Archive for ‘Economics’

Economic Peace: Some Thoughts from Barcelona

By , 1 March, 2011, No Comment

Returning from a brief (9 days) blogging hiatus with a post at Foreign Exchange. The subject: a panel I was asked to speak on at IESE’s sustainable business conference in Barcelona this weekend. My topic was ‘economic peace and the private sector’s role in fostering political stability.’ An excerpt:

Specifically, the reductive tendency leads us to place emphasis on macroeconomic growth as a cure-all, when as we’ve seen in Obasanjo’s Nigeria or Ben Ali’s Tunisia or Musharraf’s Pakistan, growth can correlate quite easily with increasing political instability and conflict. For one thing, there’s the question of distribution, of how much growth is trickling down the bottom of the economic ladder to those most likely to be embroiled in crime or violence.

But even if ‘economic growth’ is replaced by a genuine focus on job creation and the building of a stable middle class, a critical challenge remains. In a society which has chosen—and this is an ideological choice—to invest its resources in militarism or theocracy but not in education or health care, an angry young man with a steady income still can’t spend it providing for his family: the services he needs aren’t there to be purchased.

Instead, they’re available to him for free from the same crowd of ‘non-state actors’ responsible for his country’s turmoil. In other words, those actors—be they mobsters or terrorists or warlords—aren’t grafting an abstract ideology onto his poverty and rage; they are producing an alternative society, complete with the services the state does not provide. It’s an ideological battle, not an economic one, to transfer a whole society’s focus and collective, public, wealth into building the social structures that make an income valuable. Without those, a little money’s not worth the paper it’s printed on.

You can read the rest here.

One postscript: left to my own devices, I’d probably have parachuted into Barcelona for a day; attended the conference and jetted out. With encouragement and company from qwghlm, I took four whole days off work. I didn’t check Twitter and Google Reader every 5 minutes; I missed thousands of tweets and hundreds of news stories; and when we got back and I caught up, I found that nothing had fundamentally changed on the big stories I’d been following. Gaddafi? Still in power. Raymond Davis? Still in legal limbo. Me? Recharged and ready to report on both.

Indo-Pak Peace Talks Resume

By , 11 February, 2011, No Comment

Big news out of the Subcontinent this week: India and Pakistan are resuming peace talks after almost two years’ stalemate. The talks, which Foreign Secretary Nirupama Rao is calling the ‘comprehensive dialogue,’ will cover political, economic and security issues and will be structured not only around meetings between the two countries’ heads of state and foreign ministries, but also the ministries overseeing commerce, culture and natural resources. This structure will prevent, significantly, progress on any one area from being held hostage by stagnation on another.

Will these talks bear fruit? I’m skeptical, though not for the usual reasons. Read why here.

The Difference Between Expertise and Intelligence

By , 21 January, 2011, No Comment

There’s a fair bit of web chatter about Peter Baker’s magnum opus in the NYT Magazine on the Obama Administration’s economic policy failures, which doesn’t actually contain much discussion of economics or policy. Why this shocks bloggers is a mystery to me: if the NYTM wanted a deep look at economic policy, they’d have commissioned a piece from David Leonhardt. [Oh, wait, they did that already, three times.] Baker is a political correspondent, and instead of evaluating whether Obama’s economic vision is sound or not, he asks why the Administration failed to provide the public with any vision at all.

As Felix Salmon has noted, the piece places a large share of the blame on Larry Summers (who, as Director of the National Economic Council, was responsible for forging consensus among the President’s economic team, and instead was busy fighting with several of the other key players) and goes a long way towards attempting to exonerate the rest. Salmon correctly adds to Baker’s critique of Summers’ personnel skills a critique of his economic principles, which have never lined up neatly with the Pro-Main Street expectations voters have of this White House.

That’s all fair, as far as it goes, but I don’t think it goes very far.

Read More →

Sudan: What Do you Mean by Independence?

By , 13 January, 2011, No Comment

First of several posts up at Foreign Exchange today about the referendum for independence in Southern Sudan:

A rare bit of uplifting news in foreign policy land this week, as emerging returns from the independence referendum in Southern Sudan suggest minimal violence and 60% voter turnout, which is nothing short of remarkable given the distances people traveled to polling stations and the fact that any population figure for Southern Sudan includes a fair number of individuals who don’t actually live in Sudan anymore but in refugee camps in neighboring Kenya and further afield.

The positive headline aside, there are some very large unanswered questions about what independence means, substantively. The most important one, from the perspective of this blog, is that an independent South is going to be a landlocked, poor state with one valuable natural resource – oil – and no capacity to refine or export it.

Read the rest.

Thinking Long Term on India and Iran

By , 5 January, 2011, No Comment

New post at Foreign Exchange on the India-Iran oil deal and the challenges of securing funding for it amidst the US-led sanctions on Tehran. My take:

the U.S. position in recent years has been that India is most valuable as an ally when it is looking eastwards, and competing with China in the South China Sea or through trade relationships in South East Asia; that is the view favored too by a number of Indian policy wonks and popular in the Indian press.

But this banking move suggests that inside the halls of power, Indian leaders understand what I tried to argue in November: that India is most likely to challenge China, and thereby benefit other great powers, if it rectifies relations in South Asia and uses its relationship with Iran to build a trading zone to its west.

