When "Forecasts" Are Not Really Forecasts

Jeff Madrick

I have written about the deep and misleading flaws inherent in Congressional Budget Office (CBO) forecasts before. But given last week’s projections of job losses due to a proposed minimum wage hike, the inadequacy and misleading character of CBO pronouncements needs addressing again.

What particularly provokes me now is a quasi-debate between economist Jared Bernstein, former economic adviser to Vice President Joseph Biden, and Republican economist Douglas Holtz-Eakin, former head of the CBO, on CNBC. The CBO had issued its customary over-simplified statement that “Once fully implemented in the second half of 2016, the $10.10 [per hour minimum wage] option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects.” They next point out that this is merely the midpoint of a range of possibilities they derive from existing research on the relationship between the minimum wage and jobs.

But why make the declarative statement in the first place? The damage is done. Politicians and the media pick it up as if it is a forecast, not a midpoint based on a wide range of conflicting research.

Read the rest of this entry »

When “Forecasts” Are Not Really Forecasts

Jeff Madrick

I have written about the deep and misleading flaws inherent in Congressional Budget Office (CBO) forecasts before. But given last week’s projections of job losses due to a proposed minimum wage hike, the inadequacy and misleading character of CBO pronouncements needs addressing again.

What particularly provokes me now is a quasi-debate between economist Jared Bernstein, former economic adviser to Vice President Joseph Biden, and Republican economist Douglas Holtz-Eakin, former head of the CBO, on CNBC. The CBO had issued its customary over-simplified statement that “Once fully implemented in the second half of 2016, the $10.10 [per hour minimum wage] option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects.” They next point out that this is merely the midpoint of a range of possibilities they derive from existing research on the relationship between the minimum wage and jobs.

But why make the declarative statement in the first place? The damage is done. Politicians and the media pick it up as if it is a forecast, not a midpoint based on a wide range of conflicting research.

Read the rest of this entry »

Why Is the 2008 Crisis Taking So Long to Resolve? (Part 1)

Yilmaz Akyüz

Lynn Fries of The Real News Network interviews regular Triple Crisis contributor Yilmaz Akyüz about the intractability of the current global economic crisis. Akyüz traces this to “underconsumption,” which he attributes to the falling wage share of GDP in many countries. This is the first in a two-part series. You can see a related The Real News Network interview with Akyüz here.

Read the rest of this entry »

The Chulha Politics

Sunita Narain

Cross-posted from Centre for Science and Environment.

Chulhas—cookstoves of poor women who collect sticks, twigs and leaves to cook meals—are today at the centre of failing international action. Women are breathing toxic emissions from stoves and these emissions are also adding to the climate change burden. The 2010 Global Burden of Disease established that indoor air pollution from stoves is a primary cause of disease and death in South Asia. As many as 1.04 million pre-mature deaths and 31.4 million disability adjusted life years (DALYs)—measure of years lost due to ill-health, disability or early death—are related to exposure to biomass burning in poorly ventilated homes.

But what has spurred action is the science that there is a connection between local air and global air pollution. The particles formed during incomplete combustion—in diesel cars and cookstoves—are seen as powerful “climate forcers” because they absorb light and convert it into heat. It is also found that these particles or aerosols interact with clouds and affect rain pattern. They also fall on snow or ice surfaces and make them melt faster.

Read the rest of this entry »

Global Dollar-Based Financial Fragility in the 2000s, Part 4 (Conclusion)

This is the final installment of a four-part series excerpted from the Political Economy Research Institute (University of Massachusetts-Amherst) working paper “The Endogenous Finance of Global Dollar-Based Financial Fragility in the 2000s: A Minskian Approach,” by Junji Tokunaga and Gerald Epstein. Tokunaga is an Associate Professor in the Department of Economics and Management, Wako University, Tokyo. Gerald Epstein is a Professor in the Department of Economics, University of Massachusetts-Amherst, and Co-Director of the Political Economy Research Institute (PERI). See Part 1, Part 2, Part 3, and the full paper.

Junji Tokunaga and Gerald Epstein

The Nature of the Global Financial Crisis

The Endogenously Dynamic Process of Balance Sheet Expansion at LCFSs

In this section, we show how our approach is much better for understanding the nature of the global financial crisis than the arguments of the global imbalance view that many mainstream economists, policymakers, and even heterodox economists advocate.

Firstly, we argue that the global financial crisis was inherently caused by the dynamic process of balance sheet expansion at large complex financial institutions (LCFIs), driven by the elastic growth of global dollar in the global shadow banking system. … The global imbalances view attributes the emergence of global financial crisis to an excess of saving over investment in emerging market countries. According to that view, the financial crisis was triggered by an external and exogenous shock that resulted from excess saving in emerging market countries, not the shadow banking system in advanced countries which were the epicenter of the financial crisis.[43] In this view, LCFIs have a negligible role in the global financial crisis in the 2000s.

