September 15, 2003
Daniel Davies Says That Idealistic Neoliberals Like Brad DeLong Are Naive Fools

Daniel Davies says that idealistic neoliberals like Brad DeLong are naive fools: Crooked Timber: High Noon in Cancun : I say that this provides a useful yardstick to measure the character of the WTO by because it brought face to face the two views of what the WTO is actually for. On the neoliberal side, we've heard for years that WTO is all about bringing the benefits of free trade and free markets to the poor of the world and allowing them to gain the benefits of "globalisation". On the "anti" side, we've heard for years that the WTO is nothing more than a cynical exercise in attempting to subvert the democratic process of poor countries and forcing them to accept foreign ownership and control. In other words, the neoliberals have said it was all about things like the agricultural subsidy proposals, while the antiglobos have said it was all about things like the Singapore issues. And when the two came head to head in Cancun, the Singapore agenda won. When push came to shove, the rich nations were not prepared to give an inch to the poor ones on agriculture unless they got their quid pro quo in the...

Posted by DeLong at 10:12 AM

September 02, 2003
Raising the Stakes

Eswar Prasad and Ken Rogoff say that globalization raises the stakes: countries that are open to the world economy can benefit substantially if they have good economic policies, but will undergo more frequent crises and deeper depressions if their policies are wrong: "...pegged exchange rate regimes, unsound domestic macroeconomic policies and poorly supervised financial markets..." FT.com Home US: First, does financial integration by itself help a developing country to achieve higher living standards through faster growth? Interestingly, the more financially integrated developing economies do seem to have achieved higher per capita incomes than others. However, it becomes difficult to make a convincing connection between financial integration and economic growth once other factors, such as trade flows and political stability, are taken into account. The second question was whether financial integration helps a country to avoid macroeconomic instability. We found that financially integrated developing economies have in some respects been subject to greater instability than other developing countries. This result may not seem surprising, in view of recent financial crises. But it is still interesting that it is precisely those countries that made the effort to become financially integrated that, in general, faced more instability. So, if financial globalisation has not...

Posted by DeLong at 06:32 AM

July 07, 2003
Neoliberalism Rides Again?

The Wall Street Journal says to watch what the new government's economic policy is, not what it says that it's policy is: WSJ.com - Argentina's Rebound Shows IMF's Principles Still Thrive: ...New Argentine President Nestor Kirchner agrees with the latter assessment, arguing that the "neoliberal model" had failed his country. Yet his economic team promises an agenda that Washington Consensus advocates would applaud: inflation-targeting, fiscal restraint, tax overhaul, financial restructuring and market-driven infrastructure solutions. Utilities, trapped in a postcrisis rate freeze and facing contract renegotiations, can be forgiven for doubts. But, at the same time, there is no great movement to renationalize their businesses, especially after the most left-leaning candidates did poorly in recent elections. What is emerging is a distinction between the image of the Washington Consensus as a whipping boy and the continued, if less dogmatically applied, implementation of its principles. Argentine policy makers seem conscious of the good things privatization brought -- healthier water, lower electricity rates, functioning telephones -- they don't really want to turn back the clock. What they are doing is selling the idea differently: They are bashing the 1990s "model" but still embracing the language of the market. Economy Minister Roberto Lavagna argued...

Posted by DeLong at 10:25 AM

June 05, 2003
Gains From International Trade and Investment

An Irish-Arizonian-Australian cross-disciplinary alliance of Kieran Healy and John Quiggin is thinking about Pierre-Olivier Gourinchas and Olivier Jeanne's brand-new "The Elusive Benefits of International Financial Integration"--the conclusion of which is that in standard neoclassical models freeing up capital flows across nations has the capability to boost economic welfare by an amount on the order of magnitude of one percent: John Quiggin: (Small) gains from trade: (Small) gains from trade: Kieran Healy links to a paper by Pierre-Olivier Gourinchas and the missing-from-the-web Olivier Jeanne in which a calibrated growth accounting model is used to show that the gains from unrestricted capital mobility are likely to be of the order of 1 per cent of GDP. Gains from risk sharing aren't mentioned but other papers are cited to say that these are of a similar magnitude. Those who listen to the general pronouncements of economists might be surprised by the modest size of the estimated gains. But for those who have looked at similar exercises in the past there is no surprise here. One of the better-kept secrets of economics is the fact that most studies suggest that the replacement of a typical high-tariff regime (say Australia's in the 1960s) will yield...

