Washington Consensus

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pages: 226 words: 59,080

Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, business cycle, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Donald Davies, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, information asymmetry, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, Pareto efficiency, Paul Samuelson, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Vilfredo Pareto, Washington Consensus, white flight

Williamson would frequently protest that his own list had described modest reforms that fell far short of “market fundamentalism,” the blanket term for the view that markets are the solution to all public policy problems. But the term “Washington Consensus” fit the zeitgeist of the era only too well. Advocates of the Washington Consensus—whether in its original or expanded versions—presented it as good economics. For them, the policies reflected what sound economics teaches: Free markets and competition enable the efficient allocation of scarce resources. Government regulations, trade restrictions, and state ownership create waste and hamper economic growth. But this was an economics that did not go beyond Econ 101, as the advocates ought to have recognized. One problem was that the Washington Consensus skated over the deeper institutional underpinnings of a market economy, without which none of the market-oriented reforms could reliably deliver their intended benefits.

Fama, “Efficient Capital Markets: A Review of Theory and Empirical Work,” Journal of Finance 25, no. 2 (May 1970): 383–417. 8. Edmund L. Andrews, “Greenspan Concedes Error on Regulation,” New York Times, October 23, 2008, http://www.nytimes.com/2008/10/24/business/economy/24panel.html?_r=0. 9. John Williamson, “A Short History of the Washington Consensus” (paper commissioned by Fundación CIDOB for the conference “From the Washington Consensus towards a New Global Governance,” Barcelona, September 24–25, 2004). 10. Dani Rodrik, “Goodbye Washington Consensus, Hello Washington Confusion?: A Review of the World Bank’s Economic Growth in the 1990s: Learning from a Decade of Reform,” Journal of Economic Literature 44, no. 4 (December 2006): 973–87. 11. Dani Rodrik, “Getting Interventions Right: How South Korea and Taiwan Grew Rich,” Economic Policy 10, no. 20 (1995): 53–107; Rodrik, “Second-Best Institutions,” American Economic Review 98, no. 2 (May 2008): 100–104. 12.

To take the simplest example, in the absence of the rule of law, contract enforcement, and proper antitrust regulations, privatization is as likely to create monopolies for government cronies as it is to foster competition and efficiency. As the importance of institutions sank in, because of the poor response of many economies to Washington Consensus policies, reform efforts expanded in their direction. But it is one thing to slash import tariffs or remove ceilings on interest rates—two common enough approaches—and quite another to install, on short order, institutions that advanced economies acquired over decades, if not centuries. A useful reform agenda had to work with existing institutions, not engage in wishful thinking. Further still, the Washington Consensus presented a universal recipe. It presumed that all developing countries were pretty much alike—suffering from similar syndromes and in need of an undifferentiated list of reforms.


Making Globalization Work by Joseph E. Stiglitz

affirmative action, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, Berlin Wall, business process, capital controls, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Gini coefficient, global reserve currency, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Jones Act, Kenneth Arrow, Kenneth Rogoff, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, new economy, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, trickle-down economics, union organizing, Washington Consensus, zero-sum game

As a result of the debt crisis, the region suffered three years of decline and ten years of stagnation, a performance so poor that it came to be called the lost decade. It was during this period that Latin American economic policies changed dramatically, with most countries adopting Washington Consensus policies. As high inflation broke out in many of the countries, the Washington Consensus’s focus on fighting inflation made sense. Their governments had not been working well for them, and the appeal of the Washington Consensus—minimizing the role of government—was understandable. As countries like Argentina adopted the Washington Consensus policies, praise was heaped upon them. When price stability was restored and growth resumed, the World Bank and the IMF claimed credit for the success; the case for the Washington Consensus had been made. But, as it turned out, the growth was not sustainable. It was based on heavy borrowing from abroad and on privatizations which sold off national assets to foreigners—the proceeds from which were not invested.

By 2003, even the IMF had conceded that, at least for many developing countries, capital market liberalization had led not to more growth, just to more instability.13 Trade and capital market liberalization were two key components of a broader policy framework, known as the Washington Consensus—a consensus forged between the IMF (located on 19th Street), the World Bank (on 18th Street), and the U.S. Treasury (on 15th Street)—on what constituted the set of policies that would best promote development.14 It emphasized downscaling of government, deregulation, and rapid liberalization and privatization. By the early years of the millennium, confidence in the Washington Consensus was fraying, and a post–Washington Consensus consensus was emerging. The Washington Consensus had, for instance, paid too little attention to issues of equity, employment, and competition, to pacing and sequencing of reforms, or to how privatizations were conducted.

East Asia had learned that while globalization, well managed, had brought them enormous prosperity, globalization—when it meant opening themselves up to destabilizing speculative flows—had also brought economic devastation. As officials there reflect on the lessons of that brutal experience, they have come to reject even more firmly the Washington Consensus market fundamentalism which opened their countries to the ravages of the speculators. And they have put more emphasis on equity and on policies to help the poor. Growth has recovered, but these students of the “class of’97” have not forgotten the lessons. Latin America East Asia demonstrated the success of a course markedly different from the Washington Consensus, with a role for government far larger than the minimalist role allowed by market fundamentalism. Meanwhile, Latin America embraced the Washington Consensus policies more wholeheartedly than any other region (indeed, the term was first coined with reference to policies advocated for that region).


Falling Behind: Explaining the Development Gap Between Latin America and the United States by Francis Fukuyama

Andrei Shleifer, Atahualpa, barriers to entry, Berlin Wall, British Empire, business climate, Cass Sunstein, central bank independence, collective bargaining, colonial rule, conceptual framework, creative destruction, crony capitalism, European colonialism, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, income inequality, income per capita, land reform, land tenure, Monroe Doctrine, moral hazard, New Urbanism, oil shock, open economy, purchasing power parity, rent-seeking, Ronald Reagan, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, upwardly mobile, Washington Consensus, zero-sum game

(Washington, DC: Institute for International Economics, 1990). 24. World Development Report 1997, pp. 2–3. 25. Ibid., p. 14. 26. Burki and Perry, The Long March. 27. Burki and Perry, Beyond the Washington Consensus. 28. Ibid., p. 5. 29. Kuczynski and Williamson, After the Washington Consensus, p. 2. 30. Ibid., p. 308. 31. Ibid., p. 34. 32. Dani Rodrik, “After Neoliberalism, What?” remarks at the Banco Nacional de Desenvolvimento Econômico e Social (BNDES) seminar on New Paths of Development, Rio de Janeiro, September 2003, quoted in Patricio Navia and Andres Velasco, “The Politics of Second-Generation Reforms,” in Kuczynski and Williamson, After the Washington Consensus, p. 269. 33. Ibid. 34. Terry Lynn Karl, “The Vicious Cycle of Inequality in Latin America,” in What Justice? Whose Justice? Fighting for Fairness in Latin America, edited by Susan Eva Eckstein and Timothy P.

At the same time, the characteristics of that turning point appeared to dissipate any doubt as to the validity of the model of development that 42 The Historical Context had just received the most clamorous favorable verdict in world history. This helps to explain the enthusiasm with which most Latin American countries decided to resolve, once and for all, the age-old problem of endorsing the principles of the so-called Washington Consensus. As is well known, the neoliberal model prescribed by the Washington Consensus came significantly short of fulfilling its initial promises, but that did not preclude the later posing of the question of Latin America’s development gap in its original terms. More influential on this point was the fact that, once the Cold War was over and, with it, the contrast between capitalist development and the alternative proposed by socialism, the specific characteristics of different experiences within the framework of capitalism came to dominate the debate.

The social contract was the backbone of that state, but good outcomes resulted from intelligent public policy decisions. This became increasingly the case as the twentieth century peaked because of the challenge of competitiveness in the international marketplace. Asia competed and Latin America followed, but very slowly and with growing resistance toward the end of the century to the so-called liberal economic models embodied in the Washington Consensus.3 By the end of the 1990s, fierce resistance to the reform agenda had developed in many countries, leaving the Washington Consensus in tatters. The challenge in the twenty-first century is to undo or neutralize the errors and lapses in judgment of the old century. To do so will require a major reassessment of both the resources and the leadership required to close the gap with the United States and with developing Asia. In this chapter, we will address four issues that we believe help to explain the development gap between Latin America and the United States.


pages: 239 words: 62,311

The Next Factory of the World: How Chinese Investment Is Reshaping Africa by Irene Yuan Sun

barriers to entry, Bretton Woods, capital controls, clean water, Computer Numeric Control, deindustrialization, demographic dividend, Deng Xiaoping, Donald Trump, European colonialism, floating exchange rates, full employment, global supply chain, invisible hand, job automation, low skilled workers, M-Pesa, manufacturing employment, means of production, mobile money, post-industrial society, profit motive, purchasing power parity, race to the bottom, RAND corporation, Ronald Reagan, Shenzhen was a fishing village, Silicon Valley, Skype, special economic zone, structural adjustment programs, Triangle Shirtwaist Factory, union organizing, Washington Consensus, working-age population

On the global level, it was clear by the mid-2000s that the Washington Consensus had failed. Even the coiner of the term admitted in 2002 that “[t]he results have been disappointing, to say the least, particularly in terms of growth, employment, and poverty reduction.”5 To make matters worse, the implementation of Washington Consensus policies contributed to growing inequality within countries and to increasingly frequent financial crises.6 Rodrik wrote in 2006, “Proponents and critics alike agree that the policies spawned by the Washington Consensus have not produced the desired results. The debate now is not over whether the Washington Consensus is dead or alive, but over what will replace it.”7 Over the past decade, the monolithic orthodoxy of the Washington Consensus has splintered into several camps that, while not directly contradicting one another, emphasize differing ingredients as being critical to success in development.

Dani Rodrik, “Unconditional Convergence in Manufacturing,” Quarterly Journal of Economics 128, no. 1 (February 2013). 4. Dani Rodrik, “Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank’s Economic Growth in the 1990s: Learning from a Decade of Reform,” Journal of Economic Literature 44 (December 2006): 973–987. The classic formulation of the ten policy instruments generally considered to make up the Washington Consensus comes from John Williamson, who formalized the package in 1989. See John Williamson, ed., Latin American Adjustment: How Much Has It Happened? (Washington, DC: Institute for International Economics, 1990). 5. John Williamson, “Did the Washington Consensus Fail?” (Washington, DC: Peterson Institute for International Economics, November 6, 2002), http://www.iie.com/publications/papers/paper.cfm?

It says that modern manufacturing industries converge to the global productivity frontier regardless of geographical disadvantages, lousy institutions, or bad policies.”2 Moreover, this convergence happens regardless of time period or region, and studies have found that Africa is no exception.3 The accumulated history of countries around the world turns out to be exactly what Mr. Sun intuited: if you want to get rich, build yourself a manufacturing industry. It is worth noting that this advice is very different from what mainstream development institutions have been dispensing to poor countries for the past two generations. In the 1980s and 1990s, expert advice converged around the Washington Consensus. Influenced by the Ronald Reagan–Margaret Thatcher push for bigger roles for markets and smaller roles for government, the Washington Consensus advocated a sharp curb on government spending and involvement in shaping markets. Its pillars included ensuring macroeconomic stability, cutting subsidies, deregulating markets, privatizing national companies, and liberalizing trade—as Rodrik summarizes it: “Stabilize, privatize, and liberalize.”4 International financial institutions such as the International Monetary Fund and the World Bank played a large role in crystallizing this package into mainstream orthodoxy and guaranteeing its implementation, often by making much-needed economic assistance to developing countries conditional on their agreement to these prescriptive reforms.


pages: 356 words: 103,944

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

affirmative action, Asian financial crisis, bank run, banking crisis, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, central bank independence, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, endogenous growth, eurozone crisis, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, industrial cluster, information asymmetry, joint-stock company, Kenneth Rogoff, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, price stability, profit maximization, race to the bottom, regulatory arbitrage, savings glut, Silicon Valley, special drawing rights, special economic zone, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tobin tax, too big to fail, trade liberalization, trade route, transaction costs, tulip mania, Washington Consensus, World Values Survey

Trade liberalization, deregulation, privatization, and the other reforms still seemed eminently reasonable: they would make poor nations’ policies look more like those of the advanced market economies. An explicit rejection of these reforms would have forced economists to abandon some of their most fundamental tenets. The problem with the Washington Consensus had to lie elsewhere. The rehabilitation took the form of retaining the Washington Consensus but expanding it to include a wide range of additional reforms. There was nothing wrong with the Washington Consensus itself; it just had not been ambitious enough. The failure showed, the new story line went, that much more profound institutional reforms were needed to ensure the Washington Consensus would produce the advertised results. The actual reforms undertaken have been uneven and incomplete, an IMF report complained in 2005: “More progress was made with measures that had low upfront costs, such as privatization, relative to reforms that promised greater long-term benefits, such as improving macroeconomic and labor market institutions, and strengthening legal and judicial systems.”24 Anne Krueger captured the verdict in the title of a 2004 speech: “Meant Well, Tried Little, Failed Much.”25 Developing countries had to work harder; so the thinking went.

As we have seen, financial crises have their own dynamic and don’t particularly discriminate among countries with different trade strategies. In Search of a Post–Washington Consensus Consensus Today, the Washington Consensus is a “damaged brand,” as John Williamson conceded as early as 2002.20 Its disrepute comes not only from the ideological opposition it has engendered from the political left, but, more fundamentally, from its disappointing economic record. In their 1995 article, Sachs and Warner had written that “we find no cases to support the frequent worry that a country might open and yet fail to grow.”21 Even if their claim was true at the time, subsequent evidence clearly contradicted the assertion. The countries in Latin America and elsewhere that jettisoned ISI in favor of the Washington Consensus ended up, for the most part, with considerably lower rates of growth. Considering how misguided ISI policies seem by today’s standards, this was quite an embarrassment for the proponents of the Washington Consensus.

Collins, “The Empirics of Growth: An Update,” Brookings Papers on Economic Activity, 2 (2003), Table 1. 19 Kalpana Kochhar, et al., “India’s Pattern of Development: What Happened, What Follows?” Journal of Monetary Economics, vol. 53, no. 5 (July 2006), pp. 981–1019. 20 John Williamson, “Did the Washington Consensus Fail?” Outline of Speech at the Center for Strategic and International Studies, Washington, DC, November 6, 2002, online at http://www.iie.com/publications/papers/ paper.cfm?ResearchID=488. The term “damaged brand” was used in Moisés Naím, “Washington Consensus: A Damaged Brand,” Financial Times, October 28, 2002. British prime minister Gordon Brown officially pronounced the death of the Washington Consensus in early 2009. 21 Sachs and Warner, “Economic Reform,” p. 44. 22 See Dani Rodrik, “Growth Strategies,” in Philippe Aghion and Steven Durlauf, eds., Handbook of Economic Growth, Vol. 1A (Amsterdam: North-Holland, 2005). 23 Jeffrey Sachs’s more recent worldview is captured in Jeffrey D.


Profit Over People: Neoliberalism and Global Order by Noam Chomsky

Bernie Sanders, Bretton Woods, declining real wages, deindustrialization, full employment, invisible hand, joint-stock company, land reform, liberal capitalism, manufacturing employment, means of production, Monroe Doctrine, Ronald Reagan, strikebreaker, structural adjustment programs, Telecommunications Act of 1996, The Wealth of Nations by Adam Smith, Thomas Malthus, union organizing, Washington Consensus

We often discover a considerable gap. The term “neoliberalism” suggests a system of principles that is both new and based on classical liberal ideas: Adam Smith is revered as the patron saint. The doctrinal system is also known as the “Washington consensus,” which suggests something about global order. A closer look shows that the suggestion about global order is fairly accurate, but not the rest. The doctrines are not new, and the basic assumptions are far from those that have animated the liberal tradition since the Enlightenment. THE WASHINGTON CONSENSUS The neoliberal Washington consensus is an array of market oriented principles designed by the government of the United States and the international financial institutions that it largely dominates, and implemented by them in various ways—for the more vulnerable societies, often as stringent structural adjustment programs.

The most recent example is Mexico. It was highly praised as a prize student of the rules of the Washington consensus and offered as a model for others—as wages collapsed, poverty increased almost as fast as the number of billionaires, foreign capital flowed in (mostly speculative, or for exploitation of cheap labor kept under control by the brutal “democracy”). Also familiar is the collapse of the house of cards in December 1994. Today half the population cannot obtain minimum food requirement, while the man who controls the corn market remains on the list of Mexico’s billionaires, one category in which the country ranks high. Changes in global order have also made it possible to apply a version of the Washington consensus at home. For most of the US population, incomes have stagnated or declined for fifteen years along with working conditions and job security, continuing through economic recovery, an unprecedented phenomenon.

That has been a truism at least since Adam Smith, who pointed out that the “principal architects” of policy in England were “merchants and manufacturers” who used state power to serve their own interests, however “grievous” the effect on others, including the people of England. Smith’s concern was “the wealth of nations,” but he understood that the “national interest” is largely a delusion: within the “nation” there are sharply conflicting interests, and to understand policy and its effects we have to ask where power lies and how it is exercised, what later came to be called class analysis. The “principal architects” of the neoliberal “Washington consensus” are the masters of the private economy, mainly huge corporations that control much of the international economy and have the means to dominate policy formation as well as the structuring of thought and opinion. The United States has a special role in the system for obvious reasons. To borrow the words of diplomatic historian Gerald Haines, who is also senior historian of the CIA, “Following World War II the United States assumed, out of self-interest, responsibility for the welfare of the world capitalist system.”


pages: 273 words: 34,920

Free Market Missionaries: The Corporate Manipulation of Community Values by Sharon Beder

anti-communist, battle of ideas, business climate, corporate governance, en.wikipedia.org, full employment, income inequality, invisible hand, liquidationism / Banker’s doctrine / the Treasury view, minimum wage unemployment, Mont Pelerin Society, new economy, old-boy network, popular capitalism, Powell Memorandum, price mechanism, profit motive, Ralph Nader, rent control, risk/return, road to serfdom, Ronald Reagan, school vouchers, shareholder value, spread of share-ownership, structural adjustment programs, The Chicago School, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, Torches of Freedom, trade liberalization, traveling salesman, trickle-down economics, Upton Sinclair, Washington Consensus, wealth creators, young professional

For instance, Guillermo Ortiz, Mexico’s renowned finance minister and later governor of the central bank, did his graduate work at Stanford’s Business School . . . Thailand’s Minister of Finance, Tarrin Nimmanahaeminda, received his BA from Harvard and obtained an MBA in finance at Stanford as well . . .13 THE WASHINGTON CONSENSUS AND STRUCTURAL ADJUSTMENT In 1990 John Williamson, an economist with experience working for the World Bank, the IMF, and the UK Treasury, compiled a list of free market policies that were being pressed onto Latin American nations ‘by the powers-that-be in Washington’. He called this package of economic ‘reforms’ the ‘Washington Consensus’.14 The World Bank calls it the ‘market-friendly view’. His list covered: • Fiscal Discipline: Reduced budget deficits at all levels of government (after taking account of debt). • Public Expenditure Priorities: Redirecting government expenditure from areas of public demand that provide little economic return to areas with ‘high economic returns and the potential to improve income distribution, such as primary health and education, and infrastructure’. • Tax Reform: Broadening the tax base and cutting marginal tax rates to provide more incentive to high income earners to invest their money. • Financial Liberalization: Aiming towards market-determined interest rates and the abolition of preferential interest rates for privileged borrowers. • Exchange Rates: Setting exchange ‘to induce a rapid growth in nontraditional exports’, as well as to ensure exporters remain competitive. • Trade Liberalization: Reduction of tariffs and trade restrictions. • Foreign Direct Investment: Abolition of barriers to investment by foreign firms and foreign firms to be treated on the same basis as local firms. • Privatization: Privatizing government businesses and assets. • Deregulation: Abolition of regulations that impede investment or restrict competition, and requirement that all regulations be justified ‘by such criteria as safety, environmental protection, or prudential supervision of financial institutions’. • Property Rights: Securing property rights without excessive costs.15 ECONOMIC ADVISERS 149 These measures, a codified version of the Chicago School prescriptions, were measures that would expand business opportunities, reduce the cost of doing business and minimize the regulations that business would have to abide by.

. • Property Rights: Securing property rights without excessive costs.15 ECONOMIC ADVISERS 149 These measures, a codified version of the Chicago School prescriptions, were measures that would expand business opportunities, reduce the cost of doing business and minimize the regulations that business would have to abide by. They were the policies being promoted by corporate-funded think tanks in the US and the UK. The ‘Washington Consensus’ was pushed by Washington policy networks supported by large corporations and international financial interests and incorporated into an economic reform agenda for most countries in the world. Williamson recognized the role of economic advisers in achieving the Washington Consensus. He used the term ‘technopols’ to describe the ‘burgeoning breed of economic technocrats who assume positions of political responsibility’.16 These people were not only ‘able to judge what institutions and policies are needed in specific circumstances in order to further economic objectives’ but also had the political skills and ability to persuade others to adopt those policies.17 Technopols, like corporate-funded think tanks, played a key role in ensuring business-friendly measures were adopted in affluent countries by governments of many different political persuasions during the 1980s, including the conservative governments of Margaret Thatcher in Britain, Ronald Reagan in the US and Brian Mulroney in Canada, and labour/social democratic governments in Australia and New Zealand.

Since the early 1980s it had a political elite obedient to the transnational financial organizations in which American free-market doctrines were institutionalised.26 In fact, many of the nations following the World Bank/IMF prescriptions did not prosper: ‘the majority of those nations that have followed the IMF’s advice have experienced profound economic crises: low or even declining growth, much larger foreign debts and the stagnation that perpetuates systemic poverty’. Some countries that had declined the IMF’s ‘enhanced structural adjustment’ loans were in contrast better off.27 ECONOMIC ADVISERS 151 In the two decades before the introduction of the Washington Consensus, when government spending and welfare schemes were looked on with approval (1960–1980), the income per person grew by 73 per cent in Latin America and 34 per cent in Africa. In the following two decades, as the Washington consensus was implemented, incomes in Africa declined by 23 per cent and the Latin American economies have only grown by 6 per cent.28 In developing countries life expectancy has dropped. The gap between rich and poor has increased. Forty-four per cent of people in developing nations live in poverty and unemployment has doubled in the last decade.29 Even the IMF admits that ‘in recent decades, nearly one-fifth of the world population have regressed’.30 This is most evident to the populations of developing countries: A popular and political groundswell is building from the Andes to Argentina against the decade-old experiment with free-market capitalism.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

"Robert Solow", accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus, zero-sum game

Blyth, Great Transformations, 147–151; Posen, “Central Bank Independence.” 76. John Williamson, “A Short History of the Washington Consensus,” paper commissioned by Fundación CIDOB for the conference “From the Washington Consensus towards a New Global Governance,” Barcelona, September 24–25, 2004, quote from p. 1. 77. Ibid., 1, my italics. 78. Williamson, “A Short History,” 2. The fact that fiscal discipline is primus inter pares on the list is telling. 79. Korea joined the OECD in 1986. Elsewhere Williamson moves from claiming that these ideas constitute the actual practices of the OECD to claiming that they are “drawn from that body of robust empirical generalizations that forms the core of economics.” John Williamson, “Democracy and the Washington Consensus,” World Development 21, 8 (August 1993): 1113. 80. Katherine Weaver, The Hypocrisy Trap: The World Bank and the Poverty of Reform (Princeton, NJ: Princeton University Press, 2008). 81.

In the case of Greece and Italy in 2011, if that meant deposing a few democratically elected governments, then so be it. The most remarkable thing about this ordoliberalization of Europe is how it replicates the same error often attributed to the Anglo-American economies: the insistence that all developing states follow their liberal instruction sheets to get rich, the so-called Washington Consensus approach to development that we shall discuss shortly. The basic objection made by late-developing states, such as the countries of East Asia, to the Washington Consensus/Anglo-American idea “liberalize and then growth follows” was twofold. First, this understanding mistakes the outcomes of growth, stable public finances, low inflation, cost competitiveness, and so on, for the causes of growth. Second, the liberal path to growth only makes sense if you are an early developer, since you have no competitors—pace the United Kingdom in the eighteenth century and the United States in the nineteenth century.37 Yet in the contemporary world, development is almost always state led.

As the March of Dimes shows us so well, they invent new missions.81 In the case of the IMF, they became the provider of “firm-surveillance” of member states’ policies to increase global transparency, at least for the developed world. In the case of the developing world, however, the IMF became the financial police force behind the implementation of what were termed “structural adjustment programs”: also known as the Washington Consensus checklist applied in practice.82 As Dani Rodrik notes, IMF policy in this period, aided and abetted by the World Bank, devolved to a mantra of “stabilize, privative, and liberalize” as “codified in John Williamson’s well-known Washington Consensus.”83 The result was a series of one-size-fits-all policies that were applied from Azerbaijan to Zambia whose objective was to “minimize fiscal deficits, minimize inflation, minimize tariffs, maximize privatization, maximize liberalization of finance.”84 It was, in other words, “expansionary fiscal austerity” in a developmental form, and the results were, by and large, terrible.


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Profiting Without Producing: How Finance Exploits Us All by Costas Lapavitsas

"Robert Solow", Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, computer age, conceptual framework, corporate governance, credit crunch, Credit Default Swap, David Graeber, David Ricardo: comparative advantage, disintermediation, diversified portfolio, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, financial deregulation, financial independence, financial innovation, financial intermediation, financial repression, Flash crash, full employment, global value chain, global village, High speed trading, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, job satisfaction, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, London Interbank Offered Rate, low skilled workers, M-Pesa, market bubble, means of production, money market fund, moral hazard, mortgage debt, Network effects, new economy, oil shock, open economy, pensions crisis, price stability, Productivity paradox, profit maximization, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Shiller, savings glut, Scramble for Africa, secular stagnation, shareholder value, Simon Kuznets, special drawing rights, Thales of Miletus, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, total factor productivity, trade liberalization, transaction costs, union organizing, value at risk, Washington Consensus, zero-sum game

Others, however, have looked at these changes from a more sympathetic perspective; see, for instance, Neil Gilbert, Transformation of the Welfare State, Oxford: Oxford University Press, 2002. 24 The term ‘subordinate financialization’ was originally suggested by Jeff Powell. 25 The term ‘Washington Consensus’ was coined by John Williamson; see Williamson, ‘What Washington Means by Policy Reform’, in Latin American Readjustment: How Much has Happened?, ed. John Williamson, Washington: Institute for International Economics, 1990; John Williamson, ‘The Washington Consensus Revisited’, in Economic and Social Development into the XXI Century, ed. Louis Emmerij, Washington: Inter-American Development Bank, 1997. Joseph Stiglitz has put forth a sustained critique of the Washington Consensus in an effort to develop a Post-Washington Consensus drawing on the notion of market failure typically through information asymmetries; Joseph Stiglitz, ‘More Instruments and Broader Goals: Moving Toward the Post Washington Consensus’, 7 January 1998; Joseph Stiglitz, ‘Whither Reform?

The results in terms of investment, efficiency and growth have been mediocre, but financial liberalization in developing countries has gradually accrued several other features, including introduction of stock markets; by the late 1980s it had morphed into an integrated development strategy, the Washington Consensus. Guided and enforced by the World Bank and the IMF, the Washington Consensus forced changes in domestic finance in developing countries generally favouring a shift away from bank-based, relational, government-controlled structures toward market-based, arm’s-length, private institutions and mechanisms.25 Financialization of developing countries began to take shape on this basis in the late 1990s and the 2000s. A fundamental component of the Washington Consensus has been the opening of domestic economies to international capital flows, typically on the grounds that capital would flow from rich to poor countries, thus promoting development.

Financialization in developing countries is associated with the financial liberalization that began in the 1970s, lifting price and quantity controls in domestic financial systems. Financial liberalization has gradually acquired further features, including the establishment of stock markets. By the late 1980s financial liberalization had morphed into an integrated pro-market development strategy, the Washington Consensus.85 A fundamental component of the Washington Consensus has been to open domestic economies to international capital markets, typically on the grounds that capital would flow from rich to poor countries, thus promoting development. However, in the 2000s, as developing countries became more closely integrated with world capital markets, precisely the opposite has taken place, as is shown in more detail in Chapter 8.


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The Retreat of Western Liberalism by Edward Luce

"Robert Solow", 3D printing, affirmative action, Airbnb, basic income, Berlin Wall, Bernie Sanders, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, call centre, carried interest, centre right, Charles Lindbergh, cognitive dissonance, colonial exploitation, colonial rule, computer age, corporate raider, cuban missile crisis, currency manipulation / currency intervention, Dissolution of the Soviet Union, Doha Development Round, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, future of work, George Santayana, gig economy, Gini coefficient, global pandemic, global supply chain, illegal immigration, imperial preference, income inequality, informal economy, Internet of things, Jaron Lanier, knowledge economy, lateral thinking, liberal capitalism, Marc Andreessen, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, Monroe Doctrine, moral panic, more computing power than Apollo, mutually assured destruction, new economy, New Urbanism, Norman Mailer, offshore financial centre, one-China policy, Peace of Westphalia, Peter Thiel, plutocrats, Plutocrats, precariat, purchasing power parity, reserve currency, reshoring, Richard Florida, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, Snapchat, software is eating the world, South China Sea, Steve Jobs, superstar cities, telepresence, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, Washington Consensus, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, World Values Survey, Yogi Berra

Whether the Western way of life, and our liberal democratic systems, can survive this dramatic shift of global power is the question of this book. The answer is not entirely in our hands. But our response so far has been to accelerate the shift. Donald Trump’s victory crystallises the West’s failure to come to terms with the reality it faces. —— At some point during the 2008 global financial crisis, the Washington Consensus died. In truth, that economic model had been declared a ‘damaged brand’ back in 2003 by John Williamson, the man who coined the term in the late 1980s.13 The Washington Consensus prescribed open trading systems, free movement of capital and central bank monetary discipline. Countries that swallowed the prescription suffered terribly during the 1995 Mexican tesobono crisis, the 1997 Asian flu crisis, and in Russia, Brazil and elsewhere during the later 1990s. The Organization for Economic Cooperation and Development, the prestigious Western club that was set up to distribute America’s Marshall Plan aid to shattered post-war Europe, made capital account liberalisation a precondition of its membership.

Everyone wanted to join the OECD for its prestige and higher credit ratings. South Korea and Mexico duly liberalised their capital accounts to join in the early 1990s. The destabilising effects of the hot money that flooded into those economies and then out again was almost instant. Most of the world has since chosen China’s more pragmatic path of opening slowly and on its own terms. China’s unorthodox route to development exposed the limits of the Washington Consensus. It had assumed that there was one way to do things, and that the rest of the world would have little choice but to adopt it. China is simply too big, and too important to the world’s bottom line, to push around. Other developing countries have followed China’s cue. Call it the Beijing Consensus. Today we still reflexively call the meltdown that followed the bankruptcy of Lehman Brothers a global recession.

Davos has become the emblem of a global elite that has lost its ability to listen. I began this book with a reminiscence about the fall of the Berlin Wall. A decade later, I found myself employed as speechwriter to Lawrence Summers, when he was the US Secretary of the Treasury in the Clinton administration. Looking back, I am astonished at that era’s unshakeable self-confidence. This was the high noon of the Washington Consensus. Alongside Alan Greenspan, the chairman of the US Federal Reserve, and Robert Rubin, the previous Treasury Secretary, Summers personified the global intellectual elite. Though often abrasive, he is also brilliant – especially when he is wrong. But when the facts change he is capable of changing his mind. By 2008 he had already walked away from much of the triumphalism of the late 1990s. Summers complained of ‘the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered’.75 By 2016, he was warning that the public’s tolerance for expert solutions ‘appears to have been exhausted’.


pages: 290 words: 76,216

What's Wrong with Economics? by Robert Skidelsky

"Robert Solow", additive manufacturing, agricultural Revolution, Black Swan, Bretton Woods, business cycle, Cass Sunstein, central bank independence, cognitive bias, conceptual framework, Corn Laws, corporate social responsibility, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, disruptive innovation, Donald Trump, full employment, George Akerlof, George Santayana, global supply chain, global village, Gunnar Myrdal, happiness index / gross national happiness, hindsight bias, Hyman Minsky, income inequality, index fund, inflation targeting, information asymmetry, Internet Archive, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labour market flexibility, loss aversion, Mark Zuckerberg, market clearing, market friction, market fundamentalism, Martin Wolf, means of production, moral hazard, paradox of thrift, Pareto efficiency, Paul Samuelson, Philip Mirowski, precariat, price anchoring, principal–agent problem, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, shareholder value, Silicon Valley, Simon Kuznets, survivorship bias, technoutopianism, The Chicago School, The Market for Lemons, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, transaction costs, transfer pricing, Vilfredo Pareto, Washington Consensus, Wolfgang Streeck, zero-sum game

(i), (ii) capital goods (i), (ii) capitalism and belief in predestination (i) capital as stored-up labour (i) creative destruction of (i) exploitation of labour (i) Frankenstein as a metaphor for (i) homo economicus’s evolution (i) moral cost of progress (i) peripheral economies (i) in sociological thought (i) Carlyle, Thomas (i) Chang, Ha-Joon (i), (ii) Chicago school (i), (ii) class analysis (i), (ii), (iii) classical economics definition of economics (i) economic growth (i), (ii) growth/stagnation problem (i) methodology (i) scarcity in (i) cliometrics (i) closed systems (i), (ii), (iii), (iv) Coase, Ronald (i) collectivism collective agency (i), (ii), (iii) liberal/collectivist cycles (i) comparative advantage theory (i), (ii) conspicuous consumption (i) consumer sovereignty (i), (ii), (iii) contracts in general equilibrium theory (i), (ii), (iii) within modern society (i) morality and (i), (ii) the power of the state as (i) regulation of (i) cost of production theory (i) Daly, Herman (i) Debreu, Gerard (i) decision-making processes agenda power and (i) in conditions of uncertainty (i) rationality and (i) systemic errors of human behaviour (i), (ii) dependency (dependencia) theory (i) Derrida, Jacques (i) development economics big push theories of structuralism (i) economic growth in (i), (ii) import-substitution policies (i), (ii) liberalisation policies in developing economies (i), (ii) of peripheral economies within capitalism (i) protectionist doctrines (i) role of the state (i) stadial theory (i) Washington Consensus (i), (ii) Devons, Ely (i) diamond-water paradox (i), (ii) doughnut economics (i) Durkheim, Emile (i) Easterlin Paradox (i) ecological economics (i) econometric testing (i), (ii) economic growth via accumulation (i), (ii) in classical economics (i), (ii) in development economics (i), (ii) division of labour (i) free trade doctrine (i), (ii), (iii), (iv), (v) Malthusian population problem (i) moral efficiency for (i) protectionism (i), (ii) role of institutions (i), (ii), (iii) role of the state (i), (ii) social purpose of (i) technological innovation for (i), (ii) Washington Consensus (i) for wealth creation (i) economic history for empirical evidence (i), (ii) liberal/collectivist cycles (i) productive division with economics (i) the study of (i), (ii) time-series analysis (i) use of econometrics (i) see also history; history of economic thought economics defined (i) a different approach to (i) within the political landscape (i) in relation to other social sciences (i) in relation to the laws of physics (i) as a science (i), (ii), (iii), (iv), (v) teaching of (i) see also scientific economics efficiency efficiency of choice (i) moral restraint for economic growth (i) morally efficient behaviour (i), (ii), (iii) trade-off with equity (i) emulation complex (i) the Enlightenment (i), (ii) environmental economics (i) epistemology within a broader understanding of economics (i) in economics (i) insufficient generality of premises (i) probability in (i) in relation to ontology (i), (ii) equilibrium theory contracts in (i), (ii), (iii) cyclical theories (i), (ii) dynamic equilibrium (i) in economic thought (i), (ii) frictions (i) in Keynesian economics (i) in the markets (i), (ii), (iii) Marxist thought on (i) optimum equilibrium (i) partial equilibrium (i) principle of (i), (ii), (iii) in the real world (i) role of self-interest (i) shocks, notion of (i), (ii) static equilibrium (i) supply and demand (competitive equilibrium) (i) Walrasian general equilibrium (GE) (i), (ii), (iii), (iv) ethics costs of progress (i) doughnut economics (i) in economics (i), (ii), (iii), (iv) ethical objections to homo economicus (i) the harm principle (i) justice of property rights (i) lack of in scientific economics (i), (ii) methodological individualism (i) procedural ethics (i) value theory (i) see also morality fallacy of composition (i) financial crisis (2008) complex system modelling (i) developments in economic thought since (i), (ii), (iii), (iv), (v) explanations for (i) failure to foresee (i), (ii), (iii), (iv), (v) firms as economic actors (i) functions of (i), (ii) impact of modern technology (i) moral responsibilities of (i) relationship with the consumer (i) within social networks (i) transaction cost theory (i) Fogel, Robert W.

To this day, many, perhaps most, economists take private property rights as given, and explain the greater wealth of some societies in terms of their more efficient distribution of property, without showing much curiosity about why inefficient property distributions persisted for so long, or what functions they played in the life of their societies. This chapter traces ‘growth’ economics from the insights of the classical economists to the emergence of development economics as a distinct subfield of economics in the second half of the twentieth century, and the gradual dissolution of the developmental perspective into the neoclassical Washington Consensus. Population If the economist is a tragedian, the Revd Thomas Malthus has a claim to be considered its tragedian in chief. Before Malthus there was the allure of a more prosperous future; after him gloom. For the first fifty years of the nineteenth century, economics was known as the ‘dismal science’. In An Essay on the Principle of Population (1798) Malthus set out to refute the utopianism of writers like Condorcet, Godwin, and Thomas Paine.

First in the field were the ‘big push’ theories of the 1940s and 1950s, designed to turn poor countries into rich ones in double-quick time. These were based on a structuralist analysis of the economy, ancestrally derived from the doctrines of Friedrich List. The alleged failure of the big push growth policies led, in the 1970s and 1980s, to a swing back to neoclassical economics, which came to be embodied in the Washington Consensus. Structuralism Development theories can be called structural because they take as their unit of analysis the structure of the world capitalist system. They viewed this not as an integrated market peopled by competitive firms but as a binary system with an advanced centre and a lagging periphery. The dual structure of the economy required a dual system of economics and economic policy – one suited for rich countries would not suit poor ones.


State-Building: Governance and World Order in the 21st Century by Francis Fukuyama

Asian financial crisis, Berlin Wall, Bretton Woods, centre right, corporate governance, demand response, Doha Development Round, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, George Akerlof, Hernando de Soto, information asymmetry, liberal world order, Live Aid, Nick Leeson, Pareto efficiency, Potemkin village, price stability, principal–agent problem, rent-seeking, road to serfdom, Ronald Coase, structural adjustment programs, technology bubble, The Market for Lemons, The Nature of the Firm, transaction costs, Washington Consensus, Westphalian system

In response to these trends, the advice offered by international financial institutions (IFIs) like the International Monetary Fund (IMF) and World Bank, as well as by the U.S. government, emphasized a collection of measures intended to reduce the degree of state intervention in economic affairs—a package designated as the “Washington consensus” by one of its formulators (Williamson 1994) or as “neoliberalism” by its detractors in Latin America. The Washington consensus has been relentlessly attacked in the early twenty-first century, not just by antiglobalization protesters but also by academic critics with better credentials in economics (see Rodrik 1997; Stiglitz 2002). In retrospect, there was nothing wrong with the Washington consensus per se: The state sectors of developing countries were in very many cases obstacles to growth and could only be fixed in the long run through economic liberalization. Rather, the problem was that although states needed to be cut back in certain areas, they needed to be simultaneously strengthened in others.

