Will the ECB QE Save the Euro?

Philip Arestis and Malcolm Sawyer

The international financial crisis of 2007-2008 and the subsequent “Great Recession” have added to the problems of the euro area, which had long suffered from a poor design and inadequate policy framework. These problems have been faced in a number of ways—many, such as the Fiscal Compact which replaced the Stability and Growth Pact, distinctly unhelpful.

The European Union (EU) summit meeting, June 28-29, 2012, took a number of decisions: banking licence for the European Stability Mechanism (ESM) that would give it access to ECB funding and thus greatly increase its firepower; banking supervision by the ECB; a “growth pact,” which would involve issuing project bonds to finance infrastructure. Two long-term solutions were proposed: one, a move towards a banking union and a single euro-area bank deposit-guarantee scheme; another, the introduction of euro bonds and euro bills. Germany resisted the latter, arguing that it would only contemplate such action under a full-blown fiscal union. Not much has been implemented in any case.

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What We’re Writing, What We’re Reading

What We’re Writing

Jayati Ghosh, North Cyprus: Complicated, Contradictory, Charismatic

Sunita Narain, The Earth for You

What We’re Reading

Jeronim Capaldo, Overcooked Free-Trade Dogmas in the Debate on TTIP, Global Development and Environment Institute (GDAE)

Edward A. Cunningham, The State and the Firm: China’s Energy Governance in Context, Global Development and Environment Institute

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The Economic Legacy of China’s One-Child Policy

Sara Hsu

China’s One-Child policy, which limited urban families to having one child, was relaxed in late 2013 to allow urban families to have two children if one parent is an only child, but has left a deep imprint in the nation’s social fabric. The economic legacy of the One-Child policy is an aging population that has reduced the productive base, as fewer working-age individuals are available to support an increasing number of dependents.

The One-Child policy has been enforced since 1979, often involving abortion, forced abortion, and infanticide. The killing of girl fetuses and infants in particular has left China with an uneven gender ratio, reaching a level of 121 males to 100 females in 2004. Disabled babies are also far more likely to be killed. Recently, activist Chen Guangcheng referred to implementation of the policy as “genocide.”

Brutal in practice, the One-Child policy has left a lasting impression. Even though many families are now allowed to have another child, they have been loath to do so, as couples adjusted to smaller families, higher levels of consumption, and urban living. The cost of living has risen dramatically in many urban areas, making it difficult to raise a larger family.

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On Free Trade and Economics Consensus

A Response to Mankiw

Matías Vernengo

Mankiw tells us in his most recent NYTimes column that economists agree that Free Trade is good. He links to a poll in which, essentially, mainstream economists of different persuasions, some Keynesian and some not, and different political views, some liberal and some conservative, say that trade agreements are good. He backs his argument by suggesting that theoretically the argument is at the heart of the economics profession since the beginning; I guess an argument of authority.

And no better authority than Adam Smith. Mankiw says:

“The economic argument for free trade dates back to Adam Smith, the 18th-century author of ‘The Wealth of Nations‘ and the grandfather of modern economics. Smith recognized that the case for trading with other nations was no different from the case for trading with other individuals within a society.”

And it is true, Adam Smith was for laissez-faire, in general, and thought that less intervention in trade would be good. But there is in Mankiw’s argument an implication that does not follow from careful analysis of Smith’s doctrines, namely: that Adam Smith can be seen as a forerunner of modern neoclassical trade theory based on the Heckscher-Ohlin-Samuelson (HOS) comparative advantage argument (for the limitations of that theory go here).

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Towards a Better Food System

Empowering Communities and Regulating Corporations

Nora McKeon, Guest Blogger

How we have landed ourselves with a global food system that generates hunger alongside of obesity, and what can we do about it? The universal EXPO 2015 that opened in Milan on May 1 with the theme of “Feeding the Planet, Energy for Life” is placing its bets on “best technologies” and “free trade” to do the job. The US Pavilion’s sponsors include technology vendors like Dow and 3M and proponents of the Transatlantic Trade and Investment Partnership (TTIP) like the U.S. Dairy Export Council, which is seeking to lower EU barriers to antibiotic-plumped U.S. products.

But the problem really lies elsewhere: over the past three decades, public responsibility for food security has been sold out to markets and corporations while the frontline actors—families, communities and small-scale food producers—have been disempowered. Unprotected by governments, smallholder family farmers are being driven off their land and out of their markets with the allegation that they are inefficient and archaic. Yet, it is they who produce some 70% of the food consumed in the world.

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What’s We’re Writing/What We’re Reading

What We’re Writing

Sunita Narain, How Power Can Be Cleaned

Rebecca Ray, Kevin P. Gallagher, Andres Lopez, and Cynthia Sanborn, China in Latin America: Lessons for South-South Cooperation and Economic Development

Alejandro Reuss, Climate Change: What Is It? What Causes It? What Can We Do About It?

