Published: Sunday 30 December 2012
The Occupy movement changed Democratic political rhetoric, which changed poll numbers aand arguably changed the election results.

Our nation was gripped by so many fallacies and delusions in 2012 that the whole Mayan calendar end-of-the-world thing didn’t even make the list.

Even those apocalyptic prophecies were more plausible than the idea that cutting Social Security will help the deficit, that government spending cuts will jump-start the economy, there were no crimes on Wall Street, or that we live in a “divided nation” whose “center” wants more business as usual in Washington.

Here then, without further ado, are our Top 12 Political Fallacies for 2012.

1. Austerity works.

Last year we 

Published: Tuesday 18 December 2012
“While most of the hardest hit economies are middle-income countries, or even high-income nations, some of the world’s poorest countries are also victims.”

The developing world lost nearly one trillion dollars in 2010 as a result of corruption, tax evasion, and other financial crimes not involving cash transactions, according to a new report released here Monday by Global Financial Integrity (GFI).

The six-year-old research and advocacy group said that global financial corruption has grown steadily over the past decade despite unprecedented efforts by governments and non-governmental organizations (NGOs) to curb it.

It found that illicit financial outflows cost developing countries a total of 859 billion dollars in 2010, the latest year for which trade and other data compiled mainly by the International Monetary Fund (IMF) and the World Bank is available.

That sum was approximately 10 times the roughly 88 billion dollars provided to developing ...

Published: Friday 30 November 2012
“Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net.”


Nobel prize winning economist Joe Stiglitz notes:

What Iceland did was right. It would have been wrong to burden future generations with the mistakes of the financial system.

Nobel prize winning economist Paul Krugman writes:

What [Iceland's recovery] demonstrated was the … case for letting creditors of private banks gone wild eat the losses.

Krugman also says:

A funny thing happened on the way to economic Armageddon: Iceland’s very desperation made conventional behavior impossible, freeing the nation to break the rules. Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver.

Krugman is right.  Letting the banks go bust – instead of perpetually bailing them out – is the right way to go.

We’ve previously noted:

Iceland told the banks to pound sand. And Iceland’s economy is doing much better than ...

Published: Tuesday 13 November 2012
“Austerity opponents say the strike isn’t intended to grind down Europe’s already weakened economy, but to send a clear message to governments and the Troika that austerity cuts aren’t working to solve the debt crisis, but instead are worsening the problem.”

Austerity has spawned general strikes in individual countries across the troubled European Union. But this week may see something to add to the union’s tensions: a coordinated, multi-national mega-strike. Organized labor plans a general strike against the E.U.’s austerity policies, borderless and spanning the south of the continent. With more than 25 million people out of work, Europe’s biggest unions have vowed to lead marches and demonstrations on Nov. 14 that unite opposition parties, activist movements like Spain’s M15 and a growing sea of unemployed to challenge their national governments, banking leaders, the IMF and EU policymakers to abandon austerity cuts ahead of a high-stakes budgetmeeting in Brussels later this month.

What makes Wednesday’s strike even more threatening to Europe’s managerial elite is the strong support it is receiving from traditional labor groups that rarely send their members into the streets—foremost, among them, the European Trade Union Confederation, representing 85 labor organizations from 36 countries, and totaling some 60 million members. “We have never seen an international strike with unions across borders fighting for the same thing—it’s not just Spain, not just Portugal, it’s many countries demanding that we change our structure,” says Alberto Garzón, a Spanish congressman with the United Left party which holds 7% of seats in the Spanish Congress. “It’s important to understand this is a new form of protest.”

The strike is expected to cause near or total shutdowns of the ...

Published: Tuesday 13 November 2012
Published: Tuesday 30 October 2012
The question is, once we understand and openly recognize this truth, what are we going to do about it?


What is austerity? A dictionary definition will provide you with the definition of a “strict economy.” It will also provide you with an antonym: leniency. Although the current austerity practices in Europe, the U.S. and elsewhere certainly match those definitions, the implications of enforcing these measures against the will of the majority population — and imposing them as a rational solution to the socioeconomic problems we face — are far graver, dangerous and outright scary.

Let’s examine the conditions of the loans aimed at getting countries (like Greece and Spain) out of debt: they want to raise the retirement age, increase the work day and have people work for lower wages, cut funding to education, maintenance and other important public sector areas, cut Social Security, cut pensions, and even privatize the municipal water and electric systems.

But at least the measures are democratic, right? Wrong. These austerity policies have been entered into and implemented despite resounding political opposition. Almost weekly protests all over Europe have been gathering outside centers of governmental power with signs like "No Nos Representan" (They Don’t Represent Us), or scissors with a slash through it, or the European Union flag peeled away to reveal the flag of Nazi Germany, or "No es la Crisis, es el ...

Published: Friday 26 October 2012
“The United States isn't immune from contagion if Romney and Ryan enact a full-blown austerity program.”


At last Monday's debate Mitt Romney said the United States is "heading toward Greece." That remark was filled with bitter ironies, not the least of which is the fact that the world's current economic miseries were triggered by financial speculators like Romney himself. And while Romney says his harsh economic policies are designed to reduce the national debt, we now have proof they'll have the opposite effect.

Austerity makes victims pay for other people's crimes. And the lesson of Europe confirms what we always suspected: It's not just morally wrong. It's self-defeating.

Nations like Greece aren't just wracked with sky-high unemployment, endangered by full-scale depression, and experiencing the first throes of social disintegration. They're also struggling with soaring debt. That why even the International Monetary Fund, hardly a bastion of leftist dissidence, has turned against Romney-style austerity.

The United States isn't immune from contagion if Romney and Ryan enact a full-blown austerity program. The riot-torn streets and malarial villages of Greece could become our nation's future.

Austerity Increases Debt

Two stories seemed to tell a contradictory story this week. One said that European countries like Greece were "closing their spending gap," while another said that their overall debt was soaring.

Here's how that happens: When a country's economy is collapsing from within, investors don't feel ...

Published: Sunday 14 October 2012
“Financial leaders and influential policymakers have also identified the importance of investment in infrastructure and technology transfer in order to boost sustainable growth in developing economies.”

Developing countries – ­relegated to the sidelines of the West-led postwar expansion – have emerged as the saving grace of the global economy against a backdrop of calls for a new economic model that can ease the ravages of globalization and address the lack of confidence in market-based systems.

Indeed, supporting economic growth in developing countries in a way that expands domestic productivity and stimulates global demand has been a core message at the annual meetings of the World Bank and International Monetary Fund (IMF) underway in Tokyo this week.

Financial leaders and influential policymakers have also identified the importance of investment in infrastructure and technology transfer in order to boost sustainable growth in developing economies.

“The envisaged global superhighway has not realized enough growth in the world,” said IMF Managing Director Christine Lagarde, pointing out that economic expansion is currently being recorded mostly in developing countries.

Speaking at a discussion on globalization here, Lagarde says the key economic challenge today is the trend of decreasing job opportunities for youth, suggesting that nations can help each other in meeting these challenges.

“I fear an intergenerational conflict if our financial model leaves increasing debt for the younger generation,” she warned.

Western economies in particular have been hit with massive unemployment among the younger generation. Unemployment rates are as high as 50 percent in countries such as Spain and Greece, both dealing with severe austerity plans imposed by global financial lending institutions.

But Asia, by contrast, has been recording expansion. China, Asia’s growth engine, has shown an average annual 10 percent GDP growth over the past decade and is now the world’s second largest economy.

Published: Thursday 11 October 2012
Will we really do better by imitating the United Kingdom and other nations where those policies have already failed?


Unemployment is still too high, income is still too low and the recovery is still much too slow — but the United States is faring considerably better than other developed nations against the threat of a renewed recession.

Don’t believe it? Maybe you should stop listening to the right-wing propaganda machine, which has been trash talking the U.S. recovery ever since Barack Obama's inauguration, and start paying attention to economic analysts who know what they're talking about — and provide hard data to back up their findings.

They provide a hard, factual, real-world context for our often-absurd political debate, especially as the presidential election approaches.

Every few months, a fresh report appears showing that the U.S. recovery is continuing and even strengthening, despite stagnation and austerity in Europe that drag down the entire global economy. Last June, the Organization for Economic Cooperation and Development noted that the U.S. recovery was gaining momentum, in contrast to its weak trading partners, despite continuing problems in housing and construction and its report praised the Obama administration's policy initiatives on employment, the budget and taxation.


Published: Sunday 16 September 2012
Published: Tuesday 11 September 2012
In short, the Clinton-era policies sent the U.S. economy on a seriously wrong path. They created an absurd obsession with budget deficits, a pattern of bubble-driven growth, an incredibly bloated financial sector and an unsustainable trade deficit.


Bill Clinton is clearly the most talented politician of our era. It is difficult to imagine Clinton losing an election to any of the people who have run for office in the last two decades.  But his skills as a politician should not prevent us from understanding the track record of his economic policies. In fact, until we get a clear understanding of these policies, it unlikely that we will be able to restore the economy to a path of sound economic growth.

The mythology of Clintonomics is that Clinton took the hard steps to bring the deficit down. He cut spending and raised taxes. This supposedly shifted the budget from large deficits to large surpluses and led to a booming economy. In the late 90s we had the lowest unemployment in three decades, and we saw real wage growth up and down the income ladder for the first time since the early 70s. There was in fact much here to celebrate.