Recall our discussion of the endogenously dynamic process of balance sheet expansion, which, driven by the endogenously elastic finance of global dollar supplies in the global shadow banking system, contributed to the buildup of global financial fragility that led to the global financial crisis. Accordingly, it is clear that the global financial crisis is strongly affected by the endogenous dynamics of balance sheet in the global shadow banking system, rather than the emergence of excess savings in emerging market countries, as the global imbalances view stresses.

Read the rest of this entry »

Undoing the Damage in Chile

Jayati Ghosh

Cross-posted from International Development Economics Associates (IDEAs) (networkideas.org). This article was originally published in the Frontline, January 24, 2014.

It was no surprise to anyone in Chile or outside when Michelle Bachelet romped home convincingly in a landslide victory in the run-off for the Presidential election in December. Indeed, the only surprise was that while she took 62 per cent of the vote, the voting rate itself fell to only 44 per cent of the electorate.

Bachelet, the pediatrician mother of four who was also among the students persecuted by the military dictatorship in the 1970s, has already served as President once. She completed her first term with an incredible 84 per cent popularity rating, which must be a record for any democratically elected leader after four years in office. But the current Chilean Constitution does not allow consecutive terms as President, so she could not contest again. In the interim, between 2011 and 2013, she was the first Secretary General of the newly founded international organization UN Women, but resigned from that position earlier this year to run for President again.

This time around she campaigned on the basis of a more explicitly progressive and transformative agenda, leading a coalition (Nueva Mayoría or New Majority) that includes a wide spectrum of political orientation, from the Christian Democratic Party in the centre to Bachelet’s own socialist-leaning Concertacion to the Communist Party and an array of even more radical student leaders on the left. The very emergence of this coalition and its electoral success suggests that Chile has is finally shaking off some of the torpor induced by the acceptance of neoliberal economic policies by both centre-right and centre-left parties over the past decades.

Read the rest of this entry »

What’s So Dangerous About Austerity?

An interview with Mark Blyth, Triple Crisis blogger and author of Austerity: The History of a Dangerous Idea,  conducted by author and journalist C.J. Polychroniou, republished with permission from Truthout.

Austerity: The History of a Dangerous Idea, a book written by Brown University Professor of International Political Economy Mark Blyth and published last year by Oxford University Press, is one of the most important works to have emerged in recent years on the religion of austerity, the new dogma in neoliberal economics that is so perniciously enforced today in the peripheral countries of the Eurozone (Greece, Italy, Ireland, Portugal, and Spain) and loved by Republicans and all sorts of right-wingers in the United States. In his book, Blyth exposes how dangerous the policy of austerity has been in the past and explains why it resurfaced in the aftermath of the 2008 global financial crisis. With his critical analysis of austerity, Professor Blythe also provides a damning critique of orthodox economics and shows that class politics is very much alive in the actions of today’s governments and the rich.

Recently, Mark Blyth was interviewed by C. J. Polychroniou for Truthout (a shorter version of the interview appears simultaneously in Greek in Sunday’s edition of Eleftherotypia). They discussed why austerity is a dangerous idea and why it came to be seen as the only viable way out of the latest global financial crisis, with Professor Mark Blyth exposing the myth of Greece as a nation of lazy people and other propaganda, while showing who benefits from austerity.

Read the rest of this entry »

What's So Dangerous About Austerity?

An interview with Mark Blyth, Triple Crisis blogger and author of Austerity: The History of a Dangerous Idea,  conducted by author and journalist C.J. Polychroniou, republished with permission from Truthout.

Austerity: The History of a Dangerous Idea, a book written by Brown University Professor of International Political Economy Mark Blyth and published last year by Oxford University Press, is one of the most important works to have emerged in recent years on the religion of austerity, the new dogma in neoliberal economics that is so perniciously enforced today in the peripheral countries of the Eurozone (Greece, Italy, Ireland, Portugal, and Spain) and loved by Republicans and all sorts of right-wingers in the United States. In his book, Blyth exposes how dangerous the policy of austerity has been in the past and explains why it resurfaced in the aftermath of the 2008 global financial crisis. With his critical analysis of austerity, Professor Blythe also provides a damning critique of orthodox economics and shows that class politics is very much alive in the actions of today’s governments and the rich.

Recently, Mark Blyth was interviewed by C. J. Polychroniou for Truthout (a shorter version of the interview appears simultaneously in Greek in Sunday’s edition of Eleftherotypia). They discussed why austerity is a dangerous idea and why it came to be seen as the only viable way out of the latest global financial crisis, with Professor Mark Blyth exposing the myth of Greece as a nation of lazy people and other propaganda, while showing who benefits from austerity.

Read the rest of this entry »