Yuan diplomacy

Kevin P. Gallagher

When no one was looking, China became the largest source of finance for Latin American governments. Indeed, in the past few weeks Chinese government-sponsored banks have extended $1bn to Ecuador and are discussing another $1bn to the Inter-American Development Bank.

This presents a great opportunity for Latin America, but also brings new risk. If the region can seize upon the new opportunities that come with Chinese finance they could come closer to their development goals, and pose a real challenge to the way Western-backed development banks do business.

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Shale gas: dubious game-changer

Sunita Narain

The United States has always been the climate change renegade. For the past 25-odd years, since negotiations for a global agreement to combat the threat of this potential catastrophe began, the US has been the naysayer, pushing against a deal, weakening the draft and always hiding its inaction behind the legitimate growth of emissions in countries like China and India.

This much we know. We also know that this issue has lost so much traction in that fuel-guzzling country that Barack Obama, who came with a promise of change, has backed down on any discussion on climate change. In 2008, after he was elected on a promise of change in the climate change policies of the Republican government, Obama announced, “this is the moment when the rise of oceans began to slow and our planet began to heal”. But since then, little has happened to cut emissions at the scale and pace needed. In the current elections, Obama does not mention the C-word and climate change is a non-issue. The US has no interest in taking the lead in this matter. But, as I said, this is what we know. There is a new development afoot that could push the US to ‘clean energy’ but the zillion-dollar question is if this will be good or bad for the future.

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Human rights approach to climate change

Martin Khor

Climate change is also a human rights issue, as indicated by the seminar organized by the UN Human Rights Council in Geneva last week.

Bangladesh’s foreign minister Dr Dipu Moni described the devastation caused by climate-linked disasters which threaten its people’s rights to food, water, health and housing.

The Philippines is in an equally precarious situation. Its Commissioner for Climate Change, Mary Lucille Sering, spoke of how many storms and floods killed many hundreds of people last year and the country has to spend or find US$8 billion to rebuild damaged areas and property.

The two-day meeting arose from a resolution of the Human Rights Council last September reiterating concern on how climate change poses an immediate threat to people and has adverse implications for the full enjoyment of human rights. It called for a seminar to clarify the issues.

A major question is how the interface between the climate issue and human rights should be framed.

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A farewell to growth?

Matías Vernengo

It has been common for certain progressive groups to suggest that better income distribution and no growth, or even degrowth more recently, would be better than the capitalist driven consumerist growth process [for a critical review of this literature go here]. Several different strands of thought are involved in this view, and it would probably be worthwhile to disentangle them all.

First, there is an obvious Malthusian flavor to this view, going back to the dire predictions by the Club of Rome in the early 1970s, as a result of limited availability of non-renewable resources. Peak oil has been predicted a few times since. And yes it may very well happen in the near future, but somehow I doubt it. Remember that we moved away from coal and steam engines to oil and combustion ones, not because coal disappeared or became truly scarce, but simple because technological change made it less important as a source of energy (and yes we still burn a lot of coal).

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From “Technocrats” to Autocrats: Who elected the central bankers?

Gerald Epstein

The G-20 Finance Ministers’ meeting in Mexico City ended on Sunday, February 26, unsurprisingly, with no apparent progress on resolving the global economic crisis. Yet, according to some news reports, leaders at the meeting believed they had turned a corner on the euro crisis, primarily by agreeing to massive “fiscal consolidation”, another of the many euphemisms (this one for austerity) thrown up by the financial crisis.

Pushing through these austerity measures are a host of other actors, including the so-called “technocrats” who are running more institutions and even governments. Included among these so-called neutral technocrats is the “independent” European Central Bank (ECB).  Digging a bit deeper cracks open a façade of central bank “expertise” and neutrality to reveal not only a destructive adherence to a failed economic analysis but also the use of unelected central banks to exercise the raw power of financial and other elites over democratic societies.

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100 Economists Call for Trans-Pacific Trade Deal to Allow Capital Controls

Kevin P. Gallagher and Sarah Anderson, guest blogger

Since the onset of the global financial crisis, Triple Crisis bloggers have been commenting on the need for policy space for capital controls in developing countries and the need to reform US trade agreements, which generally prohibit their use.  To further that end, Triple Crisis co-chair Kevin Gallagher and Sarah Anderson of the Washington-based Institute for Policy Studies initiated an economist sign-on letter to urge negotiators of the Trans-Pacific Partnership Treaty.  The letter attracted 100 signatories from TPP countries and was released today.

