Turbulence and Stability in Financial Markets: China in Recent Times

Sunanda Sen, Guest Blogger

Sunanda Sen is a former Professor of Economics at Jawaharlal Nehru University, New Delhi.

Liberalisation of financial markets, as observed in different parts of the world economy, has never contributed to stability—avoiding unforeseen and unbridled movements in prices and quantities—in those markets. Discontinuation of state-level restraints, in deregulated markets, always generates an atmosphere of uncertainty, which itself has been instrumental in generating turbulence, and then leading to crises. Crises in different financial markets across the world are usually preceded by booms, fed by destabilising financial activities in opened-up markets.

The current downslide in China’s stock markets has followed this familiar pattern, with the crash that took place between June and July 2015 foreshowed by an unprecedented boom which came with the fast pace of liberalisation in the financial sector.

Read the rest of this entry »

Women’s Participation in the Indian Labor Market: Explaining the Decline

Sirisha C. Naidu, Guest Blogger

Between 2005 and 2012, nearly 25 million women—roughly the total population of Australia—withdrew from the Indian wage-labor market. Imagine the frenzied reaction of news media, researchers, and policymakers if the entire population of Australia pulled out of the labor market in less than a decade! This decline in Indian women’s labor force participation rate—which counts women who are employed in regular or casual wage work, self-employed or working in family-owned businesses, plus those who are seeking work, as a percentage of all working-age women—is part of a longer-term trend. The labor force participation rate for rural women declined from 42.5% in 1988 to 18% in 2012, and for urban women from 24.5% to 13.4% over the same span.

Development scholars and policymakers often assume that economic growth is a panacea that will unshackle women from the confines of the domestic sphere, increase their social status, and allow them to participate in economic and political decision-making as equals. It is puzzling, then, that the decline in the women’s participation in the labor market has continued into the current period during which India has experienced robust economic growth—the World Bank expects India to overtake China as the world’s fastest-growing economy by 2017.

Read the rest of this entry »

Mr Osborne Meets Mr Micawber

Philip Arestis and Malcolm Sawyer

In his budget speech of July 10, following an earlier announcement in a speech at the Mansion House, London, on June 10, UK Chancellor of the Exchequer George Osborne announced his intention to put into place a “budget surplus” rule, which would require a  surplus in “normal times.” Although a more extreme version, this new rule follows the pattern established by the European Fiscal Compact and the change to the German constitution in 2006 to require a balance in the “structural budget.” It appears without any economic rationale as to why a budget balance or surplus would be desirable or achievable.

In Charles Dickens’ David Copperfield, Mr Micawber considers that “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” The rationale for a “budget surplus” would appear to run along these lines.

But Mr Micawber did not have to consider the implications of his dictum. The excess of income over expenditure may bring him happiness, but is there someone to whom he can lend his sixpence?  In other words, he may wish to save but there has to be someone willing to borrow from him. He does not have to consider the effects his actions have on employment through his failure to spend. He does not have to consider whether he would have been well advised to spend more on investing for the future. The government should, of course, take into account such considerations. It should take into account the impact its spending and tax decisions have for the economy.

Read the rest of this entry »

China’s Stock Market Collapse

Jayati Ghosh

The recent rout in the Chinese stock market – and the Chinese authorities’ increasingly panicky responses to it that temporarily halted the decline – may not seem all that important to some observers. Indeed, there are analysts who have said that this is just the typical behaviour of a still immature stock market that is still “froth” in the wider scheme of things, and not so significant for real economic processes in China. After all, the Chinese economy is still much more state-controlled than most, the main banks are still state-owned and stock market capitalization relative to GDP is still small compared to most western countries, with less than 15 per cent of household savings invested in stocks. Most of all, there is the perception that a state sitting on around nearly $4 trillion in foreign exchange reserves should be rich enough to handle any such exigency without feeling the pain or letting others feel it.

But this relatively benign approach misses some crucial points about how the Chinese economy has changed over the past few years, as well as the dynamics of this meltdown and its impact in the wider Asian region. Since the Global Recession, which China weathered rather well, there have been changes in the orientation of the Chinese government and further moves towards financial liberalization, which were rather muted before then. And these resulted in big changes in borrowing patterns as well greater exposure to the still nascent stock market, in what have turned out to be clearly unsustainable rates.

