Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. 'New Haiti'; Same Corporate InterestsTerrific article by Isabel MacDonald, at the Nation.By Isabel MacDonald | January 29, 2010 In the wake of the earthquake that has killed more than 100,000 people in Haiti, the foreign ministers of several countries calling themselves the "Friends of Haiti" met on Monday in Montreal to discuss plans for "building a new Haiti." Participants in the Ministerial Preparatory Conference on Haiti, who included Secretary of State Hillary Clinton; representatives of international financial institutions including the World Bank and the International Monetary Fund; and Haitian Prime Minister Jean-Max Bellerive came to what Canadian Foreign Affairs Minister Lawrence Cannon, the conference chair, referred to as a "road map towards Haiti's reconstruction and development." However, the Latin American countries of ALBA--the Bolivarian Alliance for the Americas--who held a counter-conference, and several grassroots Haiti solidarity organizations, who organized protests outside the conference, expressed skepticism that the "Friends of Haiti" and the international financial institutions would work to further the interests of ordinary Haitians. One of the groups protesting the conference, Haiti Action Montreal, issued a statement warning that "There is a danger that these major powers will try to exploit the earthquake to further narrow pro-corporate ends, if reconstruction of New Orleans after Katrina and in Asia following the tsunami are any indication." As Naomi Klein has observed, this process is already underway. The Heritage Foundation think tank's initial response to the earthquake clearly followed the pattern she documented in her book The Shock Doctrine, by which neoliberal reformers seek to impose an agenda of privatization in times of crisis. It was less than twenty-four hours after Haiti was hit by an earthquake of 7.0 magnitude that the Heritage Foundation issued a release recommending that "In addition to providing immediate humanitarian assistance, the U.S. response to the tragic earthquake in Haiti earthquake offers opportunities to re-shape Haiti's long-dysfunctional government and economy as well as to improve the public image of the United States in the region." That sentiment was echoed by James Dobbins, former special envoy to Haiti under President Bill Clinton and director of the International Security and Defense Policy Center at the RAND Corporation, who stated in a recent op-ed in the New York Times, "This disaster is an opportunity to accelerate oft-delayed reforms," including "breaking up or at least reorganizing the government-controlled telephone monopoly" and restructuring the ports, which also represent two of Haiti's few remaining state enterprises. The World Bank also observed an upside to the catastrophe in Haiti; in a January 18 blog post titled "Haiti earthquake: Out of great disasters comes great opportunity," a World Bank disaster management analyst recently stated that "there is a silver lining to this great tragedy. Looking back in history, great natural disasters are often a catalyst for huge, positive change." Even calls for the expansion of Haiti's sweatshop industry are being made in the media. Read the rest of the article. Labels: Disaster Capitalism, earthquake, Haiti, IMF, World Bank Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The IMF and the World Bank in IstanbulFrom Monday's Guardian. Keep your eye out for an article in our Nov/Dec issue, Putting the "Global" in the Global Economic Crisis, by economist and D&S collective member Smriti Rao.Yes, the global financial sector has upped its game—but not nearly enough The mood at the meeting of the IMF and World Bank in Istanbul was one of quiet confidence, yet there are still worrying signs. Larry Elliot | The Guardian | Monday 5 October 2009 The mood is different this year. Not exactly whooping with joy, you understand, but finance ministers and central bank governors gathered in Istanbul this weekend exuded a sense of relief and quiet confidence. Relief because activity has started to pick up after its precipitous fall around the turn of the year. Quiet confidence because there is a belief that lessons have been learned over the past 12 months. When the International Monetary Fund and the World Bank last met in Washington in October 2008 the global financial system was on the brink of ruin. Bank after bank had run into trouble following the collapse of Lehman Brothers in mid-September. Iceland looked like it was about to go bust. In Britain, cash points would have stopped working had the government not come up with a rescue package that provided billions of pounds of fresh capital in return for part-nationalisation. Dominique Strauss-Kahn, the fund's managing director, says countries were forced to collaborate by the scale of the crisis, and the sense of togetherness will not vanish now the outlook is better. The replacement of the G7 by the G20, it is hoped, will improve global governance and make it easier to tackle the imbalances that lay at the root