East Asia’s Real Lessons

Jomo Kwame Sundaram

International recognition of East Asia’s rapid economic growth, structural change and industrialization grew from the 1980s. In Western media and academia, this was seen as a regional phenomenon, associated with some commonality, real or imagined, such as a supposed “yen bloc.”

Others had a more mythic element, such as “flying geese,” or ostensible bushido and Confucian ethics. Every purported miracle claims a mythic element, invariably fit for purpose. After all, miracles are typically attributed to supernatural forces, and hence, cannot be emulated by mere mortals. Hence, to better learn from ostensible miracles, it is necessary to demystify them.

The World Bank’s 1993 East Asian Miracle (EAM) volume is the most influential document on the subject. It identified eight high-performing Asian economies: Japan, Hong Kong, three first-generation newly industrialized economies, namely South Korea, Taiwan, and Singapore, and three second-generation South East Asian newly industrializing countries, viz, Malaysia, Thailand, and Indonesia. Despite a title implying geo-spatial commonality, the study denied the significance of geography and culture, and specifically excluded China, the elephant in the region.

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From Extractivism Towards Buen Vivir

El Salvador Takes the Lead in Banning Metals Mining, and a Number of Other Poorer Countries are Implementing Mining Policies that Show that the Environment Matters to Them

Robin Broad

How many of you knew that more than half a dozen poorer governments have, in the last decade, stood up to global mining firms and asserted environmental goals over short-term financial gains? It is a stunning story.

And it opens up the bigger question that PhD student Julia Fischer-Mackey and I tackle in a recently published Third World Quarterly article*: Can Third World governments steer away from plunder “extractivism” towards a new model of development that prioritizes the environment? Our article begins to answer this question by zeroing in on mining policy change as an indicator that an increasing number of governments historically engaged in “extractivism”-based development are changing course and prioritizing environmental concerns. That is, there are poorer countries initiating policies to incorporate environmental externalities, policies that suggest a changing development paradigm in the direction of environmental—and concomitant social and economic—“well-being.”

This shift is evidenced notably in the appearance of mining bans being put in place primarily for environmental reasons.  However, this shifting minerals policy is happening largely off the radar screen of development and environment scholars.

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The Fiscal Policy Experience Since the Great Recession

Philip Arestis and Malcolm Sawyer

In the period before the global financial crisis, macroeconomic policy was dominated by monetary policy; fiscal policy had become, at least in academic circles, largely dismissed. Governments still operated fiscal policy in the sense that budgets were presented and adjusted in light of economic circumstances. The countries of the Economic and Monetary Union of the European Union were supposedly constrained in the size of their budget deficits, though the constraints were frequently not observed.

With the global financial crisis, attention quickly swung to fiscal policy. Initially through late 2008 until early 2010, the automatic stabilisers of fiscal policy were allowed to function and budget deficits rose; there was additionally some relatively modest and temporary discretionary spending and tax reductions. At least the mistakes of the 1930s of cutting public expenditure in the face of recession were initially avoided, though unemployment rose substantially and the largest declines in GDP since WW2 were seen. It should have been self-evident that the upward swings in budget deficits were a direct result of the recession, and that attempts to reduce the deficit through austerity would undermine recovery. The sensible response should have been that, as recession caused the rise in budget deficit, recovery would bring a fall in the budget deficit. However, governments were panicked into a drive to “eliminate the deficit” whether or not the economic conditions were appropriate for deficit reduction. The panic was fostered by a “debt scare” with a focus on the often large rises in public debt, which occurred between 2008 and 2010. The idea was promoted that budget deficits were in some sense too large prior to the financial crisis, even though there was scant reason to think they had in any sense been unsustainable.

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America Last

Trump’s withdrawal from the Paris accord sets the US economy back

James Boyce

The alarm that greeted President Donald Trump’s announcement that the U.S. will withdraw from the Paris climate accord was an overreaction in one respect. The pace at which the world moves away from fossil fuels won’t, in fact, be greatly affected. The other countries that together now account for 85% of carbon emissions will not change course even if the U.S. drags its heels. In another respect, however, Trump’s latest proclamation is truly alarming: in what it means for America’s economy.