What We’re Reading

Deepankar Basu and Debarshi Das, Profitability in India’s Organized Manufacturing Sector: The Role of Technology, Distribution, and Demand

Nancy Folbre, Accounting for Care: A Research and Survey Design Agenda

Esteban Pérez Caldentey, Miguel Torres and Romain Zivy, Interview on Neo-Structuralism

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A Short Walk but with Giant Steps

Martin Khor

LAST Friday, I took a 10-minute walk from an old hotel to ano­­ther old building, a confe­rence hall. About 300 others were on the same walk on the warm and sunny day.

It didn’t seem anything remarkable or newsworthy. But this was no ordinary walk. Sixty years ago, on this same date, a small but powerful group of men and women took the same walk and then launched a movement that snowballed into a united anti-colonial and post-colonial battle.

We had come to commemorate and celebrate the anniversary of the Bandung conference of Asian and African leaders, all of whom had just won Independence or were on the verge of doing so.

The same grand Savoy Homann hotel was where the leaders had stayed, and they had taken the historic short walk on the Asia Africa Road to the Merdeka Building.

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Did Beijing 1995 Make Any Real Difference For Women?

What Else Do We Need To Do?

Jayati Ghosh

“More of the same will not do.” That’s the important takeaway from the new report “Progress of the World’s Women 2015” from UN Women.

Twenty years ago, the Beijing Summit of the UN was seen as a pathbreaking attempt to bring about major improvements in the conditions of women across the world. But did it really make much difference? What has actually changed in terms of gender disparities? And what can we do to make sure that this time around—as the international community contemplates new global goals for sustainable development—there will be genuine and transformative progress for women?

The Report answers these questions by framing them in the language of human rights, and uses international human rights standards such as the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) and the International Covenant on Economic, Social and Cultural Rights (ICESCR)—to assess laws and policies for their actual effect on women and girls on the ground. The answers are somewhat dispiriting: positive movements are slow, uneven and in some regions even going in the opposite direction.

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Infrastructure Financing as Power Politics

C.P. Chandrasekhar

Infrastructure lending may sound an innocuous political terrain of interest only to financiers. But it is proving to be the location for the play out of big power politics, involving especially the US and China. As of now, it appears to be one more battle the US will regret having fought.

When the deadline for applications to be a founding member of the China-mooted Asian Infrastructure Investment Bank (AIIB) passed on April 1, 2015, 47 countries had expressed an interest, about 30 of whom had already been accepted. The AIIB is a multilateral development bank to be headquartered in Beijing  with paid-up capital of $100 billion, created with the special mandate to finance much-needed infrastructural projects in Asia. China is providing $50 billion to the bank’s capital upfront.  Other countries too  would contribute, but China has promised to increase its contribution to $100 billion, if needed. Thus, though according to reports voting power in the bank will be proportional to the GDP of a member country, there can be little doubt that China will call the shots.

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Quantitative Easing and The Great Recession: Who Wins? Who Loses?

Gerald Epstein

The Federal Reserve (“the Fed”), the central bank of the United States, is at the center of a big political fight, once again. Ron Paul, former libertarian congressman, says we should “End the Fed” and reinstitute a gold standard; Rick Perry, former governor of Texas, said the Fed policy of low interest rates is “treasonous” and Fed officials should be sent to Texas where they know how to “deal with” such people; Senator Rand Paul (Ron’s son) has put forward a bill to “Audit the Fed” and establish more Congressional control over monetary policy; and progressives from Senators Bernie Sanders and Elizabeth Warren to the Occupy Movement are highly critical of the revolving door between Fed officials and Wall Street, but oppose Paul, Paul and Perry’s “hard money” policies that would make life harder for debtors.

This fight over monetary policy happens now and again in U.S. history. In the Great Depression of the 1880’s the populist movement of indebted farmers rose up to demand a looser monetary standard that would make it easier for them to pay their debts; the financial panic of 1907 ushered in a 7 year struggle that culminated in the establishment of the Fed; and the great inflation of the 1970’s and the draconian increases in interest rates that Fed Chairman Paul Volcker engineered in the late 1970’s instigated widespread protests against the Fed.

Such enduring conflicts have real causes; in its founding and very structure, the Fed is a creature of the financial industry, yet the Fed has enormous economic power that affects everyone in the U.S. economy (and indeed, the world). Most importantly, it has enormous public power – to print legal tender (the U.S. dollar) – yet it has a political structure that to varying degrees insulates it from democratic control. And with the demise of fiscal policy as a strong tool of macroeconomic policy (conservatives have blocked the use of government spending and taxation as tools of economic policy), the Fed’s power to set interest rates has become the most important and flexible tool of macroeconomic policy.

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