How Brazil can defend against Financialization Michael Hudson

In this article, it is argued that for developing countries, privatizing the public domain and financializing the economy is akin to military defeat. To defend themselves, the BRIC countries need to isolate themselves from global debt creation. And Brazil (as well as other developing countries), needs to promote the investment of its economic surplus for raising production and living standards, so as to create a positive feedback between higher wage levels and productivity, hence higher global competitiveness. Brazil (Download the full text in PDF format)

The Myth of the “Sub-prime” Crisis Prabhat Patnaik

Capitalism, like the proverbial horse, kicks even when in decline. Even as the current crisis hit it, it gave an ideological kick by attributing the crisis to “sub-prime” lending; and so well-directed was its kick that the whole world ended up calling it the “sub-prime crisis”. The idea, bought even in progressive circles, was that in the euphoria of the boom that had preceded the crisis, financial institutions in the U.S. had given loans even to sections of the population who were not really “credit-worthy”, i.e. who were poor and had few assets of their own. They would normally not…

Fake Lakes vs. Real People Ananya Mukherjee Reed#

If you have been to Toronto, you must have noticed that it lies on the shores of the vast and beautiful Lake Ontario. On this eve of the G20, the Lake looks perhaps especially blue and beautiful, as if with a vengeance, it seems to me. But this is not the lake Canada's leaders want the world to see. As you may know, Premier Harper and his men have built a fake lake - to adorn the 'marketing pavillion' created especially for the summits. The 'puddle pool' - as some have called it - and its accompaniments come at a…

The Great China Currency Debate: For workers or speculators? Andrew M. Fischer

The mainstream view in the West has long held that the renminbi is undervalued, and has been advocating a revaluation of the currency. Their insistence that currency appreciation should happen through nominal revaluation, rather than only through real appreciation, is best understood as reflective of speculative interests and detrimental to the developmental interests of China given that it would forfeit the country’s ability to appreciate through gradually rising wages, contrary to the claims of those leading the debate in the West. Debate (Download the full text in PDF format) (Note: This is also a G24 policy brief)

The Global Economic Crisis: Challenges and opportunities for public administration S.K. Rao

Following a discussion of the factors leading to the recent financial and economic turmoil, this article offers evidence that some countries that have relied more on the role of government and the public sector have managed to contain the crisis in a more successful way. There is, therefore, a need to revisit, redefine and bolster the roles of government and reposition the public sector. Global_Economic_Crisis (Download the full text in PDF format)  

Controlling Commodity Speculation Jayati Ghosh

The financial reform legislation passed by the U.S. Senate can help plug, at least partially, the loopholes that allowed frenzied activity in commodity futures markets and generated severe price volatility in many primary commodities. In fact, given the tremendous influence of the U.S. in shaping financial systems globally, even these relatively limited new regulations, if they actually come into play, could force some positive changes elsewhere as well. Speculation (Download the full text in PDF format)

The Stupidity of Financial Markets Jayati Ghosh

In the global economy, the past few months have been as bizarre as anything that could be imagined. And nowhere is this more evident at the moment than in Europe, where the crazy and unsynchronized tango between financial markets and governments now threatens the lives of ordinary citizens. Consider the fear that is now supposedly spooking the markets, that of the possibility of sovereign default. At the frontline is Greece, the country that is being asked to impose an unbelievably severe austerity package that is bound to cause employment and incomes to spiral downwards, in return for a supposed “improvement”…

Greek Debt and the European Dilemma Jayati Ghosh

It is now clear that the problems of the Greek economy – and the eurozone - have not been and cannot be solved by the large infusion of emergency finance from the ECB and the IMF. The Greek government is being asked to implement austerity measures that will cause a major decline in incomes and employment not just now but in the foreseeable future, and which will not correct the existing imbalances but actually worsen them. The heavily-indebted poor countries (HIPCs) of Africa could tell the Greeks a thing or two about this process. They could tell them how the…

No Sidestepping the Eurozone Implosion? Jan Kregel and Rob Parenteau

A week ago eurocrats launched their campaign of overwhelming force designed to shock and awe the “wolf pack” of professional speculators and institutional investors (hedge funds and pension fund managers) into a more docile, subservient position. In the currency market, the shock and awe wore off after the first 48 hours, while by the end of the week, it also appeared to be wearing off from the equity markets. Some of this is undoubtedly just the innate brazenness of the wolf pack being expressed. As a general rule, they do not take kindly to being cowed or constrained in any…

The Global Crisis and the Governance of Power in Finance Gary A. Dymski

This paper argues that resolving the global crisis of financial systems depends on recognizing and responding to the considerable, multi-dimensional power accumulated by the very financial firms whose dysfunctionality helped create that crisis in the first place. The existing rhetoric of financial regulation which focuses attention on problems of mechanism design, fails to take into account the presence and implications of systemic power in the system. But unless the debate over financial regulation is broadened, decades of sub-par growth and excessive financial exploitation lie ahead. power_finance (Download the full text in PDF format)