Honoring Alice Amsden and Albert Hirschman: Trailblazers in Development and Political Economics

Gerald Epstein

On the last day of 2012, we note the passing of two brilliant economists who have done much to contribute a broad and deep understanding of economic history and institutions. Triple Crisis has  written of the passing, life, and work of Alice Amsden, the brilliant development economist from MIT, who contributed enormously to our understanding of technology and industrial policy to the dramatic rise of Asian economies, among others.

We also recognize here Albert Hirschman, the brilliant political economist, who crossed disciplinary boundaries and had a deep commitment to learning from economic history and  political institutions. Hirschman died on December 11, 2012 at the age of 97.

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The IMF’S Institutional View On Capital Flows: Back To The Future

Yilmaz Akyuz

As the crisis in advanced economies (AEs) has laid bare the deficiencies of unfettered financial markets and developing countries (DCs) have started exploring ways and means of counteracting destabilizing capital inflows triggered by quantitative easing and historically low interest rates in major AEs through various measures, the IMF has been compelled to reconsider its position on capital account liberalization. After two years of pondering it has now come up with an Institutional View, discussed in its Executive Board and endorsed by most Directors. It is meant to guide Fund advice to members and Fund assessments in the context of surveillance, while it is also reiterated that members have no capital account obligations under the Articles of Agreement.

This new view brings no fundamental change in the long-held position of the Fund regarding the benefits of free capital movements. It is now recognized that there may be circumstances when capital movements may need to be restricted by Capital Flow Management Measures (CFMs), but such measures need to be deployed only as a last resort (even though the new text avoids using the term) and on a temporary basis. Countries with long-standing and extensive CFMs are advised to liberalize in order to benefit from capital movements. The Fund goes even further and encourages premature liberalization: “a country could make progress towards greater capital flow liberalization before reaching all the necessary thresholds for financial and institutional development, and indeed doing so may spur progress in these dimensions.”

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Econ4: Statement on Healthcare

We are economists who think that the economy should serve people, the planet and the future.

The United States ranks first in the world in health care spending per person, but only 45th in life expectancy. The average American sees a doctor less often than the average Canadian, the average Briton, or the average resident of most industrial democracies. The average life expectancy of white Americans without a high school degree has fallen since 1990 by three years for men and five years for women.

This paradoxical combination of first-class costs and second-rate performance is a result of a multi-payer health care system whose enormous administrative bureaucracy absorbs nearly one-third of our health care dollars. The aim of this private bureaucracy is to police patients and doctors, not to add value or protect human health.

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Debt Audit as Social Justice: Lessons from the Norwegian Model

Leonce Ndikumana

In 2006, Norway made history by deciding to unilaterally and unconditionally cancel its debts associated with the Ship Export Campaign of the late 1970s, due to the fact that the funded projects had not benefited the debtor, and the lender shared the responsibility for the failed experiment. For the first time, an official lender had admitted its share of responsibility in the failure of a lending operation. Traditionally, lenders have wanted the world to believe that failure of lending lies only with the borrower.

This past summer 2012, Norway made history again, by initiating an audit for its bilateral loans to developing countries. In a number of cases and on an ad hoc basis, calls for debt audits have been made by members of Parliament or civil societies in donor countries. The Norwegian debt audit is unprecedented and unique as an independent audit of official loans to developing countries initiated by the creditor government. As the new report by the Norwegian Coalition for Debt Cancellation (SLUG) – “Exportable? How to Make the Norwegian Debt Audit Transferable to Other Countries” – indicates, the Norwegian debt audit model is unique, particularly inasmuch as it promotes increased “co-responsibility” for debt by lenders and borrowers as well as “mutual respect” between creditors and debtors.

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Africa "rising"…or crashing.

By Patrick Bond, Guest Blogger

Earlier this month, Time Magazine pronounced,

“Africa owes its takeoff to a variety of accelerators, nearly all of them external and occurring in the past 10 years:

•    billions of dollars in aid, especially to fight HIV/AIDS and malaria;
•    tens of billions of dollars in foreign-debt cancellations;
•    a concurrent interest in Africa’s natural resources, led by China; and
•    the rapid spread of mobile phones, from a few million in 2000 to more than 750 million today.”

The reality is very different, so let’s try this paragraph again. Actually, Africa owes its economic decline to a variety of accelerators, nearly all of them external and occurring in the past centuries during which slavery, colonialism and neo-colonialism locked in the continent’s underdevelopment, but several of which – along with climate change – were amplified in recent years:

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Africa “rising”…or crashing.

By Patrick Bond, Guest Blogger

Earlier this month, Time Magazine pronounced,

“Africa owes its takeoff to a variety of accelerators, nearly all of them external and occurring in the past 10 years:

•    billions of dollars in aid, especially to fight HIV/AIDS and malaria;
•    tens of billions of dollars in foreign-debt cancellations;
•    a concurrent interest in Africa’s natural resources, led by China; and
•    the rapid spread of mobile phones, from a few million in 2000 to more than 750 million today.”