The U.S. joins Syria and Nicaragua as the only countries in the world that are not parties to the Paris accord. Syria’s absence stems from the fact that the country is in a horrific civil war and its leaders are under international sanctions. Nicaragua refused to sign not because it considered the accord too onerous, but because it didn’t go far enough to combat climate change.

Oddly, Trump echoed Nicaragua’s position when he said the accord would reduce global temperatures by only 0.2 degrees Celsius in 2100, calling this a “tiny, tiny amount.” His main rationale for pulling out, however, was not the modesty of the accord’s benefits. Instead it was “the draconian financial and economic burdens the agreement imposes” on the U.S. Never mind that the agreement “imposes” nothing: All commitments under the Paris accord are voluntary and non-binding, and each country’s policies can be changed at will.

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Is Nuclear Plant Closure a Mistake?

Frank Ackerman

Frank Ackerman is principal economist at Synapse Energy Economics in Cambridge, Mass., and a Dollars & Sense Associate.

Nuclear decommissioning is always expensive. At the end of a nuclear power plant’s lifetime, it must be disassembled, and safe storage must be found for a huge quantity of nuclear waste. Some of it will be hazardous for tens of thousands of years, and must be buried in a storage facility that will remain secure for much longer than the entire history of human civilization to date. The German government has allowed the country’s electric utility companies to buy their way out of responsibility for nuclear waste storage at a price of 23.6 billion euros, but that may not be enough.

Germany has committed to closing all its nuclear plants by 2022. This deadline was first adopted in 2002 by a Social Democratic-Green coalition government, responding to Germany’s strong anti-nuclear movement. In 2010, Chancellor Angela Merkel’s conservative government extended the deadline by up to 14 years. Soon after Japan’s Fukushima nuclear disaster in 2011, however, Merkel reinstated the 2022 deadline. Perhaps the only world leader who is also a physicist, she was newly impressed at the risk of nuclear accidents—and the risk of losing elections to the then-resurgent Green Party, riding the wave of post-Fukushima opposition to nuclear power. Of the 17 German reactors that were operating at the beginning of 2011, only eight are still on line. All will be permanently unplugged by the end of 2022.

Earlier retirement of nuclear plants affects the timing of decommissioning costs, but barely changes the magnitude. The main economic impact of early retirement for nukes is the loss of the low-cost electricity they could have produced in their remaining years. Most of the enormous costs of nuclear power are for initial construction and final decommissioning. With construction costs already paid via electric rates, and decommissioning costs already inescapable, the additional costs of operating a reactor for another year are relatively modest.

Does that mean that Germany’s early retirement of nuclear plants is an expensive mistake, potentially destabilizing the grid, increasing carbon emissions from coal and gas plants, and pushing up electricity imports? In a word, no.

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Why International Financial Crises?

Jomo Kwame Sundaram

International currency and financial crises have become more frequent since the 1990s, and with good reason. But the contributory factors are neither simple nor straightforward. Such financial crises have, in turn, contributed to more frequent economic difficulties for the economies affected, as evident following the 2008-2009 financial crisis and the ensuing Great Recession still evident almost a decade later.

Why international coordination?

Why is global co-ordination so necessary? There are two main reasons. One big problem before the Second World War was the contractionary macroeconomic consequences of the “gold standard.”

In 1944, before the end of the Second World War, President Franklin Delano Roosevelt convened the United Nations Conference on Monetary and Financial Affairs – better known as the Bretton Woods Conference – even before the UN itself was set up the following year in San Francisco. After almost a month, the conference established the framework for the post-war international monetary and financial system, including the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), or World Bank.

