The 1997 E. Asian financial crisis and world trade

Loomis in a Lawyers Guns & Money post linked to this piece that in turn linked to this piece by Dean Baker.  I was particularly interested in Baker's point that many poorer countries started running large trade surpluses with most of the developed world after the '97 East Asian financial crisis.  Governing elites in the S.E. Asian countries after the crisis felt they needed to build up large foreign exchange reserves (and were also, in effect, told to by the IMF); hence, the need to increase their exports as much as possible to the rich countries.  The U.S., unlike Europe and Japan, was running a trade deficit with these countries before the '97 crisis, but the U.S. trade imbalance with them got larger after that, peaking in 2005.  One result was increased loss of U.S. manufacturing jobs.  Anyway, you can read the links for the details of the argument.

Everything becomes an acronym

I heard, via C-Span radio, part of a briefing session for reporters (conducted by academic or think-tank types) on the Pres.'s upcoming trip for the APEC (Asia-Pacific Economic Cooperation) meeting and the G-20 meeting. One of the speakers, in discussing the G-20 economic agenda, referred to "[tax] base erosion and profit shifting," or as he put it: "'BEPS' in the terminology." With a trillion dollars flowing out of developing countries (broadly defined) each year as a result of tax evasion and other illegal practices, and with corporations always searching for ways to escape paying taxes, BEPS is a serious problem for governments. But I guess everything has to become an acronym, irrespective of its seriousness (or lack thereof).   

From economic growth to a 'steady state' economy

I don't write a lot here about environmental and resource issues, mostly because I feel I lack the required expertise to say something valuable. But I recently looked at this piece by an Australian philosopher named Rowan (E. Loomis linked to this which in turn linked to it), and it raises some questions that need to be discussed more widely. As Rowan points out, even the most resource-efficient, 'clean' versions of economic growth are not sustainable propositions in the long term: eventually the world will run out of physical space (for the "stuff" that people are using plus the non-bio-degradable "stuff" they have thrown out), and well before that happens raw materials will have been depleted. The way to avoid this is to transition over time to a non-growth, steady-state global economy, while ensuring, or so one would hope, that it is also marked by considerably less poverty and more material equality than the present system. Sounds like a tall order, but the alternatives if it doesn't occur will be very unpleasant. Such a transition might (probably will, I suspect) require the wealthy and the upper-middle-classes in the 'developed' world to give up some of the "stuff" that they currently view as either necessary or desirable props of their existence. 

The alternative to thinking about these issues and doing something about them will be an eventual (note "eventual" not "imminent") collapse of civilization. If it does happen, it will occur, I would guess, several hundred years after I am no longer around. But that isn't too much consolation. Humans, probably uniquely among animals, have the capacity to think about the long-term future, and that really is something more of us should do more often.

Loomis on Bangladesh's 'garment capitalists'

In this post E. Loomis criticizes the NYT for focusing on the Bangladeshi middlemen and failing to note that the apparel companies could cut them out of the picture if they wanted. Maybe so; presumably there are reasons the apparel companies find it advantageous not to. Dependency theorists used to talk a good deal about the local classes which benefited from their ties to multinational capital. Maybe dependency theory's not that passé after all.     

Natural gas and political turmoil

Erik Voeten links to Charles Mann's article which is about, in Voeten's words, "the potential deleterious consequences of finding large quantities of natural gas (methane hydrate) underneath the seafloor." Voeten's post and Mann's article suggest that among these consequences could be increased political instability, as regimes now propped up by oil become weaker and -- this point is the one Voeten stresses -- as countries become less dependent on oil imports. Dependence on oil imports makes the dependent countries co-operative and leads them to behave like good international citizens, lest turmoil interfere with the international flow of petroleum on which they rely: so say Voeten and Michael Ross in a paper on SSRN to which Voeten links.

Having only skimmed Mann's article, my off-the-cuff reaction is that the more serious potential deleterious effect of methane hydrate discoveries is that they will slow down the shift to renewable energy sources (solar and wind). Mann mentions this at the end of his piece. That seems like a fairly certain consequence of new natural gas discoveries, whereas the argument about political consequences seems somewhat more speculative to me. For instance, I doubt that its current oil-dependence has all that much of a constraining effect on U.S. foreign policy. YMMV.

May Day link

Since it's May Day, I'm linking this Boston Review forum on global labor standards (h/t), even though I haven't had a chance to read it yet.

The yuan saga continues

The Chinese central bank's somewhat vague statement that it will move toward a "more flexible" exchange rate has drawn a range of reactions, from welcoming to highly guarded. This will be an important issue at the G-20 and beyond.

