In China, Change—and Uncertainty—Are in the Air

Sara Hsu, Guest Blogger

Concerns over China’s economy are all over the news—stories like “Feeling the Heat from China Slowdown,” “China’s Economic Hard Landing,” and “China’s Slowdown Digs a Hole for US Industrials” are now everywhere. One of the most pressing questions is, will China face a massive slowdown in economic growth? Here, we explain why this is such a concern and consider what possibilities exist for continued growth.

First, a primer on growth and the way it is tabulated. Growth simply refers to the change in GDP, usually from one year to the next. GDP is calculated any of three different ways—the income approach (how much individuals and entities earn in a period), the expenditure approach (how much is spent in a period), or the production approach (how much value is added during the production process). If we focus on a single approach—say, the expenditure approach—we can look at the individual components to determine how China can improve its GDP—and therefore growth—outlook.

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The Emerging Left in the “Emerging” World: Introduction

Jayati Ghosh

Editors’ note:  Back in May 2012, economist and founding Triple Crisis contributor Jayati Ghosh delivered, as part of the Ralph Miliband Lecture Series at the London School of Economics, a lecture titled “The Emerging Left in the ‘Emerging’ World.” In it, she highlights the ways in which a new and varied “emerging” left across the so-called developing world is departing from some of the  tenets of 20th century socialism (in both its social democratic and state socialist forms), as well as elements of continuity with the past. The combination of the new and the old represent an appealing vision of socialism—and one that is much better than anything simply dreamed up by a lone thinker, since it is something really happening in the world today.

We are happy to be able to present an edited version of the lecture, serialized in four parts, today and each of the following three Wednesdays, and hope that it will provoke lively discussion.

The global left is much more dynamic, especially in the South, than most people perceive. Many left movements—in Latin America, Africa, and developing Asia—are proceeding from a rejection of capitalism to imagining alternatives. As their views about what constitutes a desirable alternative to capitalism have shifted, they have come to question several key aspects of 20th century socialist orthodoxy. Here, we look at seven features of emerging left movements that suggest a move away from traditional socialist ideas, plus two important areas of continuity with the leftist thinking of the past.

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The Emerging Left in the "Emerging" World: Introduction

Jayati Ghosh

Editors’ note:  Back in May 2012, economist and founding Triple Crisis contributor Jayati Ghosh delivered, as part of the Ralph Miliband Lecture Series at the London School of Economics, a lecture titled “The Emerging Left in the ‘Emerging’ World.” In it, she highlights the ways in which a new and varied “emerging” left across the so-called developing world is departing from some of the  tenets of 20th century socialism (in both its social democratic and state socialist forms), as well as elements of continuity with the past. The combination of the new and the old represent an appealing vision of socialism—and one that is much better than anything simply dreamed up by a lone thinker, since it is something really happening in the world today.

We are happy to be able to present an edited version of the lecture, serialized in four parts, today and each of the following three Wednesdays, and hope that it will provoke lively discussion.

The global left is much more dynamic, especially in the South, than most people perceive. Many left movements—in Latin America, Africa, and developing Asia—are proceeding from a rejection of capitalism to imagining alternatives. As their views about what constitutes a desirable alternative to capitalism have shifted, they have come to question several key aspects of 20th century socialist orthodoxy. Here, we look at seven features of emerging left movements that suggest a move away from traditional socialist ideas, plus two important areas of continuity with the leftist thinking of the past.

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China’s Development Banks Go Global: The Good and the Bad

Kevin Gallagher

China is redefining the global development agenda. While the West preaches trade liberalization and financial deregulation, China orchestrates massive infrastructure and industrial policies under regulated trade and financial markets. China transformed its economy and brought more than 600 million people out of poverty. Western policies led to financial crises, slow growth and relatively less poverty alleviation across the globe.

China is now exporting its model across the world. The China Development Bank (CDB) and the Export-Import Bank of China (EIBC) now provide more financing to developing countries than the World Bank does. What is more, China’s finance doesn’t come with the harsh conditions—such as trade liberalization and fiscal austerity—that western-backed finance has. China’s development banks are not only doing good across the world, they are helping China’s bottom line as they make a strong profit and often provide opportunities for Chinese firms.

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Buzzwords: Responsible Mining

Robin Broad

Buzzwords and Fuzzwords — terms that became popular but mean vastly different things to different people.  We’ve had a long list: development, sustainability, good governance, civil society, accountability. “Corporate responsibility” should certainly be on that list. And the avalanche of new buzzwords and fuzzwords continues: emerging markets, inclusive growth, resilience.

But today’s buzzword winner is: responsible mining. Meaning what exactly?  Well, not surprisingly, as is the case with most buzzwords, it means whatever the user wants it to mean. So, let me try to distinguish among the top four uses of “responsible mining.”

To most corporate mining executives and, alas, also to many government officials, mining is responsible if it focuses on maximizing economic growth which, in turn, maximizes economic profits, which will make everyone better off and in the most efficient way. This, of course, is what neoclassical economic theory tells us. Socially, this will be responsible because the economic benefits will multiply and trickle down to the poor.  In terms of environmental impact, the “environmental Kuznets curve” purportedly proves that, at least in theory, as a country grows in economic terms, certain environmental pollutants decrease.

