The Squandered Wealth of Nations: The Age of Greed

Jeff Madrick

When you write a book called Age of Greed, as I have, the derision about the title begins immediately. How is this age any different than others? Greed is a deep human trait; it does not disappear and suddenly reappear.  Even one of my wisest former book editors questioned the idea that greed is different now than it ever was.

But when he finally read about halfway into the book, he got the point.  Self-interest is one thing.  It is what Adam Smith wrote about in the Wealth of Nations in 1776. It makes the invisible hand work.  And if moderate, it can and sometimes does lead to widespread prosperity.

Self-interest rises to levels of greed, however, when it is unchecked by that other great sphere of modern social life, the government.   My argument is that self-interest broadly turned to greed beginning in the 1970s, and then crescendoed through the next three decades.  Milton Friedman and others argued that competition and price setting would themselves check the bad decisions stimulated by greed.  His claims were and remain nonsense.

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Towards green low-carbon growth?

Triple Crisis Blogger Martin Khor published this article in the Third World Network’s Global Trends Series, on last week’s “green low-carbon development” conference in China.

A conference last week in Beijing heard plans by China and other counties for achieving green low-carbon development to combat climate change.  Despite an upbeat mood, the difficulties are many and serious.

Despite the slow progress in the global climate negotiations, some developing countries are already taking their own climate actions to reduce emissions and adapt to the effects of climate change.

Of course, their actions will fall far short of what is required, unless the funds and technology expected as a result from the global talks materialize.  And unless the developed countries also cut their emissions greatly and leave more “carbon space” to the developing countries.

Read the full post at the Third World Network.

The Greek Crisis: The EU's Wasted Year

Daniela Schwarzer

In May 2010, the EU could praise itself for its ability to put together a 110 bn € rescue package for Greece in cooperation with the IMF and, only weeks later, for agreeing on a 750 bn € rescue fund for other potentially illiquid Eurozone members. At the time, these steps appeared as an important demonstration of European solidarity, as a signal of the Eurozone’s ability to get its act together although it had no tested crisis management instruments at its disposal, and as a manifestation of strength in the face of financial markets ready to speculate on the bankruptcy of Eurozone member states or even a breaking apart of the currency union.

A year later devastating pictures from all over Europe hit the covers of the newspapers and magazines: people flock to the streets in Greece to demonstrate against austerity measures and structural reforms which they blame on the European Union. Protesters are also out in Lisbon, Portugal, just like in Spain which so far has not requested financial assistance from the EU and the IMF, but which implements a long list of reforms and budgetary cuts in order not to lose further credibility in the financial markets. In France, the Eurozone’s second largest member state after Germany, a right-wing extremist, Marine Le Pen, wants the country to leave the Euro – and roughly a fifth of French voters would chose her if Presidential elections were held tomorrow. In Germany, skepticism towards the single currency and in particular towards the Southern European members of the Eurozone, has grown tremendously since the package for Greece was launched in spring last year.

In June 2011 –  just as in spring 2010 – the European Monetary Union finds itself at a crossroads. The choice is once again to provide Greece with credit and guarantees, or to let the country slip into bankruptcy within weeks.  This would indeed occur if the so-called Troika, which consists of the European Commission, the European Central Bank und the IMF, refuses to hand out the next 12 bn € tranche of the loan package agreed last year since Greece’s restructuring and consolidation programme is not going far enough.

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The Greek Crisis: The EU’s Wasted Year

Daniela Schwarzer

In May 2010, the EU could praise itself for its ability to put together a 110 bn € rescue package for Greece in cooperation with the IMF and, only weeks later, for agreeing on a 750 bn € rescue fund for other potentially illiquid Eurozone members. At the time, these steps appeared as an important demonstration of European solidarity, as a signal of the Eurozone’s ability to get its act together although it had no tested crisis management instruments at its disposal, and as a manifestation of strength in the face of financial markets ready to speculate on the bankruptcy of Eurozone member states or even a breaking apart of the currency union.

