Trapped by Haze—How Much Longer?

Martin Khor

The agony of being trapped in the all-enveloping haze, which should be more accurately called smog, continues with no end in sight. It is no longer a transient irritation that can be “tolerated” because it will soon go away. “The number of forest fires and land fires could rise until end-November,” according to a spokesman of Indonesia’s National Disaster Management Agency on Sept 23.

Part of the reason is the El Nino which causes dry weather that causes peat lands to burn faster. The burning of peat lands and the forest fires caused by plantations and farmers in Sumatra and Kalimantan are the sources of the haze in Indonesia, Malaysia and Singapore.

It is incredible that after so many years of the annual haze affair, after so many promises of action, and after so many meetings and agreements in the context of the three countries and of Asean cooperation, there is still a severe and prolonged haze this year. Especially if the haze is to continue another two months, solving this problem should be the highest priority for the leaders of Asean – or at least of the three countries.

Asean leaders have given priority to forging trade and investment agreements, and launching an Asean Community by the end of this year. But the most visible and urgent issue – how to end the haze which is affecting the health of millions of citizens in the three countries – has yet to receive the full attention it deserves.

The health of the people and the environment we live in are surely more basic and important than expanding trade.

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September 29, 2015 | Posted in: Uncategorized | Comments Closed

Mexican Capitalism Today, Part 2

The Power of Mexico’s Capitalists

Dan La Botz, Guest Blogger

Dan La Botz is co-editor of New Politics and editor of Mexican Labor News and Analysis. This is the second part of a two-part series. The first part is available here.

Mexico’s capitalist class is wealthy, well organized, and politically powerful. Mexican businesspeople have for many decades been organized in the Employers Confederation of the Mexican Republic (COPARMEX) which brings together “more than 36,000 member companies across the country are responsible for 30% of GDP and 4.8 million formal jobs.” COPARMEX, and other business organizations, such as the National Chamber of the Manufacturing Industry (CANACINTRA), have worked for years, principally through the PAN but also with the PRI to develop policies, write legislation, and to lobby for their political agenda.

The Mexican capitalists brought neoliberal government to power in two stages: First, the victory within the PRI of the so-called “Technocrats” over the “Dinosaurs” (that is, the neoliberals over the economic nationalists) in the 1980s and 1990s. Second, the electoral victory of the PAN. The two PAN administrations—under Vicente Fox (2000-2006) and Felipe Calderón (2006-2012)—demonstrated that the party was incapable of governing Mexico. Fox’s administration failed to deliver on its promises to the business class, while Calderón initiated the disastrous war on drugs with the tens of thousands of dead and forcibly disappeared as well as widespread police and army human rights violations.

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September 28, 2015 | Posted in: Uncategorized | Comments Closed

What We’re Writing, What We’re Reading

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What We’re Writing

Patrick Bond and Ana Garcia, BRICS: An Anti-Capitalist Critique

Gus Van Harten, Matthew C. Porterfield, Kevin P. Gallagher, Investment Provisions in Trade and Investment Treaties: The Need for Reform

Timothy A. Wise and Biraj Patnaik, Destruction of U.S. Credibility at WTO

What We’re Reading

Shouvik Chakraborty, India’s Economy Can Grow Without Increasing Carbon Emissions (video)

Leila E. Davis, Charalampos Konstantinidis, Yorghos Tripodis, A Proposal for a Federalized Unemployment Insurance Mechanism for Europe

Haider A. Khan, The Enabling Developmental State in the 21st Century

Global Development and Environment Institute, Leontief Prize for Advancing the Frontiers of Economic Thought (2016)

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When So Many Lives are at Stake

The recent decision of a U.S. pharmaceutical company, Turing Pharmaceuticals, to acquire the generic drug Daraprim (used to treat the potentially fatal parasitic infection toxoplasmosis) and hike its price from $13.50 to $750 per pill, set off worldwide controversy. The New York Times reported that this was “not an isolated example,” but part of a new “business strategy of buying old neglected drugs and turning them into high-priced ‘specialty drugs.'” The outrage at the 50-fold price hike eventually forced Turing to reverse the move. However, the controversy over drug pricing should not go away as this controversy recedes from memory. Here, Triple Crisis contributor weighs in on the prices of the drugs used to treat Hepatitis C, and why they are so much higher in Malaysia than in India. —Eds.

