Top Democrats Join Call for More Flexibility on Capital Controls

Sarah Anderson, guest blogger

At a point in the election season when politicians of the same party tend to sweep their differences under the rug, two senior Democrats have sent a strong letter to the Obama administration on a subject unknown to most American voters.

This is the issue of capital controls – various measures governments use to control volatile flows of money across their borders.  Iceland, for example, used them to prevent massive capital flight in the midst of their meltdown.  Other countries have used them to prevent speculative bubbles.  In fact, governments that used capital controls during the 2008 crisis were among the least hard-hit, according to International Monetary Fund research.

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No Magic Wand: Liberalization and Structural Transformation in India

Suranjana Nabar-Bhaduri, Guest Blogger

In November 2011, the UPA coalition government in India announced its decision to allow FDI in multi-brand retail. Proponents within the government and media argued that this decision would address the supply bottlenecks in the Indian distribution system; facilitate the transfer of knowledge and skills; generate more employment; accelerate economic growth; improve production know-how and promote exports. Following stiff resistance from some of its coalition members, and opposition parties (which was driven more by political motives, considering that the NDA, now in the opposition, had strongly pushed for FDI in retail when it was in power), which saw the Indian Parliament come to a standstill, and opposition from groups of domestic traders and retailers, the UPA government decided to suspend opening multi-brand retail to FDI in early December.  Critics of FDI in multi-brand retail argued that by endangering the survival of local stores across the country, the move would potentially result in large-scale job losses across the country. Furthermore, it is likely to result in predatory pricing by multinationals; put farmers at the mercy of big retailers; and disrupt rather than strengthen supply chains by encouraging monopolies of global retailers.

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The Fallacy of a Two-Track World Economy

Yılmaz Akyüz, guest blogger

The new millennium has witnessed a staggering rise of the South.   During 2003-08, the average growth of developing economies (DEs) exceeded that of advanced economies (AEs) by some 5 percentage points, compared to around one point in the 1980s and 1990s.  The difference widened further during 2008-11 as most DEs proved resilient to the crisis while growth collapsed in AEs.

This growth divergence has widely been seen as the decoupling of the South from the North.  However, the evidence does not show the desynchronisation of cycles between DEs and AEs, and deviations of economic activity from underlying trends continue to be highly correlated.  The more significant question is whether there has been a durable shift in the trend growth of the South relative to the North.  Such a view is widely held, including among policy makers in DEs.  However, a closer look suggests that the growth surge in the South owes as much, if not more, to exceptional and unsustainable global economic conditions as it does to improvements in their own fundamentals.  There is, consequently, no room for complacency in policy circles in DEs.

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Let’s Play the World Bank President Trivia Game

Robin Broad, guest blogger

Last week, U.S.-nominee Jim Kim was elected to be the next president of the World Bank group.   Some well-known US economists and World Bank “insiders” criticized the choice – and supported Kim’s opponent Ngozi Okonjo-Iweala — because Kim is not an economist.  From that criticism, one would surmise that the majority of World Bank presidents have indeed been economists.

But what really do we know about the background of the eleven men (yes, all men) who have held that post so far?  So, expert pundits and readers alike, let’s see how well you do on the first annual World Bank President Trivia Game. Twelve men, so twelve questions:

The first category is education:

1. To repeat: Jim Kim does not hold a graduate degree in economics. How many of the eleven World Bank presidents do have graduate degrees (masters or doctorate) in economics?

ANSWER: None. While you would not know it from the criticisms of Kim, had Okonjo-Iweala won, she would have been the first. She holds a Ph.D. in regional economic development from the MIT.

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The Political Construction of Business Interests: Coordination, Growth and Equality

Cathie Jo Martin and Duane Swank, guest bloggers

Labor market coordination is the lynchpin of high-performance societies that maximize economic growth and equality, yet why does business ever cooperate?  In a story replete with unintended consequences, The Political Construction of Business Interests recounts employers’ struggles to define their collective social identities at turning points in capitalist development, to understand why coordinated capitalism emerges in some countries but not others.  The book tells of the construction of peak employers’ associations at the beginning of the Twentieth Century, the efforts to sustain these associations at century’s end, and the impact of these institutions on employers’ preferences for the welfare state.

