Spotlight Rio+20: Rich nations backtracking as Rio Summit nears

Martin Khor

Rio+20, the UN Conference on Sustainable Development culminates in a meeting this month in Rio de Janeiro, Brazil just after the 20th anniversary of the 1992 Earth Summit and the adoption of Agenda 21. The Spotlight Rio+20 series, which this post begins, invites our bloggers and other experts to analyze different aspects of the sustainable development negotiations, and how these, in turn affect the bigger picture of finance, development, and the environment. To find our latest material in this series, please click on the Spotlight Rio+20 category. You can also follow TCB on our Twitter and Facebook pages.

As the Rio summit on sustainable development nears, governments have yet to agree on most issues, while rich countries are backtracking on the original principles and commitments made 20 years ago.

With only ten days to go before the start of the UN Conference on Sustainable Development in Rio de Janeiro, the countries are still far from agreeing on what to say in a summit declaration or plan of action. The final meeting to prepare for the Conference last week in UN headquarters in New York made some progress to narrow the gaps, but it was not enough.

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EU Austerity Measures Constitute Sheer Catastrophe

Philip Arestis and Malcolm Sawyer

The months of April and May have been tumultuous on the European political scene – the French elections have seen the return of the first Socialist President in 17 years on elements of a pro-growth, anti-austerity agenda, the Greek elections with the poor showing of the previous dominant parties associated with the severe austerity agenda being imposed on Greece, the fall of the Dutch government over budget measures, the poor showing of the Christian Democrats in German Federal elections.

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New Central Bank Mandate in Argentina: A Bold Initiative to Restore Central Banks as Agents of Economic Development

Gerald Epstein

Prevailing ideology has held that the only legitimate task for central banks is to control inflation, which often comes at the expense of broader goals such as employment creation, financial stability or economic growth. Now, in a bold and important move, the government of Argentina has fought against this neo-liberal “conventional wisdom” and broadened the mandate of the Argentine Central Bank to include economic growth and financial stability, and empowered it to use more tools to support credit allocation to promote productive investment and job creation (see Weeks).

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Spotlight G20: Ahead of the Curve: Asia takes steps to deepen regional financial architecture

Ilene Grabel

Financial crises often present opportunities as well as challenges. Sometimes they even enable fundamental institutional adjustment despite the political and historical obstacles that otherwise frustrate innovation.  In the early days of the global financial crisis it seemed that the new G20 Leaders’ meetings were going to serve as incubators for bold thinking.  That has not been the case. Aside from some reasonable statements on the use of capital controls, the G20 has failed to take on the challenge of reforming the deficient global financial architecture.

The next G20 meeting (in Los Cabos, Mexico; June 18-19) is likely to expose further the institution’s stagnation. At this point it is prudent to expect that G20 members will wring their hands over the fate of the Eurozone, say the right things, but fail to launch any major initiatives.

The logjam among the G20 stands in sharp contrast to the dynamism that has emerged in Asia.

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Crisis in Europe affects all of us

Martin Khor

The economic situation in Europe has worsened considerably in the past week, giving rise to a very worrisome situation.  The ramifications of a full-blown crisis are serious not only for Europe but also the rest of the world.

The recent Greek elections saw the citizens proclaiming their anger towards the austerity policies tied to the European-IMF bail-out package, by repudiating the two major parties and giving the small anti-austerity Syriza party second place.

The elections came in the midst of a greatly deteriorating condition. Greece has 22% unemployment, 50% youth unemployment, GNP is falling steeply, and public debt will remain high at 160% of GDP next year despite the recent bailout and debt-restructuring measures.

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Returns to Labor vs. Financial Ownership

Arjun Jayadev

In the wake of the Great Recession, there has been substantial interest in the causes of inequality and the potential impacts of rising inequality on macroeconomic fluctuations. For the most part these examinations have approached the issue through the consideration of interpersonal income inequality.

This noted, there is a long tradition of Classical, Post-Keynesian and Kaleckian approaches that have long maintained the centrality of income distribution. These have focused primarily on the factor distribution of income –the share of income going to the various factors- as being key to understanding macroeconomic dynamics as well as inequality. Some work in this tradition additionally distinguishes the income going to ‘rentiers’ from that going to capitalists -breaking out, that is, returns to ownership of financial capital vs. physical capital. Given the ongoing discussions of widening inequality and the role of the financial sector in this propelled by the occupy movement this is an increasingly important issue.

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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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Standing up to Jamie Dimon: Is it SAFE?

Gerald Epstein

Jamie Dimon’s bravado railing against financial reform  has morphed into contrition and a heavy diet of humble pie. After reportedly referring to Paul Volcker’s support of the “Volcker Rule” ban on risky proprietary trading and Federal Reserve Bank of Dallas’ President Richard W. Fisher’s support for downsizing the nation’s biggest banks as “infantile” and “nonfactual”, Dimon, President of JP Morgan-Chase is now admitting “egregious mistakes” as his bank reports a minimum of $2 billion in losses on risky trades that just a few weeks ago he defended against press reports which he called a “tempest in a teapot.”

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