Economists, Liquidity Mongers and the Banker Assault on Financial Reform

Gerald Epstein

This has been a bad stretch for advocates of financial reform – and therefore for the economy as a whole. One after the other, new financial regulations contained in the Dodd-Frank law are being gutted or delayed by regulators and Congress, while the bankers – escorted by a phalanx of paid economists, lawyers and lobbyists –  are squealing “wee, wee, wee” all the way home.

Bankers and their lobbyists and economists help grease the skids not just with money – but with  terms of “econ-speak” such as “cost-benefit analysis”, and most commonly, “liquidity”. Used and manipulated by the wrong hands, such boring and innocuous sounding concepts can turn dangerous, even fatal in the banker battle against safer financial regulation.

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The Fallacy of a Two-Track World Economy

Yılmaz Akyüz, guest blogger

The new millennium has witnessed a staggering rise of the South.   During 2003-08, the average growth of developing economies (DEs) exceeded that of advanced economies (AEs) by some 5 percentage points, compared to around one point in the 1980s and 1990s.  The difference widened further during 2008-11 as most DEs proved resilient to the crisis while growth collapsed in AEs.

This growth divergence has widely been seen as the decoupling of the South from the North.  However, the evidence does not show the desynchronisation of cycles between DEs and AEs, and deviations of economic activity from underlying trends continue to be highly correlated.  The more significant question is whether there has been a durable shift in the trend growth of the South relative to the North.  Such a view is widely held, including among policy makers in DEs.  However, a closer look suggests that the growth surge in the South owes as much, if not more, to exceptional and unsustainable global economic conditions as it does to improvements in their own fundamentals.  There is, consequently, no room for complacency in policy circles in DEs.

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Latin America: On the road to neo-extractivism?

Alejandro Nadal

Last week Argentina’s president Cristina Kirchner nationalized 51% of the Spanish (majority) owned oil company Repsol-YPF. Madrid threatened reprisals but Kirchner reaffirmed her decision with nationalistic undertones. Many in Latin America saw the Argentinean resolve as an example of the region’s quest to recover control over its natural resources.

Progressive movements interpreted this act as proof that winds of change in Latin America are definitely moving away from the dark history of neoliberalism. But one question remains in the horizon: is Latin America returning to a form of extractivism?

Extractivism represents the time of enclaves, appalling social and labor conditions and the submission of central governments to the power of big international firms. It epitomizes the unfair and asymmetric integration of Latin America to the world economy at the end of the 19th century. The import substitution development strategy implemented between 1940 and 1978 was designed to escape from this trap. The debt crisis detonated in 1982 and the neoliberal policy package implemented in many countries in the region destroyed the industrial tissue built during the import substitution strategy.

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Let’s Play the World Bank President Trivia Game

Robin Broad, guest blogger

Last week, U.S.-nominee Jim Kim was elected to be the next president of the World Bank group.   Some well-known US economists and World Bank “insiders” criticized the choice – and supported Kim’s opponent Ngozi Okonjo-Iweala — because Kim is not an economist.  From that criticism, one would surmise that the majority of World Bank presidents have indeed been economists.

But what really do we know about the background of the eleven men (yes, all men) who have held that post so far?  So, expert pundits and readers alike, let’s see how well you do on the first annual World Bank President Trivia Game. Twelve men, so twelve questions:

The first category is education:

1. To repeat: Jim Kim does not hold a graduate degree in economics. How many of the eleven World Bank presidents do have graduate degrees (masters or doctorate) in economics?

ANSWER: None. While you would not know it from the criticisms of Kim, had Okonjo-Iweala won, she would have been the first. She holds a Ph.D. in regional economic development from the MIT.

