Guido Mantega, the Brazilian Finance Minister, said recently that Brazil is in the middle of a currency war. His preoccupation with exchange rate appreciation is not directed to global imbalances, in general, or China, in particular. A more depreciated currency provides protection for domestic production, and makes domestic goods and services cheaper for foreigners. In that view, a stable but competitive (i.e. depreciated) real exchange rate (SCRER), as Roberto Frenkel and Lance Taylor call it, would be an essential tool in the development strategy in developing countries. The message is that competitiveness of domestic markets matters for development.
Lessons on Climate Change from the Pakistan Floods
There are many lessons from the recent floods in Pakistan. Here are just a few.
First, when natural calamity strikes, it can be– and nowadays more often than not it is– devastating. The tsunami that hit Indonesia and many other countries, the Haiti earthquake, and now the Pakistan floods illustrate that. In Pakistan, up to 20 million people have been affected, almost a million homes destroyed or damaged, 10 million were made homeless, and there is widespread damage to agriculture and related livelihoods.
Markets and Governments: Finding the Balance in Developing Countries
The recent global economic crisis has renewed interest in the debate over the role of the government in economic activities, in developed countries as well as developing countries. Rich countries had to stimulate their economies by injecting enormous amount of cash to deal with the financial crisis caused by the unregulated market and the activities of financial institutions. In the case of the United States, such injections amounted to over one trillion dollars. Yet, the International Financial Institutions continue to advocate a different policy for poor countries. The recommendation of the IMF to the Government of Malawi to impose pro-cyclical monetary and fiscal policies on the economy is only one example.
Small-Scale Farmers and Development: Assume a different economic model
One version of an old joke features a shipwrecked economist on a deserted island who, when asked by his fellow survivors what expertise he can offer on how they can be rescued, replies, “Assume we have a boat.”
In Mexico earlier this month, I was thinking that the real-life version of the economist’s solution is: “Assume we have employment.” But it’s no joke. A World Bank economist had just spoken during a seminar at Mexico’s National Autonomous University on Mexican farm policies in the wake of NAFTA. Earlier, I had presented my recent paper, “Agricultural Dumping Under NAFTA,” which came out in the new report “Subsidizing Inequality,” released in Spanish by the Woodrow Wilson Center and its Mexican partners.
New Estimates of China’s Foreign Investment in Latin America
China’s foreign investment into Africa has been generating a great deal of controversy. Some argue that China is becoming the new colonial power over Africa, others see China as a key source of foreign exchange that may finally help spur long-run economic growth in Africa.
There has been relatively less discussion about China’s investment in Latin America, because it was thought that there was so little of it. A closer look reveals that Chinese FDI is larger than previously thought, and growing fast.
According to official Chinese statistics, foreign direct investment (FDI) to Latin America has been relatively limited—averaging just over $4 billion per year between 2003 and 2009. That is 3-4 percent of total FDI into the region over the same period. What is more, according to China, 96.7 percent of all Chinese FDI into Latin America during that period went to the Cayman Islands or the British Virgin Islands—two countries that would sink into the ocean if they had $3 billion per year in such investment. Peal away these two financial havens and the Latin American region only received about $126 million in Chinese FDI, or less than 1 percent of the annual total.
Going Green Gets Dirty
Periods of economic recession are known to foster protectionist tendencies. This has been especially marked after the global crisis, when trade openness has become a useful battering ram in the developed world, skillfully used by policy makers and employers to pass the buck on to the threat posed by foreign producers. The significantly increased threat of unemployment is then seen – even by Northern workers – not as the result of domestic macroeconomic policies that prevent employment from rising as it feasibly could, but as something determined by trade patterns, especially exports from the developing world.
Even so, the recent trade wars over the use of “green” technologies are surprising in how extreme and openly self-contradictory the positions have been. And what is most surprising – and even alarming and distressing – is how such thinking has permeated to the working classes in the North, who now openly identify their own interests with those of their employers rather than with workers in developing countries.
Food Security and India: The unwelcome surprise
The National Advisory Council of India recently proposed a Food Security Bill. In an article published by Frontline, Triple Crisis blogger Jayati Ghosh examines the proposed Bill and argues that in pushing for a greatly truncated public distribution system (PDS), the Bill undermines the PDS itself.
“It seems that the obsessive desire to keep the price of subsidised foodgrain at the level that was promised – even if only for some chosen sections and at the cost of large-scale exclusion and possible diversion – has dominated over the goal of ensuring a viable and vibrant system of public procurement and distribution.”
“If any system of food procurement and distribution has to cope with varying situations, it has to allow for the possibility of some people moving in and out of the system, choosing to use the ration shops when market prices are high and opting out when market prices are low. Only when the food security of the entire population is secured in a coherent manner can we be sure that we are securing the food security of its most deprived sections.”
Read the Full Article
Patent Concerns: compulsory licensing of patents in India
India’s Department of Industrial Policy and Promotion (DIPP) recently unveiled a discussion paper on licensing of patents. In an article published by Frontline, Triple Crisis blogger C.P. Chandrasekhar analyses the paper and argues that the discussion paper on compulsory licensing of patents will have achieved its purpose if it can lead to a proactive policy in the area of drugs and health.
“India having signed on to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) under the World Trade Organisation (WTO), having suitably modified its Patents and Trade Marks Acts and having enacted the Designs and Geographical Indications Act, has a transparent regime for the protection of intellectual property (IP). However, any regime that protects IP must provide for ways to prevent the misuse of that protection or of its use in situations where it obviously hurts the public interest. One of the accepted and tested mechanisms to deal with situations of improper use is compulsory licensing. The paper claims to be motivated by the desire to “develop a predictable environment” for the use of such measures.”
“While the DIPP’s immediate concern is the issue of compulsory licensing, the implications of its analysis go beyond that. The effort to initiate this debate and set its tone needs to be lauded.”
Read the full Frontline Article
Recovery: Back to Normal?
The history of the United States is rather exceptional. This is the only country that has always lived under the aegis of capitalism. No slavery as the organizing principle, nor feudal lords in their castles. Just the anxious eye of capital. Maybe this is why, more than in other country, the most important source of political legitimacy resides in the ability of the power elite to maintain high living standards. And when the system that allows for this is in trouble, the power elite needs to renovate its source of political legitimacy.
This sometimes has implied the redefinition of the social compact, as in the Thirties, when Roosevelt’s New Deal established a new foundation for income distribution and for labor relations. The American right never forgave that affront and was always ready to revert that social pact. The favorable conjuncture presented itself in the Seventies and Eighties.
Atrazine Ban Would Not Ruin the Corn Belt
The U.S. Environmental Protection Agency is re-evaluating the regulation of atrazine, a powerful weed killer that is banned in Europe, but widely used by U.S. corn growers. Based on his 2007 study on the subject, Triple Crisis blogger Frank Ackerman’s recent op-ed article in the Des Moines Register questions the economic benefit of atrazine use.
“My research on the economics of atrazine shows that its benefits are greatly exaggerated. Corn yields and farm incomes would barely be affected by switching from atrazine to the next-best alternatives.
“Why is atrazine controversial? Everyone agrees that it kills weeds. But there are two rival stories about its health risks. Industry-sponsored research and agribusiness lobbies say that atrazine is completely safe and has been used for decades without harm to humans. Independent university researchers and peer-reviewed scientific literature say that it is a powerful endocrine disrupter that makes male frogs into hermaphrodites at very low concentrations and causes neural damages and cancer in laboratory animals.”
Read the full Des Moines Register column.
See Ackerman’s original study on atrazine.