There is no question that it is better to be in quadrant I than in quadrant IV, but is it better to be in quadrant II, with strong institutions and an extensive state, or quadrant III, with weak institutions and a limited state? In the early 1990s many economists preferred quadrant III on the grounds that markets would be selforganizing or that institutions and residual state capabilities would somehow take care of themselves. The so-called Washington consensus was a perfectly sensible list of economic policy measures that were designed to move countries leftward along the X-axis through reduced tariff protection, privatization, reduction of subsidies, deregulation, and so forth. There is no reason, after all, for the Brazilian government to operate steel mills or for Argentina to create a domestic automobile industry. In many cases, transitional and emerging-market countries were advised to move as rapidly as possible toward smaller state scope on the grounds that the political window for engaging in this kind of reform would close quickly and that it was better to get the pain of adjustment over with all at once.

At the same time, spending on so-called sovereignty expenditures like military forces, diplomatic services, and jobs connected to the office of the presidency increased dramatically. (In Kenya, for example, the employees of the office of the president grew from 18,213 in 1971 to 43,230 in 1990.) No international lender or bilateral donor at any time wanted this outcome, yet none were able to structure their conditionality in a way to prevent it from happening because of their inability to control local political outcomes. Many proponents of the Washington consensus now say that they of course understood the importance of institutions, rule of law, and the proper sequencing of reforms. But Y-axis questions of state capacity and state-building were largely absent from policy discussion in the late 1980s to early 1990s. There were very few warnings issued from Washington-based policymakers about the dangers of liberalization in the absence of proper institutions.


pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

"Robert Solow", bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

Available from http://www2.goldmansachs.com/ideas/brics/book/BRIC-Full.pdf. 2 Summarizing the conclusions of April 2009 G20 summit in London Gordon Brown declared: “The old Washington Consensus is over.” See Jonathan Weisman and Alistair Macdonald, “Obama, Brown Strike Similar Note on Economy,” Wall Street Journal, April 3, 2009. See also a 2009 article by John Williamson, who coined the phrase: John Williamson, “The ‘Washington Consensus’: Another Near-Death Experience?” Peterson Institute for International Economics, April 10, 2009. Available from http://www.iie.com/realtime/?p=604. See as well Dani Rodrik, “Is There a New Washington Consensus?” Business Standard, June 12, 2008. 3 Unattributable interview with the author in Anatole Kaletsky, “We Need a New Capitalism to Take on China, The Times, London, February 4, 2010. 4 “‘China’s Spirit,’ a ‘Great Wall’ at Heart Built to Ward Off Global Crisis,” People’s Daily, July 30, 2009. 5 Joshua Cooper Ramo, The Beijing Consensus. 6 Two of the best recent books are Will Hutton, The Writing on the Wall: China and the West in the 21st Century, and Bill Emmott, Rivals: How the Power Struggle Between China, India and Japan Will Shape Our Next Decade. 7 If China continues to grow at an average annual rate of 8 percent without any interruption, its living standards will catch up with those in Portugal, the poorest western European country, by around 2030.

In the twenty years since the demolition of the Berlin Wall, almost every nation has appeared to accept, at least in theory, the conventional wisdom known as the Washington Consensus: The only credible formula for long-term prosperity and development is “free markets and free people,” however unwelcome both these liberal concepts might be to incumbent oligarchies and ruling elites. Now, after watching the near-collapse of global capitalism and the damage done to Western democracies by the crisis, citizens, as well as political leaders, of many developing countries are having second thoughts. The apparent failure of Western capitalism has discredited liberalism in the eyes of many developing countries, as even the principle promoters of the Washington Consensus, the IMF and World Bank, have acknowledged in a series of confessional reports.2 As a senior U.S. diplomat remarked a few months after the crisis: “Developing countries have lost interest in the old Washington Consensus that promoted democracy and liberal economics.

Bush, far from supporting the U.S. government’s attempts to save the economy and financial system, formed an unholy alliance with neo-socialists and unrepentant Marxists to declare that free-enterprise capitalism was dead. Instead of the American Century, proclaimed by neo-conservatives a few years earlier, China’s rise to global dominance in the decades ahead now seemed as inevitable. Around the world, finance ministers and diplomats prepared to abandon the Washington Consensus presented to developing countries throughout the previous twenty years as the only way to achieve economic progress.1 The Beijing Consensus was the new buzzword, even if no one was quite sure what it meant.2 Yet within a few months of the collapse of Lehman and the election of a new American government, it became obvious that reports of capitalism’s death were exaggerated and premature.


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The Globalization of Inequality by François Bourguignon

Berlin Wall, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Credit Default Swap, deglobalization, deindustrialization, Doha Development Round, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial intermediation, gender pay gap, Gini coefficient, income inequality, income per capita, labor-force participation, liberal capitalism, minimum wage unemployment, offshore financial centre, open economy, Pareto efficiency, purchasing power parity, race to the bottom, Robert Gordon, Simon Kuznets, structural adjustment programs, The Spirit Level, too big to fail, very high income, Washington Consensus

., 87 Russia, 37, 46t Saez, Emmanuel, 48, 160–61 savings, 93, 174 Segal, Paul, 13n4 Sen, Amartya, 14, 61 Senegal, 46t, 54 sensitive urban zones (ZUS), 66 shocks, 38, 55, 91–92, 175 Singapore, 34, 82 Slemrod, Joel, 160–61 Slim, Carlos, 111 social justice, 2, 24, 60, 70, 142 social security, 37 South Africa, 16, 23, 46t, 156 South Korea, 34, 46t, 57, 82 Soviet Union, 26, 37, 75, 149, 153 Spain, 6, 46t, 53, 102, 135 standard of living, 184; absolute, 23, 31–32; after normalization, 29; average, 2, 13, 16, 18, 21, 43; between countries, 2–3, 7, 10, 17, 33, 36, 38–39, 42; China and, 120–22; convergence and, 7, 147–48; countries included in estimation of, 46t; definitions of, 17; distribution and, 16, 18, 24, 26–27; evolution of inequality and, 25–26, 41, 43–45, 46t, 53– 55, 58, 60–62, 67, 69, 73; extreme deciles of, 18, 21–23, 28, 36; factor of proportionality and, 13; fairer globalization and, 146–48, 154, 156–58, 160, 165, 168–69; GDP measurement of, 14 (see also gross domestic product (GDP) measurement); global inequality and, 10–26, 29, 31–33, 36, 39; globalization and, 120–23, 126, 138, 143; great gap in, 33–36; international inequality and, 17; median, 24; OECD countries and, 11–12, 43, 50–52, 64, 94, 99, 102, 107, 120, 149, 159, 162, 164–65; Povcal data and, 12; purchasing power and, 11, 13, 19–24, 27f, 28, 50, 80, 144, 158, 178; relative gap in, 18, 20, 30– 32, 36; rise in inequality and, 106–8, 113–14; welfare and, 31; within countries and, 2 Stiglitz, Joseph, 4, 14, 136n10, 138 subsidies, 109–10, 175 superstars, 85–87, 89–90 surveys: evolution of inequality and, 42t, 43–45, 56, 68n17, 69– 71; fairer globalization and, 169; global inequality and, 10, 12– 15, 20n10, 21–22, 29, 42t, 43– 208 surveys (cont.) 45; globalization and, 127n4, 141n15; PISA, 169–70 Sweden, 46t, 51f, 59, 87, 90, 92– 94, 164, 171–72 Taiwan, 34, 82 taxes: Brazil and, 173; capital mobility and, 93; Chile and, 173; China and, 165; credit and, 164; cutting rates of, 188; educational policy and, 167–73; effective rate of, 159–60; emerging economies and, 165; estate, 187; evolution of inequality of, 12–14, 37, 48, 50, 56n5; fairer globalization and, 148, 158–73, 175, 181–83; France and, 92–93; Germany and, 92; globalization and, 129–30, 135–36, 142–45; havens for, 160, 162, 182, 187, 189; ignoring role of, 12–13; income, 37, 89n10, 92–93, 145, 159, 161–65, 170; India and, 165; inheritance, 145, 171–73; institutions and, 92–94; investment and, 92; labor and, 159– 60, 171; liberalization and, 93; Morocco and, 173; national inequality and, 158–73, 175, 181– 83; profit and, 93; rate ceiling on, 161–62; Reagan and, 92; redistribution through, 4, 158–67; reform and, 92–94, 163, 183, 189; rise in inequality and, 74, 89n10, 91–94, 104, 114–15; Sweden and, 92–93, 172; Thatcher and, 92; transfers and, 158–67; United Kingdom and, 92–94; United States and, 92– 93, 159–60, 164; value added, 92 Index technology: artists and, 86–87; communication, 78, 85–87, 96; data transfer, 78; development gap and, 34–35, 83; fairer globalization and, 156, 173; global inequality and, 3–4, 34–35; globalization and, 118–20, 125; income and, 34, 180; increased audiences and, 86–87; information, 78, 85, 88; movies and, 87; as product of globalization, 86; progress in, 3–4, 34–35, 76, 85– 86, 90–91, 114–15, 118–19, 125, 156, 173, 180; publishing and, 87; rise in inequality and, 34, 74, 76–78, 80, 82, 85–91, 96, 114–15, 180; sports and, 87; television and, 87; writers and, 86–87 terrorism, 139 Tetra Pak, 172 Thailand, 16 Thatcher, Margaret, 91–92, 94, 101 Theil coefficient, 18–19; decomposition of, 37–38, 42; evolution of inequality and, 42 Third World, 149 “too big to fail” concept, 174–75 transportation, 76, 155 TRIPS (Agreement on Trade-­ Related Aspects of Intellectual Property Rights), 156 tuition, 170 U2 (band), 87 Uganda, 46t, 54 unions, 100–106, 108, 156, 179 United Kingdom: Big Bang and, 95; competition and, 78–79; deregulation and, 94, 97n14; evolution of inequality and, 46t, 50, 51f, 59, 67, 68n17; fairer global- Index209 ization and, 163, 169; manufacturing and, 80; real earnings loss and, 78; rise in inequality and, 21, 91–94, 97n14; taxes and, 92–94; Thatcher and, 91–92, 94, 101 United Nations, 149, 185 United States: African Growth Opportunity Act (AGOA) and, 155; Cold War and, 149, 153; competition and, 78–79; Current Population Survey and, 21; deregulation and, 94–95, 97– 98, 102–8; evolution of inequality and, 47–50, 51f, 58, 59n9, 66–70, 73; fairer globalization and, 155, 159–61, 163–64, 169, 174–75, 182; Gini coefficient of, 21; globalization and, 135–39; manufacturing and, 80; Occupy Wall Street movement and, 6, 135; Reagan and, 91–92, 101; real earnings loss and, 78; rise in inequality and, 2, 4–6, 9, 11, 21, 33, 46t, 73, 77–80, 91–95, 97– 98, 102–8; taxes and, 92–93, 159–60, 164; Washington consensus and, 109–10, 153 U.S. Congressional Budget Office, 49–50 value added, 56–58, 60, 92 violence, 66, 133–35, 139 wage ladder effects, 78–79 Wall Street, 6, 90, 135 Washington consensus, 109–10, 153 wealth: bonuses and, 87, 174; developed/developing countries and, 3, 10, 16, 21, 28, 47, 58–60, 72; distribution of, 4 (see also distribution); evolution of inequality and, 58–60; executives and, 73, 88–89, 97, 174; fairer globalization and, 162, 164, 167, 170–73; globalization and, 125, 127, 129, 131–32, 139, 143–45; great gap and, 33–36; high incomes and, 50, 52, 56, 85–93, 97–99, 140, 143, 158–62, 164, 189; income gap and, 3, 5–6, 27f, 42t, 44t, 149; inflation and, 50, 95, 102, 110; inheritance and, 93, 144–45, 170–73; lawyers and, 89–90; measuring inequality and, 18; middle class and, 51, 71, 93, 109, 133–34, 136, 140; portfolios and, 88; poverty and, 1, 11, 15n6, 19–20, 22–25, 28–29, 32, 44t, 109, 117, 123, 126–27, 134, 144, 147–52, 164, 166, 175; purchasing power and, 11, 13, 19–24, 27f, 28, 50, 80, 144, 158, 178; real earnings loss and, 78; real estate and, 131; redistribution and, 167–73; relative gap and, 18, 28, 30, 31–32, 36; rise in inequality and, 74, 95, 98; superstars and, 85–87, 89–90; taxes and, 187 (see also taxes); transfers and, 4, 14, 48, 105, 110, 130, 135–36, 142, 148, 153, 158–67, 170, 175, 181, 183, 187 welfare: global, 31; individual, 6; rate of progress and, 5; social, 14; specific nations and, 7; United Kingdom and, 94 Wilkinson, Richard, 140 women: discrimination and, 64– 66, 69, 132, 142, 180–81; labor and, 114; rise in inequality and, 103 210 World Bank, 10, 11n2, 23, 29n16, 43, 54, 68n18, 90, 109, 149 World’s Apart (Milanovic), 4–5 World Trade Organization, 86, 154 World War I era, 37, 160 Index World War II era, 26, 34, 37, 48, 92, 162 writers, 86–87 Zaire, 151 Zucman, Gabriel, 59n8, 161–62

These structural adjustment policies have often been criticized for their social costs, partly because they slowed growth and thus the reduction of poverty dramatically, and partly because they placed more of the brunt of the costs of these programs on the lower and middle classes, rather than on the high end of the income scale.23 The debt crisis began in Latin America, specifically in Mexico in 1982, and for a decade and a half it would have harsh consequences for the developing world, in particular in sub-­Saharan Africa and Latin America. The structural adjustment programs that the international financial institutions demanded in exchange for aid were grounded on a package of free market principles that were later baptized the “Washington consensus.” They resulted in deep institutional changes: commercial and financial liberalization, deregulation of goods, capital and labor markets, privatization, the elimination of consumer and producer subsidies, 23 See IMF-­IEO, Fiscal Adjustment in IMF-­Supported Programs, IMF, June 2002. 110 Chapter 3 cuts in social spending, and so forth. As we have seen, many of these reforms almost certainly had inegalitarian effects, and, in fact, between the 1980s and 1990s we can see a substantial rise in inequalities in the countries affected most directly by these programs: Argentina, Mexico, Peru, Ecuador, and even Brazil.

After three years that were especially hard on the population, growth returned and remained at high levels. However, inequality had shot up in the adjustment process. The Gini coefficient, which was 0.50 in 1999, had risen to 0.54 in 2003 at the moment when the crisis was on the verge of turning back. It has since gone back down. While this is true, there is little doubt that several structural reforms typical of the Washington consensus, in contrast to policies focused more directly on reestablishing macroeconomic equilibrium, such as those used by the Argentine government in response to the 2001 crisis (devaluation, disinflation, budgetary tightening), have had an inegalitarian effect on certain countries. This is certainly the case for policies like the elimination of input and output price subsidies for small farmers, the abandoning of consumer price subsidies, the rise in prices for certain priva- The Forces behind R ising Inequality 111 tized services, and, after some time delay, the cuts in public social spending on education and health.


pages: 241 words: 63,981

Dirty Secrets How Tax Havens Destroy the Economy by Richard Murphy

banking crisis, barriers to entry, Bernie Sanders, centre right, corporate governance, Donald Trump, Double Irish / Dutch Sandwich, en.wikipedia.org, high net worth, income inequality, intangible asset, light touch regulation, moral hazard, Occupy movement, offshore financial centre, race to the bottom, Social Responsibility of Business Is to Increase Its Profits, The Wealth of Nations by Adam Smith, transfer pricing, Washington Consensus

And it is this inappropriate setting of priorities that has led to tax havens being ignored in most current economic theory. But the pervasiveness of this philosophy has had enormous spill-over effects. The world’s major economic institutions, such as the World Bank and IMF, have proved remarkably comfortable with the Washington Consensus. Their endorsement has resulted in its ten-point policy prescription being forcibly imposed on a great many countries, including a number of developing nations that have consequently suffered enormous losses of revenue and resources, as well as corruption. In addition, the Washington Consensus policy prescriptions have become the basis for the thinking of the vast majority of mainstream political parties in many of the world’s democracies. This started with the Thatcher and Reagan administrations in the UK and United States. From there, the spread of such policies was not limited to parties of the right; it is fair to suggest, for example, that the Clinton administration of 1992–2000 endorsed many of the same ideas.

Wars have been fought over lesser issues: but for the fact that so many governments are ultimately complicit in a conspiracy of silence, it is likely that war would have been ignited on this issue in recent years. That conspiracy of silence is real. In the last thirty-five years, neoliberalism achieved near-hegemonic status in economics faculties and government departments alike. The ideas implicit in it are treated as a revealed truth, rather than a construct of a particular group with an ideological agenda. These ideas can be summarised as the components of what is known as the Washington Consensus:10 1.Fiscal discipline, requiring strict criteria for limiting budget deficits; 2.Setting public expenditure priorities that spend away from subsidies and administration towards previously neglected fields with high economic returns; 3.Tax reform, embracing broadening of the tax base and cutting marginal tax rates; 4.Financial liberalisation, particularly with regard to interest rates that should be market-determined; 5.Exchange rates that promote exports; 6.Trade liberalisation; 7.Reduced barriers to foreign direct investment; 8.Privatisation; 9.Deregulation; 10.The protection of intellectual property rights.

From there, the spread of such policies was not limited to parties of the right; it is fair to suggest, for example, that the Clinton administration of 1992–2000 endorsed many of the same ideas. Indeed, its abolition of the Glass–Steagall Act, which deregulated much of the US banking sector, was influenced by the philosophy of the Washington Consensus. Tony Blair’s New Labour governments in the UK were equally neoliberal in their outlook. The results have been unsurprising. Over the recent period, social democracy has very largely ceased to be either social or democratic, under the influence of such economic thinking. Over time, it has become increasingly difficult for parties branded as something they are not to be elected, especially in Europe. Oppositional politics has begun to fail. If there are no longer opposing sides to a debate on how to run a country, there can be no democratic choice.


pages: 272 words: 71,487

Getting Better: Why Global Development Is Succeeding--And How We Can Improve the World Even More by Charles Kenny

"Robert Solow", agricultural Revolution, Berlin Wall, British Empire, Charles Lindbergh, clean water, demographic transition, double entry bookkeeping, experimental subject, Fall of the Berlin Wall, germ theory of disease, Gunnar Myrdal, income inequality, income per capita, Indoor air pollution, inventory management, Kickstarter, Milgram experiment, off grid, open borders, purchasing power parity, randomized controlled trial, structural adjustment programs, The Wealth of Nations by Adam Smith, total factor productivity, Toyota Production System, trade liberalization, transaction costs, very high income, Washington Consensus, X Prize

In tandem with these developments in economic theory, the 1980s saw the evolution of a set of development policy recommendations that came to be known as the Washington Consensus. It was “Washington” because it was spearheaded by US economists and policy wonks, and supported by the World Bank and International Monetary Fund headquartered in the American capital. And a “Consensus” because nearly everyone in Washington agreed about what the developing world should do to kick-start economic development. Among the policies linked with the consensus were devaluation, reduction of budget deficits, liberalization of prices and interest rates, and privatization. What connected these policies was a belief that governments had played an overactive role in promoting development, taking on tasks best left to the private sector and abusing powers best left unused. According to the Washington Consensus, widespread government interventionism was not only unnecessary to promote growth, it was the chief blockage to achieving that growth.

According to the Washington Consensus, widespread government interventionism was not only unnecessary to promote growth, it was the chief blockage to achieving that growth. Yet it was very difficult to push through Washington Consensus reforms, and when they were put into effect, they had limited impact, encouraging the profession to look elsewhere for ultimate explanations for low growth. If the reforms were right but not working, the problem had to be the reformers and the environment for reform. For an answer, many development economists latched on to Nobel prize–winning work by Douglass North around what he termed the New Institutional Economics. North’s book Institutions: Institutional Change and Economic Performance suggested that a strong network of property rights, market systems, and decentralized, democratic decisionmaking structures underpin economically successful regimes.

Going back another century, we find that in some of the less emotionally gripping passages of Anna Karenina Leo Tolstoy writes about what was clearly an active debate in nineteenth-century Russia over the reasons for the backward state of the country. He covered topics such as education, insufficient market reforms to encourage entrepreneurship, and authoritarian versus participatory methods of development. Going back a bit further, to 1776, we see that still other contentions about growth are firmly rooted in the founding document of economics, Adam Smith’s Wealth of Nations. In other words, the Nobel Prize winners, the Washington Consensus, the Rimsim modelers: All were echoing centuries-old ideas. This calls into question not their sincerity or their smarts but, rather, their originality. Economists have (for good or ill) “formalized” their interpretations in their models over the past forty years. Now, a statement suggesting that a culture of thrift might encourage savings and (through investment) impact growth, as it might be, has to be expressed in a conga line of formulas before it is worthy of publication in the American Economic Review.


pages: 391 words: 102,301

Zero-Sum Future: American Power in an Age of Anxiety by Gideon Rachman

Asian financial crisis, bank run, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Bretton Woods, BRICs, capital controls, centre right, clean water, collapse of Lehman Brothers, colonial rule, currency manipulation / currency intervention, deindustrialization, Deng Xiaoping, Doha Development Round, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, global reserve currency, greed is good, Hernando de Soto, illegal immigration, income inequality, invisible hand, Jeff Bezos, laissez-faire capitalism, Live Aid, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, mutually assured destruction, Naomi Klein, Nelson Mandela, offshore financial centre, open borders, open economy, Peace of Westphalia, peak oil, pension reform, plutocrats, Plutocrats, popular capitalism, price stability, RAND corporation, reserve currency, rising living standards, road to serfdom, Ronald Reagan, shareholder value, Sinatra Doctrine, sovereign wealth fund, special economic zone, Steve Jobs, Stewart Brand, The Chicago School, The Great Moderation, The Myth of the Rational Market, Thomas Malthus, trickle-down economics, Washington Consensus, Winter of Discontent, zero-sum game

Maxwell Cameron and Brian Tomlin, The Making of NAFTA: How the Deal Was Done (Ithaca, N.Y.: Cornell University Press, 2000), 2. 6. See Hernando de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (London: Black Swan, 2001). 7. Williamson’s own account of what he meant can be found in John Williamson, “A Short History of the Washington Consensus,” Fundación CIDOB paper, presented at a conference titled “From the Washington Consensus Towards a New Global Governance,” Barcelona, September 24, 2004. Available from http://www.piie.com/publications/ papers/williamson0904-2.pdf. 8. Niall Ferguson, The Ascent of Money: A Financial History of the World (London: Allen Lane, 2008), 214. 9. Ibid., 212. 10. See John Campbell, Margaret Thatcher, vol. 2. The Iron Lady (London: Vintage, 2008), 789. 11.

Even Chile, where free-market reforms had been pursued by a military dictatorship under General Augusto Pinochet, had turned back toward democracy with the election of a civilian government in 1989. The democratic transformation of Latin America was accompanied by a free-market revolution. The Latin dictatorships had generally pursued protectionist and state-led economic strategies. Their democratic successors were much more likely to follow the orthodox economic strategies of the “Washington Consensus”: a crackdown on inflation, a welcome for foreign investment, a more open trading regime, and privatization. Latin America’s transformation illustrates how contagious political and economic ideas can be—jumping across borders with all the energy of a determined virus. The continent had been through periods of synchronized political change before. There were nine military coups across Latin America between 1962 and 1966.1 In 1973, even Chile, which had been a democracy since 1932, fell victim to a military coup.

Prominent regional economists like the Peruvian Hernando de Soto became important contributors to the new liberal economics, with De Soto doing much to argue the case for the importance of property rights for the poor.6 Nonetheless, the new economics pursued across the continent came with the approval of the International Monetary Fund and the World Bank. Since both mighty institutions were based in Washington, the free-market prescription became known as the “Washington Consensus”—a phrase dreamed up by John Williamson, an economist at the Institute for International Economics.7 Across Latin America, government pursued the new consensus policies: cutting tariffs and taxes, making life easier for foreign investors, allowing markets to set interest and exchange rates, cutting regulation, privatizing. The story told so far sounds like a liberal morality tale, in which economic and political freedom advance hand in hand.


pages: 322 words: 87,181

Straight Talk on Trade: Ideas for a Sane World Economy by Dani Rodrik

3D printing, airline deregulation, Asian financial crisis, bank run, barriers to entry, Berlin Wall, Bernie Sanders, blue-collar work, Bretton Woods, BRICs, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, central bank independence, centre right, collective bargaining, conceptual framework, continuous integration, corporate governance, corporate social responsibility, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Donald Trump, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, financial deregulation, financial innovation, financial intermediation, financial repression, floating exchange rates, full employment, future of work, George Akerlof, global value chain, income inequality, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Jean Tirole, Kenneth Rogoff, low skilled workers, manufacturing employment, market clearing, market fundamentalism, meta analysis, meta-analysis, moral hazard, Nelson Mandela, new economy, offshore financial centre, open borders, open economy, Pareto efficiency, postindustrial economy, price stability, pushing on a string, race to the bottom, randomized controlled trial, regulatory arbitrage, rent control, rent-seeking, Richard Thaler, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sam Peltzman, Silicon Valley, special economic zone, spectrum auction, Steven Pinker, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, total factor productivity, trade liberalization, transaction costs, unorthodox policies, Washington Consensus, World Values Survey, zero-sum game, éminence grise

Structural reform as a remedy for slow (or no) growth has been around at least since the early 1980s. At that time, in return for “structural adjustment” loans, the World Bank insisted on economy-wide liberalizing reforms for developing countries in Asia, Africa, and the Middle East. These policies were then extended and codified in Latin America during the 1990s under the umbrella of the Washington Consensus. Many of the former socialist economies adopted similar policies (in some cases, voluntarily) when they opened up their economies during the 1990s. A serious look at the vast experience with privatization, deregulation, and liberalization since the 1980s—in Latin America, postsocialist economies, and Asia in particular—would have produced much less optimism about the reforms Athens was asked to swallow.

Though this was not always explicit, economists also tended to have a universalist conception of institutions, presuming that what worked well in one setting could be transplanted in others. Over time, this best-practice mind-set would come to dominate the practical and policy work of international organizations such as the World Bank, the International Monetary Fund, and the Organization for Economic Co-operation and Development. The detailed but fairly specific prescriptions of the Washington Consensus would be augmented by open-ended recommendations on reducing corruption, improving regulatory and judicial institutions, and enhancing governance more broadly. In an article published in 2000, I argued that the prevailing technocratic views on institutional reform were missing an important part of the picture.5 They ignored both the malleability and the context specificity of institutional designs.

As I argued earlier, the oversight was not due to the lack of models of bubbles, asymmetric information, distorted incentives, or bank runs. It was due to the fact that such models were neglected in favor of models that stressed efficient markets. Then there are the errors of commission—cases in which economists’ fixation on one particular model of the world makes them complicit in the administration of policies whose failure could have been predicted ahead of time. Economists’ advocacy of neoliberal “Washington Consensus” policies and of financial globalization falls into this category. What happened in both cases is that economists overlooked serious second-best complications, such as learning externalities and weak institutions, which blunted the reforms and, in some cases, caused them to backfire. The Peculiar Science of Economics The firestorm over the Reinhart-Rogoff analysis overshadowed what in fact was a salutary process of scrutiny and refinement of economic research.


pages: 160 words: 46,449

The Extreme Centre: A Warning by Tariq Ali

Affordable Care Act / Obamacare, Berlin Wall, bonus culture, BRICs, British Empire, centre right, deindustrialization, Edward Snowden, Fall of the Berlin Wall, financial deregulation, first-past-the-post, full employment, labour market flexibility, land reform, light touch regulation, means of production, Mikhail Gorbachev, Monroe Doctrine, mortgage debt, negative equity, Neil Kinnock, North Sea oil, obamacare, offshore financial centre, popular capitalism, reserve currency, Ronald Reagan, South China Sea, The Chicago School, The Wealth of Nations by Adam Smith, trade route, trickle-down economics, Washington Consensus, Westphalian system, Wolfgang Streeck

For this reason he wanted to exclude Britain, since he (and almost everybody else) knew it would be little more than a Trojan horse for the United States. Both leaders were proved right. Today Germany is the strongest country in Europe, despite its truncated sovereignty, and the EU, expanded out of control as a result of Anglo-American pressure, is groaning like a sick bull. Early attempts by the Frenchman Jacques Delors to create a ‘social Europe’ foundered on the born-again fanaticism of the Washington Consensus: neoliberal capitalism was the only way forward. The EU had to accept the new rules: privatizations at home, wars and occupations abroad. The Northern Europeans (Britain and Scandinavia) and the East Europeans (delighted to accept new satellite status, with the US replacing the USSR) proved to be the most loyal and compliant of the EU vassal states. The result has been a disaster for the EU as a whole.

Bush: ‘The brutal fact is that Western Europe, and increasingly also Central Europe, remains largely an American protectorate, with its allied states reminiscent of ancient vassals and tributaries.’ Britain was so servile that it barely counted. Germany and France were important, and in any division between these two, the Germans should be supported. Brzezinski needn’t have worried. Under Jospin and Sarkozy the French Republic happily embraced the Washington Consensus, with French mediatic intellectuals proving even more willing than their German equivalents.7 There are no signs whatsoever of François Hollande breaking with this pattern, and in the unlikely event of a Red–Green victory at the next German elections, it would produce a government far closer to Washington than that of Angela Merkel. Since the collapse of the Berlin Wall, the European ruling class has never regarded continental independence, in the proper sense of the word, as a serious option.

They are regarded as such not only at home, but also by those who fear US withdrawal abroad: vassal politicians and states in Europe, Asia, the Middle East, Africa, and the loyal few in South America. The rulers of the only vassal continent – Australia – would, given its geography, be equally disturbed to contemplate independence. Yet in both the Arab world and the heartlands of Western capitalism, the systemic order imposed through the Washington Consensus since the collapse of the Soviet Union has appeared to be in forward flight. The Arab world seeks to escape its recent history, while some European states, in the grip of parliamentary paralysis, dream of external deliverance from the very bankers who were responsible for the crash of 2008. The atrophy of the productive economy in the United States and large swathes of the EU reveal a malady that was already at an advanced stage, even as some claimed that the disease had been defeated forever.


pages: 466 words: 127,728

The Death of Money: The Coming Collapse of the International Monetary System by James Rickards

Affordable Care Act / Obamacare, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Ben Bernanke: helicopter money, bitcoin, Black Swan, Bretton Woods, BRICs, business climate, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Edward Snowden, eurozone crisis, fiat currency, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, G4S, George Akerlof, global reserve currency, global supply chain, Growth in a Time of Debt, income inequality, inflation targeting, information asymmetry, invisible hand, jitney, John Meriwether, Kenneth Rogoff, labor-force participation, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market design, money market fund, money: store of value / unit of account / medium of exchange, mutually assured destruction, obamacare, offshore financial centre, oil shale / tar sands, open economy, plutocrats, Plutocrats, Ponzi scheme, price stability, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, undersea cable, uranium enrichment, Washington Consensus, working-age population, yield curve

■ From Bretton Woods to Beijing The euro project is a part of the more broadly based international monetary system, which itself is subject to considerable stress and periodic reformation. Since the Second World War, the system has passed through distinct phases known as Bretton Woods, the Washington Consensus, and the Beijing Consensus. All three of these phrases are shorthand for shared norms of behavior in international finance, what are called the rules of the game. The Washington Consensus arose after the collapse of the Bretton Woods system in the late 1970s. The international monetary system was saved between 1980 and 1983 as Paul Volcker raised interest rates, and Ronald Reagan lowered taxes, and together they created the sound-dollar or King Dollar policy. The combination of higher interest rates, lower taxes, and less regulation made the United States a magnet for savings from around the world and thereby rescued the dollar.

The omission of any reference to nations other than the United States, or any institution other than those controlled by the United States, speaks to the state of international finance in 1989 and the years that followed. Williamson went on to describe what Washington meant by debtors “setting their houses in order.” He set forth ten policies that made up the Washington Consensus. These policies included commonsense initiatives such as fiscal discipline, elimination of wasteful subsidies, lower tax rates, positive real interest rates, openness to foreign investment, deregulation, and protection for property rights. The fact that these policies favored free-market capitalism and promoted the expansion of U.S. banks and corporations in global markets did not go unnoticed. By the early 2000s, the Washington Consensus was in tatters due to the rise of emerging market economies that viewed dollar hegemony as favoring the United States at their expense. This view was highlighted by the IMF response to the Asian financial crisis of 1997–98, in which IMF austerity plans resulted in riots and bloodshed in the cities of Jakarta and Seoul.

This view was highlighted by the IMF response to the Asian financial crisis of 1997–98, in which IMF austerity plans resulted in riots and bloodshed in the cities of Jakarta and Seoul. Washington’s failure over time to adhere to its own fiscal prescriptions, combined with the acceleration of Asian economic growth after 1999, gave rise to the Beijing Consensus as a policy alternative to the Washington Consensus. The Beijing Consensus comes in conflicting versions and lacks the intellectual consistency that Williamson gave to the Washington Consensus. Author Joshua Cooper Ramo is credited with putting the phrase Beijing Consensus into wide use with his seminal 2004 article on the subject. Ramo’s analysis, while original and provocative, candidly admits that the definition of Beijing Consensus is amorphous: “the Beijing Consensus . . . is flexible enough that it is barely classifiable as a doctrine.”


pages: 232

Planet of Slums by Mike Davis

barriers to entry, Branko Milanovic, Bretton Woods, British Empire, Brownian motion, centre right, clean water, conceptual framework, crony capitalism, declining real wages, deindustrialization, Deng Xiaoping, edge city, European colonialism, failed state, Gini coefficient, Hernando de Soto, housing crisis, illegal immigration, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, jitney, jobless men, Kibera, labor-force participation, land reform, land tenure, liberation theology, low-wage service sector, mandelbrot fractal, market bubble, megacity, microcredit, Nelson Mandela, New Urbanism, Pearl River Delta, Ponzi scheme, RAND corporation, rent control, structural adjustment programs, surplus humans, upwardly mobile, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor

The Structural Adjustment Programs (SAPs) imposed upon debtor nations in the late 1970s and 1980s required a shrinkage of government programs and, often, the 36 Richard Kirkby, "China," in Kosta Mathey (ed.), Beyond Self-Help Housing, London 1992, pp. 298-99. 37 Andrew Harding, "Nairobi Slum Life," (series), Guardian, 4, 8, 10 and 15, October 2002. privatization of housing markets. However, the social state in the Third World was already withering away even before SAPs sounded the death knell for welfarism. Because so many experts working for the "Washington Consensus" have deemed government provision of urban housing to be an inevitable disaster, it is important to review some case histories, beginning with what, at first sight, seem to be the major exceptions to the rule of state failure. The two tropical cities where large-scale public housing has provided an alternative to slums are Singapore and Hong Kong. As a city-state with tight migration policies, the former doesn't have to face the usual demographic pressures of a poor agrarian hinterland.

In a review of recent studies, including a major report by the London-based Panos Institute, Rita Abrahamsen concludes that "rather than empowering 'civil society,' the PRSP process has entrenched the position of a small, homogeneous 'iron triangle' of transnational professionals based in key government ministries (especially Finance), multilateral and bilateral development agencies and international NGOs."19 What Nobel laureate Joseph Stiglitz in his brief tenure as chief economist for the Bank described as an emerging "post-Washington Consensus" might be better characterized as "soft imperialism," with the major NGOs captive to the agenda of the international donors, and grassroots groups similarly dependent upon the international NGOs.20 For all the glowing rhetoric about democratization, self-help, social capital, and the strengthening of civil society, the actual power relations in this new NGO universe resemble nothing so much as traditional clientelism.

Moreover, like the community organizations patronized by the War on Poverty in the 1960s, Third World NGOs have proven brilliant at coopting local leadership as well as hegemonizing the social space traditionally occupied by the Left Even if there are some celebrated exceptions - such as the militant NGOs so instrumental in creating the World Social Forums - the broad impact of the NGO/ "civil society revolution," as even some World Bank researchers acknowledge, has been to bureaucratize and deradicalize urban social movements.21 18 Sebastian Mallaby, The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations, New York 2004, pp. 89-90, 145. 19 Rita Abrahamsen, "Review Essay: Poverty Reduction or Adjustment by Another Name?," Review of African Political Economy 99 (2004), p. 185. 20 Stiglitz's 1998 speech, "More Instruments and Broader Goals: Moving Towards the Post-Washington Consensus," is discussed in John Pender, "From 'Structural Adjustment' to 'Comprehensive Development Framework': Conditionality Transformed?," Third World Quarterly 22:3 (2001). 21 Imparato and Ruster, Slum Upgrading and Participation, p. 255. Thus development economist Diana Mitlin, writing about Latin s America, describes how, on one hand, NGOs "preempt community- ; level capacity-building as they take over decision-making and negotiating roles," while, on the other hand, they are constrained by "the difficulties of managing donor finance, with its emphasis on shortterm project funds, on financial accountabilities and on tangible outputs."22 Similarly in the case of urban Argentina, architect Ruben Gazzoli complains that NGOs monopolize expert knowledge and middleman roles in the same way as traditional political machines.23 Lea Jellinek, a social historian who has spent more than a quartercentury studying the poor in Jakarta, in turn, recounts how one famed NGO, a neighborhood microbank, "beginning as a small grassroots project driven by needs and capacities of local women," grew Frankenstein-like into a "large, complex, top—down, technically oriented bureaucracy" that was "less accountable to and supportive o f " its low-income base.24 From a Middle Eastern perspective, Asef Bayat deplores the hyperbole about NGOs, pointing out that "their potential for independent and democratic organization has generally been overestimated.


pages: 318 words: 85,824

A Brief History of Neoliberalism by David Harvey

affirmative action, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, business cycle, capital controls, centre right, collective bargaining, creative destruction, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, George Gilder, Gini coefficient, global reserve currency, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low-wage service sector, manufacturing employment, market fundamentalism, mass immigration, means of production, Mexican peso crisis / tequila crisis, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, Pearl River Delta, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Silicon Valley, special economic zone, structural adjustment programs, the built environment, The Chicago School, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, Winter of Discontent

In retrospect it may seem as if the answer was both inevitable and obvious, but at the time, I think it is fair to say, no one really knew or understood with any certainty what kind of answer would work and how. The capitalist world stumbled towards neoliberalization as the answer through a series of gyrations and chaotic experiments that really only converged as a new orthodoxy with the articulation of what became known as the ‘Washington Consensus’ in the 1990s. By then, both Clinton and Blair could easily have reversed Nixon’s earlier statement and simply said ‘We are all neoliberals now.’ The uneven geographical development of neoliberalism, its frequently partial and lop-sided application from one state and social formation to another, testifies to the tentativeness of neoliberal solutions and the complex ways in which political forces, historical traditions, and existing institutional arrangements all shaped why and how the process of neoliberalization actually occurred.

