"Sitting on a Sack of Gold": Ecuador's Turn Toward Extractivism

Elissa Dennis, Guest Blogger

Declaring “the world has failed us,” Ecuador’s President Rafael Correa signaled the termination of the Yasuni ITT Initiative in August 2013.

Back in 2007, Correa had presented a challenge to the world community: If governments, companies, international organizations, and individuals pledged a total of $350 million per year for 10 years, equal to half of the forgone revenues from the Ishpingo, Tambococha, and Tiputinti (ITT) wells in the Yasuni National Park, Ecuador would chip in the other half and keep the oil underground indefinitely, as its contribution to halting global climate change. Citing a meager $116 million in pledges, Correa announced the decision instead to move forward with the Plan B that was always in the background: extraction of oil from the Ishpingo, Tambococha and Tiputini fields. The drilling will only impact .1% of the parklands, Correa contends, noting that the estimated value of oil in the targeted area has increased from $7 billion to $18 billion. Despite street demonstrations in Quito and Cuenca and calls for a national referendum, the National Assembly ratified Correa’s action in October 2013.

Correa, a U.S. trained economist, has consistently ridiculed “infantile” environmentalists, and is clearly most comfortable with a pragmatic economic development model of extractivism with equitable distribution of resources. Like his Bolivian counterpart Evo Morales, Correa has run afoul of indigenous communities and the environmental Left through efforts to transform the nation from exploited exporter of raw materials into savvy user of natural resources to fuel economic growth and social programs.

“We can’t be beggars sitting on a sack of gold,” is Correa’s constant refrain. Read the rest of this entry »

The Return of Merchant Capital to the Arab World

Ali Kadri

The Arab World has de-industrialised under the combined effects of war and neoliberalism. What has occurred in the AW is the gradual disengagement of national industrial capital from commercial capital, after which commerce bereft of industrialisation became the dominant mode.

Capital in the Arab World (AW), viewed in its dimension of consuming and allocating resources, has edged close to a mercantilist mode of accumulation whose principal characteristic is the near absence of positive intermediation between private and public wealth—literally it leaves behind the progressive side of capitalism.

The merchant mode of accumulation revolves around quick private gains and does not require productive reinvestment in society; the usurpation of value by financial means is a subsidiary outcome. The practice of merchant capital mimics that of financial capital, in the sense that money is transmuted into money without much involvement in production processes: M-M’. Rentier or rent-grab maybe too general a categorisation; it is also something of a misnomer, meant to support an ad hominem (and faux-nationalist) argument which conceals the fact that value transfers away from the working classes in the AW are conducted by national as well as by U.S.-led international financial capital.

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Billionaires: Decline of the West, Rise of the Rest

Robin Broad and John Cavanagh

With the help of Forbes magazine, we and colleagues at the Institute for Policy Studies have been tracking the world’s billionaires and rising inequality the world over for several decades. Just as a drop of water gives us a clue into the chemical composition of the sea, these billionaires offer fascinating clues into the changing face of global power and inequality.

After our initial gawking at the extravagance of this year’s list of 1,426, we looked closer. This list reveals the major power shift in the world today:the decline of the West and the rise of the rest. Gone are the days when U.S. billionaires accounted for over 40 percent of the list, with Western Europe and Japan making up most of the rest. Today, the Asia-Pacific region hosts 386 billionaires, 20 more than all of Europe and Russia combined.

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And the Prize Goes to … Genetically Modified Foods

Timothy A. Wise

This year’s World Food Prize went to three biotech engineers, all of whom have been instrumental in bringing genetically modified foods to your table.

Inside the Marriott Hotel in downtown Des Moines, Iowa, where the prize’s four-day program took place October 15-18, the message was clear: Technology is the answer to the world’s looming food shortages, and anyone who gets in the way isn’t putting farmers and the hungry first.

And you have to admire the laureates for their candor.

In their prepared press statements, they couldn’t have been clearer about what the prize means to them.

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The Man Who Won a Nobel Prize for Helping Create a Global Financial Crisis

James R. Crotty, Guest Blogger

Eugene Fama just received a Nobel Prize for his contributions to the theory of “efficient financial markets,” the dominant theory in financial economics that asserts that markets work ideally if not constrained by government regulation. The fact that economic “science” teaches that unregulated financial markets work effectively helped financial institutions and the rich accomplish their goal of radical financial market deregulation in the 1980s and 1990s. Deregulation, in turn, not only contributed to the rising inequality of the era, it helped cause the global financial market crisis that began in 2007 and the deep recession and austerity fiscal policies that accompanied it.

The theory of efficient financial markets requires the union of two ideas: the “efficient market hypothesis” (or EMH) and optimal (security) pricing theory (OPT). Both the EMH and OPT are built on crudely unrealistic assumptions that would lead anyone not indoctrinated in a mainstream PhD program to conclude that efficient financial market theory is a fairly-tale rather than serious social science.