of the problems. There has, of course, been plenty of this sort of stuff before. Back in 2006, well before anyone had heard of sub-prime mortgages, the fund launched a programme of multi-lateral surveillance designed to see whether the policies being pursued by the big players on the global stage were compatible with reducing global imbalances. They weren't, but nothing happened. The feeling in Istanbul was that it is different this time. Having stood on the edge of the abyss, individual countries are now prepared to look beyond their narrow self-interest to consider whether policies help or hinder the cause of global economic stability. It would be wrong to think that nothing has changed. There is a recognition that the financial system was close to collapse 12 months ago and that collective action helped prevent a severe recession turning into something worse. The decision to make the G20 – where the bigger developing countries are represented – the body that counts for global economic policy is a good one. The G7 will stagger on as a more informal gathering of finance ministers for a quiet chat, but it has had its day. There is a willingness to accept that regulation of the sector should be toughened up. Unless banks are forced to hold more capital, Alistair Darling said on Saturday, we will quickly be back in the mire. He's right about that, and the G20 in Pittsburgh displayed a greater appetite for more intrusive supervision. So, yes, the atmosphere is different. Things have changed. The problem is that they have not changed nearly enough. Growth has nudged up, but as the IMF noted last week it has so far relied almost exclusively on governments doing the spending on behalf of the private sector, and on an inevitable rise in inventories following savage de-stocking. That is no basis for strong, sustained growth and there are already some worrying signs – US unemployment, last week's survey of manufacturing in the UK – suggesting that the recovery is running out of steam. With governments likely to come under pressure to tackle budget deficit from both the financial markets and their voters, there is a risk that economic policy will be tightened too soon. The risks to growth in 2010 are to the downside. What's more, the scars from such a deep recession will take time to heal. Even on the most optimistic scenario, we are facing a jobless and joyless recovery lasting two or three years at the minimum. That particularly applies to Britain, where growth in the pre-crisis years was pumped up by bubbles in financial services and construction. The IMF says that the economy has suffered lasting damage from the downturn, with the trend rate of growth reduced at a time when the next government is going to cut public spending and raise taxes in order to reduce the budget deficit. There is, of course, a chance that things will turn out better than the Fund expects. It may be that global growth will exceed the 3.1% pencilled in for next year and that 2011 will be better still. But unless the fundamental problems are tackled, the respite is likely to be brief. There were those in Istanbul this weekend who predicted it would take a decade for countries to get to grips with the global imbalances. That is a reasonable assumption given the wide gap between rhetoric and action, but it is far too long to wait. The Germans, for example, are resistant to calls that they should run a smaller trade surplus by boosting domestic demand. China has used a cheap currency to build up manufacturing and so hasten the movement of the rural poor into the cities. It is in no hurry to revalue the renminbi significantly. The reluctance by countries running trade surpluses to change their behaviour reflects a design flaw in the post-war international system identified by Keynes: the onus falls on deficit countries to deflate rather than on surplus countries to reflate. Unless this is remedied, global rebalancing will be an uphill struggle. Meanwhile, the financial sector has regrouped and is lobbying hard against "excessive" levels of regulation. Joseph Ackermann, the chief executive of Deutsche Bank, said at the weekend that if banks were forced to hold too much capital it would impair lending and damage the economy. In reality, what the financial sector calls excessive is what was once normal and prudential. Counter-cyclical capital requirements limiting the ability of banks to lend during booms and encouraging them to keep credit flowing during busts are vital for economic stability. It is interesting, though, how the financial sector has managed to conflate its own interests with those of the wider economy. Any attempt at reform – witness Adair Turner's comment that some City activities are socially useless – is met with the argument that the financial sector is an important part of the economy creating lots of jobs. And that is supposed to be that. A different take on that perspective comes from a new study (an alternative report on banking reform; www.cresc.ac.uk) by the Centre for Research of Socio-Cultural Change at Manchester University. It makes