From Japanese Bubble to Chinese Time Bomb

An Interview with Walden Bello

Asia’s financial crisis came a decade before the global crisis, but it has had a lasting influence and left a legacy that could sow the seeds for the next global crisis.

How did the Asian financial crisis in 1997-1998 differ to the one that broke in the US and Europe in 2008?

The Asian financial crisis in 1997-98 was similar to the 2008 global financial crisis in that it was also the product of speculative bubbles in real estate and the stock market created by the search for high profits by finance capital. The difference was the role of currency speculators and hedge fund operators in hastening the bursting of the bubble and the collapse of the real economy; these actors played a negligible role in the 2008 crisis. These speculators, led by George Soros’ Quantum Fund, targeted the overvalued currencies of the Asian economies, particularly the Thai baht, betting on the probability that they would be devalued relative to the dollar owing to investor fears that the bubbles would burst, thus accelerating the devaluation of the currencies and making tremendous profits once the Asian currencies were devalued. Had the speculators not been active, the bubbles would still have burst and the real economy would still have entered into severe crisis, but the “landing” would have probably been less rough.

Where the uniqueness of the 2008-2009 crisis lay was in the fatal marriage of a real estate bubble with financial engineering. Tremendous amounts of cash flowed into real estate that were plowed into loans, a great many of them of dubious quality because the debtors’ capacity to repay the loans was questionable– thus the term subprime loans. Financial engineering allowed mortgage originators to slice, dice, and package these loans into securities that were then sold to banks and other financial institutions, which then resold them to other banks and financial institutions. When the mortgage holders could no longer service their mortgages, the quality of the loans was drastically impaired. But billions of dollars of these now toxic securities were circulating in the global financial system, upending the balance sheets of the US and foreign banks and institutions that held them and driving many, like Lehman Brothers, to bankruptcy, and others, like Citi and the German regional banks, requiring a massive government rescue.

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Economic Development for Transformative Structural Change, Part 3

Economist and Triple Crisis contributor Jayati Ghosh recently moderated, at a book launch event in Geneva, a discussion of the new book The Handbook of Alternative Theories of Economic Development.  This is the third part in a four-part series, from The Real News Network, featuring that discussion. The full series is available here.

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September 28, 2017 | Posted in: Uncategorized | Comments Closed

Is Current UK Household Debt a Serious Problem?

Philip Arestis

In a recent contribution, Arestis and Sawyer (2015) argued that the increase in the UK household sector debt helped the recovery of GDP growth. Household debt increases substantially when households experience stagnating incomes (due to rising prices and falling wages) and borrow in order to finance their consumption expenditures, which in the UK amounts to two thirds of demand. The Bank of England (2016) suggests, “An uncertain macroeconomic environment raises the prospect that households could face challenges to their ability to service their debts.” The increase in the UK household debt has continued since then, and indeed has become even more worrying in view of the possible “normalisation” of interest rates and the monetary dimension in more general terms by the Bank of England; this possible emergence could have serious implications for the households in view of their high debt in relation to economic activity.[1]

Interestingly enough, these developments, in terms of UK household debt, have worried the UK monetary authorities, which have initiated policy measures to avoid serious problems resulting from indebtedness. Indeed, the Bank of England (2016) in its Financial Stability Report suggested, “Highly indebted households are particularly vulnerable to shocks, such as falls in incomes or increases in interest rates, which threaten their ability to service their debts. If these households cut consumption sharply in order to service their debts, this may amplify any downturn in economic activity. Alternatively, if households default on their debts, this can test the resilience of lenders directly.” It is also stated, in the same report, “Total lending to households grew by 4.1% in the twelve months to September 2016, close to the fastest growth rate since the global financial crisis.” As a result of these and other risks in the UK banking sector, the Bank of England believes that tackling these problems is best through financial regulation and macro-prudential policies. The Bank of England’s Financial Policy Committee (FPC)[2] decided at its May 25, 2016, meeting to increase the UK countercyclical capital buffer rate (or systemic risk buffers), which would ensure that banks could provide lending and other needed banking services in times of financial stress.

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September 25, 2017 | Posted in: Uncategorized | Comments Closed

Economic Development for Transformative Structural Change, Part 2

Economist and Triple Crisis contributor Jayati Ghosh recently moderated, at a book launch event in Geneva, a discussion of the new book The Handbook of Alternative Theories of Economic Development.  This is the second part in a four-part series, from The Real News Network, featuring that discussion. The full series is available here.

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

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Out of Africa

Jomo Kwame Sundaram and Anis Chowdhury

Not a single month has passed without dreadful disasters triggering desperate migrants to seek refuge in Europe. According to the International Organization for Migration (IOM), at least 2,247 people have died or are missing after trying to enter Europe via Spain, Italy or Greece in the first half of this year. Last year, 5,096 deaths were recorded.

