The excitement that had marked the creation of the International Renewable Energy Agency (IRENA) in early 2009 – to act “as the global voice for renewable energies” – dissipated fast in the last year and a half. Indeed, for those few who followed what was happening at the agency, feelings of crisis and panic set in fairly early and in recent weeks had turned into a distinct sense of foreboding and desperation. One hopes that this is finally about to change as new excitement has been injected into IRENA after the resignation of its beleaguered founding Director General – Helene Pelosse from France – and the appointment of Kenyan development economist and seasoned UN official Adnan Amin as her replacement.
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.
Funding Post-Crisis Recovery in Africa: Aid vs. Domestic Revenue Mobilization
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.
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….
The Three R’s of Real Security
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.
The Three R's of Real Security
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.
Capital Controls, ‘Currency Wars,’ and New Global Financial Architecture
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).
Ecuador after the Financial Crisis: Room for Internal or External Policy Space?
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.
Conflicts of Interest and the Financial Crisis: It’s Also the Economics Profession, Stupid!
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”.
Basel III: One More Victory for Finance
Even as governments in individual countries are struggling to move forward on post-crisis financial reform aimed at preventing another crisis, the G20 seems to be settling for marginal modifications of the pre-existing framework for global regulation– at the centre of which are the Basel norms. The Basel norms in their various versions essentially require banks to hold capital amounting to a certain proportion of their risky assets in forms that are available and easily accessed to cover losses. Capital that was free of encumbrances and liquid to different degrees was ranked Tier I or Tier II, with each Tier required to be kept at a certain proportion of the value of risk-weighted assets.