Crunch time arrives for WTO talks

Triple Crisis blogger Martin Khor published the following opinion article for the Third World Network on the WTO’s April 29 meeting to decide whether to continue, suspend, or end the Doha trade talks, which are not likely to be complete before the 2011 deadline.

The differences among key countries in the World Trade Organisation’s Doha trade talks are so wide as to be unbridgeable in at least one major area, and the time has come to decide on what to do about the talks – to continue trying to get a deal this year, to admit failure and close the talks, or something in between.

This seems to be the message coming out of the 600-plus pages of a document issued by the WTO on 22 April, that contain reports on the state of play of the negotiations in nine issues, plus assessments by the Director General Pascal Lamy.

On 29 April, the WTO will meet to hear what delegations have to say about the reports and the latest crisis-like situation.

The failures in recent weeks to make progress have deepened the impasse.  The inescapable conclusion is that these talks will not complete in 2011, the deadline set by political leaders.

Read the full article at the Third World Network.

Maintaining Employment Through the Crisis

Diana Tussie

The cost of active labor policies – policies to preserve employment in an economic downturn – have become an important part of global discussions to manage the crisis.  A widely held myth is that experience with active labor policies resides in OECD countries and that these are very costly to replicate for cash strapped countries in today´s circumstances.

In fact Latin America has accumulated experience in several areas of active labor policies. Argentina was an early starter during its own crisis in 2001 with incentives to keep people busy. The economic meltdown had left skyrocketing unemployment, widespread social scars but also some lessons. Thus the Global Recession found Argentina with muscles flexed, as Pablo Trucco and I show in a recent paper.

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To make the IMF relevant will take more than a new leader

Triple Crisis blogger Jayati Ghosh published the following opinion article in the Guardian on the string of recent IMF failures and whether the organization’s rethink on capital controls is the start of major reform.

In appearing to veto Gordon Brown’s chances of becoming the next head of the International Monetary Fund, David Cameron says the organisation needs someone who “understands the dangers of excessive debt, excessive deficit”. But if that is all the new person understands, then he or she will make little difference to an institution badly in need of real reform.

For years the IMF has been caught wrongfooted during almost every major global economic event. Before the great recession of 2008 it was an international institution on life support: ignored by most developing countries; derided for its failure to predict most crises and then for its counterproductive responses; even called to book by its own auditors for poor management of its own funds.

The IMF encouraged financial liberalisation that pushed many countries to crisis, and became famous for congratulating bubble economies on healthy and sound financial management (Thailand in 1997; Argentina in 1999; most recently Ireland and Iceland in 2008) – often just months before their spectacular financial crashes. Its policy prescriptions were widely perceived to be rigid and unimaginative, applying a uniform approach to very different economies.

Read the full article at the Guardian.

To make the IMF relevant will take more than a new leader

Triple Crisis blogger Jayati Ghosh published the following opinion article in the Guardian on the string of recent IMF failures and whether the organization’s rethink on capital controls is the start of major reform.

In appearing to veto Gordon Brown’s chances of becoming the next head of the International Monetary Fund, David Cameron says the organisation needs someone who “understands the dangers of excessive debt, excessive deficit”. But if that is all the new person understands, then he or she will make little difference to an institution badly in need of real reform.

For years the IMF has been caught wrongfooted during almost every major global economic event. Before the great recession of 2008 it was an international institution on life support: ignored by most developing countries; derided for its failure to predict most crises and then for its counterproductive responses; even called to book by its own auditors for poor management of its own funds.

The IMF encouraged financial liberalisation that pushed many countries to crisis, and became famous for congratulating bubble economies on healthy and sound financial management (Thailand in 1997; Argentina in 1999; most recently Ireland and Iceland in 2008) – often just months before their spectacular financial crashes. Its policy prescriptions were widely perceived to be rigid and unimaginative, applying a uniform approach to very different economies.

Read the full article at the Guardian.

Nuclear Waste, Yucca Mountain, and Fukushima: “This is not a place of honor”

Alejandro Nadal

Suppose you had to deliver a complex message alerting future societies about a horrific manmade danger. Assume furthermore that you had to ensure your message would survive the ravages of time in order to deliver this warning to generations well into the future, say 10,000 years from today. How would you design a message for future societies that may not necessarily speak our language or share our cultural references?

Although this may sound like science fiction, finding an answer to this question was the task of a group of experts convened in 1993 by Sandia Laboratories of the US Department of Energy (DoE). Their mission was to design a marking system informing potential intruders from future societies about the dangers of radioactive material stored in the Waste Isolation Pilot Plant (WIPP) at Yucca Mountain, Nevada. The group was formed by archeologists, linguists, anthropologists and experts in materials sciences.