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None of the experts saw India’s debt bubble coming. Sound familiar?

Jayati Ghosh

So now India is the latest casualty among emerging economies. Over the past 10 days, the rupee has slid to its lowest-ever rate, and the Indian economy may well be on the verge of a full-blown currency crisis. In this febrile situation, it is open season for rumours and pessimistic predictions, which then become self-fulfilling.

This means that even if there is a slight market rally, investors quickly work themselves into even more gloom. Each hurriedly announced policy measure (raising duties on gold imports, some controls on capital outflows, liberalising rules for capital inflows and so on) has had the opposite of the desired effect. Everything the government does seems to be too little, too late – or even counterproductive.

These are all classic features of the panic phase of a financial market cycle. This doesn’t mean that a crash is inevitable, but clearly it is possible. The real surprise in all this is that investors and Indian policymakers are surprised. For some reason, they apparently did not foresee this turn of events, even though the story of every financial crisis of the past, and many in the very recent past, should have caused some nostrils to twitch at least a year or two ago.

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Lift your head from the sand

Sunita Narain

The outrage over the suspension of an official, Durga Shakti Nagpal, for simply doing her job—check illegal sand mining in the rivers of Uttar Pradesh—has highlighted a crucial issue. It is now evident that illegal mining of sand from rivers and beaches is rampant and the underbelly of this industry (I’m calling it industry for want of a better word) is powerful and connected. Worse still, all this is happening in violation of the orders of the apex court of the country. Before this brouhaha dies down we need to discuss and resolve the way to control this business, which is operated at small scales in scattered locations and managed by local goons and thugs. It is not an industry that makes for easy regulation.

But regulation is a must. Sand removal has always been done to de-silt rivers and channelise the flow. But never in this rapacious manner—the river is literally wiped clean from the bottom. As a result, the crucial recharge zone—think of it as a sponge that holds water and slowly seeps it out into the surrounding for use—is destroyed. The river is hollowed out, its ecology disturbed and fish habitats damaged. Removal of sand, therefore, needs to be assessed for environmental damage, restricted and carefully regulated.

But sand has slipped through the cracks in the regulatory system for many years. All till construction industry boomed and extraction shot up. Sand, gravel and stone are the raw material that drive this sector, which is registering a 10 per cent growth annually. We do not realise that the concrete house we build is two parts of sand, four parts of stone and gravel and only one part of cement. Not surprisingly, there are no estimates of the amount of this natural material required. Everyone plans for cement but forgets it is only a binder. The river pays the cost.

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Pursuing Profits – or Power?

James Boyce

Do corporations seek to maximize profits? Or do they seek to maximize power?

The two may be complementary—wealth begets power, power begets wealth—but they’re not the same. One important difference is that profits can come from an expanding economic “pie,” whereas the size of the power pie is fixed. The pursuit is a zero-sum game: more for me means less for you. And in corporations, the pursuit of power sometimes trumps the pursuit of profits.

Take public education, for example. Greater investment in education from pre-school through college could increase the overall pie of well-being. But it would narrow the educational advantage of the corporate oligarchs and their privately schooled children—and diminish the power that comes with it. Although corporations could benefit from the bigger pie produced by a better-educated labor force, there’s a tension between what’s good for business and what’s good for the business elite.

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The First World Keynes Conference: A Follow Up

Erinc Yeldan

The First World Keynes Conference convened over the heated days of June 26-28 at the Izmir Economics University.  Given the current impasse in mainstream economics over the ongoing great recession, it is no surprise that the Conference attracted quite a few dissident voices from many alternative paradigms and fields of research.

It is quite clear to all social scientists able to maintain their sense of scientific clarity that the causes of the global crisis lie beyond the rhetoric of toxic assets, in the realm of what should be called Toxic Economics Textbooks[1].  As the opening lines of the Conference Invitation attest,

“The vastly dominant mainstream model –New Consensus Macroeconomics (NCM) and the related Dynamic Stochastic General Equilibrium (DSGE) model – has not only suffered a severe blow by the eruptions of the recent world financial crisis but must be seen as part of its cause: the quasi-religious believe in super-efficient markets and the self-regulatory capabilities of the representative agent, the main assumption of the framework, pursuing relentlessly its own egoistic interests has distracted most professional economists from investigating the unthinkable: a violently unstable economy. The uncritical acceptance of very restricted formal models as a good approximation of reality has led many economists to produce tools which reinforced organic instability.”

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When Foreign Investors Sue the State

Martin Khor

In the recent public debate surrounding the Trans-Pacific Partnership Agreement (TPPA), an issue that seems to stands out is the investor-state dispute settlement system (ISDS).

It enables foreign investors of TPPA countries to directly sue the host government in an international tribunal.

In most US free trade agreements, the tribunal most mentioned is ICSID, an arbitration court  hosted by the World Bank in Washington.

The ISDS is a powerful system for enforcing the TPPA’s rules. Any foreign investor from TPPA countries can take up a case claiming that the government has not met its relevant TPPA obligations.

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