A year later devastating pictures from all over Europe hit the covers of the newspapers and magazines: people flock to the streets in Greece to demonstrate against austerity measures and structural reforms which they blame on the European Union. Protesters are also out in Lisbon, Portugal, just like in Spain which so far has not requested financial assistance from the EU and the IMF, but which implements a long list of reforms and budgetary cuts in order not to lose further credibility in the financial markets. In France, the Eurozone’s second largest member state after Germany, a right-wing extremist, Marine Le Pen, wants the country to leave the Euro – and roughly a fifth of French voters would chose her if Presidential elections were held tomorrow. In Germany, skepticism towards the single currency and in particular towards the Southern European members of the Eurozone, has grown tremendously since the package for Greece was launched in spring last year.

In June 2011 –  just as in spring 2010 – the European Monetary Union finds itself at a crossroads. The choice is once again to provide Greece with credit and guarantees, or to let the country slip into bankruptcy within weeks.  This would indeed occur if the so-called Troika, which consists of the European Commission, the European Central Bank und the IMF, refuses to hand out the next 12 bn € tranche of the loan package agreed last year since Greece’s restructuring and consolidation programme is not going far enough.

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The Greek Crisis: Uttering the Other "D Word"

Matías Vernengo

Default is not the dirty word that nobody wants to say.  Almost everybody now accepts that Greece will default.  Several people will prefer to use the euphemism of “re-profiling debts,” but we all know what it means.  The interesting thing is that at least some authors, like Martin Wolf in a recent Financial Times column, also acknowledge that default is not sufficient.  The surprising thing that almost nobody asks is whether a default would actually solve the Greek problem.

Of course that would require understanding the problem in the first place.  And herein lies the problem, since most people still argue that the Greek problem is fundamentally fiscal.  In other words, in the conventional view the Greek government spent too much (and lied about it), and the solution must rely on the generation of sufficient fiscal surpluses to pay for the outstanding debt.  Further, to obtain the funds it is assumed that austerity is the way to go, privatizing public firms, cutting public sector wages, and reducing pensions.

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The Greek Crisis: Uttering the Other “D Word”

Matías Vernengo

Default is not the dirty word that nobody wants to say.  Almost everybody now accepts that Greece will default.  Several people will prefer to use the euphemism of “re-profiling debts,” but we all know what it means.  The interesting thing is that at least some authors, like Martin Wolf in a recent Financial Times column, also acknowledge that default is not sufficient.  The surprising thing that almost nobody asks is whether a default would actually solve the Greek problem.

Of course that would require understanding the problem in the first place.  And herein lies the problem, since most people still argue that the Greek problem is fundamentally fiscal.  In other words, in the conventional view the Greek government spent too much (and lied about it), and the solution must rely on the generation of sufficient fiscal surpluses to pay for the outstanding debt.  Further, to obtain the funds it is assumed that austerity is the way to go, privatizing public firms, cutting public sector wages, and reducing pensions.

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Spotlight G20: The G20 Agricultural Action Plan: Changing the Course of Capitalism?

Jennifer Clapp and Sarah Martin*

Nicolas Sarkozy made no secret of his aim to use France’s presidency of the G20 as a platform to address food price volatility with tough measures, including regulating speculation on agricultural commodity futures markets.  As the first ever meeting of the G20 Agriculture Ministers got underway yesterday, he was optimistic about their efforts: “In adopting this plan you will change not only the lives of a billion farmers but the course of capitalism itself so capitalism once again contributes to the development and well-being of people.”

But the Agriculture Ministers, despite having a number of extensive policy options to address volatility, opted for a ‘light’ touch rather than changing the course of capitalism. The Action Plan adopted by the Ministers includes several marginal measures, none of which tackles market regulation. The centrepiece of the plan is the Agricultural Market Information System (AMIS).

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Can’t Pay? Won’t Pay!

