No Mysteries in Eurozone Crisis

Jeff Madrick

Little is more tragic about the eurozone crisis than that we know how to minimize it and provide the best chance for stability and growth yet we are not doing what we must. As an American, I should say ‘they’ are not doing it. It was just announced that eurozone unemployment reached a rate of 10.8 percent in February. What we should all recognize is that there are no mysteries about what to do.

The UK and the US have central banks of last resort. The Eurozone has resisted this. But the best evidence that such far more aggressive monetary policy is needed came last December when the relatively new European Central Bank chief, Mario Draghi, did an end-around and started to push hundreds of billions of euros into the banking system. Almost immediately, Spanish and Italian interest rates started to drop and Europe breathed a sigh of relief.

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The West Strikes Back

Robert H. Wade, guest blogger

In 2008, Triple Crisis blog partner GDAE gave Wade its prestigious Leontief Prize for Advancing the Frontiers of Economic Thought for his outstanding contributions to the economics of development. Today, GDAE awards the 2012 Leontief Prize to Michael Lipton and C. Peter Timmer for their critical work in the economics of food and agriculture. See full event details.

It is a commonplace to say that the world economy has become “multipolar”, as some developing countries gain a rapidly increasing share of world income. The implication is that the post-Second World War order, in which countries of the West govern the world economy, is now over.  We are in the middle of a transition to a new world order in which governments of developing countries have a substantially larger voice in setting global norms and rules.

The negotiations going on in Geneva over the mandate of the United Nations Conference on Trade and Development (UNCTAD) provide a rude shock to this conventional wisdom. UNCTAD is the UN agency, which, since its establishment in 1964, has been most responsive to the preferences of developing countries on the subjects of debt, trade, and finance. It has often voiced a second opinion about issues on which the International Monetary Fund (IMF) and World Bank – governed largely by western governments — consider themselves to be authoritative.

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José Antonio Ocampo for (World Bank) president

Kevin P. Gallagher

It is truly historic to be engaged in a global debate about who should head the World Bank. For more than 60 years the Bank presidency has been dictated by the US. Finally, the US and the Bank have pledged the institution’s next president will be chosen on merit, not hegemony.

On merit, José Antonio Ocampo is far and away the most qualified candidate to lead and reform the World Bank.

Many of the leading media outlets and key development professionals have praised the US in acknowledging the need to change the process and for putting forth Jim Yong Kim but have expressed concern that he may have too narrow a resume to run the Bank, given the many challenges it faces.

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How to discredit a financial regulator: the strange case of Iceland

Robert Wade and Silla Sigurgeirsdóttir, guest bloggers

Firms subject to a regulator generally use one of three tactics to render the regulator ineffective: emasculate, capture or discredit it – or some of all three. Iceland’s financial regulatory agency, the FME (with similar functions as the UK’s Financial Services Authority), has experienced all these tactics since its creation in 1998. A sustained campaign has recently been waged to discredit the CEO appointed in the wake of Iceland’s Great Crash in October 2008, culminating in his firing at the beginning of March 2012. His case illustrates wider issues in the relations between regulators and powerful interest groups subject to their regulation and supervision, in Iceland and beyond.

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The oil price conundrum

C. P. Chandrasekhar

All eyes are on the world’s oil market, with prices threatening once again to find a new high. The immediate cause for increased attention is a spike in oil prices since the beginning of the year.  With that 20 per cent rise taking Brent crude to $128 a barrel in early March 2012, there are fears that the price of oil may soon touch the peak $140-a-barrel it had reached in July 2008. The IMF’s Managing Director, Christine Lagarde, has declared that rising oil prices were now a bigger global worry than the debt crisis in Europe. Ali Naimi, Saudi Arabia’s oil minister also stoked fears rather than assuaging them when he said that Saudi Arabia was willing to ramp up its production to the tune of 25 per cent to bring down the “unjustified”, high price of oil.

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Why José Antonio Ocampo Should Be the Next World Bank President

Edward B. Barbier

José Antonio Ocampo, Professor at the School of International and Public Affairs, Columbia University, has just been officially put forward by the Dominican Republic and Brazil as a candidate for the Presidency of the World Bank.

Two of my fellow Triple Crisis bloggers, Kevin Gallagher and Stephany Griffith-Jones have endorsed Professor Ocampo’s candidacy for World Bank President, citing his many diplomatic and scholarly credentials.  I would like to second their “Triple Crisis” nominations, and also endorse his candidacy.

Although I have been familiar with Professor Ocampo’s contributions to policy and economics research for years, and both of us have participated in Professor Joe Stiglitz’s Initiative for Policy Dialogue at Columbia University, I did not have the pleasure of meeting Professor Ocampo until earlier this month, when we both were speakers at the Mount Holyoke Conference “Development in Crisis: Changing the Rules in a Global World”.

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Why Ocampo – not Kim – should be next World Bank president

Kevin P. Gallagher

Emerging countries have gone on the offensive to put an end to the “wink-wink” succession rule whereby Europeans get to choose who heads the International Monetary Fund and the US picks the president of the World Bank.

On Friday, developing countries are expected to nominate at least two candidates – Ngozi Okonjo-Iweala, the Nigerian finance minister, and José Antonio Ocampo, former finance minister of Colombia. If the decision is finally based on merit, as it should be, Ocampo will win: he is far and away better than any on the list of credible names, including President Barack Obama’s nominee, Jim Yong Kim.

Ocampo has the utmost credibility as a policy-maker and diplomat; he works well with the US and developing countries alike; and he is one of the leading academic economists in the field of development.

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Can Americans Trust Government Again?

Jeff Madrick

Contrary to what we hear from Republicans, America did not lose its way in the past few years. It lost its way a generation ago when it abandoned its faith in government.

Conventional wisdom has it that come November the 2012 presidential election will be determined by the state of the economy. Actually, the real battle will be over a much older fundamental ideological issue in American politics: what role government should play in shaping our future. This special issue of The Nation is dedicated to bringing the debate about government front and center as the presidential race heats up.

Anti-government ideologues are on a tear, passionately advocating austerity and smaller government as the cure for the worst economic downturn since the Great Depression. Apparently following the dictum that you should never let a crisis go to waste, they are spinning the recession to promote their pet causes, such as destroying “Obamacare” and weakening public sector unions. As a result, the stakes this November are higher than in any election since Ronald Reagan unseated Jimmy Carter in 1980.

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