Equality, Solidarity, and Sustainability, Part 2

In this second part of a four-part interview, regular Triple Crisis contributor Jayati Ghosh summarizes some major themes in her work and thought, including the prospects for the transformation and revival of socialist movements, the transfiguration of the world capitalist economy and the reproduction of structures like the core-periphery division and landlord domination, new challenges of international labor solidarity and environmental sustainability, and the way forward towards egalitarian societies. (Part 1 of the series is available here.)

Jayati Ghosh

Change and Reproduction of Core and Periphery

D&S: A half century ago, the most influential radical view of economic “underdevelopment” focused on the dominance of industrial-manufacturing “core” economies over raw-materials-producing “periphery.” Has that story changed in the current era of neoliberal globalization, with many developing countries moving out of mineral and agricultural exports and into export-oriented manufacturing (often “offshored”)?

JG: Geographical and locational changes in productive structures do not negate the idea of “core” and “periphery” operating within capitalism. Global capitalism has, throughout its history, experienced such shifts.

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What We’re Writing, What We’re Reading

What We’re Writing

Matías Vernengo, Growth forecasts and Latin American underperformance

Juan Antonio Montecino and Gerald Epstein, Have Large Scale Asset Purchases Increased Bank Profits?

Kevin Gallagher, Ruling Capital: Emerging Markets and the Reregulation of Cross-Border Finance

 

What We’re Reading

Gabriele Köhler, On the Cusp of a Genuinely Transformative Agenda?

Oakland Institute, The Corporate Takeover of Ukrainian Agriculture

Lynn Parramore, Welcome to the European Hunger Games, Brought to You by Mainstream Economics

Ian Morris, The Measure of Civilization: How Social Development Decides the Fate of Nations

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India’s Climate Strategy Needs Revision

Sunita Narain

Climate change negotiations are by now predictable. The already-industrialised come to each conference of the parties (COP) with a clear game plan, that is, to erase their contribution to the emissions already present in the atmosphere, thereby effectively remove the differentiation between their responsibility and that of the rest of the world to act. This would rewrite the 1992 convention on climate change and let them evade the obligation to provide funds and technology for action in the developing world. The problem is that developing countries do not come with an equally clear plan or proactive position. As a result, in each meeting, including the recently concluded COP20 at Lima, developing countries lose. The terms of the agreement change progressively and deliberately against the poor and the Planet.

Indian negotiators believe they can maintain the status quo and delay any new agreement, but as climate negotiations show, this tactic does not work. We block but the rich countries shove and the ground slips from under our feet. We need to revise our strategy.

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Equality, Solidarity, and Sustainability, Part 1

In this interview, forthcoming in Dollars & Sense magazine, regular Triple Crisis contributor Jayati Ghosh summarizes some major themes in her work and thought, including the prospects for the transformation and revival of socialist movements, the transfiguration of the world capitalist economy and the reproduction of structures like the core-periphery division and landlord domination, new challenges of international labor solidarity and environmental sustainability, and the way forward towards egalitarian societies. This is part one of a four-part series.

Jayati Ghosh

Prospects and Barriers for a New Socialism

D&S: We are scarcely two decades removed from the supposed global triumph of capitalism, the death of socialism, and (maximum hubris) proclamations of the “end of history.” And yet we’re seeing a revival of socialist movements—what you have called the “emerging left in the emerging world.” What are the key factors explaining this revival?

JG: I think it is now becoming more evident to most people across the world that global capitalism—especially in its current neoliberal manifestation—is not likely to deliver genuinely better material conditions, security, and justice. This is generally still a largely inchoate and diffuse sense of unhappiness with the state of things in many parts of the world. It is true that in some regions, like Latin America, there is a more developed sense of how neoliberal policies pushed the advance of aggressive and extremely unequal capitalist forces.

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Free Markets: Yellow Brick Road to War

John Weeks

Troglodyte – pronounced trog-luh-dahyt, 1) prehistoric cave dweller, 2) a person of degraded, primitive, or brutal character, 3) person living in seclusion, and 4) a person unacquainted with affairs of the world.

Troglonomics – pronounced trog-lo-nomics, the social institutions of production & exchange as viewed from a cave by a person degraded & corrupted intellect unacquainted with the affairs of the world; also known as “neoclassical” economics.

The troglodyte economics of the mainstream (a.k.a. neoclassical economics) functions as a virus of the mind. Like a computer virus, it corrupts the brain’s operating system, creating shot-circuits that by-pass both common sense and the brain’s analytical software. Once contracted through formal training in the classroom, troglonomics proves almost impossible to remove from the thought process. We find evidence of the difficulty of freeing the mind of the neoclassical virus in the writings of the few self-exiles from the mainstream who consider themselves progressive—and are so considered by the public.

