A Turning Point for European Austerity?

Lilia Costabile, Guest Blogger

Massive strikes and demonstrations in Europe last week marked an important turning point in our history, and they may coalesce into an anti-austerity consensus among European citizens. It is as if these masses understood better than their governments the real size of the fiscal multipliers, which, as the IMF has recently pointed out, are large in a recession, implying that fiscal retrenchment has turned the rebalancing of public finances in the Eurozone periphery into a Sisyphean task.

Macroeconomic imbalances are at the root of the Eurozone crisis, which matured after the introduction of the Euro. It is vital to understand the nature of these imbalances in order to devise the proper remedies.

When the sovereign debt crisis exploded, the first to be blamed were the peripheral countries, gently dubbed the PIGS: Portugal, Ireland, Greece, Spain. I will call them GIPS. (NOTE: The PIGS became the PIIGS when Italy joined in as the target of financial speculation in the summer 2011. I will write on the Italian case, which is different from the others, in another post.)

Excessive state spending in these countries, so the narrative went, led to unsustainable levels of public debt and deficits, thus fuelling speculation and opening the stage for the debt crisis. Austerity was the remedy, to be complemented by severe sanctions and finally expulsion from the Eurozone for non-abiding countries: see e.g. Wolfgang Schauble, the Federal Finance Minister of Germany, and Mark Rutte and Jan Kees de Jager, respectively prime minister and finance minister of the Netherlands.

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Capital inflows to Latin America: Blessing or curse?

Martin Rapetti, Guest Blogger

Since the early 2000s, emerging market economies have attracted growing flows of foreign capital. This trend was briefly interrupted by the eruption of the global financial crisis, but it quickly resumed in mid-2009 with even more impetus. Most Latin American countries have been part of this process. The expansion of liquidity drove risk premia and interest rates down to historical minima in most countries of the region. The EMBI+ index published by JP Morgan is now around 150 basis points in Brazil, Chile, Colombia, Mexico, Peru and Uruguay. Current levels are significantly lower than the 350 basis points that Latin American countries reached in mid-1997 before the South East Asian crises.

The ability to borrow at low cost is certainly beneficial if funds are channeled to productive uses, especially investment in tradable activities and infrastructure. Experience has shown, however, that capital inflows can also end up financing private and public consumption, generating large current account deficits and inflating financial and real estate prices. Latin America has vast experience with boom-and-bust cycles driven by capital inflows that culminated in debt and financial crises with severe economic and social costs. Partly influenced by these experiences, the IMF has recently warned about the potential dangers of capital inflows to Latin America. In its 2011 Regional Economic Outlook , the IMF explicitly pointed to the widening of current account deficits as a source of external fragility that could  lead —as it did in the past— to a sudden reversal of capital flows and crises.

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From the Suppression of Voters to the Suppression of Economic Analysis: Republicans are at War With Democracy in Defense of Oligarchy

James Crotty, Guest Blogger

That the Republican Party undertook a vigorous campaign in the recent election to suppress voting in those states and localities in which it had effective control of government is widely understood. Pictures of long lines at polling places and reports of long hours waiting to vote in neighborhoods largely populated by African American and Hispanic voters provide clear evidence of this. But to be fully effective, the democratic process must not only make it easy to vote, it must also make it easy for voters to be well-informed about the effects of the policy positions taken by contestants for office and by the Parties they represent.

The Republican Party has been waging a war against both foundations of the democratic process. Along with voter suppression, it has been constructing the infrastructure required to support oligarchy – control of the political process by large corporations and wealthy individuals. The movement toward oligarchy is evidenced by the recent Citizen’s United ruling by our ultra-conservative Supreme Court that allows corporations and the rich to spend without limit to influence elections.