By the end of the decade most economics departments in the US research universities—and these helped train most of the world’s economists—had fallen into line by broadly cleaving to the neoliberal agenda that emphasized the control of inflation and sound public finance (rather than full employment and social protections) as primary goals of economic policy. All of these strands came together in the so-called ‘Washington Consensus’ of the mid-1990s.5 The US and UK models of neoliberalism were there defined as the answer to global problems. Considerable pressure was put even on Japan and Europe (to say nothing of the rest of the world) to take the neoliberal road. It was, therefore, Clinton and then Blair who, from the centre-left, did the most to consolidate the role of neoliberalism both at home and internationally.

Whether it was all a matter of conscious though adaptive planning (‘groping the stones while crossing the river’ as Deng called it) or the working out, behind the backs of the party politicians, of an inexorable logic deriving from the initial premises of Deng’s market reforms, will doubtless long be debated.2 What can be said with precision, is that China, by not taking the ‘shock therapy’ path of instant privatization later foisted on Russia and central Europe by the IMF, the World Bank, and the ‘Washington Consensus’ in the 1990s, managed to avert the economic disasters that beset those countries. By taking its own peculiar path towards ‘socialism with Chinese characteristics’ or, as some now prefer to call it, ‘privatization with Chinese characteristics’, it managed to construct a form of state-manipulated market economy that delivered spectacular economic growth (averaging close to 10 per cent a year) and rising standards of living for a significant proportion of the population for more than twenty years.3 But the reforms also led to environmental degradation, social inequality, and eventually something that looks uncomfortably like the reconstitution of capitalist class power.


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The Abandonment of the West by Michael Kimmage

Albert Einstein, anti-communist, Berlin Wall, British Empire, Charles Lindbergh, City Beautiful movement, deindustrialization, desegregation, Donald Trump, European colonialism, Francis Fukuyama: the end of history, global pandemic, global supply chain, Gunnar Myrdal, interchangeable parts, Isaac Newton, Mahatma Gandhi, mass immigration, Mikhail Gorbachev, Monroe Doctrine, Nelson Mandela, Peace of Westphalia, profit motive, Ralph Waldo Emerson, RAND corporation, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Silicon Valley, South China Sea, Thomas L Friedman, transatlantic slave trade, urban planning, Washington Consensus

Starting in the 1990s, Eisenhower’s good cheer was much easier to come by in Western capitals, easier to maintain and easier to pin to the present moment.5 Clinton, Bush and Obama represented three different kinds of internationalist optimism. Clinton was an economic optimist; Bush, a geopolitical optimist; and Obama, an institutional optimist. Clinton began the “Washington consensus” whereby free trade and the elaboration of economic rules were to be the levers for prosperity and political-economic integration. The Washington consensus built on American advantages in business and technology, summing up the end phase of the Cold War. The Soviet Union had destroyed itself through economic inefficiency and by building mental and physical walls. To lower the barriers of economic and intellectual exchange was to open the world to creativity and, over time, to democracy: Clinton could make good on the economic liberties and the gospel of prosperity that Ronald Reagan had put before his Berlin audience in 1987.

After initiating the 2002 war in Afghanistan, Bush focused on the Middle East. As he had been advised at Camp David right after September 11, removal of the autocrat Saddam Hussein was the necessary next step. The residents of the Middle East would find their way to democracy and economic freedom, and Bush’s freedom agenda was wider even than the Middle East. Obama substituted the liberal international order for the Washington consensus and for wars of choice. Law, institutions, education, charismatic leadership and order were his long game, the lifting of people from poverty and the multilateral cultivation of political dignity and shared decision making. Liberty and self-government were living ideals for these three presidents. For different reasons, each of them consigned a self-conscious and crusading West to the past.

China profited greatly from the economic order of the 1990s and early twenty-first century—the general stability and the attendant chances to modernize and to invest—which was largely guaranteed by the United States. Without doing too much to antagonize Washington, China pursued a foreign policy and an order of its own. Beijing had no reason to concede to the West when it could harness the liberal international order for the sake of aggrandizing China. In Beijing’s assessment, the liberal international order would be eclipsed at some point by an order of Chinese design. Other setbacks for the Washington consensus and the liberal international order were more local. The shifts registered in Europe first. Southern Europe’s economic stagnation sparked anger at alleged German domination of the European Union. In Central Europe, nationalism led some political leaders to defy Brussels and to thumb their noses at the liberal international order. In 2015, a migrant crisis destabilized the entire European continent in mood if not always in fact.


pages: 221 words: 46,396

The Left Case Against the EU by Costas Lapavitsas

anti-work, banking crisis, Bretton Woods, capital controls, central bank independence, collective bargaining, declining real wages, eurozone crisis, Francis Fukuyama: the end of history, global reserve currency, hiring and firing, neoliberal agenda, offshore financial centre, post-work, price stability, quantitative easing, reserve currency, Ronald Reagan, Washington Consensus, Wolfgang Streeck

A clearer instance of the hollowing-out of democracy in the EU is hard to imagine. Broadly speaking, EU policies were of a piece with the neoliberal approach to developing country crises adopted by the IMF since the early 1980s, which gradually came to constitute the ‘Washington Consensus’ in economic policy. This is a neoliberal totem that has become characteristic of financialized capitalism and broadly advocates financial and labour market deregulation, fiscal austerity, and privatization. Over the years the ‘Washington Consensus’ has given rise to an extensive critical literature owing to its theoretical weaknesses and policy blunders.6 Far from curing the problems of stricken economies, austerity frequently has had a net destructive effect on output, employment, and productive capacity. Similarly, there is little evidence that privatization and deregulation induce rapid growth.

Quarterly Report on the Euro Area, Vol. 10, No. 3, available at: http://ec.europa.eu/economy_finance/publications/qr_euro_area/2011/pdf/qrea3_en.pdf Feldstein, M. 1997. ‘The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability’, National Bureau of Economic Research Working Paper Series No. 6150, available at: http://www.nber.org/papers/w6150.pdf Fine B., C. Lapavitsas, and J. Pincus (eds) 2001. Development Policy in the Twenty-first Century: Beyond the Post-Washington Consensus, London: Routledge. Flassbeck, H. and C. Lapavitsas 2013. ‘The Systemic Crisis of the Euro: True Causes and Effective Therapies’, Rosa Luxemburg Stiftung Studien, available at: http://www.rosalux.de/fileadmin/rls_uploads/pdfs/Studien/Studien_The_systemic_crisis_web.pdf Flassbeck, H. and C. Lapavitsas 2015. Against the Troika: Crisis and Austerity in the Eurozone, London and New York: Verso.

Index A Africa, migration from 6 asylum seekers see migrant crisis austerity destructive effect of 72 drives recession 80–2 effect of crisis 129 EMU regime of 10 German wages and 47 imposed during crisis 71, 72–3, 91 institutions for 77 left policies and 112 lifting 133 social problems from 129 Austria core of EU 8–9 Germany and 44, 63 authoritarianism Brexit and 139 migrant crisis and 120 right-wing support for 6 rise of 1, 11, 82 see also right politics B Bank of England 24 Banking Union 78 banks and financial institutions bailing-in 79 credit risk of states 75–6 debts shifted to public 73 Eurosystem 33–4 fiscal discipline and 38 Greek expansion of 89 Greek PSI and 95 Hayek on federalism and 15 interest rates 57–8 liquidity 73–5, 78, 91–2 national banks of states 33 neoliberal capitalism and 24 private lenders to periphery 69 quantitative easing 74, 80–1 reversing financialization 135 single currency and 22–3 stress tests 78 ‘sudden stops’ 68, 84 Belgium 26 Big Data 135 Bretton Woods Agreement collapse of 23–4, 27 fixed exchange rates 25–6 Britain financialization and 41 households/individuals 43 insights from Brexit 137–40 migrant crisis and 119 military hegemony 21 withdraws from EMS 30 Bundesbank model for ECB 31 no public debt purchases 74–5 stability of EMS 29 business EU neoliberal agenda 70 multinational corporations 38 self-employed in crisis 73 small and medium in crisis 73 see also industry C capitalism financialization 40–4, 41–4 see also neoliberalism Central/Eastern Europe collapse of communist bloc 2, 44 discredited socialism 8 EU expansion and 2 German FDI in 62–4 German industry and 64, 73 industry in 61–2 movement of workers 6 periphery in EU 9, 59–66 China 134, 136 class relations austerity and the Left 112 in Germany 46 Greek historical bloc 100–4 Marx and Engels on 127–8 neoliberalism against workers 10 perception of powerlessness 4–5 states and 20, 21 workers in EU 127–30 communism discredited 8 Greece’s KKE 106–7 not haunting Europe 127 Communist Manifesto, The (Marx and Engels) 127–8 competitiveness Germany’s edge 49–54, 59–9, 81 Greek loss of 85, 96, 97 monetary union and 50–2 in Southern periphery 70–1 conditionality for Greece 91–2 IMF and EU clash 99–100 labour and unions 91 neoliberal policies and 68–9, 76 Conservative Party, Britain 138–9 consumption German households 49 Greece in Eurozone 87 Czech Republic not in Eurozone 62 opening of economy 44 in periphery 9, 59 D debt austerity and 81 bad 80 bond-based in Greece 90 commercial credit 94 domestic credit 89 effects of bail-outs 96–7 Eurozone crisis 50 German lending 58–9 global crisis and 67 Greece restructures 92–3 interest rates 57 interstate lending 76 mutualization and bonds 75–6 no forgiveness 75–6 protecting EU banks 74–5 public and private 55–6, 56–7, 69, 72, 84, 88–90 rise of in Spain 69 Southern periphery 55–8 Delors, Jacques ideological expansion 2 social democracy in EU 7, 8 Delors Report (1989) 30 democracy Democracy in Europe Movement 121–2 EU deficit of 4–5, 113–18, 126–7 EU ideals of 1, 3 in Eurozone crisis 71, 117–18 Greek historical bloc 101–4 judiciary and 116–17 post-Brexit 140 powerless poor 5 against ruling elites 130 Democracy in Europe Movement (DiEM25) 121–2 Denmark, migrant crisis and 118 E Eastern Europe see Central/Eastern Europe economics ‘depoliticization’ of 3–4 ‘time-inconsistency’ 30–1 see also Eurozone crisis; global economic crisis; neoliberalism Emergency Liquidity Assistance 78 End of History and the Last Man, The (Fukuyama) 2 Engels, Friedrich The Communist Manifesto (with Marx) 127–8 environmental legislation 18 euro/single currency competitiveness of nations 50–2 creation of 18 dismantling 131–3 divisions in Left and 8 dollar exchange rate 86 Exchange Rate Mechanism 28 financialization of economies 37–8 flawed architecture of 33–6 formation of EMS 28 GDP and 54 German edge 49–54, 58–9, 59–66 German monetary hegemony 36–9 Germany as anchor/model 28–30, 98 Greece joins 97–8 Greek determination to remain 101–2 international competition 2–3 long-term interest rates 57–8 Maastricht and 14 Macron and 123 national peculiarities 22 neo-functionalists 32 neoliberal mechanisms of 10–12 neoliberal monetary policies 22–5 regime hardened 81–2 rising debt 55–8 Southern periphery 54–9 SSM and 78–9 Stability and Growth Pact 34, 49 stabilizing exchange rates 26–9 SYRIZA negotiations and 110–12 transnational mechanism of 25 see also Eurozone crisis Eurogroup 72, 132 Working Group 72, 118, 132 European Central Bank (ECB) 31 dismantling the EMU and 132 Eurobonds 75–6 Eurosystem and 33–4 Hayek’s ideas and 25 liquidity 73–5, 78, 91–2, 102 response to SYRIZA 110–12 slow effect of quantitative easing 80–1 see also Troika European Commission creation of 14 democratic deficit 113–14 increased fiscal powers 78 member state power 19 peripheral countries and 50 strength of 2 see also Troika European Court of Justice (ECJ) Brexit and 139 democratic deficit of 116–17 member state power 19 neoliberal ideology 122 rejecting 137 transnational presence 3 European Economic Community (EEC) see European Union (EU) European Financial Stability Facility (EFSF) 76 European Monetary System (EMS) 28–30, 31–2 European Monetary Union (EMU) see euro/single currency European Parliament 3 creation of 14 democratic deficit 114–16 member state power 19 European Semester 77 European Stability Mechanism (ESM) 34, 76, 94, 132 European Union (EU) attitude toward Greece 85 bail-outs for Greece 90–8 Brexit and 137–40 Central European expansion 2 clashes with IMF 99–100 class relations within 127–30 Delors and social democracy 7, 8 democratic deficit 113–18 failure in migrant crisis 118–20 Four Freedoms 13, 117, 139–40 hardens regime in crisis 99 Hayek and federalism 14–18 ideological expansion 2 impossibility of radical reform 121–6 instability of 1 integration push 14, 19 legislation 18 Macron and 123–6 neo-functionalists and intergovernmentalists 19–20 neoliberal agenda of 9–12, 70–9, 126–7 not federated 19, 35 perceived as progressive 129–30 peripheries 9, 21 power hierarchies 20 punitive interest rates 84 Social Chapter 7–8 state sovereignty and 79 see also euro/single currency; European Central Bank (ECB); European Commission; Eurozone crisis; Maastricht Treaty European Union Council decisions and democracy of 122 democratic deficit 113 Eurosystem 33–4 bonds and 75 Eurozone crisis attitudes in crisis 84 causes in Greece 83–6 competitiveness gap 81 democratic deficit of 117–18 effect of 129 Eurosystem 34 favours capital 5 Fiscal Compact 34–5 German hegemony 44 German industry and 59–60 Greek bail-outs 93–4 imposed austerity 76–8 policies drive recession 80–2 preventing euro collapse 70 priority of protecting lenders 98–9 public debt 50 sovereignty and 20–1 ‘sudden stops’ 67–70 treaty obligations 34 Excessive Deficit Procedure 77 Exchange Rate Mechanism 28, 30 exchange rates 25–9, 48 Bretton Woods system 25–6 dismantling EMU and 132 in Greek crisis 86, 92 ‘sudden stops’ and 69 F federalism Hayek and 14–18 single currency and 26–7 financial institutions see banks and financial institutions Fiscal Compact 77 foreign direct investment (FDI) 62, 63 Four Freedoms 13, 117, 139–40 France banks protected 73–4 core of EU 8–9 current account pressure 81 FDI in 64–5 financialization and 41 German edge over 60, 61 German neo-mercantilism 55 Germany as ‘anchor’ 29 households/individuals 43 idea of single currency 26 industry in 40 Macron and 122–6 migrant crisis and 119 military hegemony 21 nominal unit labour 51–2 private debt 55 productivity 53 public debt 56–7 push toward euro 31–2 Fukuyama, Francis The End of History 2 G Germany austerity and wages 47 bank-based system 42 banks protected 73–4 benefits in crisis 118 Central European periphery 59–66 competitive edge 49–54, 58–9, 81 crisis solidifies advantage 81–2 defeat of labour 44, 45–9 domestic economy 133 Europe as Deutschmark area 27–8 Eurozone hegemony 21, 31–3, 59–66 exchange rate 48 financialized economy of 40–4 Greek inflation and 86 Hartz Reforms 46–7 hegemony of 8–9, 25, 36–9 households/individuals 42–3 idea of single currency 26 imposes will in crisis 73 individuals/households 49 industrial interests 11 industry 64 infrastructure investment 49 labour and wages 41–2, 43–4, 53, 54 leadership in economic crisis 9 as lender 58–9 Macron’s France and 122–4 migrant crisis and 118–19 monetary ‘anchor’/model 28–30, 98 neo-mercantilism 55 nominal unit labour 51–2 opposes mutualization 75–6 ordoliberalism 45–6 outward FDI 62–4 private debt 55 productivity 53 public debt 56–7 reunification of 2, 32, 43 social democracy evaporates 48 global economic crisis banking collapse and 67 hegemony and hierarchy 3 globalization, effects of 134, 136–7 Greece admission to EU 1–2 agriculture 86–7, 97 banks and bail-outs 97 bond swaps 95 causes of crisis 83–6 civil service and 97 contraction of demand 94 current account deficit 84 default and exit prospect 103, 106, 107 determination to stay in 101–2 domestic credit 89 economy in EU 86–90 effect of Eurozone on 93 EU bail-outs 90–8 failure of SYRIZA 11 financialization and 38 first-bail out 93–4 historical bloc 100–4 industry 86–7, 97 joins Eurozone 97–8 laws on state debt 90, 95 long-term effects of bail-outs 96–8 loss of competitiveness 85 loss of sovereignty 97–8 no debt relief 75–6 no interstate lending 76 nominal unit labour 51–2 private debt 55 productivity 52, 53 prospect of default and exit 99 public debt 56–7, 84 refugee crisis 119–20 restructures debt 92–3 rising debt 69, 81, 87–90 second bail-out 94–5 services 86–7 Southern periphery 9, 54–9 strong growth 88 ‘sudden stop’ 69, 84 SYRIZA surrenders 109–12 SYRIZA’s rise to power 104–5 third bail-out 95–6, 111–12 treaty obligations and 34 Troika’s imposition 71–2 unable to devalue euro 92 unemployment in 80 welfare provision 90 H Hayek, Friedrich 141 federalism 22–3 interstate federalism 14–18 money and state 24–5 Hungary in Central European periphery 9 migrant crisis and 119 not in Eurozone 62 opening of economy 44 in periphery 59–66 I industry Central/Eastern European periphery 61–2 in Eurozone crisis 59–60 German 11, 40, 50, 64 Greek 86–7, 97 Hayek and federalism 16 inequality effect of crisis policies 73 financialization and 43 in Germany 46 left egalitarianism and 129 rising level of 5 tackling 133–4 inflation Eurosystem obligations 33–4 Greece and Germany 86 nominal remuneration 51 infrastructure, public investment 135–6 International Monetary Fund (IMF) clashes with EU on conditionality 99–100 protection of lenders 99 ‘sudden stops’ and 68 Washington Consensus 72 see also Troika investment declines in crisis 80 public 135–6 see also foreign direct investment Ireland credit bubble 89 debt shifted 72 investment in 88 no interstate lending 76 ‘sudden stop’ 69 treaty obligations and 34 Islam, migration crisis and 6 Italy core of EU 8–9 debt 55, 56–7 FDI in 64–5 German edge over 29, 55, 60, 61 industry in 40 nominal unit labour 51–2 productivity 53 K Keynesian economics 45 Mitterrand and 7 SYRIZA and 136 KKE (Communist Party, Greece) 106–7 L labour capital against 5 domestic demand and 133 effect of crisis 73 EU legislation 18 fiscal discipline imposed on 38 in France 125–6 in Germany 21, 41–2, 43–4, 45–9 Greek conditionality and 91 loss of democracy and 118 neoliberalism and 24 new technologies and 134–5 nominal unit 51–2 not an EU priority 70 opposition to capital 22 unemployment 46–7, 80, 96 wages 43, 53, 71, 77 see also class relations; trade unions Labour Party, Britain 139, 140 opposition to joining EEC 7 law, international 4 left politics austerity policies and 110–12 Brexit and Labour 140–1 class relations in EU 127–30 conflicts within Greece 106–8 confronting neoliberalism 131–7 discredited communism 8 dismantling EMU 131–3 EU hostility to SYRIZA 111–12 EU seen as progressive 129 industrial policies 135–6 infrastructure 135–6 insights from Brexit 137–40 lifting austerity 133 opposition to joining EEC 7 public investment 135–6 tackling inequality 133–4 world trade 136–7 Lisbon Treaty, Article 125 34 Luxembourg 63 M Maastricht Treaty class relations and 128 creation of EMU 8 crisis hardens policies of 70 federalism and 14 fiscal criteria 34 Four Freedoms 13 historical context of 14 ideological expansion 2 movement of workers 6 national policies and 116 neoliberal ascendancy 21 ‘no bail-out clause’ 34 principle of subsidiarity 18–19 Macroeconomic Imbalances Procedure 77 Macron, Emmanuel programme of 123–6 rise of 122–3 markets, money and 24–5 Marx, Karl The Communist Manifesto (with Engels) 127–8 ‘world money’ 37 media coverage of crisis 102–3 migrant crisis 5–6 Dublin regulations 118–19 moral and political failure 118–20 migration within EU 6 freedom of 13 Mitterrand, François, failure of 7 monetary policies ‘anchor’ country 28–30 Bretton Woods collapse 23–4, 27 fiscal discipline 31 French push to euro 31–2 Quantity Theory of Money 30–1 ‘Snake in the Tunnel’ 27 Sound Money 30–1, 32 in a treaty-based alliance 35 US and 35 see also euro/single currency; exchange rates N Negri, Toni 8 neo-functionalists EMU and 32 supranational bodies 19–20 neoliberalism antipathy to public sector 8 capital against labour 5 conditionality and 68–9, 76 confronting 131–7 defeats SYRIZA 111–12 democracy and EU law 116–17 effect on Greece 85 German hegemony and 9–12 German ordoliberalism 45–6 imposed in Eurozone crisis 70–9 influence in EU 98 after Maastricht 14 toward monetary union 22–5 power in EU relations 72 state institutions and 24 Thatcher/Reagan and 2 Netherlands core of EU 8–9 Germany and 44, 63 idea of single currency 26 O Outright Monetary Transactions 74 P Poland in Central European periphery 9 not in Eurozone 62 opening of economy 44 in periphery 59 Portugal admission to EU 2 economic growth of 88 financialization and 38 in Southern periphery 9 ‘sudden stop’ 69 treaty obligations and 34 poverty not an EU priority 70 unemployment and 80 see also inequality power relations credit money 23 democracy as dangerous 130 EU neoliberalism and 72 among EU states 20 Greek bail-outs and 97–8 hostility from neoliberals 136–7 world money 37 private sector involvement (PSI) 95 privatization, imposition of 71, 77 productivity comparisons 51–2 Greece 87 technological change and 134–5 proportionality principle 18–19 public sector debt shifted to 72 Eurozone crisis and 71 neoliberal antipathy toward 8 PSI and 95 R racism, Brexit and 139 Reagan, Ronald 2 refugees crisis of 5–6 migrant crisis 118–20 regulations Eurozone crisis and 71 imposed deregulation 72 right politics openings for authoritarianism 10 rejecting democracy 6 rights, individual 3 Riksbank, Sweden 24 Rome, Treaty of (1957) 13 Russia EEC and USSR 13–14 S Schröder, Gerhard, labour and 45–6 Securities Market Programme 74 service sector EU freedom of 13 Greece 86–7 Single European Act (1986), ideological expansion 2 Single Supervisory Mechanism (SSM), deals with failing banks 78–9 Six Pack 77 Slovakia opening of economy 44 in periphery 9, 59–66 Slovenia opening of economy 44 in periphery 9, 59–66 Smithsonian Agreement (1971) 27 social democrats decline of 9 EU seen as progressive 129–30 evaporates in Germany 48 social policies ‘depoliticization’ of 3–4 EU ideals of 3 EU legislation 18 IMF costs to 91 socialism, collapse of 8 Southern periphery, grouping of 9 see also France; Greece; Portugal; Spain sovereignty Brexit and 139–40 Greek loss of 97–8, 102 harmonization of EU law 116–17 plebeian class view of 130 states in EU 126–7 in treaty-based alliance 79 working-class perceptions 4–5 see also power relations; states Spain admission to EU 1–2 credit bubble 89 debt 56–7, 69, 72, 81 economic growth of 88 investment in 88 nominal unit labour 51–2 private debt 55 productivity 53 in Southern periphery 9, 54–9 unemployment in 80 Stability and Growth Pact hardening of 77 monitors fiscal structures 18 states class relations within 20, 21 competitiveness with EMU 50–2 credit risks of 75–6 euro fiscal discipline 31 monopoly over money 23 responsibility to others 79 sovereignty of 19, 35–6 supranational bodies 19–20 subsidiarity, principle of 18–19 Sweden, migrant crisis and 118 Syria, migration from 6 SYRIZA divisions within 106–8 failure of 11 Keynesianism 136 learning from failure 121, 131 rise to government 104–5 signs third bail-out 102 surrender of 105 T TARGET2 91 taxation avoidance practices 101 Eurozone crisis and 71 Greece increase in 93 Hayek on federalism and 15 immunity in Greece 90 on wealth 134 technology, economic changes and 134–5 Thatcher, Margaret, anti-labour neoliberalism 2 trade Brexit and 139–40 freedom of movement 13 globalization and 134 among member states 132 Hayek on tariffs 15–16 world economy 136–7 trade unions Greek conditionality and 91 weak in Germany 41 see also labour Troika 71 effect on Greece 91–2, 102 imposes neoliberalism 71–9 protection of lenders 98–9 Varoufakis’s negotiations 108–9 Tsipras, Alexis expectations of 105 initial strategy of 107 surrender of 109–12 Turkey, migrant crisis and 119, 120 Two Pack 77 U USA the dollar as world money 37 with EEC against USSR 13–14 financialization and 41 German FDI 63 monetary system 35 USSR 13–14 V Varoufakis, Yanis ‘democratizing’ EU 121 negotiating approach 108–9 sidelined 110 W Werner (Pierre) Report (1970) 26 POLITY END USER LICENSE AGREEMENT Go to www.politybooks.com/eula to access Polity’s ebook EULA.


Global Governance and Financial Crises by Meghnad Desai, Yahia Said

Asian financial crisis, bank run, banking crisis, Bretton Woods, business cycle, capital controls, central bank independence, corporate governance, creative destruction, credit crunch, crony capitalism, currency peg, deglobalization, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, floating exchange rates, frictionless, frictionless market, German hyperinflation, information asymmetry, knowledge economy, liberal capitalism, liberal world order, Long Term Capital Management, market bubble, Mexican peso crisis / tequila crisis, moral hazard, Nick Leeson, oil shock, open economy, price mechanism, price stability, Real Time Gross Settlement, rent-seeking, short selling, special drawing rights, structural adjustment programs, Tobin tax, transaction costs, Washington Consensus

Without endorsing debt reduction schemes publicly, the IMF actively encouraged commercial banks that had provisioned their losses to sell their loans at a discount. Meanwhile, it originated its practice of lending into the arrears to countries unable to meet their schedule of debt service with the banks. The IMF: past and future 49 The doctrine of structural adjustment got a strong impetus from the collapse of East European Socialism. It entered the 1990s under the label of “the Washington Consensus.” It fostered the IMF in its role of financial agency for development, which got reconciled with mainstream economics now dedicated to supply side. Financial liberalization reached Latin America, Eastern Europe and Asia at an astounding speed. The rest of the story is well known. The disruptions provoked by financial liberalization in countries with weak financial structures and in international markets rigged with self-fulfilling speculation, triggered crises of a magnitude not seen since the Great Depression.

But the limit of access was raised repeatedly. This model enjoyed its heyday in the mid1990s. The late financial crises had entailed so huge amount of credits and had shifted the priorities once more in such a way that an overhauling of the Fund’s mandate and a restructuring of its financial capacities are at stake. International LOLR Financial liberalization has not worked the way hoped for by the Washington Consensus. The private sector has indeed entered the financial game on both the debtor and the creditor sides. For emerging markets at least, the IMF no longer has to substitute failing capital markets in bringing resources to developing countries. But the late financial crises have amply shown that capital markets could fail otherwise. Instead of sustained current account imbalances by lack of private finance, emerging markets suffer from massive capital flights and contagion effects.

In the case of European integration, they risk being absorbed stage by stage into a new political entity over whose policies they have limited control. What an effective regionalism may supply, however, is some defence against financial turbulence. Financial crises have become significant once more because of the enormous financial flows which deregulation, floating currencies, and the abolition of exchange controls since the 1970s have unleashed. The new economic orthodoxy, dubbed in the 1980s as the Washington Consensus, has legitimated deregulation and in so doing has undermined national economic policies. Deregulation is now criticised, however, for threatening economic and political stability. The scale of the financial turbulence which has been observed in many countries in recent years, from the countries of Southeast Asia, Russia, Brazil, Argentina and the United States, has raised fears that a global financial crisis might be in the making, which would plunge the world into a major depression.


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, starchitect, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

They both sharply cut taxes at the top—Reagan slashed the highest marginal tax rate from 70 percent to 28 percent and reduced the maximum capital gains tax to 20 percent—reined in trade unions, cut social welfare spending, and deregulated the economy. This Washington Consensus was exported abroad, too. Its greatest impact, and its greatest validation, was in communist regimes. The collapse of communism in the Soviet bloc and the adoption of market economics in communist China ended that ideology’s seventy-year-long intellectual and political challenge to capitalism, leaving the market economy as the only system anyone has come up with that works. That red threat was one reason the plutocrats accepted the Treaty of Detroit, and its even more generous European equivalents. The red surrender emboldened the advocates of the Washington Consensus and helped them to create the international institutions needed to underpin a globalized economy. These three transformations—the technology revolution, globalization, and the rise of the Washington Consensus—have coincided with an age of strong global economic growth, and also with the reemergence of the plutocrats, this time on a global scale.

These three transformations—the technology revolution, globalization, and the rise of the Washington Consensus—have coincided with an age of strong global economic growth, and also with the reemergence of the plutocrats, this time on a global scale. Among students of income inequality, there is a fierce debate about which of the three is the most important driver of the rise of the 1 percent. Ideology helps to shape the argument. If you are a true-faith believer in the Washington Consensus, you tend to believe rising income inequality is the product of impersonal—and largely benign—economic forces, like the technology revolution and globalization. If you are a liberal and regret the passing of the Treaty of Detroit, you tend to attribute the changed income distribution chiefly to politics—a process Jacob Hacker and Paul Pierson have powerfully described in Winner-Take-All Politics.

As individuals, we aren’t getting smarter, but society as a whole is accumulating more and more knowledge. Our access to information and technological assistance in going through the mountains of chaff to get to the wheat—no society has ever had that. That is huge.” — This double-barreled economic shift has coincided with an equally consequential social and political one. MIT researchers Frank Levy and Peter Temin describe the transformation as a move from “The Treaty of Detroit” to the “Washington Consensus.” The Treaty of Detroit was the five-year contract agreed to in 1950 by the United Auto Workers and the big three manufacturers. That deal protected the carmakers from annual strikes; in exchange, it gave the workers generous health care coverage and pensions. Levy and Temin use “The Treaty of Detroit” as a shorthand to describe the broader set of political, social, and economic institutions that were established in the United States during the postwar era: strong unions, high taxes, and a high minimum wage.


pages: 868 words: 147,152

How Asia Works by Joe Studwell

affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, Gini coefficient, glass ceiling, income inequality, income per capita, industrial robot, Joseph Schumpeter, Kenneth Arrow, land reform, land tenure, large denomination, liberal capitalism, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Right to Buy, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, urban sprawl, Washington Consensus, working-age population

But it downplayed the significance of such policies, avoided discussion of agriculture altogether, and added Hong Kong and Singapore to Malaysia, Indonesia and Thailand, thereby leaving Japan, Korea and Taiwan as the statistical minority among its ‘High Performing Asian Economies’. (China was omitted from the report.) 2 This was the ideologically charged era of the so-called Washington Consensus, when the World Bank, the International Monetary Fund and the US Treasury were united in their determination that the free market policies coming into vogue in the US and Britain were appropriate to all economies, no matter what their level of development.3 The vitriol of the debate was such that academic rigour was frequently a victim, as with the World Bank reports. Indeed, even the academic specialists on Japan, Korea and Taiwan who opposed the Washington Consensus position on economic development made suspect claims in order to bolster their case. This only added to confusion. Chalmers Johnson wrote in the preface to his seminal study of Japanese development, published in 1982: ‘[The Japanese development model] is being repeated today in newly industrializing states of East Asia – Taiwan and South Korea – and in Singapore and South and Southeast Asian countries.’

Worse still, as the failings of half-hearted, poorly planned agricultural and manufacturing strategies became apparent from the 1980s, governments were tempted by the siren calls of the incipient Washington Consensus – the free market agenda for economic development that was being pressed on developing countries with increased vigour by the IMF, the World Bank and the US government. The loudest and most evangelical message of these agencies was that deregulating the financial sector could put the development efforts of lagging countries back on track. States were encouraged to privatise existing banks and license new banks, to take a laissez-faire attitude to international flows of capital and to expand stock markets. The argument of the Washington Consensus was that liberated capital would then itself identify the right investments to spur economic progress. What actually happened, in 1997, was a financial catastrophe on a scale similar to that which afflicted Latin America after 1982.

The financial deregulation urged by parties to the Washington Consensus does not present a viable alternative to this strategy. Deregulation policies do not empower a ‘natural’ tendency for finance to lead a society from poverty to wealth, they simply put short-term profit and the interests of consumers ahead of developmental learning and agricultural and industrial upgrading. There is no case for doing this when a country is poor. At best, the developmental emphasis of the IMF, the World Bank and the US government on financial sector deregulation in recent decades has been a waste of time. More commonly, the policy advice has had clear negative consequences. In forcing the pace of banking deregulation, capital account liberalisation and stock market development, the Washington Consensus has undermined east Asian countries’ capacity to shape their development and has greatly increased the risk of financial crises.


pages: 214 words: 57,614

America at the Crossroads: Democracy, Power, and the Neoconservative Legacy by Francis Fukuyama

affirmative action, Ayatollah Khomeini, Berlin Wall, Bretton Woods, cuban missile crisis, David Brooks, European colonialism, failed state, Francis Fukuyama: the end of history, Internet Archive, Mikhail Gorbachev, Monroe Doctrine, mutually assured destruction, New Journalism, race to the bottom, RAND corporation, rent-seeking, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, transaction costs, uranium enrichment, War on Poverty, Washington Consensus

Radar, jet aircraft technology, and a good deal of U.S. commercial aerospace similarly benefited from military spending. The Internet was developed by the Defense Advanced Research Projects Agency as a means of communicating after a nuclear attack. 14. Historically, the Washington Consensus developed in response to the Latin American debt crisis of the 1980s, where heavy foreign borrowing and lack of fiscal discipline led to a pathological cycle of currency crisis, devaluation, expansionary monetary policy to cover fiscal deficits, hyperinflation, and then renewed exchange rate crisis. The economic policy measures outlined in the Washington Consensus were necessary to break this cycle, and through a painful series of adjustments countries like Mexico, Brazil, and Argentina managed, by the early 1990s, to stabilize their macroeconomic balances. 15. The final story in Latin America is more complicated: while the rise of Lula in Brazil, Gutierrez in Ecuador, Vazquez in Uruguay, and Chavez in Venezuela marks a turn to the left, most of these new leaders have continued to follow relatively orthodox macroeconomic policies.

But the other industrialized democracies were comfortable with their welfare states and often saw the American drive to liberalize markets around the world not as a well-intentioned effort to promote reform but as an American attempt to impose its American Exceptionalism own antistatist values on the rest of the world in a "race to the bottom." Much of the drive to Americanize the global economy came out of the private sector and the challenge posed by newly competitive U.S. companies and financial institutions. But American government policy was highly supportive of economic liberalization as well, in ways that generated a backlash that often went unperceived in Washington. The Washington Consensus was a package of orthodox economic liberalization measures that were often attached as conditions to structural adjustment lending packages by international financial institutions like the International Monetary Fund (IMF) and the World Bank for developing countries. 14 Had this type of U.S.-promoted economic liberalization produced consistently positive results, there might have been greater acceptance of this form of benevolent hegemony.

., 82-83, 97> IOO > J 73 United Nations, 10; American distrust of, 159; Bush administration's attitude toward, 6, 95-96, 98; criticism of, 176; effectiveness of, 157, 160-61; legitimacy of, 157, 158-60; neocon-servative distrust of, 49, 64-65; Oil for Food program, 65, 80, 96; as political issue, 156-57; and resolutions mandating Iraq's disarmament, 96-97; and sanctions against Iraq, 80; and security issues, 158, 160-62 United Nations Special Commission (UNSCOM), 96 United States: as enforcer of U.N. resolutions on Iraq disarmament, 96-97; hostility toward, in Middle East, 106-7; an d international institutions, 192-93; moral authority of, 187; power as exercised by, 48, 62-64, 135-38, 188-91; relationship with NATO, 173-74; ro ' e °f» m international arena, 98-99, 156, 184. See also Bush administration; foreign policy, U.S.; military, U.S. U.S. Agency for International Development (USAID), 117, 134, 139, 149, 150, 151, 152-53, 2i2n39 Vernet, Daniel, 14 Vietnam War, 18, 121 Villepin, Dominique de, 100 Voice of America, 136, 150 Wall Street Journal, 34 warfare. See military, U.S.; nuclear proliferation; targeting precision Warsaw Pact, 29, 51 Washington Consensus, 109, 205ni4 weapons of mass destruction (WMDs): intelligence failures regarding, 5-6, 87, 90-91; as threat to United States, 46, 66, 79-81, 82, 203ni9 Weber, Max, 125 Weekly Standard, 40, 117 welfare state, 28, 38, 107 Wilson, James Q., 18-19, 115,206m Wilson, Woodrow, 49 Wilsonianism. See realistic Wilsonian-ism Wohlstetter, Albert, 21, 31-36 Wohlstetter, Roberta, 87 Wolfowitz, Paul, 12, 14, 21, 31 Wolfson, Adam, 2 8 women's empowerment, 120 World Bank, 145, 147 World Intellectual Property Organization, 44 World Trade Organization (WTO), 44 Yushchenko, Viktor, 5 2 Zakaria, Fareed, 140 Zarqawi, Abu Musab al-, 181 226 approach to American foreign policy through 4vhich such mistakes might be turned around — one in which the positive aspects of the neo-conservative legacy are joined with a more rfealistic view of the way American power can Ipe used around the world.


pages: 225 words: 61,388

Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Moyo

affirmative action, Asian financial crisis, Bob Geldof, Bretton Woods, business cycle, buy and hold, colonial rule, correlation does not imply causation, credit crunch, diversification, diversified portfolio, en.wikipedia.org, European colonialism, failed state, financial innovation, financial intermediation, Hernando de Soto, income inequality, information asymmetry, invisible hand, Live Aid, M-Pesa, market fundamentalism, Mexican peso crisis / tequila crisis, microcredit, moral hazard, Ponzi scheme, rent-seeking, Ronald Reagan, sovereign wealth fund, The Chicago School, trade liberalization, transaction costs, trickle-down economics, Washington Consensus, Yom Kippur War

During the 1980s bilateral flows also became more concessional in nature and by the early 1990s over 90 per cent were grants. Alongside rising government-to-government transfers (bilateral aid), multilateral institutions continued their aggressive march towards gaining greater importance – both in terms of the volume of aid disbursed and as architects of development policy. By 1989, the Washington Consensus (a standard reform package of economic policy prescriptions, mainly on monetary and fiscal policy for the countries most affected by economic crisis) became the backbone of the development strategy pursued by the Washington DC-based institutions (the IMF, World Bank, and US Treasury Department). The foreign aid agenda of the 1990s: a question of governance By the end of the 1980s, emerging-market countries’ debt was at least US$1 trillion, and the cost of servicing these obligations colossal.