Martin Khor

A relatively new medicine that can cure a life-threatening disease is now caught up in a global and local drama – how to make it available to the millions of patients who are literally dying to have access to it.

The disease is Hepatitis C, which affects over 450,000 Malaysians. Worldwide, 150 million people have chronic Hepatitis C infection and 500,000 die yearly, according to the World Health Organisation. It damages the liver, is a major cause of liver cirrhosis and can also lead to liver cancer.

The medicine is sofosbuvir, produced by Gilead and approved by US health authorities in December 2013. Taken in combination with another drug, sofosbuvir has a cure rate of around 95%. It is far superior to the conventional treatment of interferon in conjunction with ribavirin, which has many side-effects and an inferior efficacy rate. Access to sofosbuvir would dramatically improve the cure chances of Hepatitis C patients, enhance their life quality and save lives.

The problem is the astronomical price normally charged by the original producer – for a 12-week course, it sells for US$84,000 (RM360,108) in the US and for £35,000 (RM231,461) in Britain.

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September 24, 2015 | Posted in: Uncategorized | Comments Closed

Giving Water Workers their Due

Jayati Ghosh

It is hardly necessary to state how essential water is for our survival and quality of existence, for economic activity, and so on. Indeed, this has now become a policy issue of some import. It is not just that drinking water and sanitation are recognized to be absolutely critical areas of public intervention. There is much talk about the importance of managing water systems and ensuring sustainable patterns of use. There are concerns about over-exploitation, pollution, degradation and even destruction of water sources.

There is also greater recognition of the growing importance of the distributive politics around water: cross-border tangles over the sharing of river water; the choices to be made on industrial versus agricultural versus personal use; within personal consumption, allocation between necessary and luxury consumption of water; related concerns around the ability of local elites and other powerful players to access more water in their own particular locations; and so on. These distributive conflicts have become so prominent that several analysts have argued that remaining decades of the 21st century will be characterized by “water wars” rather than the “energy wars” we have become more familiar with.

Yet in all this heightened awareness and public discussion about water issues, there is typically a deafening silence on one key aspect: the water workers who ensure the treatment, delivery and conservation of water across societies, and the conditions that they must work in. Indeed, it would not be wrong to say that this work is effectively invisible to public policy (and indeed to the public at large). This lack of recognition of the significance of water work has huge implications not only for the workers themselves, but much more significantly for the safety and ease of access to water for people as well as for economic uses, and indeed for the sustainable use of water in different areas.

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September 22, 2015 | Posted in: Uncategorized | Comments Closed

Mexican Capitalism Today

Dan La Botz, Guest Blogger

Dan La Botz was a founding member of Teamsters for a Democratic Union (TDU). He is the author of Rank-and-File Rebellion: Teamsters for a Democratic Union (1991). He is also a co-editor of New Politics and editor of Mexican Labor News and Analysis.

Part 1

Mexico: A Major Capitalist Economy

One factor that accounts for labor’s defeats in Mexico in recent years is the strength, success, and power of Mexican capitalism. Mexico has a large industrial and service economy, which has since the 1970s become highly integrated into both the North American and world economy. In 2014, Mexico shipped US$397.7 billion worth of products to countries around the world in 2014, about 2.2% of global exports which are estimated at $18.2 trillion.1

Mexico is not only a capitalist country; it is the world’s thirteenth largest economy with a GDP of US$1.32 trillion.2 Forbes provides an overview: “In total, there were 19 Mexican companies on the 2013 Forbes Global 2000 list. Collectively, the companies had a combined market value of $369.9 billion, with $347.8 billion in assets; generating $203.3 billion in revenues and $16.8 billion in profits.”3 Several Mexican corporations are among the world’s largest in their fields. América Móvil is the fifth largest telecommunications company.4 Cemex is the seventh largest cement company.5 Pemex is the eighth largest petroleum company in the world.6 Several other companies could be added to the list.7

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September 21, 2015 | Posted in: Uncategorized | Comments Closed

What We’re Writing, What We’re Reading

What We’re Writing

Martin Khor, When So Many Lives are at Stake

Léonce Ndikumana and Lynda Pickbourn, The Impact of Foreign Aid Allocation on Access to Social Services in sub-Saharan Africa: The Case of Water and Sanitation

Nathaniel Cline and Matías Vernengo, Interest Rates, Terms of Trade and Currency Crises: Are We On the Verge of a New Crisis in the Periphery?

