The world after Keynes

January 14th, 2009 · No Comments

Stuart Holland argues in Red Pepper magazine that whilst Keynes is back in fashion, he did not anticipate many changes that have taken place in recent decades (transnationalisation of capital and corporations), neither did he recognise that the state itself might need to become an entrepreneur and drive long term innovating investment through public ownership. Holland argues that current borrowing to invest should be led by governments (rather than the private sector), be invested in social and environmental as well as economic spheres, be based on redistribution of wealth, and emphasise social advances above economic productivity.

The global financial crisis has vindicated those who have fought for 30 years against the delusion of Milton Friedman that state intervention was the principal economic problem and deregulation the solution. Former French prime minister Michel Rocard has written that he regrets that Friedman is dead since, were he alive, he should be tried for crimes against humanity. Yet what can or should be done now is not simply a matter of trampling on the grave of Friedman and resurrecting Keynes.
[Read more →]

→ No CommentsTags: Financial Architecture · Participatory Economics

Comic guide

January 9th, 2009 · No Comments

Explaining the financial and economic crisis in accessible terms has always been a challenge, especially when the powers-that-be are very keen to obscure what is going on. IPS together with Jobs for Justice have just released a downloadable comic book that goes some way in helping explain the causes of the crisis, debunking a few myths along the way. Check it out on their website http://economicmeltdownfunnies.org/

→ No CommentsTags: Financial/Economic Crisis

If not capitalism, then what?

January 5th, 2009 · 1 Comment

Red Pepper magazine has put together an interesting series of articles in the light of the financial crisis which are available on their website as well as their magazine:

→ 1 CommentTags: Financial Architecture · Financial/Economic Crisis · Participatory Economics

The Coming Capitalist Consensus

December 31st, 2008 · No Comments

Walden Bello argues in Foreign Policy in Focus that economic and political elites, from Prime Minister Gordon Brown to economist Joseph Stiglitz, are converging on Global Social Democracy as a solution to the current economic crisis. But this assumes a continued emphasis on global integration over local alternatives, the primacy of the market, technocratic top-down approaches and the continuation of monopoly capitalism. Progressives should not accept these limitations but instead aspire to paradigms of social organisation that aim for equality and participatory democratic control of both national and global economy.

Not surprisingly, the swift unraveling of the global economy combined with the ascent to the U.S. presidency of an African-American liberal has left millions anticipating that the world is on the threshold of a new era. Some of President-elect Barack Obama’s new appointees – in particular ex-Treasury Secretary Larry Summers to lead the National Economic Council, New York Federal Reserve Board chief Tim Geithner to head Treasury, and former Dallas Mayor Ron Kirk to serve as trade representative – have certainly elicited some skepticism. But the sense that the old neoliberal formulas are thoroughly discredited have convinced many that the new Democratic leadership in the world’s biggest economy will break with the market fundamentalist policies that have reigned since the early 1980s.

One important question, of course, is how decisive and definitive the break with neoliberalism will be. Other questions, however, go to the heart of capitalism itself. Will government ownership, intervention, and control be exercised simply to stabilize capitalism, after which control will be given back to the corporate elites? Are we going to see a second round of Keynesian capitalism, where the state and corporate elites along with labor work out a partnership based on industrial policy, growth, and high wages – though with a green dimension this time around? Or will we witness the beginnings of fundamental shifts in the ownership and control of the economy in a more popular direction? There are limits to reform in the system of global capitalism, but at no other time in the last half century have those limits seemed more fluid. [Read more →]

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Reviewing 2008: Looking towards 2009

December 31st, 2008 · No Comments

All the papers are full of reviews of 2008 which not surprisingly focus on the financial and economic crisis. Not all admit that they failed to predict the crisis in their reviews the previous year. Perhaps the Financial Times is keen to forget its headline a year ago in its predictions for 2008: “No US recession.”

Dean Baker of CEPR on “Beat the Press” does a good job of showing how US newspapers are still misunderstanding the nature of the crisis that  goes deeper than a credit crunch.

Richard Murphy of Tax Research UK has his own review of 2008 which notes some of the openings for actions on tax havens, the possibility of a Green New Deal that have arisen from the crisis.

Meanwhile in a few other articles that you might have missed:

New York Times has a compelling piece on how Washington Mutual (Wamu) built its bank on very shady loans at the height of US de-regulation. With its stories of execs snorting meths, commissions for completely unrealistic loans, sweatshop conditions for some staff, it provides a fascinating insight into the extremes that financial capitalism took in the US.

AP finds out that top executives of banks bailed out by the US government received $1.6 billion in salaries, bonuses and other benefits in the previous year.

