TripleCrisis

South Africa’s coming fight over capital flight

The Triple Crisis Blog is pleased to welcome Patrick Bond as a regular contributor. He is a political economist and Director of the Centre for Civil Society at the University of KwaZulu-Natal School of Development Studies in Durban. His research focuses on political ecology (climate, energy and water), economic crisis, social mobilization, public policy and geopolitics.

At a time South African trade unions are under fierce attack from big business for winning above-inflation wage increases through strikes, and for opposing both informal labor outsourcing and a state-subsidized sub-minimum wage for youth, the sibling of former president Thabo Mbeki is helping restore balance.

According to businessman-intellectual Moeletsi Mbeki, speaking last week to the white-dominated opposition party, “Big companies taking their capital out of South Africa are a bigger threat to economic freedom than African National Congress Youth League president Julius Malema.” (The latter, a tycoon through crony deals, recently achieved notoriety for advocating the nationalization of mines.)

It is a ripe time for such in-your-face challenges to orthodoxy here, given the post-apartheid elites’ hostility to exchange controls.

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Grabbing Global Farmland

Jayati Ghosh

An extraordinary new process has been at work in the past few years: the aggressive entry of Indian corporations into the markets for agricultural land in Africa. At one level, this process is simply following the hoary old tradition in global capitalism, of firms (often supported by the governments of the originating countries) entering new areas in search of access to natural resources on preferential terms.

Several centuries ago, the growth of plantation agriculture in large parts of the western hemisphere was essentially the product of such a process. This was further facilitated by cross-border movements of labour (in the extreme case of African labour through slavery, then through indentured labour contracts largely from South Asia, then through supposedly more ”free” movements driven by lack of adequate income opportunities in the home countries). Together these flows generated production and trade patterns that were critical in shaping the international division of labour by the mid-twentieth century.

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Jobs, and Clean Air Too

The Triple Crisis Blog is pleased to welcome Elizabeth A Stanton as a regular contributor. She is a Senior Economist with the Stockholm Environment Institute-US Center, where her work focuses on environmental policy, economic inequality, and the interplay between climate protection and development.

What’s good for job growth, good for the environment, and good for public health? No, it’s not a trick question, but it is a reassessment of what passes for conventional wisdom in Washington these days. The answer is the Clean Air Act, the Clean Water Act, and other enormously popular environmental regulations enacted in the 1960s, 70s and 80s with strong bipartisan support.

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The false promise of Obama's trade deals

Kevin Gallagher and Timothy Wise

It is bad enough that President Obama is reversing his campaign pledge and supporting Bush-era trade deals with Korea, Colombia and Panama. Starting this week in Chicago, the US will be hosting the first major trade negotiations since the “Battle in Seattle” World Trade Organisation talks came here in 1999. This occasion is for the Trans-Pacific Partnership (TPP) with a wide range of industrialised and developing Pacific Rim countries.

As part of his plan to revive the US economy and create jobs, Obama claims he will be unveiling “a trade agreement for the 21st century”. Ironically, though, he will be pushing the same “Nafta-style” trade pacts he campaigned against, and to howls of protest from his own electoral base. Let us not forget what he said:

“I voted against Cafta, never supported Nafta, and will not support Nafta-style trade agreements in the future,” Obama told Ohio voters (pdf) in 2008. “While Nafta gave broad rights to investors, it paid only lip service to the rights of labor and the importance of environmental protection.”

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The false promise of Obama’s trade deals

Kevin Gallagher and Timothy Wise

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How Obama is to the Right of Reagan on Trade

Sarah Anderson, guest blogger

I hate to break it to the Tea Partiers, but their presidential idol was less of a free-market hardliner in trade negotiations than Barack Obama.

While doing some archaeological digging into old treaties, I discovered that the Reagan revolutionaries were relative softies on at least one issue — government meddling in capital markets.

The vast majority of the 52 existing U.S. trade agreements and bilateral investment treaties forbid governments from putting controls on capital flows. But buried in the annexes to four Reagan-era treaties, I found exemptions allowing trade partners to apply such controls during financial crises. Capital controls are various measures including (gasp!) taxes designed to prevent speculative bubbles or rapid capital flight.

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Stop the Draft!

Gerald Epstein

It’s time to stop the draft.

I know: the military draft effectively ended in 1973.

But even if the government is no longer conscripting the youth into the Army, our young people are subject to a draft nonetheless: they are now being sent in droves into the “reserve army of the unemployed”.

And with the economic collapse, they are facing high odds that their number is going to come up.

According to the latest figures, 18.1 percent of young people between the ages of 16 and 24 are unemployed. But, as with the Vietnam War era draft, different groups face radically different chances of being drafted. Black and Hispanic youth have an unemployment rate of 31% and 20% respectively, while white youth face a high rate of 16%.

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The sound (finance) and the fury

Matías Vernengo

The current policy consensus in the developed world (i.e. the United States and Europe) seems to be that fiscal austerity (the euphemism used these days is consolidation) is necessary. Christine Lagarde, the new Managing Director of the International Monetary Fund (IMF), said recently in the Financial Times that: “fiscal adjustment must resolve the conundrum of being neither too fast nor too slow.”

That is what she refers to as “Goldilocks fiscal consolidation,” that is, cut spending and increase taxes, but slowly please! She repeated this view in her talk at the Jackson Hole conference, arguing that in order to obtain “credible” consolidation governments must implement: “measures that change the rate of growth of entitlements, health or retirement.” In other words, cut spending and increase taxes fundamentally on social programs that benefit overwhelmingly the poor.

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What if Equilibrium Never Existed? The Crisis in Economic Theory

Alejandro Nadal

When Arrow and Debreu published their famous proof of the existence of competitive equilibrium in 1954 their work was met with extraordinary praise. In fact, approbation was so intense that there was hardly any substantive criticism of the paper. Not a good omen. But then again, who needs to cast doubts when you want to have faith?

The existence question is not only a technical question (i.e., finding out if a system of equations has a solution). In the grand narrative of market theory, the issue of existence of equilibrium is relevant because it concerns the reference point towards which disequilibrium prices (and allocations) are supposed to converge. The idea of market forces leading an economy to a point of equilibrium would be meaningless without certitude about the existence of the promised land.[i] In macroeconomic theory, this is so important that in some extreme cases (i.e., dynamic general equilibrium models), it is assumed that the economy is always in an equilibrium position.[ii]

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Iceland has Stabilized, but Growth is Elusive

Robert Wade and Silla Sigurgeirsdottir, guest bloggers

Amid the swirling European crisis, there is some modest good news from one small corner. Iceland, having abruptly transmuted from “Nordic Tiger” to “National Bankrupt” in October 2008, when the collapse of the country’s three mega-banks put them into Moody’s league of the eleven biggest financial collapses in history, is now seeing the beginnings of a recovery.

The economy (population 310,000) experienced the third biggest fall in output and the fourth biggest fall in employment among the 30 OECD countries. The contraction stopped in late 2010, at 11% below the peak in the first quarter of 2008. Real GDP is expected to grow by just over 2% in 2011 and a little higher in 2012. Thanks to increases in welfare spending, only 14% of the population say they are finding it “very difficult” to make ends meet, well below the EU average. The government reentered global capital markets in June 2011, when it sold $1bn worth of bonds at a spread of 3.2 percentage points above LIBOR, which testifies to the credibility of the stabilization program in the eyes of financial markets.

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