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Defending UNCTAD’s Role in Agriculture and Food Security

Sophia Murphy, guest blogger

UNCTAD—the U.N. Conference on Trade and Development—is holding its 13th quadrennial conference in Doha, Qatar this week (April 21–26). As South Centre Director, Martin Khor, underscored in his Triple Crisis blog last Friday, the meeting has generated considerably controversy, the first time UNCTAD has created such waves in more than a decade. Created in the 1960s as a forum for developing countries to explore global and regional macro-economic issues independently of the Western country-dominated Bretton Woods institutions, UNCTAD has never had an easy ride from the U.S., UK and other major powers. But for the first 20 or so years of its existence, UNCTAD received the resources and respect it needed to make a big contribution to supporting initiatives that supported development, from preferential trading schemes, to commodity agreements, to what were called “rules to control restrictive business practices” (today more commonly referred to as competition policy).

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Defending UNCTAD's Role in Agriculture and Food Security

Sophia Murphy, guest blogger

UNCTAD—the U.N. Conference on Trade and Development—is holding its 13th quadrennial conference in Doha, Qatar this week (April 21–26). As South Centre Director, Martin Khor, underscored in his Triple Crisis blog last Friday, the meeting has generated considerably controversy, the first time UNCTAD has created such waves in more than a decade. Created in the 1960s as a forum for developing countries to explore global and regional macro-economic issues independently of the Western country-dominated Bretton Woods institutions, UNCTAD has never had an easy ride from the U.S., UK and other major powers. But for the first 20 or so years of its existence, UNCTAD received the resources and respect it needed to make a big contribution to supporting initiatives that supported development, from preferential trading schemes, to commodity agreements, to what were called “rules to control restrictive business practices” (today more commonly referred to as competition policy).

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Can austerity bring growth?

Rainer Kattel and Ringa Raudla, guest bloggers

European crisis resolution seems to rest on one hope: austerity can bring growth. History and most of economic theory seems to suggest that this is not possible. The Baltics peg to differ. Or so it seems. During the 2008-2010 crisis the Baltic economies of Estonia, Latvia and Lithuania experienced peak-to-trough reductions in GDP as high as 20%, 25% and 17% respectively. Governments decided to stick to currency pegs and opt for austerity and internal devaluation by cutting government expenditure in 2009 around 8-9% and additional 3-4% (of GDP) in 2010. By 2011, all Baltic economies were growing again, real GDP growth, driven by rapid recovery in exports, topping European charts with 7.6% (Estonia), 5.5% (Latvia) and 5.9% (Lithuania). Based on our forthcoming paper, “The Baltic States and the Crisis of 2008-2010”, we discuss in what follows whether in fact the Baltic internal devaluation worked and, more importantly, whether it can be replicated anywhere else, Europe or elsewhere. All data comes from our paper, where the reader can also find detailed references.

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Responding to the Food Crisis: A network to train young scholars in macro and institutional development

C. Peter Timmer, guest blogger

We are at a critical juncture with respect to the worldwide need for scholars who understand the broad forces shaping economic development and its impact on poverty reduction. These forces are driven from the macro economy, with critical sectoral and political dimensions that are virtually impossible to navigate without broad-based and policy-oriented training.

Since the development failures of the 1970s, and especially since the failures of post-Soviet privatizations to produce the predicted rapid growth in the Eastern bloc, mainstream economists have understandably been increasingly reluctant to claim that they have answers to big problems.  By contrast, when economic development first came of age as an academic topic in the 1960s, economists were trained to conduct research on the big problems of world poverty. Crucially, this research was valued by the profession itself, in the form of academic appointments and international recognition.

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Can a low-carbon economy thrive in a resource-constrained world?

Eric Kemp-Benedict, Amanda Fencl and Elena Dawkins, guest bloggers

There’s a growing momentum around the world to build a ‘green’ economy – with a special focus on energy – as a key strategy to reduce greenhouse gas emissions and prevent dangerous climate change while also increasing energy security.

But resource constraints could hinder this endeavour. Low-carbon technologies such as photovoltaics, wind turbines, and electric and hybrid cars, for example, use metals that are mined only in a handful of countries, which can limit their availability. This is already a major international issue, as evidenced by the recent complaint filed by the U.S., the EU and Japan with the World Trade Organization, challenging China’s restrictions on exports of rare-earth metals.

Biofuels development, meanwhile, has faced substantial push-back because of concerns that fuel crops will displace food crops – or displace forests and vitally important ecosystems. In addition, these crops compete for what are often limited water resources.

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