TripleCrisis

The Shortcomings of Monetary Policy

The conventional wisdom on monetary policy from the early 1990s through to the financial crises of 2007-2009 favored inflation targeting operated by an “independent” central bank. This approach to monetary policy was widely accepted by academics and central bankers, and widely implemented by the latter. In a relevant contribution, we questioned the effectiveness of this approach to monetary policy along many lines (Arestis and Sawyer, 2008). These included the weakness of the supposed link running from policy interest rate to the level of demand in the short run, and to the rate of inflation in the medium to long run; and hence that the central bank did not have an effective policy instrument to control inflation. Further, we questioned whether the lower inflation experienced during the late 1990s and early 2000s could be attributed to the adoption of inflation targeting, as non-inflation targetters appeared to do as well as targetters, if not better in some cases (see, also, Angeriz and Arestis, 2007, 2008). The promotion of inflation targeting was based on a flawed model of the economy (the “New Consensus Macroeconomics”).

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TRIPS: The Story of How Intellectual Property Became Linked to Trade, Part 5

This is the fifth part of a seven-part series with Peter Drahos, a Professor in the RegNet School of Regulation and Global Governance at the Australian National University. He holds a Chair in Intellectual Property at Queen Mary, University of London and is a member of the Academy of Social Sciences in Australia. In 2004 he and his co-author Professor John Braithwaite won the Grawemeyer Award in Ideas Improving World Order for their book Global Business Regulation. Prof. Drahos is interviewed by Lynn Fries, producer at The Real News Network. Find the whole series here.

Full text below the break.

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Can Developing Asia Hold its Ground?

C.P. Chandrasekhar and Jayati Ghosh

The recent and ongoing capital flight from Asian markets comes in the wake of a longer pattern of sell-off that has been evident for nearly two years now. And this in turn reflects a deeper unease about the pattern of growth in this hitherto very dynamic region, and the receding prospects of such growth being sustained for much longer.

Of course, it is true that the current instability in global financial markets is obviously a reflection of major political upheavals in the North and their likely economic impact. In particular, the election of Donald Trump has made it all but sure that monetary policy will be tightened in the United States in the coming months (despite the protestations of independence by the US Federal Reserve Chairperson Janet Yellen). If this is combined – as is widely anticipated – by aggressively expansionary fiscal policy based on increased military and infrastructure spending and lower taxes on the rich and on companies, then the US fiscal deficit is also likely to increase. This combination will inevitably attract footloose global capital back into the US, causing currency and asset market havoc in many emerging economies.

Indeed, this prospect is probably already being priced in by many investors and fund managers, which is why currencies of developing countries across the world have depreciated in the weeks since the US election. But it is also true that internal forces and processes have played a role in encouraging capital flight from several of the more important emerging markets, especially in the Asian region.

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ISDS Corporate Rule of Law

Jomo Kwame Sundaram

Investor-state dispute settlement (ISDS) provisions in ostensible free trade agreements (FTAs) and bilateral investment treaties (BITs) have effectively created a powerful, privileged system of protections for foreign investors that undermine national law and institutions. ISDS allows foreign corporations to sue governments for causing them losses due to legal or regulatory changes.

A law unto themselves

ISDS cases are decided by extrajudicial tribunals composed of three corporate lawyers. Although ISDS has existed for decades, its scope and impact has grown sharply in the last decade. As ISDS has been written into over 3,000 BITs and numerous FTAs, the opportunities for ISDS claims are huge and growing.

Originally justified as necessary to protect foreign corporate investments abroad from nationalization or expropriation by governments controlling national judiciaries, foreign corporations have used ISDS to change sovereign laws and undermine national regulations. As there is no cap on the amount of awards, claims – and awards – can be huge.

The system is secret and dominated by unaccountable corporate lawyers. As international arbitration is typically not transparent, pursuing such claims can avoid the public scrutiny associated with mounting legal challenges in courts. Lack of transparency means that lawyers acting as arbitrators or advocates in one case can be unnamed investors in other cases, as nobody would ever know.

ISDS proponents claim that the outcomes of cases are uncertain, and corporations only win about a quarter of the cases they pursue. But this does not include settlements agreed to before the conclusion of arbitration proceedings from which corporations often secure handsome benefits of some kind or other. ISDS arbitration is certainly far more attractive to foreign investors who would otherwise shy away from pursuing claims in other national courts, particularly against host governments.

Recent ISDS decisions have involved significantly greater delegation of authority to arbitrators in interpreting and applying the agreements concerned, without any meaningful review or opportunity to appeal the arbitrators’ decisions. There is no guarantee that tribunals will interpret treaty provisions in ways consistent with governments’ understandings of what treaty obligations mean.