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Putin Expands State's Role In Energy Policy

Michael Klare, Guest Blogger

Ever since he first assumed the presidency in 2000, Vladimir Putin has sought to bring Russian energy production under state control, reversing the effort made by his predecessor, Boris Yeltsin, to transfer state assets into private hands.  Putin made considerable progress in implementing this goal during his first two terms, when the Kremlin employed questionable tax litigation to seize the assets of privately-owned Yukos (then the largest oil company in Russia) and transferred them to state-controlled Rosneft, and has continued with renewed vigor after he regained the presidency in May.  Already, Putin’s quest has been rewarded by Rosneft’s acquisition of BP-TNK, Russia’s third-largest oil firm, bringing more than half of the country’s oil production under state control for the first time since the 1990s.  But while applauded by some in Moscow, this effort has caused increasing concern in Europe, which relies to a considerable degree on Russian oil and gas and so fears the implications of Putin’s growing sway over Russian energy policy.  The Kremlin’s growing control over energy policy also raises questions about the depth of Russia’s commitment, made at the November 2011 G-20 Summit in Cannes, to increase transparency in international energy markets – questions made all the more salient as Russia assumes the G-20 presidency in 2013.

Even before he assumed the presidency, Putin indicated that state control over oil and other natural resources was essential to the restoration of Russia’s status as a great power.  In the years immediately following the disintegration of the Soviet Union, when Russia’s power was at its lowest ebb, Putin – then a functionary in the St. Petersburg municipal government – began arguing against the selloff of state-owned oil and natural gas fields to private firms and wealthy individuals (the so-called oligarchs).  Such sales, he claimed, were depriving Russia of the resources it needed to fuel its comeback as a major world contender; only by renationalizing these assets could Russia acquire the wherewithal to command respect on the international stage.

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Putin Expands State’s Role In Energy Policy

Michael Klare, Guest Blogger

Ever since he first assumed the presidency in 2000, Vladimir Putin has sought to bring Russian energy production under state control, reversing the effort made by his predecessor, Boris Yeltsin, to transfer state assets into private hands.  Putin made considerable progress in implementing this goal during his first two terms, when the Kremlin employed questionable tax litigation to seize the assets of privately-owned Yukos (then the largest oil company in Russia) and transferred them to state-controlled Rosneft, and has continued with renewed vigor after he regained the presidency in May.  Already, Putin’s quest has been rewarded by Rosneft’s acquisition of BP-TNK, Russia’s third-largest oil firm, bringing more than half of the country’s oil production under state control for the first time since the 1990s.  But while applauded by some in Moscow, this effort has caused increasing concern in Europe, which relies to a considerable degree on Russian oil and gas and so fears the implications of Putin’s growing sway over Russian energy policy.  The Kremlin’s growing control over energy policy also raises questions about the depth of Russia’s commitment, made at the November 2011 G-20 Summit in Cannes, to increase transparency in international energy markets – questions made all the more salient as Russia assumes the G-20 presidency in 2013.

Even before he assumed the presidency, Putin indicated that state control over oil and other natural resources was essential to the restoration of Russia’s status as a great power.  In the years immediately following the disintegration of the Soviet Union, when Russia’s power was at its lowest ebb, Putin – then a functionary in the St. Petersburg municipal government – began arguing against the selloff of state-owned oil and natural gas fields to private firms and wealthy individuals (the so-called oligarchs).  Such sales, he claimed, were depriving Russia of the resources it needed to fuel its comeback as a major world contender; only by renationalizing these assets could Russia acquire the wherewithal to command respect on the international stage.

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Derivatives and Inequality in Agriculture

Sasha Breger Bush, Guest Blogger

Over the past several years it has become increasingly clear that derivatives markets and instruments have played a large role in the global food crisis.  Masters and White, Ghosh, Wise and, most recently, a paper co-authored by the World Bank, IMF, UNCTAD, and FAO (among other agencies), have all pointed to the role of speculative commodity index trading in aggravating the food price crisis in 2007-8 – perhaps by as much as 20% – as well as the run-up in global food prices in 2011.

