October » 2010 » TripleCrisis

Ecuador after the Financial Crisis: Room for Internal or External Policy Space?

Paul Krugman has drawn attention to the plight of Ecuador, noting that, since the country does not have an exchange rate policy (and hence a monetary policy), it stood deprived of a variety of policy instruments to face the crisis. With tied hands it resorted to the expedient of restricting imports.

Dollarization was no doubt a straightjacket. Ecuador nonetheless worked against the current and found policy space in a two pronged strategy to strengthen the financial system under threat of runaway deposits; and to provide support for domestic agriculture and industry.

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Conflicts of Interest and the Financial Crisis: It’s Also the Economics Profession, Stupid!

Gerald Epstein

Even the Queen of England could see that the economics profession messed up big time in the lead up to the financial meltdown. On a visit to the London School of Economics in 2009 she asked why economists’ failed to foresee the crisis. After a “serious” study, a group of eminent economists’ said economists had a “failure of imagination”, suggesting, perhaps, the need for more envisioning courses in Economics PhD programs. Paul Krugman pinned it mostly on economic theorists’ obsession with mathematical beauty and elegance at the expense of true understanding, what he called “mistaking beauty for truth”.

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Agricultural Dumping and Mexico

In an interview with the Institute for Agriculture and Trade Policy (IATP), GDAE’s Timothy Wise discusses the implications of U.S. agricultural dumping in Mexico. Wise’s comments are based on his paper on agricultural dumping under NAFTA, which is part of the Woodrow Wilson International Center for Scholars’ current project on Mexican agricultural policies, “Subsidizing Inequality“, now available in Spanish and in English in late 2010. For more on this project, see Wise’s latest Triple Crisis piece on agricultural dumping and his recent op-eds in El Universal and La Jornada.

Austerity: Common Sense or Nonsense?

Mark Blyth, faculty fellow at the Watson Institute for International Studies at Brown University, illustrates the flawed logic behind public austerity measures governments are adopting in the wake of the financial crisis and the consequences such measures would have on the poor. Blyth will be joining Triple Crisis as a regular contributor later this month.

Impact of the Financial Crisis on Least Developed Countries

Timothy A. Wise sat down with Triple Crisis blogger Mehdi Shafaeddin of the Institute of Economic Research at the University of Neuchatel, Switzerland, to discuss the political and economic challenges the Least Developed Countries (LDCs)are facing in the wake of the global economic crisis. Based on his South Centre report , Shafaeddin explains the potential negative impact of Europe’s Economic Partnership Agreements on LDCs’ policy space to respond to the crisis.

Basel III: One More Victory for Finance

C.P. Chandrasekhar

Even as governments in individual countries are struggling to move forward on post-crisis financial reform aimed at preventing another crisis, the G20 seems to be settling for marginal modifications of the pre-existing framework for global regulation– at the centre of which are the Basel norms. The Basel norms in their various versions essentially require banks to hold capital amounting to a certain proportion of their risky assets in forms that are available and easily accessed to cover losses. Capital that was free of encumbrances and liquid to different degrees was ranked Tier I or Tier II, with each Tier required to be kept at a certain proportion of the value of risk-weighted assets.

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Currency Wars and Global Rebalancing

Matias Vernengo

Guido Mantega, the Brazilian Finance Minister, said recently that Brazil is in the middle of a currency war. His preoccupation with exchange rate appreciation is not directed to global imbalances, in general, or China, in particular. A more depreciated currency provides protection for domestic production, and makes domestic goods and services cheaper for foreigners. In that view, a stable but competitive (i.e. depreciated) real exchange rate (SCRER), as Roberto Frenkel and Lance Taylor call it, would be an essential tool in the development strategy in developing countries. The message is that competitiveness of domestic markets matters for development.

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Brazil: Lula's Labor Legacy

Janine Berg, Guest Blogger

When Time magazine awarded Brazil’s President Lula the most influential world leader spot in its 2010 ranking of most influential people, Michael Moore, who wrote the excerpt on Lula, heralded the creation of the Bolsa Familia programme as well as the expansion of public education and health care. These are important achievements, but one of the great successes of Brazil of the past eight years that has gone largely unnoticed outside Brazil is the creation of 12.5 million formal jobs during his tenure. During the 2000s, formal job growth outpaced informal job growth by a three-to-one ratio, reversing the trend of growing informality that had marked the 80s and 90s. And all this occurred at the same time that the minimum wage doubled in real terms.

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Brazil: Lula’s Labor Legacy

Janine Berg, Guest Blogger

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Academic Experts Call for Reform of Investment Treaties

Gus Van Harten, Guest Blogger

Investment arbitration is a new field of law and lawyering. It disciplines governments in extraordinary ways, and regulates legislative choice and policy discretion on questions of profound public importance.

Yet the system is sometimes portrayed by practitioner-advocates as technical, obscure, or simply par-for-the-course. Debates are often dominated by lawyers and arbitrators with an obvious stake in the system’s perpetuation.

Not everyone who has expertise in investment law, arbitration and regulation supports the current arrangements, however. I am one of (now) 48 academics who has expressed concerns about the investment regime. (I do not speak for other supporters of the statement here; the statement speaks for itself and any elaborations expressed in this comment are in my name only.)

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