Read the rest of this entry »

Natural Capital and the “RG-bargy” Controversy

Edward B. Barbier

A recent article “RG-bargy” in The Economist focuses on an argument surrounding the central tenet in Thomas Piketty’s economics bestseller, Capital in the Twenty-First Century.

Piketty maintains that a key reason why wealth inequality has worsened dramatically in recent decades is that the return on capital r has exceeded the growth rate of the economy g. As capital is concentrated in the hands of the wealthy, a long period in which there is a growing gap between the return to capital and growth (i.e., r > g) must lead to widening wealth inequality. Citing evidence from eight high-income economies—the United States, Japan, Germany, France, Britain, Italy, Canada and Australia—Piketty shows that, since 1970, long-run growth has slowed but the return on capital has not changed significantly. Thus, in developed economies and throughout the world, wealth has become increasingly concentrated in the hands of the rich. What is more, Piketty predicts that future growth rates are likely to slow down further. Thus, in the coming decades the gap between r and g will widen, and thus wealth inequality will increase.

However, as pointed out by The Economist, Piketty’s evidence concerning r > g has been challenged in a forthcoming article in the Cato Journal by Robert Arnott, William Bernstein and Lillian Wu. The authors do not dispute the slow-down in long run growth g. Instead, they maintain that the future return r to capital, principally bonds, stocks, equities and other financial wealth, will also fall. This is due to two principal reasons.

First, because yields in the developed world are so low, the future returns from bonds are likely to be reduced.  Similarly, sustained periods of low interest rates—such as the current situation—are also associated with reduced equity returns over the long term.

Second, Arnott and colleagues argue that the net capital return to investors is even lower, once one accounts for taxes, fund-management costs, and other investment expenses. If based on the net return to capital, the future level of r will decline further.

However, this “RG-bargy” controversy has a major shortcoming, which is that it ignores an important source of economic wealth—natural capital.

Read the rest of this entry »

Third Bailout and the Third Punic War

John Weeks, Guest Blogger

Shock of Syriza Surrender

In an Open Democracy article I argued that there would be no agreement between the Greek government and the Troika.  I took this position because it was (and is) obvious that the most powerful actor within the Troika, the German government, would not agree to any substantial alteration of the austerity program imposed on previous Greek governments.

As a result, Greece’s Syriza government would have no choice but to abandon the eurozone and introduce a national currency. I was correct in my assessment of the inflexibility of the German government and its clients in the eurozone (e.g., Baltic countries and Finland) and the broader European Union (most obviously Poland).

However, due to naivety and/or the triumph of hope over experience, I never entertained the possibility that the Syriza government would capitulate to the Troika.  The capitulation arrived all the more unanticipated because the Syriza government acceded to EU demands more draconian and more of an affront to national sovereignty than those rejected by 61% of voters in the referendum on 5 July.

Read the rest of this entry »

Letter from Delhi, Part 2

What to do?

James K. Boyce

This is the conclusion of a two-part series on air pollution in Delhi. Part 1, on inequality in exposure—on environmental injustice—is available here.

Public awareness of air pollution in Delhi lags behind that in China, where face masks are a common sight and the remarkable film “Under the Dome” received 100 million views within 48 hours when it was posted in March (before being banned by Chinese authorities). But this may be starting to change.

This spring, the Indian Express, one of the country’s leading newspapers, ran a searching multi-part investigative series on Delhi’s air pollution called “Death by Breath.” The Centre for Science and Environment, which successfully campaigned a decade ago for conversion of Delhi’s buses and auto-rickshaws to compressed natural gas, continues to raise public consciousness and advocate for policy remedies.

In the expatriate community, Delhi’s toxic air is viewed with rising alarm. In the past year, the U.S. embassy imported 1,800 top-of-the-line air purifiers for its personnel. “My business has just taken off,” the director of a local firm selling air filtration units told the New York Times. “It started in the diplomatic community, but it’s spread to the high-level Indian community, too.”

Read the rest of this entry »

What We’re Writing

C.P. Chandrasekhar, The Search for India’s Bulky Middle

C.P. Chandrasekhar and Jayati Ghosh, Looking Back at Debt Relief for the Germans

Gerald Epstein and Juan Antonio Montecino, Banking From Financial Crisis to Dodd-Frank: Five Years On, How Much Has Changed?

Sunita Narain, Food for nutrition, nature and livelihood

Matias Vernengo, Europe in its Labyrinth, Greece on its Knees

Triple Crisis welcomes your comments. Please share your thoughts below.