However the reality is quite different from the mythology. The reduction in the deficit was supposed to lead to an increase in investment and a fall in the trade deficit. These are the two components of GDP that increase our wealth for the long-term, the former by increasing out productive capacity and the latter by giving us ownership of more foreign assets.

It turns out that the investment ...

Published: Monday 10 September 2012
Published: Sunday 9 September 2012
“Japan’s debt-to-GDP ratio is nearly 230%, the worst of any major country in the world.”

Japan’s massive government debt conceals massive benefits for the Japanese people, with lessons for the U.S. debt “crisis.”

In an April 2012 article in Forbes titled “If Japan Is Broke, How Is It Bailing Out Europe?”, Eamonn Fingleton pointed out the Japanese government was by far the largest single non-eurozone contributor to the latest Euro rescue effort.  This, he said, is “the same government that has been going round pretending to be bankrupt (or at least offering no serious rebuttal when benighted American and British commentators portray Japanese public finances as a trainwreck).”  Noting that it was also Japan that rescued the IMF system virtually single-handedly at the height of the global panic in 2009, Fingleton asked:

How can a nation whose government is supposedly the most overborrowed in the advanced world afford such generosity? . . .

The betting is that Japan’s true public finances are far stronger than the Western press has been led to believe. What is undeniable is that the Japanese Ministry of Finance is one of the most opaque in the world . . . .

Fingleton acknowledged that the Japanese government’s liabilities are large, but said we also need to look at the asset side of the balance sheet:

[T]he Tokyo Finance Ministry is increasingly borrowing from the Japanese public not to finance out-of-control government spending at home but rather abroad. Besides stepping up to the plate to keep the IMF in business, Tokyo has long been the lender of last resort to both the U.S. and British governments. Meanwhile it borrows 10-year money at an interest rate of just 1.0 percent, the second lowest rate of any borrower in ...

Published: Friday 17 August 2012
More than 46 million U.S. citizens currently rely on the federally-funded food stamp program to help meet their nutritional needs – more than one in seven people. The average benefits amount to about 143 dollars a month, even as food prices continue to rise.


Food rights activists from around the world will descend on the coastal U.S. state of Florida next week to protest homelessness and hunger facing millions of people in the United States and across the globe.

The Aug. 20-26 protests in Tampa were organized to draw attention to the Republican Party’s aggressive stance on tax cuts for the rich and reductions in the social safety net for poor and working families.

The Republicans hold their national convention in Tampa on Aug. 17 to formally anoint Mitt Romney as the party’s candidate for the presidential election in November.

“I have seen people who did not eat for five days. This is happening in the world’s wealthiest country,” Keith McHenry, co-founder of Food Not Bombs and an organizer of next week’s protests, told IPS.

More than 46 million U.S. citizens currently rely on the federally-funded food stamp program to help meet their nutritional needs – more than one in seven people. The average benefits amount to about 143 dollars a month, even as food prices continue to rise.

“What’s going on with the poor here and abroad is economic manipulation,” said McHenry. “Access to food is a right, not a privilege, but our leaders don’t recognize that. That is why there are so many people in jails because they are poor.”

The United States leads the world in incarceration rates, with more than two million people living behind bars.

The Barack Obama administration intends to cut food stamps funding by about two percent, or 1.6 billion dollars, a year. Besides attacks on health-care, the Republicans are seeking much greater cuts to the program, whose funding in 2011 was 78 million dollars.

Beyond the U.S., millions across the world are mired in chronic conditions of hunger and starvation. ...

Published: Sunday 5 August 2012
“The Palestinian Authority (PA) has announced it is facing a funding crisis; it is now relying on donor aid to cover a budget deficit of 1.1 billion dollars and cash shortfall of 500 million dollars.”


It will collapse, and the collapse will be harder when it happens later,” says Tareq Sadeq, Palestinian economist and professor at Birzeit University, about the financial bubble building up in the Palestinian Authority government.

“It will mean that people will lose their homes. They will lose their cars. They will lose their land sometimes because of the collapse of the bubble. This will affect the whole economy and will also reflect on the Palestinian Authority. So this may be a collapse of the PA itself,” Sadeq tells IPS.

The Palestinian Authority (PA) has announced it is facing a funding crisis; it is now relying on donor aid to cover a budget deficit of 1.1 billion dollars and cash shortfall of 500 million dollars.

“The Palestinian economy has become more and more dependent on wages, on salaries, for the whole economy, not just for the public sector; around 70 percent of all employees are wage employees. As a result, there is no production in the Palestinian economy. People consume and consume and consume and there is nothing to produce,” Sadeq says.

The International Monetary Fund (IMF) turned down an appeal from the Israeli government in early July for a 1 billion dollar loan to fund the PA. The West Bank economy is almost entirely upheld by international aid; in 2011, donors promised the PA 1 billion dollars in support, of which 800 million dollars was transferred.

“The whole economy is constrained to financial aid from international donors, which created more vulnerability in the Palestinian economy,” Sadeq says.

Palestinian Prime Minister Salam Fayyad has nevertheless pushed economic development and investments in the private sector as a means to secure Palestinian independence. To date, most international economic bodies and foreign governments have praised Fayyad’s approach, pointing to Palestinian gross domestic product (GDP) growth rates as a measure ...

Published: Wednesday 1 August 2012
“What does this all mean to the average person in the eurozone, or in Spain where unemployment just hit a record 24.6 percent? ”

World stock markets and European bond markets rallied last week in response to three words that came from the mouth of Mario Draghi, the head of the European Central Bank (ECB):  The ECB would do “whatever it takes” to preserve the euro.  This was widely interpreted as a promise to intervene in the sovereign bond markets to push down borrowing costs for Spain and Italy.

What does this all mean to the average person in the eurozone, or in Spain where unemployment just hit a record 24.6 percent?  Or in developing Asia or Africa or Latin America – or even the U.S.?   Most importantly, it means that the ECB has always had, and continues to have, the power to end the immediate crisis in the eurozone, but has refused to do so.  Not for any of the economic reasons commonly believed – such as worries about sovereign debt or inflation.  Rather, they have refused to end the crisis for a nefarious political reason:  in order to force the weaker economies of Europe to accept a regressive political agenda – including cuts in minimum wages and pensions, weakening of labor laws and collective bargaining, and shrinking the state. 

The ECB and its allies feared that if they stabilized these bond markets, their leverage over the peripheral countries would be reduced.  So for more than six months now the ECB has refused to buy Spanish bonds, which would push down yields as it did in similar crises last year.  This is a nasty and dangerous game of chicken, because the ECB obviously doesn’t want to reach a point where the crisis spins out of control. What happened last week is that the ECB finally blinked, in ...

Published: Friday 27 July 2012
Today, while global attention focuses on Europe’s woes, the economic crisis continues to inflict devastating social consequences worldwide.

The global economic crisis is exacerbating an existing human crisis. Prior to 2008, there were widespread inequalities: lavish lifestyles for some, while half of the world’s children were living on less than $2 per day, suffering from malnutrition and limited access to health, education, drinking water, and adequate housing. As the crisis unfolded, millions confronted deteriorating living conditions.


Today, while global attention focuses on Europe’s woes, the economic crisis continues to inflict devastating social consequences worldwide. In a new book from UNICEF’s Division of Policy and Practice, A Recovery for All: Rethinking Socioeconomic Policies for Children and Poor Households, analysis of the latest international data shows that unaffordable food, pervasive unemployment, and dwindling social support threaten much of the world’s population.


For starters, after two major international food-price spikes in 2007-2008 and 2010-2011, people in nearly 60 developing countries are paying 80% more, on average, for local foodstuffs in 2012 than they did before the crisis. As a result, poor families’ food security is threatened, as they are forced to reduce the quality or quantity of their food.


Follow Project Syndicate on Facebook or Twitter. For more from Isabel Ortizclick here. For more from Matthew Cummins, click ...

Published: Thursday 26 July 2012
“As we noted at the time, never before had a government budget been greeted with such lurid, sado-masochistically charged imagery. Appelbaum's piece read like a cross between Free to Choose and The Story of O.”

It was a dream come true for the austerity crowd when Great Britain's conservative/“centrist” coalition government took power in 2010. And for commentators like Slate's Anne Appelbaum it was that kind of dream. Her celebratory column reflected the orgiastic glee with which the new government's austerity plans were greeted, reveling in admiring (yes, admiring) phrases like these:

“Vicious cuts.” “Savage cuts.” “Swingeing (sic) cuts.” “Axe-wielders.”


Published: Monday 23 July 2012
“In order to reach the monetary figure, which many are calling quite conservative, economist James Henry commissioned was by the Tax Justice Network — a group that seeks to bring tax evasion to light.”


Major banks and the financial global elite are now confirmed to have as much as $32 trillion in hidden assets stashed away in offshore accounts that are subject to little or no taxation. As a result, around $280 billion is estimated to be lost in tax revenues. In other words, the multi-trillion dollar banks and elite families are avoiding any taxation while forcing United States citizens to foot the bill. Amazingly, the $32 trillion stashed away represents the overall GDP of the United States and Japan combined.

