Support for a Financial Transaction Tax

A number of the TripleCrisis contributors have joined an international coalition calling for the institution of an international financial transaction tax.  The proposed tax, dubbed the “Robin Hood Tax,” would levy a small charge on trades in financial assets in order to potentially reduce speculation in financial markets, and generate significant revenue that could be invested in public projects or deficit reduction.

Read the economists letter backing the tax.

Read more about the proposed Robin Hood Tax.

Or watch the video:

What Caused the Financial Crisis?

Mehdi Shafaeddin

In this post I will concentrate on the consequences of the application of the neoliberal economic philosophy to the economies of low-income countries, i.e. those that are in the early stages of development and industrialization.  The crisis is not over, as it is a systemic one; it will be repeated more frequently in the future unless the system, and the theory behind it, is modified. The recent crisis is to be a wake-up call for poor countries, in order to change their development strategies, based on neoliberal thinking and “Washington consensus” ideology imposed on them. In this and my next post, after clarifying a couple of concepts, reference will be made to the origin and the root causes of the systemic crisis, and the context in which the recent crisis emerged. A third post will be devoted to the events in the recent crisis. In the last part, I will make a few proposals as remedial measures.

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Carbon Caps: Who gets the cash?

James Boyce

Any policy that limits supply of fossil fuels must raise their price. An inexorable economic logic binds price to scarcity, regardless of whether scarcity arises from OPEC-engineered production limits, climate policies to cap carbon emissions, or other initiatives that keep fossil fuels in the ground.

The key question is who gets the money? As governments move to cap carbon emissions, attention is turning to this hundred-billion-dollar question. In video interviews on the Real News Network, economist James K. Boyce outlines three possibilities:

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Financial Regulatory Reform and US Investment Treaties

Kevin P. Gallagher

The US Department of State is about to conclude its revision of US model investment rules.  The model forms the initial bargaining position for the US in negotiations over Bilateral Investment Treaties (BITS) and Free Trade Agreements (FTAs).   When completed, the Obama Administration hopes to proceed with official negotiations with China, India, Vietnam, and possibly Brazil.

The current “Model BIT” could make it difficult for the US and its trading partners to deploy effective policies to prevent and mitigate financial crises.   The US should ensure that no measures designed to maintain financial stability are actionable under US treaties.

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How to Fire a Central Banker: Lessons from Argentina

Matías Vernengo

In the United States, the mismanagement of the financial crisis, in particular the ill designed Troubled Asset Relief Program (TARP), has led to a wave of populist protests, and to a narrow confirmation vote for Bernanke.  In Argentina, where the recession was considerably milder than in the United States and had no financial cause, the president Cristina Fernandez de Kirchner fired the head of the central bank, Martín Redrado, a holdout from the neoliberal 1990s.

The problem was caused by the plan to the use US$ 6.5 billion of the almost US$ 50 billion of the international reserves accumulated over the boom years, between 2003 and 2008, in which the economy grew at an average of 8.5% per year, recovering spectacularly from the 2001-02 crisis and external default. Redrado, harking back to his neoliberal years, refused arguing that this would violate central bank’s independence.

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The Risks of 21st Century Stagflation

Jayati Ghosh

Well before the global financial crisis finally broke in September 2008, most people in developing countries were already reeling under the effects of dramatic volatility in global food and fuel markets. From late 2006, prices of most primary commodities first increased very rapidly, then collapsed even more sharply from their peaks in May-June 2008.

This was not due to real economic forces, but rather financial activity, specifically the involvement of investors in index funds. Commodities emerged as an attractive investment avenue for financial investors from around 2006, when the US housing market showed the initial signs of its ultimate collapse. This was aided by financial deregulation that allowed purely financial agents to enter such markets without requirements of holding physical commodities. This generated a bubble, beginning in futures markets that transmitted to spot markets as well.

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Introducing the TripleCrisis Blog

Kevin P. Gallagher and Jayati Ghosh

Crises are not new to the world economy, or to developing countries. Indeed, our current predicament is a convergence of at least three crises: in global finance, development, and environment.  These areas are seemingly disparate but actually interact with each other in forceful ways to reflect major structural imbalances between finance and the real economy; between the higher income and developing economies; between the human economic system and the earth’s ecosystems.  This blog seeks to contribute to a more open and global dialogue around these three crises: about how they interact, and how they can collectively be solved.

Though the global financial crisis is seen as having started between 2007 and 2008, the underlying processes have been in operation for much longer. The preceding boom was not only unsustainable, it deeply accentuated existing global inequities.

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