a series of points: there has been institutional capture by the City of both main political parties; this coalition thwarts reform by exaggerating the social value of finance while downplaying the cost of taxpayer bail outs; much of what the financial sector does is "banking for itself"; and the pre-2007 era saw the creation of the wrong sort of debt, which encouraged speculation but not the development of productive resources. What is needed, the study concludes, is a smaller financial sector better focused on the real future needs of the economy, such as investment in low-carbon technologies and better pensions for an ageing population. Don't hold your breath. The power of the financial lobby remains immense, despite its role in pushing the global economy to within a whisker of a mark 2 Great Depression. Failure to tackle the imbalances and to reform finance would increase the chances of another crisis. But it may take that for politicians to turn words into action. Read the original article (there are some good charts). Labels: global economic crisis, IMF, World Bank Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Revisiting Bretton Woods (Literally!)Want to taste the same four-course meal that John Maynard Keynes enjoyed?You can mark the 65th anniversary of the Bretton Woods International Monetary Conference at the place where it all began, as The Mount Washington Resort is celebrating its own place in history next weekend. The upscale hotel in the White Mountains of New Hampshire will "celebrate the historic occasion by offering guests interested in exploring our world economic history [sic]." Sponsored by New Hampshire's statewide Chamber of Commerce, the weekend is aptly titled "The Gold Standard Package." Rates start at $194.40 per person, double occupancy. Guests will spend Saturday, July 25, listening to the sober analyses of mainstream economists, including the official historian of the IMF. The festivities begin on Saturday morning with a treasure hunt, called the Gold Rush (no, we're not making this up). Here's their description: On Saturday night, you can enjoy a "commemorative dinner ... based on the original menu served at the farewell dinner on July 22, 1944." But be warned: No lobster or escargot -- it was wartime, after all. All the details are here. Labels: Bretton Woods agreement, IMF, Mount Washington Hotel, World Bank Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Global Financial CommunityAn excellent article by Prabhat Patnaik on networkideas.org, the website of International Development Economics Associates, starts off with Lenin and goes on to talk about the role that the IMF and the World Bank play to create a "group of core ideologues" to exert "peer pressure" on elites to adopt a belief system that is friendly to global finance capital. This helps to explain why Obama picked the economic advisers he did:How people like Summers, Geithner and Rubin come to occupy such important political positions within the U.S. system is pretty obvious. American Presidential elections require massive amounts of money, a good chunk of which invariably comes from Wall Street. The story doing the rounds for a while was that Obama had got most of his funds from small donations of $100 each garnered through the internet; but this was complete nonsense. Obama like others before him had also tapped Wall Street and the appointment of the trio, who had organized Wall Street finance for him, was a quid pro quo. The elevation of members of the global financial community to run the American economy therefore should cause no surprise. I love the light tough of his title. Anyhow, here's the beginning of the article, which is well worth reading. Hat-tip to LF.
Read the rest of the article. Labels: IMF, imperialism, larry Summers, Lenin, Prabhat Patnaik, Timothy Geithner, World Bank Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). World Bank and Food Crisis (Bloomberg--!)A critique of the World Bank and the Washington Consensus--at Bloomberg, of all places. This is part 3 of a 7-part series entitled "Recipe for Famine." Hat tip to DRedmond at lbo-talk. Look for a feature article by Mark Engler on the decline of the Washington Consensus in our January/February issue.World Bank's 'Wrong Advice' Left Silos Empty in Poor Countries Dec. 10 (Bloomberg) -- Inside and out, the rusted towers of El Salvador's biggest grain silo show how the World Bank helped push developing countries into the global food crisis. Inside, the silo, which once held thousands of tons of beans and cereals, is now empty. It was abandoned in 1991, after the bank told Salvadoran leaders to privatize grain storage, import staples such as corn and rice, and export crops including cocoa, coffee and palm oil. Outside, where Rosa Maria Chavez's food stand is propped against a tower wall, price increases for basic grains this year whittled business down to 16 customers a day from 80. "It's a monument to the mess we are in now," says Chavez, 63. About 40 million people joined the ranks of the undernourished this year, bringing the estimate of the world's