TripleCrisis

U.S. Trade Policy: Obama’s Tricky Trip to El Salvador

United States President Barack Obama will travel to El Salvador this week. Coming into office, Obama seemed to be more in tune with Latin America in terms of economic policy than his predecessor. In recent weeks, however, Obama has done an about-face and his economic policy toward Latin America is now worse than the draconian policies of George Bush.

The Bush-era was marked by attempts to push NAFTA-style trade treaties in Latin America, despite NAFTA’s poor record in Mexico and the rejection of the Washington Consensus in Latin America. Many nations rejected this push—with Brazil shutting down negotiations for a Free Trade Area of the Americas, and Ecuador, Uruquay, and Bolivia pulling out of negotiations with the US.

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The Brazilian Economy after Lula: What to Expect?

Matías Vernengo

As President Obama completes his state tour of Brazil hoping to strengthen economic and diplomatic ties between the U.S. and Latin America’s largest economy, Triple Crisis blogger Matías Vernengo discusses what macroeconomic policies may characterize post-Lula Brazil. This article was published in the latest issue of the CESifo Forum.

Like Chile, which was governed by a left of center coalition for twenty years after the fall of Pinochet, Brazil, for the last sixteen years, has been ran by left of center parties under Fernando Henrique Cardoso and Luis Inácio Lula da Silva. The assumption of Dilma Rousseff guarantees the continuity of the left of center parties for another four years. Yet, contrary to the Chilean experience, in which Christian Democrats and Socialists, the main political parties in opposition to the dictatorship, formed a coalition, in Brazil the two main parties, the Party of Brazilian Social Democracy (PSDB) and the Worker’s Party (PT) have been political rivals.

Read the full article at the Center for Economic Studies at the Faculty of Economics of Ludwig-Maximilians-Universität.

“Inefficiency” of African agriculture or deficiencies in OECD agricultural policies?

Mehdi Shafaeddin

In a recent speech to CUTS in Geneva Mr. Pascal Lamy, the Director-General of WTO, argued, inter alia, that in order to reduce its food deficits, “African Agriculture needs to become more efficient, and…to discover ‘specialization’…”, rather than opting for self-sufficiency. He implicitly drew an analogy between the division of labour between Einstein and his Assistant and Ricardo’s theory of comparative cost advantage (CA). Hence, “… it would make no sense for Africa to produce everything for itself [become self-sufficient], just as it makes no sense for Einstein to process documents too” in addition to his scientific work.

I try to remain within the framework and logic of Mr. Lamy-let alone the fact that the theory of CA of Ricardo is static, suffers from unrealistic assumptions and is inappropriate to development issues (see Shafaeddin, Trade Policy at the Crossroads).

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Disasters and Financial Markets: More fallout from Japan’s crises

Jayati Ghosh

The massive and unfolding tragedy in Japan encapsulates in extreme form the intersection of the three crises that this blog deals with. The unprecedented earthquake and tsunami were obviously unpredictable natural disasters, but they also reflect the growing ecological fragility that is at the heart of the fears about the looming environmental crisis. The nuclear emergency that has erupted thereafter in the Fukushima nuclear installations is an extreme outcome of a particular pattern of development that has been heavily based on maximising energy sources, including the placing of nuclear reactors in known seismic and tsunami-prone zones. That these unbelievably tragic occurrences could then call forth massive financial instability is an indication of how far we have allowed our economies to become hostage to the most egregious market forces, even in times of colossal calamity.

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The “Chilean Model”: Market regulation, not just liberalization, key to success

Ricardo Ffrench-Davis, Guest Blogger

President Obama’s 4-day visit to Chile, Brazil, and El Salvador starts this Saturday and brings issues of trade and economic opportunity between Latin America and the U.S. to the fore. In this post, Ricardo Ffrench-Davis identifies the specific policies that have driven the Chile’s high economic growth since 1973, particularly the strict regulation of the country’s capital account in the 1990s.

Chile is frequently presented as a paradigmatic case of successful economic reforms, by quite different authorities. Usually, these accounts sustain the ill-informed belief that there is one “Chilean model” responsible for success in recent decades. The fact is that in the nearly forty years that have elapsed since 1973 there have been several sub-periods, with significantly different policy approaches, heterogeneous external environments, and notably diverse economic and social outcomes. There is neither only one model nor only one outcome, as we show in our recent book, Economic Reforms in Chile: From Dictatorship to Democracy.

