Crony Capitalism, or Plain-Old Capitalism?

Arthur MacEwan, Guest Blogger

Arthur MacEwan is professor emeritus of economics at the University of Massachusetts-Boston and a columnist for Dollars & Sense magazine.

The Export-Import Bank, created in 1934, is a U.S. federal government agency that supplies loans or guarantees loans to foreign firms to finance their purchases of U.S. exports. Its supporters argue that it strengthens the U.S. economy and creates jobs in the United States by bolstering demand abroad for goods produced here.

For the Export-Import Bank to stay in existence, Congress must reauthorize it by the end of September. Its existence, however, has come under attack by the anti-big-government forces of the right. They claim that there is no justification for the government to provide this support for U.S. firms. If the buyers abroad of U.S. goods cannot get financing for the purchases from regular banks—i.e., in the “free market”—the U.S. exporters are charging prices that are too high. That is, the U.S. firms are not effectively competing in the “free market,” and it is not the job of government to subsidize their inefficient operations.

These critics of the Export-Import Bank claim it is simply “crony capitalism,” where well-connected firms are able to get handouts from the government. This, they argue, is not the way “real capitalism” should and can function. For example, in the June 25 edition of National Review Online, with an article titled “The Ex-Im Bank: Crony Capitalism in Action,” the editors wrote that the Bank “hands out generous loans and credit guarantees to a select number of corporations [and] is corrupt and poorly managed. …The bank has a long history of dealing with dodgy firms and doling out suspiciously large amounts of loans to certain companies.”

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Trade and the Triple Crisis

John Weeks, Guest Blogger

A previous article of mine on Triple Crisis trashed the arguments for the international trade proposal called the Trans-Pacific Partnership, and applies as well to the loathsome Trans Atlantic Trade and Investment Partnership. These “partnerships” represent but two more attempts to sell the pernicious nonsense of “free trade”. In my new book, Economics of the 1%, I go to the analytical roots of the neoliberal trade ideology to rubbish the incantation of “gains from (international) trade.”

I recently attended a meeting in London with environmental activists, including a well-known British climate scientist. As a result of that meeting, I realize that my critique of “free trade” was far too timid and narrow. The essential problem is not these attempts by the U.S. bourgeoisie via our government to gain advantage in international markets. The problem is international trade itself. The charts below show why. The two countries with the most exports in 2012 are the United States and China, with Germany and Japan considerably further back (both the U.S. and China over US$2 trillion, Germany at just over US$1.5 trillion).

By no accident, China and the United States are at the top of the pollution list, with Japan #5 and Germany #6. But, “wait,” you say, these are also the largest economies in the world, so the issue is their domestic energy use, not whether what is produced is exported.

Well, actually, No.

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On Argentina’s Secular Decline: Why The Economist is Wrong

The Economist had a few weeks ago an issue on Argentina (here; subscription required), which I wanted to address, but had no time before today. The argument implies that the current Argentine woes (discussed here before) are part of a pattern which is associated to the long decline in income per capita from the late 19th century and early 20th century until now.

The Economist suggests that:

“In 1914 Argentina stood out as the country of the future. Its economy had grown faster than America’s over the previous four decades. Its GDP per head was higher than Germany’s, France’s or Italy’s. It boasted wonderfully fertile agricultural land, a sunny climate, a new democracy (universal male suffrage was introduced in 1912), an educated population and the world’s most erotic dance. Immigrants tangoed in from everywhere. For the young and ambitious, the choice between Argentina and California was a hard one.”

In a sense that’s true. According to Maddison’s data in 1913 Argentina per capita GDP (in 1990s dollars) was 3,797 while France and Germany had respectively 3,485 and 3,648 (data available here). However, the reasons for the decline in the 20th century are based on simplistic notions, typical of the so-called New Institutionalism of North and more recently Acemoglu and Robinson (for a critique go here). In their words:

“Building institutions is a dull, slow business. Argentine leaders prefer the quick fix—of charismatic leaders, miracle tariffs and currency pegs, rather than, say, a thorough reform of the country’s schools.”

Read the rest of this entry »

On Argentina's Secular Decline: Why The Economist is Wrong

The Economist had a few weeks ago an issue on Argentina (here; subscription required), which I wanted to address, but had no time before today. The argument implies that the current Argentine woes (discussed here before) are part of a pattern which is associated to the long decline in income per capita from the late 19th century and early 20th century until now.