Brooks's nonsense about Haiti and poverty

I hadn't intended to post again this month, but this passage from David Brooks's NYT column today (hat tip: HC) is beyond the pale in trotting out stale, dubious clichés about the alleged cultural roots of poverty:

"As Lawrence E. Harrison explained in his book 'The Central Liberal Truth,' Haiti, like most of the world’s poorest nations, suffers from a complex web of progress-resistant cultural influences. There is the influence of the voodoo religion, which spreads the message that life is capricious and planning futile. There are high levels of social mistrust. Responsibility is often not internalized. Child-rearing practices often involve neglect in the early years and harsh retribution when kids hit 9 or 10."

The notion that these things are why Haiti is poor is arrant nonsense. In fact I've just read the whole column and virtually the whole thing is nonsense. It starts at the very beginning of the piece, where Brooks confuses GDP growth with poverty alleviation. The two are related but they are not the same. You can have a lot of GDP growth without much poverty alleviation, and vice-versa. This has been obvious for decades. Then there's all this stuff about culture and poverty. It's a convenient device to obscure the way in which global institutional and economic structures (in which we're all complicit) create conditions that facilitate the continuation of poverty and maldistribution. To be sure, there are local differences. The Dominican Republic is much better off than Haiti. But is that because they have different cultures, because the Dominican Republic has "a culture of achievement" and Haiti doesn't? I don't think so. In all likelihood it's a result of complicated histories (including U.S. occupation) and the different ways they are positioned in the regional and global economies, among other things.

I'll be the first to admit I don't know much about Haiti, except what I see and read in the media. But David Brooks knows nothing about global poverty and its causes and possible solutions. An intelligent seventh-grader could have written a better column than this piece of garbage.

What about the Tobin tax?

Here (latter part of the article).

Annals of (apparently) bad predictions

Economists have been doing some soul-searching recently (see recent posts, for example, at Crooked Timber and Brad DeLong's blog for discussion and references), but economists aren't the only ones who have some less-than-great predictions to their (dis)credit.

I remember reading political scientist Steven Weber's article "The End of the Business Cycle" when it appeared in Foreign Affairs in 1997 (July/August issue). Here are the first two sentences of the summary: "The waves of the business cycle are becoming ripples. The recent American combination of minimal inflation and very low unemployment may not be an aberration, but the beginning of a new worldwide trend."

If you have a login and password, you can read the whole article at the Foreign Affairs site. Just search on the author's name.

Robert Lawrence on why the U.S. auto companies have loved to build trucks

A very interesting story, which I did not know and which goes back to the U.S.-E.C. trade quarrels of the '60s.

If wishes were horses then beggars would ride

Economic crises, while bad for those living through them, are often good for the reputations of past radical thinkers. There has been some talk recently of the renewed relevance of Marx and perhaps also some talk about the old Marxist debates on "finance capital." The phrase came to mind when I read Jason Schulman's review of Robert Reich's Supercapitalism in the spring '09 issue of Democratic Left. Schulman writes:

"Today, capitalism is dominated by finance capital, abstract capital.... Subordinating productive capital to itself, finance capital makes the economy function on a short-term and unproductive basis. It is therefore fundamentally predatory and parasitic, increasing investment in circulation rather than production -- spending vast levels of resources on income property [sic], commodity, equity and bond speculation."

To the fairly standard complaint about excessive speculation, Schulman adds the morally charged epithet "parasitic," and he goes on to say that the U.S., where only 15 percent of the labor force "is directly involved in actual production," acts as "a parasite in the world economy."

While I happen to agree that it would be better if a larger percentage of people in the U.S. made things as opposed to pushing paper (or -- dare I say it -- writing blogs!), I'm not sure I entirely buy the notion that the production of tangible goods is non-parasitic and all other economic activity is parasitic upon it. This is a quibble, however, since I do not of course want to speak up in favor of short-term speculation (who does?).

Writing in a democratic socialist publication, Schulman asserts, not surprisingly, that Reich in his book displays the timidity characteristic of New Deal liberals. Reich notes trends but fails to explain them (Schulman says), and "Reich fails to understand...that the American state....is very much a capitalist state...part of an international state system, subject to the world market, through which capital reigns."

Oh boy. Anyone up for a re-run of the Miliband-Poulantzas debate? Hmm, not right now, I'm not even typing this at my home computer.

Moving right along, we come to the very end of Schulman's review (a longer version of which is apparently going to appear in the journal New Political Science). Here there is this sentence: "...the fight for economic democracy is intrinsically tied to the fight for greater political democracy than capitalists and their political representatives will ever be willing to accept: to go beyond the freedoms of speech, assembly, association, movement, etc., and onto democratic control of the economy and real control of the state."

