Category Archives: Economy

Our Shrinking Economic Toolkits

For the last four decades, mainstream economists and policymakers have been wedded to fixed dogmas. Their blind belief in fiscal discipline and consolidation, and resulting refusal to consider more public spending even in an obvious downturn, now threatens the very stability of societies.

NEW DELHI – In the natural world, humans stand out for the complexity of the tools, technologies, and institutions that we have developed. According to the anthropologist Joseph Henrich, we owe this success to our ability to accumulate, share, and adapt cultural information across generations. But just as interconnection causes our “collective brains” to expand over time, isolation can cause them to shrink. Economists should take note.

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Posted by on October 19, 2019 in Economy, Uncategorized



The IMF Should Take Over Libra

Brilliant ideas that would be catastrophic in the hands of buccaneering privateers should be pressed into public service. That way, we can benefit from their ingenuity without falling prey to their designs.

ATHENS – The Libra Association is fragmenting. Visa, Mastercard, PayPal, Stripe, Mercado Pago, and eBay have abandoned the Facebook-led corporate alliance underpinning Libra, the asset-backed cryptocurrency meant to revolutionize international money. More corporations are likely to follow as pressure upon them mounts from worried governments determined to stop Libra dead in its tracks.

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Posted by on October 18, 2019 in Economy, Uncategorized



No More Half-Measures on Corporate Taxes

In the face of climate change, rising inequality, and other global crises, governments are losing out on hundreds of billions of dollars in tax revenue as a result of corporate tax arbitrage. Yet despite the obvious deficiencies of the global tax regime, policymakers continue to propose only piecemeal fixes.

NEW YORK – Globalization has gotten a bad rap in recent years, and often for good reason. But some critics, not least US President Donald Trump, place the blame in the wrong place, conjuring up a false image in which Europe, China, and developing countries have snookered America’s trade negotiators into bad deals, leading to Americans’ current woes. It’s an absurd claim: after all, it was America – or, rather, corporate America – that wrote the rules of globalization in the first place.

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Posted by on October 17, 2019 in Economy



Good New Idea

The broad outline of 21st-century history, its first couple of decades anyway, is starting to become clear. A period of credit-fuelled expansion and runaway financialisation ended with an abrupt crash and an unprecedented bank bailout. The public’s reward for assuming the bankers’ losses was austerity, which crippled the recovery and led to an interminable Great Recession. At the same time, increasing automation and globalisation, and the rise of the internet, kept first-world wages stagnant and led to an increase in precarity. Elites did fine, and in the developing world, especially Asia, economies grew, but the global middle class, mainly located in the developed world, felt increasingly anxious, ignored, resentful and angry. The decades-long decline in union power made these trends worse. The UK had its longest ever peacetime squeeze on earnings.​1 In response to this the political right played one of its historically most effective cards – Blame the Immigrants – and achieved a string of successes from Brexit to Trump to Orbán to Bolsonaro to Salvini and the AfD, succeeding in normalising its new prominence to such an extent that a quasi-fascist party scored 34 per cent in the French presidential elections, which were nonetheless hailed as a triumph for the ‘centrist’ winner.

The left, let’s be honest, has had a pretty bad century so far. This is partly a matter of electoral defeats, from the US to the UK to France, Germany, Italy, Brazil etc, but also a consequence of its failure to come up with a new ideological framework to match the new landscape. Many current problems seem likely to grow worse. In 1980, the bottom half of earners in the US took home 20 per cent of all income; by 2014, that figure had fallen to 12 per cent. The richest 1 per cent, meanwhile, went from earning 12 per cent of all income to earning 20 per cent. Variations on that theme played out in many countries. The old centre-left was complicit in that distribution of economic power, and as a result the old centre left model of a kinder, gentler free-market capitalism looks outdated and inadequate. Many of the current trends in automation and globalisation seem certain to make existing problems of income stagnation and inequality worse. You don’t have to believe in an imminent artificial intelligence job apocalypse to see that work will continue to change in the direction of machines doing more and humans doing less, and often less interesting, work. These trends overlap and compound. As Philippe Van Parijs and Yannick Vanderborght put it in Basic Income: A Radical Proposal for a Free Society and a Sane Economy,

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Posted by on September 25, 2019 in Economy, Reportages



The economics of bubbles

Last year, Ross Gerber, a corporate investment manager, Tweeted a warning about Tesla. Gerber wanted investors to know that Tesla’s success would put other industries ‘at risk’. Which ones? Just oil, internal combustion engine automobiles, car dealers, railroads, auto parts, automobile services, and gas stations. ‘Did I forget some?’ he asked, implying yes, he did. Gerber included hashtags referencing Uber and Netflix as comparable ‘disruptors’. This is why, Gerber implied, there was so much ‘FUD’ (fear, uncertainty and doubt) in the media about Tesla. Gerber suggests a compelling storyline: the underdog hero, Tesla, is up against the evil incumbent forces that will play dirty to defeat it, but Tesla will overcome – just as Netflix and, presumptively, Uber have done.

