Tax Havens or Financial Sinkholes?

James K. Boyce

Tax havens have gotten a lot of press lately. In Britain, the UK Uncut movement has mounted demonstrations across the country against tax dodging by large corporations and wealthy individuals – making the connection between profits parked abroad and deficits and budget cuts at home.

Last month in the U.S., The New York Times revealed that GE, one of the nation’s largest companies, earned 46% of its revenue in the U.S. over the last three years but booked less than one-fifth of its profits there, shifting most of its booked profits to low-tax countries. In 2010, taking advantage of loopholes in U.S. tax laws (for which the firm had lobbied Washington lawmakers), GE paid negative taxes: despite $5.1 billion in declared pre-tax U.S. profits, the firm received a $3.2 billion tax credit. This and other blatant examples of corporate tax dodging are inspiring the birth of US Uncut, an American cousin of the British movement.

The term “tax haven” is a euphemism, however, for two reasons.

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The “currency wars”: What’s next for the BRICs and other rising powers?

Ilene Grabel

Today’s “currency wars” stand at the intersection of many critical issues. These include the ability of developing countries to deploy capital controls, the role of the US as global financial hegemon, the inadequacy of the global financial architecture, the power of the IMF, and the role of the BRICs (and other rapidly growing developing countries).  All of these issues are at center stage both at today’s meeting of G20 Finance Ministers in Washington DC and at yesterday’s BRIC Summit in Sanya, China (which South Africa attended for the first time).

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The Other Imbalances: Inequality and the financial crisis

Michael Lim Mah-Hui, Guest Blogger

Much of the discourse on the structural imbalances of the recent great financial crisis has focused on the current account imbalances between countries.  In fact, many Western mainstream economists blame the Asian surplus countries’ “savings glut” as a fundamental cause of the crisis without reflecting on their own “consumption glut” as the mirror image of the problem.

Nevertheless, two other structural imbalances that are equally, if not more important, causes of this crisis, are less discussed. These are: the imbalance between the financial sector and the real economy, sometimes known as “financialization” of the economy; and the imbalance in income and wealth between the rich and the poor and not so rich.  These other two imbalances are discussed at length in my recent book with Lim Chin, Nowhere to Hide: The Great Financial Crisis and Challenges for Asia.

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Beyond Keynes: An interview with Justin Yifu Lin

The following interview with new World Bank Chief Economist Justin Yifu Lin is re-posted from the World Policy Institute’s World Policy Journal, a Triple Crisis partner. We periodically cross-post items of interest.

In May 1979, Justin Yifu Lin—a 26-year-old company commander in the army of the Republic of China and a recent graduate of the MBA program at National Chengchi University—defected from Taiwan to mainland China by swimming across the straits to Fujian Province, leaving behind his pregnant wife and three-year-old child.

Seven years later, after obtaining a Master’s degree in Marxist political economy from Peking University, he became one of the first citizens of the People’s Republic of China to receive a PhD in economics from the University of Chicago. Reunited with his family, and returning to China, he became a professor of economics at Peking University and founded the Beijing-based China Center for Economic Research. In June 2008, he became the chief economist of the World Bank, the first ever from a developing country. In a conversation with World Policy Journal editor David A. Andelman and managing editor Justin Vogt, Lin explained his vision of the global recovery and the role of the World Bank in helping developing nations grow and prosper.

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Food Price Volatility: What Was and Wasn’t Said in the Leaked Report to the G-20

Jennifer Clapp

Triple Crisis is pleased to welcome Jennifer Clapp as a regular blogger.

Despite the slight dip in the FAO food price index in March, global food prices still remain 37 percent higher than they were at this time last year. In this context, eyes are fixed on the upcoming G­20 meetings where France, as host, has pledged global leadership on the issue of commodity price volatility.

A confidential draft report prepared by 9 international organizations for the G­20, leaked in late March, gives us a glimpse into the analysis on volatility in food and agricultural markets that informs the G­20.

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High Food Prices: Do family farmers benefit?

