The crisis in the eurozone is leading, once again, to the adoption of policies such as bail-outs and austerity that belong to the neoliberal paradigm that partly precipitated the crisis. In fact, a feature of the recent global conjuncture, starting with the 1997 crisis in East Asia and culminating in the financial crisis and Great Recession of more recent date, is that while economic events have discredited neoliberalism as an economic ideology, it continues to dominate policy discourse and practice. One reason is, of course, the continued domination of the global economy by finance capital.
Who Killed the Euro?
Before the Great Recession it was common to suggest that the international reserve position of the dollar was in jeopardy, and that a crisis could generate a run on the dollar. Yet, the unexpected casualty of the crisis was the euro. If there were any doubts about the demise of the euro after the Greek crisis these have been lifted by the Irish crisis. Who did it? There is no need for a CSI team to pour over the evidence; the culprit has left its fingerprints all over the bloody scene. No, not the butler, it was the European Central Bank (ECB).
In the United States the crisis led to an effort by the Fed to maintain the interest rate on long-term government debt at low levels, with the controversial quantitative easing policy. By buying great quantities of treasuries, the Fed not only keeps stable bond prices and low interest rates, but it also provides assurances that Treasury bonds remain a secure asset. That allows the US Treasury to maintain high fiscal deficits on a sustainable basis.
European Debt Crisis and “Currency Wars” Halted G-20 Progress
Martin Khor
Part of a Triple Crisis series on the Nov. 11-12 G-20 meetings.
Triple Crisis blogger Martin Khor published the following opinion article for the Malaysia Star on the two issues that prevented progress at the G-20 meetings in Seoul: the new financial near-crisis in Europe and the ongoing debate about the competitive devaluation of currencies.
Inconclusive end to G-20 summit
The world economy remains in a web of serious problems with the potential to break out in new crises. The G20 summit last week discussed them but could not agree on the causes or how to resolve them. Even as the G20 leaders were meeting in Seoul, the real drama was taking place half a world away, as Europe stood on the brink of a new financial crisis.
Ireland faced a big jump in the interest cost of its debt, arising from (and giving rise to) fears that it would have to be bailed out, like Greece some months ago, or even face a debt default.
It seems like the crisis of investors losing confidence could also spread to Portugal, Spain and Italy.
European Debt Crisis and "Currency Wars" Halted G-20 Progress
Martin Khor
Part of a Triple Crisis series on the Nov. 11-12 G-20 meetings.
Triple Crisis blogger Martin Khor published the following opinion article for the Malaysia Star on the two issues that prevented progress at the G-20 meetings in Seoul: the new financial near-crisis in Europe and the ongoing debate about the competitive devaluation of currencies.
Inconclusive end to G-20 summit
The world economy remains in a web of serious problems with the potential to break out in new crises. The G20 summit last week discussed them but could not agree on the causes or how to resolve them. Even as the G20 leaders were meeting in Seoul, the real drama was taking place half a world away, as Europe stood on the brink of a new financial crisis.
Ireland faced a big jump in the interest cost of its debt, arising from (and giving rise to) fears that it would have to be bailed out, like Greece some months ago, or even face a debt default.
It seems like the crisis of investors losing confidence could also spread to Portugal, Spain and Italy.
Consequences of the Financial Crisis: The Responsibility of the State
The public discussion about the root causes and consequences of the financial crisis seems to be over before it really began. In Europe, the discourse focuses on the astonishing economic recovery, rather than the roots of the crisis and how we can prevent a recurrence.
What would it take to prevent a recurrence? In addition to rebalancing the relationship between the state and the financial sector, the state must regain its dominance and its capacity to act, independently from the financial sector. What might this take?
Spotlight G-20: Capital Controls– They're Not Just For Developing Countries
Kevin Gallagher and Stephany Griffith-Jones
Part of a Triple Crisis series on the Nov. 11-12 G-20 meetings.
