From “Technocrats” to Autocrats: Who elected the central bankers?

Gerald Epstein

The G-20 Finance Ministers’ meeting in Mexico City ended on Sunday, February 26, unsurprisingly, with no apparent progress on resolving the global economic crisis. Yet, according to some news reports, leaders at the meeting believed they had turned a corner on the euro crisis, primarily by agreeing to massive “fiscal consolidation”, another of the many euphemisms (this one for austerity) thrown up by the financial crisis.

Pushing through these austerity measures are a host of other actors, including the so-called “technocrats” who are running more institutions and even governments. Included among these so-called neutral technocrats is the “independent” European Central Bank (ECB).  Digging a bit deeper cracks open a façade of central bank “expertise” and neutrality to reveal not only a destructive adherence to a failed economic analysis but also the use of unelected central banks to exercise the raw power of financial and other elites over democratic societies.

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100 Economists Call for Trans-Pacific Trade Deal to Allow Capital Controls

Kevin P. Gallagher and Sarah Anderson, guest blogger

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 to urge negotiators of the Trans-Pacific Partnership Treaty.  The letter attracted 100 signatories from TPP countries and was released today.

Click here for the full statement and list of endorsers.

In advance of Trans-Pacific trade talks, over 100 economists are sending a letter today urging negotiators to promote global financial stability by allowing the use of capital controls.

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Rich Presidents of Poor Nations: An African story of oil and capital flight

The Triple Crisis Blog is pleased to welcome as a regular blogger Léonce Ndikumana, Andrew Glyn Professor of Economics and Director of the African Policy Program, Department of Economics and Political Economy Research Institute (PERI), University of Massachusetts at Amherst.

Stories of African presidents shipping suitcases of cash to finance political campaigns abroad in exchange for patronage have made the headlines recently, prompting legal probes into illicit wealth accumulation. On February 14th, France 24 reported that the French Police[1] searched the apartment of Theodoro Obiang Nguema, the President of Equatorial Guinea, whose family has accumulated massive wealth by mortgaging his country’s oil. In 2011, Global Witness reported that his flamboyant son Theodorin Obiang commissioned a personal super-yacht with a handsome price tag of $380 million, worth three times the country’s combined budget for health and education.[2] The French Justice system is also pursuing inquiries into the illicit wealth of Ali Bongo of Gabon and Denis Sassou Nguesso of the Republic of Congo. While they are dramatic, these stories reflect a deep seated tragedy of African resource-rich countries.

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Not so “sweetheart deals” from China in Latin America

Kevin P. Gallagher

Never letting data get in the way of a good story, pundits and policy-makers alike have clamored that Chinese development banks are engaged in “low-ball” finance that is out-competing Western finance in Latin America.  Not so simple, not so fast, according to findings in a new study that I co-authored titled “The New Banks in Town: Chinese Finance in Latin America.”

Frustrated by the lack of transparency exhibited by Chinese banks – notably the Chinese Development Bank (CDB) and the Export-Import Bank of China – we embarked on an effort to create a database of Chinese financing to Latin American governments from 2005 to the present.

Digging through SEC filings, government web pages, the press on both sides of the Pacific and beyond, we estimate that between 2005 and 2011 these banks provided upwards of $75bn in loan commitments to Latin American governments.  The Chinese committed $37bn to the region in 2010 alone, more than the World Bank, Inter-American Development Bank, and the United States Export-Import bank combined.

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10 Questions for Economists Who Oppose Manufacturing Subsidies

Jeff Madrick

Why are mainstream economists, right and left, so determined to push back any attempt to subsidize manufacturing in America? The question will arise anew tonight when President Obama presents his budget, complete with tax provisions to support manufacturing. After the president addressed the issue as his first topic in the State of the Union a couple of weeks ago, many esteemed economists seemed to rush to the offense. Obama proposed using tax carrots and sticks to encourage manufacturers to stay here, return here, or get out of those low-wage emerging markets. Some mainstreamers, seeming to represent the conventional wisdom among them, openly scorned the idea. At least one, Laura Tyson, has stood her ground in favor of a policy focus on manufacturing.

I understand the mainstream economic reflex. After working so hard to get world nations to reduce trade barriers for the last 40 to 50 years, they and their successors view subsidizing manufacturing in the U.S. as a retreat. It could provoke retaliation as well. And moving the world toward free trade makes eminently good theoretical sense — to a degree. The anti-manufacturing subsidy bias is really a subset of the firm, almost unshakable allegiance to free trade theory among the American mainstream.

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Romania’s lesson for austerity enthusiasts

The Triple Crisis blog is pleased to welcome Cornel Ban as a regular contributor. Ban is a Postdoctoral Scholar of International Studies and Deputy Director of the Development Studies Program at the Watson Institute for International Studies at Brown University. His research in international political economy focuses on the transnational spread of economic ideas and varieties of capitalist development.