In order to reach the monetary figure, which many are calling quite conservative, economist James Henry commissioned was by the Tax Justice Network — a group that seeks to bring tax evasion to light. Even the Tax Justice Network was quite shocked by the outcome, with spokesperson John Christensen saying he was ultimately startled by the “scale” of the numbers. What’s more concerning than the numbers, however, is the entities behind them. The report revealed that major banks such as Bank of America and Citigroup were among the many major corporations and banking organizations to hide their assets in offshore tax havens.

Bank of America, HSBC, Global Elite Families Among Listed

In an interview with the news organization Al Jazeera, Christensen explains just how deep the report goes:

“We’re talking about very big, well-known brands – HSBC, Citigroup, Bank of America, UBS, Credit Suisse – some of the world’s biggest banks are involved…and they do it knowing fully well that their clients, more often than not, are evading and avoiding taxes.”

To find the incriminating information, Henry (the economist working ...

Published: Friday 20 July 2012
“I expected that many men of that younger generation would also have strong reactions, given how many of them are trying to figure out how to be with their children, support their wives’ careers, and pursue their own plans.”


When I wrote the cover article of the July/August issue of The Atlantic, entitled “Why Women Still Can’t Have It All,” I expected a hostile reaction from many American career women of my generation and older, and positive reactions from women aged roughly 25-35. I expected that many men of that younger generation would also have strong reactions, given how many of them are trying to figure out how to be with their children, support their wives’ careers, and pursue their own plans.


I also expected to hear from business representatives about whether my proposed solutions – greater workplace flexibility, ending the culture of face-time and “time machismo,” and allowing parents who have been out of the workforce or working part-time to compete equally for top jobs once they re-enter – were feasible or utopian.


What I did not expect was the speed and scale of the reaction – almost a million readers within a week and far too many written responses and TV, radio, and blog debates for me to follow – and its global scope. I have conducted interviews with journalists in Britain, Germany, Norway, India, Australia, Japan, the Netherlands, and Brazil; and articles about the piece have been published in France, Ireland, Italy, Bolivia, Jamaica, Vietnam, Israel, Lebanon, Canada, and many other countries.


Reactions differ across countries, of course. Indeed, in many ways, the article is a litmus test of where individual countries are in their own evolution toward full equality for men and women. India and Britain, for example, have had strong women prime ministers in Indira Gandhi and Margaret Thatcher, but now must grapple with the ...

Published: Wednesday 18 July 2012
“Developing countries, once they enter rapid-growth mode, generate growth from capital deepening via investment, in a sense making up for past underinvestment.”

The global economy is experiencing a major growth challenge. Many advanced countries are attempting to revive sustainable growth in the face of a decelerating global economy. But the challenges across countries are not the same. In particular, the tradable and non-tradable parts of a range of economies differ in important ways.


In the non-tradable sector (60-70% of the economy in advanced countries), the main growth inhibitors are weak demand, as in the United States following the financial crisis, and structural and competitive impediments to productivity, as in Japan. In the tradable sector, growth depends on a country’s productivity relative to incomes and competitiveness. At the global level, there can also be a shortage of aggregate demand on the tradable side.

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The Nobel laureate economist Robert Solow has shown that growth comes from three sources: the working population, capital investment, and technological progress. A growing young population helps to maintain fiscal balance and ensure intergenerational equity, but it does not by itself increase incomes. On the other hand, economic growth below the sum of growth in the working population and the labor-saving part of technological change fuels unemployment.


Developing countries, once they enter rapid-growth mode, generate growth from capital deepening via investment, in a sense making up for past underinvestment. And it is possible for advanced countries to fall behind by under-investing, particularly in the public sector, relying instead on less ...

Published: Thursday 12 July 2012
“As Rajoy was making his announcement in parliament, the miners were in the streets, joined by thousands of regular citizens, all demanding that government cuts be halted. ”

As Spain’s prime minister announced deep austerity cuts Wednesday in order to secure funds from the European Union to bail out Spain’s failing banks, the people of Spain have taken to the streets once again for what they call “Real Democracy Now.” This comes a week after the government announced it was launching a criminal investigation into the former CEO of Spain’s fourth-largest bank, Bankia. Rodrigo Rato is no small fish: Before running Bankia he was head of the International Monetary Fund. What the U.S. media don’t tell you is that this official government investigation was initiated by grass-roots action.

The Occupy movement in Spain is called M-15, for the day it began, May 15, 2011. I met with one of the key organizers in Madrid last week on the day the Rato investigation was announced. He smiled, and said, “Something is starting to happen.” The organizer, Stephane Grueso, is an activist filmmaker who is making a documentary about the May 15 movement. He is a talented professional, but, like 25 percent of the Spanish population, he is unemployed: “We didn’t like what we were seeing, where we were going. We felt we were losing our democracy, we were losing our country, we were losing our way of life. ... We had one slogan: ‘Democracia real YA!’—we want a ‘real democracy, now!’ Fifty people stayed overnight in Puerta del Sol, this public square. And then the police tried to take us out, and so we came back. And then this thing began to multiply in other cities in Spain. In three, four days’ time, we were like tens of thousands of people in dozens of cities in Spain, camped in the middle of the city—a little bit like we ...

Published: Thursday 5 July 2012
When democracy is not determined by economic power, it is possible to imagine alternatives to “growth” and “austerity.”


“Growth” is, once again, the buzzword of the moment among Europe’s politicians, thanks to Francoise Hollande, the milquetoast Socialist recently elected to succeed Nicolas Sarkozy as President of France. “My mission now,” Hollande told supporters on the night of his electoral victory, “is to give European construction a growth dimension.” President Obama praised Holland at Camp David, telling reporters he would urge “other G8 leaders” to adopt a “strong growth agenda.” The previous buzzword, “austerity,” is meanwhile in decline.

Considering this shift a victory for the anti-austerity movements occupying Europe’s historic plazas over the course of the last two years mistakes both what the elites mean when they say “growth” and what the dissidents want instead of austerity. It is similar to the way liberal commentators in the United States reliably recite the official line that Occupy Wall Street “changed the conversation” on “income inequality” (which we grown-ups will take care of now from our D.C. office buildings, so please shut up now).


Published: Wednesday 4 July 2012
Another thing missing from these discussions -- it’s not just the words ‘climate change,’ but the words ‘public sector.’

As we discuss the spate of extreme weather in the United States, the author and professor Christian Parenti argues that the Republican-led assault on the public sector will leave states more vulnerable to global warming's effects. "Another thing missing from these discussions -- it's not just the words 'climate change,' but the words 'public sector,'" Parenti says. "I mean, who's out there fighting these fires? It's the public sector. Where do people go when there are these cooling centers? It's the public sector. ... This assault on the public sector must be linked to climate change." We're also joined by The Guardian's U.S. environment correspondent Suzanne Goldenberg and by Jeff Masters, director of meteorology at the Weather Underground website.  


NERMEEN SHAIKH: I want to bring in Christian Parenti into the conversation. He’s the author of Tropic of Chaos, most recently.

You’ve talked a lot about the effects of global warming and climate change in the rest of the world, especially in the Global South. One of the arguments made for why in the U.S. there is so much climate science denial is that populations here are ...

Published: Sunday 24 June 2012
Published: Wednesday 20 June 2012
Published: Wednesday 20 June 2012
Greece has no good options, but a serious contagion risk remains to be contained in order to prevent derailment of the fiscal and growth-oriented reforms in Italy and Spain.

I have just had the privilege of speaking at the main annual conference of Germany’s Economic Council, the economic and business arm of the Christian Democratic Union, the current governing party. Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble were among the other speakers. It was an interesting event – and, more important, an encouraging one.

It seemed clear that Germany (or at least this rather large gathering of government, business, and labor leaders) remains committed to the euro and to deeper European integration, and recognizes that success will require Europe-wide burden-sharing to overcome the ongoing Eurozone crisis. The reforms in Italy and Spain are rightly reviewed as crucial, and there appears to be a deep understanding (based on Germany’s own experience in the decade and a half following reunification) that restoring competitiveness, employment, and growth takes time.

Greece has no good options, but a serious contagion risk remains to be contained in order to prevent derailment of the fiscal and growth-oriented reforms in Italy and Spain. In the face of high systemic risk, private capital is leaving banks and the sovereign-debt markets, causing governments’ borrowing costs to rise and bank capitalization to fall. This in turn threatens the functioning of the financial system and the effectiveness of the reform programs.


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Thus, the central European Union institutions, along with the International Monetary Fund, have an important role to play in stabilization and ...

Published: Wednesday 13 June 2012
“A what if scenario if the problems in Europe go from bad to worse.”

Consider the following scenario. After a victory by the left-wing Syriza party, Greece’s new government announces that it wants to renegotiate the terms of its agreement with the International Monetary Fund and the European Union. German Chancellor Angela Merkel sticks to her guns and says that Greece must abide by the existing conditions.

Fearing that a financial collapse is imminent, Greek depositors rush for the exit. This time, the European Central Bank refuses to come to the rescue and Greek banks are starved of cash. The Greek government institutes capital controls and is ultimately forced to issue drachmas in order to supply domestic liquidity.