There is more (much more) that needs to be done to undo the ills that have gone before, to rectify what has been an unmitigated disaster, and to get Africa onto a solid economic footing. While international donors and organizations must be commended for shifting the development ideology from the bad economic policies of the 1970s (mainly statist) to the good market policies on the books today (introduced on the back of the Washington Consensus), we need to remind them that without the elimination of aid effective implementation of the new, better, development regime will remain shoddy, ineffectual and even disastrous. Africa’s development impasse demands a new level of consciousness, a greater degree of innovation, and a generous dose of honesty about what works and what does not as far as development is concerned. And one thing is for sure, depending on aid has not worked.

., D. Ghura, M. Mulheisen, R. Nord and E. M. Ucer, ‘Sub-Saharan Africa: Growth, Savings and Investment, 1986– 93’, IMF Occasional Paper No. 118, 2005 Hartung, William D. and Frida Berrigan, ‘U.S. Arms Transfers and Security Assistance to Israel: An Arms Trade Resource Center Fact Sheet’, 6 May 2002, at http://www.worldpolicy.org/projects/arms/reports/israel050602.html Harvard University, Washington Consensus, at http://www.cid.harvard.edu/cidtrade/issues/washington.html Hjertholm, Peter and Howard White, ‘Foreign Aid in Historical Perspective: Background and Trends’, in Tarp (ed.), Foreign Aid and Development Huntington, Samuel, Political Order in Changing Societies, New Haven: Yale University Press, 1968 Ibisin, David and Jake Lloyd Smith, ‘Tsunami disaster: UN “failing to co-ordinate relief efforts”’, Financial Times, 7 January 2005 IFAD Remittance Forum, ‘Sending Money Home: Worldwide Remittance Flows to Developing Countries’, at http://www.ifad.org/events/remittances/maps/ ING Microfinance Support, ‘A Billion to Gain?


pages: 453 words: 117,893

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

"Robert Solow", 3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, Fall of the Berlin Wall, fear of failure, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, Gini coefficient, global supply chain, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low-wage service sector, manufacturing employment, market bubble, means of production, mittelstand, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

This was avoided by China, which has led to talk of the so-called Beijing Consensus serving as an alternative model for newly marketizing nations. In vogue after the success of China’s growth and the critiques levelled at the Washington Consensus, could the Chinese model be a model for Myanmar as it embarks on a historical opening to the global economy? Of course, there may not even be a consensus about the Beijing Consensus, as the Chinese growth experience cannot be easily modelled. And there are many elements of China’s marketization process that are similar to the Washington version. The Washington Consensus was a model of economic development promulgated during the 1980s and 1990s that stemmed from the IMF and US Treasury, both located in Washington, DC. The model was premised on privatization and financial and trade liberalization.

The model was premised on privatization and financial and trade liberalization. As a number of developing countries failed to benefit from following these prescriptions, which was seen both in the decade-long recession of the former Soviet Union during the 1990s and in the 1980s Latin American crisis, the Washington Consensus fell out of favour and developing countries sought an alternative. Some turned to China, whose market-oriented reforms proceeded at a more gradual pace and with sequencing of key reforms. For instance, state-owned enterprises were slowly reformed and were not subject to mass privatization until a couple of decades into the reform process. China also established a non-state sector that absorbed the laid-off workers, so preventing persistent large-scale unemployment. But as discussed earlier, one consequence is that reforms are incomplete and state ownership persists.

Crafted by the Nobel laureate Arthur Lewis, this model sees economic growth occurring when workers move out of low-productivity agriculture and into more productive factories and the services economy. Although with a different stress, the end result is the same: industrialization supports economic development. That shift to industry could launch Myanmar into the rapid-growth phase experienced by other Asian countries. So, the Beijing Consensus perhaps offers a better set of guidelines for Myanmar than the Washington Consensus as it is derived from the experience of its East Asian neighbours. About 70 per cent of Myanmar’s population are employed in the agriculture and resources sector, which accounts for over half of the country’s economic output. It means that there is a lot of scope to industrialize, which can launch a country into fast growth as it ‘catches up’, as occurred in the East Asian ‘miracle’ economies of South Korea, Taiwan, Singapore and Hong Kong, which are among the few that have become rich in the post-war period.


pages: 252 words: 13,581

Cape Town After Apartheid: Crime and Governance in the Divided City by Tony Roshan Samara

conceptual framework, deglobalization, ghettoisation, global village, illegal immigration, late capitalism, moral panic, neoliberal agenda, New Urbanism, structural adjustment programs, unemployed young men, urban decay, urban planning, urban renewal, Washington Consensus, working poor

For a discussion of the rise of urban neoliberalism in the United States, see Alice O’Conner, “The Privatized City: The Manhattan Institute, the Urban Crisis, and the Conservative Counterrevolution in New York,” Journal of Urban History 34, no. 2 (January 2008): 333–53; Jamie Peck, “Liberating the City: Between New York and New Orleans, Urban Geography 27, no. 8 (2006): 681–713. 23.╯Walden Bello, Deglobalization: Ideas for a New World Economy (London: Zed Books, 2005). 24.╯Bryn Hughes, “The ‘Fundamental’ Threat of (Neo)Liberal Democracy: An Unlikely Source of Legitimation for Political Violence, Dialogue 3, no. 2 (2005): 43–85. http://www.polsis.uq.edu.au/dialogue/3-2-4.pdf (accessed November 11, 2010); Leys, Market Driven Politics: Neoliberal Democracy and the Public Interest; Robert W. McChesney, Rich Media, Poor Democracy: Communication Politics in Dubious Times (Champaign: University of Illinois Press, 1999). 25.╯Walden Bello, “The Post-Washington Consensus: The Unraveling of a Doctrine of Development” (Focus on the Global South, October 18, 2008). http://focusweb.org/the-post-washington-dissensus.html?Itemid51 (accessed 200╇ ·â•‡ Notes to introduction November 11, 2010). See also Pedro-Palo Kuczynski and John Williamson, eds., After the Washington Consensus: Restarting Growth and Reform in Latin America (Washington, D.C.: Petersen Institute, 2003). 26.╯Mark Purcell, Empowering Democracy: Neoliberalization and the Struggle for Alternative Urban Futures (New York: Routledge, 2008); Mike Davis, Planet of Slums (New York: Verso, 2007); Jason Hackworth, The Neoliberal City: Governance, Ideology and Development in American Urbanism (Ithaca, N.Y.: Cornell University Press, 2007); McDonald, World City Syndrome; Helga Leinter, Jamie Peck, and Eric S.

In the year following the 9/11 attacks and preceding the World Summit on Sustainable Development held in Johannesburg in August 2002, political and economic elites from British prime minister Tony Blair to UN Secretary General Kofi Annan and World Bank head James Wolfensohn went so far as to draw attention to the relationships among poverty, terrorism, and global security, arguing that underdevelopment was in fact a security issue.15 In March of that year, reformed neoliberal crusader Jeffery Sachs observed: “The extreme poverty of the bottom billion is shocking, morally intolerable and dangerous—a breeding ground of disease, terrorism and violence.”16 Growing unease about the instability that underdevelopment generates suggests that the narrower definition of security has not passed quietly into history along with the Cold War. Rather, the global development agenda of the now post–Washington Consensus continues to be constrained by and articulated through the national security interests of powerful states and transnational interests of global capital. The “pragmatic” agenda of global governance that has resulted is what Canadian political scientist Robert Cox calls global poor relief and riot control, in which the production of security means attempts “to prevent the way in which societies have been evolving through globalisation from destabilising the central structures of globalisation.”17 The merging of security and development agendas under conditions of globalization leads to a knitting together of international bodies—from the UN to aid organizations, military establishments, NGOs, private security companies, and multinational corporations—into transnational networks of global governance administered primarily from the global North.18 According to Peter Wilkin, these governance networks are not geared toward the amelioration of social crisis, but rather are structures assembled for “containment and quarantine of the effects of global poverty, . . . for protecting states from the world’s most impoverished people.”19 Despite the celebration with which many of today’s proponents 10 ╇ ·â•‡ Introduction of globalization greeted the end of the Cold War, a decidedly pessimistic core exists at the center of new elite approaches to security and development.

Neoliberal principles of economic reform originally came to prominence through their application at the national level in the global South. Although change was already afoot in the nations and cities of the global North as well, it was the structural adjustment programs of the World Bank and the International Monetary Fund in the 1980s and 1990s, and the intimately related prescriptions of the Washington Consensus, that first drew attention and notoriety to the ascent of neoliberalism as a global governance force.22 The requirements for installing this new governance regime were substantial, and their implementation often Introduction╇ ·â•‡ 11 necessitated significant restructuring of the state and the strict management of often intense political resistance to all or part of the project. Neoliberal restructuring thus was immediately politicized within the geopolitical contexts of the late Cold War and, eventually, post–Cold War globalization.


pages: 372 words: 92,477

The Fourth Revolution: The Global Race to Reinvent the State by John Micklethwait, Adrian Wooldridge

Admiral Zheng, affirmative action, Affordable Care Act / Obamacare, Asian financial crisis, assortative mating, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bernie Madoff, Boris Johnson, Bretton Woods, British Empire, cashless society, central bank independence, Chelsea Manning, circulation of elites, Clayton Christensen, Corn Laws, corporate governance, credit crunch, crony capitalism, Deng Xiaoping, Detroit bankruptcy, disintermediation, Edward Snowden, Etonian, failed state, Francis Fukuyama: the end of history, full employment, Gunnar Myrdal, income inequality, Khan Academy, Kickstarter, knowledge economy, Kodak vs Instagram, labor-force participation, laissez-faire capitalism, land reform, liberal capitalism, Martin Wolf, means of production, minimum wage unemployment, mittelstand, mobile money, Mont Pelerin Society, Nelson Mandela, night-watchman state, Norman Macrae, obamacare, oil shale / tar sands, old age dependency ratio, open economy, Parag Khanna, Peace of Westphalia, pension reform, pensions crisis, personalized medicine, Peter Thiel, plutocrats, Plutocrats, popular capitalism, profit maximization, rent control, rent-seeking, ride hailing / ride sharing, road to serfdom, Ronald Coase, Ronald Reagan, school choice, school vouchers, Silicon Valley, Skype, special economic zone, too big to fail, total factor productivity, War on Poverty, Washington Consensus, Winter of Discontent, working-age population, zero-sum game

Not all of them worked, but even in its more grotesque deviations of fascism and communism, the West was still striving, at least in theory, to forge the future. The rest of the world followed. The Chinese and the Russians followed Marxism. India, when it became independent in 1947, embraced British Fabianism even as it put a torch to British imperialism. In Latin America, despite their citizens’ love-hate relationship with the gringos in el norte, the region’s economies lurched forward two decades ago when most of them embraced “the Washington consensus” (a phrase invented by John Williamson to mean a combination of open markets and prudent economic management). Even in Pudong there is a recognition that, until recently, the Western model represented the gold standard of modernity. Freedom and democracy have been central to that. The rise of the Western state was not just a matter of setting up a competent civil service. Even Hobbes’s monster, as we shall see, was a dangerously liberal one for a royalist to propose, because Leviathan relied on the notion of a social contract between the ruler and the ruled.

And everywhere they withdrew from the commanding heights of the economy. Between 1985 and 2000 Western European governments sold off some $100 billion worth of state assets, including such well-known national champions as Lufthansa, Volkswagen, Renault, Elf, and ENI. “Industrial policy” was reduced to hanging on to a few golden shares in privatized companies. The postcommunist countries embraced the Washington consensus especially heartily. Russia privatized thousands of industrial enterprises. Leszek Balcerowicz, Poland’s finance minister after the fall of communism, declared that Thatcher was his “hero.” In Brazil, Fernando Henrique Cardoso introduced a Thatcher-inspired privatization program that, measured by the value of the assets sold, was twice as big as Britain’s. Even in India, the bastion of Fabianism, Manmohan Singh tried to tear up the License Raj to get “government off the backs of the people of India, particularly off the backs of India’s entrepreneurs.”31 Palaniappan Chidambaram, who served as India’s finance minister for a while during the 1990s, summed things up: “What happened under Mrs Thatcher was an eye-opener, a revelation.

In South Korea, for instance, about 80 percent of what you get out of the system is tied to what you put in.15 In Asia as a whole, public-health spending is still only 2.5 percent of GDP, compared with about 7 percent in the OECD group of rich nations. The second reason is the crisis of the Western model of democracy and free-market capitalism. In the 1990s Lee’s lectures on Asian values seemed somewhat eccentric, even to Asians. The Washington consensus was sweeping all before it. Francis Fukuyama talked about “the total exhaustion of viable systematic alternatives to Western liberalism.”16 Rather than associating Deng Xiaoping’s China with economic greatness, Americans thought of the lone student walking toward the tanks in Tiananmen Square in 1989. Bill Clinton told China’s president, Jiang Zemin, to his face that he was “on the wrong side of ­history.”17 The Asian economic crisis in 1997 only reinforced the conceit of Western democracy, especially when the IMF had to launch a $40 billion program to help South Korea, Thailand, and Indonesia, which had all borrowed too much from foreign banks.


When the Money Runs Out: The End of Western Affluence by Stephen D. King

Albert Einstein, Asian financial crisis, asset-backed security, banking crisis, Basel III, Berlin Wall, Bernie Madoff, British Empire, business cycle, capital controls, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, congestion charging, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-subsidies, debt deflation, Deng Xiaoping, Diane Coyle, endowment effect, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial repression, fixed income, floating exchange rates, full employment, George Akerlof, German hyperinflation, Hyman Minsky, income inequality, income per capita, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Kickstarter, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, London Interbank Offered Rate, loss aversion, market clearing, mass immigration, moral hazard, mortgage debt, new economy, New Urbanism, Nick Leeson, Northern Rock, Occupy movement, oil shale / tar sands, oil shock, old age dependency ratio, price mechanism, price stability, quantitative easing, railway mania, rent-seeking, reserve currency, rising living standards, South Sea Bubble, sovereign wealth fund, technology bubble, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, trickle-down economics, Washington Consensus, women in the workforce, working-age population

The near-­term losses in Asia were, in many cases, far bigger than those seen in the West following its later financial crisis but, having been written off as hotbeds of crony capitalism and, thus, doomed to fail, Asian economies were able to bounce back in style. There was no Western-­style economic stagnation but, instead, a return to economic dynamism within just a handful of years. Yet the political response varied from nation to nation. In the early 1990s, Asian nations had increasingly adopted the so-­called ‘Washington Consensus’, broadly speaking a commitment to low inflation, conservative fiscal policies and open cross-­border capital markets. For a while, the policies seemed to work: Thailand, 192 4099.indd 192 29/03/13 2:23 PM From Economic Disappointment to Political Instability Korea, Malaysia and Indonesia all enjoyed rapid income gains thanks partly to heavy inflows of foreign financial investment. Indeed, the rest of the world was perfectly happy to buy into the Asian miracle (as, indeed, it later bought into the US housing miracle and the Greek government bond miracle).

Others followed suit: Indonesia down over 13 per cent, Malaysia down more than 7 per cent and Korea down almost 6 per cent. As this financial and economic tsunami took hold, it seemed as though the Asian miracle was now over. 193 4099.indd 193 29/03/13 2:23 PM When the Money Runs Out Then came the fallout and finger-­pointing. Western policy-­makers, unable to believe there was anything wrong with the Washington Consensus, laid the blame fairly and squarely on the frailties of the Asian economic model. US Federal Reserve Governor Roger Ferguson offered the following – in hindsight, remarkable – musings on the subject at hand in a speech given in March 1998: One of the most important elements . . . has been the weakness of the banking sector in most of these countries. The managers of banks had not developed appropriate procedures for evaluating and extending loans.

As a result, the economy slowly rebalanced away from growth led by domestic demand towards export-­led growth (a polite way of saying that Malaysian workers saw the fruits of their labours heading abroad rather than staying at home). And although the economy collapsed in 1998, it thereafter delivered year after year of rapid economic expansion, having adjusted to the new global economic reality. 198 4099.indd 198 29/03/13 2:23 PM From Economic Disappointment to Political Instability Mahathir was also, however, quick to turn economic convention on its head. The Washington Consensus demanded that countries should open their capital markets to international investors. Mahathir argued that this policy had contributed to the crisis. On 1 September 1998, Bank Negara – the Malaysian central bank – released a statement announcing the imposition of capital controls, giving those holding ringgit offshore a month to bring their money back home. Later that day, Mahathir gave an interview to the media where he explained that: where the ringgit’s value is in an unstable situation, business could not be continued in a way that would be profitable . . . when the ringgit’s value is brought down, our income will be reduced . . . we have to fix the ringgit permanently . . . the currency traders . . . make huge profits, while at the same time impoverishing a whole country, regions and peoples.


pages: 354 words: 92,470

Grave New World: The End of Globalization, the Return of History by Stephen D. King

9 dash line, Admiral Zheng, air freight, Albert Einstein, Asian financial crisis, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Sanders, bilateral investment treaty, bitcoin, blockchain, Bonfire of the Vanities, borderless world, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collateralized debt obligation, colonial rule, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, debt deflation, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Snowden, eurozone crisis, facts on the ground, failed state, Fall of the Berlin Wall, falling living standards, floating exchange rates, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, global value chain, hydraulic fracturing, Hyman Minsky, imperial preference, income inequality, income per capita, incomplete markets, inflation targeting, information asymmetry, Internet of things, invisible hand, joint-stock company, Kickstarter, Long Term Capital Management, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, moral hazard, Nixon shock, offshore financial centre, oil shock, old age dependency ratio, paradox of thrift, Peace of Westphalia, plutocrats, Plutocrats, price stability, profit maximization, quantitative easing, race to the bottom, rent-seeking, reserve currency, reshoring, rising living standards, Ronald Reagan, Scramble for Africa, Second Machine Age, Skype, South China Sea, special drawing rights, technology bubble, The Great Moderation, The Market for Lemons, the market place, The Rise and Fall of American Growth, trade liberalization, trade route, Washington Consensus, WikiLeaks, Yom Kippur War, zero-sum game

(i) Trump, Donald election as president (i), (ii) his simple explanation (i) isolationism and (i), (ii), (iii), (iv), (v) Mexican wall (i), (ii) populist approach of (i) Republican policy and (i) route to White House (i) secures Republican nomination (i) TPP and (i), (ii) Tsipras, Alexis (i) tuberculosis (i) Turkey (i) Turks (i), (ii) see also Ottoman Empire; Seljuk Turks Twitter (i), (ii) Uganda (i), (ii), (iii) Ukraine (i), (ii), (iii), (iv), (v) Umayyad Caliphate (i) unemployment (i), (ii), (iii), (iv), (v) United Arab Emirates (i) United Kingdom (UK) see also Brexit; British Empire 16th century (i) bankers to the world (i) Blair and Brown (i) corporate scandals (i) extradition treaty with US (i) IMF and (i) immigration into (i) inflation (i), (ii) internal inequality (i) joins EEC (i) living standards (i) Mossadeq (i) post-First World War (i) social welfare (i) ‘special relationship’ with US (i) Suez (i) Thatcher and Reagan (i) United Kingdom Independence Party (UKIP) (i), (ii) United Nations (UN) (i), (ii), (iii), (iv), (v), (vi)n9 United States (US) 1930s bank failures (i) absence of firm leadership (i) brand name companies (i) changing fortunes since Second World War (i) checks and balances (i) China and (i), (ii), (iii), (iv) complaints against (i) corporate scandals (i) dismantling the British Empire (i) dollar see American dollar excess Chinese capital (i) First World War view (i) immigration into (i) imperial activities of (i)n1 (Introduction) inflation through war (i) Iraq (i) living standards (i) Locke and the constitution (i) Marshall Plan (i) Middle East inconsistencies (i) middle-income earners (i) military presence in Europe (i) military spending (i) Moscow Olympics (i) naval power (i) 9/11 (i) PACOM (i) Pearl Harbor (i) Plaza Accord (i) population censuses (i) post-First World War (i) post-Second World War initiatives (i) Reagan and Thatcher (i) social mobility (i) Soviet Union and (i) strength of position (i) sub-prime mortgages (i) taxation (i) TPP and (i), (ii) vetoing UN Security Council (i) ‘Washington Consensus’ (i), (ii), (iii) Uruguay Round (GATT) (i) Uzbekistan (i) Varoufakis, Yanis (i), (ii) Vasco da Gama (i), (ii) Venezuela (i) Venice (i) Versailles, Palace of (i) Versailles, Treaty of (i), (ii) Vickers Report (i) Vienna, Congress of (i), (ii), (iii), (iv) Vietnam (i), (ii), (iii), (iv), (v) Vietnam War (i) Vikings (i), (ii) Visigoths (i) Vladivostok (i) Volcker, Paul (i) Vote Leave (i) Wales (i), (ii) Wall Street (i), (ii) Wall Street Journal (i) Walt Disney Productions (i) ‘War on Terror’ (i) Wars of the Roses (i) warships (i) Washington, DC (i), (ii) ‘Washington Consensus’ (i), (ii), (iii) water shortages (i) Waterloo, Battle of (i) Weimar Republic (i) welfare states (i) Wells, H.G.

The US itself began to slow at the beginning of the new millennium. Elsewhere in the world, free-market philosophies were seemingly contributing to financial instability: most striking was the Asian Crisis of 1997/98 – which hit Thailand, South Korea, Indonesia, Malaysia and Hong Kong hard, even as communist China emerged relatively unscathed – and the broader emerging-market upheavals that followed. The phrase ‘Washington Consensus’ – which originally referred to a ten-point plan involving, inter alia, fiscal discipline, tax reform, trade liberalization, open cross-border capital markets, property rights and privatization3 – was reinterpreted pejoratively as a symbol of US ‘neo-liberalism’, leading to huge criticism of the post-war Washington-based institutions that, in earlier decades, had done so much to foster economic stability.

For good measure, he added that ‘Realism maintains that universal moral principles cannot be applied to the actions of states.’19 This creates a seemingly paradoxical situation: a state has to look after the collective interests of its citizens, even if that means that those citizens, individually, might feel a grave injustice had been committed on their behalf.20 Yet the interests of the international statesman may not always align with the ‘national interest’, particularly if the statesman is now also a member of some international organization that provides him with a whole bunch of new incentives.21 At that point, the statesman’s role is in danger of becoming disturbingly ambiguous. Does the new international club provide a convenient scapegoat for the delivery of unpopular measures at home, as happened with the imposition of austerity measures in Southern European countries during the Eurozone crisis that began in 2010? Does the homogeneity of view associated with club membership – for example, adherence to the Washington Consensus or acceptance of inflation-targeting conventions – undermine otherwise legitimate protests at home? Does the new club limit the powers of domestic government through the growth of, for example, a supranational legal authority? And what happens if the views of the international statesman – and the new club he has now joined – are rejected by the nation he is supposed to represent? None of these issues is new.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond, zero-sum game

The countries were Brazil, Chile, China, the Czech Republic, Hong King, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Poland, Russia, Singapore, and Thailand. 63 Christopher Rude, “The Role of Financial Discipline in Imperial Strategy,” Socialist Register 2005, London: Merlin, 2004, esp. pp. 90–1. 64 See Porter, Globalization and Finance, p. 64; and Bank of International Settlements, “Strengthening Banking Supervision Worldwide,” p. 4. 65 For a comprehensive analysis of the “new monetary policy consensus” that gave rise to the push for central bank independence and inflation-targeting regimes in developing countries, see the independent report for the UNDP by Alfredo Saad Filho, “Pro-Poor Monetary and Anti-Inflation Policies: Developing Alternatives to the New Monetary Policy Consensus,” Centre for Development Policy and Research Discussion Paper 2405, School of Oriental and African Studies, London, 2005. 66 Volcker and Gyohten, Changing Fortunes, p. 181. 67 Baker, Group of Seven, p. 79. 68 For an earlier discussion of this in the context of a critique of Robert Cox’s “outside-in” approach to the shift in the hierarchy of state apparatuses, see Panitch, “Globalization and the State.” 69 See John Williamson, “Did the Washington Consensus Fail?,” speech at the Center for Strategic and International Studies, November 6, 2002; and “A Short History of the Washington Consensus,” paper presented to the conference on From the Washington Consensus to a New Global Governance, Fundacion CIDOB, Barcelona, September 24–25, 2004, p. 7. 70 Devesh Kapur, John P. Lewis, and Richard Webb, The World Bank: Its First Half Century, Washington, DC: Brookings Institution Press, 1997, p. 510. 71 Frieden, Banking on the World, p. 65. 72 Harold James, “From Grandmotherliness to Governance: The Evolution of IMF Conditionality,” Finance and Development, December 1998, p. 45. 73 Sarah.

The wide international range of US firms, as well as the relative size and importance of US markets, gave American state authorities “tremendous leverage in pressuring foreign firms and regulatory authorities” to adopt these rules and practices.1 But the inherent limits on the extraterritorial application of US law in a world of formally sovereign states also gave rise to extensive coordination of national regulations through international institutions like the newly created WTO, the World Bank, the Bank of International Settlements, and the IMF. The embrace of “structural adjustment” by so many states often depended on their desperation for emergency funds on the conditional terms of the “Washington Consensus.” Yet it was not amiss of James Boughton to point out that what was “included in that rubric was similar to the indigenous revolution or evolution in thinking in developed and developing countries” on the part of state elites as well as capitalist classes around the world.2 As we shall see, the interplay between “global norm making and national lawmaking” at the end of the twentieth century confirmed the extent to which the “spread of an international legal order with capitalism” still meant that “the power dynamics of political imperialism are embedded within the very juridical equality of sovereignty.”3 The Laws of Free Trade A key determinant of the realization of global capitalism at the end of the twentieth century was the capacity of the American state to maintain the postwar trajectory towards the liberalization of trade laws.

What it did mean was that the latter were increasingly likely to restructure themselves so that their representation of non-financial interests would be more attuned to making demands and policy proposals that conformed to the exigencies of fiscal and monetary discipline.68 This sort of discipline figured at the very top of the set of policies that John Williamson was referring to when he famously coined the term “Washington Consensus” in 1989 to capture the neoliberal interface between the US Treasury and Federal Reserve, on the one hand, and the IMF and World Bank on the other.69 And central bank independence became the institutional change that, more than any other, signaled a state’s readiness to embrace the “structural adjustment” required to ensure that this discipline was enforced against democratic pressures for social expenditure.


pages: 234 words: 63,149

Every Nation for Itself: Winners and Losers in a G-Zero World by Ian Bremmer

airport security, banking crisis, barriers to entry, Berlin Wall, blood diamonds, Bretton Woods, BRICs, capital controls, clean water, creative destruction, Deng Xiaoping, Doha Development Round, energy security, European colonialism, failed state, global rebalancing, global supply chain, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, Kickstarter, Martin Wolf, mass immigration, Mikhail Gorbachev, mutually assured destruction, Nelson Mandela, Nixon shock, nuclear winter, Parag Khanna, purchasing power parity, reserve currency, Ronald Reagan, smart grid, South China Sea, sovereign wealth fund, special economic zone, Stuxnet, trade route, uranium enrichment, Washington Consensus, WikiLeaks, Yom Kippur War

.* Then there is the International House of Pancakes, a chain of more than fifteen hundred restaurants whose global presence amounts to seventeen restaurants in Canada, twelve in Mexico, and two in Guatemala.9 Like IHOP and baseball’s Fall Classic, the World Bank and the International Monetary Fund, both headquartered in Washington, D.C., clearly bear the “made in America” label. Some critics charge that by conditioning financial support to needy countries on adoption of democratic, free-market reforms—an agenda dubbed the “Washington Consensus”—these institutions exist mainly as tools of U.S. foreign policy.10 That’s a caricature, but beyond the succession of Western leaders who have run these organizations, no one can deny that the U.S. and European governments retain formal and informal powers within them that no longer reflect the size of their contribution to the global economy’s strength. These baked-in Western advantages are no accident.

MITI’s ranks supplied the country with many of its midcentury prime ministers. Japan’s rise also made clear once and for all that nothing barred ancient Eastern cultures from embracing Western capitalist values. As Japan grew stronger, many Americans began to view its rise as a threat to American hegemony. Yet unlike today’s China, Japan’s competitive edge flowed from a political and economic system in relative harmony with the Washington Consensus. By the 1970s, Western Europe and Japan were breaking free of postwar U.S. dominance, but political and economic values helped align their national interests. In 1975, the United States, Japan, Britain, West Germany, France, and Italy formed the G6 group of industrialized nations. A year later, Canada made it a G7. Whatever the economic and cultural rivalries within the group, common faith in free-market democracy and a collective fear of Soviet communism ensured a fundamental unity of purpose.

China has earned a lot of friends within cash-hungry governments in both the established and the emerging worlds, but it has little chance of capturing the hearts and minds of the people who live in these countries. The United States would also lack some of its advantages of the last century. Without the kind of unity imposed by the aftermath of World War II, there will not be a new Bretton Woods to align countries’ economic policies, no Washington Consensus that gives the United States global institutional dominance, no hunger in the rest of the world for U.S. exports or investment, and nothing like the ideological appeal that came from the thirst for democracy after years of fascist dictatorship or fear of a Soviet advance. To be sure, Cold War 2.0 is more likely to emerge than either the G2 or concert scenarios, but many factors limit the risk of a direct and destabilizing U.S.


pages: 537 words: 158,544

Second World: Empires and Influence in the New Global Order by Parag Khanna

"Robert Solow", Admiral Zheng, affirmative action, anti-communist, Asian financial crisis, Bartolomé de las Casas, Branko Milanovic, British Empire, call centre, capital controls, central bank independence, cognitive dissonance, colonial rule, complexity theory, continuation of politics by other means, crony capitalism, Deng Xiaoping, different worldview, Dissolution of the Soviet Union, Donald Trump, Edward Glaeser, energy security, European colonialism, facts on the ground, failed state, flex fuel, Francis Fukuyama: the end of history, friendly fire, Gini coefficient, global reserve currency, global supply chain, haute couture, Hernando de Soto, illegal immigration, income inequality, informal economy, invisible hand, Islamic Golden Age, Khyber Pass, Kickstarter, knowledge economy, land reform, low cost airline, low skilled workers, mass immigration, means of production, megacity, Monroe Doctrine, Nelson Mandela, oil shale / tar sands, oil shock, open borders, open economy, Parag Khanna, Pax Mongolica, Pearl River Delta, pirate software, Plutonomy: Buying Luxury, Explaining Global Imbalances, Potemkin village, price stability, race to the bottom, RAND corporation, reserve currency, rising living standards, Ronald Reagan, Silicon Valley, Skype, South China Sea, special economic zone, stem cell, Stephen Hawking, Thomas L Friedman, trade route, trickle-down economics, uranium enrichment, urban renewal, Washington Consensus, women in the workforce

But in reality, Mexico, Venezuela, Brazil, and Argentina had to borrow ever greater sums of money just to service their debts, like drunken sailors being served drinks by a drunken bartender. The result was the “lost decade” of the 1980s, in which Latin America became, in the words of former Venezuelan trade minister Moisés Naím, “Atlantis—the lost continent.”10 Crisis followed crisis. To make matters worse, the IMF responded to the United States “like thunder to lightning,” forcing Latin American regimes to tighten their belts as prescribed by the “Washington Consensus” orthodoxy of rapid liberalization, an international variant of trickle-down economics.11 Over a century after the Pan-American Union effort, the heated debate over how to meet Latin Americans’ rising expectations despite unequal American trade continues in the form of a proposed Free Trade Area of the Americas (FTAA) stretching from Alaska to Tierra del Fuego. But China’s commercial presence in the Western Hemisphere is also deepening; thus, so is its strategic presence.

But the United States must then convince Latin American leaders that China is not an alternative to American leadership but rather its complement. To date, however, America’s hot-and-cold style of diplomacy, careening between the extremes of absent and overbearing, has contributed to the rise of leftist leaders since the 1990s who respond to American encroachment with the rhetoric of cultural resistance, loudly bucking the Washington Consensus and the pleas to democratize. Even in so perfunctory a body as the Organization of American States (OAS), whose charter vainly emphasizes “respect for individual personalities,” America has been unable to introduce a peer-review mechanism anywhere near as sophisticated as Eastern Europe’s intra–second world levers. And though past OAS secretaries-general have been virtual spokesmen for American interests, the group pointedly rebuffed all of America’s top candidates to take over the organization in 2005.

Such companies are happy to sign joint production agreements through “mixed companies” with murky standards, even if they have to pay a higher windfall tax—which Chávez uses to ratchet up pressure on European oil companies already operating in Venezuela. Since America has already thrown in its hand, will Europe play its cards to rein in Chávez? Between China and Chávez, Venezuela might still achieve a lasting contribution to both the spirit and practice of Latin American cooperation, one based on a post–Washington Consensus model of mutual aid and indigenous institutions. But history may also ultimately repeat itself in Venezuela, with surging oil prices and Chinese demand allowing Chávez to rely on energy exports and ignore other industries, leaving the economy vulnerable to price fluctuations. The country now resembles Iran prior to the overthrow of the Shah: oil wealth, inequality, and disenfranchisement, a classic prerevolutionary situation.


pages: 535 words: 158,863

Superclass: The Global Power Elite and the World They Are Making by David Rothkopf

airport security, anti-communist, asset allocation, Ayatollah Khomeini, bank run, barriers to entry, Berlin Wall, Bob Geldof, Branko Milanovic, Bretton Woods, BRICs, business cycle, carried interest, clean water, corporate governance, creative destruction, crony capitalism, David Brooks, Doha Development Round, Donald Trump, financial innovation, fixed income, Francis Fukuyama: the end of history, Gini coefficient, global village, high net worth, income inequality, industrial cluster, informal economy, Internet Archive, Jeff Bezos, jimmy wales, joint-stock company, knowledge economy, liberal capitalism, Live Aid, Long Term Capital Management, Mahatma Gandhi, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Martin Wolf, mass immigration, means of production, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, Nelson Mandela, old-boy network, open borders, plutocrats, Plutocrats, Ponzi scheme, price mechanism, shareholder value, Skype, special economic zone, Steve Jobs, Thorstein Veblen, too big to fail, trade liberalization, trickle-down economics, upwardly mobile, Vilfredo Pareto, Washington Consensus, William Langewiesche

It can simply be reflecting the broad impulses of this group to support the market end of the government-market continuum. For example, the financial community’s agenda for the IMF almost unquestioningly embraces policies of fiscal discipline with inadequate attention to social issues, even those that are directly linked to political sustainability of vital reforms in developing countries. It’s not that the core idea was wrong; it is that the balance was off. The same can be said of the Washington Consensus. The Washington Consensus is full of merit, yet its reforms were not sufficiently broad or balanced in scope. It did not focus enough on creating the new stakeholders of globalization by enabling the poor to accumulate and develop assets more rapidly, nor did it prioritize giving them the training and the access to capital they would need to do so—and thus it sowed the seeds of inequity in places like Chile and Brazil and the populist revivals that have occurred throughout Latin America and in Russia.

We believe if we leave it to the market the best company will win and the best projects will get done.” Brown couldn’t help but chuckle. After traveling around the world promoting market doctrine, he had been out-free-marketed. The lessons of the Chicago boys were so well learned, in fact, that they became practically a religion. Although Chile is a mostly Catholic nation, it could also be said to be one that worships at the altar of the “Washington Consensus,” the prescription of market-oriented reforms that became the primary intellectual product offered by the IMF, the World Bank, and other mainstream international financial institutions during the 1990s. The term was coined by John Williamson of Washington’s Institute for International Economics in a 1989 paper in which he described how old and generally discredited development ideas that had resulted in, among other things, the regional debt crisis of the ’80s, had been overtaken by what he described as a list of “ten policies that I thought more or less everyone in Washington would agree were needed more or less everywhere in Latin America.”

And as trade liberalization connected them to the world, they began to recognize that keeping labor costs down in their countries would help them attract investment capital. Their interests actually grew less and less aligned with those of their workers and more tied to those of the investment bankers and others who could offer them big paydays or accelerated growth (read: wealth creation) for their companies. This was possible largely because the term “free market”—a bumper sticker description of the complex ideas described among those of Williamson’s Washington consensus—is typically a misnomer. There are always rules: those set by governments, like tax structures and incentives, often tuned to promote the development interests successfully promoted by segments of the business community; and those inherent to markets, like the fact that cost efficiency favors the creation of entities of scale, and compensation structures for bankers favor doing fewer big deals for big companies (which also typically have better credit profiles) rather than many for smaller companies or for individuals.


Rogue States by Noam Chomsky

anti-communist, Asian financial crisis, Berlin Wall, Branko Milanovic, Bretton Woods, business cycle, capital controls, collective bargaining, colonial rule, creative destruction, cuban missile crisis, declining real wages, deskilling, Edward Snowden, experimental subject, Fall of the Berlin Wall, floating exchange rates, land reform, liberation theology, Mikhail Gorbachev, Monroe Doctrine, new economy, oil shock, RAND corporation, Silicon Valley, strikebreaker, structural adjustment programs, Tobin tax, union organizing, Washington Consensus

A week later, farmers blockaded a highway near the capital city of La Paz to protest the eradication of coca leaf, the only mode of survival left to them under the “reforms,” as actually implemented. Reporting on the protests over water prices and the eradication programs, the Financial Times observes that “the World Bank and the IMF saw Bolivia as something of a model,” one of the great success stories of the “Washington consensus,” but the April protests reveal that “the success of eradication programs in Peru and Bolivia has carried a high social cost.” The journal quotes a European diplomat in Bolivia who says that “until a couple of weeks ago, Bolivia was regarded as a success story”—by those who “regard” a country while disregarding its people. But now, he continues, “the international community has to recognize that the economic reforms have not really done anything to solve the growing problems of poverty”; they may well have deepened it.

The high-minded rhetoric at and about the Vienna conference was not besmirched by inquiry into the observance of the UD by its leading defenders.25 These matters were, however, raised in Vienna in a Public Hearing organized by NGOs. The contributions by activists, scholars, lawyers, and others from many countries reviewed “alarming evidence of massive human rights violations in every part of the world as a result of the policies of the international financial institutions,” the “Washington Consensus” among the leaders of the free world. This “neoliberal” consensus disguises what might be called “really existing free market doctrine”: market discipline is of great benefit to the weak and defenseless, though the rich and powerful must shelter under the wings of the nanny state. They must also be allowed to persist in “the sustained assault on [free trade] principle” that is deplored in a scholarly review of the post-1970 (“neoliberal”) period by GATT secretariat economist Patrick Low (now director of economic research for the World Trade Organization), who estimates the restrictive effects of Reaganite measures at about three times those of other leading industrial countries, as they “presided over the greatest swing toward protectionism since the 1930s,” shifting the US from “being the world’s champion of multilateral free trade to one of its leading challengers,” the journal of the Council on Foreign Relations commented in a review of the decade.26 It should be added that such analyses omit the major forms of market interference for the benefit of the rich: the transfer of public funds to advanced industry that underlies virtually every dynamic sector of the US economy, often under the guise of “defense.”