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Lord Nicholas Stern on the new economics of climate change

Triple Crisis blogger Frank Ackerman interviewed Lord Nicholas Stern for the Global Development And Environment Institute (GDAE) on the changes in economics needed to understand climate change issues and consequences. Last week, GDAE presented Stern and Dr. Martin Weitzman with the 2011 Leontief Prize for Advancing the Frontiers of Economic Thought for their pioneering analysis of the economics of global climate change. Read a transcript of Stern’s remarks and full event coverage at GDAE.

Nuclear Power Not the Solution

Frank Ackerman

The emerging nuclear crisis in Japan has brought the future of nuclear power in the U.S. to the fore. The Obama administration supports nuclear power as an alternative to fossil fuels. But is it really the solution? Triple Crisis blogger Frank Ackerman addressed this question in a post this past summer for our partner the Real Climate Economics blog. We cross-post his original piece below.

If carbon emissions from energy production are the problem, is nuclear power the solution? After all, nuclear reactors split uranium atoms to generate heat; no fossil fuels are used on site, and no CO₂ is released into the air from the power plant itself. Plenty of voices can be now heard advocating construction of nuclear plants in order to save the environment. The Obama administration supports new loans and incentives for nuclear power, as does the Kerry-Lieberman climate and energy bill.

It’s not quite that simple. The nuclear power life cycle includes many steps, from mining and enriching uranium, building the reactor, operating the plant, processing and disposing of the spent fuel, through, someday, decommissioning the plant when it can no longer be used. Many of these stages are quite energy-intensive, so there are life-cycle greenhouse gas emissions from nuclear power. The best available data show the life-cycle emissions from nuclear power to be much lower than from fossil fuel-burning power plants, but equal to or higher than the emissions from renewable energy, such as solar, wind, and hydro-power.

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Protectionism after the Crisis: The case of Latin America

Diana Tussie

It is accepted wisdom that protectionism is a first gut reaction in times of crisis, but there are few studies on how different countries react to get themselves over the hump. What did we see this time when the global financial crisis hit in late 2008? After six years of expanding on an annual average rate of 16.3%, world exports plunged 22.6% in 2009. Trade restrictions increased but, in contrast to previous crises, the protectionist threat has not been as bad as expected, mainly because the recession in major economies was partially offset by the dynamism of emerging countries.

Latin America (LA) is a case in point. Although output in LA decreased 8% in 2009, most countries in the region showed a better performance than in previous crises as a result of stronger fundamentals. Mexico, which was amongst the hardest hit countries, has been able to remain afloat.

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Green new deals, ecological scarcity and the lessons of history

Edward B. Barbier, Guest Blogger

The history of natural resource use and development, from the Agricultural Transition 12,000 years ago to the present, suggests that humankind has had to surmount successive scarcity problems: From Malthusian population-land “traps” to fossil fuel scarcity, and now, ecological scarcity.

In any age of natural resource scarcity, there also appear to be winners and losers. The winners adjust to the changing economic conditions imposed by scarcity, innovate before other economies do, and end up dominating trade and economic relationships as a result. Over a thousand years ago, China, India and other Asian Empires were among the most powerful economies in the world, because their rulers adopted long-term strategies to parlay their vast agricultural and resource-based wealth into regional and then global dominance. Today, modern China, South Korea and other Asian economies look to green and clean energy investments and technologies as propelling their economies to the forefront of global trade and development, as well as securing a more sustainable economic future.

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Comparing climate strategies: Economic optimization versus equitable burden-sharing

Triple Crisis blogger Frank Ackerman co-authored the following working paper the Stockholm Environment Institute on climate policy’s unevenly distributed costs and benefits and whether climate policy should be based on economic efficiency or equity.

Comparing climate strategies: Economic optimization versus equitable burden-sharing

Climate change is the ultimate global public good (or public bad): the severity of the problem depends on total world emissions, so anyone’s greenhouse gas emissions affect everyone. The impacts, however, are unevenly distributed, often falling most heavily on the hottest and poorest countries. The capacity to deal with the problem may be even more unequally distributed, since the response requires significant investments in mitigation and adaptation.

Thus the discussion of climate policy naturally includes a focus on questions of international equity. In order to reach agreement on coordinated global action to address this global externality, some agreement on burden-sharing is necessary. In only slightly oversimplified terms, how much of the global cost of climate protection should rich and poor countries pay?

Read the full report at the Stockholm Environment Institute.