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Category Archives: Economy

Messages from “Fiscal Space”

Among the many inequalities revealed by the COVID-19 pandemic, one of the most striking is the dramatic divergence in governments’ fiscal responses. Economic activity has collapsed worldwide as a result of lockdown measures to contain the coronavirus. But while some developed countries have been able to deploy fiscal stimulus on an unprecedented scale, most have not.

Since March, the US government has announced additional spending amounting to over 14% of GDP. In Japan, the figure is over 21%, compared to nearly 10% in Australia and around 8.4% in Canada. In Europe, lack of agreement on a strong joint stimulus effort has led to more varied responses, from additional spending ranging from 1.4% of GDP in Italy and 1.6% in Spain to 9% in Austria, with Germany and France in the middle, at 4.9% and 5%, respectively. Rigid EU budget rules continue to limit government spending in precisely those countries that need fiscal stimulus the most.

https://www.project-syndicate.org/commentary/global-inequality-in-fiscal-capacity-by-jayati-ghosh-2020-05

 
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Posted by on May 15, 2020 in Economy

 

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The Normal Economy Is Never Coming Back

As the coronavirus lockdown began, the first impulse was to search for historical analogies—1914, 1929, 1941? As the weeks have ground on, what has come ever more to the fore is the historical novelty of the shock that we are living through. The economy is currently in something akin to free fall. If it were to continue to contract at its current pace, 12 months from now GDP would be one-third lower than at the beginning of 2020. That is a rate of shrinkage four times faster than during the Great Depression of the 1930s. There has never been a crash landing like this before. There is something new under the sun. And it is horrifying.

As recently as five weeks ago, at the beginning of March, U.S. unemployment was at record lows. By the end of March, it had surged to somewhere around 13 percent. That is the highest number recorded since World War II. We don’t know the precise figure because our system of unemployment registration was not built to track an increase at this speed. On successive Thursdays, the number of those making initial filings for unemployment insurance has surged first to 3.3 million, then 6.6 million, and now by another 6.6 million. At the current rate, as the economist Justin Wolfers pointed out in the New York Times, U.S. unemployment is rising at nearly 0.5 percent per day. It is no longer unimaginable that the overall unemployment rate could reach 30 percent by the summer.

https://foreignpolicy.com/2020/04/09/unemployment-coronavirus-pandemic-normal-economy-is-never-coming-back/

 
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Posted by on April 23, 2020 in Economy

 

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The coronavirus crisis shows we need an entirely new economic system

“We will do whatever it takes,” says the Chancellor. Unfortunately, Rishi Sunak does not have what it’s going to take – or at least, not yet. Because the Covid-19 crisis is going to collapse growth – both here and across the globe – in an entirely different way from anything we’ve experienced.

And what Sunak is going to need is an anti-capitalist imagination. In response to this crisis the government has to do nothing less than take command of the economy. But it doesn’t know how to. It’s not just a question of lacking education and experience in crisis management; it’s a question of ideology.

Let’s summarise the measures taken by the Treasury and the Bank of England so far. In the Budget (11 March), Sunak pledged £12bn to tackle the “temporary disruption” of the virus, mainly using cuts to business rates, cash grants to small firms and a £2bn scheme to provide better access to sick pay. At the same time, the Bank slashed interest rates to 0.25 per cent (from 0.75 per cent) and authorised commercial banks to use £190bn of money they had been forced to hold as reserves for lending to businesses.

https://www.newstatesman.com/politics/economy/2020/03/coronavirus-crisis-economic-collapse-capitalism

 
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Posted by on March 18, 2020 in Economy

 

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The COVID-19 Debt Deluge

Pandemics like COVID-19, alarming and destructive as they are, can serve a useful purpose if they remind everyone of the critical importance of public health. When a contagious disease strikes, even a society’s most protected elites must worry about the health of neglected populations. Those who have advocated privatization and cost-cutting measures that deny health care to the most vulnerable now know that they did so at their own peril. A society’s overall health depends on the health of its poorest people.

More immediately, though, the COVID-19 crisis could have many severe economic effects, possibly pushing the global economy into recession. Supply chains are being disrupted, factories are being closed, entire regions are being locked down, and a growing number of workers are struggling to secure their livelihoods. These developments will all lead to mounting economic losses. A world economy already suffering from insufficient demand – owing to rising wealth and income inequality – is now vulnerable to a massive supply-side shock.

https://www.project-syndicate.org/commentary/coronavirus-debt-crisis-by-jayati-ghosh-2020-03

 
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Posted by on March 17, 2020 in Economy

 

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Has Davos Man Changed?

This year marked the 50th anniversary of the World Economic Forum’s flagship meeting of the world’s business and political elites in Davos, Switzerland. Much has changed since my first Davos in 1995. Back then, there was euphoria over globalization, hope for ex-communist countries’ transition to the market, and confidence that new technologies would open up new vistas from which all would benefit. Businesses, working with government, would lead the way.

Today, with the world facing climate, environmental, and inequality crises, the mood is very different. Facebook, willing to provide a platform for mis-/disinformation and political manipulation, regardless of the consequences for democracy, has shown the dangers of a privately controlled monopolistic . Corporate leaders, and not just in the financial sector, have displayed remarkable moral turpitude.

https://www.project-syndicate.org/commentary/davos-gap-between-business-leaders-rhetoric-and-actions-by-joseph-e-stiglitz-2020-01

 
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Posted by on January 31, 2020 in Economy

 

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Greta Thunberg, Donald Trump, and the Future of Capitalism

Steven Mnuchin, US President Donald Trump’s treasury secretary, outraged liberal commentators at this year’s World Economic Forum meeting in Davos with a snide remark directed at teenage climate activist Greta Thunberg. Responding to Thunberg’s call for an immediate exit from fossil fuel investments, Mnuchin said that she should go to college “to study economics” before “she can come back and explain that to us.” Two days earlier, Trump had referred to climate scientists as “the heirs of yesterday’s foolish fortune tellers.”

