In the immediate aftermath of the global financial crisis even the deepest market fundamentalists embraced the core Keynesian insight that when in deep recession, monetary policy will be ineffective and fiscal stimulus is required. They have now abandoned that view as calls for fiscal austerity abound regardless of the increasingly fragile nature of the global recovery.
While economists and policy-makers debate the short and medium-term remedies to the crisis, there is an incredibly surprising and under-discussed consensus emerging for the longer run. From the Financial Times to the South Centre there is agreement that the United States and East Asia (notably China) have to change the ‘structures’ of their economies.
The more things change, the more they really do stay the same. For a while after the global crisis, we were told that the IMF had changed its position with respect to the strict and generally pro-cyclical measures it had been suggesting to countries in the throes of financial or balance of payments crisis. Their economists openly accepted the need for fiscal stimuli and generally counter-cyclical macroeconomic policies to combat the recession.
According its own internal review in September 2009, the IMF has really changed in this respect: “Internalizing lessons from the past, (IMF) programs have responded to country conditions and adapted to worsening economic circumstances to attenuate contractionary forces…The stance of fiscal policy in most cases has been accommodative and adjusted to evolving conditions. Deficits were allowed to rise in response to falling revenues and, in cases where domestic and external financing was lacking, this was facilitated by channeling Fund resources directly to the budget.”
A serious campaign in favor of “de-growth” has been going on for some time and has made important contributions. This movement has opened new avenues for debate and analysis on technology, credit, education and other important areas. It’s an effort that needs support and attention, and we must applaud their initiators and promoters for their boldness and dedication.
De-growth is defined as “a reduction of production and consumption in physical terms through down-scaling and not only through efficiency improvements”. Kallis-Schneider-Martínez Alierexplain that de-growth is a smooth, voluntary and equitable downscaling of production and consumption that insures human wellbeing and ecological sustainability locally as well as globally on the short and long term. Thus, de-growth is not limited to a technological dimension.
On June 29, Triple Crisis blogger Kevin Gallagher interviewed Andong Zhu of Tsinghua University in Beijing China about China’s worker strikes and growing inequality.
In a recent post, I argued that capital controls have become the new normal. This is welcome news to progressives who have long argued that developing countries should have the right to deploy capital controls. A reasonable question for progressives to ask at this point is why are capital controls breaking out all over?
There are several possible (and no doubt, mutually reinforcing) reasons for the resurgence of controls.
First, on a practical level, they are needed in many countries. Policymakers in the developing economies that are performing well now are using these policies to contain the asset bubbles (and attendant inflationary pressures and currency appreciation) stimulated by the foreign investment that is flooding developing economy markets (itself the consequence of the low interest rates and dim economic prospects of the USA and Europe).
As of Friday, July 2, Mr. Wulff became Germany’s new Federal President, the state’s highest office. The election electrified the German public even though the German President has little power and is chosen by the members of the German Parliament and representatives of each of the sixteen states rather than by public vote.
It has been a long time since the German public was as captivated as they were by Mr. Wulff’s opponent, Mr. Gauck. Despite the great enthusiasm for his candidacy, he was, at last, defeated by the conservative majority of electoral delegates. But one can learn a lot from Gauck’s one-month campaign: He was able to inspire people to become politically active. Broad-based activism is needed to transform society and achieve a socially and ecologically sustainable economy.
Like many progressive economists, I’m addicted to economics and business news. These days one phrase is repeated constantly—“The new normal.” Indeed, National Public Radio’s show, “Planet Money” recently featured a story on this omnipresent phrase. The new normal is shorthand for features of a dismal new economic reality to which the (investing) public must adjust. The new realities of our era include lower rates of return on stocks, bonds and real estate; larger government budget deficits which precipitate higher inflation rates; sluggish (and even negative) rates of growth in rich countries; and a shift in economic (and political) power to the world’s dynamic developing countries.
But another new normal has flown in under the pundit’s radar screen. This new normal is the proliferation of capital controls, which are being implemented rather widely across the developing world.
In the indigenous, western highlands of Guatemala, a rebellion is swelling against the forces of global capitalism. Well, at least against its palpable manifestation—an open pit gold and silver mine owned and operated by the Canadian company Goldcorp. The mine is seen as early warning of what could be a storm of foreign mining companies: the Guatemalan government has granted some 300 mining concessions, over 90% of them near indigenous communities. On June 18, some 12,000 indigenous people streamed into Huehuetenango to give a message to a visiting UN Special Rapporteur on Indigenous Rights: “No to mining, yes to life”.
Goldcorp inherited the Marlin mine when it acquired Glamis Gold back in 2006. Since then, Goldcorp has emerged as the industry’s “growth leader” . Its 2009 Annual Report boasts a five-year average return to shareholders of 21.2%–nearly double that of its “senior” competitors.
Almost two decades ago, Francis Fukuyama, at the peak of the hubris and arrogance of neoliberal thinking, famously suggested that history had ended. The unfolding of the European crisis may finally prove him wrong. It is true that the failures of the Washington Consensus during the 1990s led to a revival of the left in Latin America, starting with the election of Chávez in 1998. However, I would venture, risking being a bit Eurocentric, that political changes in the periphery are seldom capable of having global effects in the same way as changes in the center of the capitalist system.
On the other hand, the crisis of the euro, and the adjustment measures taken by the European countries may prove more significant as a way of bringing back the old coalitions that were instrumental in building the Welfare State. There are at least two elements in the rescue packages implemented in Greece and Spain that are particularly wrongheaded and will have a terrible social impact.
Trade officials in the Obama Administration have made it abundantly clear that they will move forward in the WTO’s Doha Round of negotiations only if the larger developing countries agree to open their economies more to U.S. exports. As Kevin Gallagher pointed out on the Triple Crisis Blog (“Obama’s New Trade Agenda”), the administration’s trade policies, and its announced goal of doubling U.S. exports, backtrack from those of the Bush Administration, renege on the basic principles of the Doha Development Round, and undermine precisely the kind of multilateralism President Obama claims to stand for.
Such intransigence does not bode well for the WTO, nor does it give much hope that the Obama Administration will use the current TransPacific Partnership negotiations to forge what it promises will be a “21st century trade agreement.”
Clearly, a creative new approach is needed to break the trade deadlocks. I offer a modest proposal here: Instead of negotiating reductions in tariffs and farm subsidies, it’s time to negotiate reductions in hypocrisy. I call it the Hypocrisy Clause, which mandates phased reductions in “trade-distorting hypocrisy,” with the greatest reductions coming from the most developed hypocrites.