With Greece out of the eurozone, all eyes turn to Spain. Germany and others are at first adamant that they will do whatever it takes to prevent a similar bank run there. The Spanish government announces additional fiscal cuts and structural reforms. Bolstered by funds from the European Stability Mechanism, Spain remains financially afloat for several months.

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But the Spanish economy continues to deteriorate and unemployment heads towards 30%.  Violent protests against Prime Minister Mariano Rajoy’s austerity measures lead him to call for a referendum. His government fails to get the necessary support from voters and resigns, throwing the country into full-blown political chaos. Merkel cuts off further support for Spain, saying that hard-working ...

Published: Tuesday 5 June 2012
“America can no longer regard itself as the land of opportunity that it once was. But it does not have to be this way: it is not too late for the American dream to be restored.”



America likes to think of itself as a land of opportunity, and others view it in much the same light. But, while we can all think of examples of Americans who rose to the top on their own, what really matters are the statistics: to what extent do an individual’s life chances depend on the income and education of his or her parents?


Nowadays, these numbers show that the American dream is a myth. There is less equality of opportunity in the United States today than there is in Europe – or, indeed, in any advanced industrial country for which there are data.


This is one of the reasons that America has the highest level of inequality of any of the advanced countries – and its gap with the rest has been widening. In the “recovery” of 2009-2010, the top 1% of US income earners captured 93% of the income growth. Other inequality indicators – like wealth, health, and life expectancy – are as bad or even worse. The clear trend is one of concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.

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Published: Friday 1 June 2012
“Even if these measures were to reduce the cumulative public debt, a recession would increase the debt as a proportion of gross domestic product – making a bad situation worse.”

What if Europe and the US converged on a set of economic policies that brought out the worst in both – European fiscal austerity combined with a declining share of total income going to workers? Given political realities on both sides of the Atlantic, it is entirely possible.

So far, the US has avoided the kind of budget cuts that have pushed much of Europe into recession. Growth on this side of the pond is expected to be around 2.4 per cent this year. And jobs are recovering, albeit painfully slowly.

But a tough bout of fiscal austerity could be coming in six months. The non-partisan Congressional Budget Office warned last week that if the Bush tax cuts expire on schedule at the start of 2013, just as $100bn of budget cuts automatically take effect under the deal to raise the debt ceiling that Democrats and Republicans agreed to last August, the US will fall into recession in the first half of next year.

Even if these measures were to reduce the cumulative public debt, a recession would increase the debt as a proportion of gross domestic product – making a bad situation worse. That is the austerity trap much of Europe now finds itself in.

Meanwhile, real wages in the US continue to fall. A new “World Outlook” released by the International Monetary Fund last Friday showed that in the three years since the depths of the downturn in 2009, total national income has rebounded in most of Europe and in the US. But the share of national income going to workers has fallen sharply in the US, while rising in Europe as a whole.

The trend is even more striking measured from the start of the recession. It used to be that when a downturn began, profits fell faster than workers’ income because companies were reluctant to lay off employees and couldn’t easily cut wages given union contracts or the threat of unionization.

That is still the case in Europe, courtesy of stronger unions and labor-market ...

Published: Monday 28 May 2012
Published: Sunday 27 May 2012
Published: Friday 11 May 2012
“On the anti-austerity side, a left-wing coalition came in second with around 17 percent of the vote. More ominously, a far right anti-immigrant party, which is also anti-austerity, received almost 7 percent of the vote.”

Austerity was the big loser in the Greek elections on Sunday. The two main Greek parties, who endorsed the austerity pact signed last year, together got just over one-third of the vote. This is an extraordinary rebuke given that between them, these parties have governed Greece since the end of the dictatorship in 1976.

On the anti-austerity side, a left-wing coalition came in second with around 17 percent of the vote. More ominously, a far right anti-immigrant party, which is also anti-austerity, received almost 7 percent of the vote.

It is important for people elsewhere in the world, and especially in Europe, to understand that the Greek voters were not just being cranky kids who refuse to take their medicine. There is no doubt that Greece’s government and economy were poorly managed in the years leading up to the crisis.

However the current path of austerity does not offer the country a path to a better future. The current path of austerity is simply a path of pain as end in itself. This can be seen from examining the official projections.

The IMF now projects that 2012 will be Greece’s fifth successive year of economic contraction, with 2013 being a year of stagnation. Even with growth projected to resume again in 2014, Greece’s per capita income is still projected to be more than 8.0 percent lower than it was a decade earlier. Its unemployment rate, which is currently hovering near 20 percent, is still projected to be almost 15 percent in 2017. And, its debt to GDP ratio is projected to be 137 percent in five years, far higher than it was at the onset of the crisis.

This is not a path to a healthy economy. ...

Published: Monday 7 May 2012
“This we should know by now: markets on their own are not stable.”


This year’s annual meeting of the International Monetary Fund made clear that Europe and the international community remain rudderless when it comes to economic policy. Financial leaders, from finance ministers to leaders of private financial institutions, reiterated the current mantra: the crisis countries have to get their houses in order, reduce their deficits, bring down their national debts, undertake structural reforms, and promote growth. Confidence, it was repeatedly said, needs to be restored.


It is a little precious to hear such pontifications from those who, at the helm of central banks, finance ministries, and private banks, steered the global financial system to the brink of ruin – and created the ongoing mess. Worse, seldom is it explained how to square the circle. How can confidence be restored as the crisis economies plunge into recession? How can growth be revived when austerity will almost surely mean a further decrease in aggregate demand, sending output and employment even lower?

Follow Project Syndicate on Facebook or Twitter. For more from Joseph E. Stiglitz, click here.

This we should know by now: markets on their own are not stable. Not only do they repeatedly generate destabilizing asset bubbles, but, when demand weakens, forces that exacerbate the downturn come into play. Unemployment, and fear that it will spread, drives down wages, incomes, and consumption – and thus total demand. Decreased rates of household formation – young Americans, for example, are increasingly moving back in with their parents – depress housing prices, leading to still more foreclosures. States ...

Published: Tuesday 1 May 2012
Published: Wednesday 18 April 2012
“From 2010 onwards, governments started to raise taxes and cut spending in response to growing fears of sovereign default.”

Nearly four years after the start of the global financial crisis, many are wondering why economic recovery is taking so long. Indeed, its sluggishness has confounded even the experts. According to the International Monetary Fund, the world economy should have grown by 4.4% in 2011, and should grow by 4.5% in 2012. In fact, the latest figures from the World Bank indicate that growth reached just 2.7% in 2011, and will slow this year to 2.5% – a figure that may well need to be revised downwards.

There are two possible reasons for the discrepancy between forecast and outcome. Either the damage caused by the financial crisis was more serious than people realized, or the economic medicine prescribed was less efficacious than policymakers believed.

In fact, the gravity of the banking crisis was quickly grasped. Huge stimulus packages were implemented in 2008-9, led by the United States and China, coordinated by Britain, and with the reluctant support of Germany. Interest rates were slashed, insolvent banks were bailed out, the printing presses were turned on, taxes were cut, and public spending was boosted. Some countries devalued their currencies.

As a result, the slide was halted, and the rebound was faster than forecasters expected. But the stimulus measures transformed a banking crisis into a fiscal and sovereign-debt crisis. From 2010 onwards, governments started to raise taxes and cut spending in response to growing fears of sovereign default. At that point, the recovery went into reverse.

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Published: Sunday 8 April 2012
“According to data from the International Monetary Fund (IMF), China’s economy is currently about 80 percent of the size of the U.S. economy. It is projected to pass the United States by 2016.”

Politicians in the United States must ritualistically assert that the United States is and always will be the worlds leading economic, military and political power. This chant may help win elections in a country where respectable people deny global warming and evolution, but it has nothing to do with the real world.

Those familiar with the data know that China is rapidly gaining on the United States as the world’s leading economic power. According to data from the International Monetary Fund (IMF), China’s economy is currently about 80 percent of the size of the U.S. economy. It is projected to pass the United States by 2016.

However, there is a considerable degree of uncertainty about these numbers. It is difficult to accurately compare the output of countries with very different economies. By many measures China is already well ahead of the United States.

It passed the U.S. as the world’s biggest car market in 2009. In most categories of industrial production it is far ahead of the United States and it is a far bigger exporter of goods and services. The number of people graduating college each year with degrees in science and engineering far exceeds the number in the United States. And China has nearly twice as many cell phone and Internet users as the United States.

China still has close to half of its population living in the countryside. The living standard of the 650 million people living in rural areas is much lower than in urban areas and also much more difficult to measure. The main reason that living standards are difficult to gauge is that prices are much lower in rural areas.

new ...

Published: Saturday 7 April 2012
Under an informal "gentlemen’s agreement" between the U.S. and Europe, a U.S. national has always held the top Bank position, while a European has run the IMF.

In an open letter sent to the Bank's executive board Wednesday, 39 former senior Bank staff endorsed Okonjo-Iweala's candidacy, citing her "deep experience in international and national issues of economic management", which includes four years as the Bank's managing director. 


"She would hit the ground running and get things done from the start," the former officials, who included senior vice presidents, vice presidents, and directors, wrote. "In a word, she would be the outstanding World Bank President the times call for." 