→ No CommentsTags: Financial/Economic Crisis

TNI videos on the financial crisis

December 18th, 2008 · No Comments

Here are two videos from the TNI seminar held in Brussels on 10 December. The first is a presentation by Francois Houtart, a member of the UN High Level Task force on the Financial Crisis in which he calls for tackling the root causes of the crisis. Journalist Sue Branford reports back on Latin America’s response to the crisis.

Francois Houtart about the financial crisis
Uploaded by transnationalinstitute

Sue Branford about the financial crisis
Uploaded by transnationalinstitute

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A few links – 16 December 2008

December 16th, 2008 · No Comments

Global Labor Strategies have written an interesting series of posts analysing the Beijing Declaration (posted on this blog, now with more than 470 sign-ons). The first piece analysed the vision, the second the programme for change, and most recently they have put forward some great ideas on next steps including exposing perpetrators of the crisis, building allies in places of power and amongst certain countries, projecting concrete demands, and helping people at the grassroots meet their survival needs by organizing themselves and connecting with each other.

In terms of finding allies, one place to start could be the little reported meeting of financial ministers of the six Alba countries (Bolivia, Honduras, Nicaragua, the Dominican Republic, Venezuela, Cuba, with Ecuador) in Caracas in November, that looked to respond to the financial crisis. The meeting resolved to look into establishing a common currency (the ‘Sucre’) to diminish dependence on the dollar, to bolster the Bank of the South to weaken influence of the IMF and World Bank, and to strengthen the alternative trade block, the Bolivarian Alternative for the Americas (ALBA). They also gave backing to Ecuador who have said they will not pay back illegal and illegitimate debts.

Another place for potential allies in places of power is the new UN high level task force set up the UN General Assembly President Miguel d’Escoto, whose openess to more radical visions and advisors is causing some upset at Foxnews! Yet he is elected by the Assembly so his new taskforce chaired by Stiglitz will have  considerable weight. See the Terms of Reference (PDF, 2.2 MB)

Daniel Bradlow for Foreign Policy in Focus argues that given that global elites are focused on financial regulation rather than broader issues of global governance and justice, popular movements should push a progressive agenda for regulatory reform based on community reinvestment, licensing requirements for hedge funds, sovereign wealth funds, introduction of impact assessments for lending, improving access to financial services for low-income population, and ensuring greater accountability in international financial coordination.

Ralf Martin on Open Economy argues that governments should seize this chance to promote fiscal stimulus that is also pro-environment and take the occasion to embrace pollution taxes (perhaps starting in 2 years) to pay for the borrowing that the stimulus undoubtedly requires.

Dean Baker of CEPR puts the case for a Financial Transaction Tax that could generate $100 billion in the US.

→ No CommentsTags: Financial Architecture

Capitalist Fools

December 16th, 2008 · No Comments

Joseph Stiglitz in Vanity Fair argues that in the debate over remaking financial policy, it is crucial to get the history right about the causes of the crisis. He puts the blame on five key decisions and moments: Reagan’s appointment of free market zealot Greenspan as Chair of the Federal Reserve, the repeal of Glass-Steagall act and other laws that increased de-regulation of the financial sector, Bush’s tax cuts for the rich and unprecedented low interest rates that encouraged excessive borrowing and lending, failure to tackle stock options or incentive structures for rating agencies which instead encouraged everyone to hide the real figures, and finally the misdirected actions of the Bush administration to the crisis that bailed out bankers and shareholders but not those facing foreclosures of their homes.

“There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history – a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it’s crucial to get the history straight.

What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road – we had what engineers call a “system failure,” when not a single decision but a cascade of decisions produce a tragic result. Let’s look at five key moments. [Read more →]

→ No CommentsTags: Financial/Economic Crisis

Casino Crash: the end of neo-liberalism?

December 15th, 2008 · 2 Comments

The greatest financial crisis since the Wall Street crash of 1929 has been met by an unprecedented set of government actions to stem the tide of destruction. But is there also a coming sea change in economic theory and practice, as well as in politics, in the shift from a free market to intervention in the market? Is this the end of ‘capitalism as we know it? What are the power politics and prospects to achieve change? What are the alternatives to these catastrophically failed ideas behind the ‘neoliberal globalization’ and ‘corporate globalisation?

