Budget Fallacies: Why the Ryan Plan Won’t Work

Triple Crisis blogger Jeff Madrick published the following opinion article in The New York Review of Books Blog on the flawed assumptions underlying Congressman Paul Ryan’s budget proposal.

Among the economic fallacies embraced in Congressman Paul Ryan’s budget proposal, two are particularly egregious: that getting rid of Medicare will reduce health care costs and that enacting yet further tax cuts for the rich will spur growth and investment.

Critics on the left are up in arms because Ryan’s proposal to force Medicare recipients to buy private insurance will raise the amount those now under 55 will pay when they are old enough to get Medicare by an average of $6,000 a person. In other words, critics say, we are trying to cut health care costs—and supposedly reform it through more privatization—on the backs of future elderly Medicare recipients.

But the Ryan plan won’t reduce health care costs. As Peter Orszag, the former White House budget director, told me recently, the bipartisan Congressional Budget Office calculates that overall health care spending will go up as Medicare recipients are forced to buy private insurance, since private insurance has far higher administrative expenses than Medicare. Health care expenditures, as Orszag nicely puts it, are not being reduced on the backs of seniors, they are being raised on the backs of seniors.

Read the full article at The New York Review of Books Blog.

Ecological scarcity, poverty and development

Edward B. Barbier

The Triple Crisis Blog is pleased to welcome Edward B. Barbier, John S. Bugas Professor of Economics at the University of Wyoming, as a regular blogger.

In my recent book, Scarcity and Frontiers: How Economies Have Developed Through Natural Resource Scarcity, I have argued that the world is entering a new era, the “Age of Ecological Scarcity”.  The main development challenge of this era is the implications for global poverty.  Exacerbating the problem is that, compared to past eras in human history, economic growth through exploiting abundant “frontiers” of land and natural resources will no longer be the means to improve the livelihoods of the poorest human populations.

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Demystifying Syria

Salim Kassem, Guest Blogger

Two relationships have long been at play behind the stability of the Syrian regime. The first relationship is an economic relationship, in which the regime would put back into national production just enough to create jobs and produce cheap national goods to keep the working population in steady or, better yet, improving living conditions. The second is a political relationship, in which the regime soberly assesses the balance of power, commits to the right of return under UN resolution 194 and raises the dose of repression the more power, control and wealth become concentrated in the hands of the ruling military elite and its adjunct bourgeois class. As the recent popular uprising has come to show, serious distortions have been incurred to both relationships, which are also, under more concrete conditions, inseparable.
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Crunch time arrives for WTO talks

Triple Crisis blogger Martin Khor published the following opinion article for the Third World Network on the WTO’s April 29 meeting to decide whether to continue, suspend, or end the Doha trade talks, which are not likely to be complete before the 2011 deadline.

The differences among key countries in the World Trade Organisation’s Doha trade talks are so wide as to be unbridgeable in at least one major area, and the time has come to decide on what to do about the talks – to continue trying to get a deal this year, to admit failure and close the talks, or something in between.

This seems to be the message coming out of the 600-plus pages of a document issued by the WTO on 22 April, that contain reports on the state of play of the negotiations in nine issues, plus assessments by the Director General Pascal Lamy.

On 29 April, the WTO will meet to hear what delegations have to say about the reports and the latest crisis-like situation.

The failures in recent weeks to make progress have deepened the impasse.  The inescapable conclusion is that these talks will not complete in 2011, the deadline set by political leaders.

Read the full article at the Third World Network.

Maintaining Employment Through the Crisis

Diana Tussie

The cost of active labor policies – policies to preserve employment in an economic downturn – have become an important part of global discussions to manage the crisis.  A widely held myth is that experience with active labor policies resides in OECD countries and that these are very costly to replicate for cash strapped countries in today´s circumstances.

In fact Latin America has accumulated experience in several areas of active labor policies. Argentina was an early starter during its own crisis in 2001 with incentives to keep people busy. The economic meltdown had left skyrocketing unemployment, widespread social scars but also some lessons. Thus the Global Recession found Argentina with muscles flexed, as Pablo Trucco and I show in a recent paper.

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To make the IMF relevant will take more than a new leader

Triple Crisis blogger Jayati Ghosh published the following opinion article in the Guardian on the string of recent IMF failures and whether the organization’s rethink on capital controls is the start of major reform.

In appearing to veto Gordon Brown’s chances of becoming the next head of the International Monetary Fund, David Cameron says the organisation needs someone who “understands the dangers of excessive debt, excessive deficit”. But if that is all the new person understands, then he or she will make little difference to an institution badly in need of real reform.

For years the IMF has been caught wrongfooted during almost every major global economic event. Before the great recession of 2008 it was an international institution on life support: ignored by most developing countries; derided for its failure to predict most crises and then for its counterproductive responses; even called to book by its own auditors for poor management of its own funds.