The International Confederation of Free Trade Unions reports that “unions are being repressed across the world in more countries than ever before,” while “poverty and inequality have increased in the developing countries, which globalization has drawn into a downward spiral of ever-lower labor standards to attract investment and meet the demands of enterprises seeking a fast profit” as governments “bow to pressure from the financial markets rather than from their own electorates,” in accord with the “Washington consensus.”60 These are not the consequences of “economic laws” or what “the free market has decided, in its infinite but mysterious wisdom,”61 as commonly alleged. Rather, they are the results of deliberate policy choices under really existing free market doctrine, undertaken during a period of “capital’s clear subjugation of labor,” in the words of the business press.62 Contempt for the socioeconomic provisions of the UD is so deeply engrained that no departure from objectivity is sensed when a front-page story lauds Britain’s incoming Labor government for shifting the tax burden from “large businesses” to working people and the “middle class,” steps that “set Britain further apart from countries like Germany and France that are still struggling with pugnacious unions, restrictive investment climates, and expensive welfare benefits.”63 Industrial “countries” never struggle with starving children, huge profits, or rapid increases in CEO pay (under Thatcher, double that of second-place US);64 a reasonable stand under the “general tacit agreement” that the “country” equals “large businesses,” along with doctrinal conventions about the health of the economy—the latter a technical concept, only weakly correlated with the health of the population (economic, social, or even medical).


pages: 192

Kicking Awaythe Ladder by Ha-Joon Chang

Asian financial crisis, business cycle, central bank independence, clean water, colonial rule, Corn Laws, corporate governance, creative destruction, David Ricardo: comparative advantage, fear of failure, income inequality, income per capita, joint-stock company, joint-stock limited liability company, land reform, liberal world order, moral hazard, open economy, purchasing power parity, rent-seeking, short selling, Simon Kuznets, The Wealth of Nations by Adam Smith, trade liberalization, Washington Consensus

Concluding Remarks 71 110 125 125 125 129 135 139 References 143 Notes 161 Index 181 Chapter I I ntroduction: H o w did the Rich C o u n t r i e s Really B e c o m e R i c h ? I.I. Introduction There is currently great pressure on developing countries from the developed world, and the international development policy establishment that it controls, to adopt a set of 'good policies' and 'good institutions' to foster their economic development.1 According to this agenda, 'good policies' are broadly those prescribed by the so-called Washington Consensus. They include restrictive macroeconomic policy, liberalization of international trade and investment, privatization and deregulation.2 The 'good institutions' are essentially those that are to be found in developed countries, especially the Anglo-American onesl The key institutions include: democracy; 'good' bureaucracy; an independent judiciary; strongly protected private property rights (including intellectual property rights); and transparent and market-oriented corporate governance and financial institutions (including a politically independent central bank).

Introduction In the previous chapter, I pointed out that there have been surprisingly few attempts to apply lessons learned from the historical experiences of developed countries to problems of contemporary development. Also, as will become clearer further on, the few references to these historical experiences tend to be full of myths that support the orthodox version of the history of economic policy in the NDCs, which emphasize the benefits of free trade and laissez-faire industrial policy. The story, which underlies virtually all recommendations for "Washington Consensus-type policies, goes something like the following.1 From the eighteenth century onward, the industrial success of laissezfaire Britain proved the superiority of free-market and free-trade policies. Through such policies, which unleashed the entrepreneurial energy of the nation, it overtook interventionist France, its main competitor at the time, establishing itself as the supreme world economic power.

In this context, there were really only nine developing countries where there was a growth acceleration that can in theory be attributed to a shift to 'good policies'. Of course, even then, we should not forget that improved performance in the two biggest of these nine economies, that is, China (from 2.7 per cent p.a. to 8.2 per cent p.a.) and India (from 0.7 per cent p.a. to 3.7 per cent p.a.) cannot be attributed to 'good policies' as defined by the Washington Consensus. 8. Stiglitz 2001b. In the ascending order in terms of growth rate (or rather the rate of contraction, in all cases but Poland), they are Georgia, Azerbaijan, Moldova, Ukraine, Latvia, Kazakhstan, Russia, Kyrgyzstan, Bulgaria, Lithuania, Belarus, Estonia, Albania, Romania, Uzbekistan, Czech Republic, Hungary, Slovakia, and Poland. 9. The 16 countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Norway, Sweden, Switzerland, the UK and the USA. 10.


pages: 561 words: 87,892

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

Admiral Zheng, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, G4S, George Akerlof, German hyperinflation, Gini coefficient, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low skilled workers, market clearing, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, women in the workforce, working-age population, Y2K, Yom Kippur War

Levy and Temin argue that the primary reason behind the shift in income distribution is the demise of institutions created during the Great Depression that were designed to spread the benefits of prosperity more widely. These included unions, centralized bargaining frameworks for businesses, workers and government and a protected minimum wage, all of which were dismantled as the economic failures of the 1970s gave way to the laissez-faire Washington Consensus of the 1980s and beyond. Perhaps not surprisingly, others have disputed these claims. For example, Stephen N. Kaplan and Joshua Rauh suggest that institutional arrangements played only a minor role in the huge income gains for those in the top echelons of the earnings spectrum.7 They also dismiss so-called trade-based theories, which argue that higher incomes accrue to those who can exploit comparative advantage while lower incomes come to those in the wrong industries at the wrong time (‘it seems difficult for trade [theories] to explain the increase in the top end of venture capital investors, private equity investors and, particularly, lawyers and professional athletes’).

Now it is the world’s biggest consumer of metals and the second-biggest consumer of oil, other countries have a strong incentive to strike bilateral deals with this new economic behemoth, an economy that finds itself at the epicentre of expanding emerging-market-to-emerging-market trade. Fourth, even if China did nothing to promote the renminbi as an alternative to the dollar as a reserve currency, the renminbi’s status could be elevated by default, merely as a result of growing disenchantment with the dollar. Fifth, many countries that tried but failed with the so-called Washington Consensus might now be content to build economic relationships with a country that at least offers an alternative to US economic hegemony.9 Sixth, and politically most interesting, China is now actively promoting the renminbi’s role as an alternative reserve currency to the dollar. Admittedly, it’s still early days. However, China has seen a blossoming of bilateral currency swap deals with, amongst others, Indonesia, Belarus and Argentina.

At a White House press conference on 16 September 2001, President Bush said, ‘This crusade, this war on terrorism is going to take a while.’ See http://georgewbush-whitehouse.archives.gov/news/releases/2001/09/20010916-2.html. 6. Argentina fell into this trap: it devalued and defaulted to its foreign creditors in 2001. 7. At the time of writing, Google was attempting to do exactly that. 8. Source: Office of the Russian Prime Minister. 9. The Washington Consensus was a view driven by the idea that ‘the market knows best’ and was often imposed by the IMF and others on unsuspecting economies that simply couldn’t cope with liberalized markets and small government. Most obviously, it demanded aggressive fiscal consolidation. Funnily enough, this particular stricture has now been forgotten in the light of the huge increases in budget deficits which followed the 2007/8 credit crunch. 10.


pages: 414 words: 119,116

The Health Gap: The Challenge of an Unequal World by Michael Marmot

active measures, active transport: walking or cycling, Affordable Care Act / Obamacare, Atul Gawande, Bonfire of the Vanities, Broken windows theory, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, centre right, clean water, congestion charging, correlation does not imply causation, Doha Development Round, epigenetics, financial independence, future of work, Gini coefficient, Growth in a Time of Debt, illegal immigration, income inequality, Indoor air pollution, Kenneth Rogoff, Kibera, labour market flexibility, longitudinal study, lump of labour, Mahatma Gandhi, meta analysis, meta-analysis, microcredit, New Urbanism, obamacare, paradox of thrift, race to the bottom, Rana Plaza, RAND corporation, road to serfdom, Simon Kuznets, Socratic dialogue, structural adjustment programs, the built environment, The Spirit Level, trickle-down economics, twin studies, urban planning, Washington Consensus, Winter of Discontent, working poor

The HDR for 2013 expands the insights of Drèze and Sen and identifies what it calls: unwelcome types of growth: jobless growth, which does not increase employment opportunities; ruthless growth, which is accompanied by rising inequality; voiceless growth, which denies the participation of the most vulnerable communities; rootless growth, which uses inappropriate models transplanted from elsewhere; and futureless growth, which is based on unbridled exploitation of environmental resources.17 The HDR contrasts the Washington Consensus, which argues for getting the economic fundamentals right, with UNDP’s own approach, which puts human development first. I love it. Of course I do. This UN agency says that improvement in poor people’s lives – and hence, their health – cannot be postponed while the economic fundamentals start to work. It is actually stronger than that. The Washington Consensus, neoliberalism by another name, is likely to make inequalities wider in addition to neglecting the need to build people’s capabilities and ensure their meaningful freedoms. Further, consistent with Joseph Stiglitz’s arguments outlined in Chapter 9, social protection and enhancing people’s capabilities are likely to be good for economic growth and economic productivity.

In their most recent, An Uncertain Glory, they write that when India began its economic reforms in the early 1990s it faced ‘two gigantic failures of economic governance. The first was a failure to tap the constructive role of the market.’ The second was a ‘resounding failure to harness the constructive role of the state for growth and development’.10 It could not be clearer: both markets and state institutions are vital. The critique of neoliberalism is correct. The idea that unbridled free markets in everything (the so-called Washington Consensus) is the way for countries to grow, develop and ensure better health and greater health equity is contradicted by the evidence. Equally, market dynamism is a route to greater productivity and economic growth. The question should no longer be capitalism or not, but what kind of capitalistic society do we want to have. LEARNING . . . from what is working Suspending ideological predispositions, as far as is possible, where could we find societies that combine economic success, a profitable private sector, a constructive role for the state, and a record of good health?

We now need to look at what can be done to improve governance at a global level so that effective action can be taken on the social determinants of health. In light of the experience in Europe with austerity we, the governance commission, went back to an older literature to look at the effect of IMF policies of structural adjustment in low-income countries. It does not make happy reading. In the 1980s the IMF made loans contingent on governments accepting IMF recommendations on how to manage the economy. It was mainstream Washington consensus: reduce public spending, markets as the default option for public services, economic deregulation, privatise public assets. We concluded: the effects of these programmes have been disastrous for public health . . . structural adjustment programmes undermined the health of poor people in sub-Saharan Africa through effects on employment, incomes, prices, public expenditure, taxation, and access to credit, which in turn translated into negative health outcomes through effects on food security, nutrition, living and working environments, access to health services, education.13 When discussing the battle between austerians and Keynesians I said that a key criterion should be impact on the lives people are able to lead.


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Age of Ambition: Chasing Fortune, Truth, and Faith in the New China by Evan Osnos

conceptual framework, crony capitalism, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, East Village, financial independence, Gini coefficient, income inequality, indoor plumbing, information asymmetry, land reform, Lao Tzu, low skilled workers, market fundamentalism, Mohammed Bouazizi, plutocrats, Plutocrats, rolodex, scientific worldview, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, Steve Jobs, transcontinental railway, Washington Consensus, Xiaogang Anhui farmers, young professional

He published The China Miracle, a book coauthored with Fang Cai and Zhou Li that zeroed in on the disarray produced by the collapse of the Soviet Union, and concluded, “The more radical the reform, the more violent will be the destructive social conflicts, and opposition to reform.” Lin promoted China’s “tinkering gradualist approach.” In a lecture at Cambridge University in the fall of 2007, he pointed to “the failure of the Washington Consensus reforms.” He joked that the shock therapy policies ordained by the IMF seemed more like “shock without therapy,” and were destined to lead to “economic chaos.” He reminded people that the proponents of the Washington Consensus had warned that China’s slow-reform approach would be, in his words, “the worst possible transition strategy,” doomed to “result in unavoidable economic collapse.” He had become China’s most prominent evangelist for its own story of prosperity. In November 2007, Lin received a phone call from the World Bank, which provides loans and expertise to combat poverty.

It had the makings of a paradox: the Party was sparking individual ambition and self-creation in one half of life and suppressing those tendencies in the other. As an economic strategy, the approach put China at odds with the dominant economists in the West who recommended that the collapsing Soviet bloc undertake “shock therapy”: cut spending, privatize state-owned companies, and open borders to foreign trade and investment, a recipe that became known as the Washington Consensus. In 1994, in a small office borrowed from the geography department at Peking University, Lin and four other economists founded the China Center for Economic Research, a think tank designed to attract foreign-trained Chinese scholars. He worked like a man possessed, often hunched over his desk until 1:00 or 2:00 a.m., and back the next morning by 8:00. Among colleagues, he was known as furiously driven and, on some level, unreachable.

I think we have to accept the possibility that China may become something close to a fully developed economic state without substantial political reform.” When World Bank officials visited Beijing to celebrate thirty years since China resumed its Bank membership, Zoellick praised China’s reductions in poverty and said, “We, and the world, have much to learn from this.” At the Bank, Lin churned out a series of papers intended to “revisit” the understanding of how poor countries get rich, much if it anathema to the Washington Consensus that prevailed in the 1990s. Writing with the Cameroonian economist Célestin Monga, he argued that governments must “regain center stage.” Industrial policy, in which governments seek to support certain sectors, known to critics as “picking winners,” has a bad name in the West, he said, and for good reason: it has failed far more often than it has succeeded. But he argued that the only thing worse was not having an industrial policy.


Termites of the State: Why Complexity Leads to Inequality by Vito Tanzi

"Robert Solow", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Andrei Shleifer, Andrew Keen, Asian financial crisis, asset allocation, barriers to entry, basic income, bitcoin, Black Swan, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, clean water, crony capitalism, David Graeber, David Ricardo: comparative advantage, deindustrialization, Donald Trump, Double Irish / Dutch Sandwich, experimental economics, financial repression, full employment, George Akerlof, Gini coefficient, Gunnar Myrdal, high net worth, hiring and firing, illegal immigration, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labor-force participation, libertarian paternalism, Long Term Capital Management, market fundamentalism, means of production, moral hazard, Naomi Klein, New Urbanism, obamacare, offshore financial centre, open economy, Pareto efficiency, Paul Samuelson, price stability, principal–agent problem, profit maximization, pushing on a string, quantitative easing, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, Tyler Cowen: Great Stagnation, universal basic income, unorthodox policies, urban planning, very high income, Vilfredo Pareto, War on Poverty, Washington Consensus, women in the workforce

Sandel’s point bears some relationship to comments made by Pope Francis, elaborated in his 2015 encyclical letter, Laudato Si’. On the other hand, see Nordhaus (2015) for an economically based criticism of some of the pope’s views on how to deal with global warming. Influenced by the new economic thinking, several governments moved in the previously reported, more pro-market direction, especially in the 1990s, when a related movement, called “Washington Consensus,” mainly directed at developing countries, acquired some influence. Perhaps stretching a little, the Washington Consensus could be considered a stepchild of the supply-side revolution because it also stressed the importance of the supply side of the economy and of the market. That thinking influenced also developments then underway in the economies of countries that were 82 Termites of the State moving from central planning to markets, especially in Eastern Europe (see Tanzi, 2010a).

Shadow fiscal policy can be related to the concept of fiscal illusion, which had been analyzed by the Italian economist Amilcare Puviani more than a century ago, in 1903. Fiscal illusions are often easier to create with regulations than with taxes and spending. It can be concluded that, as the twentieth century came to an end, by and large, market forces had been allowed to play a larger role, in many, though not all, of the advanced countries, especially during the last decade of that century, the period of the Washington Consensus and of market fundamentalism, than they had played in earlier decades, in spite of the higher levels of taxes and of public spending in most countries, and in spite of various structural obstacles that continued to exist in the markets of many countries. At the same time the redistributive role that governments had played in the decades immediately after World War II was being reduced, in response to efficiency and incentive concerns that had led to important policy changes, especially in tax policy but also in spending policies such as the welfare reform of 1996 in the United States.

The pro-market thinking attracted not only academic economists but also influential policymakers, including, prominently, Alan Greenspan, who, at that time, was the powerful head of the Federal Reserve system, as well as some members of the Clinton administration, including to some extent Robert Rubin and Larry Summers (see Greenspan, 2004; Rubin and Weisberg, 2003). During the second Bush administration, that thinking would influence the heads of regulatory commissions, such as the Securities and Exchange Commission (SEC) and others. It had generated the pro-market policies associated with the Washington Consensus. After twelve years of Republican administrations, the new Democratic president, Clinton, could declare that the “time of big government was over” and could get set to reform some welfare programs, reduce regulations, especially in the financial sector, and reduce some taxes by enacting more tax expenditures. Also, the number of federal employees in relation to the US population Giving Markets More Freedom 85 would shrink considerably, in part because there were fewer individuals in the military.


pages: 424 words: 119,679

It's Better Than It Looks: Reasons for Optimism in an Age of Fear by Gregg Easterbrook

affirmative action, Affordable Care Act / Obamacare, air freight, autonomous vehicles, basic income, Bernie Madoff, Bernie Sanders, Branko Milanovic, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, coronavirus, David Brooks, David Ricardo: comparative advantage, deindustrialization, Dissolution of the Soviet Union, Donald Trump, Elon Musk, Exxon Valdez, factory automation, failed state, full employment, Gini coefficient, Google Earth, Home mortgage interest deduction, hydraulic fracturing, Hyperloop, illegal immigration, impulse control, income inequality, Indoor air pollution, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Watt: steam engine, labor-force participation, liberal capitalism, longitudinal study, Lyft, mandatory minimum, manufacturing employment, Mikhail Gorbachev, minimum wage unemployment, obamacare, oil shale / tar sands, Paul Samuelson, peak oil, plutocrats, Plutocrats, Ponzi scheme, post scarcity, purchasing power parity, quantitative easing, reserve currency, rising living standards, Robert Gordon, Ronald Reagan, self-driving car, short selling, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, Steve Wozniak, Steven Pinker, supervolcano, The Chicago School, The Rise and Fall of American Growth, the scientific method, There's no reason for any individual to have a computer in his home - Ken Olsen, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, transaction costs, uber lyft, universal basic income, War on Poverty, Washington Consensus, WikiLeaks, working poor, Works Progress Administration

Starting with the same geography, resources, and people, the one using central control became an indigent nightmare, while the one letting the market decide eliminated poverty and achieved the world’s highest rate of postsecondary education. Gill further notes most developing nations that have followed the “Washington Consensus” policy prescription have raised living standards, increased education levels for girls and women, and held free elections, while most developing nations that cling to central economic control remain impoverished, backward, and under the thumbs of thugs and despots. Put together in the 1980s by an international team of economists, the Washington Consensus recommends that developing nations switch to free economies without central control, avoid debt, deregulate, create enforceable private property rights, liberalize trade going out and capital coming in, and have low marginal tax rates that they actually implement.

Put together in the 1980s by an international team of economists, the Washington Consensus recommends that developing nations switch to free economies without central control, avoid debt, deregulate, create enforceable private property rights, liberalize trade going out and capital coming in, and have low marginal tax rates that they actually implement. (Troubled nations such as Greece post high tax rates, then allow the affluent to bribe their way out of taxes.) Some analysts scorn the Washington Consensus, which stands as the reverse of the prescription of absolute central planning—ministries and subsidies as far as the eye can see. That market-oriented economics usually (of course not always) helps the poor, while central planning usually harms the poor, does seem to settle the matter. Nobody-in-control economics improves living standards for almost everyone while encouraging social progress, since even Fortune 500 types observe that shaking up the system is good. Based on what’s known today at least, the average person is best served by an uncommanded system. But the thought that the big chair is empty is unsettling.

., on, 67 coal mining and, 61, 76–77, 233 collapse anxiety and, 68 communism and, 174 comparative advantage and, 79–80 control and, 65–66 currency and, 69 democracy and, 167–168, 170, 173–174, 193 Dodd-Frank Act and, 92–93 education and, 169 fascism and, 66 Feldstein on, 91 globalization and, 82 golden age of, 69–70 Great Recession and, 64, 68, 97 inequality and, 84–85 inflation and, 87 infrastructure and, 93–95 Keynes on, 98–99 marriage and, 267, 268 media negativity and, 77, 79, 87–88 modern monetary theory and, 96 Panasonic and, 68–69 paper mills and, 78–79 Piketty on, 84–85 predictions and, 64 pretax income and, 84–85, 91 regulations of, 92–93 retirement economics, 31, 273–274 slow growth and, 90–92 Soviet and American, 167 state pension accounts and, 97–98 trade boosting, 79, 245–246 Trump and, 70–71 US domestic production and, 77–78 US GDP and, 84, 90–91 war and, 93, 132–134 Washington Consensus and, 66–67 Western living standards and, 88 See also market economy; middle class, US; national debt, US education, 280 book reading and, 271 in China, 170 college as, 269–271 democracy and, 169–170 disability and, 37 economy and, 169 immigrants and, 269–270 jobs and, 89–90 longevity and, 37–38 marriage and, 267 public school system and, 38, 269 skilled trades and, 270 wage and, 89–90 The Education of Henry Adams (Adams), 197, 198 Ehrlich, Paul, 5 elections.


pages: 495 words: 138,188

The Great Transformation: The Political and Economic Origins of Our Time by Karl Polanyi

agricultural Revolution, Berlin Wall, borderless world, business cycle, central bank independence, Corn Laws, currency manipulation / currency intervention, David Ricardo: comparative advantage, Fall of the Berlin Wall, full employment, inflation targeting, joint-stock company, Kula ring, land reform, land tenure, liberal capitalism, manufacturing employment, new economy, Panopticon Jeremy Bentham, price mechanism, profit motive, Republic of Letters, road to serfdom, Ronald Reagan, the market place, The Wealth of Nations by Adam Smith, trade liberalization, trade route, trickle-down economics, Washington Consensus, Wolfgang Streeck, working poor, Works Progress Administration

But whatever the explanation, the fact of the matter is that unemployment is not a phantasm, modern societies need ways of dealing with it, and the self-regulating market economy has not done so, at least in ways that are socially acceptable. (There are even explanations for this, but this would draw me too far away from my main themes.) Rapid transformation destroys old coping mechanisms, old safety nets, while it creates a new set of demands, before new coping mechanisms are developed. This lesson from the nineteenth century has, unfortunately, all too often been forgotten by the advocates of the Washington consensus, the modern-day version of the liberal orthodoxy. The failure of these social coping mechanisms has, in turn, contributed to the erosion of what I referred to earlier as social capital. The last decade has seen two dramatic instances. I already referred to the disaster in Indonesia, part of the East Asia crisis. During that crisis, the IMF, the U.S. Treasury, and other advocates of the neoliberal doctrines resisted what should have been an important part of the solution: default.

Now, albeit too late, the consequences of those mistaken policies are being realized; but it will be all but impossible to entice the capital that has fled back into the country, except by providing assurances that, regardless of how the wealth is acquired, it can be retained, and doing so would imply, indeed necessitate, the preservation of the oligarchy itself. Economic science and economic history have come to recognize the validity of Polanyi’s key contentions. But public policy—particularly as reflected in the Washington consensus doctrines concerning how the developing world and the economies in transition should make their great transformations—seems all too often not to have done so. As I have already noted, Polanyi exposes the myth of the free market: there never was a truly free, self-regulating market system. In their transformations, the governments of today’s industrialized countries took an active role, not only in protecting their industries through tariffs, but also in promoting new technologies.

Hong Kong was long held up as the bastion of the free market, but when Hong Kong saw New York speculators trying to devastate their economy by simultaneously speculating on the stock and currency markets, it intervened massively in both. The American government protested loudly, saying that this was an abrogation of free market principles. Yet Hong Kong’s intervention paid off—it managed to stabilize both markets, warding off future threats on its currency, and making large amounts of money on the deals to boot. The advocates of the neoliberal Washington consensus emphasize that it is government interventions that are the source of the problem; the key to transformation is “getting prices right” and getting the government out of the economy through privatization and liberalization. In this view, development is little more than the accumulation of capital and improvements in the efficiency with which resources are allocated—purely technical matters.


pages: 391 words: 22,799

To Serve God and Wal-Mart: The Making of Christian Free Enterprise by Bethany Moreton

affirmative action, American Legislative Exchange Council, anti-communist, Berlin Wall, big-box store, Bretton Woods, Buckminster Fuller, collective bargaining, corporate personhood, creative destruction, deindustrialization, desegregation, Donald Trump, estate planning, Fall of the Berlin Wall, Frederick Winslow Taylor, George Gilder, global village, informal economy, invisible hand, liberation theology, longitudinal study, market fundamentalism, Mont Pelerin Society, mortgage tax deduction, Naomi Klein, new economy, post-industrial society, postindustrial economy, prediction markets, price anchoring, Ralph Nader, RFID, road to serfdom, Ronald Reagan, Silicon Valley, Stewart Brand, strikebreaker, The Wealth of Nations by Adam Smith, union organizing, walkable city, Washington Consensus, white flight, Whole Earth Catalog, Works Progress Administration

Asked about the lasting impact of his years in Arkansas, Díaz recalled, “I met Sam Walton twice in person and quickly came to learn that fiÂ�nanÂ�cial success and Christianity were perfectly compatible: being successful and humble, being loving and demanding, being competitive and caring for others—all of these were compatible.”1 Díaz’s Christian testimony—his inspirational biography of salvation, success, and humility—is the quiet back story of free trade in the Americas. The ofÂ�fiÂ�cial story focuses on the hemisphere’s “Washington Consensus,” the term applied by a corporate think tank in 1989 to a suite of economic reforms that would encourage “the magic of the market” as the basis for hemispheric relations. Backed by the lending muscle of the World Bank and promoted by conservative economists like Milton Friedman, these recommendations included privatizing state enterprises, flattening tax rates, liberalizing trade, and relaxing government regulation.2 Though their consequences were uniquely devastating in much of Latin America, these policies were part of the overall economic transformation evident in the rise of the Sun Belt.

In the United States as well as for its southern neighbors, the result was a new era of federal austerity in ev�ery realm but defense. Social programs were slashed, from education to infrastructure to public health, while military spending increased by almost 50 percent over the Reagan years. States like California and Texas with sig�nifi�cant defense industries received billions in contracts.3 The Washington Consensus, in other words, functioned as the hardware of economic restructuring in the Western hemisphere. At the same time, conservative Christians took up the cause of anticommunism in Central America with new fervor in the 1970s and 1980s. As the Reagan administration funded right-wing counterinsurgencies in El Salvador and Guatemala and sought to overturn the Sandinista victory in Nicaragua, it had no better stateside allies than religious conservatives.

The White House Office of Public Diplomacy, staffed by psychological warfare experts from the Army and the Central Intelligence Agency, coordinated a multimillion dollar PR campaign to “defin[e] the terms of public discussion on Central America policy.”4 Against this backdrop, the intersecting lives of a Nicaraguan student, an Oklahoma journalist, and an Arkansas merchant sketch a web of relationships between people and institutions that shadowed the Washington Consensus—a private-sector “Bentonville Consensus,” a software of globÂ�alÂ�iÂ�zaÂ�tion. Through a Walton Family Foundation program, this human network bridged the transition from the last Cold War proxy battles to the new frontier of hemispheric free trade in the 1990s. It was not part of the coordinated Christian and neoconservative campaign of direct aid to anticommunists, but rather a parallel incubator of promarket Christians.


Globalists: The End of Empire and the Birth of Neoliberalism by Quinn Slobodian

Asian financial crisis, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, collective bargaining, David Ricardo: comparative advantage, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, Doha Development Round, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, full employment, Gunnar Myrdal, Hernando de Soto, invisible hand, liberal capitalism, liberal world order, market fundamentalism, Martin Wolf, Mercator projection, Mont Pelerin Society, Norbert Wiener, offshore financial centre, oil shock, open economy, pattern recognition, Paul Samuelson, Pearl River Delta, Philip Mirowski, price mechanism, quantitative easing, random walk, rent control, rent-seeking, road to serfdom, Ronald Reagan, special economic zone, statistical model, The Chicago School, the market place, The Wealth of Nations by Adam Smith, theory of mind, Thomas L Friedman, trade liberalization, urban renewal, Washington Consensus, Wolfgang Streeck, zero-sum game

By the early 1980s this manifested in renewed attention to modes of investment protection and third-­party arbitration alongside the rethinking of criteria for World Bank aid and IMF assistance that would become known as the Washington Consensus.25 Equally impor­tant was the rise of monetarism, culminating in the ­so-­called Volcker Shock in 1979, which dramatically raised U.S. interest rates—­ and thus debt ser­ vice payments for Global South nations—­ initiating the Third World debt crisis and dealing the “death blow to the NIEO movement.”26 Scholars have tracked the rise of the Washington Consensus and shifts in ideologies of monetary governance in the United States. Yet A W o r l d of S ig n als 223 they have overlooked the quiet counterrevolution that the NIEO challenge prompted in Geneva itself.27 In the 1970s and early 1980s a trio of experts at the GATT, Jan Tumlir, Frieder Roessler, and Ernst-­Ulrich ­Petersmann, explic­itly applied the ideas of Hayek to rethink the international economic order and became the standard-­bearers of Geneva School neoliberalism.

The long intellectual prehistory of the high point of the Geneva School of neoliberalism shows that, at its origins, neoliberalism was not only a philosophy of ­free markets but also a blueprint for double government in capitalism’s doubled world. Covering the better part of a ­century as it does, my account is necessarily incomplete. It focuses on the period from the early 1920s to the early 1980s, mostly ending before the breakthrough of neoliberal policies with the governments of Reagan and Thatcher. It does not explore the worthy topics of the conversion of the IMF and World Bank to the policies that became known as the “Washington Consensus.” Similarly absent are the transformations in international monetary governance, including the rise of monetarism, the end of the Bretton Woods system, the introduction of the euro, and changes in central bank policy. This means 24 GLOBALISTS leaving out the all-­important question of finance, which was perhaps the single most impor­tant transformation in global capitalism since the 1970s.

The new brand was given another name when Pascal Lamy used the term “the Geneva Consensus” for the first time in 2005 during his successful campaign for director general of the WTO.55 He was working from his experience as the EU trade commissioner and, true to the spirit of ordoglobalism, contended that “the building of Eu­rope is in fact the most ambitious experiment in supranational governance ever attempted” and that, as “a laboratory,” “the Eu­ro­pean experience . . . ​offers in­ter­ est­ing ave­nues for the global level.”56 Lamy claimed that the Geneva Consensus, against the Washington Consensus that it putatively replaced, would be dedicated to “humanizing globalization and establishing further justice and equity.”57 Like the IMF, which began to pay lip ser­vice to poverty reduction while continuing to focus on the old key issues of cutting public bud­gets, the WTO sought to add new rhe­ toric without changing the basic structure of the organ­ization.58 Seattle was an existential crisis for ordoglobalism.


pages: 251 words: 76,868

How to Run the World: Charting a Course to the Next Renaissance by Parag Khanna

Albert Einstein, Asian financial crisis, back-to-the-land, bank run, blood diamonds, Bob Geldof, borderless world, BRICs, British Empire, call centre, carbon footprint, charter city, clean water, cleantech, cloud computing, commoditize, continuation of politics by other means, corporate governance, corporate social responsibility, Deng Xiaoping, Doha Development Round, don't be evil, double entry bookkeeping, energy security, European colonialism, facts on the ground, failed state, friendly fire, global village, Google Earth, high net worth, index fund, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Kickstarter, laissez-faire capitalism, Live Aid, Masdar, mass immigration, megacity, microcredit, mutually assured destruction, Naomi Klein, Nelson Mandela, New Urbanism, off grid, offshore financial centre, oil shock, open economy, out of africa, Parag Khanna, private military company, Productivity paradox, race to the bottom, RAND corporation, reserve currency, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, sustainable-tourism, The Fortune at the Bottom of the Pyramid, The Wisdom of Crowds, too big to fail, trade liberalization, trickle-down economics, UNCLOS, uranium enrichment, Washington Consensus, X Prize

A former Mexican diplomat in London put it best: “If you’re not at the table, you’ll be on the menu.” Economic diplomacy is now a dizzying game of musical tables—with the fate of globalization hanging in the balance. The first global economy took shape during the Middle Ages, but it was one in which different regions had their own anchors and rules. Similarly, today there is no more free-market “Washington Consensus” to which the world’s economies subscribe. Instead, each is searching for ways to manage globalization to its benefit. Yet all seem to agree with the mantra that the world coming out of the financial crisis must be different from the world going in. For that to happen, however, the public and private sectors need a new kind of partnership: one fast enough to manage risks and progressive enough to benefit the masses.

Who Has the Money Makes the Rules At the World Economic Forum’s 2009 Davos meeting, Chinese premier Wen Jiabao succinctly articulated what became the dominant narrative of the global financial crisis, claiming it had its roots in an “unsustainable model of development characterized by prolonged low savings and high consumption” and the “blind pursuit of profits.” What part of that do Washington and Wall Street not understand as they continue to demand higher consumption from Asians? Privatization and price liberalization—tenets of the Washington Consensus—have been steadily controlled by Asian governments ever since their late 1990s financial crisis. Indeed, the “global imbalances” that we constantly hear about are as much ideological as fiscal and monetary. The United States wants Asians to reverse an innate savings culture and more than a decade of insuring themselves against economic volatility by suddenly becoming voracious consumers.

Introduction to On the Manner of Negotiating with Princes: Classic Principles of Diplomacy and the Art of Negotiation by François de Callières. Boston: Houghton Mifflin, 2000. Hart, Stuart L. Capitalism at the Crossroads: Aligning Business, Earth, and Humanity. Upper Saddle River, N.J.: Wharton School Publishing, 2007. Held, David. The Global Covenant: The Social Democratic Alternative to the Washington Consensus. Cambridge, UK: Polity, 2004. Held, David, and Anthony McGrew, eds. Governing Globalization: Power, Authority, and Global Governance. Cambridge, UK: Polity, 2002. Henderson, David. Misguided Virtue: False Notions of Corporate Social Responsibility. London: Institute for Economic Affairs, 2001. Higgott, Richard A., Geoffrey R. D. Underhill, and Andreas Bieler, eds. Non-State Actors and Authority in the Global System.


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Radical Cities: Across Latin America in Search of a New Architecture by Justin McGuirk

A Pattern Language, agricultural Revolution, dark matter, Donald Trump, Enrique Peñalosa, extreme commuting, facts on the ground, Guggenheim Bilbao, Hernando de Soto, housing crisis, illegal immigration, income per capita, informal economy, Jane Jacobs, Kickstarter, lateral thinking, mass immigration, microcredit, Milgram experiment, neoliberal agenda, New Urbanism, place-making, Silicon Valley, starchitect, technoutopianism, unorthodox policies, urban decay, urban planning, urban renewal, urban sprawl, Washington Consensus

Walking up and down thirty storeys every day to get to your front door – Torre David has no elevator – is the price you pay for swapping precarious living on the city’s edge for penthouse living in the city centre. Torre David is an anomaly, an accident of extreme circumstances, but it is precisely the kind of formal-informal hybrid that cities of the developing world need to explore if they are to start imagining a future that is different from the present. Learning from Latin America There was a time when, in the eyes of those exporting the policies of the Washington Consensus, Latin America was a byword for precariousness, corruption and illegal practices. Today, we are just as likely to think of Wall Street in the same terms. By contrast, Latin America’s economies are relatively stable, demonstrating the kind of growth that the US and Europe would die for, and its governments represent a bastion of progressive politics that has not yet had to dismantle its welfare systems in the name of austerity.

With rising unemployment, the favelas in the city’s northern industrial heartland took on a new proportion. The number of favelados rose by 50 per cent, leaving a third of the population living in poverty. Government self-help schemes were simply not geared up to handling the scale of informal growth. But just when policy-makers were throwing their hands up, they were offered a lifeline in the form of a new liberal economic ideology. From the late 1980s onwards, with the Washington Consensus spreading south through the arm-twisting of the World Bank and the International Monetary Fund, the neoliberal agenda took control. Government’s job was to cut spending, privatise, and let the housing market regulate itself. In effect, Turner’s argument for self-determination was turned on its head by politicians who, now relieved of housing obligations, no longer had to pick up the ruinous bill.

The shift with Pérez and Fajardo, then, was that EPM’s profits started to be deployed in the poorest communities, namely, the comunas of the northeast and northwest and the relatively central but haggard Moravia. If neoliberalism insists that utility companies are only fit to be sold off to the private sector, then many a municipal government, not to mention national ones, might look to Medellín and reconsider. The role that EPM played in the rehabilitation of Medellín is symptomatic of a political culture that has not yet bought into the Washington Consensus wholesale. This is ironic, because one of the critiques levelled at Medellín is that it embraced neoliberal development driven by profits from the narco-traffickers. Much has been made of the fact that cartel money was laundered through construction projects, that cartel gangs were involved in the ‘pacification’ of districts that were ripe for development and that, all in all, Medellín’s establishment was in bed with the mob.* All of which was true.


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The Great Economists: How Their Ideas Can Help Us Today by Linda Yueh

"Robert Solow", 3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, Fall of the Berlin Wall, fear of failure, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, Gini coefficient, global supply chain, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, manufacturing employment, market bubble, means of production, mittelstand, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

This was avoided by China, which has led to talk of the so-called Beijing Consensus serving as an alternative model for newly marketizing nations. In vogue after the success of China’s growth and the critiques levelled at the Washington Consensus, could the Chinese model be a model for Myanmar as it embarks on a historical opening to the global economy? Of course, there may not even be a consensus about the Beijing Consensus, as the Chinese growth experience cannot be easily modelled. And there are many elements of China’s marketization process that are similar to the Washington version. The Washington Consensus was a model of economic development promulgated during the 1980s and 1990s that stemmed from the IMF and US Treasury, both located in Washington, DC. The model was premised on privatization and financial and trade liberalization.

The model was premised on privatization and financial and trade liberalization. As a number of developing countries failed to benefit from following these prescriptions, which was seen both in the decade-long recession of the former Soviet Union during the 1990s and in the 1980s Latin American crisis, the Washington Consensus fell out of favour and developing countries sought an alternative. Some turned to China, whose market-oriented reforms proceeded at a more gradual pace and with sequencing of key reforms. For instance, state-owned enterprises were slowly reformed and were not subject to mass privatization until a couple of decades into the reform process. China also established a non-state sector that absorbed the laid-off workers, so preventing persistent large-scale unemployment. But as discussed earlier, one consequence is that reforms are incomplete and state ownership persists.