Timothy A. Wise

Farm prices are up again, so farmers must be getting rich, right? The U.S. Department of Agriculture sure thinks so, projecting that U.S. farmers will see record net cash farm income of $99 billion in 2011. The media follows the government’s lead, offering interviews with farmers gushing about their new-found prosperity. Are things really so great down on the U.S. farm?

They may be for the big guys, but they’re not for many family farmers. My recent study, “Still Waiting for the Farm Boom: Family Farmers Worse Off Despite High Prices,” shows that the largest farms were capturing a remarkable 88% of all net cash farm income. Meanwhile, small-to-mid-scale family farmers had lower farm incomes in 2009 than they did earlier in the decade when prices were lower, and their household incomes were down as well thanks to the Great Recession. The data reveal a lot about the precarious nature of family farming, even in a resource-rich country like the United States.

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New battle lines in climate talks

Triple Crisis blogger Martin Khor published the following opinion article at Third World Network on the North-South debate over the Kyoto Protocol, which resumed last week at the global climate talks in Bangkok.

The United Nations’ climate talks resumed last week in Bangkok.  There was a lot of drama, with developing countries throwing a challenge to the developed countries to proclaim themselves once and for all, whether they intend to continue with the Kyoto Protocol or to kill it.

This North-South battle had already been boiling the whole of last year.  Especially at the big climate conference in Cancun in December, when Japan brazenly stated it had no intention to join a second period of the protocol, after its first period expires in 2012.

Japan’s announcement had evoked outrage among the developing countries, especially since the country had hosted the meeting that created the Kyoto Protocol.  The KP is the main pillar of the UN Climate Convention; all the developed countries (except the United States) have made legal commitments under it to cut their emissions of Greenhouse Gases.

Read the full article at Third World Network.

Think energy efficiency isn’t working? Think again

Triple Crisis blogger Frank Ackerman published the following opinion article in Grist on the media’s misleading reports on the recent release of the first half of the Energy Information Administration’s (EIA) Residential Energy Consumption Survey.

Imagine a press release with this message: We’re not using more household energy than we used to — and the latest data won’t be available until next year. If you read that, I’m guessing you would join me in yawning and moving on to the next story.

That is what the Energy Information Administration (EIA), the federal agency that tracks our energy usage, just said — but it said it in a confusing way that sounded like a much bigger story, and was almost designed to mislead readers. Jess Zimmerman, writing in Grist, was among those whom they succeeded in misleading. Zimmerman’s article, “How Americans defeated efficiency with consumerism,” says that average household energy use has remained stable even as appliances have become more efficient, because we all have more appliances now.

Read the full article at Grist.

New Financial Architecture: Towards a “Beijing Consensus”?

C.P. Chandrasekhar

Joseph Stiglitz has written an article in the Financial Times dated April 1, 2011, arguing that a substantially enhanced issue of Special Drawing Rights (SDRs)by the IMF should be the first step in the reform of the international monetary system. The article is of special significance because it is based on a statement issued by 18 leading economists from across the globe calling themselves the Beijing Group, which includes nine known Chinese figures.

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The IMF's welcome rethink on capital controls

Triple Crisis blogger Kevin Gallagher co-authored the following opinion article with José Antonio Ocampo in the Guardian on the IMF’s formal recognition of capital controls as a vital policy tool for regulating destabilizing capital flows in developing countries.

In contrast to most western governments, over the past two years, the International Monetary Fund (IMF) has boldly conducted one of the most honest self-assessments of its actions leading up to the financial crisis, has become somewhat critical of inflation-targeting and has endorsed the use of capital controls. In March of this year, the IMF held a full conference on rethinking macroeconomics where its organisers concluded that the crisis has shattered the economic orthodoxy behind the fund’s previous policies.

In preparation for its annual meetings next week, on Tuesday the IMF took its work on capital controls a step further by issuing two reports (one official report and one staff discussion paper) outlining when nations should use capital controls, and what types of capital controls should be used under the proper circumstances. The new reports amount to yet another big step forward for the IMF – though there is still a long way to go.

Read the full article at the Guardian.