TripleCrisis

Britain’s Austere Future: Zombie Flick or Godzilla Movie?

The Triple Crisis Blog is pleased to welcome Mark Blyth as a regular contributor.

In my first triple crisis piece I wrote about John Quiggin’s new book thesis concerning Zombie Economic ideas. Lead zombie of the moment is the idea of fiscal austerity as the way out of the crisis, despite oodles of evidence to the contrary. In short, we need to cut budgets to restore fiscal sanity, and we know that this is the way forward since small open economies in the 1980s (Ireland, Belgium, Denmark) that cut their budgets still grew. The economic (ir)rationale for this has been pointed out by Krugman, Stiglitz, and others. But for me the most interesting, and most tragic part of this story, are the distributional consequences of these policies, and the politics that they engender.

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Funding Post-Crisis Recovery in Africa: Aid vs. Domestic Revenue Mobilization

Eric Ogunleye

The Triple Crisis Blog is pleased to welcome Eric Ogunleye, a Research Fellow at the African Center for Economic Transformation in Accra, Ghana, as a regular blogger.

The negative effects of the recent global financial crisis on African countries are still very fresh in our minds. Global commodity demand fell precipitously, protectionist and restrictive trade policies soared, foreign investment shrank and foreign aid contracted, threatening the growth and poverty reduction achieved in the recent past. For instance, between 2007 and 2009, real GDP growth plummeted in percentage points from 20.3 to 0.7 (Angola), 4.8 to -3.7 (Botswana) and 6.2 to -3.7 (Madagascar). During the same period, fiscal balance excluding grants worsened from +11.5 to -4.8 (Angola), +0.8 to -4.9 (South Africa), +5.6 to -10.6 (Botswana) and +3.6 to -15.4 (Liberia). Increasing unemployment remains a major risk; South Africa lost 484,000 jobs in the third quarter of 2009 alone. The Nigerian stock exchange lost almost 70% of its value.

These were all the result of vulnerability to foreign financial resources. To reverse these negative trends and re-launch the continent on the path of sustainable recovery, deepening domestic revenue mobilization is imperative.

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Capital Controls are Prudent but not Easy

Kevin P. Gallagher, Financial Times, October 20, 2010

Triple Crisis blogger Kevin P. Gallagher was invited to submit an article for the Financial Times as part of a three-way debate on the use of capital controls. His piece begins below, and you can read the full article at Financial Times, as well as the other positions written by Guillermo Calvo and Gerard Lyons. For more on the issue from Triple Crisis, see Ilene Grabel’s recent post, and other contributions on capital controls. Read more on Gallagher’s work on issue for the Global Development and Environment Institute.

Emerging markets have their hands full trying to stem currency appreciation and asset bubbles due to their higher interest rates and formidable economic recoveries relative to the west. The situation will only worsen as world leaders continue to fail to reform global finance and the US moves to another round of quantitative easing.

In times like this, capital controls have regained their legitimacy as a tool emerging markets can resort to.

One can make the argument that many emerging markets eventually need to let their currencies appreciate, in real terms. But flows of speculative capital that stop and start suddenly are a destabilizing way to that end….

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Averting the Next Food Crisis: What role for food reserves?

Sophia Murphy, Guest Blogger

The 36^th meeting of the FAO’s Committee on Food Security (CFS) concluded in archetypal UN fashion: one and a half hours of apparently aimless milling about followed by a call to order, a ten minute exchange during which it becomes clear that the milling about was actually about last – very last – minute negotiations, and, finally, adoption of the report by acclamation. So ended the first meeting of a revamped piece of the UN system — a small but fascinating piece.

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The Three R's of Real Security

James K. Boyce

Security – protection from natural and accidental disasters as well as from deliberate efforts to inflict harm – is a basic human need. To a large extent it is a public good: when provided to one it is provided to all. Security is one reason for the existence of governments.

Those who want to play the role of daddy in a daddy state peddle the illusion that security can be entrusted to government alone. But real security requires more than government agencies. On the economic front, it requires infrastructure built for resilience. On the political front, it requires citizens to shoulder responsibilities. And on the moral front, it requires respect for others.

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The Three R’s of Real Security

James K. Boyce

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Capital Controls, ‘Currency Wars,’ and New Global Financial Architecture

Ilene Grabel

For those of us advocating change in the global financial architecture, the last few months have been fairly exhilarating. Let’s recap…

Capital controls, as I’ve written previously, have become the ‘new normal’ in the developing world. It’s hard to keep up with developments in countries that have introduced or tightened existing controls since I last wrote about them here (see below). IMF staff now write about capital controls with a taken-for-granted attitude (see even the institution’s October 2010 Global Financial Stability Report, which contains the by now customary bland language on the role and efficacy of capital controls, e.g. p. 28).

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Ecuador after the Financial Crisis: Room for Internal or External Policy Space?

Diana Tussie

Paul Krugman has drawn attention to the plight of Ecuador, noting that, since the country does not have an exchange rate policy (and hence a monetary policy), it stood deprived of a variety of policy instruments to face the crisis. With tied hands it resorted to the expedient of restricting imports.

Dollarization was no doubt a straightjacket. Ecuador nonetheless worked against the current and found policy space in a two pronged strategy to strengthen the financial system under threat of runaway deposits; and to provide support for domestic agriculture and industry.

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Conflicts of Interest and the Financial Crisis: It’s Also the Economics Profession, Stupid!

Gerald Epstein

Even the Queen of England could see that the economics profession messed up big time in the lead up to the financial meltdown. On a visit to the London School of Economics in 2009 she asked why economists’ failed to foresee the crisis. After a “serious” study, a group of eminent economists’ said economists had a “failure of imagination”, suggesting, perhaps, the need for more envisioning courses in Economics PhD programs. Paul Krugman pinned it mostly on economic theorists’ obsession with mathematical beauty and elegance at the expense of true understanding, what he called “mistaking beauty for truth”.

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Agricultural Dumping and Mexico

In an interview with the Institute for Agriculture and Trade Policy (IATP), GDAE’s Timothy Wise discusses the implications of U.S. agricultural dumping in Mexico. Wise’s comments are based on his paper on agricultural dumping under NAFTA, which is part of the Woodrow Wilson International Center for Scholars’ current project on Mexican agricultural policies, “Subsidizing Inequality“, now available in Spanish and in English in late 2010. For more on this project, see Wise’s latest Triple Crisis piece on agricultural dumping and his recent op-eds in El Universal and La Jornada.