The majority – including ‘economic migrants’, victims of ‘people smugglers’, and so on – were young Africans aged between 17 and 25. The former head of the British mission in Benghazi (Libya) claimed in April that as many as a million more were already on their way to Libya, and then Europe, from across Africa.

Why flee Africa?

Why are so many young Africans trying to leave the continent of their birth? Why are they risking their lives to flee Africa?

Part of the answer lies in the failure of earlier economic policies of liberalization and privatization, typically introduced as part of the structural adjustment programmes (SAPs) that many countries in Africa were subjected to from the 1980s and onwards. The World Bank, the African Development Bank and most Western donors supported the SAPs, despite United Nations’ warnings about their adverse social consequences.

SAP advocates promised that private investment and exports would soon follow, bringing growth and prosperity. Now, a few representatives from the Washington-based Bretton Woods institutions admit that ‘neoliberalism’ was ‘oversold’, condemning the 1980s and 1990s to become ‘lost decades’.

While SAPs were officially abandoned in the late 1990s, their replacements were little better. The Poverty Reduction Strategy Papers (PRSPs) of the World Bank and IMF promised to reduce poverty with some modified policy conditionalities and prescriptions.

Meanwhile, the G8 countries reneged on their 2005 Gleneagles pledge to provide an extra US$25 billion a year for Africa as part of a US$50 billion increase in financial assistance to “make poverty history”.

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September 19, 2017 | Posted in: Uncategorized | Comments Closed

Economic Development for Transformative Structural Change, Part 1

Lack of Alternatives Is Not the Problem

Economist and Triple Crisis contributor Jayati Ghosh recently moderated, at a book launch event in Geneva, a discussion of the new book The Handbook of Alternative Theories of Economic Development.  This is the first part in a four-part series, from The Real News Network, featuring that discussion. The full series is available here.

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

Triple Crisis is published by

September 15, 2017 | Posted in: Uncategorized | Comments Closed

Did Monsanto Write Seed Policy in Malawi?

An Interview with Timothy A. Wise

In this interview, conducted by Sharmini Peries of the Real News Network, Timothy A. Wise of the Small Planet Institute discusses the role of Monsanto in developing Malawi’s new restrictive seed policies. Wise also discussed these issues in his recent article “Did Monsanto Write Seed Policy in Malawi?” for Food Tank (also posted on Triple Crisis here. —Eds.

Originally published by the Real News Network.

Full text below the jump.

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The Trump Supply Chain and the Art of the Sweatshop

John Miller

John Miller is a professor of economics at Wheaton College (Norton, Mass.) and a member of the editorial collective at Dollars & Sense magazine. This article is forthcoming in the September/October 2017 Special Labor Issue of Dollars & Sense.

Reports that the President’s and his daughter’s clothing lines are not made in the United States put the lie to the White House’s “Made in America Week” this past July.

It was the height of hypocrisy. With the exception of his “Make American Great Again” hats and a few suits that are “stitched” in the United States, everything in Donald Trump’s clothing line, even the ties, is made in China and other developing countries, not the United States. And not one of the 838 products—garments, accessories, and shoes—advertised on Ivanka Trump’s website is made exclusively in the United States.

The Garment Supply Chain and the Trump Brand

That Trump brand garments are made outside the United States is hardly unusual. In 2015, according to the American Apparel and Footwear Association (AAFA), 97% of clothing consumed in the United States was imported. China, the top country of origin, supplied over one-third (35.9% by value) of U.S. apparel imports, followed by Vietnam, Bangladesh, Indonesia, and then nearly 150 other countries.

Garments are designed, produced, marketed, and sold through a multilayer, multinational supply chain. Typically, brand-name retailers, headquartered in either western Europe or the United States, develop designs for an ever-changing line of fashionable clothing. The retailers’ buyers then place orders across the developing world, negotiating with competing manufacturers—the contractors—over the materials used, the delivery date, and the price. Larger contractors often subcontract production to smaller factories, typically with fewer quality controls, worse working conditions, and lower costs, which they keep to a minimum by hiring and firing workers to match demand and forcing them to work overtime.

This global supply chain relentlessly drives down costs. For example, in 2013 a pair of George jeans made in Bangladesh sold for £14, or $22, at Asda, a British subsidiary of Walmart. Bloomberg BusinessWeek reports that Walmart paid out just $1.16 per pair of jeans to the Sepal Group, a large Bangladeshi manufacturer to make the jeans. Sepal pocketed 26 cents per pair of jeans and the remaining 90 cents went to cover factory costs (excluding materials). If garment workers in Sepal Group factories were paid the Bangladesh minimum wage of $68 per month and worked 50 hours a week, about 45 cents per pair of jeans would have gone to wages.