Posted by DeLong at 07:09 AM

May 16, 2003
Still Optimistic About Brazil

The Economist is still optimistic about Brazilian President Lula's chances for pushing through his planned reforms of pensions and taxes... Economist.com | Reforms in Brazil: ...What matters now is how many votes Lula can muster in Congress. Neither proposal is likely to pass unscathed. Both involve constitutional amendments, which must pass twice by three-fifths majorities in both the Chamber of Deputies and the Senate. A lot can happen on the way. To mild surprise, Lula included a contentious clause to reduce the pensions of existing retirees, a measure demanded by the states to shore up their finances. This may be watered down--perhaps by raising the portion exempted from the new charge--or eliminated. Although that would denude the pension reform of much of its immediate fiscal impact, it would not trouble the financial markets much. "If they keep the rest, it's still meaningful," says Carlos Kawall, chief economist at Citibank in Sao Paulo. The tax bill is a hotch-potch, rather than a thorough overhaul. It would unify 27 different state value-added taxes and convert a separate tax on company turnover into a proper VAT. Though less controversial than the pension plan, the tax bill benefits some sectors at the expense of...

Posted by DeLong at 08:53 PM

May 14, 2003
Notes: Grigore Pop-Eleches, "Refracting Conditionality: IMF Programs and Domestic Politics During the Latin American Debt Crisis and the Post-Communist Transition"

I have to read a political science dissertation tonight. It's very good... Grigore Pop-Eleches (2003), "Refracting Conditionality: IMF Programs and Domestic Politics During the Latin American Debt Crisis and the Post-Communist Transition" (Berkeley, CA: U.C. Berkeley Ph.D. Diss.). To the extent that neoliberal reforms are consolidated in any but the most developed countries of the two regions, the relative success stories discussed in this dissertation (Bolivia and Bulgaria) revealed a highly contingent pattern of deep initial economic crisis, skillful political coalition building, and generous Western support... the importance of taking advantage of the initial economic crisis... to forge a more durable political coalition in support of economic reforms. While.. the importance of such coalitions is easy to ignore during the post-electoral honeymoon period, governments that succumb to the temptation of insulated economic policy decision-making have a much more difficult time sustaining economic reforms once their popularity is undermined by the sometimes sizeable social costs of such reforms.... another interesting dilemma... the statistical results and the discussion of Bolivia's unlikely neoliberal reform coalition confirm the importance of rent sharing as the glue that binds together social and political actors.... On the other hand, the increasing neoliberal emphasis on privatization, deregulation,...

Posted by DeLong at 05:18 PM

May 07, 2003
Notes: World Bank Private Sector Development Forum

PSD FORUM History--JMK and HDW. Feared a world in which the capital requirements of development were immense (think Alex Gerschenkron), and in which sovereigns had a very difficult time borrowing. When you think about it, after all, given experience from start of WWI, why should sovereigns have been able to borrow on a large scale? Bulow and Rogoff. Hence World Bank. Broadly speaking, belief in the US during the 1930s and 1940s that successful growth and development required three things: Public investment in infrastructure. Social democracy--understood as full employment, safety net, income distribution sufficiently equal to make politics a positive rather than a zero-sum game in which, say, rich in U.S. inheritance taxes poor in Ghana take the cocoa export revenues fron the Ashantl. Third: market competition: Low tariffs, stable currencies, exports, comparative advantage, markets, and private businesses. Extraordinary success in nw and s europe. Extraordinary success in East Asia. Had you asked people in 1945 economic destiny of France... One of my teachers, David Landes, reputation France family capitalism... Italy... Argentina. Elsewhere. Disappointing. Glass half-empty. Indicative planning administrative guidance seemed to work fine in France and East Asia--for a while at least. Elsewhere... Infrastructure... Exchange rates... Regional development... If...