Joseph Stiglitz represents an obvious example of a prominent mainstream-trained economist whose progressive views are not up to the task of purging his mind of the basic principle of troglodyte ideology, that resources are scarce and human wants unlimited (see the first chapter of his macroeconomics text with Carl Walsh, and the teeth-grinding “Thinking like an economist” boxes scattered through the book).

It is a mystery how an intelligent person (not withstanding his so-called Nobel Prize in economics, actually awarded by the Central Bank of Sweden, not the Nobel Committee) could live in a world of persistent unemployment and believe that resource scarcity is the central problem of a capitalist economy (my critique of resource scarcity is in Chapter 4 of my new book).

Krugman on War (yet again)

But few progressives are more virus-inflected than Paul Krugman. Despite his commendably progressive views on a range of social and political issues, Mr/Professor/Laureate Krugman remains a true believer in the virtues of international trade, his critique of which is limited to concerns about “market failure” (see his 1997 book Pop Internationalism, which to my knowledge he has not disavowed).

This loyalty to the mainstream ideology on trade goes far to explain his singularly bizarre view of the causes of war. In the August 17 edition of the New York Times he argued that since ancient times wars have been fought “for fun and profit” (his exact words in “Why We Fight Wars,” and see a critique in my Huffington Post blog).

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Protecting Money or People?

Amid climate change, what’s more important?

James K. Boyce

the latest round of international climate talks this month in Lima, Peru, melting glaciers in the Andes and recent droughts provided a fitting backdrop for the negotiators’ recognition that it is too late to prevent climate change, no matter how fast we ultimately act to limit it. They now confront an issue that many had hoped to avoid: adaptation.

Adapting to climate change will carry a high price tag. Sea walls are needed to protect coastal areas against floods, such as those in the New York area when Superstorm Sandy struck in 2012. We need early-warning and evacuation systems to protect against human tragedies, such as those caused by Typhoon Haiyan in the Philippines in 2013 and by Hurricane Katrina in New Orleans in 2005.

Cooling centers and emergency services must be created to cope with heat waves, such as the one that killed 70,000 in Europe in 2003. Water projects are needed to protect farmers and herders from extreme droughts, such as the one that gripped the Horn of Africa in 2011. Large-scale replanting of forests with new species will be needed to keep pace as temperature gradients shift toward the poles.

Because adaptation won’t come cheap, we must decide which investments are worth the cost.

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Bretton Woods After 70 Years

“The End of (Monetary) History”

Erinç Yeldan

As we are about to wrap up 2014, it may prove worthwhile to celebrate the 70th anniversary of one of the most innovative and exciting episodes of homo economicus: The Bretton Woods Monetary Conference. Convened in 1944 at the Mount Washington Hotel in New Hampshire, the conference established the World Bank and the IMF (later referred to as the “Bretton Woods Institutions”) and set the gold standard at $35.00 an ounce with fixed rates of exchange to the U.S. dollar.

Based on John Maynard Keynes’s famous dictum, “let finance be a national matter,” and on the productivity advances of Fordist technology and institutional structures, the global economy expanded at a fast rate over the postwar era, from 1950 to the mid-1970s. Per capita global output increased by 2.9% per year over this period, which later came to be referred to as the “Golden Age of capitalism.” (In contrast, the average rate of per capita growth over the whole century has been estimated at 1.6%.)

The conditions that created the Golden Age were exhausted by the late 1960s, however, as industrial profit rates started to decline in the United States and continental Europe due to increased competition, particularly from the Asian “tigers” or “dragons” (Republic of Korea, Taiwan, Hong Kong, and Singapore). In the meantime, Western banks were severely constrained in their ability to recycle the massive petro-dollar funds and the domestic savings of the newly emerging baby-boomer generation. Trumpets for the “end financial repression” intensified with the so-called McKinnon-Shaw-Fama hypotheses of financial deregulation and efficient markets. A global process of financialization was commenced, lifting its logic of short-termism, liquidity, flexibility, and immense capital mobility over objectives of long-term industrialization, sustainable development, and poverty alleviation with social-welfare driven states.