To be sure, the Bretton Woods system reflected sometimes poor compromises made among the negotiating government representatives. Nevertheless, it served post-war reconstruction and early post-colonial development reasonably well until 1971.

In September of that year, the Nixon Administration in the US – burdened with mounting inflation and unsustainable budget deficits, partly due to the costly Vietnam War – unilaterally withdrew from its core commitment to ensure full US dollar convertibility to gold at the agreed rate. Thus, the unilateral US action did not involve a transition from the Bretton Woods system to any coherent, internationally agreed alternative.

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Europe’s Faustian Bargain with Big Finance

An Interview with Walden Bello

Europe’s social democrats played a central role in unleashing the financial sector that created the European economic crisis that continues to today.

You’ve looked closely into how the financial crisis that erupted in 2008 played out in different parts of the world. What did the financial crisis in Europe have in common with the US crisis?

One common factor in the US and Europe was unregulated, undisciplined finance capital. First, European banks, including German banks, bought huge amounts of toxic subprime securities and as a result they saw their balance sheets gravely impaired, and, in the case of many, they had to be bailed out by their governments.

Second, European banks engaged in the same uncontrolled lending to real estate ventures, thus creating a huge property bubble in places like the United Kingdom, Ireland, and Spain.

Another common factor was that European countries had also adopted so-called “light-touch” regulation, under the influence of Wall Street and neoliberal theories like the so-called “Efficient Market hypothesis,” which asserted that financial markets left to themselves would lead to the most efficient allocation of capital. Even German authorities were under the spell of such doctrines, so that they were caught by surprise by the massive exposure of their banks to toxic subprime securities and to poor credit risks like Greece.

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Land and the Right to Food in Zambia

U.N. Envoy Urges Shifts Away from Large-Scale Projects

Timothy A. Wise

Leave it to the U.N. Special Rapporteur on the Right to Food, Hilal Elver, to remind the Zambian government—and all of us—that in agricultural countries such as Zambia the right to food depends on the access of the rural poor to land.

“The push to turn commercial large-scale agriculture into a driving engine of the Zambian economy, in a situation where the protection of access to land is weak, can risk pushing small-holder farmers and peasants off their land and out of production with severe impacts on the people’s right to food,” Elver said in Lusaka on May 12, 2017, at the end of her 10-day official mission to the land-locked southern African country.

In the absence of secure land rights, she warned, small-scale farmers can become “squatters on their own land,” as they become laborers or contract farmers to export-oriented commercial farms. “This situation is particularly alarming since small-scale farmers represent 60 percent of Zambians and at the same time produce 85 percent of the food for the population.”

With nearly four-fifths of rural Zambians living in poverty and 40 percent of children—more than one million—suffering stunted growth from malnutrition, Zambia has become one of Africa’s most impoverished countries. This, despite strong economic growth and large increases in the production of maize (corn), the country’s staple food crop.

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Genetically Engineered Disappointments

Jomo Kwame Sundaram and Tan Zhai Gen

Advocates of genetically engineered (GE) crops have long claimed that genetic engineering is necessary to raise crop yields and reduce human exposure to agrochemicals. Genetic engineering promised two major improvements: improving yields affordably to feed the world, and making crops resistant to pests to reduce the use of commercial chemical herbicides and insecticides.

Genetic modification of crops through natural evolution or artificial crossbreeding has been happening for millennia, giving rise to more productive or resilient crop species. Thus, the term ‘genetic engineering’ more accurately refers to the artificial introduction of genetic material to produce new GE varieties.

Trans-Atlantic Divide

A report by the United States National Academy of Sciences, Engineering and Medicine – picked up by the New York Times – found that US GE crop yield gains have slowed over the years, leaving no significant advantage in yield gains compared to non-GE plant varieties. Over two decades ago, Western Europe largely rejected GE crops while North America – the United States and then Canada – embraced them. More than twenty years later, US crop yield gains are not significantly higher than in Western Europe.

