Saturday, December 24, 2016

Dreaming about Creating a G25?

A while ago I proposed to form a new G24, not of nations but of individuals. Such a G24 could contribute to a better world, I thought. The G24 I envisioned would be a group that created ideas (and lobbied for them) in the interest of the world community rather than companies or power groups within countries. 

I received a few enthusiastic responses but the G24 I had in mind was not established. That is not surprising, perhaps, because it is unrealistic to think that you can create a global think group without a budget. 

Thirty years ago I managed to form precisely such an international group, the Forum on Debt and Development (FONDAD). But then I received core funding from the Dutch Ministry of Foreign Affairs. As a network and research center FONDAD still exists, and I am still its director. Since May 2008 FONDAD has operated without a budget. In fact I have been working for FONDAD more than eight years without being paid for it. This proves that it is possible to constitute, or rather continue, an international group without a budget. So could a G24 still be formed, building on members of the FONDAD network and including a few more thinkers with additional expertise (see below)? 
My proposal was and is that we create a network of 24 persons to exchange ideas about possible improvements in the global system. Yeah, I know that all kinds of groups and organizations are doing that. My point is, that the G24 I envisage - which might better be called G25 to avoid confusion with the existing G24 - gives an extra boost, both intellectual and practical. 
For me, the G25 would consist of 25 creative thinkers who are experts in the fields of politics and economics, socio-economic issues (including working conditions, unemployment, exclusion and income distribution), environment / ecology, and (maritime) transport. Why maritime transport? Because 90% of world trade goes via maritime transport. (And because I'm writing a book about world ports, together with my wife Aafke Steenhuis -- who besides being a writer is also a painter; she made the drawings on the cover of the two FONDAD books exposed.) 
Profile 
To which profile must comply G25 members? I thought of the following:  
- You are curious, creative 
- You can listen to someone else 
- You speak at least two international languages (unfortunately these are European languages, unless you would like to include eg Russian, Chinese or Mandingo), besides English preferably also Spanish, French or Portuguese (see, eg, Global financial experts must understand French... and Global financial experts must play music...)
- You are a non-conformist (see, eg, Robert Triffin: "Most economists are demagogues"). 

I created FONDAD in 1986 when I was 38 years old. Now I'm 68 and soon will be 69. The G25 should consist of members whose ages range between, say, 25 and 85 years. Members are not expected to do anything else than occasionally contribute to the virtual discussion among G25 members. Examples of how I organised such virtual discussions in the past for members of the FONDAD network are:
Macro-prudential regulation 
Bill White: "The current financial system is inadequate
Three schools of thought on crisis prevention 
Asset Bubbles and Inflation 
Managing the crisis (1) 
Preventing the crisis (4)
Explaining the crisis (3) 
Explaining the crisis (1) 

I continued to moderate such discussions until last year but did not make them any longer public via this blog. If I would restart those discussions involvng people with the additional expertise I just mentioned, I don't intend to spend too much time on moderating the group, publishing its discussions and promoting its policy suggestions. Maybe someone else could do that. I am just too busy -- as are the people I'd like to involve. I'm afraid others will think the same and -- with rare exceptions -- would react by saying: It's a nice idea Jan Joost but, unfortunately, I won't have the time for participating. I would fully understand such reaction and therefore think a G25 will not emerge. However, I keep dreaming that maybe one day, before I am 85... 


Monday, December 19, 2016

Christine Lagarde was found guilty

December 19, 2016

 
BREAKING NEWS
The chief of the I.M.F. has been convicted of criminal charges. Christine Lagarde may be forced from her post and faces jail time.

Monday, December 19, 2016 9:20 AM EST


Christine Lagarde, the managing director of the International Monetary Fund, was found guilty on Monday of criminal charges linked to the misuse of public funds during her time as France’s finance minister, a verdict that could force her out of her post.
Ms. Lagarde, who began her second five-year term at the I.M.F. in February, faces a fine of up to 15,000 euros, or $15,700, and up to one year in jail. The scandal has overshadowed her work at the fund, to which she was appointed in 2011, after Dominique Strauss-Kahn resigned as managing director when he was accused of having sexually assaulted a maid in a New York City hotel.
Read more »

Sunday, December 18, 2016

European integration enters terminal crisis?

