TripleCrisis

Economic crises in a world of resource scarcity and wealth inequality

Ramón López, Guest Blogger

Repressing labor unions, reducing enforcement of minimum wages and lowering them over time, cutting unemployment benefits and welfare to the poor, are some of the new “institutions” to enhance labor supply and to lower reservation wages implemented in the USA and other countries over recent decades. These policies were complemented with massive tax cuts for the rich and financial deregulation. All this responded to the old bromides of the right, once sarcastically described by Galbraith as the doctrine that considered that the rich were too poor and the poor too rich to be productive.

This model of course brings much joy to the elites. It causes real wage stagnation so that productivity growth is entirely captured by the elites and income growth stagnates for almost everyone except the very rich. But the stagnation of the income of almost everyone also constitutes a problem for the model because it causes insufficient demand to sustain the expansion of production and profits.

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Economists Launch the World Economics Association

This week a group of 141 economists from 40 countries established the World Economics Association (WEA) in order to fill an important gap in the international economics community–”the absence of a truly international, inclusive, pluralist, professional association.” The WEA is committed to global democracy and plurality of economic thought, method and philosophy. Triple Crisis bloggers Jayati Ghosh, Kevin Gallagher, C.P. Chandrasekhar, and Stephany Griffith-Jones are among the founding members.

Read the World Economics Association Manifesto at WEA.

Economic Partnership Agreements: The last nail in the coffin for LDC industrialization and development

Mehdi Shafaeddin

The so-called Economic Partnership Agreement (EPA) being negotiated between EU and ACP countries can have more devastating impacts on industrialization and development of low-income countries than the 5 per cent rules imposed on colonies during the colonial era. It will lock the Least Developed and other low-income (ACP) countries in production and exports of primary commodities and at best in some labour-intensive industries and assembly operations.

The EPA is supposed to be a reciprocal free trade agreement between unequal partners-i.e. between countries with little or no industrial base and European countries which are already industrialized. While EPA does not provide any gain in market access for ACP countries, it restricts their policy space further. In fact, they are threatened that if they do not ratify the contract, their preferential market access to the EU will be withdrawn. Even if they do ratify EPA, their preferential market access will be lost in 5 to 10 years anyhow, while non-LDCs try to preserve their preferential market access.

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Food insecurity means few would mourn the death of Doha

Triple Crisis blogger Jayati Ghosh published the following opinion article in the Guardian on one reason why developing countries are skeptical about saving the Doha trade talks– the WTO agreement on agriculture left developing countries exposed to volatile food prices.

Officials at the WTO and leaders of several governments have launched what is said to be a “last-ditch effort” to save the Doha development round of trade negotiations from what is seen as imminent collapse. Will it collapse? And does it matter if it does? Or in other words, what is the likelihood of such a deal, and how much would it benefit developing countries? The brief answers are: low and very little.

So far, the finger-pointing for the failure has been directed either at the US (in which domestic politics suggests little appetite for external trade negotiations), or the newly significant large emerging economies such as China, Brazil and India (that are less willing to accept what are seen as unequal terms), or the overall impact of the “Great Recession” (which has made more countries wary of trade openness that could undermine domestic production and employment).

One aspect that is less talked about is the impact of the WTO Agreement on agriculture and food security in the developing world. The apathy or even downright cynicism in such quarters towards a new trade deal can be understood if we examine this. Basically, many developing countries are now more food-insecure than ever before, and at least part of that can be related to recent trade patterns.

Read the full article at the Guardian.

Doha Goes on Life Support

Timothy A. Wise

The impasse continues in the WTO’s Doha negotiations, to the point that even the relentlessly optimistic Secretary General Pascal Lamy, after another deadline-driven search for concessions, admitted that there is no movement and little basis for an agreement. Doha is on life support while he and the WTO leadership assess what can be salvaged from ten years of trade negotiations.

Life support is not a cure for what ails the Doha Round. As crisis after crisis roils the global economy, the WTO has drifted toward irrelevance. New market-access demands from the U.S. and other developed countries may make political sense at home, but they do nothing to make the Doha agenda compatible with its initial promise of development. Leave Doha on life support or pull the plug, but we should all use the crisis to remember why development matters and why a multilateral trading system is important to a complex global economy facing multiple crises caused not by too little liberalization but by too much.

