Historic moment for the IMF

Kevin P. Gallagher, Stephany Griffith-Jones, and José Antonio Ocampo, guest blogger

The three are co-chairs of the GDAE cosponsored Pardee Task Force on Regulating Global Capital Flows for Development, which published the report “Regulating Global Capital Flows for Long-Run Development.”

This month the International Monetary Fund (IMF) can make history.  The IMF is set to officially change its view on the regulation of cross-border finance.  Preliminary work released by the IMF exhibits diligent research and deep soul searching, but falls short of being a comprehensive view on how and when to regulate capital flows.  There is still time for the IMF to further sharpen its view.
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The Case Against Tax Breaks for Private Equity

Jeff Madrick

Private equity disproportionately rewards privatization companies while others are burdened with the risks.

I wanted to wait a few days before commenting on Newark Mayor Cory Booker’s spontaneous criticism of Barack Obama for picking on Mitt Romney’s experience at Bain Capital. Booker doesn’t know much of anything about private equity, but many financial services donors have his ear. He took in nearly half a million dollars in campaign donations from the industry over the last nine months, and he frankly sounded like its mouthpiece.

Booker backtracked, but it would be nice if he knew something about the private equity business before he spoke publicly about it. This expectation of knowledge should also apply to widely read columnists like David Brooks, who, as usual, reflexively defended the Wall Street practice without presenting evidence. He issued a piece of public relations diatribe that no doubt soothed the right but contributed nothing to our understanding. The contention is that these buyouts turned fat American companies into lean and productive ones since the 1970s. Other pundits less well known for their conservative reflex responses have also given partial defense of private equity.

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Why some countries have managed catching-up, others do not?

Mehdi Shafaeddin

As explained in an earlier blog post, a number of developing countries in East Asia have managed to accelerate their growth rate of GDP, particularly Manufacturing Value Added (MVA), during recent decades. By contrast, a large number of least developed countries (LDCs), particularly in Africa, have fallen behind. Moreover, many LDCs have experienced de-industrialization, i.e., the share of MVA in their GDP has declined. I also mentioned that restrictions imposed on their policy space by international financial institutions and donors have, inter alia, contributed to their stagnation or slow growth rate of GDP and MVA.

Building on Kalecki’s views, in this brief I will explain the political economy of the catching-up process (or mechanism) and the role of internal and external factors in facilitating or inhibiting the process (See Shafaeddin, 2012). International trade and finance can facilitate the acceleration of growth, but under certain conditions it could also have some negative effects which limit the policy space of developing countries.

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ILO leadership election must not be another charade

Jayati Ghosh
A third global institution is to pick a new leader and this time the job must go to a candidate from a developing country

Later this month, the governing body of the International Labour Organisation is due to elect a new director-general. This election has not received as much attention as the recent appointments of other institutions like the IMF and the World Bank. Even so, it could have important consequences for the world and most of its population. The candidacy of Jomo Kwame Sundaram represents an important chance for the ILO to move to centre stage in developing strategies to counter the global turbulence and move towards more stable, equitable and democratic paths.

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The 2012 Food Assistance Convention: Is a Promise Still a Promise?

Jennifer Clapp and C. Stuart Clark, guest blogger

In late April 2012, the long-anticipated new Food Assistance Convention (FAC) text was finally agreed upon. The Food Assistance Convention replaces the 1999 Food Aid Convention, which expired in 2002 and has been limping along for a decade on year-long extensions.

First negotiated in 1967, the FAC defines global rules for food assistance by major donors. As an international treaty, it is both unique and significant. It is the only international legal agreement that requires members to provide a minimum amount of food assistance, demonstrating an important commitment among donor states to address world hunger.
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Top Democrats Join Call for More Flexibility on Capital Controls

Sarah Anderson, guest blogger

At a point in the election season when politicians of the same party tend to sweep their differences under the rug, two senior Democrats have sent a strong letter to the Obama administration on a subject unknown to most American voters.

This is the issue of capital controls – various measures governments use to control volatile flows of money across their borders.  Iceland, for example, used them to prevent massive capital flight in the midst of their meltdown.  Other countries have used them to prevent speculative bubbles.  In fact, governments that used capital controls during the 2008 crisis were among the least hard-hit, according to International Monetary Fund research.

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Blinded by the (solar) light

By Kelly Sims Gallagher and Kevin P. Gallagher

The Obama Administration’s preliminary decision to impose a 31 per cent tariff on solar panels imported from China is short sighted. The move could cause a trade war, hurt the US economy, jeopardize US security interests, and put the world further off course in terms of meeting its global climate change goals.

The decision opens the US up to a trade war in renewable energy, of all things. The US currently has a trade surplus with China in solar energy because of large US exports of poly-silicon to China. Not surprisingly, Li Junfeng, a senior Chinese government official, has already proposed imposing retaliatory tariffs on US polysilicon—and a trade war might not stop there.

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G-8 punts on food security … to the private sector

Sophia Murphy, guest blogger, and Timothy A. Wise
(also available in Portuguese at INESC)

The G-8 met this past the weekend in the United States. Three years earlier the group of the most powerful industrialized nations met in L’Aquila, Italy, just as food-price spikes were sending millions into poverty. They stepped up to the challenge, with a three-year, $22 billion pledge of aid for agricultural development to address the food crisis.

Well, three years is done and, apparently, so is the G-8 commitment to address the food crisis. How else to interpret the sad excuse of an aid program that is “The New Alliance for Food Security and Nutrition.”

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Breakthrough Institute Fails to Flatten Climate Economics

Frank Ackerman

Why does the Breakthrough Institute insist that everyone else besides them who cares about the environment is wrong, wrong, wrong? Their latest, called “The Creative Destruction of Climate Economics,” is a swipe at those misguided souls who think putting a price on carbon emissions would help combat climate change.

Breakthrough, according to its website, aims “to modernize liberal-progressive-green politics” and to accelerate the transition to an “ecologically vibrant” future. They “broke through” into well-funded fame in 2003 with their attack on environmentalists for failing to emphasize the economic concerns of ordinary Americans, such as jobs – thereby alienating  the major environmental groups, who had been talking about jobs and the environment for years.

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Patent Truths

C. P. Chandrasekhar

At the heart of the defence of modern day capitalism is the view that it is an innovation machine powered by competition and rivalry. In its ambit, the fittest survive and the leanest grow, goes the argument. In practice, however, it is precisely in the area of innovation that capitalism today affords private firms legal monopolies in the form of patents. And such protection is proving increasingly difficult to justify in the context of the huge investments being made by firms in acquiring and hoarding patents (not inventions) and financing litigation costs incurred to defend themselves against patent violation suits. Since these investments rarely lead to new innovations and often serve to block technological advance by others, patents are losing their sheen even in the mainstream media.

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