Paulo Nogueira Batista, vice president of the New Development Bank
Paulo Nogueira Batista wonders whether European integration is entering its terminal crisis after various years of increasing problems.
He sees highly polarized populations in Europe, as well as in the Middle East, Latin America and the United States.
In the developed world the polarization is a reaction to neoliberal globalisation, he observes. And in the US a man like Trump would not have been chosen in more normal circumstances.
So we are living in exceptional times. Do you agree?

Polarização

No Brasil, estamos vivendo regressão fenomenal em termos políticos, institucionais, e até em termos de comportamento
Paulo Nogueira Batista Jr., O Globo
Não sei se os brasileiros se dão conta, mas vários dos nossos problemas estão ocorrendo simultaneamente em diferentes partes do mundo. A crise não é só nossa. Se isso for verdade, ficamos, por um lado, psicologicamente reconfortados. Mas, por outro lado, é mais difícil sair do pântano, uma vez que os problemas econômicos e políticos de outros países rebatem sobre o Brasil, dificultando a superação da nossa crise.
Um traço da crise atual é a polarização da sociedade em vários países ou regiões — EUA, Reino Unido, Europa continental, Turquia, Brasil, Venezuela, por exemplo. Nem falo das guerras civis e da desordem no Oriente Médio — Síria, Líbia, Iraque, Iêmen. Nos países desenvolvidos, a polarização representa uma reação à chamada globalização neoliberal, ou seja, a rejeição do projeto socioeconômico das elites internacionalizadas.
No Brasil, o caso é diferente — o que tivemos, e temos ainda, é a rebelião das elites e da maior parte da classe média contra determinado projeto político e social, que prevaleceu no Brasil de 2003 até 2014. Não pretendo discutir hoje se a rejeição ou rebelião se justifica ou não. Mas queria destacar o quadro de crescente polarização que atinge até mesmo um país como o Brasil, que se notabilizava pela sua capacidade de conciliar divergências.
Nem sempre se observa, leitor, que nas eleições e referendos dos últimos meses a margem das vitórias foi quase sempre pequena. Parece um padrão: Brexit (sair 52%, ficar 48%), eleição de Donald Trump (por 47% a 48% no voto popular — vitória no colégio eleitoral), eleição na Áustria (vitória do candidato verde por 54% contra os 46% do candidato de um partido de extrema-direita).
No Brasil, em 2014, Dilma Rousseff se reelegeu por margem também estreita (52% contra 48%), indicando já então a divisão da sociedade, que seria agravada nos anos seguintes pela campanha pelo impeachment e seus desdobramentos. A exceção foi o referendo na Itália, do- mingo passado, em que a derrota do governo foi por quase 60% a 41%, levando à renúncia do primeiro-ministro do Partido Democrático, de centro-esquerda.
Outro aspecto notável: a disposição do eleitorado de optar por caminhos arriscados. Na Itália parlamentarista, por exemplo, estava claro que a derrota do governo levaria à queda do gabinete e, portanto, a nova eleição, em que a direita nacionalista tem, ao que parece, grande chances de vencer. O Brexit era uma aposta de alto risco para o Reino Unido, como se vê pelas dificuldades que a saída da União Europeia acarreta e continuará a acarretar.
Nos EUA, em situação mais normal, dificilmente um Trump conseguiria se eleger presidente — ou mesmo chegar a ser candidato por um dos dois principais partidos. No Brasil, grande parte da classe média saiu às ruas para pedir a derrubada da presidente eleita, ignorando ou desprezando os vários tipos de riscos que o impeachment estava tendo e continuaria a ter para o país. A violência crescente da disputa política é mais um aspecto que salta aos olhos.
No Brasil, estamos vivendo regressão fenomenal em termos políticos, institucionais, e até em termos de comportamento. Mas não só aqui: a regressão é evidente também nos EUA — muito antes da eleição de novembro — e na Europa onde o projeto “iluminista” de integração regional profunda patina há vários anos, e entrou agora em crise talvez terminal. O espaço acabou. Tento retomar noutra ocasião.
Mundo (Foto: National Geographic)
Paulo Nogueira Batista Jr. é vice-presidente do Novo Banco de Desenvolvimento, sediado em Xangai

Wednesday, December 14, 2016

FONDAD and the US Debt Problem



Images of a trip to Antwerp mixed with the voices of Barry Eichengreen (University of California) and Jan Joost Teunissen recorded at a FONDAD conference focusing on the US debt problem. The conference resulted in two books:
 Global Imbalances and the US Debt Problem: Should Developing Countries Support the US Dollar?






and Global Imbalances and Developing Countries: Remedies for a Failing International Financial System.


