Bracing for Another Storm in Emerging Markets

Kevin P. Gallagher

In 2012, Brazilian President Dilma Roussef scolded U.S. Federal Reserve Chairman Ben Bernanke’s monetary easing policies for creating a “monetary tsunami”: Financial flows to emerging markets that were appreciating currencies, causing asset bubbles, and generally exporting financial instability to the developing world.

Now, as growth increases in the United States and interest rates follow, the tide is turning in emerging markets. Many countries may be facing capital flight and exchange-rate depreciation that could lead to financial instability and weak growth for years to come.

The Brazilian president had a point. Until recently U.S. banks wouldn’t lend in the United States despite the unconventionally low interest rates. There was too little demand in the U.S. economy and emerging market prospects seemed more lucrative.

From 2009 to 2013, countries like Brazil, South Korea, Chile, Colombia, Indonesia, and Taiwan all had wide interest rate differentials with the United States and experienced massive surges of capital flows. The differential between Brazil and the U.S. was more than 10 percentage points for a while—a much better bet than the slow growth in the United States.

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Time for New Environmentalism

Sunita Narain

2014 has brought India’s environmental movement to a crossroad. On the one hand, there is a greater acceptance of our concerns, but on the other hand, there is also growing resistance against the required action. More importantly, every indicator shows that things on the ground are getting worse. Our rivers are more polluted, more garbage is piling up in our cities, air is increasingly toxic and hazardous waste is just dumped, not managed. Worse, people who should have been in the front line of protection are turning against the environment. They see it as a constraint to local development. They may protest against the pollution from neighbouring mines or factories, but even if they succeed their livelihood from natural resources is not secure. They are caught between mining companies and foresters. Either way, they lose.

We must also realise that even as environmental problems have grown, the institutions for the oversight and management of natural resources have shrunk. While the environmental constituency has grown, core beliefs have been lost. In this way, the underlying politics of environmental movement has been neutered.

It is important we point out the fundamental weaknesses and contradictions in the environmental movement. It is only then that we can deliberate on the direction for future growth of the movement.

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Statement on Greece

The following Statement on Greece was issued by a group of members of the Scientific Board of the Progressive Economy Initiative, which includes Triple Crisis contributor Ilene Grabel (other signatories to the Statement on Greece include Jean-Paul Fitoussi, James Galbraith Andras Inotai, Louka Katseli, Kate Pickett, and Jill Rubery). The statement on Greece refers to a Call for Change (May 2014)—signed by members of the Scientific Board including Joseph Stiglitz, James K. Galbraith, Ilene Grabel, and Stephany Griffith-Jones, among others—outlining a program to move “from the crisis to a new egalitarian ideal for Europe.” The Call for Change is available here, and is well worth reading in full.

Statement by Members of the Scientific Board

We welcome the decision of the Greek people to elect a new government committed to fundamental change in the policies of Greece and of Europe.

We note the common ground between the principles and programs of the SYRIZA movement in Greece and those of the Call for Change that we prepared for the European Parliament elections in May 2014.

We recognize that this important political event comes at a moment when there is full recognition by the European Commission and the European Central Bank that new ideas and new policies are required to bring economic and political stability and inclusive growth to Europe.

We therefore call on all Europeans to welcome the government of Prime Minister Alexis Tsipras as a constructive partner in the search for a new direction for Europe and for Greece.

We call on the European Commission, the European Central Bank, the IMF and the governments of all European countries to provide financial support and fiscal space during the interval required for the new government of Greece to form and to present its proposals, and then to enter negotiations in good faith with the government of Greece on the policy changes required for that country.

We call on the European Central Bank, the European Commission, the IMF and the governments of all European countries to reject all threats and intimidation aimed at the new government of Greece, and to intervene as necessary to support the financial system of Greece and to quell speculative attacks on that country as negotiations proceed.

Signed:

Jean-Paul Fitoussi
James Galbraith
Ilene Grabel
Andras Inotai
Louka Katseli
Kate Pickett
Jill Rubery

The signers are members of the Scientific Board of the Progressive Economy Initiative, writing in their
personal capacities.

January 26, 2015

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