Timothy A. Wise, Two Roads Diverged in the Food Crisis: Global Policy Takes the One More Travelled

What We’re Reading

Dan La Botz, The Agony of Mexican Labor Today

Prabhat Patnaik, The Devaluation of the Yuan

Manuel Riesco, Commodity Supercycle: A “Myth” Explained

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Understanding Contemporary Capitalism, Part 2

Neoliberal Capitalism, Financialized Capitalism, or Globalized Capitalism?

David Kotz, Guest Blogger

David Kotz is a professor of economics at the University of Massachusetts-Amherst and the author of The Rise and Fall of Neoliberal Capitalism (Harvard University Press, 2015). This is the second installment of a two-part series based on his book. Part 1 is available here.

While it is widely agreed that capitalist economies underwent significant change after around 1980, there are different interpretations of the new form of capitalism that emerged. There is no agreement about the best organizing concept for post-1980 capitalism. Some view it as financialized capitalism, some as globalized capitalism, and some as neoliberal capitalism. These different conceptions of contemporary capitalism have implications for our understanding of the problems it has produced, including the financial and economic crisis that emerged from it in 2008. Focusing on the U.S. economy, I presented a case in part 1 that “neoliberal capitalism” is the best overall concept for understanding the form of capitalism that arose around 1980. Here, I deal more specifically with the shortcomings of alternative interpretations – focused on the concepts of “financialization” and “globalization,” respectively.

Why Not “Financialization”?

Some economists view “financialization” as the best overall concept for understanding contemporary capitalism. Financialization can best be understood, however, as an outgrowth of neoliberal capitalism. The rise in financial profit, which gave the financial sector a place of growing importance in the economy, came quite late in the neoliberal era. As figure 2 shows, only after 1989 did financial profit begin a long and steep climb, interrupted by a fall in the mid 1990s, and then a sharp rise to a remarkable 40% of total profit in the early 2000s. It was only in the 2000s that financialization fully blossomed. At that time, commentators noted, Wall Street was beginning to draw a large percentage of elite college graduates.

The “financialization” of the U.S. economy in recent decades, important though it is, was itself driven by neoliberal restructuring. The neoliberal institutional structure, including financial deregulation, enabled financial institutions to appropriate a growing share of profits. Furthermore, financialization cannot account for many of the most important economic developments in contemporary capitalism. It cannot explain the dramatic shift in capital-labor relations from acceptance of compromise by the capitalists to a striving by capitalists to fully dominate labor.. It cannot explain the sharp rise in inequality. And it cannot explain the deepening globalization of capitalism.

Why Not “Globalization”?

Like financialization, “globalization” has been presented by some analysts as the best framework for understanding the contemporary form of capitalism. Capitalism has, indeed, become significantly more integrated on a world scale in recent decades, including the emergence of global value chains and a truly global production process in some sectors.

The degree of globalization of capitalism has gone through ups and downs in history. Capitalism became increasingly globalized in the decades prior to World War I. Then the cataclysm of two world wars and the Great Depression reversed the trend, and capitalism became less globally integrated over that period.  After World War II, the process of globalization resumed, gradually at first. Around the late 1960s, globalization accelerated somewhat measured by world exports relative to world GDP, as figure 3 shows. After 1986 the trend became more sharply upward. Thus, in contrast to financialization, which emerged later than neoliberalism, the globalization process in this era began before neoliberalism emerged, although globalization accelerated in the neoliberal era, particularly after 1990.

However, many of the most important features of capitalism since 1980 cannot be understood or explained based on globalization any more than they can be on the basis of financialization. Globalization cannot fully explain the rapidly rising inequality in the contemporary era, which has been quite extreme in the United States yet milder even in some other countries, such as Germany, that are more integrated into the global economy. Globalization cannot explain the financialization process and the rise of a speculatively-oriented financial sector, nor can it explain the series of large asset bubbles. Like financialization, globalization has been an important feature of neoliberal capitalism, but it is not its defining feature.