Triple Crisis is published by

What’s Next for Greece?

Harry Konstantinidis, Guest Blogger

Harry Konstantinidis is an assistant professor of economics at the University of Massachusetts-Boston.

Most readers already probably know the sequence of events around Greece and its creditors over the last month, but they are worth reviewing: a fruitless and frustrating negotiation leading to a take-it-or-leave-it offer from the creditors; the announcement of a referendum (the first in more than 40 years) for the people of Greece to decide whether to accept the offer; a triumph of the No vote with 61.3% rejecting the offer, despite a visceral campaign in favor of the Yes vote by the Greek media and foreign politicians; the resignation of Finance Minister Yanis Varoufakis; a retreat by Syriza offering austerity for a deal; the creditors’ outrageous demand in a rather open attempt to push Greece or Syriza towards exit; and finally a roadmap towards a deal that no party really believes in.

The terms of the agreement reflect the creditors’ attempt to make Syriza renege on all its promises and cross all its “red lines,” except for euro membership. Sharp value-added tax (VAT) increases, the establishment of a privatization fund including 50 billion euros worth of assets, no restoration of collective bargaining rights or minimum wages, automatic cuts when fiscal targets are not achieved, vetting of all legislation by the Troika (European Commission, European Central Bank, and IMF), and the depoliticization of Greek public administration. The deal passed the Greek parliament without the support of almost one-fourth of Syriza MPs, rendering Syriza effectively a minority government and prompting a cabinet reshuffle. How could Syriza have agreed to such a deal? Wouldn’t Greece be better off introducing its own currency, rather than conceding both fiscal and monetary policy?

Read the rest of this entry »

Development Central Banking, Part 2

Answering the Questions about Development Central Banking

Gerald Epstein

This is part 2 of a two-part series by regular contributor and Political Economy Research Institute (PERI) co-director Gerald Epstein, adapted from his recent International Labour Office (ILO) working paper “Development Central Banking: A Review of Issues and Experiences.” Part 1 is available here. The full paper is available here.

In both the developed and developing world, countries face significant transformational challenges. According to the International Labour Organization (ILO), global unemployment is over 200 million, with vulnerable employment being almost 50% of the total; among youth the unemployment rate stands at 13.1% but, in some places, such as the southern European countries, it is significantly higher. If current trends continue, these levels of unemployment and unemployment rates are unlikely to decline appreciably (ILO, 2014). In fact, in some respects, current trends are virtually guaranteed to get worse. Specifically, climate change, which is already creating considerable economic dislocations in many parts of the world, is predicted to accelerate over the next decades. It will especially harm poor and economically vulnerable communities (IPCC, 2014).

Historically, central banks have often been part of the policy apparatus that has helped to guide and provide financing for important development and transformational projects. (Bloomfield, 1957; Brimmer, 1971; Chandavarkar, 1987; Epstein, 2007). However, with the rise of the “Washington Consensus”, the global drive toward financial liberalization and the elimination of so-called “financial repression”, central banks were instructed or chose to follow the increasingly prevalent norm of the “inflation targeting” approach to central banking. This approach eschews virtually all goals other than keeping inflation in the low single digits. Its tool-kit was limited to just a few and ideally only one instrument – a short term interest rate (Bernanke et al., 1999; Anwar and Islam, 2011).

This approach to goals and instruments was accompanied by a drive to change the governance structure of central banks. Hitherto, they had tended to be integrated into the government’s policy apparatus but were also potentially subject to inappropriate influence by government officials. Now, they were able to “independently” implement inflation targeting policy structures and, especially, resist excessive financing of government expenditures.

If inflation targeting is not the best monetary policy framework for achieving broad economic and social goals, then what kind of central bank frameworks—goals, governance and instruments—are likely to best help developing countries address the key problems they face? Important lessons can be learned from history with respect to the kinds of central bank frameworks that have been tried and those that have been successful in achieving macroeconomic stability and economic development (Epstein, 2007, 2013).

Read the rest of this entry »

Links:当社は日本で最高品質はシャネルコピー 代引き対応N級時計/財布/バッグ通販を主な業務として,弊店はスーパーコピー代引き時計業界で最大なブランドコピー 代引き時計/ウブロコピー、スーパーコピー代引き時計/コピーブランド 代引き/スーパーコピーブランド代引きバッグ/コピー時計代引き販売専門店です