At this time 12 months ago, this column had highlighted how the dying year 2010 could be labeled the year of natural calamities, and predicted more on the way.
Sure enough, the year that has just passed witnessed even worse disasters. If 2010 was marked by the Haiti earthquake, 2011 surpassed that in impact (if not in deaths) by the Fukushima triple tragedy of earthquake, tsunami and nuclear accident.
But Fukushima was only the worst of the calamities that included hurricanes in Central and Latin America, drought in parts of Africa, massive floods in Thailand and elsewhere, and many typhoons and storms in the Philippines.
Triple Crisis blogger Gerald Epstein was recently interviewed by the Real News Network on why stronger banking regulation should focus on eliminating conflicts of interest and ensuring banks function to support the real economy.
Almost two years into dealing with the sovereign debt crisis in the Euro area, the problems in Greece are far from being solved. In fact, the free fall of the Greek economy has made the troika’s plans obsolete. Once again the assumptions about GDP development have proven to be overly optimistic. The economy will probably shrink more than the assumed 3%, current estimates actually see the recession as being twice as strong in 2012 than assumed. Given rising internal tensions, growing protests against further reforms, a disorderly default of the Greek state can no longer be excluded. Greece is encountering increasing pressure to fulfill the conditionality attached to the loans provided by the EU and the IMF. The scenario that the troika of IMF, European Commission and European Central Bank actually does not pay out the next tranche of credit in order to keep up pressure on the government to reform and to consolidate is no longer unrealistic.
The Triple Crisis Blog is pleased to welcome Philip Arestis and Malcolm Sawyer as regular contributors.Philip Arestis is the Director of Research at the Cambridge Centre for Economic & Public Policy and Senior Fellow in the Department of Land Economy at the University of Cambridge, UK, and Professor of Economics at the University of the Basque Country, Spain. Malcolm Sawyer is Professor of Economics at the University of Leeds, UK.
In a recent post (19th December 2011) we argue that the recent ‘fiscal compact’ agreed upon by the European Union (EU)/European Monetary Union (EMU) at their meeting of 8th/9th December 2011 would not deliver. Now that further details have emerged, it is clear that the situation is even far worse than what appeared to be in the first instance. It is now clear that neither the governments of the EMU countries nor the European Central Bank (ECB) have committed themselves to doing enough let alone satisfactorily. The ECB is not prepared to perform the proper role of any central bank, namely the ‘lender of last resort’ function. EMU governments have not made progress on the ‘eurobond’ idea, whereby the EMU members would share the troubled economies burden of debt.
There is a palpable sense of gloom and impending doom in most discussions of the world economy today. Even before, several economists had argued that the excessive optimism about ”V shaped recovery” that was being used to describe the economic revival in 2010 was premature and misplaced, especially as none of the fundamental contradictions of global capitalism that led to the previous crisis had been adequately addressed. But they were once again written off as Cassandras by the financial media, which desperately sought sources of ”good news” and future engines of growth particularly among the emerging markets.
Now even the most stalwart establishment voices are expressing growing concern and pessimism. Oliver Blanchard, Chief Economist at the IMF, has issued what must be an unprecedentedly sombre and even dismal statement at the close of the year, noting that recovery is at a standstill in the advanced economies and recognising that 2012 may face even worse economic conditions than 2008. Read the rest of this entry »
I was at an Occupy Wall Street demonstration this weekend and many clergy addressed the group. One nun told the crowd it was Christmas season and that it was time for something new to be born in America.
It was a nice thought, and I hope that the “something new” is good sense, because it has been a year in which some of the worst economic ideas ever have gained support and are being applied around the world. So here’s my list of the 10 worst economic ideas of 2011:
1. Taxes should be more regressive.
At the top of the list for sheer scandalous insensitivity are Herman Cain’s and New Gingrich’s tax plans for America. Cain and Gingrich are both flat tax advocates. Cain proposes “9-9-9″ — a 9 percent sales tax, 9 percent income tax, and 9 percent corporate tax. He would also eliminate most deductions. Would this raise more or less money? The romantic conservatives claim the lower income tax rate would mean more growth. Never mind that the evidence to support that claim has been found profoundly lacking time and again.
Gillian Tett (“Fears of worse to come fuel debate over capital controls”, December 16) highlights the new and important Bank of England paper on capital flows and financial crises that argues how cross-border capital flows continue to plague the world economy and will continue to do so in alarming ways to 2050. The Bank rightly argues for cross-border regulation and co-ordination on capital flows – traditionally referred to as capital controls.
From 1980s through the early 2000s developing countries faced repeated demands to get their financial houses in order as a condition of financial assistance from the international financial institutions (IFIs) and the world’s leading economies. The Washington Consensus codified the standard conditionality. It tied financial rescue on all manner of draconian policies that were designed to ensure that developing country governments could meet obligations to their international creditors. In pursuit of solvency, few public sector expenditures were exempt from the neoliberal axe. Social welfare spending was slashed, taxes on all but the wealthy and large firms were raised, markets were liberalized, enterprises were sold off to the presumably more efficient private sector (though often the “private sector” were domestic elites with privileged access to the assets at bargain prices), and barriers to international trade and financial flows were rescinded. All of this was done with the expressed goal (among others) of demonstrating worthiness for continued lending by IFIs.
It’s the Christmas season, so why not indulge ourselves? Let’s ask for a few miracles. In fact, we in America have had a miracle and everyone has noticed it, Occupy Wall Street. There was another even bigger one in the Mideast. Not only an Arab spring in Egypt and Libya, but peaceful voting in Tunisa. There may even be a Slovak spring.
So here is my wish list for miracles—ASAP. More or less in order of importance.
Self-awareness in Germany
I wish that Germans would realize their economic dominance is dependent on their indebted neighbors. An economic model that emphasize net exports as a major source of growth is, internationally, a debt led model. It will require buyers of those exports to borrow. Imbalances in the eurozone are not sustainable.
It gets worse. Germany also believes it has the moral right to demand that others suppress wages and government borrowing, ensuring slow growth among their European partners. So I also wish Germany a modicum of rationality in their public discourse. Even right wing columnists recognize that if Germany were on its own due to a break up of the eurozone, the value of the Deutsche Mark would have been driven up, undermining its export advantage. Now Germany is imposing recession in Europe. The flight to German debt, which is keeping their interest rates low, may soon end.