On the Road to Damascus? Ambiguity and Continuity at the IMF

Cornel Ban

The most recent high profile form of target practice for the expansionary austerity thesis uses a great deal of IMF research as ammunition. A senior IMF level official who managed the Fund’s involvement during the Irish crisis blasted Europe’s policy of austerity and issued dire warnings about a gloomy future if the current course of action is maintained.Has the crisis really changed the International Monetary Fund’s policy advice? The main finding of an international workshop that took place recently at Boston University was that while some remarkable changes did in fact occur in IMF policy advice, they were too modest to suggest that an economic paradigm change is imminent.

The contributors noted that this international organization took a half-step on capital account regulation, became more open to the preferences of developing countries, relaxed its erstwhile strict commitment to austerity and has become a lot more reserved towards cross-border banking and the involvement of private sector consultants in its financial surveillance teams. At the same time, they found that the Fund has narrowed the scope of its programs to a predominantly orthodox economic policy agenda, continued to make counter-cyclical policies conditional on bond market sentiment and contributed to the weakening of recovery via its continued discrimination in favor of foreign creditors.

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Triple Crisis Roundup: The Problem with Reinhart and Rogoff

by Eli Epstein-Deutsch

Carmen Reinhart and Kenneth Rogoff’s famous ratio of 90% debt-to-GDP, above which countries allegedly begin to experience negative growth, has been cited widely as a justification for austerity by politicians from American Senators Paul Ryan and Tom Coburn to European Commisioner Olli Rehn.  Thus the commentariat have lit up at the recent discovery by Robert Pollin, Michael Ash and Thomas Herndon that Reinhart and Rogoff’s 2010 paper Growth in a Time of Debt contained serious errors, including methodological problems and unwarranted omissions of key data. In their new paper, the University of Massachusetts economists challenge the original growth-rate at the 90% debt-level, which may have been over two percentage points too low: a notable difference. Pundits such as as Paul Krugman have seized on this rebuttal as fresh evidence for a long-standing suspicion that the 90% case was overstated (the correlation never proved the direction of causality, he points out). Defenders of Reinhart and Rogoff such as a Douglas Holtz-Eakin claim that nothing in the takedown really rocks their world (the idea seems to be that debt is intrinsically known to be bad anyway, like sin). With the political tensions over austerity ratcheted up of late, the debate is only likely to heat up from here.

Twitterverse goes nuts over economists clash

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How Much Unemployment did Reinhart and Rogoff’s Arithmetic Mistake Cause?

Reinhart-Rogoff, Continued

Serious Threat to Asian Economic Model

Martin Khor

Many articles and books have been published on the contrast and competition between the present Western and the Asian-style economic models.

Western countries are said to have the free-market model based on competition among private firms, with the government taking a hands-off approach.

East Asian countries are branded as practising “state capitalism” in which the government plays a major role in helping the local private sector and the state also fully or partially owns many enterprises.

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Country Income Shares in PPP

Jayati Ghosh

The UNDP’s latest Human Development Report 2013 (entitled “The rise of the South”) has one particularly striking chart that it uses to make the point about the recent growing economic significance of some “emerging” nations. In Chapter 1, Chart 3 suggests that just three countries (Brazil, China and India) together account for around 30 per cent of global GDP already, around the same as the total share of large Northern countries (Canada, France, Germany, Italy, the UK and the US).

If this were an accurate representation  of reality it would mark a truly astounding change over the past three decades. but since the output of different countries is measured in terms of 1990 PPP dollars, rather than nominal exchange rates, this greatly exaggerates the extent of change. With nominal exchange rates, the rising trend share of these countries is still evident but not so marked: the GDP of these three countries in 2011 accounted for just above 16 per cent of world GDP according to IMF, (around half of the ratio estimated by the HDR) and their share of total merchandise exports is just above 13 per cent according to the WTO.

