Don’t Pay Polluters

James Boyce

A little known greenhouse gas called HFC-23 made the news recently. Also called fluoroform, it’s a waste gas generated in the manufacture of refrigerants. Compared to carbon dioxide (CO2), HFC-23 is a minor greenhouse gas. Pound-for-pound, however, it traps more than 10,000 times as much heat.

The UN’s Clean Development Mechanism (CDM), set up under the Kyoto accord as a way for industrialized countries to “offset” their own CO2 emissions by paying for comparable actions in developing countries, counts destruction of one pound of HFC-23 as equivalent to prevention of 11,700 pounds of CO2 emissions.

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Hunting the Auctioneer

Alejandro Nadal

“For the Snark’s a peculiar creature, that won’t / Be caught in a commonplace way./ Do all that you know, and try all that you don’t: / Not a chance must be wasted today!

Lewis Carroll, The Hunting of the Snark

Of all the assumptions of general equilibrium theory, the Walrasian auctioneer may very well be the most important one. Because macroeconomics has been absorbed by neoclassical microeconomics, today the role of the auctioneer is also embedded in macro models. For example, the work of Lucas and Kydland and Prescott relies heavily on the presence of an auctioneer. It is therefore no exaggeration to say that this assumption runs through the spinal chord of orthodox economic theory, both micro and macro.

Although everyone seems to agree that this is not a good assumption, the auctioneer is also one of orthodoxy’s less well-understood figures. Both friend and foe repeatedly misunderstand its role and its intimate relation to stability theory in general equilibrium models.

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Courage Wins Over Poison

Sunita Narain

I want to tell you today a true story of extraordinary courage, not of one, but of many.

This past fortnight I was in Kasargod, a district in Kerala, splendid in beauty and natural resources, but destroyed by one toxic chemical: endosulfan.

The pesticide was aerially sprayed over cashew plantations for 20 years, in complete disregard for the fact that there is no demarcation between where plantations end and habitation begins. Moreover, it is a high-rainfall region. Thus, once sprayed, the pesticide leached into the ground and flowed downstream. The poison contaminated water and food. It ultimately harmed human beings.

This story is known. What is not known is the human endeavour and personal battles that make up the story of this poisoned land and its diseased people. More importantly, what is not asked is: where does this story end?

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Can clean energy campaigns stop climate change?

Frank Ackerman

Can we protect the earth’s climate without talking about it – by pursuing more popular policy goals such as cheap, clean energy, which also happen to reduce carbon emissions? It doesn’t make sense for the long run, and won’t carry us through the necessary decades of technological change and redirected investment. But in the current context of climate policy fatigue, it may be the least-bad short-run strategy available.

You may have lost interest in climate change, but the climate hasn’t lost interest in you. Once-extraordinary heat waves are becoming the new normal. Recent research demonstrates that by now someone “old enough to remember the climate of 1951–1980 should recognize the existence of climate change, especially in summer.”

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Low interest rates- for whom?

Arjun Jayadev

A common story holds that the key cause of the financial turmoil in the U.S over the last two decades was the excessively low interest rates. This perspective lays the blame for the financial crisis at the feet of discretionary Federal Reserve policy, and is typically made based on the fact that short term rates such as the federal funds rate or Treasury bill rates had been lower between 2001 and 2011 than in any previous decade. In short, this view claims that rates were “too low for too long.”

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Living as a Financial Enclave: Banks and Sovereigns in the EU’s Eastern Periphery

Cornel Ban

Before the PIIGS entered the collective consciousness of European elites, the East-Central European member states of the E.U. were supposed to be at the root of the European financial woes. Just as the beginnings of the Great Depression were tied to the financial imbroglio of a Viennese bank, it was Austria’s massive exposure to the financial sectors of countries like Hungary or Romania by 2008 that was expected to trigger collapse in the rest of Europe. Yet this did not happen. Why not and with what costs for the economies of the region?

The story of this averted meltdown in the East begins years before Lehman entered a tailspin. After the end of state socialism and especially as these states ran for E.U. membership, the I.M.F. and the E.U. abetted and at times coerced a wholesale transformation of their banking systems. The rules of the game were clear: privatization, deregulation, central bank independence, and trans-nationalization of the interbank market.

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How not to manage capital flows: the IMF guide for developing countries

Daniela Gabor, guest blogger

In 2010, the development community sighed in collective relief as the IMF reconsidered its long-standing rejection of capital controls. Development agendas, it was hoped, would hence be pursued without the well-known disruptions caused by large and volatile capital inflows. And since foreign crises now come through capital rather than trade flows, developing countries could draw on the IMF’s expertise to avoid global financial volatility and contain sudden-stops.

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China's Rebalancing

Yılmaz Akyüz

It is now generally agreed that China cannot go back to the export-led growth it had enjoyed in the run-up to the global financial crisis even with a return of the US and Europe to vigorous growth.  It needs to expand the domestic market by reversing the secular decline in the share of private consumption in GDP, which has been hovering around wartime-like levels of some 35 per cent.  It should do so not so much by reducing the household propensity to save as by increasing the share of household income in GDP which has been in a downward trend for almost two decades.  This would require a judicious combination of wage, agricultural pricing and tax policies and significantly increased government transfers, particularly to poor rural households, financed with dividends from state-owned enterprises (Export Dependence and Sustainability of Growth in China).

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China’s Rebalancing

Yılmaz Akyüz

It is now generally agreed that China cannot go back to the export-led growth it had enjoyed in the run-up to the global financial crisis even with a return of the US and Europe to vigorous growth.  It needs to expand the domestic market by reversing the secular decline in the share of private consumption in GDP, which has been hovering around wartime-like levels of some 35 per cent.  It should do so not so much by reducing the household propensity to save as by increasing the share of household income in GDP which has been in a downward trend for almost two decades.  This would require a judicious combination of wage, agricultural pricing and tax policies and significantly increased government transfers, particularly to poor rural households, financed with dividends from state-owned enterprises (Export Dependence and Sustainability of Growth in China).

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The Drought and the Coming Food Price Bubble

As drought ravages the Midwest and the world prepared for its third price spike in five years, Timothy A. Wise sat down with the Real News Network to talk about the implications of the crisis. Drawing on his co-authored report with Sophia Murphy, “Resolving the Food Crisis: Assessing Global Policy Reforms Since 2007,” Wise points out that the international community has failed to address any of the important drivers of the food crisis – climate change, biofuels expansion, financial speculation, the lack of publicly managed food reserves, and strong reinvestment in developing country food production.

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