In another letter released Thursday, more than 100 economists endorsed Ocampo, arguing that his experience leading the ministries of finance, agriculture and planning, as well as stints as the head of the Economic Commission for Latin America and the Caribbean, the U.N. Commission for Latin America and the Caribbean, and as U.N. under-secretary general for economic and social affairs, made him "the most suitable candidate for World Bank President". 

The signers included internationally recognized figures, primarily from North America, Latin America, Europe, China, and India, including former Bank officials, ministers of finance and development, and central bank governors, as well as academics. 

The endorsements are coming as the Bank's executive board prepares to interview all three candidates early next week and reach a final decision the following week, by the opening of the annual Spring meetings of the Bank and its sister institution, the International Monetary Fund (IMF). 

The current race is the first since the Bank was created at the Bretton Woods conference in ...

Published: Saturday 24 March 2012
If approved by the bank’s governing board, Jim Yong Kim, who immigrated to the United States with his family at the age of five and, will succeed Robert Zoellick as the head of the world’s biggest multilateral development institution.

In a surprise to many development and finance experts here on Friday, U.S. President Barack Obama nominated Jim Yong Kim, a relatively unknown but highly regarded international health specialist to become the next president of the World Bank.


"It's time for a development professional to lead the world's largest development agency," Obama said as he introduced Korean-born Kim, a co-founder of Partners in Health who currently serves as president of Dartmouth College, in a brief appearance in the White House Rose Garden.


If approved by the bank's governing board, Kim, who immigrated to the United States with his family at the age of five and, among other posts, headed the World Health Organization’s HIV/AIDS department, will succeed Robert Zoellick as the head of the world's biggest multilateral development institution.


But for the first time in the bank's history, it appears that the U.S. nominee will face two strong challengers. The Nigerian Finance Minister, Ngozi Okonjo-Iweala, who served as the bank's managing director from 2007 to 2011, was formally nominated by South Africa earlier this week.


José Antonio Ocampo, who has served as U.N. Under-Secretary-General for Economic and Social Affairs and as Colombia's finance minister, was also nominated, after a period of much speculation.


Another candidate, Columbia University's Earth Institute president Jeffrey Sachs, withdrew from contention shortly after Kim's nomination was announced.


"I congratulate the administration for nominating a world-class development leader for this position," Sachs, who was nominated by at least three poor countries – Bhutan, Haiti and Timor Leste – and who had openly campaigned for the job, said in a statement. "I support his nomination 100 percent."


No break ...

Published: Thursday 23 February 2012
“Greece is bracing for protests after eurozone finance ministers concluded a deal that will provide a $170 billion bailout in return for another round of deep austerity cuts.”

Greece is bracing for protests after eurozone finance ministers concluded a deal that will provide a $170 billion bailout in return for another round of deep austerity cuts. The bailout is opposed by several unions and left-wing groups in Greece over new cuts and layoffs imposed on public sector workers. We’re joined by Paul Mason, economics editor at BBC Newsnight and author of the new book, "Why It’s Kicking Off Everywhere: The New Global Revolutions." He has just returned from Greece. "What makes the headlines are, of course, the riots," Mason says. "What doesn’t make so many headlines is what is happening to real people... We are living in a time where the world has, in the last couple of years, erupted in a way that many people thought they would never see again since the 1960s... The underpinnings of this new global unrest are that...people are sick of seeing the rich get richer during a crisis."


NERMEEN SHAIKH: We turn now to ...

Published: Thursday 23 February 2012
“It’s not entirely too late to try again: but it requires the currently unimaginable: a political will that is population – rather than bank – oriented.”

Greece has been the most pillaged country in Europe this Depression, among other reasons, because no one in any leadership position seems to have learned lessons from the 1930s. Plus, banks have more power now than they did then to call the shots.

Despite no signs of the first bailout working – certainly not in growing the Greek economy or helping its population - but not even in being sufficient to cover speculative losses, Euro elites finalized another 130 billion Euro, ($170 billion) bailout today. This is ostensibly to avoid banks’ and credit default swap players’ wrath over the possibility of Greece defaulting on 14.5 billion Euros in bonds.

Bailout promoters seem to believe (or pretend) that: bank bailout debt + more bank bailout debt + selling national assets at discount prices + oppressive unemployment = economic health. They fail to grasp that severe austerity hasn’t, and won’t, turn Greece (or any country) around. Banks, of course, just  want to protect their bets and not wait around for Greece to really stabilize for repayment.

Prior to the Great Depression, the Greek economy experienced years of growth, a healthy commercial activity spree, and like today, a stark increase in (less-leveraged) bank loans to finance it. When the Depression struck, banks and local businesses faced unpayable loans and ...

Published: Friday 17 February 2012
On Feb. 8, Eurostat published a report estimating that 27.7 percent of the active workforce, aged 18-64 years old, currently lives on the poverty line.

According to European mainstream economists and politicians, the solution to the Greek debt crisis, and the only option for returning the country to a path of progress, is 'fiscal consolidation'.

But for the Greek masses, the word ‘austerity’ has meant the demise of labor, economic and human rights and the dismantling of an inefficient yet crucial social welfare system.

In a last ditch attempt to secure an additional bailout loan of 130 billion dollars from the Troika (a mechanism comprised of the International Monetary Fund, the European Central Bank and the European Commission), Greece has capitulated to the austerity plan forced upon it by the international community, hoping to escape bankruptcy.

The latest phase of the plan included cutting 150,000 public sector jobs, overturning existing labor laws, slashing pensions and reducing monthly minimum wages by 20 percent, from 751 euros to 600 euros.

Workers under 25 years of age have been asked to take a bigger – 30 percent – salary cut.

Parliament ushered in the fresh ‘bout of austerity’ on Feb. 12 amid increasing violence across the city. Mobs of newly impoverished Greeks took to the streets, setting Athens ablaze and offering yet another spectacle to the international media.

Meropi Andriopoulou, a medical officer involved in the national health system since 1989, who often joins the demonstrators, believes that ordinary Greeks only stand to lose more from the neoliberal structural adjustment policies (SAPs) imposed on the country.

"Greece was a country with universal healthcare. Now, many of the people who show up in public hospitals can’t even afford the five-euro general admission fee introduced two years ago. Ten percent of patients don’t even have insurance," she said.

"Spending your days in a public hospital (highlights the degree of) social exclusion. Our healthcare system has ...

Published: Thursday 16 February 2012
“In an open letter released shortly after the Bank’s announcement that Zoellick will step down at the end of his five-year term in June, some 60 groups and activists from around the world said any candidate should gain the ‘open support’ of at least the majority of World Bank member countries.”

A global coalition of development activists and non- governmental organizations (NGOs) is calling on the World Bank's governors to ensure that Bank President Robert Zoellick's successor is chosen in an "open and merit-based process" that will give borrowing countries a major say in the selection.


In an open letter released shortly after the Bank's announcement Wednesday that Zoellick will step down at the end of his five-year term in June, some 60 groups and activists from around the world said any candidate should gain the "open support" of at least the majority of World Bank member countries and of the majority of low- and middle-income countries that make up most of its borrowers. 


"As the Bank only operates ...

Published: Thursday 16 February 2012
“For now, people still must turn for solutions to their national governments, which remain the best hope for collective action.”

One of our era’s foundational myths is that globalization has condemned the nation-state to irrelevance. The revolution in transport and communications, we hear, has vaporized borders and shrunk the world. New modes of governance, ranging from transnational networks of regulators to international civil-society organizations to multilateral institutions, are transcending and supplanting national lawmakers. Domestic policymakers, it is said, are largely powerless in the face of global markets.

The global financial crisis has shattered this myth. Who bailed out the banks, pumped in the liquidity, engaged in fiscal stimulus, and provided the safety nets for the unemployed to thwart an escalating catastrophe? Who is re-writing the rules on financial-market supervision and regulation to prevent another occurrence? Who gets the lion’s share of the blame for everything that goes wrong? The answer is always the same: national governments. The G-20, the International Monetary Fund, and the Basel Committee on Banking Supervision have been largely sideshows.


Published: Monday 30 January 2012
“An excessive cut in public spending in the current circumstances can lead to a contraction in growth, which is already happening: the International Monetary Fund now projects that the eurozone will shrink by 0.5% in 2012.”

It is now increasingly clear that what started in late 2008 is no ordinary economic slump. Almost four years after the beginning of the crisis, developed economies have not managed a sustainable recovery, and even the better-off countries reveal signs of weakness. Faced with the certainty of a double-dip recession, Europe’s difficulties are daunting.

Not only is Europe running the risk of lasting economic damage; high long-term unemployment and popular discontent threaten to weaken permanently the cohesiveness of its social fabric. And, politically, there is a real danger that citizens will stop trusting institutions, both national and European, and be tempted by populist appeals, as in the past.

Europe must avoid this scenario at all costs. Economic growth must be the priority, for only growth will put people back to work and repay Europe’s debts.


Published: Thursday 19 January 2012
“Policymakers cannot afford to wait decades for economists to figure out a definitive answer, which may never be found at all.”

