In his latest book, Age of Greed, former New York Times economic columnist Jeff Madrick tells how Wall Street triumphed and America paid the price. It’s the story of how, starting in the 1970s, right-wing economics – a mystical cult centered on small government, low taxes and financial deregulation – and human greed teamed up to produce not shared prosperity but obscene economic inequality and financial instability, through the ideas and doings of a bipartisan roster of politicians, financiers, and economists, some obscure, others prominent (hello, Robert Rubin, Larry Summers!). We recently got him on the phone to talk about the triumph of finance and the decline of America in our age of greed.
Running on Empty: U.S. ethanol policies set to reach their illogical conclusion
I’m as cynical as the next policy wonk, but sometimes even I am surprised at the perverse outcomes of some of those policies. Take the bizarre scenario outlined in the new agricultural outlook report from the FAO and the OECD regarding the projected rise in ethanol trade – ethanol traded for ethanol – between the United States and Brazil. That’s right, 6.3 billion gallons a year sloshing between the world’s pre-eminent ethanol producers by 2021. And all in the name of the environment, without a single drop helping people or the planet.
Weather dice is loaded
During my weekly conversation with my sister I told her about the unusual searing heat this June, the problems of power cuts and how we are coping in India. She, in turn, told me that in Washington DC, where she lives, there was a terrible storm that damaged her roof and uprooted trees in her garden. They were fortunate that they still had electricity, because most houses in the city were in the dark. She also said it was unbearably hot because the region was in the grip of an unprecedented heat wave. Both of us, living across the oceans, in different countries, with vastly different circumstances, were similarly placed.
Is this, then, what the future holds for us—a changing weather that has no boundaries or preferences. And why are we still so reluctant to make the connection between weather events and a changing climate?
The Time Bomb of Public Private Partnerships
Philip Arestis and Malcolm Sawyer
The South London Healthcare Trust, which runs three hospitals in south-east London, has recently been put into administration by the UK Secretary of State for Health as it struggles with its debts and deficits (see, for example, PFI will ultimately cost £300bn, Guardian, 5th July 2012). This story has much wider significance than a struggle with the effect of cuts in health expenditure, as much of the blame for the financial plight of this healthcare trust is being put at the door of the costs of the use of the private finance initiative (PFI) for the construction of two of the hospitals managed by the trust. It is also seen as a forerunner for further financial difficulties for many other healthcare trusts arising from the PFI-financed hospitals. It is indicative of the dangers of public partnerships which are costly, inflexible and disguise the financial implications of infrastructure investment.
New blow to banking system
The still-developing LIBOR scandal is the latest and biggest blow to the credibility of big banks and their regulators, and should catalyse broad-ranging reforms to the financial system.
The reputation and credibility of banks, regulators and the banking system in Western developed countries, already battered by the twists and turns of the financial crises, have reached new lows with the LIBOR scandal, which is still evolving and will yet reveal more wrong-doing.
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Spain: Shaken by crisis
Barcelona is an extraordinary city. It is obviously memorable for its fantastic architecture, dominated by the impressive, quirky, imaginative and joyful creations of Antonio Gaudi and other architects of the ”modernista” tradition of the early 20th century. It was home to some of the most interesting artistic innovators of the twentieth century – from the artists Picasso and Joan Miro to the musicians Isaac Albeniz and Enrique Granados. It has amazing food, in which the glories of being near to the sea are adequately reflected, and it is clear that in this city the manifold pleasures of eating and drinking are fully appreciated and indulged in.
Brazil: Emerging markets can regulate global finance
The development process can quickly unravel when a herd of speculative investors steers into a country. Brazil boldly attempted to regulate such speculation in 2010 and 2011. Their efforts were a modest success, but developing countries can’t bear the full burden of regulating cross-border capital flows.
When the Law Takes its Course
On 16 June 2012, a twelve-member jury convicted the India born and educated Rajat Gupta, former head of consultancy major McKinsey and Company and former board member at Goldman Sachs and Procter and Gamble (among other firms). He was found guilty on three counts of securities fraud and one charge of conspiracy. All convictions were related to insider trading in Goldman stocks, which were among the charges on which hedge fund manager Raj Rajaratnam of Galleon Group had been earlier convicted. Rajat Gupta, the jury concluded, provided confidential information to Rajaratnam with regard to Goldman Sachs that permitted him to enter into and profit from trades based on insider knowledge.
India and the Credit Rating Agencies
The recent downgrade of India as a sovereign borrower by the US-based Fitch has come close on the heels of similar downgrades and placing on “negative watch” by the other big two international credit rating agencies. In April, Standard and Poor’s had lowered India’s rating outlook from “stable” to “negative,” and June it warned that India become the first “fallen angel” among the BRICS nations to get a sovereign credit rating below investment grade.
Wages, Household Debt and the Fiscal Cliff
It is well known that while real wages kept the pace with labor productivity up to the early 1970s in the United States, they have lagged ever since, as shown in Figure 1. The causes of the collapse of the so-called Golden Age of Capitalism that allowed for expanding wages in the advanced economies are complex and diverse, but it is clear that the demise of the Keynesian consensus and full employment policies was at center stage.
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