Now, I agree with Schulman on the need for "democratic control of the economy." (I wouldn't be a member of the organization that publishes Democratic Left if I didn't.) There's just one little problem: leftists have been calling for democratic control of the economy for decades, with distressingly little to show for it in terms of results. Am I blaming the left for all the malign world-historical events, from the breakdown of the Keynesian accommodation to the rise of neoliberalism, that have occurred in the last 30 years? Of course not. But I do think that, as someone who read Michael Harrington as a teenager and joined DSOC when I was in high school, I am entitled to be just a little bit weary when, roughly 35 years later, I read yet another series of clarion calls for "democratic control of the economy," having read quite a few such calls in the intervening years.

Democratic control of the economy. Democratic control of investment. Genuine political and economic democracy. Transcending capitalism.

Great. I'm all for it. But I'm not holding my breath.

Pakistani brothers in an unlikely line...

...the manufacture of garments used by Americans and Europeans into bondage and fetishes.

They complain that their profits have fallen since trade unions, illegal under Musharraf, are now legal. Can't say I feel sorry for them on that score.

[Hat tip: Chris Blattman]

Bonnie Honig on 'Slumdog Millionaire'

In a remarkable column on 'Slumdog Millionaire' (published in Indian Express last month), political theorist Bonnie Honig reads the movie as "a meditation on the contradictions of democracy and the ideological faces of global capital."

This is the kind of piece that probably should be read on the page not the screen, so, having not yet printed it out but just read it on the computer (and read it somewhat hastily at that), my reactions must be tentative. What Honig says about the movie's peddling a fantasy that the global capitalist economy rewards human singularity, when in fact it doesn't, seems right. But the movie's consciousness of the fantasy-like quality of its plot (among other things) prevents it, I would suggest, from being an apology for capitalism (and I suspect Honig would agree).

Where I am less convinced by the piece is its argument about democracy. What makes Jamal's story a "tale of democracy," Honig says, is its "dependence on chance," and she quotes Jacques Rancière on contingency's link to democracy. I do not really see this, at least not as clearly as she does. It's also telling, I think, that the words "justice" and "injustice" do not appear in the column. If instead of citing Rancière, Lacan, and Hannah Arendt, Honig had quoted, say, Amartya Sen or Thomas Pogge, the column might have had a somewhat different flavor. That said, this piece is still worth reading and, indeed, worth printing out.

[Hat tip: The Virtual Stoa]

Almost everyone is a Keynesian now...

...except the journalists asking the questions, as Peter Howard observes.

When economic isolation doesn't seem so bad

In recent years, most (not all) mainstream economists have argued that developing countries do best when they are integrated into the global economy to the greatest extent possible. That might have been true when the global economy was, after a fashion, working. Now that the global economy is in crisis, however, the advantages of not being fully integrated are becoming apparent. An interesting article in the Wash Post today, somewhat provocatively titled "The End of American Capitalism?," includes the following passage in which the head of the IMF notes that African countries are relatively insulated from the most damaging effects of the crisis by virtue of their comparative lack of exposure to the world economy:

"'Obviously the crisis comes from an important regulatory and supervisory failure in advanced countries . . . and a failure in market discipline mechanisms,' Dominique Strauss-Kahn, the IMF's managing director, said yesterday before the fund's annual meeting in Washington.

"In a slideshow presentation, Strauss-Kahn illustrated the global impact of the financial crisis. Countries in Africa, including many of those with some of the lowest levels of market and financial integration and openness, are now set to weather the crisis with the least amount of turbulence."

Of course, there are virtually no truly autarkic economies, so all will be affected, but it's a matter of degree. There are other interesting passages in this article, but I'll let readers ferret them out for themselves.

p.s. What the article says about China is particularly worth noting. See also this post from D. Rodrik.

Hoarding and panicking

Watching coverage of the financial crisis some hours ago, I heard one or two commentators say that people are "hoarding cash." The verb "to hoard" has a somewhat old-fashioned ring to my ears, conjuring up images of misers in Victorian novels mooning over their gold and silver. Presumably what it means in this context is that people are withdrawing cash from their banks and storing it (or secreting it) in their homes. If this is indeed occurring, it suggests that "panic" (from the Greek panikos: of sudden fear, as supposedly inspired by the god Pan [to quote my dictionary]) may be the right word to apply to the current situation. (Alternatively, "people are hoarding cash" could just be a dramatic way of saying "people are not spending as freely as they ordinarily do.")

On a somewhat although not totally unrelated note, the PBS news program 'Worldfocus' made its debut in this area today. The idea -- a half-hour program drawing on the reporting of various news organizations -- is a sound one, though I thought the first show's execution and content were uneven. It did include a good report on the impact of rising food prices on the poor (and the not-so-poor) in Kenya.