Since the adoption of GE crops, US use of herbicides has increased. In the US, decreasing use of some herbicides has involved large increases in the use of glyphosate, a key ingredient in herbicides used for GE crop cultivation. This is in contrast to France, which bans GE crop cultivation, where overall use of herbicides has been reduced due to EU efforts.

Glyphosate-resistant GE crops survive herbicide spraying while killing non-resistant weeds. However, rising weed resistance to glyphosate has led to the application of larger doses. For example, although land planted with GE soybeans has grown by less than a third over the last two decades, herbicide use has doubled. Herbicide use for maize production was declining before the introduction of GE crops, but has increased since 2002.

Glyphosate was assessed as carcinogenic by the International Agency for Research on Cancer (IARC) under the World Health Organization. Some glyphosate-based herbicides also contain other more toxic herbicides – such as 2,4-D, a key ingredient in Agent Orange, the infamous Vietnam War defoliant – to increase their efficacy against resistant weeds.

Diversity Declining

GE crops, typically with traits which tend to result in monoculture, have been promoted as more productive than non-GE crops. As farmers adopt GE crop varieties, others varieties are abandoned, and access to such seeds are increasingly in the hands of giant transnational seed companies rather than government facilities.

But when farmers lose confidence in GE crops or wish to turn to non-GE varieties for other reasons, they are no longer able to simply revert to their old non-GE varieties or to crossbreed them. Instead, they now need to buy seeds from these very same monopolistic transnational seed companies.

Similarly, the impact on ecological diversity, important for maintaining fragile ecosystems, cannot be underestimated. Biodiversity reduction fundamentally transforms ecosystems. Rich, diverse traditional farmer knowledge – of the use of plants and other natural resources to maintain soil and plant health, and to conserve water and other natural resources – is also being ignored in favour of ‘hi-tech’, genetically-engineered, agro-chemical and other ‘industrial’ solutions, which invariably engender new problems. For example, pesticides are intended to be toxic only to pests, but not to others, but most are carcinogenic or otherwise dangerous to human health.

While GE crops offer some benefits, unclear productivity advantages and rising pest resistance are reducing the edge it once claimed over conventionally developed crops. GE crops seem to be harmless, but there is still much uncertainty over their longer-term effects, including increased pesticide resistance and reduced diversity. The scientific ethic advising precaution in the face of uncertainty seems to have been abandoned in favour of profitable expediency, ostensibly to increase productivity and reduce agro-chemical reliance, neither of which have been achieved.

Corporate Power Growing

As many of the same corporations or conglomerates sell both GE seeds as well as the agro-chemicals needed to increase yields, the potential for other types of innovation is inevitably diminished. Recent mergers and acquisitions have further consolidated oligopolies selling both seeds and agrochemicals, exemplified by the acquisition bid for Monsanto by Bayer. Not surprisingly then, companies have less incentive to develop new traits, or to invest heavily in tackling other problems when greater pest resistance increases sales of their pesticides and overall profits.

All this is often justified in terms of the urgent need to feed the hundreds of millions of hungry people in the world. However, although there already is enough food being produced to feed everyone in the world, the real problem is one of access, as most of the hungry do not have the means to buy or produce the food they need.

Therefore, while US agribusiness has long claimed that GMOs will “save the world”, there has been little compelling evidence to this effect after two decades. Proponents select evidence to support their exaggerated claims that GE varieties meet many needs in different parts of the world, although their actual track records are much more modest and chequered.

Much of the resistance against GE crops is due to the interests and methods of the agribusiness transnationals dominating food production, both directly and indirectly through their control and promotion of seeds, agrochemicals, etc.

Originally published by Inter Press Service.

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The Congressional-Industrial-Military Juggernaut

James Cypher

James Cypher is a professor of economics in the Doctoral Program in Development Studies , Universidad Autonoma de Zacatecas. This interview explores themes developed in his article “Military Spending in the Swampland,” in the special Costs of Empire issue of Dollars & Sense magazine (March/April 2017).

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