The Economist suggests that:

“In 1914 Argentina stood out as the country of the future. Its economy had grown faster than America’s over the previous four decades. Its GDP per head was higher than Germany’s, France’s or Italy’s. It boasted wonderfully fertile agricultural land, a sunny climate, a new democracy (universal male suffrage was introduced in 1912), an educated population and the world’s most erotic dance. Immigrants tangoed in from everywhere. For the young and ambitious, the choice between Argentina and California was a hard one.”

In a sense that’s true. According to Maddison’s data in 1913 Argentina per capita GDP (in 1990s dollars) was 3,797 while France and Germany had respectively 3,485 and 3,648 (data available here). However, the reasons for the decline in the 20th century are based on simplistic notions, typical of the so-called New Institutionalism of North and more recently Acemoglu and Robinson (for a critique go here). In their words:

“Building institutions is a dull, slow business. Argentine leaders prefer the quick fix—of charismatic leaders, miracle tariffs and currency pegs, rather than, say, a thorough reform of the country’s schools.”

Read the rest of this entry »

China-Latin America Economic Bulletin

Jill Richardson, Guest Blogger

This post is a summary of the inaugural China-Latin America Economic Bulletin, from the Global Economic Governance Initiative (GEGI) at Boston University. Triple Crisis contributors Kevin Gallagher and Cornel Ban are the co-directors of GEGI.

As 2013 drew to a close, Boston University’s Global Economic Governance Initiative inaugurated its annual China-Latin America Economic Bulletin. The Bulletin is intended as a go-to source for analyzing and synthesizing trends within the burgeoning China-LAC [Latin America and Caribbean] relationship. It can be a significant challenge to come by reliable data detailing this trade and investment relationship. By providing concrete figures and data, the Economic Bulletin helps to fill in these gaps as well as provide an evidence-based understanding of trends and developments in the increasingly important China-LAC connection.

Many of the key findings of the 2013 Economic Bulletin involve the evolving nature of China-LAC trade. As a whole, LAC exports to China have risen massively since 2000, averaging a 23 percent annual export growth rate. This relatively rosy picture obscures the fact that in recent years this rate has dropped precipitously, slowing to just 7.2 percent growth in 2012. Much of this slowdown can be attributed to falling commodity prices. Despite LAC exports to China growing in volume, price volatility has allowed for stagnant, or even declining, export values.

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How Beer Explains 20 Years of NAFTA’s Devastating Effects on Mexico

Timothy A. Wise

Cross-posted from Global Post.

Mexico’s largest agribusiness associated invited me to Aguascalientes to participate in its annual forum in October. The theme for this year’s gathering was “New Perspectives on the Challenge of Feeding the World.”

But it was unclear why Mexico, which now imports 42 percent of its food, would be worried about feeding the world. It wasn’t doing so well feeding its own people.

In part, you can thank the North American Free Trade Agreement (NAFTA) for that. Twenty years ago, on January 1, 1994, NAFTA took effect, and Mexico was the poster child for the wonders of free trade. The promises seemed endless.

Mexico would enter the “First World” of developed countries on the crest of rising trade and foreign investment. Its dynamic manufacturing sector would create so many jobs it would not only end the U.S.  immigration problem but absorb millions of peasant farmers freed from their unproductive toil in the fields. Mexico could import cheap corn and export electronics.

So much for promises.

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How Beer Explains 20 Years of NAFTA's Devastating Effects on Mexico

Timothy A. Wise

Cross-posted from Global Post.

Mexico’s largest agribusiness associated invited me to Aguascalientes to participate in its annual forum in October. The theme for this year’s gathering was “New Perspectives on the Challenge of Feeding the World.”

But it was unclear why Mexico, which now imports 42 percent of its food, would be worried about feeding the world. It wasn’t doing so well feeding its own people.

In part, you can thank the North American Free Trade Agreement (NAFTA) for that. Twenty years ago, on January 1, 1994, NAFTA took effect, and Mexico was the poster child for the wonders of free trade. The promises seemed endless.

Mexico would enter the “First World” of developed countries on the crest of rising trade and foreign investment. Its dynamic manufacturing sector would create so many jobs it would not only end the U.S.  immigration problem but absorb millions of peasant farmers freed from their unproductive toil in the fields. Mexico could import cheap corn and export electronics.