Click here for the full statement and list of endorsers.

In advance of Trans-Pacific trade talks, over 100 economists are sending a letter today urging negotiators to promote global financial stability by allowing the use of capital controls.

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Rich Presidents of Poor Nations: An African story of oil and capital flight

The Triple Crisis Blog is pleased to welcome as a regular blogger Léonce Ndikumana, Andrew Glyn Professor of Economics and Director of the African Policy Program, Department of Economics and Political Economy Research Institute (PERI), University of Massachusetts at Amherst.

Stories of African presidents shipping suitcases of cash to finance political campaigns abroad in exchange for patronage have made the headlines recently, prompting legal probes into illicit wealth accumulation. On February 14th, France 24 reported that the French Police[1] searched the apartment of Theodoro Obiang Nguema, the President of Equatorial Guinea, whose family has accumulated massive wealth by mortgaging his country’s oil. In 2011, Global Witness reported that his flamboyant son Theodorin Obiang commissioned a personal super-yacht with a handsome price tag of $380 million, worth three times the country’s combined budget for health and education.[2] The French Justice system is also pursuing inquiries into the illicit wealth of Ali Bongo of Gabon and Denis Sassou Nguesso of the Republic of Congo. While they are dramatic, these stories reflect a deep seated tragedy of African resource-rich countries.

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Not so “sweetheart deals” from China in Latin America

Kevin P. Gallagher

Never letting data get in the way of a good story, pundits and policy-makers alike have clamored that Chinese development banks are engaged in “low-ball” finance that is out-competing Western finance in Latin America.  Not so simple, not so fast, according to findings in a new study that I co-authored titled “The New Banks in Town: Chinese Finance in Latin America.”

Frustrated by the lack of transparency exhibited by Chinese banks – notably the Chinese Development Bank (CDB) and the Export-Import Bank of China – we embarked on an effort to create a database of Chinese financing to Latin American governments from 2005 to the present.

Digging through SEC filings, government web pages, the press on both sides of the Pacific and beyond, we estimate that between 2005 and 2011 these banks provided upwards of $75bn in loan commitments to Latin American governments.  The Chinese committed $37bn to the region in 2010 alone, more than the World Bank, Inter-American Development Bank, and the United States Export-Import bank combined.

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10 Questions for Economists Who Oppose Manufacturing Subsidies

Jeff Madrick

Why are mainstream economists, right and left, so determined to push back any attempt to subsidize manufacturing in America? The question will arise anew tonight when President Obama presents his budget, complete with tax provisions to support manufacturing. After the president addressed the issue as his first topic in the State of the Union a couple of weeks ago, many esteemed economists seemed to rush to the offense. Obama proposed using tax carrots and sticks to encourage manufacturers to stay here, return here, or get out of those low-wage emerging markets. Some mainstreamers, seeming to represent the conventional wisdom among them, openly scorned the idea. At least one, Laura Tyson, has stood her ground in favor of a policy focus on manufacturing.

I understand the mainstream economic reflex. After working so hard to get world nations to reduce trade barriers for the last 40 to 50 years, they and their successors view subsidizing manufacturing in the U.S. as a retreat. It could provoke retaliation as well. And moving the world toward free trade makes eminently good theoretical sense — to a degree. The anti-manufacturing subsidy bias is really a subset of the firm, almost unshakable allegiance to free trade theory among the American mainstream.

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Romania’s lesson for austerity enthusiasts

The Triple Crisis blog is pleased to welcome Cornel Ban as a regular contributor. Ban is a Postdoctoral Scholar of International Studies and Deputy Director of the Development Studies Program at the Watson Institute for International Studies at Brown University. His research in international political economy focuses on the transnational spread of economic ideas and varieties of capitalist development.

You know that a ship is about to sink when the most loyal sailors head for the life raft. Until January 2012 the continuous expansion of the realm of the market and the shrinking of the state’s responsibility for delivering public goods was de rigueur in Romania. Indeed, this East European country that joined the EU in 2007 appeared as a poster child for austerity and market reforms. The country’s 2010 fiscal adjustment included the usual mass layoffs and wage cuts in the public sector but the government surprised even the visiting IMF chief with its utter lack of concern for distribution costs: drastic cuts in the social security benefits of the most vulnerable, a “flat” cut of 25 percent applied to all wages in the country’s very unequal public sector, and an undifferentiated hike of the VAT to one of Europe’s highest levels.

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