Crafted by the Nobel laureate Arthur Lewis, this model sees economic growth occurring when workers move out of low-productivity agriculture and into more productive factories and the services economy. Although with a different stress, the end result is the same: industrialization supports economic development. That shift to industry could launch Myanmar into the rapid-growth phase experienced by other Asian countries. So, the Beijing Consensus perhaps offers a better set of guidelines for Myanmar than the Washington Consensus as it is derived from the experience of its East Asian neighbours. About 70 per cent of Myanmar’s population are employed in the agriculture and resources sector, which accounts for over half of the country’s economic output. It means that there is a lot of scope to industrialize, which can launch a country into fast growth as it ‘catches up’, as occurred in the East Asian ‘miracle’ economies of South Korea, Taiwan, Singapore and Hong Kong, which are among the few that have become rich in the post-war period.


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When China Rules the World: The End of the Western World and the Rise of the Middle Kingdom by Martin Jacques

Admiral Zheng, Asian financial crisis, Berlin Wall, Bob Geldof, Bretton Woods, BRICs, British Empire, credit crunch, Dava Sobel, deindustrialization, Deng Xiaoping, deskilling, discovery of the americas, Doha Development Round, energy security, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, global reserve currency, global supply chain, illegal immigration, income per capita, invention of gunpowder, James Watt: steam engine, joint-stock company, Kenneth Rogoff, land reform, land tenure, lateral thinking, Malacca Straits, Martin Wolf, Naomi Klein, Nelson Mandela, new economy, New Urbanism, one-China policy, open economy, Pearl River Delta, pension reform, price stability, purchasing power parity, reserve currency, rising living standards, Ronald Reagan, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, spinning jenny, Spread Networks laid a new fibre optics cable between New York and Chicago, the scientific method, Thomas L Friedman, trade liberalization, urban planning, Washington Consensus, Westphalian system, Xiaogang Anhui farmers, zero-sum game

(Britain’s GDP expanded at a shade over 2 per cent and the United States at slightly over 4.2 per cent per annum between 1820 and 1870, their fastest period of growth in the nineteenth century.)4 The result has been the rapid and progressive transformation of a region with a population of around 2 billion people, with poverty levels falling to less than a quarter by 2007 (compared with 29.5 per cent in 2006 and 69 per cent in 1990).5 The myth that it was impossible for latecomers to break into the club of advanced nations has been exploded. The Asian tigers have instead demonstrated that latecomers can enjoy major advantages: they can learn from the experience of others, draw on and apply existing technologies, leapfrog old technologies, use the latest know-how and play catch-up to great effect. Their economic approach, furthermore, has largely been homespun, owing relatively little to neo-liberalism or the Washington Consensus - the dominant Western ideology from the late seventies until the financial meltdown in 2008.6 Nor is their novelty confined to the economic sphere. The Asian tigers have given birth to a new kind of political governance, namely the developmental state, whose popular legitimacy rests not on democratic elections but the ability of the state to deliver continued economic growth.7 The rise of the Asian tigers, however, has an altogether more fundamental import.

The contrasting approach of China and Western nations towards Africa, and developing countries in general, has led to a discussion amongst Africans about a distinctive Chinese model of development, characterized by large-scale, state-led investments in infrastructure and support services, and aid which is less tied to the donor’s economic interests and less overwhelmingly focused on the extraction of minerals as in the case of the West.40 China’s phenomenal growth, together with the huge reduction in poverty there, has also provoked enormous interest in what lessons it might offer for other developing nations.41 An important characteristic of the Chinese model has been the idea of strong government and the eschewing of the notion of democracy, an approach which has an obvious appeal amongst the more authoritarian African governments. In the light of the country’s economic success, the Chinese approach to governance seems destined to enjoy a much wider influence and resonance in the developing world. The Chinese academic Zhang Wei-Wei has argued that the Chinese model combines a number of features. In contrast to the Washington Consensus, it rejects shock therapy and the big bang in favour of a process of gradual reform based on working through existing institutions. It is predicated upon a strong developmental state capable of steering and leading the process of reform. It involves a process of selective learning, or cultural borrowing: China has drawn on foreign ideas, including the neo-liberal American model, as well as many that have been home-grown.

Finally, it embraces sequencing and priorities, as evidenced, for example, by a commitment to economic reforms first and political ones later, or the priority given to reforms in the coastal provinces before those in the inland provinces.42 There has been considerable debate, in this context, about a Chinese model, sometimes described as the Beijing Consensus. There are certainly fundamental differences between the Chinese approach and the Washington Consensus, with the Chinese model both markedly less ideological and also distinctively pragmatic in the manner of the Asian tigers. It is still far too early to make any considered judgement about the likely long-term merits and demerits of China’s relationship with Africa.43 The experience has been brief and the literature remains thin. The most obvious danger for Africa lies in the fundamental inequality that exists at the heart of their relationship: China’s economy is far bigger and more advanced, the nearest economic challenger, South Africa, being diminutive in comparison, while the population of Africa as a whole is less than that of China’s.


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The Wake-Up Call: Why the Pandemic Has Exposed the Weakness of the West, and How to Fix It by John Micklethwait, Adrian Wooldridge

Admiral Zheng, Affordable Care Act / Obamacare, basic income, battle of ideas, Berlin Wall, Bernie Sanders, Boris Johnson, carried interest, cashless society, central bank independence, Corn Laws, coronavirus, COVID-19, Covid-19, creative destruction, David Ricardo: comparative advantage, Deng Xiaoping, Dominic Cummings, Donald Trump, Etonian, failed state, Fall of the Berlin Wall, global pandemic, Internet of things, invisible hand, Jones Act, knowledge economy, laissez-faire capitalism, McMansion, night-watchman state, offshore financial centre, oil shock, Panopticon Jeremy Bentham, Parkinson's law, pensions crisis, QR code, rent control, road to serfdom, Ronald Reagan, school vouchers, Shoshana Zuboff, Silicon Valley, smart cities, trade route, universal basic income, Washington Consensus

Just as powerful central bankers tamed inflation, people speculated that the bond markets would bind Leviathan. Even socialist Sweden eventually buckled. Public spending there was chopped from 67 percent of GDP in 1993 to 49 percent of GDP, while the top marginal tax rate was cut by 27 percentage points. FAREWELL, WASHINGTON CONSENSUS So was this another revolution? Not really—or certainly not enough of one. At home, Thatcher and Reagan did more to change the debate about the state than they changed the state itself (possibly making reform more difficult). Abroad, the Washington consensus overreached. Privatization aside, neither Reagan nor Thatcher succeeded in reinventing the public sector for the global age they trumpeted. Reagan’s victory over the air traffic controllers did not change much: a study in 1996 found that air traffic controllers reported through sixteen layers of decision-makers (with the number rising to sixty layers when it came to policy and budget questions).10 In her eleven momentous years in office, Thatcher succeeded in reducing social spending from 22.9 percent of GDP in 1979 to 22.2 percent in 1990.


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The Vanishing Middle Class: Prejudice and Power in a Dual Economy by Peter Temin

"Robert Solow", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, anti-communist, Bernie Sanders, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carried interest, clean water, corporate raider, Corrections Corporation of America, crack epidemic, deindustrialization, desegregation, Donald Trump, Edward Glaeser, Ferguson, Missouri, financial innovation, financial intermediation, floating exchange rates, full employment, income inequality, intangible asset, invisible hand, longitudinal study, low skilled workers, low-wage service sector, mandatory minimum, manufacturing employment, Mark Zuckerberg, mass immigration, mass incarceration, means of production, mortgage debt, Network effects, New Urbanism, Nixon shock, obamacare, offshore financial centre, oil shock, plutocrats, Plutocrats, Powell Memorandum, price stability, race to the bottom, road to serfdom, Ronald Reagan, secular stagnation, Silicon Valley, Simon Kuznets, the scientific method, War on Poverty, Washington Consensus, white flight, working poor

Powell’s call to arms for business cohered into what is now called a neoliberal philosophy. It is useful to see this new policy direction in terms of the New Federalism that Nixon proposed in 1969 and the Washington Consensus formulated for developing countries in the 1990s. The New Federalism proposed to counter federal control of Roosevelt’s New Deal by converting specific grants to states into block grants, that is, shifting control over federal money from federal to state governments where state officials could preserve racial discrimination. Among the recommendations in common with the Washington Consensus are the desire for fiscal discipline in place of Keynesian polices, low marginal tax rates, low tariffs, privatization of state enterprises, and deregulation of private markets. Neoliberals added freedom of contracts, by which they typically mean opposition to labor unions, and they abandoned the postwar mandate to maintain full employment.18 Modern conservatives fear the power of the federal government that grew in the world wars and Great Depression, and they oppose the redistribution in a welfare state.

Holder and, 65, 89, 142, 159 slavery and, ix (see also Slavery) timing of elections and, 67–68 turnout rates and, 63–65 women and, 56, 58, 64–65, 67, 94 Voting Rights Act, 15, 58, 65, 67, 89, 94, 142, 159 Wages concepts of government and, 89–92 dual economy and, 3–13 FTE (finance, technology, and electronics) sector and, 16, 20–23, 25, 41–46 growth and, 3–4 Investment Theory of Politics and, 62, 65–70, 72, 75 low-wage sector and, 3, 27–41, 41–46 (see also Low-wage sector) race and, 49, 55, 60 real, 3–4, 21, 32–33 transition and, 41–46 very rich and, 79–81, 84 Walker, Scott, xv Wall Street, 24, 93 Walmart, 122 Walton family, 121 Warmth of Other Suns, The (Wilkerson), 20 War on Drugs, x, xv–xvi, 15, 27, 37–38, 53, 55, 104, 106, 110, 132 War on Poverty, 17, 27, 126, 168n2 Warren, Elizabeth, 53 Washington Consensus, 21 Water systems, 35–36, 129–130 Welfare Queens, 38, 171n27 Welfare state, 21, 80, 101, 104 Whistle blowers, 84 White flight, 34, 38, 117, 125, 179n7 White rage, 51, 101, 104 White supremacist organizations, 169n9 Wilkerson, Isabel, 20 Wilson, William J., 34–35, 39, 132 Witchcraft, 50 Within Our Reach (Schorr), 115, 124 Women, 12, 156 abortion and, 57–58, 72 bodily integrity and, 56–58 civic identity of, 56 college and, 57, 116 concepts of government and, 94 coverture and, 56 employment and, 59–60 English family law and, 56 equal protection clause and, 58, 67, 102 Fifteenth Amendment and, 15, 56 health care and, 56 inequality and, 12 Investment Theory of Politics and, 61, 64–65, 67 jury duty and, 59 mass incarceration and, 103, 106, 157 occupations available to, 59–60, 116 pregnancy and, 58 production and, 59 property rights of, 56–57 public education and, 115–116, 118, 120 rape and, 56–57, 108–109 suffrage and, 58, 64, 67 universities and, 57 voting rights and, 56, 58, 64–65, 67, 94 Worcester Polytechnic Institute, 57 Workers’ compensation, 4, 90–91 World War I era, ix, xi concepts of government and, 94 FTE (finance, technology, and electronics) sector and, 20–21 inequality and, 162 Investment Theory of Politics and low-wage sector and, 27 municipal water systems and, 129 production and, 20 public education and, 133 voting restrictions and, 67 World War II era, ix baby boomers and, 69, 104, 128 Bretton Woods and, 15 concepts of government and, 88, 92 conservative business movement and, 80–81 FTE (finance, technology, and electronics) sector and, 15, 21 GI Bill and, 34, 43, 52, 65 Investment Theory of Politics and, 69 low-wage sector and, 34 postwar prosperity and, 54, 88, 92, 162–164 production and, 3, 80–81 segregation and, 171n16 very rich and, 80–81 Zuckerberg, Mark, 122 Zucman, Gabriel, 82


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The New Economics: A Bigger Picture by David Boyle, Andrew Simms

Asian financial crisis, back-to-the-land, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delayed gratification, deskilling, en.wikipedia.org, energy transition, financial deregulation, financial exclusion, financial innovation, full employment, garden city movement, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, Kickstarter, land reform, light touch regulation, loss aversion, mega-rich, microcredit, Mikhail Gorbachev, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Vilfredo Pareto, Washington Consensus, wealth creators, working-age population

If you helped some people get rich, then they would spend more and it would trickle down through the economy to the poorest. It survives to this day in most of the assumptions of mainstream regeneration and economic development, though it is even more obvious now than it was to Carville that wealth doesn’t trickle down, it floods up. In fact, of course, the great days of trickle down economics were still to come. Every government conditioned by the so-called Washington Consensus, as well as the all-powerful International Monetary Fund (IMF) and World Bank, believed that cutting taxes would in the end stimulate the economy, and – to start with – it did. But in the constant failure of regeneration, redistribution and community revitalization, it was increasingly obvious to most people outside that consensus that trickle down simply did not work. This was an era dominated by the set of policies that became known as ‘neoliberal’, though they bore no relation to any liberalism worthy of the name.

It was more accurately an application of Darwin’s evolutionary theories to economics: a kind of survival of the economically fittest. But their interpretation of the ‘fit’ – the marketable, the profitable, the global – was not only a misreading of Darwin, but deeply inadequate. The financially ‘fit’ survived; those that did not fit into the shape of the new world, people, communities and nations, were bled dry. The Washington Consensus built a devastating machine that could bear no variation, and it assumed a kind of adolescent approach to morality by business, as if it were somehow exempt in the sacred duty of creating wealth. The corporate pioneer John D. Rockefeller once boasted that he was quite willing to pay someone a salary of a million dollars if he were brutal enough. ‘He must be able to glide over every moral restraint with almost childlike disregard,’ he wrote, ‘and has, besides other positive qualities, no scruples whatsoever and be ready to kill off thousands of victims – without a murmur.’19 If you pretend that business is beyond morality, that is unfortunately the kind of business you get.

(Ernst Friedrich, ‘Fritz’) 1, 18, 21–2, 27, 114, 117 SDRs (special drawing rights) 147–8 Seattle (Washington) 41 seeds 91, 117, 119, 140, 141 seigniorage 58–9 Sen, Amartya 12 SERs (special emission rights) 148 set prices 80 sharing 34, 44, 91, 119, 140 shopping 26, 80, 82–3, 104, 105, 125, 133 shops 20 local 75, 80, 82–3, 104, 105, 124, 124–5, 126, 151 see also out-of-town retailing; supermarkets short-termism 11, 13, 14–15 SIVs (structured investment vehicles) 1, 5–6, 6 skills 13, 60, 98, 100, 101, 105, 132 190 THE NEW ECONOMICS Slow Food 118, 119–20 Small is Beautiful (Schumacher, 1977) 1, 21 small islands 31–2, 33–4 small-scale banks 146 Smith, Adam 89 social auditing 26, 45, 153–4 social banks 144, 146 social capital 19, 33, 54–5, 86–7, 89, 126–7, 132 Wal-mart and 124–5 social credit 19, 58, 59, 90 social networks 36, 127, 132 social norms 67–8, 71 social relationships 34, 45 social return on investment (SROI) 45 Soros, George 51, 148 South Africa 136 South African New Economics (Sane) 58 South Shore Bank (Chicago) 144 sovereignty 55, 113 special drawing rights (SDRs) 147–8 special emission rights (SERs) 148 speculation 22, 53, 81, 82, 84, 146, 158 deterring 51–2, 60, 61 financial 7, 15, 50–1, 51–2, 61 spirituality 4–5, 18, 21–2, 75, 79, 81 SROI (social return on investment) 45 Stamp Out Poverty 61 Starkey, Richard 118 state 12–13, 28, 155 see also governments steady-state economy 43, 44 Stern Report (Stern, 2006) 155 Stiglitz, Joseph 61 stress 4, 35, 37, 83 structured investment vehicles see SIVs sub-prime loans 1, 5–7, 144 sub-Saharan Africa 82 ‘subsidiarity’ 117 subsidies 11, 82, 112, 113, 117, 119, 123–4 success 79–80, 89 measuring 2, 8, 10, 43, 44, 55, 154, 156, 158 suicides 83, 91, 140 super rich 120, 141, 142 supermarkets 80, 85, 90, 104, 105, 123–6, 129 sustainability 24, 73, 89, 113, 114, 116, 117 sustainable development 51–2, 61 Swann, Bob 120, 151 Sweden 102 Swift, Jonathan 18 Switzerland 52, 62 T-bills (Treasury bills) 49–50, 58 takeovers 84, 142, 143 talent system 58 targets 9, 41, 129 tariffs 113 tax havens 15, 52–3, 53, 61, 136, 157 Tax Justice Network 136–7 taxation 73, 92, 116 taxes 10, 15, 27, 32, 43, 62, 136–7 paid by corporations 52, 61, 137, 157 TB (tuberculosis) 130, 148 TEQs (tradeable energy quotas) 117–18 terra (currency) 56, 61, 120 Tesco 85, 116, 125 Thatcher, Margaret 21, 22, 23, 27 The Other Economic Summit see TOES Thoreau, Henry David 69 time 44, 45–6, 60, 103, 132 time banks 58, 59, 60, 89, 92, 123, 131, 132 Titmuss, Richard 65, 70 Tobin, James 51–2 Tobin Levy 51–2, 61 TOES (The Other Economic Summit) 23–5 Toffler, Alvin 88 trade 25, 81, 109–10, 111–15, 116, 148, 158 fair trade 26, 119, 145, 153 Trade-Related Aspects of Intellectual Property see TRIPS tradeable energy quotas (TEQs) 117–18 traffic speed 65–6, 74 transport 67, 74, 112, 115 see also public transport Treasury bills (T-bills) 49–50, 58 INDEX trickle down 27–8, 39–40, 138 ‘doesn’t work’ 27, 52, 104 TRIPS (Trade-Related Aspects of Intellectual Property) agreement (1995) 113, 117 tuberculosis (TB) 130, 148 Turning Point network 23 UK (United Kingdom) 4, 39, 55, 61, 70, 85, 119, 145 aid from 136 corporation tax gap 137 cultural enrichment 111 debt 83, 141 Ecological Debt Day 114 energy 102, 114 food production 96, 114 Happy Planet Index 32 ‘illth’ 4, 35 interest rates 144–5 local savings schemes 61 money deposits 136 orchard loss 111, 112, 115, 124 poverty 82 real costs of road transport 115 super-casinos 14 trade 112, 113 well-being 4, 35–6, 41, 68 working hours 68 young people in 35–6 see also house prices Ukraine 110 UN (United Nations) 39, 51–2, 60, 91, 110–11, 157 unemployment 44, 46, 55–6, 91–2, 157 unpaid work 87–9 Unto This Last (Ruskin, 1860) 18, 29 USA (United States) 39, 57, 61, 82, 113, 119, 127, 157 and Cuba 95 debt 49–50, 84, 141 Happy Planet Index 32 invasion of Iraq (2003) 49, 60 subsidies 11, 113 trade deficit 50 191 unemployment 55 well-being deteriorating 41, 68 usury 80, 81, 144–5 value 44, 98, 99 measuring 10, 15, 29, 53, 59, 115 values 11, 71, 115, 127 Vanuatu 31–2, 35, 42 Vaxjo (Sweden) 102 vegetable box schemes 104 ‘victory gardening movement’ 96 Virgil, Eclogues 110 voluntary sector 13, 87, 132, 145 voting 124–5, 127 Wal-mart 104, 123, 124–5 Wall Street Crash (1929) 1, 51, 90 Waring, Marilyn 38–9 Washington Consensus 27–8 waste 97, 100–1, 158 Waste Electrical and Electronic Equipment directive see WEEE directive wealth 18, 28, 38, 41–2, 52, 89, 141–2, 152 defining 18–19, 32, 34, 35, 38 and ‘illth’ 29, 35–6 local 14, 53–4 measuring 32, 36–40, 53–4, 143 money and 19, 32, 38, 78, 143 new economics and 3, 15, 35, 37 real 2, 32, 37–40 see also Happy Planet Index WEDGE project 23 WEEE (Waste Electrical and Electronic Equipment) directive 98, 100, 101 welfare 25, 28, 44, 127, 129, 153 Welfare State 19, 129 well-being 4–5, 25, 45–6, 99, 158 demand for 4–5, 11, 68–9 falls in 4, 37, 41, 68, 78 GDP and 4, 36, 37 measuring 4, 18, 32–3, 34, 43 money and 18, 21, 81 as motivation 4–5, 11, 68–9, 72 new economics and 41–7, 68–9 192 THE NEW ECONOMICS origins of 43 willingness to pay 99 Willington, Sally 23 Wir currency 62 Witt, Susan 151 Woking (Surrey) 102–3 women 38–9, 77–8, 79, 83, 144 work 24, 45, 81, 84–5, 86–7, 92 concept of 25, 83, 86, 87–9 to pay mortgages 46, 68, 73, 77–8, 79, 81, 83, 84, 89, 126–7, 140 of women 38–9, 77–8, 83 working hours 45–6, 78, 79, 83, 92 World Bank 27, 81, 82, 91, 137, 139, 143, 147 Yank Tanks (film, Schendel, 2002) 95 young people, UK 35–6 youth courts 129, 132 Yunus, Mohammed 143–4 Zimbabwe 32 Zurich (Switzerland) 66


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The World in 2050: Four Forces Shaping Civilization's Northern Future by Laurence C. Smith

Bretton Woods, BRICs, business cycle, clean water, Climategate, colonial rule, deglobalization, demographic transition, Deng Xiaoping, energy security, flex fuel, G4S, global supply chain, Google Earth, guest worker program, Hans Island, hydrogen economy, ice-free Arctic, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, invisible hand, land tenure, Martin Wolf, megacity, Mikhail Gorbachev, New Urbanism, oil shale / tar sands, oil shock, peak oil, Pearl River Delta, purchasing power parity, Ronald Reagan, Ronald Reagan: Tear down this wall, side project, Silicon Valley, smart grid, sovereign wealth fund, special economic zone, standardized shipping container, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, trade route, UNCLOS, UNCLOS, urban planning, Washington Consensus, Y2K

.: Farrar, Straus & Giroux, 2005). 28 From “Store Openings,” http://franchisor.ikea.com/ (accessed November 13, 2009). 29 P. 38, Steger, Globalization: A Very Short Introduction (Oxford: Oxford University Press, 2003). 30 For more on how the United States exported its business model to the world, see J. A. Agnew, Hegemony: The New Shape of Global Power (Philadelphia: Temple University Press, 2005). 31 The Washington Consensus is attributed to John Williamson of the Peterson Institute for International Economics, a think tank in Washington, D.C. (www.iie.com). Its policies have now been adopted by (or forced onto, depending on one’s point of view) many developing countries. Neoliberals praise these reforms, citing new markets and jobs for struggling people. Critics point to two-dollar-a-day wages while multinational corporations grow rich. The Washington Consensus and similar policies remain highly controversial. If you have any antiglobalization friends, mention it to them sometime and watch their mouths foam. 32 “Expanding trade and investment has been one of the highest priorities of my administration. . . .

The neoliberalism movement was championed by British prime minister Margaret Thatcher and U.S. president Ronald Reagan, but was rooted in the ideas of Adam Smith. Throughout the 1980s and 1990s the IMF, WTO, and World Bank aggressively pursued agendas of liberalizing (deregulating) trade markets around the world, vigorously urged on by the United States.30 A common tactic was to require developing countries to accept neoliberal reforms to qualify for IMF or World Bank loans. This practice was exemplified by the “Washington Consensus,” a controversial list of hard-nosed reforms including trade deregulation, opening to direct foreign investment, and privatization of state enterprises.31 In the United States, presidents from both political parties also worked to dismantle international trade barriers. Of particular importance to this book was the North American Free Trade Agreement (NAFTA), proposed in 1991 by President George Herbert Walker Bush to remove trade barriers between the United States, Mexico, and Canada.

Department of Energy U.S. Department of State U.S. Federal Energy Regulatory Committee U.S. Geological Survey (USGS) U.S. Minerals and Management Service U.S. National Intelligence Council U.S. National Science Foundation Uzbekistan Vancouver, British Colombia Varlomov, Alexei Venezuela Verkhoyansk, Russia Vietnam Vikings volcanoes Volta River Vörösmarty, Charlie Walmart warfare Washington Consensus Water Follies (Glennon) water resources: and agriculture; aquifers; and climate change; crises related to; and drought; and energy consumption; export projects; and foreign policy; and global water stress; and groundwater pumping; and hydropower; importance of; and the Intertropical Convergence Zone; large water projects; measurement of; and population growth; and privatization; prospects for; and runoff; and sanitation; and snowpack and glaciers; and transboundary rivers; and urbanization; and virtual water trade WaterGAP Watt-Cloutier, Sheila weather patterns.


pages: 471 words: 124,585

The Ascent of Money: A Financial History of the World by Niall Ferguson

Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, negative equity, Nelson Mandela, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, stocks for the long run, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, undersea cable, value at risk, Washington Consensus, Yom Kippur War

Indeed, there was arguably a Paris Consensus before there was a Washington Consensus (though in many ways it was building on a much earlier Bonn Consensus in favour of free capital markets).64 In London, too, Margaret Thatcher’s government pressed ahead with unilateral capital account liberalization without any prompting from the United States. Rather, it was the Reagan administration that followed Thatcher’s lead. Jaime Roldós Aguilera of Ecuador . . . . . . and Omar Torrijos of Panama: Allegedly victims of the ‘economic hit men’ Stiglitz’s biggest complaint against the IMF is that it responded the wrong way to the Asian financial crisis of 1997, lending a total of $95 billion to countries in difficulty, but attaching Washington Consensus-style conditions (higher interest rates, smaller government deficits) that actually served to worsen the crisis.

Yet the days had gone when investors could confidently expect their governments to send a gunboat when a foreign government misbehaved. Now the role of financial policing had to be played by two unarmed bankers, the International Monetary Fund and the World Bank. Their new watch-word became ‘conditionality’: no reforms, no money. Their preferred mechanism was the structural adjustment programme. And the policies the debtor countries had to adopt became known as the Washington Consensus, a wish-list of ten economic policies that would have gladdened the heart of a British imperial administrator a hundred years before.bc Number one was to impose fiscal discipline to reduce or eliminate deficits. The tax base was to be broadened and tax rates lowered. The market was to set interest and exchange rates. Trade was be liberalized and so, crucially, were capital flows. Suddenly ‘hot’ money, which had been outlawed at Bretton Woods, was hot again.

violence, in absence of money 18-19 ‘virtual’ money see electronic money VOC (Dutch/United East India Company) 128-37 shares in 129-30 structure 128-9 volatility: alleged death of 6 projected return of 356 see also investors; stock markets Volcker, Paul 166 Voltaire 145 voting rights see electoral reform wage cuts 160 Wallace, Robert 190-95 Wall Street crash 158-63 war: and capitalist system 297-8 causing ‘bankruptcy of nations’ 297 and commodity markets and prices 10 conditions for 304 finance for 1 globalization and 338-40 and industrial change 348 and inflation see inflation and insurance see insurance and money 1 probabilities 183 and trade 134 war bonds 101-2 and welfare state 202-4 see also bonds and bond markets War Damage Corporation 206 War Loans 295 Washington, D.C. 306 Washington Consensus 308 Washington Mutual 266 Waterloo, Battle of 3 Watkins, Sherron 171-2 wealthy 26 weapons see arms; technological innovation; war weather: derivatives 227-8 extreme 6; see also disasters and stock markets 159 Webster, Alexander 190-95 welfare state 199-211 backlash against 215 dismantling of 211 and economy 209-11 and war see war Wellington, Duke of 80-1 Western Union 317 Westminster, Duke of 234 wheat prices see grain widows and orphans 192-4 William of Orange 75 Williamson, John 308n.


pages: 651 words: 135,818

China into Africa: trade, aid, and influence by Robert I. Rotberg

barriers to entry, BRICs, colonial rule, corporate governance, Deng Xiaoping, energy security, European colonialism, failed state, global supply chain, global value chain, income inequality, Khartoum Gordon, land reform, megacity, microcredit, offshore financial centre, one-China policy, out of africa, Pearl River Delta, profit maximization, purchasing power parity, RAND corporation, Scramble for Africa, South China Sea, special economic zone, structural adjustment programs, trade route, Washington Consensus, zero-sum game

Vigorous debate over appropriate development models consumed much intellectual and political energy in Africa through the 1970s and 1980s. Disillusionment induced by the collapse of the Soviet Union at the end of the Cold War and the seeming global triumph of the Washington Consensus led to a cessation of the debate in the 1990s. 13-7561-4 ch13.qxd 9/16/08 4:23 PM Page 288 288 ndubisi obiorah, darren kew, and yusuf tanko The ensuing period was characterized by structural adjustment, poverty reduction, and other economic reform programs imposed on African governments by Western donors and international finance institutions. Many Africans, including intellectuals and civil society actors, perceive that their governments’ adoption of the Washington Consensus has failed to deliver both bread and freedom. African rulers learned that they could successfully engage in a sleight of hand by adopting the barest minimum in political and economic reforms, which would permit bureaucracies to continue aid flows to their countries, while vigorously resisting substantive change.

Many in African intellectual and political circles are impressed by China’s seeming geometric economic progress since Deng Xiaoping initiated economic reforms in China in the 1980s. This success, often attributed to China’s state-led development model, has rekindled the debate in Africa over appropriate paths to development and encouraged many Africans to look to East Asia for political and economic models. Many in Africa question the wisdom of remaining wedded to the Washington Consensus and ask if indeed bread does not count more than the vote, and if human rights and democracy are not really of secondary concern to attaining political stability and economic progress. The debate in Africa over the China model is not, however, based on a romantic vision. Admiration among the Nigerian media for China’s economic success is often balanced with acute recognition of its social costs and the lack of political freedoms.

-China Economic and Security Family Planning Association, 205; Review Commission, 181, 218 16-7561-4 index.qxd 9/16/08 4:25 PM Page 338 338 Index Value-added products, 99, 106–07 West Kordofan, Sudan, 178 Venezuela, 163 Whelan, Theresa, 168 Vietnam, 26, 71; foreign aid and, 198; White Nile River, 171 network trade and, 107 Whites, 260, 263 Vines, Alex, 40 Wolfowitz, Paul, 218, 302 Wood Mackenzie (analysts firm), 120 Wade, Abdoulaye, 75, 242 World Bank, 261; aid coordination and, WAHUM Fabrics, 291 303, 308; on China as creditor, 302; Wang Dongming, 240 Chinese foreign aid and, 208, 210, Wang Jiarui, 240 218; Eximbank and, 198; high pay- Wang Qiming, 35 ments and, 123; tripartite coopera- Warri, Nigeria, 281 tion and, 205; vs. China model, 288 Washington Consensus, 287–88 World Health Organization (WHO), Van der Wath, Kobus, 52 301 Websites, 219, 240; concessional loans World Trade Organization (WTO), 2, and, 219–20, 223, 226 51, 68, 213; China’s entry into, 58, 68 Wei Jianguo, 34 Wu Bangguo, 241–42 WEMPCO (Western Metal Products Wu Guanzheng, 24 Company), 291 Wu Xueqian, 28 Wen Jiabao, 120; foreign aid and, 209; visits to Africa by, 3, 51, 53 Xiamen, China, 138–40 Wenran Jiang, 13 Xinjiang Uyghur Autonomous Region, West, 116–17, 213, 217–18, 243; African 12 resources and, 290; anticolonialism and, 231; arms transfers and, 163; Yangtze River Delta, 138 balance of power and, 273, 290; Yar’Adua, Umaru, 275 China as alternative to, 274, 287; on Youth militias, 261 China as creditor, 303; Chinese- African partnership and, 299; condi- Zaire (Democratic Republic of Congo), tional assistance and, 251; 27, 157–59; debt-equity swaps and, development model of, 287–88, 298; 205 human rights and, 263–64; image of, Zambia, 6, 11, 27–28, 56, 117; arms 305; imperialism and, 157; market transfers to, 163; China model and, reforms and, 234; military assistance 273; Copperbelt region, 143–44; crit- and, 159, 174; Nigeria and, 277; oil icism of China by, 301; development and, 109–11, 281, 305; oil strategy and, 146; elections in, 235; foreign and, 109–12; post-Cold War era and, aid and, 200; immigrant backlash in, 300; reforms and, 290–91; Sudan 272–73; infrastructure and, 74; and, 124–25; transparency and, 124; Kaunda and, 146; labor and, 122; Zimbabwe and, 261 military ties to, 155–56, 158, 161, West Africa, 100, 106; SEZs and, 148 173; mining in, 252; as recipient of Western Sahara: peacekeeping in, Chinese arms, 9–10; SEZs and, 6, 176–77 140; Tanzam Railway and, 147 16-7561-4 index.qxd 9/16/08 4:25 PM Page 339 Index 339 Zambia Privatization Agency, 147 culpability and, 252, 261–63, 264–66; Zanzibar, 158 conflict in, 308; Confucius Institutes Zhai Jun, 175, 306 in, 29, 78; corruption and, 301; dele- Zhao Ziyang, 28, 203–05; four princi- gations from, 242; human rights and, ples of, 26–27 14–15, 55, 251, 260–61; military Zhejiang Normal University, 29 assistance and, 159–61, 173–75; Zheng He, 116, 179–80 stability-building efforts in, 17; Zhong Xing Telecommunication Equip- trade with, 6, 55; visited by Chinese ment Company, 275 leaders, 28 Zhongyuan Petroleum Exploration Zimbabwe African National Union— Bureau, 179 Patriotic Front (ZANU-PF), 242, Zhou Enlai, 23, 146, 231; China’s oil 260–61 strategy and, 112; eight principles of, Zimbabwe African National Union 26–27; foreign aid and, 200 (ZANU), 156, 260 Zhu Di, 116 Zimbabwe African People’s Union Zhuhai, China, 138, 140 (ZAPU), 260 Zimbabwe, 3, 10, 69, 81, 156; antidemo- Zimbabwe Staff College, 175 cratic regimes in, 11–15, 37; arms Zoellick, Robert, 306–07 transfers and, 9–10, 163; Chinese ZTE Corporation, 167 16-7561-4 index.qxd 9/16/08 4:25 PM Page 340 Document Outline Table of Contents Preface Chapter 1: China's Quest for Resources, Opportunities, and Influence in Africa Chapter 2: China's New Policy toward Africa Chapter 3: China's Emerging Strategic Partnerships in Africa Chapter 4: Africa and China: Engaging Postcolonial Interdependencies Chapter 5: Chinese-African Trade and Investment Chapter 6: Searching for Oil Chapter 7: Special Economic Zones Chapter 8: Military and Security Relations Chapter 9: China's Foreign Aid in Africa Chapter 10: Chinese Concessional Loans Chapter 11: China's Political Outreach to Africa Chapter 12: China's Role in Human Rights Abuses in Africa Chapter 13: "Peaceful Rise" and Human Rights Chapter 14: China's Renewed Partnership with Africa Contributors Index Table of Contents Partnerships in Africa


pages: 606 words: 87,358

The Great Convergence: Information Technology and the New Globalization by Richard Baldwin

"Robert Solow", 3D printing, additive manufacturing, Admiral Zheng, agricultural Revolution, air freight, Amazon Mechanical Turk, Berlin Wall, bilateral investment treaty, Branko Milanovic, buy low sell high, call centre, Columbian Exchange, commoditize, Commodity Super-Cycle, David Ricardo: comparative advantage, deindustrialization, domestication of the camel, Edward Glaeser, endogenous growth, Erik Brynjolfsson, financial intermediation, George Gilder, global supply chain, global value chain, Henri Poincaré, imperial preference, industrial cluster, industrial robot, intangible asset, invention of agriculture, invention of the telegraph, investor state dispute settlement, Isaac Newton, Islamic Golden Age, James Dyson, Kickstarter, knowledge economy, knowledge worker, Lao Tzu, low skilled workers, market fragmentation, mass immigration, Metcalfe’s law, New Economic Geography, out of africa, paper trading, Paul Samuelson, Pax Mongolica, profit motive, rent-seeking, reshoring, Richard Florida, rising living standards, Robert Metcalfe, Second Machine Age, Simon Kuznets, Skype, Snapchat, Stephen Hawking, telepresence, telerobotics, The Wealth of Nations by Adam Smith, trade liberalization, trade route, Washington Consensus

He continues: “In most versions of high development theory, the self-reinforcement came from an interaction between economies of scale at the level of the individual producer and the size of the market.”3 The job of policymakers was to get the virtuous circle spinning. In the first wave of thinking, the standard way of implementing this “big push” was to reserve the local market to local productions by raising import tariffs sky-high. This was called the “import substitution industrialization” strategy. Its widespread failure was brought home by the 1980s debt crises. A second wave of theories, called the “Washington Consensus,” embraced the same virtuous cycle groundwork but relied more on free markets as the cycle starter. By the time Lindauer and Pritchett penned their piece, enthusiasm for the second wave had gone flat. Many tried it but few succeeded. Worse yet, the success stories seemed to defy the thinking. The roaring success of Asia, especially China, was something Lindauer and Pritchett called “puzzling.”

See agriculture and food foreign direct investment (FDI) , 102–103, 239, 249, 250. See also bilateral investment treaties (BTIs) The Foundations of Science (Poincaré), 281 fractionalization (fragmentation) of production, 137, 142, 168, 175–176, 196–206, 203f, 231, 232, 290, 291 France, 188. See also Europe; G7 Frantz, Brian, 49 free trade, 101, 125, 129, 161, 166, 190–191, 193–196, 194f, 209. See also GATT; liberal policies; Washington Consensus Friedman, Thomas, 142 Fujita, Masahisa, 127, 179 future (third unbundling), 8–10, 281–301 G7/global North/developed nations, 5–7; agglomeration and, 129, 188; BITs and, 104; communication and, 286–287; domestic value-added in export growth by sector 1994-2008, 94f, 95, 96; exports and, 151–154, 153f; GATT and, 101; global GDP share and, 48f, 81f, 89–, 92f, 93, 186; global income share of 1500-2020, 2f–3; Great Convergence and, 136; ICT/comparative advantage and, 139, 144; ideas and, 124; income divergence and, 57, 59; industrial clustering and, 124; industrialization and, 5, 55–56, 59–60, 60f, 61, 109; manufacturing and, 3f, 86–87, 88f, 89, 90f, 91, 133; national vs. corporate interest and, 169–170; New Globalization and, 12, 110, 143–144, 163f; New Globalization policies and, 225–241; Old Globalization (first unbundling) and, 78, 123; people-moving costs and, 7; servicification and, 155, 156–160; skilled workers and, 205; social policies and, 240; tariffs and, 72f, 100f, 101; trade with developing nations, 161; transfer of knowledge and, 175; urbanization and, 63; workers and, 13, 162, 165, 166, 168.