From Washington’s perspective, it’s a classic clash between short- and long- term policy objectives, between the nuclear issue and the need for an India that is strong in the region. There are no signs as yet that the U.S. government wants to shift its strategy towards the long-term and let this deal stand, but if it did, I for one would welcome it.

Read it all.

Gordon Brown, After the Fall

By , 15 December, 2010, No Comment

A post at Foreign Exchange on a Gordon Brown lecture/book launch I attended yesterday at NYU:

The basic thrust of the book is that financial reform laws in individual countries are irrelevant as tools against a future crisis, because they simply provide incentives to firms to take their riskier business elsewhere. Instead, the book pushes for formal regulatory coordination and essentially, for expanded global governance. It is not an explicitly left-wing argument, as Brown’s vision of global coordination includes a completed Doha Round and a plea for international institutions to prod China into speeding up its push for more consumer spending. [During his talk, Brown clarified this point–essentially he thinks the recent five year plan can be a two year plan if Beijing wants it to be.] My take having read the first section and skimmed the rest: It’s a pretty good blueprint, but completely unfeasible. It’s also not badly written, as far as books by ex-politicians go. Certainly a relief after the purple prose we got from Blair.

After laying all this out in a short lecture, the former PM took a few questions.

Read the rest.

Some Soul-Searching On Inequality

By , 7 December, 2010, 2 Comments

In the early months of the financial crisis, I wrote up a post that attempted to look at the relationship between income inequality and economic catastrophes, arguing that as the U.S. economy has opened to the rest of the world, the correlation between economic growth and income growth has eroded. As a result, it’s now perfectly possible to see incomes fall even as the economy is growing. There are two problems with this: first, the kind of debt bubbles created by the gap between growth (ie consumption) and income, and secondly, the ease with which a person paying attention to that top-line growth can MISS the signs of an oncoming bubble burst if they aren’t paying attention to the income gap.

At the time, this was a bit of a crazy argument to be making, but since then I have seen versions of it pop up elsewhere. It was posed as a question–and left hanging–by Derek Thompson at the Atlantic. It was the underlying assumption of a series on the causes of inequality that Tim Noah wrote up for Slate. And it has been bandied about by senior economists at Harvard, Princeton, and U. Chicago.

Here’s what’s interesting about this trend. Most of the people making the argument against income inequality are folks who were in favor of greater redistribution before the crisis, folks who see a moral argument for greater equity irrespective of the economics, and for whom the economics is just a new arrow in the quiver.

Read More →

More on Ireland

By , 30 November, 2010, No Comment

Another quickie Ireland at Foreign Exchange today, this time looking at the politics of the deal with an Irish TD:

Going into the conversation, I was under the impression that Ireland might hope to renegotiate at a lower interest rate after the crisis has stabilized somewhat. Deputy Fleming was determined to disabuse me of this assumption.

Over time, he says, “people will begin to see that the interest rate is not so bad. If the financial situation stabilizes, by year 3 [of the loan period], it may be possible to be raising funds in the bond markets again at a rate that is lower than the rate on offer [in the EU settlement], and we may not have to draw it all down at that rate.” In other words, there’s no plan to renegotiate a better deal in Brussels, but there is a plan to aggressively hack at the deficit domestically, and then leverage the Brussels offer to renegotiate with the bond markets.

For more such optimistic predictions, read the whole thing.

Germany’s Ireland Calculus

By , 29 November, 2010, No Comment

Short post over at Foreign Exchange on Germany and the Irish bailout:

…the Ireland debacle is just the latest episode in an ongoing conversation about Germany’s place within the eurozone, about the German public’s frustration with cleaning up after its weaker neighbors and about the frustration of other major EU players with German intransigence.

Here’s the question: is this particular incident (the threat to gauge the bond markets to appease to German public followed by a five year compromise that spares the bondholders with promises of stricter rules in the future), a victory over the Germans, or a victory for them? was Angela Merkel made to compromise, or was she bluffing all along? I’m guessing it’s the latter…

Go read the rest.

Thinking About Food

By , 17 November, 2010, No Comment

Latest at Foreign Exchange:

Lately, I’ve been perusing some new research into the global food crisis: the dramatic spike in prices in 2007 and 2008 and the price volatility, inflation, and hunger that has followed it in search of some cases to probe in longer-form.

It’s an issue whose significance did not come home to me until I was reporting on sugar shortages in Pakistan. It was clear that the shortages were a political risk for the government, and that they were indicative of a much wider spectrum of economic mismanagement. But at a more basic level, I got the sense that hunger, even more than poverty, was the index against which people measured their suffering. That’s when I started reading up food and water in earnest.

Here’s the thing: we in the business press have a tendency to cover commodities like these in two ways, first as fodder for this-or-that futures market, and secondly, as raw materials for biofuels. We don’t spend nearly enough time on food and water as the nuts and bolts of subsistence. And yet, to me, the most exciting thing about following wheat prices or sugar prices or water management is that these are data points that cut vertically and geographically across the global economy. It is one of the few things I’ve covered that feels like I’m scratching at the edge of something universal. I’m still looking for the story that will let me communicate that. But in the meantime, here’s the picture of the crisis I have so far:

For the details, read the whole thing.