 In his classic Fable of the Bees: or, Private Vices, Publick Benefits (1724), Bernard Mandeville, the Dutch-born British philosopher and satirist, described – in verse – a prosperous society (of bees) that suddenly chose to make a virtue of austerity, dropping all excess expenditure and extravagant consumption. What then happened?

The Price of Land and Houses falls;


Published: Wednesday 18 January 2012
“Banks hoard cheap money which doesn’t help populations, exacerbating the damaging economic effects. Unfortunately, this won't end any time soon.”

The markets (read: traders with big books at mega financial firms and hedge funds) weren’t particularly shocked by last week’s wave of heavily pre-broadcast S&P sovereign debt downgrades. For months, the question wasn’t ‘if’, but ‘when.’ True to form, just as with the US downgrade, S&P’s reasons skated the surface of prevailing wisdom – governments have too much debt, and not enough income. That’s only a fraction of the story.

Nowadays, when any sovereign (including the US) gets downgraded by a rating agency, it's not just because its debt repayment ability is questionable (the publicized logic of rating agencies), but because it incurred more expensive debt to float its banking system. It chose to subsidize banks over people.

The S&P likes moving on Friday nights. It was on a Friday night that it downgraded US debt to AA+ from AAA. On Friday night, January 13, 2012,  it downgraded France and Austria from AAA to AA+, and 7 other European countries, too; Cyprus, Italy, Portugal, and Spain by two notches; Malta, Slovakia, and Slovenia, by one notch. Portugal, Cyprus, Ireland and Greece are at junk status. Germany’s AAA rating is intact.

Nowhere in S&P’s statement about “global economic and financial crisis”, did it clarify that sovereigns were hit due to backing their largest national banks (and international, US ones) which engaged in half a decade of leveraged speculation. But here’s how it worked:

1) Big banks funneled speculative capital, and their own, into local areas, using real estate and other ...

Published: Wednesday 28 December 2011
“The world’s top economists, those who had successfully predicted the crisis of 2008, tried telling the rest of the world what was wrong with the idea: Joblessness and consumer fears were killing any chance of real recovery.”

This is the time of year when we're reminded of all the famous people who died over the last twelve months, a list which includes two of my favorite guitar players (Hubert Sumlin and Cornell Dupree). But there were also some notable non-human deaths in 2011, especially in the world of economic policy.

One of those deaths should have completely altered the political debate in Washington. The name of the deceased was "Austerity Economics," and it was first glimpsed in a 1921 paper by conservative economist Frank Wright. Austerity died of natural causes brought on by prolonged exposure to reality.


Published: Thursday 22 December 2011
“The negotiating teams at the troika surely must know that the path they are following can only lead to further crises.”

At this point the sovereign debt crisis in Europe is almost getting boring. We’ve seen the same script played out over and over with country after country. The basic story is the markets begin a run on the debt of a country: Greece, Ireland, Italy, Spain etc.

The troika, the European Central Bank (ECB), the European Union (EU), and the International Monetary Fund (IMF) then demand a series of austerity measures. In addition, they sometimes demand measures unrelated to fiscal policy, such as a lower minimum wage in Ireland or weaker employment protection legislation in Italy, that are intended to weaken workers’ bargaining power. As a quid pro quo, the troika then arranges enough bond purchases or other supports to get through the immediate crisis.

Of course these measures don’t actually solve the underlying problem. If the troika took the steps needed to ensure that the indebted countries got past this crisis, it would lose the ability to demand further austerity and other steps that weaken welfare state supports for workers. The troika is not willing to give up its leverage at this point.

That is why the ECB repeatedly declares its refusal to guarantee support for sovereign debt any time it seems as though the financial markets believe that it is committed to supporting the debt of the troubled borrowers. This insistence by the ECB, coupled with the other policies it pushes to stifle growth, ensures that the crises will continue. The same countries will have to keep coming back for another dose of punishment and new countries will be added to the list as the contagion of slumping demand, deteriorating bank balance sheets, and dwindling confidence spreads.

The negotiating teams at the troika surely must know that the path they are following can only lead to further crises. Their medicine of austerity is irrelevant to the disease that is afflicting the debt-burdened countries.

Most immediately they are suffering ...

Published: Monday 5 December 2011
“Letting the ECB off the hook in this manner would simply validate for Europe as a whole the same moral hazard feared by German and other leaders who oppose ECB intervention.”

A short-lived rumor recently suggested that the International Monetary Fund was putting together a €600 billion ($803 billion) package for Italy to buy its new government about 18 months to implement the necessary adjustment program. Except for the magnitude of the package, this sounds no different from a standard IMF adjustment program – the kind that we are accustomed to seeing (and criticizing) in the developing world. But there is one crucial difference: Italy is part of a select club that does not need outside rescue funds.

So far, programs for the eurozone periphery have been spearheaded and largely financed by European governments, with the IMF contributing financially, but mainly acting as an external consultant – the third party that tells the client the nasty bits while everyone else in the room stares at their shoes.

By contrast, the attempt to crowd multilateral resources into Europe was made explicit by eurozone finance ministers’ call in November for IMF resources to be boosted – preferably through ...

Published: Sunday 27 November 2011
“Reforming social-welfare benefits is the only permanent solution to Europe’s crisis”

The resignations of Greek Prime Minister George Papandreou and Italian Prime Minister Silvio Berlusconi have highlighted how Greece, Italy, and many other countries obscured for too long their bloated public sectors’ long-standing problems with unsustainable social-welfare benefits. Indeed, for many of these countries, meaningful reform has now become unavoidable.

The social-insurance systems in Europe, as in the United States, Japan, and elsewhere, were designed under vastly different economic and demographic circumstances – more rapid economic growth, rising populations, and lower life expectancy – from those prevailing today. Governments (the focus is on Greece and Italy at the moment, but they are not alone) have promised too much, to too many, for too long. My 1986 book Too Many Promises pointed to the same problem with America’s social-welfare system.

This fundamental problem has now manifested itself in these countries’ unsustainable debt dynamics. Euro membership, which temporarily enabled massive borrowing at low ...

Published: Friday 25 November 2011
“The military council accepted the resignation of caretaker prime minister Essam Sharaf's cabinet, amid continued unrest in Cairo and other major cities.”

Egypt's ruling military council has reportedly asked a former prime minister, Kamal al-Ganzouri, to form a new cabinet. But there are no signs of a let-up in the anti-military demonstrations.

Ganzouri headed the government from 1996 to 1999, under the deposed president, Hosni Mubarak (1981-2011). 

The state newspaper Al-Ahram said on its website, quoting sources close to Ganzouri, that he had agreed in principle to lead a national government after his meeting with Field Marshal Mohamed Hussein Tantawi, head of the Supreme Council of the Armed Forces (SCAF). 

The military council earlier accepted the resignation of caretaker prime minister Essam Sharaf's cabinet, amid continued unrest in Cairo and other major cities. 

After the popular uprisings earlier this year, Ganzouri distanced himself from Mubarak in a television interview, prompting several Facebook pages to recommend him as a future presidential candidate. 

Born in 1933, Ganzuri served as minister of planning and international co-operation before his first tenure as prime minister. He then made a name for himself by working to strengthen ties between Egypt and the World Bank and the International Monetary Fund. 



Published: Wednesday 23 November 2011
“Now we’re just barely in the second quarter of the game of thrones, where the big banks are the kings, the ECB, IMF and the Fed are the money supply, and the populations are the powerless serfs.”

Often, when I troll around websites of entities like the ECB and IMF, I uncover little of startling note. They design it that way. Plus, the pace at which the global financial system can leverage bets, eviscerate capital, and cry for bank bailouts financed through austerity measures far exceeds the reporting timeliness of these bodies.

That’s why, on the center of the ECB’s homepage, there’s a series of last week’s rates – and this relic - an interactive Inflation Game (I kid you not)  where in 22 different languages you can play the game of what happens when inflation goes up and down. If you’re feeling more adventurous, there’s also a game called Economia, where you can make up unemployment rates, growth rates and interest rates and see what happens.

What you can’t do is see what happens if you bet trillions of dollars against various countries to see how much you can break them, before the ECB, IMF, or Fed (yes, it'll happen) swoops in to provide “emergency” loans in return for cuts to pension funds, social programs, and national ownership of public assets. You also can’t input real world scenarios, where monetary policy doesn’t mean a thing in the face of tidal waves of derivatives’ flow. You can’t gauge say, what happens if Goldman Sachs bets $20 billion in leveraged credit default swaps against Greece, and offsets them (partially) with JPM Chase which bets $20 billion, and offsets that with Bank of America, and then MF Global (oops) and then… see where I’m going with this.

We're doomed if even their board games don’t come close to mimicking the real situation in Europe, or in the US, yet they supply funds to banks torpedoing local populations with impunity. These central entities also don’t bother ...

Published: Sunday 20 November 2011
“A sovereign nation can always find the money to pay debts owed in its own currency.”

It is no great surprise that with only days to go, the congressional “super committee,” given the herculean task of carving an additional $1.2 trillion out of the federal budget, has failed to reach agreement.  Why should six Republicans and six Democrats with diametrically opposed views agree in a few weeks, when Congress couldn’t shake hands on it after months of wrangling, despite the guillotine blade of a federal default hanging over their heads?      