The Tweet does not substantiate any of this. It doesn’t say why Tesla’s business case is like Netflix’s or Uber’s. It doesn’t say why all the purportedly threatened industries share the same interests here. It doesn’t have to – the human brain does that on its own without any help. As the US literary scholar Jonathan Gottschall has shown in his book The Storytelling Animal (2012), even the faintest sketch of a plotline is enough to prompt our minds to fill in the details. Gerber’s story outline is a familiar enough sketch of David taking on not just one but several Goliaths. It’s a good story outline. But it also ignores many important parts that do not fit with the plucky underdog narrative. It implies that all these alleged Goliaths have the same interest. It’s fiction, fantastically so.

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Posted by on September 14, 2019 in Economy, Reportages



The IMF’s Latest Victims

The process of selecting the International Monetary Fund’s next managing director must change. In particular, the tradition of choosing a European for the post – based on an unfair and anachronistic “gentlemen’s agreement” reached with the United States when the institution was established 75 years ago – needs to be discarded. But even more important, the IMF’s longstanding approach to lending should be transformed.

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Posted by on September 12, 2019 in Economy


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Why the US trade war with China is a genuine conflict

The trade war between the US and China can only fill us with dread. How will it affect our daily lives? Will it result in a new global recession or even geopolitical chaos?

To orient ourselves in this mess, we should bear in mind some basic facts. The trade conflict with China is just the culmination of a war which began years ago when Donald Trump fired the opening shot aimed at the biggest trading partners of the US by deciding to levy tariffs on the imports of steel and aluminium from the EU, Canada and Mexico.

Trump was playing his own populist version of class warfare: his professed goal was to protect the American working class (are metal workers not one of the emblematic figures of the traditional working class?) from “unfair” European competition, thereby saving American jobs. And now he is doing the same with China.


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The Exploitation Time Bomb

Worsening economic inequality in recent years is largely the result of policy choices that reflect the political influence and lobbying power of the rich. There is now a self-reinforcing pattern of high profits, low investment, and rising inequality – posing a threat not only to economic growth, but also to democracy.

NEW DELHI – Since reducing inequality became an official goal of the international community, income disparities have widened. This trend, typically blamed on trade liberalization and technological advances that have weakened the bargaining power of labor vis-à-vis capital, has generated a political backlash in many countries, with voters blaming their economic plight on “others” rather than on national policies. And such sentiments of course merely aggravate social tensions without addressing the root causes of worsening inequality.

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Posted by on August 8, 2019 in Economy



The imperial rivalry between the US and China means the left must choose the EU it wants

The US has declared China a “currency manipulator” — which, on the face of it, is like a bear declaring that another bear defecated in the woods. But the formal act of designation is a big deal.

Under a law passed in 1988, when the US first discovered that its global dominance might be under threat from trade competitors, the president is empowered to “initiate negotiations … on an expedited basis” to force China to raise the value of the renminbi against the dollar.

The act includes sanctions such as banning Chinese firms from US contracts, and was described at the time by critics as “the economic equivalent of civilian bombing”. But in truth the economic war between China and the US is already under way, and is wholly framed by Trump’s skewed vision of American geopolitics.

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Posted by on August 7, 2019 in Asia, Economy, European Union, North America


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Mauritius Leaks

Key findings
New leak reveals how multinational companies used Mauritius to avoid taxes in countries in Africa, Asia, the Middle East and the Americas
Law firm Conyers Dill & Pearman and major audit firms, including KPMG, enabled corporations operating in some of the world’s poorest nations to exploit tax loopholes
A private equity push into Africa backed by anti-poverty crusader and rock star Bob Geldof benefited from Mauritius’ treaties that divert tax revenue away from Uganda and elsewhere
Multi-billion dollar U.S. companies Aircastle and Pegasus Capital Advisers cut taxes through confidential contracts, leases and loans involving Mauritius and other tax havens
Officials from countries in Africa and Southeast Asia told ICIJ that tax treaties signed with Mauritius had cost them greatly and that renegotiating them was a priority

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Posted by on August 7, 2019 in Africa, Economy