Audio recording of the whole seminar is now online

[Read more →]

→ 2 CommentsTags: Climate Change · Corporate Globalisation · Español · EuropeanUnion · Financial Architecture · Financial/Economic Crisis · International Institutions · North America · Participatory Economics

The Swinging of the Pendulum: The Global Crisis and Beyond

December 14th, 2008 · 1 Comment

This crisis is very likely the beginning of a new phase of reform and adaptation in the history of capitalist development, but which direction will this take? Will the ‘markets’ emerge re-empowered and strengthened or will the state resume its role in guiding and restraining the markets, redistributing wealth in the interest of the welfare and security of all citizens? If a radical public response to the crisis can be mobilised quickly, the crisis can be an opportunity for radical transformation, argues Barry Gills in the article available on the website of Globalizations journal.

→ 1 CommentTags: Financial Architecture · Financial/Economic Crisis · International Institutions · Participatory Economics · Uncategorized

Some links – December 9th

December 9th, 2008 · No Comments

A little roundup of some interesting articles out on the net:

CEPR unveil the scale of the economic collapse in the US, showing how half a million jobs have been lost in the last three months.

But workers are not taking this lying down: in Chicago, laid off workers have occupied a factory and say they won’t go home without assurances they’ll get severance and vacation pay. Their slogan: “You got bailed out, we got sold out” to Bank of America, who received $25 billion from the government’s financial bailout package and as creditors of the factory have refused to allow payments to the workers.  The story is a microcosm of who has benefited and suffered from the crisis, but also a symbol of resistance that is likely to grow.

Robert Weissman of Multinational Monitor and Foreign Policy in Focus does a useful annotated analysis of the G20 statement.

Ann Pettifor on Debtonation wonders why politicians have been so ineffective and wrong-headed in their approach and concludes it is based on their ties to the financial sector which prevents them from taking back control.

→ No CommentsTags: Corporate Globalisation · Financial/Economic Crisis

China adopts sustainable lending laws

December 3rd, 2008 · No Comments

Banktrack have released an interesting new report, showing how the Chinese government have introduced regulations that cut lending to energy-intensive industries and increased funding to green projects. The picture on financing and results is a mixed one, but as Michelle Chan, one of the contributing authors to the report argues, it sets an important precedent: “China’s banking crisis led to massive government bailouts starting in the late ’90s. But it wasn’t ‘no-strings-attached.’ Banks had to make drastic changes, and new regulations forced banks to follow prudent lending practices, including taking the environment into account. Governments around the world should demonstrate the same vision as they nationalize their banks and reform their financial sectors.”

Press release below and on Banktrack website:

A new report released today by BankTrack analyzes green finance policies introduced in China over the past 18 months that are designed to curb the country’s growing environmental problems, such as pollution and climate change. [Read more →]

→ No CommentsTags: Climate Change · Financial Architecture

UN last chance for real reforms?

December 3rd, 2008 · No Comments

After the G20 managed to agree on little more than to meet again, and with few signs of radical proposals at an official government level elsewhere, it seems it has been left to the UN to push for deeper more structural responses to the crisis.

UN General Assembly President Miguel D’Escoto has set up a high level task force chaired by Joseph Stiglitz. The commission also includes some other potentially more radical voices such as:  Francois Houtart active in the World Social Forum, Malaysian economist Jomo Sundaram who during the Asian financial crisis was an early advocate of capital control measures and Pedro Paez, Ecuadorian government minister who has spoken out in favour of shifting from models of economic growth to models of wellbeing.

“The international community has the responsibility and the opportunity to identify longer-term measures that go beyond protection of banks, stabilization of credit markets and reassurances for big investors,” said Mr. D’Escoto as he launched the UN task-force.

Of course it is doubtful whether the task force will have any traction, given the lack of support by major economic powers. An article listed below, which includes calls by UN economists for deep reforms, suggests that the US is against the initiative.  Now there’s a surprise! Still it will be an important body to keep an eye on in terms of recommendations and whether they pick up on proposals, such as those in Beijing. [Read more →]

→ No CommentsTags: Financial Architecture · Financial/Economic Crisis · International Institutions

Global Europe and the financial crisis

December 3rd, 2008 · No Comments

Myriam Vander Stichele, TNI fellow argues that the financial crisis in Europe resulted from a mismatch between liberalisation of financial services and lack of supervision of European cross-border financial conglomerates. Pressure from the UK government and financial corporations to compete with the US stymied attempts at regulation and led to the UK aggressively pushing financial services liberalisation in international trade agreements.