Neoliberalism as the Key Concept

Both financialization and globalization are fundamental tendencies in capitalism. Financial institutions have an ever-present tendency to move into speculative and risky activities to gain the high profits of such pursuits. Even more so, globalization is a tendency present from the rise of capitalism, since the capital accumulation drive always spurs expansion across national boundaries. Then why do these phenomena characterize one era of capitalism more than another?

Both of these tendencies can be obstructed for long periods of time, or released, depending on the prevailing institutional form of capitalism. Financialization was held in check from the mid 1930s to 1980 by financial regulation, and globalization was hindered from World War I until the 1960s by the world wars, the Great Depression, and then the state regulation of trade and international investment allowed under the post-World War II Bretton Woods monetary system. The neoliberal restructuring starting in the late 1970s can explain all of the key economic developments in contemporary capitalism, with the processes of financialization and globalization—released by neoliberal capitalism—forming a part of the account.

These differences in analysis are  important, since they represent different views of the basic characteristics of the current era of capitalism and different diagnoses of the origins of the current crisis. Proposals to overcome the current crisis that focus only on reigning in financialization or reconfiguring globalization would be insufficient unless part of a restructuring that replaces neoliberalism with something new.

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Why Some Leaders in Poorer Countries are Championing the Environment, Part II

A Call for Research

Robin Broad and John Cavanagh

This piece is a slighted revised excerpt from Robin Broad and John Cavanagh, “Poorer Countries and the Environment: Friends or Foes?” World Development, August 2015, 72, pp 419-431.

Poorer countries and the environment—friends or foes?

In a recent article in World Development, we built on our research in El Salvador and Costa Rica to try to delineate the conditions that led these two countries to implement environmentally inspired mining bans, bans that have been stringent enough to provoke mining company lawsuits. We shared our conclusions on conditions related to civil society, to the private sector, and to the government in a previous Triple Crisis post on this topic. In brief, we found that strong community and civil society groups opposed to mining, combined with few business elites profiting from mining, combined with government officials who responded to democratic demands from society, all came together to lead to governmental action to halt mining in these two countries.

Our analysis of El Salvador and Costa Rica, thus, presents two case-studies to add to the political economy literature. In addition, our case studies provided evidence refuting the so-called Environmental Kuznets Curve, the theory that countries need to be relatively richer to take decisive action to protect the environment.

Beyond that, we also hope our research—with its focus on El Salvador and Costa Rica—might motivate others with the relevant expertise to analyze the extent to which our conclusions concerning the three conditions do or do not hold in other countries. So we want to take the opportunity to issue a call for further research to add to our collective understanding of when governments in poorer countries take decisive action to protect the environment and when they do not.

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September 15, 2015 | Posted in: Uncategorized | Comments Closed

From BBB-razil to BB+razil or the meaning of investment grade

Matias Vernengo

So Brazil (or here about Petrobras, the State oil company) lost its investment grade status with Standard & Poor’s. You would think this is huge given the media attention in Brazil. If you read S&P’s actual rationale for the downgrading (here) it is essentially about the fiscal situation. They say: “We now expect the general government deficit to rise to an average of 8% of GDP in 2015 and 2016 before declining to 5.9% in 2017, versus 6.1% in 2014. We do not expect a primary fiscal surplus in 2015 or 2016.” They do discuss the political problems too, the corruption investigations,* and the political instability that has plagued the government. There is a discussion of the external vulnerability, but here they are quite sensible and know there is no problem. The report says that: “despite the wider current account deficit, Brazil has low external financing needs compared with its current account receipts and its high level of international reserves compared with some of its peers.” So this is a fiscal problem in their view.

And therein lies the problem. They had years ago also revised the outlook of US debt negatively (my comments here), also on the basis of fiscal, and political, factors. As much as the US then, Brazil now has no risk of not paying its internal debt in domestic currency. And yes, the fiscal outlook has worsened, and the reasons are no secret. It’s austerity. If you cut spending, output falls, and the recession leads to lower revenue and higher deficits. It’s part of the problems caused by policies that S&P’s analysts actually favor. Austerity also is the cause of the recession, and the worsening of the growth outlook in the next couple of years, which are also discussed in S&P’s rationale for the downgrade. So the fiscal problems that are the main cause for the downgrade are self-inflicted wounds (see Serrano and Summa), and the cause of the lack of growth and the worsening of the future fiscal balances.

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