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Damming Capital

Triple Crisis bloggers Kevin Gallagher and Stephany Griffith-Jones co-authored the following opinion article with Jose Antonio Ocampo for Project Syndicate on the IMF’s proposed guidelines for the use of capital controls in developing countries. Read more Triple Crisis commentary on capital controls and Gallagher’s latest publication on capital controls and trade and investment treaties.

Capital-account regulations have been at the center of global financial debates for two years. The reasons are clear: since the world has experienced a “multi-speed recovery,” as the International Monetary Fund puts it, slow-growth advanced countries are maintaining very low interest rates and other expansionary monetary policies, while fast-growth emerging economies are unwinding the expansionary policies that they adopted during the recession. This asymmetry has spurred huge capital flows from the former to the latter, which are likely to continue.

Emerging economies fear that this flood of capital will drive up their currencies’ exchange rates, in addition to fueling current-account deficits and asset bubbles, which past experience has taught them is a sure recipe for future crises. The problem is compounded by the fact that one of the countries undertaking expansionary policies is the United States, which has the world’s largest financial sector and issues the paramount global currency.

Small wonder, then, that several emerging economies are using capital controls to try to manage the flood. This, of course, contradicts the wisdom that the IMF and others have preached in the past – that emerging economies should free their capital accounts as part of a broader process of financial liberalization.

Read the full article at Project Syndicate.

Development Banks: Their role and importance for development

Triple Crisis blogger C.P. Chandrasekhar published the following opinion article for the International Development Economics Associates (IDEAs) Network on why several countries are doing away with development banking institutions despite the critical role development banks have played in many countries’ development trajectories.

Among the institutions whose role in the development of the less developed regions is well recognised but inadequately emphasised are the development banks. Playing multiple roles, these institutions have helped promote, nurture, support and monitor a range of activities, though their most important function has been as drivers of industrial development.

All underdeveloped countries launching on national development strategies, often in the aftermath of decolonisation, were keen on accelerating the pace of growth of productivity and  per capita GDP. This was the obvious requirement for alleviating poverty and reducing the developmental gap that separated them from the developed countries. To realise this goal, they considered industrialisation to be an important prerequisite. This stemmed from the perspective that modern economic growth was a process characterised by an increase in the
share of employment in the non-agricultural sector, and within the latter by a change in the scale of productive units, the growth of factory production and a shift from personal enterprise to the impersonal organisation of economic firms.

Read the full article at the IDEAs Network.

Tax Havens or Financial Sinkholes?

James K. Boyce

Tax havens have gotten a lot of press lately. In Britain, the UK Uncut movement has mounted demonstrations across the country against tax dodging by large corporations and wealthy individuals – making the connection between profits parked abroad and deficits and budget cuts at home.

Last month in the U.S., The New York Times revealed that GE, one of the nation’s largest companies, earned 46% of its revenue in the U.S. over the last three years but booked less than one-fifth of its profits there, shifting most of its booked profits to low-tax countries. In 2010, taking advantage of loopholes in U.S. tax laws (for which the firm had lobbied Washington lawmakers), GE paid negative taxes: despite $5.1 billion in declared pre-tax U.S. profits, the firm received a $3.2 billion tax credit. This and other blatant examples of corporate tax dodging are inspiring the birth of US Uncut, an American cousin of the British movement.

The term “tax haven” is a euphemism, however, for two reasons.

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The “currency wars”: What’s next for the BRICs and other rising powers?

Ilene Grabel

Today’s “currency wars” stand at the intersection of many critical issues. These include the ability of developing countries to deploy capital controls, the role of the US as global financial hegemon, the inadequacy of the global financial architecture, the power of the IMF, and the role of the BRICs (and other rapidly growing developing countries).  All of these issues are at center stage both at today’s meeting of G20 Finance Ministers in Washington DC and at yesterday’s BRIC Summit in Sanya, China (which South Africa attended for the first time).

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The Other Imbalances: Inequality and the financial crisis

Michael Lim Mah-Hui, Guest Blogger

Much of the discourse on the structural imbalances of the recent great financial crisis has focused on the current account imbalances between countries.  In fact, many Western mainstream economists blame the Asian surplus countries’ “savings glut” as a fundamental cause of the crisis without reflecting on their own “consumption glut” as the mirror image of the problem.

Nevertheless, two other structural imbalances that are equally, if not more important, causes of this crisis, are less discussed. These are: the imbalance between the financial sector and the real economy, sometimes known as “financialization” of the economy; and the imbalance in income and wealth between the rich and the poor and not so rich.  These other two imbalances are discussed at length in my recent book with Lim Chin, Nowhere to Hide: The Great Financial Crisis and Challenges for Asia.

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