hungry to 963 million of its 6.8 billion people, the Rome-based United Nations Food and Agriculture Organization said yesterday. The growth didn't come just from natural causes. A manmade recipe for famine included corrupt governments and companies that profited on misery. Another ingredient: The World Bank's free-market policies, which over almost three decades brought poor nations like El Salvador into global grain markets, where prices surged. "The World Bank made one basic blunder, which is to think that markets would solve problems of such severe circumstances," said Jeffrey Sachs, director of the Earth Institute at Columbia University and a special adviser to UN Secretary-General Ban Ki-moon. "But history has shown you need to help people to get above the survival threshold before the markets can start functioning." Read the rest of the article. Labels: Ban Ki-moon, Bloomberg, El Salvador, Jeffrey Sachs, World Bank Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Good Survey: How Bad in Emerging Markets?From Der Spiegel (translated into English, though). Hat tip to Yves SmithSPIEGEL ONLINE 11/04/2008 04:54 PM THE GHOST OF ARGENTINA What Happens when Countries Go Bankrupt? By SPIEGEL Staff First it was mortgage lenders. Then large banks began to wobble. Now, entire countries, including Ukraine and Pakistan, are facing financial ruin. The International Monetary Fund is there to help, but its pockets are only so deep. No, Alexander Lukyanchenko told reporters at a hastily convened press conference last Tuesday, there is "no reason whatsoever to spread panic." Anyone who was caught trying to throw people out into the street, he warned, would have the authorities to deal with. Lukyanchenko is the mayor of Donetsk, a city in eastern Ukraine with a population of a little more than one million. For generations, the residents of Donetsk have earned a living in the surrounding coalmines and steel mills, a rather profitable industry in the recent past. Donetsksta, a local steel producer, earned 1.3 billion euros ($1.65 billion) in revenues last year. But last Tuesday the mayor, returning from a meeting with business leaders, had bad news: two-thousand metalworkers would have to be furloughed. Lukyanchenko doesn't use the word furlough, instead noting that the workers will be doing "other, similar work." But every other blast furnace has already been shut down, and one of the city's largest holding companies is apparently gearing up for mass layoffs. Under these conditions, how could panic not be rampant in Donetsk, the capital of Ukraine's industrial heartland? In Mariupol, a steelworking city, a third of the workers have already been let go. The chemical industry, Ukraine's second-largest source of export revenue, is also ailing. In the capital Kiev, booming until recently, construction cranes are at a standstill while crowds jostle in front of currency exchange offices, eager to convert their assets into US dollars. Donetsk is in eastern Ukraine, 8,100 kilometers (5,030 miles) from New York's Wall Street and 2,700 kilometers (1,677 miles) from Canary Wharf, London's financial center. But such distances are now relative. The world financial crisis has reached a new level. No longer limited to banks and companies, it is now spreading like wildfire and engulfing entire economies. It has reached Asia and Latin America, Eastern Europe, Iceland the Seychelles, the Balkan nation of Serbia and Africa's southernmost country, South Africa. It is a development that has investors and speculators alike holding their breath. Some are pulling their money out of troubled countries, while others are betting on a continued decline -- and in doing so are only accelerating the downturn. Central banks are desperately trying to halt the downward trend, but in many cases the plunge seems unstoppable. Read the rest of the article Labels: currencies, Der Spiegel, Emerging markets, financial crisis, financial crisis bailout, IMF, World Bank, Yves Smith Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Corn Ethanol Pushes up Food PricesFrom a recent World Bank report, via the newsletter of Union of Concerned Scientists; hat-tip to Arthur MacEwan for this:Food prices have shot up 170 percent in the past six years, putting a serious burden on the world's poor and causing food riots in some countries, according to a new report from the World Bank. The report found that the increase was largely caused by U.S. and European government support for biofuels, particularly corn ethanol. Government policies that diverted grain from food to biofuel uses include tariffs on imports, export bans and restrictions, and subsidies for energy companies. The report estimated that other influences such as higher energy and fertilizer costs and the weaker dollar account for only about 25-30 percent of the increased costs, while biofuel production accounts for the rest. Read the full report. Read an article on the food crisis by D&S collective member Ben Collins. Labels: commodity prices, ethanol, food crisis, World Bank Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