The reality is very different, so let’s try this paragraph again. Actually, Africa owes its economic decline to a variety of accelerators, nearly all of them external and occurring in the past centuries during which slavery, colonialism and neo-colonialism locked in the continent’s underdevelopment, but several of which – along with climate change – were amplified in recent years:

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The anatomy of mediocrity: FDI and Eastern Europe’s mid-level manufacturing trap

Cornel Ban

The 1990s and the 2000s were decades replete with economic myths. Remember the hubristic stories about the end of manufacturing or the endless opportunities afforded by the “new economy”? Remember the paeans to the virtues of radical financial deregulation? Correspondingly, it was a time when many apparently sensible people would scoff at warnings about the export of manufactured goods loaded with predominantly domestic innovations, cautious optimism about the added value of technological somersaults, and skepticism about the benefits of light touch regulation. The new EU member states from Eastern Europe were no exception. In the initially euphoric transitions experienced by those inhabiting the former space of really existing socialism, the new myths had an even greater appeal. Indeed, they provided starry-eyed reformers with the contours of the very market economy of the future.

How times have changed! The financial crisis and the success that the old-fashioned German economy has had in overcoming its worst aftereffects, have had a sobering effect on the frenzied talk and economic “newspeak” of the previous two decades. Vocational training, patient finance, economic coordination and such elements of stigma in, say, 2006, were being reconsidered by 2012 as far as British conservative circles.

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Why Does Neoliberalism Persist Even After the Global Crisis?

Vamsi Vakulabharanam, Guest Blogger.

The 2007-9 crisis in global capitalism brought a new energy and focus to the heterodox economists, and more broadly to the critics of neoliberalism from different arenas of society. It seemed clear at that time that neoliberalism had run its course when it met its structural contradiction – with the burst of the US housing bubble and the concomitant financial crises across the world, it looked like the avenues through which demand was being generated were closed and the system was poised for structural change. Three years later, Southern Europe is witnessing an intense so-called sovereign debt crisis with the working people bearing the brunt of it, and real economies in the developed world are continuing to witness slow growth. The US seems to be under the threat of the so-called fiscal cliff (which seems more like a political event rather than an economic one). The economies that grew quickly during the neo-liberal period, like China and India, have slowed down considerably. Across the globe, we seem to be going through a period of uncertainty without a clear path ahead. Yet, neoliberalism persists. Why?

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Applying a Human Rights Framework to Macroeconomic Policies

Margot Baruch, Guest Blogger. 

Tax laws impact government revenue and expenditure and can also violate states’ obligations to protect, respect, and fulfill economic and social rights.  Last week the Center for Women’s Global Leadership (CWGL) at Rutgers University circulated their most recent Nexus Brief: Shaping Feminist Visions in the 21st Century (http://cwgl.rutgers.edu/component/docman/doc_download/517-nexusbrief3), which provides an analytical tool to measure government’s realization of economic and social rights through economic policy. The tool uses human rights principles as a framework for auditing economic policy.

The current global economic crisis provides stark evidence that the economic policies of the last three decades have not been working. The devastation that the crisis has wrought on the most vulnerable households in the Global North and Global South is a reminder that the formulation of economic policy and the realization of human rights (economic, social, political, civil and cultural) have for too long been divorced from one another. Economic policy and human rights do not have to be opposing forces, but can exist symbiotically.

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The Abuses of Aid

Jayati Ghosh

Foreign aid has been getting a bad press this year – and not without reason. For a long time bilateral aid in particular has been seen as too small and scattered, too politically motivated, too supportive of the interests of donors (especially of the business interests of donor countries) rather than oriented to real  benefits for intended recipients. Now, governments of poor developing countries that were earlier grateful for any crumbs from the rich countries’ table are less welcoming, especially of aid that comes tied to various economic and political strings. The improvement in their terms of trade over the past six years, as well as the emergence of new markets and new sources of aid and investment from other emerging nations and oil-exporting countries, have all played a role in this changed perception.

The relationship of the UK government with foreign aid has become particularly complicated in recent times – but it may well be symptomatic of a wider problem in many developing countries. The Cameron government announced that it was going to “ringfence” foreign aid from the sweeping budget cuts that it has already announced or plans to implement over the next few years. But this has come under attack from both Left and Right for various reasons. Revelations in the British media that a significant part of the funds has been directed to highly paid consultants based in the UK whose output is often of dubious relevance or usefulness to the so-called “beneficiary” country or its people may have come as a surprise to many within Britain, but such patterns have been apparent in the developing world for some time now.

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