Triple Crisis bloggers Kevin Gallagher and Stephany Griffith-Jones published the following opinion article in the Guardian on G-20 leaders’ concerns about US dollar devaluation, in which they propose cooperative capital controls as a potential solution to the QE2 debate.
How the US can fix its QE2 problem
Ben Bernanke has been criticised from different sides and perspectives for quantitative easing. From one side, inflation hawks prefer austerity over expansion. Those who favour expansion and growth have valid concerns that it may not work and, instead, have negative global effects. At the G20, the United States got criticised – rightly – by emerging countries for the negative impact of QE2 on their economies.
Spotlight G-20: Capital Controls– They’re Not Just For Developing Countries
Kevin Gallagher and Stephany Griffith-Jones
Part of a Triple Crisis series on the Nov. 11-12 G-20 meetings.
Triple Crisis bloggers Kevin Gallagher and Stephany Griffith-Jones published the following opinion article in the Guardian on G-20 leaders’ concerns about US dollar devaluation, in which they propose cooperative capital controls as a potential solution to the QE2 debate.
How the US can fix its QE2 problem
Ben Bernanke has been criticised from different sides and perspectives for quantitative easing. From one side, inflation hawks prefer austerity over expansion. Those who favour expansion and growth have valid concerns that it may not work and, instead, have negative global effects. At the G20, the United States got criticised – rightly – by emerging countries for the negative impact of QE2 on their economies.
Spotlight G-20: Where’s the Growth Supposed To Come From?
Jayati Ghosh
Part of a Triple Crisis series on the Nov. 11-12 G-20 meetings.
Have governments everywhere simply lost their marbles? Not much emerged from the Seoul G-20 Summit – and definitely not anything really desirable in the form of coordinated Global Keynesian policies (of the kind that Matias Vernengo has advocated in this blog). But then, quite frankly, not much was really expected to come out, given the downplaying of expectations and the volume of discordant notes that preceded the Summit.
This reflects the absence of a global economic leader willing and able to fulfill the roles identified by Charles Kindleberger: discounting in crisis; countercyclical lending to countries affected by private investors’ decisions; and providing a market for net exports of the rest of the world, especially those countries requiring it to repay debt. For obvious reasons, the US cannot currently do these, and there is no evident alternative. That is why coordination is so critical right now for international capitalism.
Spotlight G-20: A Post Mortem
Another in the Triple Crisis Blog’s series, Spotlight G-20, which has featured posts by a wide range of analysts, including Gerald Epstein, Stephany Griffith-Jones, Martin Khor, Jane D’Arista, and Ilene Grabel and Ha-Joon Chang and stimulated responses from Paul Krugman among others.
The failure of the G-20 foreclosed the export-led recovery scenario. Geithner’s proposal to limit imbalances to 4% of GDP and to force the appreciation of the currencies of the surplus countries, went nowhere as expected. So we are back to the domestic economy. Paul Krugman argued provocatively in one of his last posts that to solve the ‘deficit problem’ we should rely on death panels and sales taxes.
By that he means simply that health costs will have to be reduced and that tax revenues will have to increase, and Value Added Taxes (VAT) would be the best solution. He also notes that the well-known health and tax specialist Henry Aaron defends a similar plan to reduce the deficit. These views would also be an antidote to the president’s deficit commission plan.
What History, and the Budget, Bodes for the Tea Party
Mark Blyth and Akim Reinhardt, Guest Blogger
The results are in from the US midterms and as expected the outsiders are the new insiders. Tea Party candidates continue to make inroads. Rubio and Paul succeeded where O’Donnell and Whitman failed, but the momentum is theirs. From this point on the Democrats’ nightmare is that for the next two years these ‘no-compromise’ Republicans will produce policy gridlock and blame the Democrats for it. The anger that brought them to power will build in the face of a staled economy and a stalled Congress, and more such candidates will be elected in 2012, possibly even a President bearing their mark. But even if this happens will they really be able to radically alter American politics and the trajectory of federal spending? It is perhaps worthwhile then to look back upon similar ‘outsider’ eruptions in American politics to ask if the Tea Party really will mark a sea change in American politics.