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A Green Facade

Sunita Narain

Building green is definitely important. But equally important is to know how green is a green building. Take the glitzy, glass-enveloped buildings popping up across the country. It does not matter if you are in the mild but wet and windy climate of Bengaluru or in the extreme hot and dry climate of Gurgaon, glass is the in-thing. I have always wondered how buildings extensively using glass could work in such varied climatic zones, where one needs ventilation. Then, I started reading that glass was green. Buildings liberally using glass were being certified green. How come?

Here the story becomes interesting. The Energy Conservation Building Code (ECBC) has specified prescriptive parameters for constructing an energy-efficient building envelope—the exterior façade of a building. The façade, based on the insulation abilities of the material used for roof and wall construction, will reduce heat loss. It will also reduce energy use if it allows daylight in. It is, therefore, important for any green building to have the right material for its exterior.

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How Can BRICS Contribute to the Development of Africa?

M. Shaffaedin

The purpose of this piece is to propose a way BRICS can provide support for “unlocking Africa’s potential” for development through regional cooperation. This objective was  agreed upon by BRICS countries in their recent meeting in Durban (South Africa). Let me first explain the background before making my proposal.

In their latest meeting, the BRICS countries agreed, inter alia, on discussing with African leaders the way “Africa’s potential” can be “unlocked”. They also reaffirmed their support for regional integration of Africa, and the  “industrialization process through stimulating foreign direct investment”. Nevertheless, while emphasizing their willingness to help promote regional integration and industrialization of the continent, by supporting infrastructure development, they have not mentioned the mechanism by which Africa’s potential can be unlocked, nor the way BRICS could provide the necessary support. Supposedly, their proposals to establish  “the BRICS Think Tanks Council” and “ a new Development Bank” are relevant in achieving the aforementioned objectives.

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India's Patently Wise Decision

Arjun Jayadev

The Indian Supreme Court’s refusal to uphold the patent on Gleevec, the blockbuster cancer drug developed by the Swiss pharmaceutical giant Novartis, is good news for many of those in India suffering from cancer. If other developing countries follow India’s example, it will be good news elsewhere, too: more money could be devoted to other needs, whether fighting AIDS, providing education, or making investments that enable growth and poverty reduction.

But the Indian decision also means less money for the big multinational pharmaceutical companies. Not surprisingly, this has led to an overwrought response from them and their lobbyists: the ruling, they allege, destroys the incentive to innovate, and thus will deal a serious blow to public health globally.

Read more at Project Syndicate

India’s Patently Wise Decision

Arjun Jayadev

The Indian Supreme Court’s refusal to uphold the patent on Gleevec, the blockbuster cancer drug developed by the Swiss pharmaceutical giant Novartis, is good news for many of those in India suffering from cancer. If other developing countries follow India’s example, it will be good news elsewhere, too: more money could be devoted to other needs, whether fighting AIDS, providing education, or making investments that enable growth and poverty reduction.

But the Indian decision also means less money for the big multinational pharmaceutical companies. Not surprisingly, this has led to an overwrought response from them and their lobbyists: the ruling, they allege, destroys the incentive to innovate, and thus will deal a serious blow to public health globally.

Read more at Project Syndicate

Subsidized Corn Destroying Global Bio-Diversity

James Boyce

In this video on the Real News Network, PERI Economist James Boyce discusses how industrialized agriculture in the United States endangers the wealth of genetic corn variation, and why hard-pressed small farmers in South America offer a potential counterweight.

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The Damaging Links Between Food, Fuel and Finance: A growing threat to food security

Timothy A. Wise

Just when you thought the unhealthy ties between food, fuel, and financial markets couldn’t get more perverse, we get the announcement that Vitol, the world’s largest independent oil trader, is entering the grain-trading business, hiring a team from Viterra, based in Toronto, to run the show. And lest we toss this off as just another corporate deal, Javier Blas in the Financial Times reminds us that Viterra has itself recently been bought by Glencore, perhaps the world’s greatest global commodity speculator.

What could go wrong?

For the world’s poor, plenty. They’ve already endured three food price spikes in the last six years, fueled in part by financial speculators gambling on agricultural, energy, and metals commodities as they fled the wreckage of the housing and stock market crashes. This corporate deal may not change a thing, but it is a powerful symbol of what’s wrong with our broken food system.

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