Whether the super committee reaches agreement or not, however, the deficit hawks win.  If they agree, either $1.2 trillion gets cut from the budget or taxes go up by that amount; and the committee co-chair has categorically stated taxes are not going up, so that means the budget will be cut.  If agreement is not reached, $1.2 trillion in cuts automatically kick in, split evenly between domestic and military spending.  Either way, the economy will wind up with $1.2 trillion less in the way purchasing power.  The result will be to reduce demand, kill jobs, and put more people on the streets.

For the deficit hawks, however, it all seems to be going according to plan.  The super committee is characterized as an emergency measure that was rushed through to avoid an arbitrarily imposed August deadline for freezing the debt ceiling, but it has actually been in the works for years.  In 2009, it was called the

Published: Wednesday 16 November 2011
“The euro is at risk of collapse, and some European politicians are waxing apocalyptic.”

Europe has always been a rather tenuous concept. A rump continent, Europe represented the barbarous hinterlands for the Greeks and Romans. The first use of the term "European" occurred in a chronicle describing the forces of Charles the Hammer that turned back the northward advance of Islam at the battle of Tours in 732. Long celebrated in Europe as a victory of civilization over barbarism, the Battle of Tours was, as historian David Levering Lewis reminds us in God's Crucible, actually the opposite: "the victory of Charles the Hammer must be seen as greatly contributing to the creation of an economically retarded, balkanized, fratricidal Europe that, in defining itself in opposition to Islam made virtues out of religious persecution, cultural particularism, and hereditary aristocracy."

For most of its existence, Europe has been just that: a continent divided against itself. From the conquests of Charlemagne to the unprecedented bloodletting of two world wars in the 20th century, Europe saw only brief stretches of unity, and that only by virtue of imperial force.

Europe as a unified, democratic, relatively peaceful, and economically prosperous order has so far only enjoyed a brief lifespan. This conception of Europe dates to the early days of the Cold War and the perceived need to create a bulwark against the Soviet Union to the east. Centuries of Franco-German enmity vanished after World War II, as these two key European countries united against a common enemy at the urging of a common friend (the United States). The resulting economic alliance would expand and deepen over the decades into the current European Union of 27 countries. The EU now boasts a parliament, a council of ministers, a common currency (for 17 of the 27), the largest economy in the world, and even, somewhat ominously, a military force that has intervened overseas a dozen times or so.

Thanks to a difficult-to-contain economic ...

Published: Wednesday 9 November 2011
Published: Wednesday 9 November 2011
“People will want to hold onto ocean-front property in the Greek islands or at the foot of the Acropolis, so there will be demand for the currency.”

Greek Prime Minister George Papandreou touched off a firestorm last week when he proposed putting the austerity package designed by the “troika” (the I.M.F, the European Central Bank and the European Union) up for a popular vote. The idea that the Greek people might directly be able to decide their future terrified leaders across Europe and around the world. Financial markets panicked, sending stocks plummeting and bond yields soaring.

However, by the end of the week things were back under control. The leaders of France and Germany apparently laid down the law to Papandreou and he backed off plans for the referendum. While the government is in the process of collapsing in Greece, the world can now rest assured that the Greek people will not have an opportunity to vote on their future.

This is unfortunate since it means that Greece’s future will likely be decided by politicians who may not have the interests of the Greek people foremost in their minds. By their own projections, the austerity package designed by the troika promises a decade of austerity, with high unemployment, falling real wages and sharp reductions in public services and pensions. And, their projections have consistently proven to be overly optimistic.

If given the opportunity would the Greek people endorse this sort of austerity package? The answer obviously depends on the alternative.


Published: Sunday 6 November 2011
Sarkozy eventually closed the G20 meeting in Cannes on Friday with the announcement that ten out of the twenty countries support the implementation of the tax, though no concrete action plan was put in place.

While the Greek bailout and stimulus package dominated discussion among the Group of 20 (G20) major industrialized and emerging market economies at the high-level summit in Cannes, France, this week, the proposed financial transactions tax (FTT) received meagre attention.

Dubbed by some economists and activists as the ‘Robin Hood Tax’, the FTT has enjoyed marginal but sustained support from hard-hitters in the G20.

Back in February, French President Nicolas Sarkozy nudged Microsoft co-founder Bill Gates to prepare a report on the enormous potential of such a tax to jump-start development in poor countries, particularly after the 2008-9 crash pushed many donor nations to slash their official development assistance (ODA) to the global south.

A ‘technical note’ from the report, released at the World Bank and International Monetary Fund spring meetings in Washington D.C. in September, claimed that the adoption of an FTT by the G20 or even the European Union could generate "substantial resources."

According to the note, "Some modeling suggests that even a small tax of 10 bp (basis points) on equities and two bp on bonds would yield about 48 billion (dollars) on a G20-wide ...

Published: Saturday 5 November 2011
“Today’s protesters are asking for little: a chance to use their skills, the right to decent work at decent pay, a fairer economy and society.”

The protest movement that began in Tunisia in January, subsequently spreading to Egypt, and then to Spain, has now become global, with the protests engulfing Wall Street and cities across America. Globalization and modern technology now enables social movements to transcend borders as rapidly as ideas can. And social protest has found fertile ground everywhere: a sense that the “system” has failed, and the conviction that even in a democracy, the electoral process will not set things right – at least not without strong pressure from the street.

In May, I went to the site of the Tunisian protests; in July, I talked to Spain’s indignados; from there, I went to meet the young Egyptian revolutionaries in Cairo’s Tahrir Square; and, a few weeks ago, I talked with Occupy Wall Street protesters in New York. There is a common theme, expressed by the OWS movement in a simple phrase: “We are the 99%.”


Published: Thursday 3 November 2011
“If the people of Europe want to have control over their destiny they cannot allow a small clique to run the central bank for their interests.”

In the last month, people from around the country and around the world have picked up on the Occupy Wall Street theme of retaking the country from the wealthy. Insofar as this sentiment gathers force in Europe, there is probably no place better for people to plant themselves than on the steps of the European Central Bank (ECB).

More than any other institution the ECB is responsible for the economic wreckage that has overtaken the European economy. In the years when housing bubbles were building across the much of the eurozone and the United States, the ECB looked the other way. Its position at the time was that these bubbles and the huge imbalances they created were not its concern. Its concern was keeping the inflation rate at 2.0 percent.

This single-minded obsession with the inflation rate at a time when the economies of the eurozone and the world were on the edge of disaster is akin to Kodak insisting that its business line was photographic film at a time when digital photography was exploding. Competent business people adjust their business plans when the world changes. In the same vein, competent central bankers reorder their priorities when the economic situation requires changes.

But the ECB ignored the housing bubbles and the economy came crashing down around them. This may have been due to incompetence or it may have something to do with the fact that many of their friends in the banking industry were making lots of money financing the bubbles. Either way the consequences for ...

Published: Thursday 3 November 2011
“States and cities have been slashing public services for the past three years.”

Which do you trust more: democracy or financial markets?

Greek Prime Minister George Papandreou decided in favor of democracy yesterday when he announced a national referendum on the draconian budget cuts Europe and the IMF are demanding from Greece in return for bailing it out.

(Or, more accurately, the cuts Europe and the IMF are demanding for bailing out big European banks that have lent Greece lots of money and stand to lose big if Greece defaults on those loans – not to mention Wall Street banks that will also suffer because of their intertwined financial connections with European banks.)

If Greek voters accept the bailout terms, unemployment will rise even further in Greece, public services will be cut more than they have already, the Greek economy will contract, and the standard of living of most Greeks will deteriorate further.


Published: Thursday 27 October 2011
“The Catholic Church has for many years raised objections to the patterns of globalization, concentration of wealth and economic equality that have encouraged the massive redistribution of wealth upward that has made the rich richer, the poor poorer and the middle class more vulnerable than at any time in generations.”


The Catholic Church has for many years raised objections to the patterns of globalization, concentration of wealth and economic equality that have encouraged the massive redistribution of wealth upward that has made the rich richer, the poor poorer and the middle class more vulnerable than at any time in generations.

And, now, as the Occupy Wall Street movement raises the issue of economic inequality, the church is stepping up with a proposal to begin to address the extreme injustice of a system that taxes working people for necessities but allows speculators to avoid even the most basic responsibilities.

On the eve of the G-20 leaders, the Pontifical Council for Justice and Peace has endorsed a series of reforms to the global economic financial and monetary systems that features as its centerpiece the development of a financial transactions tax.

From the note on financial reform from the Pontifical Council:

Specific attention should be paid to the reform of the international monetary system and, in particular, the commitment to create ...

Published: Monday 24 October 2011
“While the betting is that a resolution to the debt crisis will be reached before the whole system explodes, the ECB and its partners are imposing enormous risks on everyone else for concessions that are of questionable value, at best.”

Jean Claude Trichet will be retiring as head of the European Central Bank at the end of the month. He will step into retirement having wreaked the sort of destruction on the European economy that hostile powers can only dream about. Tens of millions of people across the eurozone countries are unemployed or underemployed because of his mismanagement of Europe’s economy. Meanwhile the world teeters on the brink of another financial crisis because of the ECB’s failure, along with the IMF, to effectively address the sovereign debt crisis. Most incredible of all, Trichet probably thinks he has done a good job.