The IMF encouraged financial liberalisation that pushed many countries to crisis, and became famous for congratulating bubble economies on healthy and sound financial management (Thailand in 1997; Argentina in 1999; most recently Ireland and Iceland in 2008) – often just months before their spectacular financial crashes. Its policy prescriptions were widely perceived to be rigid and unimaginative, applying a uniform approach to very different economies.

Read the full article at the Guardian.

To make the IMF relevant will take more than a new leader

Triple Crisis blogger Jayati Ghosh published the following opinion article in the Guardian on the string of recent IMF failures and whether the organization’s rethink on capital controls is the start of major reform.

In appearing to veto Gordon Brown’s chances of becoming the next head of the International Monetary Fund, David Cameron says the organisation needs someone who “understands the dangers of excessive debt, excessive deficit”. But if that is all the new person understands, then he or she will make little difference to an institution badly in need of real reform.

For years the IMF has been caught wrongfooted during almost every major global economic event. Before the great recession of 2008 it was an international institution on life support: ignored by most developing countries; derided for its failure to predict most crises and then for its counterproductive responses; even called to book by its own auditors for poor management of its own funds.

The IMF encouraged financial liberalisation that pushed many countries to crisis, and became famous for congratulating bubble economies on healthy and sound financial management (Thailand in 1997; Argentina in 1999; most recently Ireland and Iceland in 2008) – often just months before their spectacular financial crashes. Its policy prescriptions were widely perceived to be rigid and unimaginative, applying a uniform approach to very different economies.

Read the full article at the Guardian.

Nuclear Waste, Yucca Mountain, and Fukushima: “This is not a place of honor”

Alejandro Nadal

Suppose you had to deliver a complex message alerting future societies about a horrific manmade danger. Assume furthermore that you had to ensure your message would survive the ravages of time in order to deliver this warning to generations well into the future, say 10,000 years from today. How would you design a message for future societies that may not necessarily speak our language or share our cultural references?

Although this may sound like science fiction, finding an answer to this question was the task of a group of experts convened in 1993 by Sandia Laboratories of the US Department of Energy (DoE). Their mission was to design a marking system informing potential intruders from future societies about the dangers of radioactive material stored in the Waste Isolation Pilot Plant (WIPP) at Yucca Mountain, Nevada. The group was formed by archeologists, linguists, anthropologists and experts in materials sciences.

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Damming Capital

Triple Crisis bloggers Kevin Gallagher and Stephany Griffith-Jones co-authored the following opinion article with Jose Antonio Ocampo for Project Syndicate on the IMF’s proposed guidelines for the use of capital controls in developing countries. Read more Triple Crisis commentary on capital controls and Gallagher’s latest publication on capital controls and trade and investment treaties.

Capital-account regulations have been at the center of global financial debates for two years. The reasons are clear: since the world has experienced a “multi-speed recovery,” as the International Monetary Fund puts it, slow-growth advanced countries are maintaining very low interest rates and other expansionary monetary policies, while fast-growth emerging economies are unwinding the expansionary policies that they adopted during the recession. This asymmetry has spurred huge capital flows from the former to the latter, which are likely to continue.

Emerging economies fear that this flood of capital will drive up their currencies’ exchange rates, in addition to fueling current-account deficits and asset bubbles, which past experience has taught them is a sure recipe for future crises. The problem is compounded by the fact that one of the countries undertaking expansionary policies is the United States, which has the world’s largest financial sector and issues the paramount global currency.

Small wonder, then, that several emerging economies are using capital controls to try to manage the flood. This, of course, contradicts the wisdom that the IMF and others have preached in the past – that emerging economies should free their capital accounts as part of a broader process of financial liberalization.

Read the full article at Project Syndicate.

Development Banks: Their role and importance for development

Triple Crisis blogger C.P. Chandrasekhar published the following opinion article for the International Development Economics Associates (IDEAs) Network on why several countries are doing away with development banking institutions despite the critical role development banks have played in many countries’ development trajectories.

Among the institutions whose role in the development of the less developed regions is well recognised but inadequately emphasised are the development banks. Playing multiple roles, these institutions have helped promote, nurture, support and monitor a range of activities, though their most important function has been as drivers of industrial development.

All underdeveloped countries launching on national development strategies, often in the aftermath of decolonisation, were keen on accelerating the pace of growth of productivity and  per capita GDP. This was the obvious requirement for alleviating poverty and reducing the developmental gap that separated them from the developed countries. To realise this goal, they considered industrialisation to be an important prerequisite. This stemmed from the perspective that modern economic growth was a process characterised by an increase in the
share of employment in the non-agricultural sector, and within the latter by a change in the scale of productive units, the growth of factory production and a shift from personal enterprise to the impersonal organisation of economic firms.

Read the full article at the IDEAs Network.