The West Strikes Back

Robert H. Wade, guest blogger

In 2008, Triple Crisis blog partner GDAE gave Wade its prestigious Leontief Prize for Advancing the Frontiers of Economic Thought for his outstanding contributions to the economics of development. Today, GDAE awards the 2012 Leontief Prize to Michael Lipton and C. Peter Timmer for their critical work in the economics of food and agriculture. See full event details.

It is a commonplace to say that the world economy has become “multipolar”, as some developing countries gain a rapidly increasing share of world income. The implication is that the post-Second World War order, in which countries of the West govern the world economy, is now over.  We are in the middle of a transition to a new world order in which governments of developing countries have a substantially larger voice in setting global norms and rules.

The negotiations going on in Geneva over the mandate of the United Nations Conference on Trade and Development (UNCTAD) provide a rude shock to this conventional wisdom. UNCTAD is the UN agency, which, since its establishment in 1964, has been most responsive to the preferences of developing countries on the subjects of debt, trade, and finance. It has often voiced a second opinion about issues on which the International Monetary Fund (IMF) and World Bank – governed largely by western governments — consider themselves to be authoritative.

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How to discredit a financial regulator: the strange case of Iceland

Robert Wade and Silla Sigurgeirsdóttir, guest bloggers

Firms subject to a regulator generally use one of three tactics to render the regulator ineffective: emasculate, capture or discredit it – or some of all three. Iceland’s financial regulatory agency, the FME (with similar functions as the UK’s Financial Services Authority), has experienced all these tactics since its creation in 1998. A sustained campaign has recently been waged to discredit the CEO appointed in the wake of Iceland’s Great Crash in October 2008, culminating in his firing at the beginning of March 2012. His case illustrates wider issues in the relations between regulators and powerful interest groups subject to their regulation and supervision, in Iceland and beyond.

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Remembering Alice Amsden: an intellectual force

Calestous Juma, guest bloggerAlice Amsden
World renowned development economist Alice Amsden passed away this week.

It is with great sadness that I learned of the passing of Professor Alice Amsden. Alice was a true intellectual force and made remarkable contributions to our understanding of emerging economies.

She was widely recognized as one of the world’s leading visionaries. In 2003 she was awarded the Leontief Prize for Advancing the Frontiers of Economic Thought from GDAE at Tufts University. The prize recognizes scholars whose work has helped to broaden economics to better understand urgent contemporary issues. She has made important contributions to our understanding of the role of building productive capabilities as a foundation for innovation.

A few of us who came to work with her closely also knew her as a person of irrepressible character who maintained very high standards. She challenged herself as hard as she challenged others. She pursued her research with remarkable vigor.

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Governments Agree on Voluntary Rules to Control Land Grabs

Sophia Murphy, guest blogger

Three years of negotiations on guidelines to govern the tenure of land, fisheries and forests (commonly referred to as the Voluntary Guidelines, or VG) came to a successful close on Friday, March 9 in Rome. Under the auspices of the newly reconfigured Committee on World Food Security (housed at the FAO with a secretariat shared among the FAO, the World Food Program and the International Fund for Agriculture and Development, or IFAD), the negotiations were contentious and important.

Ninety-six governments, accompanied by UN agencies, civil society organizations, farmer organizations and private sector representatives worked through three rounds of negotiations over as many years to come to agreement. The talks were chaired by the United States, whose negotiators earned the praise of the participants for their commitment to finding agreement across often significant divides. The conclusion of the VGs (see the FAO press release) marks an important step towards providing some protection for small-holders and communities around the world, who have found their productive assets (arable land, or fishing waters, or forests) under siege by a wave of investor interest from private companies and wealthy food importing countries.

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What do the new World Bank poverty statistics really tell us?

Robin Broad and John Cavanagh, guest bloggers

Now here is what sounds like a New York Times headline to celebrate: “Extreme Poverty in Developing World Is Down Despite the Recession, Report Says.”[i] That report would be a 6-page World Bank briefing note, the press release for which is titled: “New Estimates Reveal Drop in Extreme Poverty 2005-2010.” Echoes The Economist: “For the first time ever, the number of poor people is declining everywhere.”

If it were only that easy.  Let us dig into what the World Bank’s new briefing note really tells us and ask two questions: Do the statistics really show a fall in extreme poverty across the world?  And, what policies lie behind the changing poverty figures?

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Will IMF neoliberalism make a comeback in Africa via Tunisia?

Patrick Bond and Khadija Sharife, guest blogger

With International Monetary Fund (IMF) managing director Christine Lagarde in Tunisia last week, the stage was set for ideological war over the progress of democratic revolutions.

Until 27-year-old fruit seller Mohamed Bouazizi committed suicide by immolation in the provincial town of Sidi Bouzid, Tunisia was packaged as an IMF success story. In 2008, dictator Zine El Abidine Ben Ali was embraced by Lagarde’s predecessor, Dominique Strauss-Kahn: “Economic policy adopted here is a sound policy and is the best model for many emerging countries.”

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A three-step programme to re-civilise capitalism

Stephany Griffith-Jones, Michael Lipton and Robert Wade, guest bloggers

What should protesters protest for? They rightly oppose the many faults of the current economic system, but what is the alternative? What ground should occupiers occupy? What can politicians who reject corporatist politics-as-usual, and economists who reject wrong economic thinking do in response to justified protest? How can the economy be transformed to serve the 99%, instead of the 1%?

Capitalism can work if reformed, and history can teach us much. In the period 1940-80, the Keynesian, mixed-economic models of north-west Europe, North America and many developing regions delivered to the poor and weak, while not frightening the strong. The financial sector was fairly small, well-regulated and simple; it financed the real economy, as it is supposed to. Growth, employment and security were high, poverty was reduced and liberty preserved, partly because social democracy helped both to moderate capitalism and to oppose communism.

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Open Economics: Weigh in

Norbert Häring, guest blogger

The World Economics Association’s forum for the open review of proposed articles for the World Economics Journal and for Economic Thought is now open. 19 submissions have been posted so far. It is located at http://discussion.worldeconomicsassociation.org/.

The World Economics Association has been founded in spring 2011 and has so far attracted more than 7000 members from around 120 countries. The Journals of the association are committed to a policy of inclusiveness, openness and transparency. You are encouraged to read and comment on submitted papers that interest you. Editors will also make public comments to make their final decision making process transparent and to allow readers and authors to react and interact.

Papers submitted to the World Economics Journal include:

Microfinance and the Illusion of Development: from Hubris to Nemesis in Thirty Years, by Milford Bateman and Ha-Joon Chang

Incorporating the Rentier Sectors Into a Financial Model, by Michael Hudson

External Fragility or Deindustrialization: What is the Main Threat to Latin American Countries in the 2010s? by Roberto Frenkel and Martín Rapetti

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Is Latin America prepared for more financial turbulence in 2012?

Juan O’Farrell, guest blogger

The increasing global economic uncertainty and the prospects of a flight-to-quality, with money flowing out of developing towards developed countries, raise the question of how prepared developing countries are to protect their economies from external shocks in the coming year. But volatility of financial flows also means that, most probably, following capital flight driven by the eurozone crisis emerging markets will again experience a surge in speculative financial inflows. The threat of continued ‘boom and bust’ cycles and lack of responses from international forums like the G20 and the IMF to address global monetary chaos makes the need for central banks to take action even more urgent.

There is a welcome shift in Latin America as countries continue their slow process of acceptance and de-stigmatisation of capital account regulations. In September this year Costa Rica joined the group of countries using these regulations, when it established that short-term foreign loans received by banks and other financial entities will be subject to a holding deposit of 15% of the value of the investment.

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