substitute for the repairing of private balance sheets, and that has actually been the case in the past year. However, the remarkably rapid political backlash against “excessive” government spending – even though it has little validity within a Keynesian macroeconomic framework – seems to have already affected the ability and the willingness of the US government to engage in further spending to ward off potential recession. The dangers of early withdrawal of stimulus measures are thus very high.
Emerging from Financial Crisis: A return to “normalcy” without fundamental changes?
Andong Zhu
Guest Blogger, Tsinghua University, Beijing, China
After the biggest, multi-trillion dollar stimulus plan in human history was implemented by the governments of many countries, financial indicators, world trade volume and industrial production all show positive signs. According to a recent calculation by American economist Barry Eichengreen, world equity markets, world trade, and world industrial production all recovered from the trough (50%,20%,13% below the previous peak, respectively) to the current situation (25%,8%,6% below the previous peak, respectively). The latest World Bank forecasts of world GDP growth in 2010 and 2011 are 2.7% and 3.2%, after a decline of 2.2% in 2009.
Clear Economics
The United States Congress is expected to take up the Carbon Limits and Energy for America’s Renewal (CLEAR) Act in the coming months. The bill – a potential breakthrough in U.S. climate policy – was proposed in December by Senators Maria Cantwell of Washington and Susan Collins of Maine. In preparation for that debate, Matthew E. Riddle and I have analyzed the household-level impacts of the bill’s cap-and-dividend climate policy and how these differ across the income spectrum and across the states.
A new report, Clear Economics, shares our findings that the CLEAR Act delivers positive net benefits to the majority of households in every state: what these households will receive in dividends exceeds what they will pay as a result of higher fossil fuel prices. We also suggest ways in which the interstate differences in impacts could be further reduced or eliminated altogether, and assess state-by-state job creation that will result from public investments in the clean energy transition.
Macroeconomic Policy: The Elephant in the Room
International conferences on poverty and the environment come and go. There’s always a big pachyderm in the meeting room. It’s got the words “macroeconomic policy” written on its forehead. Nobody wants to talk about it.
Consider the following. The Millennium Development Goals were debated in many conferences, but nobody spoke about the macroeconomic policy framework needed to achieve them. As if reducing hunger and extreme poverty, generating employment and providing health services and education had nothing to do with fiscal policy, monetary policy and financial deregulation. Aside from some pious words about financing and overseas development assistance, the implicit message was to carry on with the same macroeconomic policies. That could only have been based on faith in the trickle-down potential of neo-liberal globalization.
Financing the fight against climate change: Where are the governmental shareholders?
According to UNDP, limiting global warming to less than 2° Celsius above the pre-industrial era is estimated to require about $250 billion a year in additional investment to “green” the world economy in 2010-2015. Governments would be wise to meet this target by investing in low-carbon development – particularly since the cost of the alternative is much more expensive. However, high and rising government debts will significantly preclude this path.
Knowledge in Development: Fostering knowledge generation in the global South
Who produces the knowledge some believe we have about development? And who consumes it? Plentiful experiential evidence suggests that ideas about development are largely produced in the developed countries, and crucially, legitimated in them. They are also often peddled in Southern countries by Northern institutions, where to varying degrees they receive ‘take up’.
Not Your Grandfather’s IMF: The emergence of policy space in the wake of global economic crisis?
When things have been so bleak for so long, when yesterday’s mistakes routinely become tomorrow’s blueprints, it is understandable that we fail to recognize change when it begins to unfold. This is certainly true of those of us who for so long have railed against the extension of neo-liberalism across the global South at the hands of the IMF/World Bank, Wall Street, leading governments, neo-liberal reformers in the developing world and the economics profession. Faced with a juggernaut of this sort, surely we can forgive ourselves for failing to recognize, let alone take any hope in, signs of change.
Forgiven, that is, if the stakes weren’t so high. But they are very high—and so we can’t be quite so self-forgiving if in fact our pessimism leads us to discount too readily evidence of aperture that could be exploited to bring about the kind of change in ideas and policies that the developing world so badly needs. This insight should warn us against premature conclusions that nothing has or can change.
Obama Goes Nuclear: What happened to clean energy?
President Obama’s embrace of nuclear power as a “clean energy” source – coupled with his announcement last month of $8.3 billion in federal loan guarantees for the first nuclear reactors to be built in the United States since the 1970s – has been met with dismay by many of the president’s supporters as well as his usual critics.
For environmentalists, who generally back the president’s climate policy goals, the rebirth of nuclear power is a nightmare come true. They point to the risk of accidents, remembering the partial meltdown at the Three Mile Island reactor in Pennsylvania in 1979 and the Soviet Union’s Chernobyl disaster seven years later. They draw attention to the serious environmental and health costs of uranium mining. Above all, they point to the unsolved problem of what to do with high-level radioactive waste generated by nuclear power plants.
Climate Change and the U.S.: Is the Environmental Protection Agency under-pricing carbon?
What will the US do about climate policy? The ongoing paralysis in Congress makes it clear that failure actually is an option. For those who long for success, the best hope may be EPA regulation of carbon emissions. Yet far from setting an ambitious new course, EPA may be following the worst of traditional economics – effectively arguing, in opaquely technical language, that climate change isn’t such a big deal, so the right policy is to do almost nothing.
Beyond Copenhagen: Searching for climate resilient development paths
Nobody was surprised by the February 19 announcement of the resignation of Yvo de Boer as head of the UN’s climate talks. In Copenhagen, De Boer presided over the most chaotic, costly and in the end, fruitless attempt to negotiate a multilateral treaty in the history of global environmental governance.
In the wake of Copenhagen, climate activists, experts and leaders alike are asking “what way forward”? Some, like the South Centre’s Martin Khor, are gearing up for the next round of global talks, which will be held in Mexico in July. Others are refocusing energies on national or state level climate policy, including key states like California. Evo Morales, the president of Bolivia, is hosting an alternative climate conference in April to build political support for the concept of “climate debt” and to press for a “declaration of the rights of mother nature.” De Boer himself has thrown in his lot with business—he will join KPMG as an advisor on global climate and sustainability.