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As We Now Enter the Sixth Year of the Global Recession

Erinç Yeldan

The global capitalist economy has now entered its sixth year of recession, as it continues to suffer from its worst crisis since the Great Depression. Initially dismissed as routine financial turbulence in the summer months of 2007, the crisis conditions accelerated slowly, yet continually, to reach an officially declared full-fledged recession in the late 2000s.

What is more revealing, the current crisis began not in the so-called emerging markets of the global periphery, but erupted directly in the hegemonic centers of the capitalist world. At the root of the crisis are not, as commonly accused, the “corrupt” governments of crony capitalism, and their over-interference with market rationality, but the upfront irrational exuberance of “free markets,” with their unfettered workings guided by the private profit motive. Read the rest of this entry »

Fiddling in Rome While Our Food Burns

Timothy A. Wise and Marie Brill

Rumor has it that the Roman emperor Nero played a fiddle and sang while Rome burned for five days in the Great Fire of 64. Nearly 2000 years later, at the very site where this devastating fire started so long ago, history is repeating itself, only the leaders doing the fiddling are delegates to the 40th meeting of the UN Committee on World Food Security (CFS). And what’s burning is the world’s food, in the engines of our cars.

Unfortunately this time, the fire didn’t end in five days. Food-based biofuels have been burning for over a decade, the fires are growing in scale and intensity, and there is no end in sight.

It’s not as if we haven’t seen the warning signs. There have been three food price spikes in the last six years, with a wide range of studies implicating biofuels as a key driver of price volatility. How could it be otherwise? In the United States, 40% of our corn—fully 15% of the global corn supply—is now diverted to make ethanol, up from just 5% in 2000.

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Hunger, Metrics, and SOFI 13

Jennifer Clapp

Last week, the Food and Agriculture Organization of the United Nations (FAO) published the 2013 version of its annual State of Food Insecurity Report (SOFI 13). The SOFI reports provide important insight into trends regarding the extent and distribution of hunger around the world, and their findings are widely reported in the media, typically with a headline announcing how many people on the planet are hungry (this year it is 842 million, down slightly from last year, meaning roughly one in eight people is chronically undernourished).

This year’s SOFI report is in many ways an improvement over SOFI 12. Last year’s report received criticism because, in introducing its revamped methods for counting hunger, the FAO made crystal clear just how narrow its key measure for hunger, the Prevalence of Undernourishment (PoU), actually is, raising questions about its usefulness in policymaking. A group of scholars and activists coordinated by Frances Moore Lappé (in which I took part) published an academic article and a longer framing paper outlining our concerns about continuing to rely on such a narrow measure and using it to track global progress on the fight against hunger.

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Crooks, Liars, Idiots, and Plutocrats

Matías Vernengo

Economic historian Carlo Cipolla famously noted that human beings fall into four basic categories: the martyr who takes an action and suffers a loss while producing a gain to others; the genius or prodigy who takes an action by which he/she makes a gain while yielding a gain also to society; the crook (and liar too) who takes an action by which he/she makes a gain causing others a loss; and the stupid person who causes losses to others while deriving no personal gain and even possibly incurring losses. At first glance, the shutdown of the government and the looming debt-ceiling crisis seem to indicate that we are dealing with idiots, the likes of Michele Bachmann, Ted Cruz, Louie Gohmert, Steve King, and other Tea Party Republicans.

After all, there is no rational reason to shut down the government to preclude what is essentially a Republican-designed health law (created by the Heritage Foundation), that would create the conditions for finally attaining universal health coverage in the United States, a goal that all the other advanced nations have achieved decades ago. In particular, the alternative to “Obamacare” proposed by the GOP is nonexistent, and basically means leaving millions of Americans without proper medical care. On top of that, the shutdown, together with the previous sequestration, and the overall contractionary fiscal stance, will most likely make the very slow recovery even slower, maintaining an unnecessarily large portion of the labor force unemployed.

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Trade Deals Must Allow for Regulating Finance

From the editors: This piece by Triple Crisis blogger Kevin Gallagher appeared previously on the Institute for New Economic Thinking blog.

Kevin Gallagher

World leaders who are gathering for the APEC summit next week had hoped to be signing the Trans-Pacific Partnership Agreement (TPP). The pact would bring together key Pacific-rim countries into a trading bloc that the United States hopes could counter China’s growing influence in the region.

But talks remain stalled. Among other sticking points, the U.S. is insisting that its TPP trading partners dismantle regulations for cross-border finance. Many TPP nations will have none of it, and for good reason. The U.S. stands on the wrong side of experience, economic theory, and guidelines issued by the International Monetary Fund.

Indeed, it’s the U.S. that could learn a few lessons from the TPP countries when it comes to overseeing cross-border finance.

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