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The Failed Austerity Experiment in the UK

Philip Arestis and Malcolm Sawyer

A general election in the UK is set to be held in May 2015, which will mark the end of a five year period of Conservative-Liberal Democrat coalition government. This government set in 2010 as its prime policy target the elimination of what they have tended to refer to as Labour’s deficit and “clearing up the mess.” In an “emergency budget” introduced just over a month after coming into power (June 2010), Chancellor of the Exchequer George Osborne introduced some emergency cuts amounting to £6 billion—which can be compared with a deficit of over £150 billions. Initial plans were put in place to come close to eliminating the deficit over the lifetime of the Parliament, reinforced by the Spending Review of October 2010. These plans were based on “expansionary fiscal consolidation” arguments, along with a number others. “The most urgent task facing this country is to implement an accelerated plan to reduce the deficit. Reducing the deficit is a necessary precondition for sustained economic growth. To continue with the existing fiscal plans would put the recovery at risk, given the scale of the challenge. High levels of debt also put an unfair burden on future generations. …The Government has therefore set a forward-looking fiscal mandate to achieve cyclically adjusted current balance by the end of the rolling, five-year forecast period” (HM Treasury Budget 2010, emphasis added).

It was not only that the budget deficit was to be largely eliminated over a five year period, but that it would go alongside a booming economy with the output gap (between actual output and potential output) closed. The ability of the government to achieve a close to balanced budget and a closed output gap was validated by the newly established and “independent” (of government) Office for Budget Responsibility. This was accompanied by forecasts that investment and exports would recover and grow rapidly, and this would in effect enable the budget deficit to decline and the economy to grow.

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A 2 x 4 x 20 Climate Change Agreement

Edward B. Barbier

On November 12, President Barack Obama announced what he called a “historic agreement” on climate change between the United States and China. The gist of the bilateral pact is that the United States has pledged to reduce greenhouse gas (GHG) emissions to 17 percent below 2005 levels by 2020, and 26 to 28 percent below these levels by 2025. China aims to cap its total GHG emissions by 2030, if not sooner. Other commitments and details of this bilateral deal can be found in David Baliol’s excellent summary in Scientific American.

There are sound economic grounds for this agreement. In a paper published by the Kiel Institute for World Economy earlier this year, Johnson Gwatipedza and I show that growing trade and capital flows between the United States and China also provide a powerful incentive for cooperation on jointly reducing GHG emissions. Economists refer to this incentive as issue linkage: increasing economic ties between the U.S. and China fosters their mutual interest to negotiate a bilateral deal on GHGs. Our paper also suggests that any agreed national targets should be differentiated, which means that each country should adopt an emission reduction strategy that is suitable to its economic structure and stage of development. It therefore makes economic sense that the relatively rich United States proposes GHG limits to be achieved in 2020 and 2025, whereas an industrializing economy such as China does not start capping emissions until 2030.

The bilateral agreement between China and the United States has also sparked hope of an eventual global climate change deal. As David Baliol writes: “The agreement between the two countries that together emit more than 40 percent of global CO2 pollution suggests a strong deal will be signed by the world’s nations in Paris in 2015, under the terms of the United Nations Framework Convention on Climate Change.” One further encouraging sign is that the third largest global emitter of GHGs—the European Union of 28 countries—has also pledged to cut greenhouse gas pollution by 40 percent below 1990 levels by 2030. Clearly, as suggested by Jaime de Melo and Mariana Vijl in their Green Growth Knowledge Platform blog post, “the recent China-US announcement of national targets calling for substantial additional efforts by both is a step in the right direction.”

Unfortunately, expectations that this “step in the right direction” will turn into a signed global deal by 2015 in Paris may be a leap of faith. Instead, a more realistic path to achieving substantial and quick reductions in global GHGs might be a “2 x 4 x 20” climate change agreement.

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The IMF's Perestroika Moment

Cornel Ban and Kevin Gallagher

The economic crisis that struck in 2008 challenged many myths. One of them is the myth of the International Monetary Fund (IMF) as a global agent of economic orthodoxy. Since the 1970s, the IMF has been heavily criticized for being insensitive to the diversity of domestic conditions. Its rigid commitment to a conservative view of economic development has been dubbed the “Washington Consensus.” However, we argue in a forthcoming special issue of the journal Governance that this conventional wisdom is outdated. The IMF is not what it used to be.

In some of its policy thinking the IMF has undergone deep transformations that often point in a more Keynesian direction. The most radical change has been in the IMF’s research on the systemic risks posed by the interconnectedness of global banks, followed by its views on capital controls, and its interventions in the austerity debate.

Surprising its critics, the IMF has endorsed capital controls—of which it was a staunch opponent for decades—as well as state spending to stimulate the economy under certain conditions. Moreover, it has been sharply critical of the theory—popular with E.U. institutions—that spending cuts reignite growth and has become an advocate of slightly more progressive taxation systems. The IMF now holds a strong preference for more spending on public investment and safety nets as the main instruments in the stimulus toolbox.

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