Bob Cropf

Archive for March, 2009|Monthly archive page

Globalization and the Great Recession

In economics, Obama on March 31, 2009 at 12:47 PM

Back in the golden era before 2001, the International Monetary Fund (IMF) took a hands-off approach to capital controls imposed by national governments. As Sarah Anderson points out:

As part of a broader market fundamentalist agenda, the IMF and the U.S. government once galloped side by side in a crusade to eliminate these controls, which are various measures to reduce volatility by taxing or prohibiting certain cross-border investments. The IMF banned them through loan agreements, while the U.S. government severely restricted their use through bilateral investment treaties and the investment chapters in trade agreements.

The thought was if free trade worked, why not deregulate the flow of capital as well?

The problem was the countries that fare the best in times of financial meltdowns like the one we’re experiencing just so happen to be the countries with more restrictions on capital. The point was empirically proven in the Asian Crisis in the late 1990s. The IMF seemed to learn this lesson and became less dogmatic on the point of regulating capital. The same, however, could not be said for the previous administration, which followed a market fundamentalist line on this issue.

Now, the current administration has an opportunity to reverse the failed policy of the past and follow the lead of economists such as Joseph Stiglitz and Paul Krugman who favor allowing nation-states to impose tighter controls on capital flight. So far, the administration has not said too much on the subject and it is hard to read too much into previous statements on similar topics by Obama and his economic policy advisers. (Tim Geithner is on record, however, as supporting continued deregulation–another reason to suspect his good judgment at Treasury).

As the G-20 gets underway this week, one can hope that this issue will be revisited. Ideally, there will be a consensus among the world leaders to convene another meeting to tackle the question of capital controls in the near future.

BC

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This Week’s Reading Assignment

In class stuff on March 31, 2009 at 9:03 AM

This week’s reading assignment is chapters 7, 8 and 9 in Sen. See you Wednesday.

– Josh

Paul Krugman Song

In 1 on March 30, 2009 at 6:10 AM

For your enjoyment:

-kc

Assignment Question

In class stuff on March 26, 2009 at 10:50 AM

Pick a policy issue and demonstrate how globalization is increasingly reducing the traditional autonomy of the nation-state in policy making, while increasing interdependence among nations. What forces are particularly behind the unfolding of the issue you have selected at the global level? What is the position of the U.S.A. on this issue? Using theories discussed in class, what is your assessment of this position? In other words, is the U.S.A.’s response appropriate or do you have other recommendations?
  
Note: while you are free to select an issue that was not necessarily discussed in class, the issue should be within the domain of public finance or should directly affect the primary concerns/paradigms of public finance.

Due date: Wed. April the 8th, 2009

Today’s Lecture

In class stuff on March 25, 2009 at 12:16 PM

Here is today’s Lecture…sorry for the late delivery.

sen_s_inequality_reexamined_ptii12

Some businesses find the recession “sweet”

In economics, miscellaneous on March 24, 2009 at 7:21 AM

While the last few months have brought a steady stream of bad economic news–layoffs, home foreclosures, failing banks, drop in consumer demand–the list can go on and on, there is some good news that is hidden away if you look for it. One industry that has seen its fortunes move in the opposite direction of the rest to the rest of the economy is the candy business. This article in NY Times shows that it might be a smart idea to invest in a chocolate company for the duration of the recession. The sweets industry is enjoying its biggest boom since the Great Depression. It looks like the last indulgence consumers are willing to give up is feeding their sweet tooth.

Bailing out bankers rather than banks

In economics on March 18, 2009 at 10:41 AM

David Leonhardt in today’s NY Times, writes a good article pointing out the fallacies in A.I.G’s claims that the bonuses the company paid out to its employees for “retention purposes.” He systematically discredits this argument on several grounds:
1) They’re totally unnecessary. He points out that almost no executive has left one company for a similar position at another company.
2) For jobs below that of CEO, it is not necessarily a bad thing for turnover to happen. After all, isn’t the case that the Financial Product division is the one most responsible for getting the company into its current mess?
Leonhardt also dismisses A.I.G chief, Edward Liddy’s claim that the bonuses are needed to keep top talent in the firm by pointing out that a) it hasn’t worked–52 employees receiving bonuses still left and b) none of the employees are truly
indispensable; all could without a great deal of trouble be replaced. The whole situation points to the need for increased government oversight of the industry, which should have been in place years before, so that the situation we now find ourselves in would probably never have happened. This is what occurs when you leave the asylum to be run by its inmates. How could anyone expect things to turn out differently?

As a side note, there is a very interesting video of a lecture by Alan Blinder at Princeton’s Woodrow Wilson School, which was given in November 2008 and is well-worth watching. The lecture is entitled “The Origins of the Financial Mess.”

Inequality Lecture

In 1 on March 18, 2009 at 9:10 AM

Please click on this link for today’s  ppt. slides for the inequality section.sen_s_inequality_reexamined11

This Week’s Class – Globalization session

In class stuff on March 16, 2009 at 3:45 PM

The Globalization session of this week’s class will cover two readings. The main one is “Spreading the wealth” by David Dollar and Aart Kraay and the responses to their article, basically pages 23 – 44.In this document if you have time you can also look at the “great divide …” by Bruce R Scott from page 53.

The second one is “international Financial Stability and Market efficiency as a Global Public Good” by Stephany Griffith-Jones. You will find both documents in the eRes reading list. 

As you look through the readings, for the first one, familiarize yourself to the arguments surrounding the issue of whether globalization increases inter- country and intra country inequality and consider the methodological approaches and fundamental assumptions that the authors take/make. 

For the second reading, think of the current economic crisis and how isolated ‘economic stimulus plans’ by individual countries will be insufficient if a global stabilization program is not pursued (the G-20 was just discussing this).Particularly, think of such objectives within the current world economic order or financial architecture, and the opportunities and challenges it faces as Griffith-Jones discusses it.

 

Let me know if you have any questions.

 

Josh

Not every country is suffering

In 1, economics on March 16, 2009 at 12:00 PM

According to the Business Pundit, there are 10 countries where the economic crisis hasn’t made a dent yet. However, the posting is dated last September so I’m pretty sure that some of the countries have been hit since; China springs immediately to mind. I’d be surprised if the list was unchanged from last year. Now, maybe in terms of relative effect, these countries have been least affected. But even so China seems pretty hard hit by layoffs and the severe drop in consumer demand.