So much for promises.

Read the rest of this entry »

At the TPPA Open Day

Martin Khor

Last Thursday I took part in an unusual Open Day on the Trans-Pacific Partnership Agreement in Kuala Lumpur.

A thousand people turned up at the event, showing how this trade agreement has aroused great public interest and concern.

The organiser of the half day event was the Ministry of International Trade and Industry (MITI), which had been criticised by several citizen groups as not revealing enough information about the TPPA.

It was unusual because the Trade Minister Datuk Seri Mustapa Mohamed spoke frankly of a “trust deficit” on TPPA between MITI and the public.

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Korea’s Debt Mountain

Jayati Ghosh

SEOUL, the capital of the Republic of Korea, is now one of the “happening” cities of Asia. Psy’s “Gangnam style” (the pop music video that has gone viral online with more than 6 billion hits) that somewhat randomly celebrates the posh modern district of Gangnam is only one of various ways in which the city is supposed to reflect the new cool. There is growing recognition that this city is both vibrant and livable, with its vertiginous high-rise buildings coexisting with clean streets, fine new museums and spots that combine the natural beauty of its forested hills with carefully preserved (or reconstructed) palaces of the Joseon dynasty.

The evident sophistication and confidence of this capital city are relatively recent, indicating the material successes brought about by the much acclaimed and analysed “Korean economic miracle” that lifted a relatively poor economy into developed country status over the course of a generation. It is now recognised that this miracle was not a result of the operation of unfettered market forces. Rather, it was based on active state involvement in shaping the way private agents behaved. This economic success also had its dark side in the brutal dictatorship of Park Chung-hee (whose daughter Park Gyeun-hye was recently elected President). And both of these were enabled by the active support of Western (specifically United States) political and economic power.

This exemplifies the extent to which Korea’s turbulent and frequently tragic history has encapsulated the pulls and pushes of external forces, which outsiders frequently do not recognise. Korea’s history has been significantly driven from without, from the 7th century attempts at domination by the T’ang emperors of China to the Ming takeover of the 15th century to the tug of war between the Qing rulers of China and newly expansionist Japan in the 19th century. The subsequent 20th century division of the country into northern and southern sections was a reflection of the Cold War’s hottest moment. The Korean War in the 1950s, which split the country, was less an internally generated civil war and more the result of the desire of the conflicting foreign powers to maintain their own areas of strategic domination.

Read the rest of this entry »

Korea's Debt Mountain

Jayati Ghosh

SEOUL, the capital of the Republic of Korea, is now one of the “happening” cities of Asia. Psy’s “Gangnam style” (the pop music video that has gone viral online with more than 6 billion hits) that somewhat randomly celebrates the posh modern district of Gangnam is only one of various ways in which the city is supposed to reflect the new cool. There is growing recognition that this city is both vibrant and livable, with its vertiginous high-rise buildings coexisting with clean streets, fine new museums and spots that combine the natural beauty of its forested hills with carefully preserved (or reconstructed) palaces of the Joseon dynasty.

The evident sophistication and confidence of this capital city are relatively recent, indicating the material successes brought about by the much acclaimed and analysed “Korean economic miracle” that lifted a relatively poor economy into developed country status over the course of a generation. It is now recognised that this miracle was not a result of the operation of unfettered market forces. Rather, it was based on active state involvement in shaping the way private agents behaved. This economic success also had its dark side in the brutal dictatorship of Park Chung-hee (whose daughter Park Gyeun-hye was recently elected President). And both of these were enabled by the active support of Western (specifically United States) political and economic power.

This exemplifies the extent to which Korea’s turbulent and frequently tragic history has encapsulated the pulls and pushes of external forces, which outsiders frequently do not recognise. Korea’s history has been significantly driven from without, from the 7th century attempts at domination by the T’ang emperors of China to the Ming takeover of the 15th century to the tug of war between the Qing rulers of China and newly expansionist Japan in the 19th century. The subsequent 20th century division of the country into northern and southern sections was a reflection of the Cold War’s hottest moment. The Korean War in the 1950s, which split the country, was less an internally generated civil war and more the result of the desire of the conflicting foreign powers to maintain their own areas of strategic domination.

Read the rest of this entry »