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TRIPS: The Story of How Intellectual Property Became Linked to Trade, Part 4

This is the fourth part of a seven-part series with Peter Drahos, a Professor in the RegNet School of Regulation and Global Governance at the Australian National University. He holds a Chair in Intellectual Property at Queen Mary, University of London and is a member of the Academy of Social Sciences in Australia. In 2004 he and his co-author Professor John Braithwaite won the Grawemeyer Award in Ideas Improving World Order for their book Global Business Regulation. Prof. Drahos is interviewed by Lynn Fries, producer at The Real News Network. Find the whole series here.

Full text below the break.

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Trump and “National Neoliberalism”

Sasha Breger Bush

Sasha Breger Bush is an assistant professor in political science at the University of Colorado-Denver.

John Galbraith once noted that, “The only function of economic forecasting is to make astrology look respectable.” I’ve decided that I cannot heed his advice. I take solace in writing and am feeling empowered by it during these dark and strange times. I hope that my notes below contribute to the conversation that’s begun about what we can expect following Trump’s election. If these comments ever make it into history’s dustbin, perhaps those who find them will look upon them sympathetically, for these are uncertain times and no one really knows what will happen next.

I take as my starting point two assumptions:

Despite all the talk of Trump’s election being a backlash to a failed neoliberal project, I believe that neoliberalism is here to stay, at least for a while. Neoliberalism is far too embedded in American society and psyche to disappear with the mere choice of a new president, no matter how historic his election or how different his platform may seem. Neoliberalism is not poised to disappear, I think, but rather to change in form. This is related to my second assumption, which is:
Trump’s xenophobia, nationalism and isolationism will be reflected in new policies and initiatives that start to unfold after he takes office. The extent to which these values will be embraced in the United States and around the world, the manner in which they are incorporated into policy, and the potential national and international backlash to them are uncertain.

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A Progressive Agenda for Renegotiating NAFTA

Timothy A. Wise

During the campaign, President-elect Donald Trump pledged to renegotiate the North American Free Trade Agreement (NAFTA) with Mexico and Canada, or withdraw the United States from the pact.

Although no one at Trump Tower so far has asked me for advice (and I’m not waiting by my phone for a call), I know a little bit about this subject: Eight years ago I helped convene a panel of experts to make recommendations to another president who promised to rewrite NAFTA.

That would have been Barack Obama, who, as a candidate in 2008, was clear on the issue: “NAFTA’s shortcomings were evident when signed and we must now amend the agreement to fix them.”

Alas, as president, he did no such thing, which is of course one of the reasons we find ourselves with a right-wing president who rode popular dissatisfaction with globalization into the White House.

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Macri’s First Year in Office: Welcome to 21st Century Neoliberalism

Alan Cibils

Alan Cibils is an Argentine economist and Professor of Political Economy at the Universidad Nacional de General Sarmiento in Buenos Aires, Argentina.

As the United States and the world grapple with the potential implications of a Trump presidency, Argentina is evaluating the results of Mauricio Macri’s first year in office. Macri’s electoral victory on November 22, 2015, marked the end of 12 years of populist, expansionary economic policies and the return to neoliberalism. While government officials and supporters deny this, a close look at the Macri administration’s discourse on economic issues and policies implemented force the conclusion that this is neoliberalism—again.

From campaign rhetoric to economic policy

Macri campaigned as an outsider to politics (despite two consecutive 4-year terms as mayor of the City of Buenos Aires), whose main goal was to solve ordinary people’s problems. His message was that he would keep those policies of kirchnerismo (the previous two presidents were Néstor Kirchner and Cristina Fernández de Kirchner) that had worked and improve or change those that hadn’t.

However, when Macri took office it became clear that his program was a major rollback of the populist legacy and a return to neoliberalism. Macri stacked key ministries with corporate CEOs, leading some to state that Argentina was now a CEO-cracy, rather than a democracy. Bloomberg heralded Macri’s arrival to office with an eloquent “Wall Street Is in Charge in Argentina (Again).” Argentine Treasury Minister Alfonso Prat Gay stated the Macri government’s intentions clearly at a G7 minister meeting: “The world is threatened by protectionism and populism, and Macri was elected to emancipate Argentina from these evils.” In other words, Macri would do away with the populist legacy and open the economy to the world.

So, what have been Macri’s main economic policies in his first year in office?

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Keeping America’s Promises: The Green-State Climate Agreement

Frank Ackerman

In January Donald Trump will endorse climate denial, renouncing the Clean Power Plan and climate targets in general. This will damage the fragile global momentum toward emission reduction, established in last year’s Paris agreement. If the United States refuses to cooperate, why should much poorer, reluctant participants such as India do anything to cut back on carbon?

But among many things that this dreadful election did not represent, it was not a statement of (dis)belief about climate change. Large parts of the country recognize the validity of modern science, understand the urgency of the problem, and remain committed to ambitious carbon reduction targets.

Suppose that many of our state governments got together and told the rest of the world about our continuing commitment to action: we are still abiding by the U.S. pledges under the Paris agreement, or even planning to do more. Not just NGO reports, blog posts, or individual signatures, but an official, coordinated announcement from government bodies with decision-making power over emissions – primarily states, perhaps joined by Indian tribes and major city governments.

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