In a recent speech to CUTS in Geneva Mr. Pascal Lamy, the Director-General of WTO, argued, inter alia, that in order to reduce its food deficits, “African Agriculture needs to become more efficient, and…to discover ‘specialization’…”, rather than opting for self-sufficiency. He implicitly drew an analogy between the division of labour between Einstein and his Assistant and Ricardo’s theory of comparative cost advantage (CA). Hence, “… it would make no sense for Africa to produce everything for itself [become self-sufficient], just as it makes no sense for Einstein to process documents too” in addition to his scientific work.
I try to remain within the framework and logic of Mr. Lamy-let alone the fact that the theory of CA of Ricardo is static, suffers from unrealistic assumptions and is inappropriate to development issues (see Shafaeddin, Trade Policy at the Crossroads).
The massive and unfolding tragedy in Japan encapsulates in extreme form the intersection of the three crises that this blog deals with. The unprecedented earthquake and tsunami were obviously unpredictable natural disasters, but they also reflect the growing ecological fragility that is at the heart of the fears about the looming environmental crisis. The nuclear emergency that has erupted thereafter in the Fukushima nuclear installations is an extreme outcome of a particular pattern of development that has been heavily based on maximising energy sources, including the placing of nuclear reactors in known seismic and tsunami-prone zones. That these unbelievably tragic occurrences could then call forth massive financial instability is an indication of how far we have allowed our economies to become hostage to the most egregious market forces, even in times of colossal calamity.
President Obama’s 4-day visit to Chile, Brazil, and El Salvador starts this Saturday and brings issues of trade and economic opportunity between Latin America and the U.S. to the fore. In this post, Ricardo Ffrench-Davis identifies the specific policies that have driven the Chile’s high economic growth since 1973, particularly the strict regulation of the country’s capital account in the 1990s.
Chile is frequently presented as a paradigmatic case of successful economic reforms, by quite different authorities. Usually, these accounts sustain the ill-informed belief that there is one “Chilean model” responsible for success in recent decades. The fact is that in the nearly forty years that have elapsed since 1973 there have been several sub-periods, with significantly different policy approaches, heterogeneous external environments, and notably diverse economic and social outcomes. There is neither only one model nor only one outcome, as we show in our recent book, Economic Reforms in Chile: From Dictatorship to Democracy.
The emerging nuclear crisis in Japan has brought the future of nuclear power in the U.S. to the fore. The Obama administration supports nuclear power as an alternative to fossil fuels. But is it really the solution? Triple Crisis blogger Frank Ackerman addressed this question in a post this past summer for our partner the Real Climate Economics blog. We cross-post his original piece below.
If carbon emissions from energy production are the problem, is nuclear power the solution? After all, nuclear reactors split uranium atoms to generate heat; no fossil fuels are used on site, and no CO2 is released into the air from the power plant itself. Plenty of voices can be now heard advocating construction of nuclear plants in order to save the environment. The Obama administration supports new loans and incentives for nuclear power, as does the Kerry-Lieberman climate and energy bill.
It’s not quite that simple. The nuclear power life cycle includes many steps, from mining and enriching uranium, building the reactor, operating the plant, processing and disposing of the spent fuel, through, someday, decommissioning the plant when it can no longer be used. Many of these stages are quite energy-intensive, so there are life-cycle greenhouse gas emissions from nuclear power. The best available data show the life-cycle emissions from nuclear power to be much lower than from fossil fuel-burning power plants, but equal to or higher than the emissions from renewable energy, such as solar, wind, and hydro-power.
It is accepted wisdom that protectionism is a first gut reaction in times of crisis, but there are few studies on how different countries react to get themselves over the hump. What did we see this time when the global financial crisis hit in late 2008? After six years of expanding on an annual average rate of 16.3%, world exports plunged 22.6% in 2009. Trade restrictions increased but, in contrast to previous crises, the protectionist threat has not been as bad as expected, mainly because the recession in major economies was partially offset by the dynamism of emerging countries.
Latin America (LA) is a case in point. Although output in LA decreased 8% in 2009, most countries in the region showed a better performance than in previous crises as a result of stronger fundamentals. Mexico, which was amongst the hardest hit countries, has been able to remain afloat.
The history of natural resource use and development, from the Agricultural Transition 12,000 years ago to the present, suggests that humankind has had to surmount successive scarcity problems: From Malthusian population-land “traps” to fossil fuel scarcity, and now, ecological scarcity.
In any age of natural resource scarcity, there also appear to be winners and losers. The winners adjust to the changing economic conditions imposed by scarcity, innovate before other economies do, and end up dominating trade and economic relationships as a result. Over a thousand years ago, China, India and other Asian Empires were among the most powerful economies in the world, because their rulers adopted long-term strategies to parlay their vast agricultural and resource-based wealth into regional and then global dominance. Today, modern China, South Korea and other Asian economies look to green and clean energy investments and technologies as propelling their economies to the forefront of global trade and development, as well as securing a more sustainable economic future.
Triple Crisis blogger Frank Ackerman co-authored the following working paper the Stockholm Environment Institute onclimate policy’s unevenly distributed costs and benefits and whetherclimate policy should be based on economic efficiency or equity.
Comparing climate strategies: Economic optimization versus equitable burden-sharing
Climate change is the ultimate global public good (or public bad): the severity of the problem depends on total world emissions, so anyone’s greenhouse gas emissions affect everyone. The impacts, however, are unevenly distributed, often falling most heavily on the hottest and poorest countries. The capacity to deal with the problem may be even more unequally distributed, since the response requires significant investments in mitigation and adaptation.
Thus the discussion of climate policy naturally includes a focus on questions of international equity. In order to reach agreement on coordinated global action to address this global externality, some agreement on burden-sharing is necessary. In only slightly oversimplified terms, how much of the global cost of climate protection should rich and poor countries pay?
The Obama Administration and the House Republicans are engaged in an intense battle over spending that will likely lead to a shutdown of the federal government. The immediate issue is funding the government for the remainder of the 2011 Fiscal Year that runs through September 30th. If the two sides don’t reach an agreement, current funding runs out on March 18th. But as soon as that issue is resolved, an even more momentous conflict will begin over spending levels for Fiscal Year 2012. The Administration has made clear that in both cases, it wants to protect certain types of spending from Republican cuts, especially funds for infrastructure and innovation.
Triple Crisis blogger Kevin Gallagher published the following opinion article in the Guardian on why China’s new model of development for Latin America is eclipsing the U.S. reign in the region based on trade deals.
The end of the ‘Washington consensus’
Colombian President Juan Manuel Santos sent shockwaves through Washington when he told the Financial Times that his nation is holding negotiations with China to build a multibillion dollar “dry canal” that would compete with the Panama Canal. After all, Santos said, China is “the new motor of the world economy”.
This deal is charged with politics. Colombia is trying to get the US to pass a long-stalled trade deal. And let us not forget that the original canal was to be the result of an agreement between the US and Colombia. When the Colombians didn’t like the deal the US had on offer and threatened to squelch it, Washington supported Panamanian separatist movements and got itself a new country to build a canal with.
But that’s all water under the isthmus. Or so we thought.
Whether or not this deal goes through, it highlights the stark contrast between China’s foreign economic ventures and those of the United States.