The issue is still very live with France recently watering down proposals at EU level for European wide supervision of cross-border insurance companies. Financial institutions not only need to be supervised, they must be required to invest in social and environmental areas to tackle the climate and food crises. [Read more →]

→ No CommentsTags: Climate Change · EuropeanUnion · Financial/Economic Crisis · Free Trade Agreements

What to Do

November 30th, 2008 · 1 Comment

By Paul Krugman

What the world needs right now is a rescue operation. The global credit system is in a state of paralysis, and a global slump is building momentum as I write this. Reform of the weaknesses that made this crisis possible is essential, but it can wait a little while. First, we need to deal with the clear and present danger. To do this, policymakers around the world need to do two things: get credit flowing again and prop up spending. Read more in New York Review of Books

→ 1 CommentTags: Financial/Economic Crisis

The crisis-torn global economy needs a World Knowledge Fund to revive it

November 28th, 2008 · 1 Comment

Sami Mahroum
Many have drawn parallels between this G-20 meeting and the one involving 44 countries that took place 64 years ago in Bretton Woods, New Hampshire, to devise the post-war international monetary system. The meeting led to the creation of the International Bank for Reconstruction and Development, the General Agreement on Tariffs and Trade, and the International Monetary Fund.

One of the main achievements of these Bretton Woods institutions was allowing the rapid reconstruction of post-war Europe. But these same institutions failed elsewhere, particularly in bridging the wealth gap between the North and the South. A main reason for this is their inability to address the knowledge gap. When they next meet in April 2009, the leaders of the G20 countries should recognise this failure in globalisation and address it by the creation of a World Knowledge Fund.
Read more on the website of Science&Business

→ 1 CommentTags: Uncategorized

World Bank President Opts for Turkey Dinner over Development Finance Conference

November 25th, 2008 · No Comments

Today’s Washington Post reports that World Bank President Robert Zoellick cited “Thanksgiving plans” as his excuse for dropping out of the November 29-December 2 Financing for Development Conference in Doha, Qatar. This year’s American turkey-eating fest falls on November 27.

Zoellick’s snub is just one more indication that the economic needs of the developing world are being pushed to the back-burner in the midst of a global financial crisis that originated in the richest nations. According to a new report by the Institute for Policy Studies, U.S. and European governments have committed about $4.1 trillion to rescuing their own financial firms. That’s 45 times as much as they spent last year in development aid. In fact, the U.S. government’s $23.2 billion aid bill last year is far less than the $29 billion bailout for just one investment bank – Bear Stearns. And while industrialized nations pledged to increase aid pledges in September, all bets are off now that they are plundering their coffers to prop up their failing financial institutions.

→ No CommentsTags: Climate Change · Financial/Economic Crisis · IPS · International Institutions

Ante la crisis financiera, exigimos cambiar el modelo

November 25th, 2008 · No Comments

Alianza Social Continental

Dirigentes sociales de México, Colombia, Venezuela, Ecuador, Perú, Argentina, Bolivia y Chile, pertenecientes a la Alianza Social Continental, reunidos en Quito el 15 de noviembre de 2008 -al mismo tiempo que lo hacían los líderes del G20 en Washington- discutimos las implicaciones de la actual crisis financiera global y las acciones que deberán emprender los pueblos del Continente. Al evento invitamos al Ministro de Coordinación para la Política Económica de Ecuador, Pedro Páez; al Senador del Polo Democrático Alternativo de Colombia, Jorge Enrique Robledo; y al Embajador de Bolivia en Ecuador, Juan Javier Zárate, quienes expusieron sus apreciaciones ante el tema que nos convocaba.

Después de debatir ampliamente sobre las causas, los responsables, los impactos sobre la sociedad y las propuestas de solución, concluimos:
[Read more →]

→ No CommentsTags: Español · Financial/Economic Crisis

The Crisis & What to Do About It

November 24th, 2008 · No Comments

George Soros
The salient feature of the current financial crisis is that it was not caused by some external shock like OPEC raising the price of oil or a particular country or financial institution defaulting. The crisis was generated by the financial system itself.

This fact-that the defect was inherent in the system -contradicts the prevailing theory, which holds that financial markets tend toward equilibrium and that deviations from the equilibrium either occur in a random manner or are caused by some sudden external event to which markets have difficulty adjusting.

The severity and amplitude of the crisis provides convincing evidence that there is something fundamentally wrong with this prevailing theory and with the approach to market regulation that has gone with it. To understand what has happened, and what should be done to avoid such a catastrophic crisis in the future, will require a new way of thinking about how markets work.

Read more on the website of The New York Review of Books

→ No CommentsTags: Financial Architecture · Financial/Economic Crisis · Uncategorized

Skewed priorities: How the bailouts dwarf other global crisis spending

November 24th, 2008 · No Comments

By Sarah Anderson, John Cavanagh and Janet Redman, Institute for Policy Studies
The approximately $4.1 trillion that the United States and European governments have committed to rescue financial firms is 40 times the money they’re spending to fight climate and poverty crises in the developing world. Download the report [PDF]