For decades, progressive economists have argued that, as a development strategy, mining is a “resource curse”. The main reason is that capital-intensive mineral exploitation creates enclaves with few positive spillovers, i.e. linkages to the local economy, and many negative social and environmental spillovers. Moreover, the rents and returns generated by mining can be—and in case after case have been shown to be—captured by local elites and foreign shareholders rather than distributed to or invested in local communities. The upshot is that large-scale mineral-led development retards economic growth and innovation and promotes corruption and social conflict.
Consequences of the Financial Crisis: The Responsibility of the State
The public discussion about the root causes and consequences of the financial crisis seems to be over before it really began. In Europe, the discourse focuses on the astonishing economic recovery, rather than the roots of the crisis and how we can prevent a recurrence.
What would it take to prevent a recurrence? In addition to rebalancing the relationship between the state and the financial sector, the state must regain its dominance and its capacity to act, independently from the financial sector. What might this take?
Are High Agricultural Prices Good or Bad for Poverty?
Dani Rodrik is back, and he reignites an old debate with his recent blog post. He asks if high food prices are good or bad for poverty, and answers, “It depends on whether the poor are selling or buying, of course.” Citing a recent paper by Jacob Swinnen, he goes on, “High food prices benefit poor farmers who are net food sellers, and hurt poor food consumers in urban areas. Low food prices have the opposite effects. In each case, the net effect on poverty depends on the balance between these two effects.”
Seems obvious, but not so fast: What if the poor also work for wages and agricultural prices affect labor markets? Sandra Polaski and others have shown that when one incorporates labor market effects of high vs. low agricultural prices, high prices will clearly be better for many developing countries.
Spotlight G-20: Capital Controls– They're Not Just For Developing Countries
Kevin Gallagher and Stephany Griffith-Jones
Part of a Triple Crisis series on the Nov. 11-12 G-20 meetings.
Triple Crisis bloggers Kevin Gallagher and Stephany Griffith-Jones published the following opinion article in the Guardian on G-20 leaders’ concerns about US dollar devaluation, in which they propose cooperative capital controls as a potential solution to the QE2 debate.
How the US can fix its QE2 problem
Ben Bernanke has been criticised from different sides and perspectives for quantitative easing. From one side, inflation hawks prefer austerity over expansion. Those who favour expansion and growth have valid concerns that it may not work and, instead, have negative global effects. At the G20, the United States got criticised – rightly – by emerging countries for the negative impact of QE2 on their economies.
Spotlight G-20: Capital Controls– They’re Not Just For Developing Countries
Kevin Gallagher and Stephany Griffith-Jones
Part of a Triple Crisis series on the Nov. 11-12 G-20 meetings.
Triple Crisis bloggers Kevin Gallagher and Stephany Griffith-Jones published the following opinion article in the Guardian on G-20 leaders’ concerns about US dollar devaluation, in which they propose cooperative capital controls as a potential solution to the QE2 debate.
How the US can fix its QE2 problem
Ben Bernanke has been criticised from different sides and perspectives for quantitative easing. From one side, inflation hawks prefer austerity over expansion. Those who favour expansion and growth have valid concerns that it may not work and, instead, have negative global effects. At the G20, the United States got criticised – rightly – by emerging countries for the negative impact of QE2 on their economies.
A Lesson in US Job Creation: The Civilian Conservation Corps
How could the Obama Administration have spent two years in office and forgotten to create any visible new jobs for the millions of unemployed Americans? Nothing contributed as much to the Democrats’ midterm electoral losses as the high rate of unemployment; the party in power routinely gets clobbered when lots of people are out of work on Election Day.
Once upon a time, there was a much smarter response to unemployment. In fact, I recently spent a week enjoying the results of the wisdom of the past. In a vacation trip to Grand Canyon and Bryce Canyon National Parks, I walked on trails, protected by retaining walls and guardrails, built by the Civilian Conservation Corps (CCC) in the 1930s. The CCC, part of the Roosevelt Administration’s response to the Great Depression, created vast numbers of jobs – 600,000 at its peak – in repairing, protecting, and improving parks, forests, and other natural resources.
Spotlight G-20: Where’s the Growth Supposed To Come From?
Jayati Ghosh
Part of a Triple Crisis series on the Nov. 11-12 G-20 meetings.
Have governments everywhere simply lost their marbles? Not much emerged from the Seoul G-20 Summit – and definitely not anything really desirable in the form of coordinated Global Keynesian policies (of the kind that Matias Vernengo has advocated in this blog). But then, quite frankly, not much was really expected to come out, given the downplaying of expectations and the volume of discordant notes that preceded the Summit.
This reflects the absence of a global economic leader willing and able to fulfill the roles identified by Charles Kindleberger: discounting in crisis; countercyclical lending to countries affected by private investors’ decisions; and providing a market for net exports of the rest of the world, especially those countries requiring it to repay debt. For obvious reasons, the US cannot currently do these, and there is no evident alternative. That is why coordination is so critical right now for international capitalism.
The Dragon in the Room: Chinese Investment in Resources Creating Lopsided Economy in Latin America
Following his opinion article in the Financial Times, Triple Crisis blogger Kevin Gallagher was interviewed by the Real News Network on how China’s growing investment in Latin America may be good for short-term economic growth, but bad for Latin American industrialization.
Read Gallagher’s full article at Financial Times.
Read more on Gallagher’s work on China in Latin America.
Latin America Must See China as a Trade Threat as well as a Partner
As global attention to China’s expanding economic influence grows, Triple Crisis blogger Kevin P. Gallagher published the following opinion article in the Financial Times on China’s role in Latin America. It draws on his new book with Roberto Porzecanski, The Dragon in the Room: China and Future of Latin American Industrialization.
Latin America must see China as a trade threat, as well as a partner
Major Chinese investment in Latin America is now a regular event: Sinopec’s $7.1bn investment in Repsol’s Brazilian unit is just the latest example. Such deals are rightly celebrated with fanfare in Latin America. However, the long-run effects are uncertain – especially given that Latin American exports are losing badly to their Chinese counterparts in world markets.
Latin America needs to diversify its exports – away from oil, iron, soya, meat and the like – if it is to grow sustainably. Unfortunately, as the region has focused on selling its commodities to China, Chinese firms have been outcompeting Latin American manufacturing exporters at a frightening pace.
In the 1980s and 1990s, Latin America looked to the US as a core economic partner, adopting the Washington Consensus in order to attract US investment and gain better access to US markets. Alas, in the twenty years up to 2002, Latin America grew by barely one per cent a year in per capita terms.
Read the full article at Financial Times.
Read more on Gallagher’s work on China in Latin America.
Spotlight G-20: A Post Mortem
Another in the Triple Crisis Blog’s series, Spotlight G-20, which has featured posts by a wide range of analysts, including Gerald Epstein, Stephany Griffith-Jones, Martin Khor, Jane D’Arista, and Ilene Grabel and Ha-Joon Chang and stimulated responses from Paul Krugman among others.
The failure of the G-20 foreclosed the export-led recovery scenario. Geithner’s proposal to limit imbalances to 4% of GDP and to force the appreciation of the currencies of the surplus countries, went nowhere as expected. So we are back to the domestic economy. Paul Krugman argued provocatively in one of his last posts that to solve the ‘deficit problem’ we should rely on death panels and sales taxes.
By that he means simply that health costs will have to be reduced and that tax revenues will have to increase, and Value Added Taxes (VAT) would be the best solution. He also notes that the well-known health and tax specialist Henry Aaron defends a similar plan to reduce the deficit. These views would also be an antidote to the president’s deficit commission plan.