Damming Capital

Triple Crisis bloggers Kevin Gallagher and Stephany Griffith-Jones co-authored the following opinion article with Jose Antonio Ocampo for Project Syndicate on the IMF’s proposed guidelines for the use of capital controls in developing countries. Read more Triple Crisis commentary on capital controls and Gallagher’s latest publication on capital controls and trade and investment treaties.

Capital-account regulations have been at the center of global financial debates for two years. The reasons are clear: since the world has experienced a “multi-speed recovery,” as the International Monetary Fund puts it, slow-growth advanced countries are maintaining very low interest rates and other expansionary monetary policies, while fast-growth emerging economies are unwinding the expansionary policies that they adopted during the recession. This asymmetry has spurred huge capital flows from the former to the latter, which are likely to continue.

Emerging economies fear that this flood of capital will drive up their currencies’ exchange rates, in addition to fueling current-account deficits and asset bubbles, which past experience has taught them is a sure recipe for future crises. The problem is compounded by the fact that one of the countries undertaking expansionary policies is the United States, which has the world’s largest financial sector and issues the paramount global currency.

Small wonder, then, that several emerging economies are using capital controls to try to manage the flood. This, of course, contradicts the wisdom that the IMF and others have preached in the past – that emerging economies should free their capital accounts as part of a broader process of financial liberalization.

Read the full article at Project Syndicate.

Development Banks: Their role and importance for development

Triple Crisis blogger C.P. Chandrasekhar published the following opinion article for the International Development Economics Associates (IDEAs) Network on why several countries are doing away with development banking institutions despite the critical role development banks have played in many countries’ development trajectories.

Among the institutions whose role in the development of the less developed regions is well recognised but inadequately emphasised are the development banks. Playing multiple roles, these institutions have helped promote, nurture, support and monitor a range of activities, though their most important function has been as drivers of industrial development.

All underdeveloped countries launching on national development strategies, often in the aftermath of decolonisation, were keen on accelerating the pace of growth of productivity and  per capita GDP. This was the obvious requirement for alleviating poverty and reducing the developmental gap that separated them from the developed countries. To realise this goal, they considered industrialisation to be an important prerequisite. This stemmed from the perspective that modern economic growth was a process characterised by an increase in the
share of employment in the non-agricultural sector, and within the latter by a change in the scale of productive units, the growth of factory production and a shift from personal enterprise to the impersonal organisation of economic firms.

Read the full article at the IDEAs Network.

Tax Havens or Financial Sinkholes?

James K. Boyce

Tax havens have gotten a lot of press lately. In Britain, the UK Uncut movement has mounted demonstrations across the country against tax dodging by large corporations and wealthy individuals – making the connection between profits parked abroad and deficits and budget cuts at home.

Last month in the U.S., The New York Times revealed that GE, one of the nation’s largest companies, earned 46% of its revenue in the U.S. over the last three years but booked less than one-fifth of its profits there, shifting most of its booked profits to low-tax countries. In 2010, taking advantage of loopholes in U.S. tax laws (for which the firm had lobbied Washington lawmakers), GE paid negative taxes: despite $5.1 billion in declared pre-tax U.S. profits, the firm received a $3.2 billion tax credit. This and other blatant examples of corporate tax dodging are inspiring the birth of US Uncut, an American cousin of the British movement.

The term “tax haven” is a euphemism, however, for two reasons.

Read the rest of this entry »

The “currency wars”: What’s next for the BRICs and other rising powers?

Ilene Grabel

Today’s “currency wars” stand at the intersection of many critical issues. These include the ability of developing countries to deploy capital controls, the role of the US as global financial hegemon, the inadequacy of the global financial architecture, the power of the IMF, and the role of the BRICs (and other rapidly growing developing countries).  All of these issues are at center stage both at today’s meeting of G20 Finance Ministers in Washington DC and at yesterday’s BRIC Summit in Sanya, China (which South Africa attended for the first time).

Read the rest of this entry »

Beyond Keynes: An interview with Justin Yifu Lin

The following interview with new World Bank Chief Economist Justin Yifu Lin is re-posted from the World Policy Institute’s World Policy Journal, a Triple Crisis partner. We periodically cross-post items of interest.

In May 1979, Justin Yifu Lin—a 26-year-old company commander in the army of the Republic of China and a recent graduate of the MBA program at National Chengchi University—defected from Taiwan to mainland China by swimming across the straits to Fujian Province, leaving behind his pregnant wife and three-year-old child.