Derivatives markets and instruments are thus implicated as levers of inequality, as food price volatility does not affect all people in the same way. Indeed, in the presence of food price risk, the poor tend to suffer disproportionately.  Food purchases are generally a greater proportion of one’s income the lower that income is, meaning that food price increases have a disproportionately negative effect on low income people and households. Food price shocks often lead poorer individuals and families to coping strategies that ensure adequate food in the short-term but have longer-term costs, such as pulling kids out of school or liquidating hard assets.  Those with higher incomes, more assets or access to credit do not face the same vulnerabilities. This generates inequalities on a global scale, especially as food price volatility becomes a more permanent feature of the global economic landscape.

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The West almost succeeds in marginalizing the UN Conference on Trade and Development

Robert Wade, Guest Blogger

When the UN Conference on Trade and Development (UNCTAD) was being established in 1964 in Geneva as a kind of think tank for developing countries, developing countries argued that it must have a mandate for financial issues because of the close link between finance and trade. Western states said “over our dead bodies”: finance is for us and our organizations.

The deadlock was broken at the last minute when Ted Heath, then President of the British Board of Trade (later Prime Minister) came to Geneva for the final round of negotiations and met up with one of the leaders of the developing country side, an Algerian who had been his Oxford college mate years before. They went into a small private room and emerged with a compromise: that UNCTAD could appropriately concern itself with the “invisible account” in the balance of payments as it related to trade. The invisible account included finance. The western side reluctantly agreed.

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La Via Campesina: Food Sovereignty and the Global Feminist Struggle

Esther Vivas, Guest Blogger

La Via Campesina

Via Campesina is the world’s foremost international movement of small farmers. It promotes the right of all peoples to food sovereignty. Via Campesina was established in 1993 at the dawn of the anti-globalization movement, and gradually became one of the major organizations in the critique of neoliberal globalization. Its ascent is an expression of peasant resistance to the collapse of the rural world caused by neoliberal policies, and the intensification of those policies as embodied in the World Trade Organization (Antentas and Vivas, 2009a).

Since its founding, Via Campesina has promoted a “female peasant” identity that is politicized, linked to land, food production and the defense of food sovereignty—built in opposition to the current agribusiness model (Desmarais, 2007). Via Campesina embodies a new kind of “peasant internationalism” (Bello, 2009), that can be viewed as a “peasant component” of the new international resistance presented by the anti-globalization movement (Antentas and Vivas, 2009).

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Without Women There is No Food Sovereignty

Esther Vivas, Guest Blogger

In the countries of the Global South women are the primary producers of food, the ones in charge of working the earth, maintaining seed stores, harvesting fruit, obtaining water and safeguarding the harvest. Between 60 to 80% of food production in the Global South is done by women (50% worldwide) (FAO, 1996). Women are the primary producers of basic grains such as rice, wheat, and corn which feed the most impoverished populations in the South. Despite their key role in agriculture and food however, women, together with their children, are the ones most affected by hunger.

For centuries, peasant women have been responsible for domestic chores, the care and feeding of their families, the cultivation, exchange and commercialization of household gardens; charged with reproduction, production and community—all the while occupying an often invisible domestic and social sphere. The main economic transactions in agriculture have traditionally been undertaken by men in markets, with the purchase and sale of animals, and the commercialization of large quantities of grains in the private and public sphere.

This division of roles, assigning women as the caretakers of the house as well as the health and education of their families, and granting men the “technical” management of land and machinery, maintains the assigned gender roles that have persisted in our societies through the centuries and into the present (Oceransky Losana, 2006).

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The Walmart Strikes

Barry Eidlin, Guest Blogger

For the past two decades, retail giant Walmart has served as a model for corporate America to emulate. Now, by forcing unions to break out of old habits, its workers might be showing the way forward for labor.

Walmart stores and critical parts of its distribution chain have been hit by a series of strikes in recent weeks. These strikes are remarkable for three reasons. First, the workers involved have no union protection. While their strikes are technically legal, they are taking huge risks by walking out. Second, many are not technically employed by Walmart. Rather, they work for a variety of sub-contractors that Walmart can replace at will. Third, despite items one and two, these workers are winning, and the strikes seem to be spreading.

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