The Paris Club, Vulture Funds, and Global Debt Restructuring

Matias Vernengo

Argentina has finalized a deal with the Paris Club two weeks ago. And tomorrow, if I’m not wrong, the case against the Vulture Funds will be finally decided by the Supreme Court. On the first one, Argentina signed an agreement with the Paris Club that implies the country will pay around US$9.7 billions in the next 5 years.

There is an interesting twist in the agreement with the Paris Club. The agreement was reached without accepting an IMF program, which have traditionally been part of all such negotiations. The Club and the IMF used to be joined at the hip. Two Paris Club chairmen, Jacques de Larosière and Michel Camdessus, became later managing directors of the IMF. So in a sense, the idea was that austerity at home was essential for repayment abroad. Here it is important to note a traditional confusion in the conventional view about the role of austerity.

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No Help from Abroad

C.P. Chandrasekhar

With India’s integration with the global economy through trade and investment flows having increased significantly over the last quarter of a century, the days when domestic economic performance was relatively insulated from global trends are over. So as the new government begins its tenure and there is much anticipation about what it would deliver in the short and medium term, it may be useful to consider the global environment it faces. That environment influences both policy space and economic outcomes through many routes: through capital flows and its impact on currency value, through its impact on export performance, and through the cost of imports, to name a few.

The OECD Secretariat has just recently put out a set of estimates and projections of global growth. Its projections are optimistic and predict a revival of growth over 2014 and 2015. But the background to those projections suggest that this may be one more of the many instances in the recent past when forecasters proclaimed that green shoots of recovery had been sighted, but were proved wrong as the recession persisted.

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Should We Count Out Piketty Due to "Sum" Math Errors?

Steven Pressman, Guest Blogger

Economist Steven Pressman has been “Live-Blogging” on his reading of Thomas Piketty’s Capital in the Twenty-First Century, and related controversies, at the Dollars & Sense blog. This post combines two installments, focused on the attempted refutation of Piketty by the Financial Times‘ Chris Giles, and Piketty’s rejoinder.

While I am here in Paris reading Capital in the Twenty-First Century carefully, the book has dominated the headlines again. Having just spent a good deal of time thinking about its numbers, I thought it would be useful to reflect on the piece published May 23 in the Financial Times.

There, Chris Giles provides a detailed and lengthy argument against Piketty. He claims there are many instances where Piketty has used the wrong numbers in making his calculations and that many assumptions Piketty makes in doing his research are incorrect.

First, an important point—data transcription and math errors occur all the time in economics. It is a sort of dirty and hidden secret. Typically, errors are not discovered and don’t make front page news. One cost of being an economic rock star is that the data Paparazzi hang on to your every number.

But the “gotcha!” reception of finding math mistakes is worth reflecting on. I have been amused by smug claims that Piketty supporters unthinkingly accepted his numbers, and that Giles has proven Piketty to be totally wrong. Even before examining any numbers, it is easy to see that these claims succumb to the same mistake that they accuse Piketty’s supporters of making. I cannot think of any better evidence that Capital in the Twenty-First Century has hit a raw nerve in the socio-economic psyche.

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Should We Count Out Piketty Due to “Sum” Math Errors?

Steven Pressman, Guest Blogger

Economist Steven Pressman has been “Live-Blogging” on his reading of Thomas Piketty’s Capital in the Twenty-First Century, and related controversies, at the Dollars & Sense blog. This post combines two installments, focused on the attempted refutation of Piketty by the Financial Times‘ Chris Giles, and Piketty’s rejoinder.

While I am here in Paris reading Capital in the Twenty-First Century carefully, the book has dominated the headlines again. Having just spent a good deal of time thinking about its numbers, I thought it would be useful to reflect on the piece published May 23 in the Financial Times.

There, Chris Giles provides a detailed and lengthy argument against Piketty. He claims there are many instances where Piketty has used the wrong numbers in making his calculations and that many assumptions Piketty makes in doing his research are incorrect.

First, an important point—data transcription and math errors occur all the time in economics. It is a sort of dirty and hidden secret. Typically, errors are not discovered and don’t make front page news. One cost of being an economic rock star is that the data Paparazzi hang on to your every number.

But the “gotcha!” reception of finding math mistakes is worth reflecting on. I have been amused by smug claims that Piketty supporters unthinkingly accepted his numbers, and that Giles has proven Piketty to be totally wrong. Even before examining any numbers, it is easy to see that these claims succumb to the same mistake that they accuse Piketty’s supporters of making. I cannot think of any better evidence that Capital in the Twenty-First Century has hit a raw nerve in the socio-economic psyche.

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Climate Policy as Wealth Creation, Part 1

James K. Boyce

This is the first installment of a five-part series on climate policy by regular Triple Crisis contributor James K. Boyce, professor of economics at the University of Massachusetts-Amherst and director of the Program on Development, Peacebuilding, and the Environment at the Political Economy Research Institute (PERI).

The series is adapted from Prof. Boyce’s March 31 lecture, part of the Climate Change Series at the Honors College of the University of Pittsburgh. The lecture explores how to turn the atmosphere (heretofore treated as an “open access” resource, into which greenhouse gases can be dumped at no cost to the emitter) into a common-property resource. This requires the establishment of a set of public property rights over the atmosphere’s capacity to absorb and recycle carbon, the imposition of costs (as through a carbon tax or sale of carbon permits) on those who use this finite resource, and a determination of how the rents will be distributed.

The remaining parts of the series will appear once a week for the next four weeks. The full lecture and subsequent discussion are available, as streaming video, through the University of Pittsburgh website. Click here or on the image below.