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Why Development Should be on the G20 Agenda

Adil Najam

The G20 – first at the Finance Minister’s level and more recently at the leaders level – was born in times of financial crisis. But its very perceived success as a ‘crisis management syndicate’ has brought calls for the G20 to become a possible successor to the G8. With the last G20 summit in Korea, the next one in France and the following one in Mexico, the G20 Summits are in the process of becoming substantively formalized and routinized. But this formalization also raises many new question – importantly, about the future agendas for the G20. An eminent set of experts, diplomats and political leaders gathered at a conference to discuss these very question.

In this video, Triple Crisis blogger Prof. Adil Najam of Boston University’s Pardee Center for the Study of the Longer-Range Future and one of the participants at the conference discusses what role the G20 can play in enabling a new global architecture for climate change governance and why development should be at the core of G20’s concerns. (More details of the conference here).

Can low carbon growth save us from catastrophic climate change?

Lyuba Zarsky

Climate policy may have fallen off the US legislative agenda but the evidence that the planet is on a path to catastrophic climate change keeps mounting. In early May, the international Arctic Monitoring and Assessment Program found that temperatures in the Arctic in the last six years were the highest since measurements began in 1880. Arctic sea ice is melting significantly faster than projected by the UN International Panel on Climate Change (IPCC) in 2007 and, along with melting ice sheets and glaciers, points toward a sea level rise of 35-63 inches by 2100.

Most people know by now that cutting emissions of greenhouse gases, especially carbon, is the only way to back off from a global warming “tipping point”– maybe around 2 degrees Celsius (4 degrees Fahrenheit)—that could trigger chaotic climate change. We are already nearly halfway there—the earth has already warmed by 0.75 degrees Celsius– and going strong. Under a “business as usual scenario (BAU),” carbon emissions will double by 2050 over current levels. Given the inertia in the climate system—carbon is very long-lived in the atmosphere–and the momentum of the fossil-fuel-based global economy, is it possible to reduce emissions enough and in time?

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Growth of Limits

Ralf Fücks, president of Triple Crisis co-sponsor and partner the Heinrich Boell Foundation, published the following opinion article in Die Zeit on the question of whether continued economic growth is sustainable given current natural resource consumption and population growth.

Nearly 40 years after the famous study by the Club of Rome entitled Limits to Growth, our unease about economic growth is returning. The nuclear disaster in Japan has also raised the question of whether the danger at which industrial society puts itself requires radical change. Without a doubt, our current growth model is not sustainable. It overburdens the ecosystems people depend on. What conclusion are we to draw from this insight? Should we bid farewell to growth or take a giant leap into an ecological modernity in which economic growth and consumption of natural resources are decoupled? Does the ecological vision mean prosperity without growth or growth in line with nature?

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Trading Away Financial Stability in Colombia: Capital Controls and the US-Colombia Trade Agreement

Triple Crisis blogger Kevin P. Gallagher published the following Latin American Trade Network (LATN) policy brief on the Obama Administration’s revised US-Colombia Free Trade Agreement (FTA), which is the subject of today’s Senate Finance Committee hearing and will be sent to Congress this session alongside revised FTAs for Panama and South Korea. Gallagher demonstrates that the FTA has not been reworked to ensure that Colombia has the ability to prevent and mitigate financial crises.

The United States-Colombia Trade Agreement between the United States and Colombia was signed before the global financial crisis. As Congress and the President convene to rework the agreement, it will be important to ensure that the agreement is designed so that it given both nations the flexibility to put in place macro-prudential regulations to prevent and mitigate financial crisis.

As the treaty now stands, a number of actions that Colombia has successfully deployed in the past to prevent and mitigate treaties in the past would be deemed actionable under the agreement’s chapters on financial services and investment.

The global financial crisis has demonstrated that sound regulations are needed to stem the ability of speculative capital to create financial bubbles that burst and then leave ordinary Americans and Colombians worse off.

Read the full policy brief at LATN.

Peace in commerce and war in currency

Pablo Heidrich, Guest Blogger

Since the last G20 meeting in Seoul to now, as we approach to the next G20 meeting in Paris later this year, one particular subject has consumed the political efforts and bargaining of its country members: what to do in response to the US monetary policy of “quantitative easing”? This policy measure is also known as printing real or fictional money until the sun sets – $600 billion this time – to buy medium and longer term US government bonds. According to its architect, the US Federal Reserve, it should help restart economic growth in the United States by lowering the mid-term cost of credit.

Beyond the technical details, printing money is an old and tested means of trying to resuscitate an economy in the midst of a serious recession, or even one risking depression and deflation. The problems of such policies are well known, too. Increasing the money in circulation eventually produces inflation and one can be trapped in a situation where the economy could get worse instead of better as investors and consumers anticipate increasing prices and costs, and refrain from making productive investments and larger purchases.

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