Asia – Pacific: Cost of saving air NZ to rise Terry Hall

The financial costs to New Zealand's government of saving the flag carrier airline from collapse are expected to continue into the new financial year. Papers released under the Official Information Act yesterday suggest Air New Zealand will need a further NZ Dollars 670m (Pounds 204m), on top of the NZ Dollars 1.04bn committed last year when the government was forced to take an 83 per cent stake. Economists say these are big numbers for a country with a total revenue base of NZ Dollars 37bn, despite the country's strong growth. Craig Ebert, a BNZ economist, said he still forecast a…

The Global Divide: Inequality in the world economy Marc Lee

Inequality is a pressing issue in the global economy. This new report by the Canadian Centre for Policy Alternatives finds that inequality is extremely large and growing, both between and within countries. The World Bank and IMF have been significant contributors to the rise in global inequality. global_divide (Download the full text in PDF format)

A Peculiar Economic Recovery in the US Nick Beams

Everything seems to be on the up and up so far as the recovery in the US economy is concerned. Last week the Commerce Department made a second revision of its estimate of the annual growth rate in the fourth quarter of last year, lifting it to 1.7 percent, compared with its initial estimate of only 0.2 percent. This was followed by the news this week that manufacturing activity in March rose to its highest level since February 2000 as factories boosted production to meet the biggest increase in demand for eight years. One of the key indicators of future…

China: Can more reform break the stalemate? C.P. Chandrasekhar

After Japan and South Korea, China is arguably Asia's next giant. Starting from a relatively egalitarian base, in terms of asset and income distribution, created during the years of central planning, it has over the last two-and-a-half decades grown at a remarkable pace within the framework of an increasingly market-friendly regime. Per capita income has increased more than four-fold from $168 in 1980 at 1995 prices to $727 in 1998. Growth over time was indeed uneven with the annualised rate of growth of three-year-average GDP figures rising from a little less than 7 per cent in 1982 to a peak…

Sharp Rise in Federal Spending May have Helped Ease Recession Louis Uchitelle

When a bitterly divided Congress failed to pass an Economic stimulus bill last fall, many predicted the recession would only worsen. But while few were paying attention, government spending surpassed the amounts envisioned in the stimulus measure, exceeding what even the most vociferous advocates wanted. The unexpected surge - along with the remarkable strength in consumer spending - helps to explain why the recession, to nearly everyone's surprise, has been so mild and may beending. The mood was much different last fall. Anticipating harder times, Democrats and Republicans pushed for an additional $80 billion to $100 billion in federal outlays.…

Globalization of Capital and Terms of Trade Movements Prabhat Patnaik

This paper argues that the "liberalization" of exchange rate regimes has an independent, powerful and separate effect on the terms of trade which has its origin in the currency markets and not the goods markets. This effect arises from the secular tendency of the real values of third world currencies to fall, relative to the dominant currency in a regime of "liberalized exchange rates". globalization_capital (Download the full text in PDF format)

On Some Common Macroeconomic Fallacies Prabhat Patnaik

Fallacy 1: The interest rate in the Economy is High because the Fiscal Deficit is high The interest rate is the return on a particular asset, namely a debt instrument. It must be determined therefore as part of a stock equilibrium. The fiscal deficit is a flow concept. To say that the interest rate is determined by the size of the fiscal deficit is tantamount to saying that the price of a stock is determined by a flow, which is plain illogical. But, it may be argued, while the fiscal deficit may not determine the interest rate, it certainly affects…

Argentina : A cautionary tale from South America Jayati Ghosh

The comprehensive mess in Argentina today almost defies belief. At the turn of the year, the financial and economic collapse was near total, with banks closed, the state of the currency (and even its very existence) in some doubt, rapidly increasing unemployment, decline in almost all public services and shortages of liquidity that threatened access to basic food and necessary goods for survival for much of the population. cautionary_tale (Download the full text in PDF format)