Demand and Supply

Broadly speaking, there are two types of policies to reduce carbon emissions from fossil-fuel combustion. One set of policies operates on the demand side of the picture, on the need for fossil fuels. These are policies that include investments in energy efficiency, investments in alternative sources of energy, public investment in mass transit, etc.—investments that reduce our demand for fossil fuels at any given price. Even if the prices of fossil fuels were to remain unchanged, people would consume less of them, thanks to these investments in efficiency, alternative energy, alternative modes of transportation, etc. That’s an important set of policies, but it’s not the only one that is relevant.

I’m going to focus on the complementary set of policies that operate not on the demand side of the equation, but the supply side—policies that raise the price of fossil fuels at any given level of demand. Those policies operate by raising the price in either of two ways which are more or less equivalent, either by instituting a tax on carbon emissions or, alternatively, by putting a cap on emissions and thereby restricting supply. In the same way, OPEC restricts supply when it wishes to increase the price of oil and increase profits—it raises the price. Well, that’s how a cap works to raise the price, too.

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Real Wage Growth Around the World

Matías Vernengo

The new edition of the International Labour Organization’s Global Wage Report (2012/13) has been published. The figure below shows the rates of growth in real wages by region.

Note that real wages have basically stagnated in the developed world, and have fallen in the Middle East, while they have grown in the rest of the world. One should take with a grain of salt the incredible increase in Eastern Europe. For example, the graph below, showing Russia’s real wages, gives a more accurate picture.


Real wages are now slightly above the levels associated with the pre-liberalization, and market reform period. In other words, the commodity boom and the Natural Resource Nationalism have allowed a significant recovery in real wages. Not dissimilar to the Latin American story, by the way.

In Asia a lot of the growth in real wages is explained by the vast migration of rural workers to urban areas in China.


Note that without China the rate of growth in real wages has been considerably less impressive. At any rate, as always, the ILO report provides a wealth of data, which is worth to take into consideration.

Originally posted at Naked Keynesianism.

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Confronting Financialization on Steroids

Costas Lapavitsas, Guest Blogger

The interview below is from a series on The Real News Network’s Reality Asserts Itself, with Paul Jay. Jay interviews Costas Lapavitsas, professor of economics at the School of Asian and Oriental Studies, University of London, and author of the book Profiting Without Producing: How Finance Exploits Us All (Verso). Lapavitsas recently did an interview with Triple Crisis blog and Dollars & Sense magazine, serialized here (part 1, part 2, part 3, part 4).

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State of the World's Health

Martin Khor

The premier international conference on public health policy is the World Health Assembly, organised by the World Health Organisation, which attracts Ministers of Health and other top health officials as well as non-governmental organisations to Geneva every year. This is where the latest trends in public health problems are presented and debated, and action plans for solutions are adopted. This year’s Assembly, which closed on May 24, had 3,500 participants and saw a record number of issues debated and resolutions adopted.

One of the key buzzwords during the Assembly was “universal health coverage” (UHC). This is being promoted by the WHO and several governments as one of the goals for the United Nations’ post-2015 Development Agenda. There is no precise definition for the term, but it is widely taken to mean that everyone should have access to medical treatment and other health services. Inability to pay should not prevent someone from being “covered” by the health system, and people should not become financially burdened in order to receive treatment.

The UHC concept is a great one, similar to the “health for all by the year 2000” slogan that the WHO adopted in the 1980s. The “right to health” is one of the human rights recognised by the United Nations.

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State of the World’s Health

Martin Khor

The premier international conference on public health policy is the World Health Assembly, organised by the World Health Organisation, which attracts Ministers of Health and other top health officials as well as non-governmental organisations to Geneva every year. This is where the latest trends in public health problems are presented and debated, and action plans for solutions are adopted. This year’s Assembly, which closed on May 24, had 3,500 participants and saw a record number of issues debated and resolutions adopted.

One of the key buzzwords during the Assembly was “universal health coverage” (UHC). This is being promoted by the WHO and several governments as one of the goals for the United Nations’ post-2015 Development Agenda. There is no precise definition for the term, but it is widely taken to mean that everyone should have access to medical treatment and other health services. Inability to pay should not prevent someone from being “covered” by the health system, and people should not become financially burdened in order to receive treatment.

The UHC concept is a great one, similar to the “health for all by the year 2000” slogan that the WHO adopted in the 1980s. The “right to health” is one of the human rights recognised by the United Nations.

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A Reflection on Capital in the 21st Century

Philip Arestis and Malcolm Sawyer

The recent book Capital in the 21st Century by Thomas Piketty (2014) has attracted an enviable amount of attention with its detailed history of income and wealth inequality. A central idea in this book comes from (r > g); that is, the idea that the rate of return on wealth (r) exceeds by a considerable margin the rate of economic growth (g) so far as Western industrialised countries are concerned. This, Piketty argues, has implications for rising inequality especially of wealth and of rentier income.

The basic mechanism is that when the rate of return is greater than the income growth rate, then savings made out of the return on wealth received in the form of dividends, rents, interest and capital gains adds to wealth, which then rises at a rate determined by these savings (and equal to savings propensity out of wealth (s), multiplied by the rate of return (r), (i.e., s∙r), and then the stock of wealth rises faster than income. The wealth to income ratio then rises, and the gains from wealth rise faster than other incomes. Wealth inequality also rises on the basis that rich wealth owners can achieve higher returns on their wealth than the poorer wealth owners. This is a substantial, though not complete, part of the general rises in inequality over the past three or more decades (and a large part of his book is concerned with documenting those rises in inequality).

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