Posted by DeLong at 09:45 PM

September 14, 2002
Michel Camdessus Is Not a Happy Camper...

Camdessus on Stiglitz http://www.imf.org/external/np/vc/2002/091202.htm Michel Camdessus Responds to Joseph Stiglitz A Commentary By Michel Camdessus, Honorary Governor of the Bank of France Nouvel Observateur Week of Thursday, September 12, 2002 - No. 1975 - Economics In our July 18 issue, the author of Globalization and Its Discontents, a former World Bank Chief Economist, had personally criticized Michel Camdessus, former Managing Director of the International Monetary Fund, in these terms: "In December 1997 in Kuala Lumpur, during a meeting of Ministers of Finance of the G-7 and leading Asian countries, I told Michel Camdessus, then the head (French) of the IMF, of my poor opinion of his recommendations. He replied that for a people to recover economically, "they must suffer..."" The following is Michel Camdessus' response: To confine myself to the facts, I would make the following points: the only G-7 meetings I-but not Mr. Stiglitz-attended in my official capacity at the International Monetary Fund were Ministers of Finance meetings. No such meetings were held in November or December 1997 in Kuala Lumpur. I did stop over for a few hours in Kuala Lumpur in early December 1997 to deliver a speech (the text of which I have located) to...

Posted by DeLong at 03:18 PM

Michel Camdessus Is Not a Happy Camper...

Camdessus on Stiglitz http://www.imf.org/external/np/vc/2002/091202.htm Michel Camdessus Responds to Joseph Stiglitz A Commentary By Michel Camdessus, Honorary Governor of the Bank of France Nouvel Observateur Week of Thursday, September 12, 2002 - No. 1975 - Economics In our July 18 issue, the author of Globalization and Its Discontents, a former World Bank Chief Economist, had personally criticized Michel Camdessus, former Managing Director of the International Monetary Fund, in these terms: "In December 1997 in Kuala Lumpur, during a meeting of Ministers of Finance of the G-7 and leading Asian countries, I told Michel Camdessus, then the head (French) of the IMF, of my poor opinion of his recommendations. He replied that for a people to recover economically, "they must suffer..."" The following is Michel Camdessus' response: To confine myself to the facts, I would make the following points: the only G-7 meetings I-but not Mr. Stiglitz-attended in my official capacity at the International Monetary Fund were Ministers of Finance meetings. No such meetings were held in November or December 1997 in Kuala Lumpur. I did stop over for a few hours in Kuala Lumpur in early December 1997 to deliver a speech (the text of which I have located) to...

Posted by DeLong at 03:18 PM

July 07, 2002
More Thoughts on Stiglitz's Globalization and Its Discontents

So I reread Globalization and Its Discontents, and I am more puzzled than ever. I cannot figure out what is going on inside Stiglitz's head. Part of it I think I have figured out. The repeated changes of position--"No! You should not have imposed any conditions on Suharto but lent freely respecting Indonesia's national sovereignty!" "No! You should not have loaned anything to Suharto at all!" "No! You should have loaned to Suharto, and encouraged capital to flow into Indonesia! And been very careful of his face! The longer Suharto stayed in power, the more order defeats chaos, and the better for Indonesia!" "No! Corrupt kleptocrats harm their countries! Clinton and Camdessus should have warned industrial-core companies against investing in Indonesia!" These repeated changes of position tell me that Stiglitz's main complaint against Summers, Fischer, and all is that they were sitting in the control seat where he wanted to be. He wanted to be the one making the decisions about when to lend in hope and when lending would be hopeless, when the current leader is the best that can be expected and when the best option is to cut off all economic contact and hope the current leader...

Posted by DeLong at 09:45 PM