Tuesday, December 13, 2016

Did Christine Lagarde commit a crime?

Christine Lagarde in the court room.
In April this year I published a post that soon became the most read story on my blog, Janet Yellen praises Christine Lagarde, and now I read a story about Christine Lagarde that some of you may find interesting again. This is what I read on the Dutch news site of NOS television (the national broadcast):

IMF top woman Christine Lagarde has said on the first day of the trial about an issue from 2008 that the whole affair is based on a series of fabrications. It is suspected that she has intervened in her time as Minister of Finance in a compensation scheme for the French businessman Bernard Tapie.

Tapie received 400 million euros from the state-owned bank Credit Lyonnais after a dispute over the sale of its majority stake in Germany's Adidas.

Lagarde told the Court of Justice of the Republic that she was shocked by the indictment. Which according to her is short-sighted and "a fantasy conspiracy" written by someone who has never met her.

The proceedings against Lagarde will take ten days.

Friday, December 9, 2016

Will EU countries abandon the Euro? (1)

Eurozone, or euro area (in blue).

Before the Eurozone came into existence on 1 January 1999, you could be either for or against the euro (or be neutral). I was against the introduction of the euro. Some of my central bank friends also opposed it -- without success. After the adoption of the euro by a large number of EU countries you could only hope it would become a success or continue to voice your concern about the (likely) negative effects of the euro.

In 1998 I voiced my concern about the euro in a Fondad book, Regional Integration and Multilateral Cooperation in the Global Economy (1998), in which I said that I saw a major problem with an unbridled process of ever-deepening regional integration. "How far should it go? Isn't Europe's energetic embracing of a single currency, the Euro, now showing the pitfalls of integration that has gone too fast or too far? Should European nations not put more energy in keeping alive their rich variety of differences - in cultural, social, political and even economic life -  rather than almost blindly following the new dogma of  'conversion' of economic policies? ... regional integration should never become a dogma. It is a useful and attractive project as long as those who are intended to benefit from it indeed reap the fruits. ... But on the day that citizens begin to raise serious and well-founded doubts about the supposed beneficial effects, policymakers and entrepreneurs should begin to rethink the wisdom of ever-increasing regional integration. In my view, regional integration should never become an end in itself, but it should be subdued to the broader and 'higher' goals of justice, social equality, cultural identity and respect for nature. In other words, social, political and cultural (and economic!) considerations can be good reasons for a revision of integration plans."

One of the dire consequences of the adoption of the euro was that the Member States of the eurozone (the official name is euro area) no longer had the freedom to implement the political, social and economic policies that their residents wanted. The Maastricht Treaty (1992) convergence criteria or conditions for entering the eurozone meant that a country had to subscribe to a whole set of neoliberal policies and keep its public debt and deficit and inflation at low levels. With these conditions the Maastricht Treaty legitimized and pushed for the austerity policies that since 2010 have been adopted in eurozone countries. Anyone who did not obey and wanted to pursue different policies was threatened with punishment.

The 'convergence' agenda of policies that member countries had to implement, and the establishment of the Eurogroup, ie the group of countries that have adopted the euro, meant in practice that member states had to follow neoliberal policies, even though this has never been explicitly mentioned. Other policies were simply not tolerated.

But, as has happened with the tough prescriptions by the IMF, the powerful countries can always disregard the Maastricht criteria when they think this is in their interest. Germany (after unification with Eastern Germany) and France are examples of poweful countries that broke the Maastricht budget deficit rule. Greece is an example of a weak country that could not escape from the straitjacket of the Maastricht Treaty and the neoliberal consensus of the Eurogroup (of which Greece is a part). When the Tsipras government in 2015 wanted to negotiate a debt deal with the Eurogroup and the ECB (and the IMF), it was simply told that its efforts to end austerity and get debt relief were meaningless as it just had to stick to the euro rules and the debt agreements made by previous governments.