The Trump administration’s attitude to climate change, and those campaigning for drastic measures to contain it, is ugly, nasty, and wrong. But behind the crassness and toxicity of Trump, Mnuchin, et al. is cold logic and brutal honesty: Their politics is the only authentic defense of contemporary capitalism. And, judging by Mnuchin’s patronizing advice to Thunberg, they understand that mainstream economics, unlike climate science, is their friend.

https://www.project-syndicate.org/commentary/greta-thunberg-climate-change-future-of-capitalism-by-yanis-varoufakis-2020-01

 
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Posted by on January 30, 2020 in Economy

 

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The Truth About the Trump Economy

As the world’s business elites trek to Davos for their annual gathering, people should be asking a simple question: Have they overcome their infatuation with US President Donald Trump?

Two years ago, a few rare corporate leaders were concerned about climate change, or upset at Trump’s misogyny and bigotry. Most, however, were celebrating the president’s tax cuts for billionaires and corporations and looking forward to his efforts to deregulate the economy. That would allow businesses to pollute the air more, get more Americans hooked on opioids, entice more children to eat their diabetes-inducing foods, and engage in the sort of financial shenanigans that brought on the 2008 crisis.

Today, many corporate bosses are still talking about the continued GDP growth and record stock prices. But neither GDP nor the Dow is a good measure of economic performance. Neither tells us what’s happening to ordinary citizens’ living standards or anything about sustainability. In fact, US economic performance over the past four years is Exhibit A in the indictment against relying on these indicators.

https://www.project-syndicate.org/commentary/grim-truth-about-trump-economy-by-joseph-e-stiglitz-2020-01

 
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Posted by on January 28, 2020 in Economy, North America

 

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Imagining a World Without Capitalism

While the defeat of Jeremy Corbyn’s Labour party in the United Kingdom this month threatened the radical left’s momentum, particularly in the United States, where the presidential primaries loom, capitalism found itself under fire from some unexpected quarters. Billionaires, CEOs, and even the financial press have joined intellectuals and community leaders in a symphony of laments about rentier capitalism’s brutality, crassness, and unsustainability. “Business cannot continue as usual,” seems to be a widespread sentiment even in the boardrooms of the most powerful corporations.

https://www.project-syndicate.org/commentary/imagining-a-world-without-capitalism-by-yanis-varoufakis-2019-12

 
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Posted by on December 30, 2019 in Economy, Uncategorized

 

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$166 Water Could Dictate International Iceberg Law

I tasted my first iceberg in L’anse aux Meadows, Canada, overlooking the windswept grassland that clings to the northern tip of Newfoundland. I had ordered a martini on the rocks from the only bar in town, and it arrived at my table gently fizzing. The jagged pieces of ice swirling around the glass crackled as the millennia-old air inside escaped. It was good fun, like drinking nature’s Pop Rocks.

The restaurant where I sipped my cocktail is one of several businesses in Newfoundland and Labrador that trade on the novelty of icebergs to sell their wares. The Quidi Vidi Brewery, in St. John’s, uses 20,000-year-old iceberg water for its Iceberg, a light lager that comes in a striking cobalt bottle. Auk Island Winery blends iceberg water with wild berries to make specialty wines, and the Canadian Iceberg Vodka Corporation makes exactly what its name advertises. For my martini, the waiter told me, a cook plucked a piece of ice from the Labrador Sea while out on his Jet Ski.

https://www.theatlantic.com/science/archive/2019/10/iceberg-water-and-race-exploit-arctic/601147/

 
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Posted by on December 23, 2019 in Economy, North America

 

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How our home delivery habit reshaped the world

A decade ago, the British department-store chain John Lewis built itself a long warehouse, painted in gradations of sky blue. The shed, as it is called in the industry, cost £100m and covered 650,000 sq ft. Windsor Castle could easily fit inside it. John Lewis named the shed Magna Park 1, after the site where it stands: a “logistics campus” of warehouses, roads, shipping containers and truck bays east of Milton Keynes. Magna Park 1 was intended to supply the company’s stores around southern England, but almost as soon as it was finished, John Lewis realised that it wasn’t enough. The pace of e-commerce was flying, and Magna Park 1 opened in the midst of a spell in which, between 2006 and 2016, the share of John Lewis deliveries going direct to customers rose 12-fold.

So John Lewis built Magna Park 2, measuring 675,000 sq ft. After that, the company realised it needed a new shed for Waitrose, its supermarket chain, where home deliveries were skyrocketing, too. “It became a bit of a standing joke,” said Philip Stanway, a regional director at Chetwoods, the architecture firm that designed and built all these facilities. “They used to come to meetings with their forecasts, and they’d say: ‘Screw this. This is the new forecast,’” Stanway said, making a scribbling motion in the manner of a John Lewis executive hastily updating the numbers. “We couldn’t build the buildings quick enough for them.”

The Waitrose shed ended up spanning close to 1m sq ft. And then, even as Magna Park 2 was being constructed, John Lewis decided to commission Magna Park 3 to fulfill more home deliveries. Magna Park 3 was slightly smaller than the others, Stanway said – just 638,000 sq ft. “But that’s only because that was the size of the plot. That was all the land was left.”

https://www.theguardian.com/technology/2019/nov/21/how-our-home-delivery-habit-reshaped-the-world

 
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Posted by on December 23, 2019 in Economy

 

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