The Fundamentals of the Fed

Jane D’Arista, occasional guest blogger for Triple Crisis, was recently interviewed by the Real News Network on the development of the banking sector’s influence on the Federal Reserve and her opinions on Fed reform. This video is re-posted from the Political Economy Research Institute, a Triple Crisis partner. We periodically cross-post items of interest.

Jane D’Arista is a research associate and co-coordinator of the SAFER Project at the Political Economy Research Institute (PERI), University of Massachusetts at Amherst.

Full Disclosure in Economics— the Role of the Economic Associations

George DeMartino, Guest Blogger

Last Thursday the Executive Committee of the American Economic Association (AEA) ratified a proposal of AEA President Robert Hall to establish a committee “to consider the Association’s existing disclosure and other ethical standards and potential extensions to those standards.” To non-economists that may not sound like much, but it represents a substantial break with a century-long practice of avoiding the issue. When the American Association of University Professors (AAUP) and others voiced concern about conflicts of interest in economics and the need for disclosure during the 1920s and 1930s, the AEA largely ignored the matter.

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From Washington Consensus to Brussels Consensus

Diana Tussie

In my August entry I noted a trend to decentralizing global finance moving away from the High Command in the form of new forms of financial cooperation amongst countries of the global South, especially spreading in South America and Asia.

But Stephany Griffith Jones´s November entry prior to the meeting of the G20 in Seoul has made me rethink. She notes with concern the worrying trend toward the consolidation of a paradigm of fiscal retrenchment in Europe. She is naturally right (as usual) in drawing attention to pervasive fiscal retrenchment in deficit countries and even surplus countries.  While Germany eschews expansionary policies, Greece, Portugal, Spain and Ireland have been pressed by financial markets and the European Commission mainly under German influence into draconian fiscal adjustment.

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Economists Demand Ethics Code for U.S. Economists

As Triple Crisis blogger Gerald Epstein pointed out in two recent blog posts (here and here), the economics profession has no official standards or ethical code to regulate potential conflicts of interest between economists’ roles as experts and their frequent roles as consultants and agents of private firms. As the American Economics Association (AEA) convenes today for its annual conference, Epstein and coauthor Jessica Carrick-Hagenbarth have spearheaded an effort to remedy this issue with a sign-on letter to the AEA, which has garnered the support of close to 300 economists and drawn the attention of the national media.

Read the economists’ letter to the American Economic Association.
Read the coverage in the New York Times and Bloomberg.

Lost Finances: The fight against secrecy jurisdictions

Gerhard Schick

This post from Gerhard Schick will be his last, as he will no longer be a regular blogger. Triple Crisis thanks him for his insightful and timely contributions.

Estimates of the total amount of untaxed resources held offshore by individuals range from $7.4 trillion (the 2010 Global Wealth Report of the Boston Consulting Group) to $11.5 trillion  (Tax Justice Network (TJN)). By definition, it is impossible to identify the exact figure, but these are highly instructive estimates. Taking TJN’s number as a basis, approximately $250 billion in taxes are illegally evaded on an annual basis.  If these resources had been collected from 2000 to 2015, they could have almost entirely financed the attainment of the Millennium Development Goals.

Tax evasion has an even more direct impact on developing countries since they are entitled to the majority of unpaid taxes. James Henry, former Chief Economist at McKinsey & Co, estimates that about $6.2 trillion of the total amount held offshore by individuals represents developing country wealth.  He calculates that failure to tax this wealth deprives developing countries of an amount estimated between $64 billion to $124 billion in annual tax receipts.

The above estimates are based on the offshore wealth of individuals.  By including money moved offshore by private companies, the scale of losses would easily exceed the roughly $103 billion that developing countries receive annually in overseas aid.

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Triple Crisis Economists Sign on to New Economic Approach

A group of economists, including many from the Triple Crisis blog, convened in São Paulo and crafted ten theses toward a “New Developmentalism” – the tenets of a new approach to economic theory and policy that nations could embark upon in the aftermath of the current economic crisis. View the “ten theses” and the list of initial signatories at Ten Theses on New Developmentalism.

By a more rational institution

Luiz Carlos Bresser-Pereira, Guest Blogger

The crisis as a whole shows a more general aspect: the governments of States are more rational than the private agents and their enterprises.