Now that the disastrous consequences of the euro have become visible to more people than just the small group of expert critics, there is increasing doubt about the beneficence of the euro. In several countries voices have called for the abolition or reduction of the role of the euro, and the reintroduction of a national currency.

Right-wing populist leaders like Marine Le Pen and Geert Wilders have capitalized on the discomfort over austerity measures. They have announced that they will abandon the euro in their countries if they have the power to do so. Because the National Front of Le Pen in France and the Freedom Party of Wilders in the Netherlands do well in the elections and the polls, receiving more votes than any other party, the European technocrats defending the euro are concerned. They are feverishly searching for ways to prop up the European common currency. Their fear is that if one country leaves the eurozone, others might follow.

Ideas of how Europe could maintain the euro range from restricting it to a number of countries in northern Europe to democratizing the Eurogroup and giving its member states more freedom to implement the policies they see as fit.

There are also those who advocate reintroducing a national currency while preserving the euro as an international means of payment, just like the dollar. Is a breakup of the eurozone possible?

In a paper about the dismantling of the euro, "The Breakup of the Euro Area", the economist Barry Eichengreen, who has studied for many years the European monetary system and the international monetary system and has contributed to Fondad conferences and books, wrote in July 2007 that a country that abandons the euro and reintroduces a national currency might face major technical difficulties. But it can do it. One of the countries that might decide to leave the euro area was Portugal, he said, and another Germany:

"Different countries could abandon the euro for different reasons. One can imagine a country like Portugal, suffering from high labor costs and chronic slow growth, reintroducing the escudo in the effort to engineer a sharp real depreciation and export its way back to full employment. Alternatively, one can imagine a country like Germany, upset that the ECB has come under pressure from governments to relax its commitment to price stability, reintroducing the deutschemark in order to avoid excessive inflation."

A country where plans were made to withdraw from the eurozone and reintroduce the national currency was Greece. Are there similar plans in other countries?

to be continued (and revised)

Monday, December 5, 2016

Is Europe run jointly by its technocrats and CEOs?

European Round Table of Industrialists (ERT) meeting Merkel, Hollande and Juncker.
In the previous post I said that to get an idea of the world we are living in, it is helpful to look at the world economy and its composing parts, i.e. countries and companies. But, in terms of policy making, the distinction between countries and companies is a bit artificial. Is, for instance, Europe not run jointly by technocrats and its major multinationals such as Nestlé, Royal Dutch Shell, Total, Repsol, Philips, BP, Vodafone, BASF, AkzoNobel, Heineken, Siemens, Deutsche Telekom, Bayer, ThyssenKrupp, and Maersk?

All multinationals mentioned, except Maersk, are curently member of the powerful business lobby group European Round Table of Industrialists (ERT). Observers say that ERT was the major force behind the creation of the euro and the attempt to get TTIP adopted.

On its website the ERT says it is "a forum bringing together around 50 Chief Executives and Chairmen of major multinational companies of European parentage covering a wide range of industrial and technological sectors.  Companies of ERT Members are widely situated across Europe, with combined revenues exceeding € 2,135 billion, sustaining around 6.8 million jobs in the region. They invest more than € 55 billion annually in R&D, largely in Europe."

According to the Dutch version of Wikipedia, the ERT can be considered as one of the main architects of the great treaties of the European Union [1] since 1985, and policy decisions such as the EU enlargement, the introduction of the euro, pan-European connections such as Eurotunnel and the Oresund Bridge between Denmark and Sweden, [2] the Lisbon Strategy [3] or the Transatlantic Trade and Investment Partnership TTIP. [4]

The English version of Wikipedia says that "The political agenda of the EC [EU] has to a large extent been dominated by the ERT......While the approximately 5000 lobbyists working in Brussels might occasionally succeed in changing details in directives, the ERT has in many cases been setting the agenda for and deciding the content of EC [EU] proposals."[3] quoting Keith Richardson's study Big Business and the European Agenda (2000), The Sussex European Institute, p.30.

Other European companies setting the policies of governments include big bankers. Insiders once told me that Angela Merkel followed the advice of Josef Ackermann when he was still the CEO of Deutsche Bank. An article in the NYT confirms Ackermann's influence on Merkel, Deutsche Bank's Chief Casts a Long Shadow in Europe.