TripleCrisis

IMF May Be on Collision Course with Trade Policy

The International Monetary Fund (IMF) has officially endorsed an “institutional view” on the management of capital flows. Henceforth the IMF will advise nations, under certain circumstances, to deploy capital controls on inflows and outflows of capital. The IMF is aware that such advice may conflict with obligations that nations have under trade and investment treaties, and recommends that such treaties be reformed.

What the IMF Decided

On December 3, 2012 the International Monetary Fund made public an Executive-Board approved “institutional view” on capital account liberalization and the management of capital flows. In a nutshell, the IMF’s new “institutional view” is that nations should eventually and sequentially open their capital accounts. This is indeed in contrast with its view in the 1990s that all nations should be uniformly required to open their capital accounts regardless of the strength of a nation’s institutions. The IMF now recognizes that capital flows also bring risk, particularly in the form of capital inflow surges and sudden stops that can cause a great deal of financial instability. Under such conditions, and under a narrow set of circumstances, according to the new “institutional view” the IMF may recommend the use of capital controls to prevent or mitigate such instability in official country consultations or Article IV reports. In other words, the IMF now sanctions staff and management to recommend the use of capital controls to nations under certain circumstances.

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A "low ambition" outcome in Doha

Martin Khor

The annual UN climate conference concluded in Doha last Saturday with “low ambition” both in emission cuts by developed countries and funding for developing countries

The UN Climate Conference in Doha ended last Saturday with the adoption of many decisions, including on the Kyoto Protocol’s second period in which developed countries committed to cut their emissions of Greenhouse gases.

Many delegates left the conference quite relieved that they had reached agreement after days of wrangling over many issues and an anxious last 24 hours that were so contentious that most people felt a collapse was imminent.

The relief was that the multilateral climate change regime has survived yet again, although there are such deep differences and distrust among developed and developing countries.

The conflict in paradigms between these two groups of countries was very evident throughout the two weeks of the Doha negotiations, and it was only papered over superficially in the final hours to avoid an open failure. But the differences will surface again when negotiations resume next year.

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A “low ambition” outcome in Doha

Martin Khor

The annual UN climate conference concluded in Doha last Saturday with “low ambition” both in emission cuts by developed countries and funding for developing countries

The relief was that the multilateral climate change regime has survived yet again, although there are such deep differences and distrust among developed and developing countries.

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The IMF's Half-Step

Kevin Gallagher

“What used to be heresy is now endorsed as orthodox,” John Maynard Keynes remarked in 1944, after helping to convince world leaders that the newly established International Monetary Fund should allow the regulation of international financial flows to remain a core right of member states. By the 1970’s, however, the IMF and Western powers began to dismantle the theory and practice of regulating global capital flows. In the 1990’s, the Fund went so far as to try to change its Articles of Agreement to mandate deregulation of cross-border finance.

With much fanfare, the IMF recently embraced a new “institutional view” that seemingly endorses re-regulating global finance. While the Fund remains wedded to eventual financial liberalization, it now acknowledges that free movement of capital rests on a much weaker intellectual foundation than does the case for free trade.

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The IMF’s Half-Step

Kevin Gallagher

Triple Crisis Welcomes Your Comments. Please Share Your Thoughts Below.

Triple Crisis Prompts Shift from Vulnerable to Rooted Agriculture

Robin Broad

As long ago as 1999, I argued that neoliberalism – the Washington Consensus – was cracked and that the development debate would once again open up. Now, after research in the Philippines and after studying the food prices crises of the past four years, I have become convinced that the crisis of food and farming could well be the catalyst for several countries to shift away from free- market policies. At the very least, some countries are shifting from more “vulnerable” to more “rooted” agriculture.

My most recent article on this subject, coauthored with John Cavanagh (director of the Institute for Policy Studies), was recently published in the Journal of Peasant Studies. We point out that a lot of countries have been left vulnerable in agriculture to the cruel batterings of volatile global markets.

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Waste, waste, waste

Arjun Jayadev

A few years ago Suresh Naidu and I began to write, but sadly never completed, a paper that included a long discussion of conceptual measures of waste in economics. I’m reminded of this because of Bill Janeway’s very interesting-sounding book that has recently been released. Bill’s talk at the inaugural INET conference introduced me to the idea of “Schumpeterian waste”: or the idea that in the process of innovation, one must encounter and accept periods of wasted resources. When Suresh and I were writing the paper, we spent hours trying to operationalize and provide some theoretical underpinnings for ideas of waste, but we never really felt like we had gotten it. But there were some ideas there, and so for all that effort to not go to, well, waste, maybe it’s worthwhile to write a blog post to keep it alive.

Economics is very theoretically comfortable with what may be termed `Keynesian’ waste. This is the degree to which an economy lies below its production possibility frontier. All the initial motivation for Keynesian Macro was the attempt to minimize this waste.

Bill, as mentioned, describes the phenomenon of `Schumpeterian Waste’: or the waste in terms of resources that arises from the fact that some failure of firms is necessary for the proper functioning of capitalist dynamics. As his introduction puts it: “economic growth has been driven by successive processes of trial and error and error and error: upstream exercises in research and invention, and downstream experiments in exploiting the new economic space opened by innovation. Each of these activities necessarily generates much waste along the way: dead-end research programs, useless inventions and failed commercial ventures.” Bill suggests that there needs to be a break from concerns about financial returns and investment (thereby necessitating a role for government) in order for this to work effectively.

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Climate Talks At New Crossroads

Martin Khor warns that it is evident from the Bangkok negotiations in September that the future of global climate change talks hangs in the balance. The prospect of bridging the division within the international community on tackling the problem seems as remote as ever even as evidence of the devastating impact of climate change mounts.

THE global climate change negotiations are at a new crossroads, as evident after the latest round of meetings that ended in Bangkok on 5 September.

‘Crossroads’ because the talks and the emerging climate change regime may go into one of various directions, or else become stuck in an impasse. ‘New’ because the climate talks have faced crossroads several times before in the past five years.

The Bangkok negotiations of the UN Framework Convention on Climate Change (UNFCCC), held over a week, revealed a major split between developed and developing countries on what to do over many issues that the developing countries want to continue to discuss, because they have not been resolved.

Most developed countries, led by the United States, believe there is no need for further discussion because they have been closed off by a decision taken at the last Conference of the Parties to the UNFCCC in Durban, South Africa last December.

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Clean Air for All: Benefits of Environmental Justice

James K. Boyce

Is environmental racism good for white folks? The answer isn’t as obvious as it might seem.

In the United States, there is plenty of evidence that African Americans, Latinos, Asian Americans and Native Americans typically face greater pollution burdens than whites, with associated health risks. So if the same total amount of pollution were spread more evenly, whites would wind up breathing dirtier air.

But would total pollution remain the same? Or would pollution decline if it was no longer disproportionately inflicted on minorities?

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Econ 4 The Bottom Line: Housing

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

Four million families have lost their homes to foreclosure in the Great Recession. Today another four million or more face the same fate. This devastation was triggered by unscrupulous financiers and exacerbated by government policies that put banker bonuses ahead of homeowner solvency.

Some blame families for foolishly pursuing the American Dream of homeownership. They think government assistance for banks is OK, but homeowners should be left to take free-market medicine.

Some claim that the solution for the housing crisis is to extend and pretend, to perpetuate make-believe values on bank balance sheets rather than to modify principal based on real housing prices. These policies may be a dream for bankers, but they’re a nightmare for homeowners.

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