During the 30 Neoliberal Years we have learned that the State was the source of all evil; that the private sector was always balanced because it was coordinated by the market, whereas the State, governed by politics, was the object of economic populism and was a major obstacle to growing with stability. Apart from being antidemocratic, this idea was false, because the financial crises demonstrated throughout the years that the market has never been able to control the speculative behavior of private agents. And it was a half-truth in relation to the State, because there are populist politicians, but most of them are fiscally responsible, because they know that their survival depends on this responsibility.

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Downward to Stagnation: Wage policies in times of crisis

Janine Berg

The Triple Crisis Blog is pleased to welcome Janine Berg, Senior Labour Economist at the International Labour Office in Brasilia, Brazil, as a regular contributor.

Not surprisingly wages have fallen during the economic crisis. A new report produced by the ILO, Wage Policies in Times of Crisis, provides evidence on the decline in wage growth during the crisis, and highlights the particularly severe reductions that have occurred in industrialized countries.

The world’s salaried employees suffered a decline in real wage growth from 2.2 percent in 2007 to 0.8 percent in 2008 and 0.7 percent in 2009 (excluding China, due to difficulties with the data). Real wages fell in 12 of 28 industrialized countries in 2008, including Australia (-0.9%), Germany (-0.4%), Italy (-0.7%), Japan (1.9%), Mexico (-2.6%), S. Korea (-1.5%) and the U.S (-1.0%).  And although some countries recovered in 2009 (in some cases due to the fall in inflation), real wage growth continued to be negative in Germany (-0.4%), Mexico (-5.0%), Japan (-1.9%), and S. Korea (-3.3%), whilst France (-0.8%), the U.K (-0.5%), and Russia (-3.5%), also entered into negative territory.  Moreover, these figures likely over-represent real wage growth, as job losses have been more concentrated on low-wage workers, who by no longer working are no longer considered in the sample. By 2009, the ranks of the unemployed had reached 210 million, a global unemployment rate of 6.4 percent.

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Academic Economists to Consider Ethics Code

As economists arrive in Denver, Colorado this week to participate in the annual meeting of the American Economics Association, they will be asked to consider an economist’s code of ethics. This effort is discussed in the following New York Times article by Sewell Chan, and highlights the work of Triple Crisis blogger Gerald Epstein as well as a new book by George F. DeMartino, who will author a guest blog on this subject in 2011.

Excerpt from “Academic Economists to Consider Ethics Code,” by Sewell Chan:

“When the Stanford business professor Darrell Duffie co-wrote a book on how to overhaul Wall Street regulations, he did not mention that he sits on the board of Moody’s, the credit rating agency.

As a commentator on the economy, Laura D’Andrea Tyson, a former adviser to President Bill Clinton who teaches in the business school at the University of California, Berkeley, does not usually say that she is a director of Morgan Stanley.

And the faculty Web page of Richard H. Clarida, a Columbia professor who was a Treasury official under President George W. Bush, omits that he is an executive vice president at Pimco, the giant bond fund manager.

Academic economists, particularly those active in policy debates in Washington and Wall Street, are facing greater scrutiny of their outside activities these days. Faced with a run of criticism, including a popular movie, leaders of the American Economic Association, the world’s largest professional society for economists, founded in 1885, are considering a step that most other professions took a long time ago — adopting a code of ethical standards.”

Read the full article at the New York Times.

Academic Economists to Consider Ethics Code

As economists arrive in Denver, Colorado this week to participate in the annual meeting of the American Economics Association, they will be asked to consider an economist’s code of ethics. This effort is discussed in the following New York Times article by Sewell Chan, and highlights the work of Triple Crisis blogger Gerald Epstein as well as a new book by George F. DeMartino, who will author a guest blog on this subject in 2011.

Excerpt from “Academic Economists to Consider Ethics Code,” by Sewell Chan:

“When the Stanford business professor Darrell Duffie co-wrote a book on how to overhaul Wall Street regulations, he did not mention that he sits on the board of Moody’s, the credit rating agency.

As a commentator on the economy, Laura D’Andrea Tyson, a former adviser to President Bill Clinton who teaches in the business school at the University of California, Berkeley, does not usually say that she is a director of Morgan Stanley.

And the faculty Web page of Richard H. Clarida, a Columbia professor who was a Treasury official under President George W. Bush, omits that he is an executive vice president at Pimco, the giant bond fund manager.

Academic economists, particularly those active in policy debates in Washington and Wall Street, are facing greater scrutiny of their outside activities these days. Faced with a run of criticism, including a popular movie, leaders of the American Economic Association, the world’s largest professional society for economists, founded in 1885, are considering a step that most other professions took a long time ago — adopting a code of ethical standards.”

Read the full article at the New York Times.