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The Political Construction of Business Interests: Coordination, Growth and Equality

Cathie Jo Martin and Duane Swank, guest bloggers

Labor market coordination is the lynchpin of high-performance societies that maximize economic growth and equality, yet why does business ever cooperate?  In a story replete with unintended consequences, The Political Construction of Business Interests recounts employers’ struggles to define their collective social identities at turning points in capitalist development, to understand why coordinated capitalism emerges in some countries but not others.  The book tells of the construction of peak employers’ associations at the beginning of the Twentieth Century, the efforts to sustain these associations at century’s end, and the impact of these institutions on employers’ preferences for the welfare state.

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Reforming the European Central Bank to Promote Economic Prosperity

Philip Arestis and Malcolm Sawyer

In our blog in December we provide a quick critique of the ‘fiscal compact’ for the Economic and Monetary Union (‘euro area’) (now to be embodied in the Treaty on Stability, Coordination and Governance). The fiscal compact is more rigorous in terms of the constraints on budget deficits of the member states in relation to those that were contained in the Stability and Growth Pact and the requirement for a ‘structural balanced budget’. The proposed Treaty (signed by all the European Union members with the exception of the UK and the Czech Republic, and currently under a process of ratification by national parliaments) makes no mention of the role of the ‘independent’ European Central Bank.

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Uncertainty as UNCTAD XIII begins

Martin Khor

The ministerial meeting of the UN Conference on Trade and Development kicked off to a good start last Saturday with a opening session marked by a modern play and dance depicting the inequalities of the modern world, and with speeches by an impressive group of political leaders, including the Emir of Qatar, the President of Tunisia who came to power in the wake of the Arab Spring, and the Prime Ministers or Presidents of Turkey and Bangladesh.

Most of them stressed the need to rethink the model of economic growth that was driven by a financial system that is now seen as dysfunctional and by a pattern of development that may be economically and environmentally unsustainable.

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Defending UNCTAD's Role in Agriculture and Food Security

Sophia Murphy, guest blogger

UNCTAD—the U.N. Conference on Trade and Development—is holding its 13th quadrennial conference in Doha, Qatar this week (April 21–26). As South Centre Director, Martin Khor, underscored in his Triple Crisis blog last Friday, the meeting has generated considerably controversy, the first time UNCTAD has created such waves in more than a decade. Created in the 1960s as a forum for developing countries to explore global and regional macro-economic issues independently of the Western country-dominated Bretton Woods institutions, UNCTAD has never had an easy ride from the U.S., UK and other major powers. But for the first 20 or so years of its existence, UNCTAD received the resources and respect it needed to make a big contribution to supporting initiatives that supported development, from preferential trading schemes, to commodity agreements, to what were called “rules to control restrictive business practices” (today more commonly referred to as competition policy).

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Defending UNCTAD’s Role in Agriculture and Food Security

Sophia Murphy, guest blogger

UNCTAD—the U.N. Conference on Trade and Development—is holding its 13th quadrennial conference in Doha, Qatar this week (April 21–26). As South Centre Director, Martin Khor, underscored in his Triple Crisis blog last Friday, the meeting has generated considerably controversy, the first time UNCTAD has created such waves in more than a decade. Created in the 1960s as a forum for developing countries to explore global and regional macro-economic issues independently of the Western country-dominated Bretton Woods institutions, UNCTAD has never had an easy ride from the U.S., UK and other major powers. But for the first 20 or so years of its existence, UNCTAD received the resources and respect it needed to make a big contribution to supporting initiatives that supported development, from preferential trading schemes, to commodity agreements, to what were called “rules to control restrictive business practices” (today more commonly referred to as competition policy).

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UNCTAD’s future mandate on the line at UNCTAD XIII

Martin Khor

On 21 April, the UNCTAD ministerial conference known as UNCTAD XIII begins in Doha.   It is shaping up as an important milestone to reaffirm – or not – the mandate given to UNCTAD to work on key global economic issues, including finance and macro-economic policy.

In fact, UNCTAD enjoys that mandate already, given its role in the UN system to organize an integrated perspective on trade, finance and economic issues.

However, some developed countries have attempted to dilute the specific issues that the UNCTAD secretariat has highlighted in recent years, especially in the wake of the global financial and economic crisis.

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