-Canada Auto Pact (1965), 150–151 Valeo, 202 value-added, 158f, 159 value chains, 157. See also global value chains (GVCs) Van Reenen, John, 200 Venables, Tony, 127, 179, 195, 208–211 Venezuela, 95. See also Latin America; R11 (Rising Eleven) Versailles Treaty, 64 Vietnamese case studies, 262, 270, 275–276 Vietnamese case study, 145–146 virtual presence, 98 visas, 239, 240 wages, 8, 12–13, 186–187, 201–202, 232, 290, 292 Wallerstien, Immanuel, 208 Washington Consensus, 244 water transport, inland, 49 The Wealth of Nations (Smith), 39, 40, 198–199 Weinberg, Gerhard, 66 “What’s the Big Idea? The Third Generation of Policies for Economic Growth” (Lindauer and Pritchett), 243, 244 “When Did Globalization Begin?” (O’Rourke and Williamson), 53 “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization” (Samuelson), 147–148 Why the West Rules—For Now (Morris), 25 Williamson, Jeff, 5, 53 Wilson, Charles Erwin, 169–170 Wilson, Woodrow, 64 Winkler, Deborah, 272 wire harnesses examples, 79, 260, 261, 270 workers and jobs: cities and, 235; future and, 164–165, 284–285, 294–295; global value chains and, 230–231; manufacturing and, 232–234; New Globalization (second unbundling) and, 162, 164–170, 166f, 175, 176, 225, 236; Old/New Globalization compared, 166f–169; textile-mill, 236–237.


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The Post-American World: Release 2.0 by Fareed Zakaria

affirmative action, agricultural Revolution, airport security, anti-communist, Asian financial crisis, battle of ideas, Berlin Wall, Bretton Woods, BRICs, British Empire, call centre, capital controls, central bank independence, centre right, collapse of Lehman Brothers, conceptual framework, Credit Default Swap, currency manipulation / currency intervention, delayed gratification, Deng Xiaoping, double entry bookkeeping, failed state, Fall of the Berlin Wall, financial innovation, global reserve currency, global supply chain, illegal immigration, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, Mahatma Gandhi, Martin Wolf, mutually assured destruction, new economy, oil shock, open economy, out of africa, Parag Khanna, postindustrial economy, purchasing power parity, race to the bottom, reserve currency, Ronald Reagan, Silicon Valley, Silicon Valley startup, South China Sea, Steven Pinker, The Great Moderation, Thomas L Friedman, Thomas Malthus, trade route, Washington Consensus, working-age population, young professional, zero-sum game

Before 2008, whatever people thought of American foreign policy, they all agreed that the United States had the most modern, sophisticated, and productive economy in the world—with the most advanced capital markets. As a result, it held hegemony not just in military power and diplomacy but in the realm of ideas. Central bankers and treasury ministers around the world studied the basics of their profession at American schools. Politicians developed their economies by following the advice prescribed by the Washington consensus. The innovations of Silicon Valley were the envy of the world. New York’s deep, lucrative capital markets were admired and imitated on every continent except Antarctica. As Brad Setser, a fellow at the Council on Foreign Relations, has noted, globalization after World War II was almost synonymous with Americanization. “Foreign borrowers looking to raise funds tended to issue bonds denominated in dollars, made use of New York law, and met the Securities and Exchange Commission’s standards for disclosure,” he writes.

When I have put the same question to Indian or Latin American officials, they launch into complicated explanations of the need for rural welfare, subsidies for poor farmers, and other such programs, all designed to slow down market forces and retard the historical—and often painful—process of market-driven industrialization. But Beijing’s approach has also been different from that advocated by many free-market economists—a program of simultaneous reforms on all fronts that is sometimes called the “Washington consensus.” Most significantly, it is different from Russia’s shock therapy approach under Boris Yeltsin, which Chinese leaders studied carefully and often cite as a negative example, probably agreeing with Strobe Talbot’s pithy description when he served in the Clinton administration: “Too much shock, too little therapy.” Rather than a big bang, Beijing chose an incremental approach, one that I would call a grow-the-denominator strategy.

Information Services, 271 Uttar Pradesh, 179 Uzbekistan, 54 Valentine’s Day, 88 Vedrine, Hubert, 246 Véliz, Claudio, 187 Venezuela, 6, 19, 31, 55, 190, 194n venture capital, 201–2 Vesalius, Andreas, 68 Victoria, Queen of England, 184–85 Vietnam, 20, 133–34, 143, 157, 199, 252, 281, 284 Vietnam War, 20, 199, 252, 284 Vijayanagar, 67 visas, travel, 280 Voice of America, 96 Volcker, Paul, 25 Voltaire, 123 wage levels, 67, 206, 207, 229, 282 Wahhabism, 12 Wall Street Journal, 209 Walmart, 104, 281 warfare, 69, 73, 76, 85–86 War of 1812, 194 war on terror, 29, 241, 264, 269, 272–73, 276–80 “Washington consensus,” 107 Washington Post, 30, 211 Watergate scandal, 284 water supplies, 33 wealth, 65–67, 70n, 75, 76, 93–94, 151–52, 215–16 weapons of mass destruction (WMDs), 17, 250 Weber, Steven, 38 WEF Competitiveness Index, 212–13 Welch, Jack, 228 Weller, Robert, 126 Wen Jiabao, 114, 119, 134, 135 Western culture, 1–5, 15, 38, 41, 62–99, 126–27 wheat prices, 21, 31, 67 Whelan, Theresa, 270 Wilhelm II, Emperor of Germany, 186n Wilson, Woodrow, 182 Wohlforth, William, 257 Wolf, Martin, 139, 232 women’s rights, 88–89, 93, 157–58, 160–61 working class, 216 World Bank, 24, 41, 55, 130 World Economic Forum, 146–47, 200, 212–13 World Economy, The: A Millennial Perspective, (Maddison), 66n World Trade Organization (WTO), 5, 27, 108, 137 World War I, 162, 190, 191, 195, 253 World War II, 20, 36–38, 40, 101, 134–35, 195–97, 253, 254, 256, 284 Wu Jianmin, 118, 128 Xinghai Fang, 118–19 Yalta Conference (1945), 196, 254 Yangtze River, 71, 111 Yeltsin, Boris, 107 yen, value of, 282 Youth (Conrad), 85 Yugoslavia, 10, 245 yutori kyoiku (relaxed education), 212 Yu Yongding, 49 Zambezi, 80 Zarqawi, Abu Mussab al-, 12 Zawahiri, Ayman, 13, 15 Zenawi, Meles, 130 Zheng Bijian, 119 Zheng He, 62–64, 70, 71, 77 Zimbabwe, 26, 130 * Even if an attack were to take place tomorrow, the fact that, for nine years, Al Qaeda Central has been unable to organize one explosion anywhere is surely worth noting


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Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State by Paul Tucker

Andrei Shleifer, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Ben Bernanke: helicopter money, Berlin Wall, Bretton Woods, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, conceptual framework, corporate governance, diversified portfolio, Fall of the Berlin Wall, financial innovation, financial intermediation, financial repression, first-past-the-post, floating exchange rates, forensic accounting, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, incomplete markets, inflation targeting, information asymmetry, invisible hand, iterative process, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, liberal capitalism, light touch regulation, Long Term Capital Management, means of production, money market fund, Mont Pelerin Society, moral hazard, Northern Rock, Pareto efficiency, Paul Samuelson, price mechanism, price stability, principal–agent problem, profit maximization, quantitative easing, regulatory arbitrage, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Robert Bork, Ronald Coase, seigniorage, short selling, Social Responsibility of Business Is to Increase Its Profits, stochastic process, The Chicago School, The Great Moderation, The Market for Lemons, the payments system, too big to fail, transaction costs, Vilfredo Pareto, Washington Consensus, yield curve, zero-coupon bond, zero-sum game

Administrative agencies now regulate the terms of trade (competitive conditions) in many industries, health and safety at work and in public spaces, the quality of goods and services sold to consumers, social discrimination, the quality of public services, and the integrity of the higher reaches of the state (public appointments, electoral practices, legislators’ expenses). Furthermore, since the 1990s international organizations have been promoting independent agencies as a “good thing.” Central bank independence was prominent in the 1990s’ “Washington Consensus” on global macroeconomic and financial management. The International Monetary Fund (IMF) advocates independence for financial regulators. The Organisation for Economic Co-operation and Development (OECD) promotes delegated governance across a wider terrain.1 There is something striking about an official consensus in favor of insulating policy from politics articulated by institutions that are themselves nonmajoritarian, as critics are not slow to point out.

As CBI spread, it became harder to buck the trend, via what some have termed mimesis.9 Eventually, this was institutionalized in canons of orthodoxy. In Europe, that came through the Delors Report’s strong recommendation that any monetary union be founded upon an independent central bank. In the wider world, it worked through IMF advocacy and, in specific cases, conditions attached to support packages, as part of the so-called Washington Consensus.10 Pristine and Parsimonious For a couple of decades, the monetary policy conducted under this global standard was fairly simple and straightforward. Compared with much of the administrative state, central banks did not rely on a plethora of “key performance indicators,” which are useful for managing projects and for delivery functions but not for facilitating public debate on achieving a public purpose.

Arguably, it is natural to read the first clause as an objective (albeit one that, in terms of the Principles, is hard to monitor) and the second as the purpose (Fisher, “Financial Stability,” and Tucker, “Monetary Policy”). 9 McNamara, “Rational Fictions.” 10 Williamson, “Washington”; and a retrospective, distinguishing between earlier and later versions of the package, in Fischer, “The Washington Consensus.” 11 O’Neill, A Question of Trust and “Perverting Trust.” 12 Woodford, “Principles and Public Policy,” makes similar points. As it happens, I do not share the enthusiasm for some of the specific substantive principles Woodford advances, which I think mix up practicable policy in a world of wobbly rationality with ideal metastandards for evaluating earthly economic life. 13 Hetzel and Leach, “Treasury-Fed Accord.” 14 Woodward, Maestro. 15 Volcker, “Triumph of Central Banking?”


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Rendezvous With Oblivion: Reports From a Sinking Society by Thomas Frank

Affordable Care Act / Obamacare, Bernie Sanders, big-box store, business climate, business cycle, call centre, crowdsourcing, David Brooks, deindustrialization, deskilling, Donald Trump, edge city, Frank Gehry, high net worth, income inequality, Jane Jacobs, Jeff Bezos, McMansion, new economy, New Urbanism, obamacare, offshore financial centre, plutocrats, Plutocrats, Ponzi scheme, profit maximization, Ralph Nader, Richard Florida, Ronald Reagan, Silicon Valley, single-payer health, The Death and Life of Great American Cities, too big to fail, urban planning, Washington Consensus, Works Progress Administration

This means winning a two-thirds majority in a lame-duck legislative body that is still filled with his opponents, and the bulk of the movie is a close study of the lobbying and persuading and self-censoring to which Lincoln and his team must descend in order to, well, free the slaves. These are the lessons for our time that Spielberg has plucked from Goodwin’s Lincoln saga. And upon beholding the film, the upholders of the Washington consensus saw the clouds part and the sun shine through. Yet another commonplace had been magnificently reaffirmed—and this time it was the emptiest D.C. cliché of all. “It’s compromise,” is how Goodwin summarized the film’s message for an interviewer. And the commentariat chimed in unison: Yes! We have learned from this movie, they sang, that politicians must Make Deals. That one must Give Something to Get Something.

Nevertheless, when voiced by the individuals in question, they become unacceptable. We hear a lot these days about the dangers to speech posed by political correctness, about those insane left-wing college students who demand to be shielded from uncomfortable ideas. What I am describing here is something similar but far more consequential. It is the machinery by which the boundaries of the Washington consensus are enforced. You will recall how, after the Nevada unpleasantness, Eugene Robinson, who claimed to share Sanders’s philosophy, nonetheless condemned the candidate’s criticism of the Democratic Party’s nominating process as “reckless in the extreme.” Impugning the party, Robinson argued, might empower Donald Trump. Looking back, however, it seems to me that the real recklessness is the idea that certain political questions are off-limits to our candidates—that they must not disparage the party machinery, that they must not “revile” the Wall Street bailouts, and so on.


What We Say Goes: Conversations on U.S. Power in a Changing World by Noam Chomsky, David Barsamian

banking crisis, British Empire, Doomsday Clock, failed state, feminist movement, Howard Zinn, informal economy, liberation theology, mass immigration, microcredit, Mikhail Gorbachev, Monroe Doctrine, oil shale / tar sands, peak oil, RAND corporation, Ronald Reagan, Thomas L Friedman, union organizing, Upton Sinclair, uranium enrichment, Washington Consensus

The economic policies he supports have been a disaster for most of the global south. If you take a look at the last twenty-five years, growth rates have sharply declined in countries that have adopted the policies he loves. The countries that have done very well—China, South Korea, Taiwan—have done so by violating the rules that Friedman advocates. These countries radically violated International Monetary Fund and World Bank rules—the Washington consensus, which he praises—and they grew. On the other hand, the countries that observed neoliberal rules rigorously had an extremely sharp decline in economic growth and just about every other macroeconomic measure. In fact, the United States doesn’t follow the rules that it imposes on others. During the last twenty-five years, to the extent that there has been a limited imposition of neoliberalism in the United States, it’s been the worst prolonged period in U.S. economic history.

The countries in Latin America and southern Africa that adhered to the rules, on the other hand, are the worst disasters. These figures are muddled in the pronouncements by the World Bank and by many economists who argue that growth has really improved greatly and poverty has been reduced by neoliberal rules. The way they get these results is by mixing together two quite different things: one is export orientation and the other is following the Washington consensus, the neoliberal rules. So China, which has a population of one billion people, has been dedicated to export promotion but has also violated the neoliberal rules. If you muddle all of this together, you can say, “Well, the neoliberal rules work because a billion Chinese had a high growth rate,” forgetting that they had a high growth rate by violating the neoliberal rules. This kind of deception is going on all the time.


American Secession: The Looming Threat of a National Breakup by F. H. Buckley

Affordable Care Act / Obamacare, Andrei Shleifer, Bernie Sanders, British Empire, Cass Sunstein, colonial rule, crony capitalism, desegregation, diversified portfolio, Donald Trump, Francis Fukuyama: the end of history, hindsight bias, illegal immigration, immigration reform, income inequality, old-boy network, race to the bottom, Republic of Letters, reserve currency, Ronald Coase, transaction costs, Washington Consensus, wealth creators

Individually, we enjoy a well-protected set of personal liberties, the freedom to speak our mind and practice our religion, as well as the economic freedom to hold property and start a business. We also enjoy a strong set of political rights that come with living in a democratic society where government officials must campaign for our votes. We used to think that personal and political freedoms went together, like horse and carriage. This was called the “Washington Consensus.” When a state liberalized its economy it would create a middle class that would demand political freedom. That seemed to be what had happened in Chile, when the freemarket Pinochet regime was followed by a liberal democracy. Insofar as this pattern was spreading around the globe, it represented what Francis Fukuyama called “the end of history,” the point where the big questions of politics have been settled.

White Utah Uyghurs Venezuela Vermont Verneule, Adrian “Vices of the Political System of the United States” (Madison) Vietnam; war in Virginia; and Davis trial; and Peace Convention; on secession rights Virginia Plan (Madison) Virginia Resolutions (1798) Voting Rights Act (1965) Vriend v. Alberta Wag the Dog (film) Wall Street Journal Walpole, Horace War of 1812 Warren, Earl Washington (state) Washington, George; and Carlisle Commission; erasure of; on foreign entanglements; on representative ratio Washington Consensus Washington Monthly Washington Peace Convention (1861) Washington Post wealth (GDP); and population Webster, Daniel West, Kanye West Virginia White Citizens Councils Who Are We? (Huntington) Wilde, Oscar Will, George F. Wilson, Edmund Wilson, James Wilson, Woodrow; Fourteen Points; incorporation rules Wolfe, Alan Wood, Gordon World Happiness Report World War II Wyoming Yemen Yes California Yugoslavia Zenger, John Peter Zimbabwe


pages: 475 words: 149,310

Multitude: War and Democracy in the Age of Empire by Michael Hardt, Antonio Negri

affirmative action, Berlin Wall, Bretton Woods, British Empire, business cycle, conceptual framework, continuation of politics by other means, David Graeber, Defenestration of Prague, deskilling, Fall of the Berlin Wall, feminist movement, Francis Fukuyama: the end of history, friendly fire, global village, Howard Rheingold, Howard Zinn, illegal immigration, Joseph Schumpeter, land reform, land tenure, late capitalism, liberation theology, means of production, Naomi Klein, new economy, Paul Samuelson, post-work, private military company, race to the bottom, RAND corporation, reserve currency, Richard Stallman, Slavoj Žižek, The Chicago School, The Structural Transformation of the Public Sphere, Thomas Malthus, Thorstein Veblen, Tobin tax, transaction costs, union organizing, War on Poverty, Washington Consensus

It dictates for ailing and poor economies a neoliberal formula that includes minimal spending on public welfare, privatization of public industry and wealth, and the reduction of public debt. This formula, which has come to be known as the “Washington Consensus,” has always been criticized from outside and also from within the supranational economic institutions. 89 Some object on economic grounds, for example, to the way that the policies have been applied as an invariable model in different countries without regard for national specificity and without accounting for the relationship between monetary policies and social dynamics. Others object more generally to the political agenda of the Washington Consensus model: a monetary policeman is never neutral and always supports a specific political regime. After the economic disasters in Southeast Asia in 1997 and Argentina in 2000, which have been largely blamed on the IMF, the model has been even more widely criticized.

On the functioning of law firms in international commerce, see Yves Dezalay, “Multinationales de l’expertise et “dépérissement de l’Etat,” Actes de la recherche en sciences sociales, no. 96-97 (March 1993): 3-20; Marchands de droit: La restructuration de l’ordre juridique international par les multinationales du droit (Paris: Fayard, 1992); and (with Bryant Garth), Dealing in Virtue: International Commercial Arbitration and Construction of a Transnational Legal Order (Chicago: University of Chicago Press, 1996). 86 On the concept of “complex sovereignty,” see Kanishka Jayasuriya, “Globalization, Law, and the Transformation of Sovereignty: The Emergence of Global Regulatory Governance,” Indiana Journal of Global Legal Studies 6, no. 2 (Spring 1999): 425-55. 87 For IMF voting power figures, see http://www.imf.org/external/np/sec/memdir/members.htm. 88 For an interesting view into the culture of the IMF from a sympathetic and well-informed journalist, see Paul Blustein, The Chastening: Inside the Crisis that Rocked the Global Financial System and Humbled the IMF (New York: Public Affairs, 2001). 89 For Joseph Stiglitz’s speeches about the Washington Consensus, see Ha-Joon Chang, ed., Joseph Stiglitz and the World Bank: The Rebel Within (London: Anthem, 2001); and, more generally, Stiglitz, Globalization and Its Discontents (New York: Norton, 2002). See also Yves Dezalay and Bryant Garth, “Le ‘Washington Consensus’: Contribution à une sociologie de l’hégémonie du neoliberisme,” Actes de la Recherches en Sciences Sociales, no. 121-22 (March 1998): 3-22. 90 For a detailed history of the World Bank, see Devesh Kapur, John Lewis, and Richard Webb, The World Bank: Its First Half Century, vol. 1: History (Washington, DC: Brookings Institution, 1997). 91 On scarcity and immaterial property, see Christopher May, A Global Political Economy of Intellectual Property Rights: The New Enclosures (London: Routledge, 2000), 45. 92 See Donna Haraway, Modest Witness @ Second Millennium (New York: Routledge, 1997), 79-85. 93Diamond v.


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The Long Boom: A Vision for the Coming Age of Prosperity by Peter Schwartz, Peter Leyden, Joel Hyatt

American ideology, Asian financial crisis, Berlin Wall, centre right, computer age, crony capitalism, cross-subsidies, Deng Xiaoping, Dissolution of the Soviet Union, European colonialism, Fall of the Berlin Wall, financial innovation, hydrogen economy, industrial cluster, informal economy, intangible asset, Just-in-time delivery, knowledge economy, knowledge worker, life extension, market bubble, mass immigration, megacity, Mikhail Gorbachev, Nelson Mandela, new economy, oil shock, open borders, Productivity paradox, QR code, Ronald Reagan, shareholder value, Silicon Valley, Steve Jobs, the scientific method, upwardly mobile, Washington Consensus, Y2K

The approach, which was the developing world's version of what Reagan and Thatcher had begun in the United States and Britain just a few years before, became known as the Washington consensus, referring to the policies encouraged by global institutions like the World Bank and IMF (International Monetary Fund), which are based in Washington. The program called for privatization of state-run monopolies, deregulation of governmental control over business, lower trade barriers, lower barriers to foreign investment, reform of the tax systems, a focus on fiscal and monetary policies for fighting inflation, and the maintenance of a competitive foreign exchange rate. The Latin Americans had bitten the bullet on this approach by the late 1980s, but following the Washington consensus was a very difficult process, so difficult, in fact, that the Latin Americans call the period the "lost decade."


Interventions by Noam Chomsky

Albert Einstein, Ayatollah Khomeini, cuban missile crisis, energy security, facts on the ground, failed state, Monroe Doctrine, nuremberg principles, old-boy network, Ralph Nader, Thorstein Veblen, uranium enrichment, Washington Consensus, éminence grise

Those who agree with Lutzenberger’s conclusion face a clear and important task. If a perfectly logical argument leads to a totally insane conclusion, then the problem must lie with the premises, in particular, the rejection of “moral reasons” or “social concerns.” Then follows another task, if Summers is right that such a move can be used against all World Bank proposals for “liberalization”—that is, implementation of the “Washington consensus.” The conclusion seems obvious without spelling it out. It is perhaps of some interest that this reasoning, hardly more than elementary logic, appears to have been ignored within mainstream opinion, neither refuted nor pursued. The modern standard for such questions is the Universal Declaration of Human Rights, adopted by the UN General Assembly in 1948. Article 25 declares, “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.”

They have sought to construct democratic systems based on popular participation rather than elite and foreign domination. A persuasive explanation for the decline of faith in existing democratic institutions has been offered by Argentine political scientist Atilio Borón, who observed that the new wave of democratization in Latin America coincided with externally mandated economic “reforms” that undermine effective democracy: the neoliberal “Washington consensus,” virtually every element of which undermines democracy, and which has also led to economic disaster in Latin America, as in other regions that rigorously followed the rules. The concepts of democracy and development are closely related in many respects. One is that they have a common enemy: loss of sovereignty. In a world of nation-states, it is true by definition that decline of sovereignty entails decline of democracy, and decline in ability to conduct social and economic policy.


Capitalism, Alone: The Future of the System That Rules the World by Branko Milanovic

"Robert Solow", affirmative action, Asian financial crisis, assortative mating, barriers to entry, basic income, Berlin Wall, bilateral investment treaty, Black Swan, Branko Milanovic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carried interest, colonial rule, corporate governance, creative destruction, crony capitalism, deindustrialization, dematerialisation, Deng Xiaoping, discovery of the americas, European colonialism, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, ghettoisation, gig economy, Gini coefficient, global supply chain, global value chain, high net worth, income inequality, income per capita, invention of the wheel, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, labor-force participation, laissez-faire capitalism, land reform, liberal capitalism, low skilled workers, Lyft, means of production, new economy, offshore financial centre, Paul Samuelson, plutocrats, Plutocrats, post-materialism, purchasing power parity, remote working, rent-seeking, ride hailing / ride sharing, Silicon Valley, single-payer health, special economic zone, The Wealth of Nations by Adam Smith, Thorstein Veblen, uber lyft, universal basic income, Vilfredo Pareto, Washington Consensus, women in the workforce, working-age population, Xiaogang Anhui farmers

In two influential books (Economic Origins of Dictatorship and Democracy and especially Why Nations Fail), Daron Acemoglu and James Robinson provided a comprehensive theory that aimed to explain why democracies develop and fail and to demonstrate the close relationship between political and economic inequalities. Their view was very influential, especially in the period before the 2008 global financial crisis, because it unified two strands then dominant in liberal thought: the Washington Consensus (which promoted privatization internally and globalization externally) and the Fukuyama-style celebration of liberal democracy. Difficulty of dealing with communism is widespread One of Acemoglu and Robinson’s central concepts is that of “extractive” institutions: political and economic institutions that are controlled by an elite in order to extract economic resources and concentrate political power, with political and economic power occurring together and reinforcing each other.

And these organizations could do that regardless of formal ownership structure and rights. Even Chinese official statistics have difficulty dealing with the distinctions, so numerous are the forms of ownership and so many are the different rights of ownership, ranging from the ability to dispose and sell assets to usufruct only. This multitude of ownership and corporate structures was one of the main headaches for the unconditional partisans of the Washington Consensus, who insisted on the importance of clearly defined property rights for growth. It was impossible to fit China, with its scores of different property relationships, into the neoliberal straitjacket. Moreover, some of the most murky types of ownership, like township and village enterprises, registered the most spectacular rates of growth (see Weitzman and Xu 1993). It may be useful at this point to draw a parallel between the multitude of ownership arrangements and the uneven application of the rule of law (the “zones of lawlessness” mentioned above).

See also Elite; Rich Urban inequality in China, 100–102, 103 Vanishing American Corporation, The (Davis), 25 Veblen, Thorstein, 17, 171 Vecchi, Michela, 152 Venturini, Francesco, 152 Vietnam: GDP per capita growth rate in, 86–87; growth rate in, 235; increase in economic growth in, 8; political capitalism in, 96, 97; social and national revolutions in, 79–80; support for globalization in, 9 Voltaire, 228 Vonyó, Tamas, 83–84 Vries, Peer, 115 Wage inequality: in China, 102–103; education and, 50 Wage labor outside the home, 189 Wallerstein, Immanuel, 116 Wang Fan-hsi, 81 Wang Hui, 116 Wang Ming, 81 War, global capitalism and, 205–207 War Communism, 69 Warren, Bill, 76, 78, 223 Washington Consensus, 73, 116–117 Wealth: hierarchy and, 177–178; inequality and concentration of, 30–31; inherited, 62–63; intergenerational transmission of, 158–159; liberal meritocratic capitalism and concentration of, 26–31; reduction of concentration of, 216, 217 Wealth and Poverty of Nations, The (Landes), 196 Wealth-income ratio, 27, 30 Wealth of Nations, The (Smith), 113, 114, 178, 253–254n4 Wealth tax to deconcentrate capital ownership, 48–50 Weber, Max: capitalism of, 176–180; definition of capitalism, 12, 225; on distinction between production and family spheres, 189; on irregular work, 192; on political capitalism, 91, 94; on Protestantism, 254n6 “Weightless” economy, 194–195 Weiss, Yoram, 39 Welfare state: globalization and, 50–55, 155–159; migration and, 52–55, 133 Welfare system, universal basic income and, 203–205 West: malaise about globalization in, 9–10; rise of Asia and end to military, political, and economic superiority of, 6 Western path of development (WPD), 222, 223–224; Third World and, 74, 76, 78–79 When China Rules the World (Jacques), 122 Whig view of history, 68 Wilson, Woodrow, 80, 112 Wolff, Edward, 26, 32 Wootton, David, 227, 253–254n4 Workers, division of net product between owners and, 14–16 World Bank, 127; World Development Report, 202; Worldwide Governance Indicators, 160 World War I, 71, 72, 205–206, 221, 256–257n31 World War II, 205 Worldwide corruption, 159–175; enablers of, 168–170; globalization and, 130–131; imitation of consumption patterns of rich countries and, 170–173; lack of attempts to control, 173–175; limits on, 163–168 Xia, Ming, 92 Xie, Yu, 103 Xi Jinping, 93, 95, 125, 248n41 Xu Caihou, 108–109 Xu Chenggang, 123 Yang, Li, 103–104, 105 Yitzhaki, Shlomo, 33 Zasulich, Vera, 74, 245n6 Zhao Ziyang, 92, 248n39 Zheng He, 122 Zhou, Xiang, 103 “Zone of lawlessness”: China and, 117; in political capitalism, 93 Zucman, Gabriel, 103–104, 161, 168, 169


pages: 684 words: 212,486

Hunger: The Oldest Problem by Martin Caparros

Berlin Wall, Bob Geldof, carbon footprint, commoditize, David Graeber, European colonialism, Fall of the Berlin Wall, Food sovereignty, Gini coefficient, income inequality, index fund, invention of agriculture, Jeff Bezos, Live Aid, Louis Pasteur, Mahatma Gandhi, Mohammed Bouazizi, Nelson Mandela, New Journalism, plutocrats, Plutocrats, profit maximization, Slavoj Žižek, The Fortune at the Bottom of the Pyramid, the market place, Tobin tax, trade liberalization, trickle-down economics, Upton Sinclair, Washington Consensus, We are the 99%

The European invasion at the end of the nineteenth century destroyed what was left of African economies, leaving their local industries demolished, their trade in shambles, their lands occupied, their food crops replaced by crops needed in the metropolis. When independence came, the Europeans took everything they could away with them. In most countries, the situation was difficult: weak infrastructure, few people with any training, lack of capital to invest in any of that—and, of course, political and social conflicts. But everything got worse in 1989 when the Washington Consensus and the World Bank and the International Monetary Fund (IMF) “convinced”—with threats regarding their foreign debt—most African governments to reduce the state’s involvement in certain sectors.3 One of these was agriculture, which continued to be the principal economic activity of a large part of the continent, and the one that fed most of its inhabitants. The market will oversee an improvement of conditions, repeated the leaders of the World Bank and the IMF.

Those who don’t have it, still have shitty lives: between the years 2000 and 2010, more children died of diarrhea than soldiers in all the conflicts from the Second World War to the present. A slum is, more than anything else, a place where the state doesn’t function. There is no light, no water, no streets, no police, no schools. Until the seventies, many governments in what was then the Third World, tried to replace slums with housing projects. Those were the policies before the British economist John Williamson proposed in 1989 what would become known as the Washington Consensus, ten policy points a country would need to follow in order to recover from economic decline. These included fiscal policy discipline, redirection of public spending toward infrastructure development, tax reform, market determined interest rates and deregulated entry, competitive exchange rates, the liberalization of trade, the liberalization of foreign investment, the privatization of state enterprises, oversight of financial institutions, and legal security for private property.

In many countries the policies of the IMF and the World Bank also included the elimination of subsidized food and regulating mechanisms for internal pricing, which their states had implemented through the maintenance of reserves of grain and other food products. In cases such as Niger, the effect was straightforward: thousands of people died from hunger, plain and simple. * * * — The Washington Consensus. How horrible—for a man, for a city—to be inscribed in history with the name of a policy that screwed over so many millions of people. The capitalist offensive of the eighties and nineties also produced a more generalized and significant phenomenon: basic decisions about a country’s economy were made at IMF and World Bank headquarters—in Washington—wresting from national authority almost all their power.


pages: 215 words: 64,460

Shadows of Empire: The Anglosphere in British Politics by Michael Kenny, Nick Pearce

battle of ideas, Berlin Wall, Boris Johnson, Bretton Woods, British Empire, colonial rule, corporate governance, Dominic Cummings, Donald Trump, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, Francis Fukuyama: the end of history, full employment, global reserve currency, imperial preference, informal economy, invention of the telegraph, Khartoum Gordon, labour mobility, liberal capitalism, Mahatma Gandhi, mass immigration, Monroe Doctrine, Nixon shock, quantitative easing, reserve currency, Ronald Reagan, trade route, Washington Consensus

Its depth and range suggests a ‘structural multilateral relationship in the Anglosphere, rather than simply bilateral or ad hoc arrangements.’8 From the ‘End of History’ to Iraq In the immediate years after the collapse of Soviet communism, when Francis Fukuyama's contention that liberal-democratic capitalism represented the ‘end of history’, the global dominance of this Anglo-American, liberal economic and political order appeared assured. A long boom, fuelled by global financialisation, was under way. China and India were becoming integrated into the global economy. And some of the leading, disruptive ideologies of the twentieth century – fascism, communism and socialism – had apparently fallen away. The ‘Washington Consensus’ dominated decision-making in the world's economic institutions. American military supremacy was unrivalled. The liberal, free market institutional order appeared to contain no internal contradictions that could threaten it. The prospect of a serious challenge to the Anglo-American West was almost inconceivable. Fukuyama captured the Zeitgeist of this moment with great elan, anchoring the claims of liberal democratic politics and Anglo-liberal capitalism in a historicist account which foretold their continued dominance into the new century.

Trump, Donald Turkey Turnbull, Malcolm United Europe Movement United Kingdom Independence Party (UKIP) United Nations US Navy USA: Anglo-America concept; ANZUS Pact; Blair's relations with; Bretton Woods agreement (1944); and Brexit; British dominions’ relations with; British future relations with; British migration to; British nineteenth-century relations with; British relations with post Iraq; British twentieth-century relations with; and Europe; Eurosceptic attitude; French attitude; international ambitions; in late nineteenth century; Muslim attitude; and New Right Anglosphere; and nuclear weapons; under Obama; Open Door policy; Powell's attitude; railways; ‘special relationship’ with Britain; Thatcher's relations with; Trump's relations with Britain; in twenty-first century; War on Terror Venezuela Versailles, Treaty of (1919) Vucetic, Srdjan Wales War on Terror Washington Conference (1921–2) Washington Consensus welfare state Wells, H. G. the West: and interventionism; rise of concept West Africa West Germany; see also Germany Willetts, David Wilson, Harold Wootton, Barbara Zimbabwe (formerly Rhodesia) POLITY END USER LICENSE AGREEMENT Go to www.politybooks.com/eula to access Polity's ebook EULA.


pages: 409 words: 118,448

An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by Marc Levinson

affirmative action, airline deregulation, banking crisis, Big bang: deregulation of the City of London, Boycotts of Israel, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, car-free, Carmen Reinhart, central bank independence, centre right, clean water, deindustrialization, endogenous growth, falling living standards, financial deregulation, floating exchange rates, full employment, George Gilder, Gini coefficient, global supply chain, income inequality, income per capita, indoor plumbing, informal economy, intermodal, invisible hand, Kenneth Rogoff, knowledge economy, late capitalism, linear programming, manufacturing employment, new economy, Nixon shock, North Sea oil, oil shock, Paul Samuelson, pension reform, price stability, purchasing power parity, refrigerator car, Right to Buy, rising living standards, Robert Gordon, rolodex, Ronald Coase, Ronald Reagan, Simon Kuznets, statistical model, strikebreaker, structural adjustment programs, The Rise and Fall of American Growth, Thomas Malthus, total factor productivity, unorthodox policies, upwardly mobile, War on Poverty, Washington Consensus, Winter of Discontent, Wolfgang Streeck, women in the workforce, working-age population, yield curve, Yom Kippur War, zero-sum game

The IMF and the World Bank spread the new wisdom that free-market policies would enable the debtor countries to grow at long last, sharply reversing their past positions favoring top-down planning and government-directed investment. Many people in the debtor countries came to the same conclusion, recognizing that state-managed industrialization backed up by import barriers, as advocated for so long by Raúl Prebisch, had failed to bring sustained prosperity. The new market-oriented thinking would become known as the Washington Consensus, a semi-official compendium of principles the experts said would help the developing countries outgrow their debts.22 The experts, their advice framed by the ideological battles over the role of government in Washington and London, failed to recognize that the economic problems of developing countries generally had less to do with high tax rates and Big Government than with large-scale tax avoidance and incompetent government.

Privatization brought little economic boost when it meant nothing more than turning a state-owned monopoly into a privately owned monopoly, and opening the door to foreign investment was of little consequence when would-be investors encountered a parade of corrupt officials demanding bribes or contracts. In countries where shockingly low literacy rates stood in the way of improving worker productivity, simply rolling back government could not improve the ability of education ministries to provide an adequate education to children for whom private-school tuition was beyond reach. Such shortcomings, ignored by advocates of the Washington Consensus, turned out to be serious drags on developing countries’ economic growth. When it came to surmounting the debt crisis, there was only one poster child: South Korea. The country’s foreign debts were nearly $47 billion at the end of 1985; relative to the size of its economy, it was more indebted than Mexico. The Koreans flatly rejected the advice being dispensed from Washington. Theirs was in no sense a free-market economy; five-year plans determined which industries would grow and which would shrink, and the state decided which companies could borrow money from Korean banks.

See also Federal Reserve Venezuela, 250–251 Versailles Treaty, 86 Vietnam, 48; hardship in, 44 Vietnam War, 4, 163, 202 Volcker, Paul, 97; Carter and, 220–224; inflation and, 220–221, 223–224, 230; monetary policy of, 221–224; Reagan and, 232, 234; recession under, 224; Third World debt crisis and, 244–245; unemployment and, 224 Volcker shock, 221, 224, 232 Volpe, John, 88 wage controls, 53–54 The Wall Street Journal, 221 Wallich, Henry, 87 Walters, Alan, 176 Washington Consensus, 254 The Washington Post, 71, 96, 104, 223 Watergate scandal, 101, 110, 156 wealth: loss of, and income distribution, 138 Wealth and Poverty (Gilder), 225 welfare state, 133, 143–154, 224, 257; anti-tax movements and, 151–154; birth of, 17–18; budget deficit and, 150; conservative parties and, 24; entitlements and, 157–158; government budget deficits and, 150; growth in cost of, 147–151; income tax and, 145–147, 149–151; oil crisis of 1973, 148; role of government and, 143–145; ungovernability and, 157–158.


pages: 251 words: 69,245

The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality by Branko Milanovic

Berlin Wall, Branko Milanovic, colonial rule, crony capitalism, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, endogenous growth, Fall of the Berlin Wall, financial deregulation, full employment, Gini coefficient, high net worth, illegal immigration, income inequality, income per capita, Joseph Schumpeter, means of production, open borders, Pareto efficiency, plutocrats, Plutocrats, purchasing power parity, Simon Kuznets, very high income, Vilfredo Pareto, Washington Consensus, zero-sum game

This Latin America, which reaped so few benefits from Globalization 2.0, is thus not surprisingly the only part of the world that is trying to experiment with alternative policies. By the standards of the past, these alternatives are rather meek, since the differences are not in the substance but in the details. But as the world has, in terms of economic policies followed by different countries, become much more homogeneous, even these small departures from the Washington consensus orthodoxy attract attention. Africa, of course, has remained the third world. But on account of its almost unrelieved misery and relative and often absolute decline during the last quarter of the twentieth century, we may be justified in giving it the unenviable title of the fourth world. China remains a world apart, with obviously a much higher income today than before but with equally opaque ambitions or rather the same inner ambivalence not only about the role it wants to play internationally but whether it wants a role at all.

