Economists Issue Statement on Capital Controls and Trade Treaties

Since the onset of the global financial crisis, Triple Crisis bloggers have been commenting on the need for policy space for capital controls in developing countries and the need to reform US trade agreements, which generally prohibit their use.  To further that end, Triple Crisis co-chair Kevin Gallagher and Sarah Anderson of the Washington-based Institute for Policy Studies initiated an economist sign-on letter, which has more than 250 signatures including many Triple Crisis bloggers. It was released today and presented to Congress and the Obama Administration. The press release, with links to the letter and further information, follows.

More than 250 Economists Call for Trade Reforms to Allow Capital Controls

In a letter delivered January 31, more than 250 economists urged the Obama administration to reform U.S. trade rules that restrict the use of capital controls.

The statement reflects growing consensus among economists that capital controls, while no panacea, are legitimate policy tools for preventing and mitigating financial crises.

Signatories include several economists who have been generally supportive of free trade but are critical of the capital control restrictions (e.g., Arvind Subramanian, Senior Fellow of the Peterson Institute for International Economics and Nancy Birdsall, President of the Center for Global Development), as well as former IMF officials (e.g., Olivier Jeanne of Johns Hopkins University) and a Nobel laureate (Joseph Stiglitz).

Read the rest of this entry »

Curbing Hot Capital Flows to Protect the Real Economy

Triple Crisis bloggers Stephany Griffith-Jones and Kevin P. Gallagher published the following proposal to stem the excessive flows of speculative capital into developing countries in Economic and Political Weekly. In their approach, the United States and developing countries each regulate the outflow and inflow of hot money and redirect investment toward the real economy.

Curbing Hot Capital Flows to Protect the Real Economy

Developing countries are once again the destination for speculative capital flows with in inlows reaching pre-crisis levels, leading to currency appreciation and asset bubbles. Many of these nations are deploying prudential capital regulations to stem these flows. However, this may only be a partial remedy to the problem – such measures should be coupled with action by the developed countries in order to fully steer capital to productive use and to avoid future crises.

Download the full article at Economic and Political Weekly.

Food Price Volatility: Market fundamentals and commodity speculation

Timothy A. Wise

As Jayati Ghosh explained in her recent post on the “Frenzy in Food Markets,” high food prices are back and market fundamentals do not adequately explain the price rise. Still, a wide range of analysts and commentators, from Paul Krugman to the International Food Policy Research Institute, dismiss the argument that a significant part of the 2006-8 food price surge was due to speculation. They are more dismissive now, two years further removed from the bursting bubbles of the housing and financial crises.

Read the rest of this entry »

State of the Union: US trade policies stuck in Neverland

Timothy A. Wise

In his State of the Union speech, President Obama made a mercifully quick stop in the Neverland of U.S. trade policy, promising – again – to double U.S. exports and to do so by reviving the long-dormant Bush-era trade deals (South Korea, Colombia, and Panama) and pursuing the TransPacific Partnership, which he held off on branding by name or acronym. TPP, after all, could start to sound a lot like NAFTA, that agreement he promised to renegotiate and in whose image the Bush deals were created, with a few post-Bush cosmetics (and side deals) to fool a few trade union leaders and perhaps a few more legislators.

Read the rest of this entry »

State of the Union: US trade policies stuck in Neverland

Timothy A. Wise

In his State of the Union speech, President Obama made a mercifully quick stop in the Neverland of U.S. trade policy, promising – again – to double U.S. exports and to do so by reviving the long-dormant Bush-era trade deals (South Korea, Colombia, and Panama) and pursuing the TransPacific Partnership, which he held off on branding by name or acronym. TPP, after all, could start to sound a lot like NAFTA, that agreement he promised to renegotiate and in whose image the Bush deals were created, with a few post-Bush cosmetics (and side deals) to fool a few trade union leaders and perhaps a few more legislators.

Read the rest of this entry »

State of the Union: The war on demand and the Sputnik moment

Matías Vernengo

President Barack Obama’s call for a five-year freeze in non-security, discretionary spending during his State of the Union address is exactly what should not be done, for the economy and for the future of his presidency.  The President’s call for a government that lives within its means shows that, at least in terms of ideas, he has caved to what Krugman has suitably termed the “war on demand.”  The great Polish economist Michael Kalecki long ago explained the reasons for the dislike of demand policies in his classic on “The Political Aspects of Full Employment,” in which he argues that it is the elites’ abhorrence of empowering the lower classes that is behind the doctrine of “sound finance” (i.e. balanced budgets).

Read the rest of this entry »

Nothing Lasts Forever: The Future of the Dollar in the International Monetary System

David Nelson Black, re-posted from the World Policy Institute’s World Policy Blog, a Triple Crisis partner. We periodically cross-post items of interest.

For the foreseeable future, the US government’s inability — or refusal — to embrace fiscal responsibility will likely remain one of the global economy’s most pressing issues and one of its most reliable constants. Barring any radical and unforeseen change of course, this means that the US dollar is likely to continue to decline in importance. Private investors, along with foreign governments and their central banks, will gradually lose confidence in the notion that the US possesses the political will or ability to preserve the underpinnings of a healthy monetary system. Gone will be the latitude afforded by being the world’s financial capital and holder of its reserve currency — what Charles DeGaulle and his finance minister 50 years ago labeled the United States’ “exorbitant privilege.”

Read the rest of this entry »

Should Economists Declare Conflicts of Interest?

Gerald Epstein

Triple Crisis blogger Gerald Epstein was recently interviewed by the Real News Network on his and Jessica Carrick-Hagenbarth’s study on the failure of economists to disclose conflicts of interest when providing financial analysis in the media. They spearheaded an effort to get the American Economic Association to adopt an ethics code for economists with a sign-on letter that garnered the support of close to 300 economists. In this video, Epstein discusses the letter’s impact at this month’s AEA annual meeting, which resulted in the creation of a committee to research and consider new ethics standards for economists.

Read more of Epstein’s commentary on economists’ conflicts of interest in two recent blog posts (here and here).

January 24, 2011 | Posted in: Videos | Comments Closed

Approaches to Competitiveness: Double Standards and Hypocrisy

Mehdi Shafaeddin

There is a double standard in the way the concept of “competitiveness” is applied by governments of developed countries and the manner in which they impose it on developing countries. Developed countries aim at achieving competitiveness at a high level of development through specialization based on dynamic comparative advantage. By contrast, they advocate to, and impose on, developing countries policies that will lead to specialization based on static comparative advantage and will keep them at low level of development.

Read the rest of this entry »

Complex Implications of the Cancún Climate Conference

Triple Crisis blogger Martin Khor originally published this commentary on the shallow successes and deeper failures of December’s Cancún climate change conference in Economic and Political Weekly.

Complex Implications of the Cancún Climate Conference

When the dust settles after the Cancun climate change conference of the United Nations, a careful analysis will find that the adoption of the “Cancun Agreements” may have given the multilateral climate system a shot in the arm, but that the meeting also failed to save the planet from climate change and helped pass the burden of climate mitigation onto developing countries. Instead of being strengthened, the international climate regime was weakened by the now serious threat to close the legally binding and top-down Kyoto Protocol system and to replace it with a voluntary pledge system.

Read the full article at Economic and Political Weekly.