Seven years later, after obtaining a Master’s degree in Marxist political economy from Peking University, he became one of the first citizens of the People’s Republic of China to receive a PhD in economics from the University of Chicago. Reunited with his family, and returning to China, he became a professor of economics at Peking University and founded the Beijing-based China Center for Economic Research. In June 2008, he became the chief economist of the World Bank, the first ever from a developing country. In a conversation with World Policy Journal editor David A. Andelman and managing editor Justin Vogt, Lin explained his vision of the global recovery and the role of the World Bank in helping developing nations grow and prosper.

Read the rest of this entry »

Food Price Volatility: What Was and Wasn’t Said in the Leaked Report to the G-20

Jennifer Clapp

Triple Crisis is pleased to welcome Jennifer Clapp as a regular blogger.

Despite the slight dip in the FAO food price index in March, global food prices still remain 37 percent higher than they were at this time last year. In this context, eyes are fixed on the upcoming G­20 meetings where France, as host, has pledged global leadership on the issue of commodity price volatility.

A confidential draft report prepared by 9 international organizations for the G­20, leaked in late March, gives us a glimpse into the analysis on volatility in food and agricultural markets that informs the G­20.

Read the rest of this entry »

High Food Prices: Do family farmers benefit?

Timothy A. Wise

Farm prices are up again, so farmers must be getting rich, right? The U.S. Department of Agriculture sure thinks so, projecting that U.S. farmers will see record net cash farm income of $99 billion in 2011. The media follows the government’s lead, offering interviews with farmers gushing about their new-found prosperity. Are things really so great down on the U.S. farm?

They may be for the big guys, but they’re not for many family farmers. My recent study, “Still Waiting for the Farm Boom: Family Farmers Worse Off Despite High Prices,” shows that the largest farms were capturing a remarkable 88% of all net cash farm income. Meanwhile, small-to-mid-scale family farmers had lower farm incomes in 2009 than they did earlier in the decade when prices were lower, and their household incomes were down as well thanks to the Great Recession. The data reveal a lot about the precarious nature of family farming, even in a resource-rich country like the United States.

Read the rest of this entry »

New battle lines in climate talks

Triple Crisis blogger Martin Khor published the following opinion article at Third World Network on the North-South debate over the Kyoto Protocol, which resumed last week at the global climate talks in Bangkok.

The United Nations’ climate talks resumed last week in Bangkok.  There was a lot of drama, with developing countries throwing a challenge to the developed countries to proclaim themselves once and for all, whether they intend to continue with the Kyoto Protocol or to kill it.

This North-South battle had already been boiling the whole of last year.  Especially at the big climate conference in Cancun in December, when Japan brazenly stated it had no intention to join a second period of the protocol, after its first period expires in 2012.

Japan’s announcement had evoked outrage among the developing countries, especially since the country had hosted the meeting that created the Kyoto Protocol.  The KP is the main pillar of the UN Climate Convention; all the developed countries (except the United States) have made legal commitments under it to cut their emissions of Greenhouse Gases.

Read the full article at Third World Network.

Think energy efficiency isn’t working? Think again

Triple Crisis blogger Frank Ackerman published the following opinion article in Grist on the media’s misleading reports on the recent release of the first half of the Energy Information Administration’s (EIA) Residential Energy Consumption Survey.

Imagine a press release with this message: We’re not using more household energy than we used to — and the latest data won’t be available until next year. If you read that, I’m guessing you would join me in yawning and moving on to the next story.

That is what the Energy Information Administration (EIA), the federal agency that tracks our energy usage, just said — but it said it in a confusing way that sounded like a much bigger story, and was almost designed to mislead readers. Jess Zimmerman, writing in Grist, was among those whom they succeeded in misleading. Zimmerman’s article, “How Americans defeated efficiency with consumerism,” says that average household energy use has remained stable even as appliances have become more efficient, because we all have more appliances now.

Read the full article at Grist.

New Financial Architecture: Towards a “Beijing Consensus”?

C.P. Chandrasekhar

Joseph Stiglitz has written an article in the Financial Times dated April 1, 2011, arguing that a substantially enhanced issue of Special Drawing Rights (SDRs)by the IMF should be the first step in the reform of the international monetary system. The article is of special significance because it is based on a statement issued by 18 leading economists from across the globe calling themselves the Beijing Group, which includes nine known Chinese figures.

Read the rest of this entry »