Edward Barbier

What do the worldwide debt crisis and global warming have in common?

They both represent economies drawing down assets faster than they can replenish them.

In the case of the debt crisis, economies are spending more wealth than they are accumulating.  In the case of global warming and other symptoms of ecological scarcity, we are using up nature’s capital and its vital services at an alarming rate (see my forthcoming book, Capitalizing on Nature: Ecosystems as Natural Assets).  Rather than adding to wealth – both financial and natural – economies are squandering it.  This is not a new problem but has occurred throughout history, although this tendency has accelerated in recent times, as I show in my recent book, Scarcity and Frontiers: How Economies Have Developed Through Natural Resource Scarcity.

The connection between economic and natural debt is revealed if our conventional measure of economic progress – Gross Domestic Product (GDP) per capita – is replaced with an alternative indicator – Adjusted Net Domestic Product (ANDP) per capita.  As explained in my article, “Tracking the Sputnik Economy” in The Economists’ Voice, calculating ADNP per capita for most economies is straightforward.  ANDP is also a better indicator than GDP per capita of whether or not an economy’s real income is spent on adding to capital – human, reproducible and environmental.

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Spotlight G20: Agriculture Ministers Should Strengthen Government Role in Volatile Markets

Sophia Murphy, Guest Blogger

Tomorrow the first ever summit of G20 Agriculture Ministers will take place in Paris. The French government is to be commended for the initiative. Concerned by the evident disarray in government responses to the food price crisis of 2007-08, the French government moved quickly and deliberately to consider how best to respond. One of their investments, one that might be overlooked in the drama of a G20 summit, has been in research to understand what kinds of tools governments have used to respond to price spikes and volatility, and how effective those tools have been, particularly in developing countries, and particularly with an eye on reducing poverty and vulnerability to hunger. The results of that investment is informing the debate at many levels, and is a welcome addition to a literature that is otherwise rather too orthodox.

One of the main contributors to this research is Franck Galtier, who works with part of the French agricultural research institution CIRAD. Galtier makes the point that countries are each quite different and need their own distinct mix of policies to respond to the specificities of their situation. Galtier has built a typology of responses to price volatility with four categories: measures to prevent (or mitigate) volatility and measures to cope with it, crossed with measures that are designed to leave the private sector in charge versus measures that require the state to intervene. One of his important conclusions is that by far the largest share of international policy advice (and money) for the last twenty years has focused on policies and programs that use public funds either to build infrastructure and open borders; or, to manage risk and facilitate participation in commodities markets. Public interventions to mitigate volatility—to keep prices stable—have been widely neglected. Yet common sense and long experience suggest they might be the best use of money.

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Myth and the crisis of alternative ideology

Salim Kassem, Guest Blogger

In a recent article, Prof. Prabhat Patnaik provided critique of the received wisdom that neoliberal policies hasten capitalist development and hence the march to modernity in a developing context. He rightly arrived at the conclusion that far from dealing blows against the old obscurantist order of myths and self-styled messiahs, neoliberal policies reach a modus vivendi with it, which impedes the march to modernity. Indeed, it does, but not only in a developing context but also in a developed context.

If modernity is to be partly understood as a social and political discourse and practice free of the influence of mythology, shamanism and phantasm, then the case may be that the United States, the leading capitalist power, is anything but modern. One recent occurrence, the speech of Mr. Benjamin Netanyahu, the Israeli prime minister to congress, which had received 29 standing ovations may, in two particular accolades,  unequivocally demonstrate the point. Standing ovations numbered 15 and 16 respectively, in which biblical references to Judea and Samaria and a 4000 thousand years old bond of Jewish people to Jewish land exemplify the body language a state to mythical statements.  How is one to understand this raucous applause to religious myths from the representatives of the most advanced capitalist state, which is, at one end, the ‘realisation of the spirit’ and, on the other the mediation of the varying positions of social classes in society? 

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