This last point really is central because the ECB, like much of the economics profession, continues to be controlled by a bizarre clique that believes that the most important, and possibly only, goal that a central bank should pursue is a 2 percent inflation target. By this measure, the ECB has done reasonably well, even the as the euzo zone economy has crumbled around it. After all, inflation in the eurozone economies rarely exceeded 3 percent and averaged well under the 2 percent target over the last decade.

However, the low and stable eurozone inflation rate is not going to provide much help to the 21.2 percent of the Spanish work force that is unemployed or the 14.6 percent of the Irish workforce, nor the millions more elsewhere in the eurozone who have lost their jobs as a result of the collapsed of the housing bubbles that the ECB let grow unchecked.

If Trichet and his colleagues at the ECB had been awake, they would have noticed that real house prices in Spain had more than doubled between 1998 and 2006. The same was true in Ireland. There was no remotely comparable increase in rents, strongly indicating that this run-up was not being driven by the fundamentals of the housing market.

And in both countries, the massive run-up in house prices was having the predictable effect on the economy. Both countries had huge ...

Published: Tuesday 11 October 2011
By lowering expectations enough, even the pathetic September jobs numbers can be made to look good.

The September jobs report showed that the U.S. economy created just 103,000 jobs in the month, 45,000 of which were the jobs of Verizon workers who were returning from a strike in August. The economy has created 99,000 jobs a month over the last three months, about 9,000 more than it needs to keep pace with the growth of labor force. At this pace, it will be around 80 years until the economy gets back to normal levels of unemployment.

Nonetheless, the news accounts told the public that the jobs numbers were better than expected. After all, at least the number of jobs is growing; the economy has not sunk back into recession.

Of course slow growth is better than a recession. But this is like saying that we are better off with one major hurricane hitting the East Coast than two. This is true, but why would we expect that two major hurricanes would hit the East Coast in the same year?

This is the same logic with the double-dip recession story. In the last several months many economic analysts have been running around with scary stories about a double-dip recession. While the stories were scary, they never made much sense.

Every recession that the United States has had since the Great Depression has been triggered by a plunge in housing and car sales. It is very difficult to imagine sharp falls in either of these sectors at this point primarily because current sales levels are already very low. At worst, we could see a modest downturn in one or both ...

Published: Saturday 8 October 2011
“With the recession sharply curtailing revenue, that doesn’t leave much money for inventive job-creating agendas.”

Virtually all forecasters are now projecting the unemployment rate to remain high for years into the future. This is the result of the political deadlock in Washington, where the Republican leadership has made it clear that it will oppose any further measures to create jobs.

If nothing happens in Washington, then state and local governments are left to fend for themselves. Unfortunately state and local governments have two serious disadvantages in the job creation effort relative to Washington. They can’t run deficits, since most are required to balance their budgets. And, they can’t just print money like the Federal Reserve Board.

As a result, the range of action for state and local policymakers is limited to what they can pay for. With the recession sharply curtailing revenue, that doesn’t leave much money for inventive job-creating agendas. These governments can raise taxes, but there is a limit to how much taxes can be increased without sending business into neighboring states, even if the political will exists.

However, there is one tax that state and local governments can raise without fear of losing businesses or people. They can tax vacant properties.

This is an especially desirable tax in the current economic situation since the real estate bubble created a glut of both residential and non-residential property in much of the country. Having housing units or commercial properties sit idle does no one any good. People could be living in the housing units and the commercial properties could offer new jobs in stores and offices.

The problem is that property owners often have difficulty coming to grips with the new market environment. They saw the run-up in prices of the bubble years and they expect that these prices will soon return. Rather than accept a lower price to sell or rent their vacant properties, they are waiting for prices to return to their bubble peak.

As a result, these pie-in-the-sky ...

Published: Tuesday 4 October 2011
“Many people look back with fondness on Clinton years and there is good cause: The economy grew at an annual rate of almost 4.5 percent during his second term and the unemployment rate fell to a 4.0 percent as a year-round average in 2000.”

The New York Times reported last week that former President Bill Clinton is working on a new book on economic policy to be released in time for next year’s election. This is unfortunate, since Clinton stands alongside Alan Greenspan as one of the last people who should be giving the country and the world advice on economic policy.

Many people look back with fondness on Clinton years and there is good cause. The economy grew at an annual rate of almost 4.5 percent during his second term. The unemployment rate fell to a 4.0 percent as a year-round average in 2000. And the country saw strong real wage growth up and down the income ladder for the first time since the early 70s.

This was all good news. However, it was unsustainable and Clinton’s economic team should have known it at the time. The immediate cause of the prosperity was the demand created by a $10 trillion stock bubble. While this gave some boost to investment, its main impact was on consumption. People spent based on their newly created stock wealth, causing the savings rate to fall below 2.0 percent, which at the time was the lowest level of the post-war era.

Bubbles of course burst, and when this one did it gave the country a severe downturn in 2001. While the official recession was short and relatively mild, ending in just seven months, the economy didn’t start to generate jobs again until September of 2003.

It is not easy to recover from a recession caused by a collapsed asset bubble, as is becoming more evident every day. The country did not regain the jobs lost in the 2001 downturn until 2005, and even then it was only due to growth driven by the housing bubble.

One of the factors that made it harder to recover from the 2001 downturn was the sharp increase in the country’s trade deficit. Demand was diverted abroad from domestically produced goods and services. This was in turn a direct result of the high dollar policy that was put in place ...

Published: Sunday 25 September 2011
“In these circumstances, we need collective action for global recovery along four main policy lines: repair, reform, rebalancing, and rebuilding.”

The global economy has entered a dangerous new phase. There is a path to sustained recovery, but it is narrowing. To navigate it, we need strong political will around the world – leadership over brinksmanship, cooperation over competition, and action over reaction.

One of the main problems today is too much debt in the global financial system – among sovereigns, banks, and households, and especially among the advanced economies. This is denting confidence and holding back spending, investment, and job creation. These countries face a weak and bumpy recovery, with unacceptably high unemployment. The eurozone debt crisis has worsened, and financial strains are rising. Political indecision in some quarters is making matters worse. Social tensions bubbling beneath the surface could well add fuel to the crisis of confidence.

In these circumstances, we need collective action for global recovery along four main policy lines: repair, reform, rebalancing, and rebuilding.

First, repair. Before doing anything else, we must relieve some of the balance-sheet pressures – on sovereigns, households, and banks – that risk smothering the recovery. Advanced countries need credible medium-term plans to stabilize and reduce public debt.

"Follow Project Syndicate on Facebook or Twitter. For more from Christine Lagarde, click here."

But consolidating too quickly can hurt the recovery and worsen job prospects. There is a solution. Credible measures that deliver and anchor savings in the medium term will help create space to accommodate growth today – by allowing a slower pace of consolidation. Of course, the precise path is different for each country, as some are under market pressure and have no choice, while others ...

Published: Friday 19 August 2011
“Eurozone governments have proven unwilling, or unable, to produce a solution that persuades markets that they are on top of the problem.”

“April is the cruelest month,” wrote T.S. Eliot at the beginning of his great poem, “The Waste Land.” But, if Eliot had been a professional investor who had observed European financial markets over the last few years, I am quite certain that his choice would have been August.

In August 2007, the decision by BNP Paribas to close two of its hedge funds exposed to the subprime sector precipitated a liquidity crisis for all European banks during that summer. This year, BNP’s great rival, Société Générale, has been in the spotlight. Its stock fell by more than 14% in one day in mid-August, plumbing depths not seen for two and a half years. Rumors have swirled about a possible downgrade of France’s sovereign debt, accompanied by speculation about the consequences for French banks.

"Follow Project Syndicate on Facebook or Twitter. For more from Howard Davies, click here."


Published: Thursday 4 August 2011
Published: Sunday 31 July 2011
"Everything changes. Sometimes you have to change it yourself."

Recently, Nelson Mandela turned 93, and his nation celebrated noisily, even attempting to break the world record for the most people simultaneously singing “Happy Birthday.” This was the man who, on trial by the South African government in 1964, stood a good chance of being sentenced to be hanged by the neck until dead. Given life in prison instead, he was supposed to be silenced.  Story over.  

You know the rest, though it wasn’t inevitable that he’d be released and become the president of a post-apartheid South Africa. Admittedly, it’s a country with myriad flaws and still suffers from economic apartheid, but who wouldn’t agree that it’s changed?  Activism changed it; more activism could change it further.

Meanwhile, Rupert Murdoch, who’d amassed a vast media empire, banked billions of dollars, and been listed by Forbes as the world’s 13th most powerful person, must have thought he had it made these past few decades.  Now, his empire is crumbling and his crimes and corrosive influence (which were never exactly secret) are being examined by everyone. You never know what’ll happen next.

About 1,600 years ago, Boethius put it this way in The Consolations of Philosophy, written while he, like Mandela, was in prison for treason: “As thus she turns her wheel of chance with haughty hand, and presses on, fortune now tramples fiercely on a fearsome king, and now deceives no less a conquered man by raising from the ground his humbled face.”

Still, that wheel didn’t just turn.  It took some good journalism -- thank you, reporters of ...

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