You know that a ship is about to sink when the most loyal sailors head for the life raft. Until January 2012 the continuous expansion of the realm of the market and the shrinking of the state’s responsibility for delivering public goods was de rigueur in Romania. Indeed, this East European country that joined the EU in 2007 appeared as a poster child for austerity and market reforms. The country’s 2010 fiscal adjustment included the usual mass layoffs and wage cuts in the public sector but the government surprised even the visiting IMF chief with its utter lack of concern for distribution costs: drastic cuts in the social security benefits of the most vulnerable, a “flat” cut of 25 percent applied to all wages in the country’s very unequal public sector, and an undifferentiated hike of the VAT to one of Europe’s highest levels.

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Understanding the Financial Crisis: Inside “the secret laboratory of the bourgeoisie”

Alejandro Nadal

Marx is the ultimate critic of capitalism, so what does a Marxian analysis offer when applied to the present global economic and financial crisis?

Two preliminaries are important. First, for Marx crises are not pathologies of capitalism. They are the necessary outcome of the contradictions that define the essence of this mode of production. The backdrop of Marx’s analysis of crises is always class struggle. Second, capital has its own views of crisis and cycles: they are designed to facilitate policy and intervention. These views vary in their degree of accuracy, but in general they do not question capitalism. Marx’s perspective has a different objective: to reveal to the working class the forces that can overthrow capital.

Marx’s theory of crises is disseminated in several key writings. We concentrate our attention on the following: Grundrisse, Contribution to the Critique of Political Economy, Capital, Theories of Surplus Value. It must be remembered that Engels first advanced his theory of overproduction in his Outline of a Critique of Political Economy (1843).

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EU’s airlines carbon tax starts trade wars over climate change

Martin Khor

A group of 26 countries are organising themselves to retaliate against the European Union for its move to charge airlines for the greenhouse gases they emit on flights into and out  of Europe.

This seems to be the start of a trade war fought over climate change.

Many countries whose airlines are affected – including China, India, Malaysia, Nigeria, South Africa, Egypt, Brazil and the United States – consider this to be unfair or illegal or both.

This is the first full-blown international battle over whether countries can or should take unilateral trade measures on the ground of addressing climate change.

Developing countries in particular have been concerned over increasing signs that the developed countries are preparing to take protectionist measures to tax or block the entry of their goods and services on the ground that greenhouse gases above an acceptable level are emitted in producing the goods or undertaking the service.
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Emerging Asia next?

C.P. Chandrasekhar

It is now more than four years since the onset of the real economy recession in the United States. It is also close to five years since the disclosure by the investment-banking firm Bear Stearns that two of its subprime mortgage-linked funds were worthless, which signalled the onset of the financial crisis. Yet the global economy has not emerged out of both crises.

In the January 2012 update of its World Economic Outlook, the International Monetary Fund (IMF) has revised downwards by three-fourths of a percentage point (to 1.2 per cent) its global growth forecast for 2012. It also fears that things could be even worse. “The world recovery, which was weak in the first place, is in danger of stalling. The epicentre of the danger is Europe, but the rest of the world is increasingly affected,” said Olivier Blanchard, the IMF’s Economic Counsellor. The IMF has also noted, in a parallel January update to its Global Financial Stability Report: “Since the last Global Financial Stability Report (GFSR), risks to stability have increased, despite various policy steps to contain the euro area debt crisis and banking problems.”

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A Better Deal? Chinese Finance in Latin America

Kevin P. Gallagher, Amos Irwin, and Katherine Koleski, guest bloggers

Lending by the Chinese Development Bank (CDB) and Export-Import Bank of China (China Ex-Im) to Latin America is larger, newer, and growing faster than its Western counterparts.  According to our research, since 2005, China has provided $75 billion in loans and credit lines to Latin American countries.  In 2010, Chinese funding exceeded the region’s combined financing from the World Bank, Inter-American Development Bank (IDB), and U.S. Export-Import Bank. In fact, China overtook the World Bank and IDB even as those banks doubled lending to the region from 2006 to 2010.

China’s emerging role as a major lender to Latin America has raised concerns regarding the competitiveness of loans from World Bank and Western export credit agencies and implications on governance and environmental initiatives. In an article for The Washington Post, journalist John Pomfret further outlined these concerns stating that “China is a master at low-ball financing, fashioning loans of billions of dollars at tiny interest rates that can stretch beyond 20 years… This has become a headache for Western competitors, especially members of the 32-nation Organization for Economic Cooperation and Development (OECD), which long ago agreed not to use financing as a competitive tool.”  Others argue that Chinese financing provides an alternative source of financing without the restrictive policy conditionalities imposed by the World Bank. Deborah Bräutigam, a professor at American University, believes that in Africa, China is filling an unmet need for energy, mining, infrastructure, transportation, and housing lending, which was all but abandoned by the World Bank decades ago.

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