The supply chain for Trump garments is similarly international, penny-pinching, and exploitative. Let’s take a closer look at the Ivanka Trump line, which is far larger and more profitable than the now nearly defunct Donald Trump clothing line.

In 2012, the Ivanka Trump Brand, which employs just twelve employees, signed a licensing agreement with G-III, an apparel group whose clients include large brands such as Guess, Calvin Klein, and Donna Karan, and other celebrity brands such as Jessica Simpson. G-III, located in the New York City garment district, designs the brand’s line of clothes and accessories. The company’s buyers then place orders for the manufacture of those designs with contractors in China, Indonesia, Bangladesh, and other developing countries. G-III also imports the finished garments and accessories and distributes them to retailers throughout North America. The $157 blush-colored sheath dress Ivanka Trump wore to address the Republican Convention last year and other Ivanka-branded dresses, blouses, coats, denim jeans, and handbags are sold in department stores, such as Macy’s and Dillard’s, in discount outlets such as T.J. Maxx and DSW, and online by Amazon. Later this year, the Ivanka Trump Brand will open its own store in Trump Tower.

The workers who stitch and sew garments for the Ivanka Trump brand and other international brands are not only poorly paid. Garment workers, who are overwhelmingly women with few other employment opportunities, work long hours often without days off, and have been subjected to physical abuse, pregnancy tests, and other indignities. They work under dangerous conditions that have cost them their health, their limbs, and even their lives.

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UN Role in Reforming International Finance for Development

Jomo Kwame Sundaram

Growing global interdependence poses greater challenges to policy makers on a wide range of issues and for countries at all levels of development. Yet, the new mechanisms and arrangements put in place over the past four decades have not been adequate to the growing challenges of coherence and coordination of global economic policy making. Recent financial crises have exposed some such gaps and weaknesses.

Multilateral UN inclusive

Although sometimes seemingly slow, the United Nations (UN) has long had a clear advantage in driving legitimate discussion on reform because of its more inclusive and open governance. Lop-sided influence in the current international financial system is a principal reason why many countries lack confidence in existing arrangements. Rebuilding confidence in such arrangements will require that all parties feel they have a stake in the reform agenda.

But the UN is also suited to drive the discussion because of its long tradition of reliable work on international economic issues. The UN secretariat has developed and maintained a coherent and integrated approach to trade, finance and sustainable development, with due attention to equity and social justice issues.

The ongoing ‘secular stagnation’ has again highlighted the interdependence of global economic relations, exposing a series of myths and half-truths about the global economy. These include the idea that the developing world has become “decoupled” from the developed world; that unregulated financial markets and the new financial instruments had ushered in a new era of “great moderation” and “stability”; and that macroeconomic imbalances — due to decisions made in the household, corporate and financial sectors — were less dangerous than those involving the public sector.

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Did Monsanto Write Malawi’s Seed Policy?

Timothy A. Wise

In late July, a short article was published in a Malawian newspaper: “Press Release on Organization of Seed Fairs.” Issued by the Ministry of Agriculture, Irrigation, and Water Development, in conjunction with the Seed Traders Association of Malawi, the short statement advised the public that “only quality certified seed suppliers registered with Government to produce and/or market seed should be allowed to display seed at such events.” The release was signed by Bright Kumwembe for the Agriculture Ministry.

I received this news in the United States as I prepared a research trip to Malawi, and I was shocked. Malawi is in the final stages of a multi-year effort to reform its seed policy and laws, and the largest point of contention at this point is the failure of the draft policy to recognize and protect so-called “farmers’ rights” to save, exchange, and sell the seeds they grow on their farms.

Remarkably, the policy seeks to define the word “seed” as applying only to certified seed from commercial companies. Farm-saved seed is referred to in the policy as just “grain,” unworthy even of the word seed.

Some 80 percent of the crops grown in Malawi come from farm-saved seeds, and many of those seeds are displayed, exchanged, and sold at local seed fairs. These are often community events organized by local non-governmental organizations or district agriculture offices to promote seed improvement. Farmers show their most successful varieties, sometimes alongside seed from commercial companies that have bred, patented, and produced “improved” varieties that are then certified by the government for quality.

What this press release implied, in no uncertain terms, was that henceforth farmers would not be allowed to display their seeds. The formal and informal seed sectors have coexisted for decades. Why was the Malawian government, embroiled in a controversy over a still-unfinished seed policy, threatening to ban farm-saved seed from the market?

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