China remains a world apart, with obviously a much higher income today than before but with equally opaque ambitions or rather the same inner ambivalence not only about the role it wants to play internationally but whether it wants a role at all. One of the striking features is that the incredible economic rise of China that was achieved by using a mixture of recipes never seen before, and indeed very different from the recipes (economic policies) advocated by the Washington consensus, has not produced any “codified” rules of economic conduct. There is no attempt to “package” these policies, explain how they might work elsewhere, in other words “sell” a specifically Chinese model of development or economic ideology. Contrast this with the fact that, already by 1776 when the Industrial Revolution was as old as the Chinese “takeoff ” is today, the world had in Adam Smith’s Wealth of Nations well-codified rules for economic success.


pages: 288 words: 64,771

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey

"Robert Solow", Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, collective bargaining, creative destruction, Credit Default Swap, crony capitalism, Daniel Kahneman / Amos Tversky, David Brooks, diversified portfolio, Donald Trump, Edward Glaeser, endogenous growth, experimental economics, experimental subject, facts on the ground, financial innovation, financial intermediation, financial repression, hiring and firing, Home mortgage interest deduction, housing crisis, income inequality, informal economy, information asymmetry, intangible asset, inventory management, invisible hand, Jones Act, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, knowledge worker, labor-force participation, Long Term Capital Management, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass immigration, mass incarceration, medical malpractice, Menlo Park, moral hazard, mortgage debt, Network effects, patent troll, plutocrats, Plutocrats, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Ronald Reagan, Silicon Valley, Silicon Valley ideology, smart cities, software patent, too big to fail, total factor productivity, trade liberalization, transaction costs, tulip mania, Uber and Lyft, uber lyft, Washington Consensus, white picket fence, winner-take-all economy, women in the workforce

This has led them to shift their favored policy responses to inequality away from redistribution in favor of what is often called “predistribution”—rewriting the rules of the economic game with a specific view to altering the distribution of rewards.16 In examining government as a source of inequality, these analysts on the left usually focus only on how the powerful use their influence over government to prevent regulation or redistribution. For instance, they have pointed to the decline in antitrust enforcement, financial regulation, legal encouragement of unionization, and taxation of high incomes as key explanations for the explosion of inequality. In one early and influential effort along these lines, Frank Levy and Peter Temin characterized these developments as a shift from the “Treaty of Detroit” to the “Washington Consensus.”17 What this approach misses is the role of government action itself, rather than the government’s mere failure to act, as a cause of inequality. Because of their attachment to the state as an instrument of social justice, those on the left have generally failed to recognize the egalitarian potential of constraints on government power. At least since the Progressive movement, liberals have favored liberating government at all levels, giving it the discretionary authority necessary to counteract business and regulate a complex modern economy.

See total factor productivity “third party support”, 155 Thomas, Diana, 186n14 “Tobin’s Q”, 19–20, 22–23 total factor productivity, 24–27, 78–79 “Treaty of Detroit”, 11 Trump, Donald, 2–4, 8 tulip mania, 46 unionization, 6, 11, 31, 146, 157 collective bargaining and, 28 decline of, 91–92 post-New Deal, 29 upstream innovation, 74 upward mobility, 1, 30, 97–98, 143 upward redistribution, 12–14, 28–31, 127. See also redistribution of wealth homeownership and, 121–22 land-use and, 110 mortgage lending and, 39 urban areas, 114–15 VA. See Veterans Administration Vergara v. California, 158 Veterans Administration, 39, 41 Vox, 149 Wagner Act, 28 Walker, Jack, 155 Warren, Elizabeth, 135 “Washington Consensus”, 11 wealth inequality. See inequality welfare state, 150–52, 207n35 White House Office of Budget and Management, 164–65 Willig, Robert, 185n8 Winship, Scott, 122 women, 3, 6, 27, 125 Wood, Diane, 169 World War II, 35 Zingales, Luigi, 12 zoning. See also home ownership/housing; land-use concentrated benefits and, 130 economic growth and, 113–23 geographic inequality and, 115–23 property values and, 111 as rent-seeking, 113 restrictions on building and, 123 supply restriction and, 109–13 urban areas and, 114–15 Zuckerberg, Mark, 108


pages: 247 words: 68,918

The End of the Free Market: Who Wins the War Between States and Corporations? by Ian Bremmer

affirmative action, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, centre right, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, cuban missile crisis, Deng Xiaoping, diversified portfolio, Doha Development Round, Exxon Valdez, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, global reserve currency, global supply chain, invisible hand, joint-stock company, Joseph Schumpeter, Kickstarter, laissez-faire capitalism, low skilled workers, mass immigration, means of production, megacity, Mikhail Gorbachev, mutually assured destruction, Naomi Klein, Nelson Mandela, new economy, offshore financial centre, open economy, race to the bottom, reserve currency, risk tolerance, shareholder value, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, trade route, tulip mania, uranium enrichment, Washington Consensus, Yom Kippur War, zero-sum game

In America, Reagan administration officials preached the gospel of limited government so successfully that by 1996, a Democratic president used his State of the Union address to declare, “The era of big government is over.”15 In the 1980s, Western European governments followed British Prime Minister Margaret Thatcher’s lead in profitably privatizing hugely inefficient state enterprises in energy and power generation (oil, gas, coal, and nuclear), transport (national airlines, railways, and bus companies), and telecommunications. In the 1990s, they preached the virtues of free-market capitalism to their newly liberated Eastern European neighbors and began to integrate them into a single market. Global financial institutions pressed them to embrace U.S.-endorsed liberal economic theories, known collectively as the Washington Consensus.a The results speak for themselves. Between 1980 and 2002, world trade more than tripled. The costs of doing business—especially in transportation and communications—fell sharply. Many protectionist barriers, like tariffs and import quotas, went the way of the Berlin Wall. Tariff rates (as a percentage of total import costs) were halved during this period in America, were more than halved in Europe, and fell by 80 percent in Canada.

Trotsky, Leon Troubled Asset Recovery Program (TARP) Troubled Asset Relief Program troubled assets Tuleyev, Aman Tunisia Turkey Twitter Tymoshenko, Yulia Ukraine Ukraine International Airlines Union Carbide United Arab Emirates United Malays National Organization (UMNO) United Nations United Nations Human Development Report United States Chinese trade with in financial crisis military of in oil embargo oil production in trade by Uzbekistan Vale Venezuela Vietnam von Mises, Ludwig Walmart Warsaw Pact Washington Mutual Wealth of Nations, The (Smith) Webb, Jim Welch, Jack Wen Jiabao Westinghouse Will, George World Bank World Economic Forum World Trade Organization (WTO) World War I World War II Yanukovych, Viktor Yeltsin, Boris Yom Kippur War yuan Yudhoyono, Susilo Bambang Yugoslavia Yukos Oil Company Yushchenko, Viktor Zakaria, Fareed Zhao Ziyang Zhu Rongji Zhu Xinli Zimbabwe Zubkov, Viktor Zuma, Jacob Zyuzin, Igor a The Washington Consensus comprises three major ideas: fiscal and budgetary discipline; a market economy, including property rights, competitive exchange rates, privatization, and deregulation; and openness to the global economy through liberalization of trade and foreign direct investment. b Even in Costa Rica, which has no armed forces, the government operates a Ministry of Public Security that oversees a Civil Force, a kind of special police force devoted to combating drug trafficking and other crimes.


pages: 413 words: 119,379

The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth by Tom Burgis

Airbus A320, Berlin Wall, blood diamonds, BRICs, British Empire, central bank independence, clean water, colonial rule, corporate social responsibility, crony capitalism, Deng Xiaoping, Donald Trump, F. W. de Klerk, Gini coefficient, Livingstone, I presume, McMansion, megacity, Nelson Mandela, offshore financial centre, oil shock, open economy, purchasing power parity, rolodex, Ronald Reagan, Silicon Valley, South China Sea, sovereign wealth fund, structural adjustment programs, trade route, transfer pricing, upwardly mobile, urban planning, Washington Consensus, WikiLeaks, zero-sum game

Ghana comes close to the top of the UN index that ranks countries by their success in turning GDP per head into improved living standards (scoring 22, compared with97 for Equatorial Guinea), but Ghanaians’ average income is a tenth of Lithuanians’ and one in three Ghanaians cannot read or write, the same level of illiteracy as in Congo. Inherent in the praise that is heaped on Ghana is a troubling undertone that mitigated penury is the best that Africans can aim for. Like the rest of Africa’s resource states, Ghana bowed to the orthodoxy that the World Bank and the IMF imposed from the early 1980s in the form of ‘structural adjustment programmes’. Based on a set of neoliberal economic policies known as the Washington Consensus, these programmes made loans to poor countries dependent on their adherence to strict conditions, including deep cuts to public spending, privatizing state-owned assets, and lifting controls on trade. Foreign investment was deemed essential to economic growth. African and other poor countries were exhorted to bend over backward with tax breaks and other incentives in order to attract multinational corporations.

And the issue of corruption and the issue of trying to get good governance is, I think, under less pressure now in a number of these countries than it was when I was around. It’s going to be a long road.’ It was not just the World Bank that found its influence in Africa’s resource states diminished. The IMF, its sister institution charged with maintaining the stability of the world financial system, already had a bad reputation in Africa, with reformers and kleptocrats alike, for imposing the strictures of the Washington Consensus, under which African states had become test tubes for the unfettered free-market philosophy that would also beget the subprime crisis and subsequent near-collapse of the Western banking system. Emil Salim’s review of the World Bank’s record in the oil and mining industries reported that, in the cases it had studied, ‘the IMF’s approach to the extractive sectors was mainly one that promoted aggressive privatization of significant mining and hydrocarbon assets for short-term financing of the [government’s budget] deficit.

See Diakité, Aboubacar Touré, Mamadie with Cilins in Florida, 103–105, 109, 125–126, 127 Guinea’s minerals and, 103–105, 109, 110, 124, 125–126, 127 Transfer pricing, 166 Transparency International, 17 Trendfield company, 140–141, 144 Trump, Donald, 246 Tsvangirai, Morgan, 219, 223, 237 Turner, Bill, 39–40 Tutsi/Hutu conflict and aftermath, 30–31, 32, 40–41, 43–44, 45–46, 55, 56 Tutu, Desmond, Archbishop, 66 Uba, Andy, 77, 193 Ukraine, 147, 242 Umunna, Hillary, 64–65 Vale mining and Guinea, 104, 108, 123–124, 128, 129–130 Varma, Somit, 163–164 Vicente, Manuel background, 10–11, 19 business empire, 23, 99 China Sonangol/Queensway Group and, 26, 94, 95, 96–97, 98, 100, 114, 119 Futungo and, 10–11, 12, 97, 111 oil and, 11, 12, 14, 16, 17, 18–19, 25, 26, 94, 95, 96–97, 98, 100, 114, 119 poverty in Angola and, 20, 208 Vines, Alex, 100 ‘VIP’ (‘Vagabond in Power’/Nneka), 246–247 Voser, Peter, 194 ‘Vultures’ (Achebe), 208 Wang Xiangfei, 90–91, 92–93 Wase, Abdullahi, 182 Washington Consensus, 163, 171 Wolfensohn, James, 157, 171 Wolfowitz, Paul, 170 World Bank Africa/African countries and, 57–58, 65, 136, 151–152, 163–164 BRICS nations vs., 218 China credit vs., 137, 170, 171 criticism of, 3, 151–152, 157–159, 160, 161, 164, 170, 171 description/staff, 169–170 ‘extreme poverty’/poor countries, 4 IFC and, 153, 154, 156 Miga and, 158–161 reputation/influence, 169–170 role/methods, 144, 151, 153, 154, 157, 165, 170 Salim’s criticism/recommendations, 157–159, 160, 161, 164, 170, 171 structural adjustment programmes, 162–163, 171 See also International Finance Corporation (IFC) World Trade Organization (WTO), 81, 157, 239 Wu Yang, 93, 98, 101–102, 145, 193 Xi Jinping, 23 Xia Huang, 134–135, 148, 149 Xueming Li (pseudonym), 91 Yar’Adua, Umaru health problems/death, 72, 73, 77, 78, 79, 183–184, 189, 201, 202, 203 as Katsina governor, 68 presidential campaign/as president, 69, 72, 77–78, 179, 202 Zambia, 4, 34, 56, 163, 165, 225 Zeng Peiyan, 86–87, 94, 99 Zibi, Songezo, 217 Zimbabwe diamonds/effects, 220–223, 226, 235–236 ‘indigenization’ of mining industry/corruption, 230–232 Marange massacre/Operation No Return, 220–221, 222, 226, 235, 236 minerals (overview), 231 Mugabe’s security forces/CIO, 223, 226, 234–236, 237, 243 Pa/Queensway Group and, 223, 230, 234, 235–236, 237–238, 243 See also specific companies/organizations; specific individuals Ziv, Israel, 117 Zuks, Nik, 143–144 Zuma, Jacob, 217–218 About the Publisher Australia HarperCollins Publishers (Australia) Pty.


Money and Government: The Past and Future of Economics by Robert Skidelsky

anti-globalists, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, Basel III, basic income, Ben Bernanke: helicopter money, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, constrained optimization, Corn Laws, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Graeber, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, Donald Trump, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, Financial Instability Hypothesis, forward guidance, Fractional reserve banking, full employment, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, incomplete markets, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, law of one price, liberal capitalism, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, market clearing, market friction, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, mobile money, Mont Pelerin Society, moral hazard, mortgage debt, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, placebo effect, price stability, profit maximization, quantitative easing, random walk, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, rising living standards, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, shareholder value, short selling, Simon Kuznets, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, value at risk, Washington Consensus, yield curve, zero-sum game

As Stedman Jones notes for Britain: The major differences, and the real departure in economic terms, between the Callaghan government and the Conservatives lay in [the latter’s] radicalization of microeconomic policy through various market-based supply-side reforms and their importation of market mechanisms into public service provision, something the Labour Party continued and deepened after 1997. 56 197 T h e R i s e , T r i u m p h a n d Fa l l of K e y n e s The new orthodoxy’s structural reform ideas spread across the world in the form of the ‘Washington consensus’ that, through the IMF and the World Bank, made the receipt of financial support conditional on the deregulation of financial sectors, the privatization of state-owned enterprises, the liberalization of markets and fiscal discipline. The revolution in theory initiated by Friedman and Lucas ran in parallel with another theoretical enterprise particularly relevant to policy, known as the ‘economics of politics’.

., 179 Erie Canal, 90 Eshag, Eprime, 71 European Central Bank, 139, 188, 198, 217, 242–3, 253, 254, 361 institutional constraints on, 50, 234, 242, 249, 274–5 misreading of Eurozone crisis, 275 quantitative easing (QE) by, 273–4 on ‘stress testing’, 364 taxing of ‘excess’ reserves, 266 use of LTROs, 257 European Commission, 139, 3612, 365 European Exchange Rate Mechanism, 188 European Investment Bank, 354 European Union (EU, formerly EEC), 153, 318, 379, 383 Financial Stability Board (FSB), 363 ‘Four Freedoms’, 375 lack of state, 376 Single Resolution Board, 365 Eurozone current account imbalances, 333, 334, 335, 336–7, 341–2 Juncker investment programme, 274 proposed European Monetary Fund, 376, 382 structural flaw in, 341, 375–7 two original sins of, 274, 376–5 Eurozone debt crisis (2010–12), 50, 223, 377, 382 and double-dip recession, 241, 242–3, 274 ECB’s misreading of, 275 and financial crowding-out theory, 234 and Greece, 32, 224, 224–5, 226, 233, 235, 242–3, 243, 365 and ‘troika’, 32, 139, 243 469 i n de x exchange-rate policy, 127–8, 139 and Congdon’s ‘real balance effect’, 285 and domestic interest rates, 251 fixed rates under Bretton Woods, 16, 159, 161, 162, 168 floating rates from 1970s, 16–17, 184 and Friedman, 182 IMF ‘scarce currency’ clause, 380–81 Nixon’s dollar devaluation (1971), 153, 154, 165 and quantitative easing, 267, 267 sterling crisis (1951), 145 sterling devaluation (November 1967), 152 sterling-dollar peg (from 1949), 148, 150, 152 sterling/franc/deutschmark devaluations (1949), 152 ‘Triffin paradox’, 161, 165 ‘expansionary fiscal consolidation’, 192, 225, 231 Fabian socialism, 96 Fama, Eugene, 208, 311–12, 313 Fanny Mae, 217, 256, 309, 320 fascism, 13, 98, 131, 175 Federal Reserve, US and 2008 crash, 50, 217, 254, 256 AIG bail-out (2008), 325 Federal Open Market Committee (FOMC), 185–6 and Great Depression, 104–6 inflation targeting, 188 and monetarism, 185–6, 188 monetary policy in 1950s, 146 ‘Operation Twist’, 268 quantitative easing (QE) by, 256–7, 273–4 ‘Reserve Position Doctrine’ (1920s), 103–4 and under-consumption theory, 298 Ferguson, Niall, 73, 79, 80, 91 financial collapse (2007–8) acute phase, 218–20, 223 ‘Austrian’ explanation, 104, 303 banks as proximate cause, 343, 361, 365 Bear Stearns rescue, 217 British analogies with Greece, 235 British debate after, 225–8 causes of, 3–4, 343–4, 365, 366, 368 central bank responses, 3, 217, 219, 234–5, 253–4, 254, 256–8, 359 comparative recovery patterns, 241–4, 242, 273, 273–4 compared to 1929 crash, 218 Conservative narrative, 226–8, 229–31, 233, 234–5, 237–9 and crisis of conservative economics, 17 and embedded leverage, 318, 322, 325 five distinct stages of crisis, 216–19 ‘global imbalances’ explanation, 11, 331, 333, 336–43, 337 government responses, 3, 217–18, 219–20, 221–36, 237–47 Hayekian view of cause, 303 hysteresis after, 239–41, 240, 241, 370 inequality as deeper cause of, 299–306, 368 Lehman Brothers bankruptcy, 3, 50, 217, 365 leverage (debt to equity) ratios on eve of, 317–18 liquidity-solvency confusion, 317 outbreaks of populism following, 13, 371–3, 376, 383 post-crash deficit, 226–33, 229, 237–8 private debt as proximate cause, 3–4 470 i n de x stagnation of real earnings as deep cause, 4, 303, 367 standard account of origins of, 3–4 as test of two theories, 2–3, 76 theoretical and policy responses, 10, 129, 219–20, 223–36, 237–47 see also austerity policy and under-consumption theory, 303–6 US sub-prime mortgage market, 3, 216, 304–5, 309, 323, 328, 341 see also Great Recession (2008–9) Financial Services Authority, U K, 321–2, 330 financial system and causes of 2008 collapse, 3, 4–5, 253, 307–9, 361 and crisis of conservative economics, 17 deregulation, 307–9, 310–16, 318–22, 328, 332–3, 384 East Asian financial crisis (1997–8), 202, 339, 371, 382 ‘Efficient Market Hypothesis’ (EMH), 311–13, 321–2, 328, 388 ‘financialization’ of the economy, 5, 305, 307–9, 366–7 fraud and criminality, 3, 4, 5, 7, 328, 350, 365–6, 367 and free-market orthodoxy, 5, 308–16 loosening of moral restraints, 319 mark-to-market (M2M) framework, 314 offshore euro-dollar market, 308, 332 privatised gain and socialised loss, 319–20 released from national regulation (1980s/90s), 131, 318–22 structural power of finance, 6–7, 14, 309 systemic under-estimation of risk, 314–16, 316*, 320–22, 323, 329–30 Thatcher’s Big Bang (1980s), 319 tradable public debt instruments, 43, 80–81 Turner’s ‘financial intensity’ concept, 366 unrealism of assumptions, 310–16 value at risk (VaR) framework, 314–15, 315, 330 ‘Washington consensus’ deregulation, 198, 200 see also banks FinTech, 356 First World War, 86, 95, 106–7, 374, 375 ‘fiscal consolidation’, 10–11, 129, 225 Darling’s plan (2009), 225–6 ‘expansionary’, 192, 225, 231 and Osborne, 227–8, 229–30, 231, 233, 237–9, 243–4, 244, 245 fiscal policy and 2008 collapse, 10, 217–18, 219–20, 223–36, 265–6, 273–4, 286 ‘Barber boom’, 167, 168 during Blair-Brown years, 221–4, 223, 225–6, 227 British experience (1692–2012), 77 Congdon’s total rejection of, 280, 285–6 ‘crowding out’ argument, 83–4, 109–11, 226, 233–5 current and capital spending, 107–8, 114, 142, 155–6, 193, 221–3, 237–8, 355–7 directing flow of new spending, 286–7 fiscal multiplier, 110–11, 125–6, 133–6, 138, 230–31, 233, 235, 244–5 471 i n de x fiscal policy – (cont.) in inter-war Britain, 106–17 and Keynesian economics, 2–3, 109, 111, 114–17, 125–7, 129–31, 133–4, 137–8, 173, 278 Keynesian full employment phase (1945–60), 141–8 Krugman’s ‘confidence fairy’, 117 Lawson counterrevolution, 185, 192–3, 222, 358 legacy of monetarism, 190–93 May Committee (1931), 112 national income accounts, 138 New Classical view of, 200 in new macroeconomic constitution, 351–2, 355–7, 360–61 nineteenth-century theory of, 9, 29 post-Keynesian disablement of, 193, 221, 258, 304, 328 pre-crash orthodoxy, 221–2, 223–4, 230–31 Public Sector Borrowing Requirement (PSBR), 155–6 see also balanced budget theory; public investment; taxation Fisher, Irving, 9, 52, 61, 99, 280 ‘compensated dollar’ scheme, 66 equation of exchange, 62–4, 71–2, 258, 278–9, 283, 284, 287 QTM formulation, 62–7, 71–2 and quantitative easing, 258, 278–9 Santa Claus money, 62–4, 258, 278–9 Fitch (CR A), 329 France assignats in 1790s, 64–5 and gold standard, 50, 102, 104, 127 ‘indicative planning’ system, 150 ‘physiocrats’in, 81 protectionism in late nineteenthcentury, 59 state holding companies, 356 statism in, 140, 144 university campus revolts (1968), 164 Freddie Mac, 217, 256, 309, 320 free trade, xviii, 9, 58–9, 76, 79, 81–2 abandoned in Britain (1932), 113 general presumption in favour of, 377 and Hume’s ‘price-specie-flow’ mechanism, 37–8, 53, 54, 104, 332 and Irish potato famine, 15 List’s ‘infant industry’ argument, 88–9, 90, 378–7 and nationalist–globalist split, 371–3 and post-war liberalization, 16, 374 and presumption of peace, 379 repeal of Corn Laws (1846), 15, 85 Ricardo’s doctrine of comparative advantage, 88, 378, 379, 379 US conversion to (1940s), 90 Freiburg School, 140 Friedman, Milton adaptive expectations theory, 180–81, 183, 194, 206–11 and Cartesian distinction, 22 as Fisher’s heir, 278 The Great Contraction (with Schwartz; 1865), 105 idea of ‘helicopter money’, 63 and monetary base, 185, 280 and Mont Pelerin Society, 176–7 and ‘natural’ rate of unemployment, 163, 177, 181, 195, 206, 208 onslaught on Keynesianism, 170, 174, 177–83, 261 ‘permanent income hypothesis’ (1957), 178, 183 and Phillips Curve, 38, 180–81, 194, 206–8, 207 472 i n de x policy implications of work of, 182–3 political motives of, 177, 183–4 and quantity theory, 61, 70, 177–9, 182, 183, 194 ‘stable demand function for money’, 179 view of Great Depression, 104–6, 179, 183, 256, 276, 278 weaknesses in arguments of, 183 Frydman, Roman, 389 Fullarton, John, 49 Funding for Lending programme, 265–6 G20 Financial Stability Board, 363 summits (2009/10), 219–20, 223, 225 G7 finance ministers meeting (February 2010), 224–5 Galbraith, James, 303, 361 game theorists, 389 Gasperin, Simone, 357* Geddes, Sir Eric, 108 German Historical School, 88–9 Germany and 2008 crash, 217, 218, 243 current account surplus, 333, 334, 341, 342, 380, 381 employer–union bargains, 147, 167 and Eurozone crisis, 341, 365, 376, 377 and Great Depression, 97, 111, 129–30 growth Keynesianism (1960–70), 153–4 high growth rates in 1950/60s, 149, 156 Hitler’s reduction in unemployment, 111, 112, 129–30 hyperinflation of early 1920s, 275 as Keynesian in 1960s, 140 nineteenth-century expansion and unification, 89, 91 ‘ordo-liberalism’ in, 140 post-war modernization/catch-up, 156–7 protectionism in late nineteenthcentury, 59 return to gold standard (1924), 102 ‘Rhenish capitalism’ model, 154 Giffen, Robert, 51 Giles, Chris, 219, 302 Gini coefficient, 299, 300 Gladstone, William, 42–3, 86 Glass–Steagall Act (1933), 319, 361, 362 global imbalances basic theory of, 335–6 and capital account liberalization, 318–19 capital flight, 59, 334, 337, 341, 343 Eurozone see Eurozone: current account imbalances as explanation for 2007–8 crash, 11, 331, 333, 336–43, 337 and financial deregulation, 318–19, 332–3 and First World War, 95 increases in pre-crash years, 333, 333–4, 334, 335 problematic nature of, 333–4 reserve accumulation, 336, 337–41 ‘saving glut’ vs ‘money’ glut, 338–41, 342 structural causes still in place, 344 US dollar as main reserve currency, 338 global warming, 383 globalization, 17, 300, 334–5 absence of the state, 350, 373, 375–6 anti-globalist movements, 371–2, 373 first age of, 51, 55, 57, 59, 374, 375 473 i n de x globalization – (cont.) future of, 382–4 Geneva and Seattle protests (1998/99), 371 and inflation rate, 252–3 and lower wages in developed world, 252–3, 300, 379 nationalist-globalist split, 371–3 ‘neo-liberal’ agenda of IMF, 139, 181, 318–19 popular protest against, 351, 371–2 resurgence of after Cold War, 374 Rodrik’s ‘impossible trinity’, 375 gold, 23, 24, 25, 28, 35, 37 new gold production, 51, 52, 55, 62 gold standard, xviii, 1, 9, 27, 29, 338 and Britain, 9, 42, 43, 44, 45–50, 53, 57–9, 80, 101, 102, 113 collapse of US exchange standard (1971), 160, 165 commitment to convertibility, 55–6 and Cunliffe model, 54–5, 102 depressions in later nineteenthcentury, 51–2 dysfunctional after First World War, 95, 97 final suspension in Britain (1931), 113, 125 Fisher’s ‘compensated dollar’ scheme, 66 Hume’s ‘price-specie-flow’ mechanism, 37–8, 53, 54, 104, 285, 332 and international bond markets, 92 as international by 1880s, 50–52 Keynes on, 58, 101, 127 Kindleberger thesis, 58–9 move to ‘managed’ system, 71, 99–100 replaces silver standard (1690s), 42, 43 restored (1821), 48 return to in 1920s, 102, 104, 107 suspension during Napoleonic wars, 43, 45–7 suspension of convertibility (1919), 101–2 triumph of by mid-nineteenthcentury, 44, 50 working and design of, 52–9 as working in tandem with empire, 57, 58 Goldberg, Michael D., 389 Goldman Sachs, 315 Goodhart, Charles, 168, 187 Graeber, David, 28 Great Depression (1929–32), 9, 13, 96, 97–8, 110–13, 127 compared to 2008 crash, 218 Friedman-Schwartz view, 104–6, 179, 183, 256, 276, 278 impact on US policy-makers in 2008 period, 256, 275, 278 left-wing explanations of, 298 rise in inequality in lead-up to, 289 and second wave of collectivism, 15–16 Great Moderation (early 1990s–2007), 4, 53, 202, 278 economic problems during, 348 financial deregulation during, 318–22, 328 financial innovation during, 322–8 and independent central banks, 215 inflation during, 106, 215, 216, 252–3, 253, 348, 359, 360 international financial network, 309, 318–28 output growth during, 215, 253, 348 Great Recession (2008–9), xviii Congdon’s view of, 281–2, 287 co-ordinated global response, 219–20, 383 decline in productivity after, 305–6 474 i n de x initial signs of recovery (2009), 218–19, 225, 226 monetary interpretation of, 105, 106 ‘premature withdrawal’ of fiscal stimulus, 219–20, 223–36, 245, 352 reform agenda after, 361–8 rise in inequality in lead-up to, 289–90, 299–300 see also financial collapse (2007–8) Greece and Eurozone debt crisis, 32, 224, 224–5, 226, 233, 235, 242–3, 243, 337, 341, 365 in gold standard era, 59 Greenspan, Alan, 188, 313 Hamilton, Alexander, 88, 90, 92 Hammond, Philip, 236, 352 Hannover Re scandal, 329 Harrison, George, 105 Harrod, Roy, 123 Harvey, John, 333, 387 Hawtrey, Ralph, 109–10, 280 Hayek, Friedrich, 33, 46, 177, 195, 350, 367 founds Mont Pelerin Society, 176 ‘over-consumption’ theory, 296 The Road to Serfdom (1944), 16, 175–6 on Wall Street Crash, 104 Heath, Edward, 167–8 Heckscher, Eli, 37 Help to Buy programme, 265, 266 Henderson, Hubert, 109 Henderson, W.

., 171, 208 Napoleonic wars, 43, 45–8, 80, 81, 84 national debt and 2007–8 crash, 76, 217–18, 219–20, 223–4, 224, 225–36, 237 British experience (1692–2012), 77 British long-term securities, 43 ‘burden on future generations’ fallacy, 236 bust at end of Lawson boom, 193 in eighteenth-century Britain, 80–81 four big spikes (since 1815), 84 and ‘Geddes Axe’ (1920s), 108 Alexander Hamilton on, 92 international bond markets, 90–92, 235 in Keynesian era, 156, 159–60, 161 Merkel’s ‘Swabian housewife’, 236 and modern tax systems, 32 monetary financing of deficits, 246–7, 285 during Napoleonic wars, 45–8 nineteenth-century money lenders, 90–91, 332 ‘off-budget’ accounting, 108–9 and PFI, 222–3 post-crash deficit, 226–33, 229, 237–9, 328, 352 public sector net borrowing (PSNB), 185, 227–8, 237, 238 Reagan’s budget deficits, 186, 190–91 recession of early 1980s, 186–7, 191 sinking fund, 83, 84, 85, 106, 108, 112, 114, 355 Sinking Fund Act (1875), 114 Smith and Ricardo’s view, 81–2, 83–4, 109, 110 ‘structural’ or ‘cyclically-adjusted’ deficit, 237–41, 238 US in 1950s/60s, 159–60, 161 Victorian fiscal constitution, 85–8, 86 and warfare, 83 483 i n de x nationalism, 17, 92, 95, 351, 371–3, 375 nationalization, 15–16, 142, 158 during 2008 crisis, 217 Labour’s renationalization proposals, 356 naval power, 78, 79–80, 87 Navigation Acts, British, 78 neo-classical economics tradition, xviii and 2008 collapse, 310–16, 328 comparisons with Keynesian view, 204, 204 and deregulation of banking, 310–11 distribution in perfect markets of, 292 formula for multiplier, 134–6 and Friedman, 177–83 and growth in inequality, 245–6 in Hutchison’s continua, 349 and Keynes, 122–3, 128 Keynesian synthesis, 172, 173–4, 201–2 microeconomics of Walras, 10, 173, 181, 385 model of rationality, 120 ‘natural’ rate of unemployment, 2, 163, 195, 197, 208, 232–3 and New Consensus, 199 and ‘optimal’ rate of investment, 368 pivotal role of banks ignored, 311 Solow growth model, 293 theoretical abolition of Keynesianism, 201 wage-adjustment story, 107, 108, 115, 121–2, 123, 128, 130, 132, 172 see also classical economics tradition; New Classical economics neo-liberal ideology ‘anti-state’ deception of, 93 capture of politics by, 6, 16–17, 292 and Eurozone constitution, 274 and Eurozone design flaw, 376, 377 implosion of growth model, 305 need for jettisoning of, 351, 367 term coined by Rustow (1938), 175 totalitarianism as original target, 175–6 as unchallenged since Cold War, 374 Netherlands, 78 New Classical economics and 2008 collapse, 2–3, 5 DSGE modelling, 196, 211–12 and erroneous austerity arguments, 232–4 and growth in inequality, 4 inflation targeting, 2 and microeconomics of Walras, 10 ‘natural’ rate of unemployment, 2, 195, 197, 208, 232–3 New Classical economics – (c0nt.) and neo-liberal capture of politics, 6, 16–17 and policies of austerity, 3 pre-crash models/mindset of 2000s, 212–13, 221, 229–35, 310–16 REH as analytic core of, 194–7, 385–6 synthesis with New Keynesians, 195–7, 199–201, 202 and unimpeded financial markets, 5, 6–7 unrealism of assumptions, 200, 310–16, 321–2 victory of in 1970s, 16–17 New Consensus, 9, 196–8, 202 based on supply not demand, 200 Brown constitution, 221–3 main features of, 199–201 primacy of monetary policy, 200–201, 212 ‘Washington consensus’, 198 484 i n de x New Keynesianism, 195–7, 199, 200, 201, 202, 212, 358 Brown constitution, 221–3, 227 and inflation targeting, 196, 251 ‘new stagnation’ theorists, 151 New Zealand, 188 Newton, Isaac, 42, 43, 47–8 Nielsen, Robert, 389 Niemeyer, Sir Otto, 108 Nixon, Richard, 153, 162 Norman, George, 49 Norman, Montagu, 115 North, Douglass, 198–9 Northern Rock, 317, 319*, 362 Obama, Barack, 225, 241–2, 274 O’Brien, Denis, 78 Office for Budgetary Responsibility (OBR), 228, 229–30, 237 oil prices, 271, 272 oil price shock (1973–4), 166–7, 189, 190 price spike (1980–82), 189, 190 OPEC surpluses, 308, 332 Orbán, Viktor, 373 Osborne, George, 114, 227–8, 229, 231, 233 and cost of austerity, 243–4, 244, 245 crucial mistake in austerity policy, 229–30 ‘deficit’ obsession of, 237 and Reinhart-Rogoff work, 232 and ‘structural’ deficit, 237–9 output gaps, 144, 197, 212–13, 229, 235, 237, 258, 286 ‘over-consumption’ theory, Austrian, 296 Overstone, Lord, 49 Palley, Thomas, 302–3, 304, 305 Papandreou (Greek Prime Minister), 324 Pareto-efficiency, 290, 291 Paulson, Henry, 217 Peel, Robert, 47–8, 86 Péreire brothers, 91 Pettifor, Ann, 246, 309 Pettis, Michael, 339 Petty, William, 28 Phillips, A.


pages: 708 words: 176,708

The WikiLeaks Files: The World According to US Empire by Wikileaks

affirmative action, anti-communist, banking crisis, battle of ideas, Boycotts of Israel, Bretton Woods, British Empire, capital controls, central bank independence, Chelsea Manning, colonial exploitation, colonial rule, corporate social responsibility, credit crunch, cuban missile crisis, Deng Xiaoping, drone strike, Edward Snowden, energy security, energy transition, European colonialism, eurozone crisis, experimental subject, F. W. de Klerk, facts on the ground, failed state, financial innovation, Food sovereignty, Francis Fukuyama: the end of history, full employment, future of journalism, high net worth, invisible hand, Julian Assange, Kickstarter, liberal world order, Mikhail Gorbachev, millennium bug, Mohammed Bouazizi, Monroe Doctrine, Nelson Mandela, Northern Rock, Philip Mirowski, RAND corporation, Ronald Reagan, Silicon Valley, South China Sea, statistical model, structural adjustment programs, too big to fail, trade liberalization, trade route, UNCLOS, UNCLOS, uranium enrichment, Washington Consensus, WikiLeaks, zero-sum game, éminence grise

It also hit East Asia, despite hopes that the region would be able to ride out the storm. This is a testament to the extent of economic interpenetration that has already developed, and the extent to which the rest of the world depends upon the US economy. It is also a very good reason why, after the worst economic crisis since the 1930s, the US can still lead a wide coalition of states as it presses for further entrenchment of the “Washington Consensus.” The dominance of Wall Street is reminiscent of British domination of world trade in the nineteenth century, in that US interests have in a way become synonymous with those of the world. If it goes down, we all go down. This eBook is licensed to Edward Betts, edward@4angle.com on 04/01/2016 Part II This eBook is licensed to Edward Betts, edward@4angle.com on 04/01/2016 4.

In September 2005, the new US ambassador to Ecuador, Linda Jewell, reiterated the embassy’s concerns about an unintended loss of US influence in Ecuador, in a cable titled: “Democracy Promotion Strategies for Ecuador.”48 As this cable illustrates, so-called “democracy promotion” is a strategy by which Western governments seek to influence and contain political and economic change in countries of strategic importance. In Ecuador, the US wanted to counteract the influence of Latin America’s burgeoning social movements. Demanding democratic reforms and an economic alternative to the Washington consensus, these movements had brought left-wing leaders to power in Venezuela, Bolivia, and Uruguay. The embassy feared that the “pink tide” would engulf Ecuador, damaging US business interests in the country and dashing any hopes of negotiating a free-trade agreement. Moreover, the Ecuadorians who had mobilized against Gutiérrez were calling for an end to US interference in Ecuador and closure of the US Forward Operating Base at Manta.

While soft US methods of intervention helped maintain right-wing, Washington-friendly political parties in power during the period of democratization of the 1990s, beginning in 1998 a tide of left-leaning candidates began winning elections, from the southern tip of South America to El Salvador. By 2009, the vast majority of Latin Americans—who had experienced an unprecedented economic growth failure for more than two decades6 under governments that adhered to the neoliberal “Washington Consensus”—were living under governments that explicitly rejected many of these policies. This chapter will examine the actions, recommendations, and observations of US diplomats in five countries, four of which saw left-wing political governments elected to power, and one of which experienced a US-backed coup that was followed by political violence and repression. The methods of intervention described above are all apparent in El Salvador, Nicaragua, Bolivia, and Ecuador, where US diplomatic missions sought to undermine left-leaning candidates and governments.


pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

"Robert Solow", Alvin Roth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, do-ocracy, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

Part of the blame might be laid at the door of the neoliberals themselves: as I document below, even though the members of Mont Pèlerin Society initially used the term “neoliberal” to refer to themselves in the early 1950s, by the 1960s they had backtracked, trumpeting the ambagious notion that their ideas all could be traced back to Adam Smith, if not before. But an equal moiety of blame should be dished out to their opponents on the left, who often bandy about attributions of “neoliberalism” as a portmanteau term of abuse when discussing grand phenomena often lumped together under the terminology of “globalization” and “financialization” and “governmentality.” The Washington Consensus, the death of the welfare state, the risk society, the wars in Iraq and Afghanistan, European (dis)integration, the ascendancy of China, and the outsourcing of manufacturing all portend cosmic themes, mostly of interest to those who regard themselves of taking the broad view of power politics.4 But broad characterizations of contemporary political events should not be mistaken for the painstaking construction of political doctrines to motivate organization in the long run, however much they may be related.

The market is not the one and all; it has an outside, it has a limit.14 Just so it doesn’t appear that I am unfairly taking advantage of a certain class of people who might have been overly inclined to jump the gun, let’s sample some people closer to the orthodoxy in American economics like, say, Joseph Stiglitz: Neo-liberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy.15 In an interview with the Berliner Zeitung, Stiglitz was quoted as saying, “Neoliberalism like the Washington Consensus is dead in most western countries. See the debates in South America or other countries. The U.S. has lost its role as the model for others. Everyone only laughs when U.S. technocrats give lectures in other countries and say: ‘Do as we do, liberalize your financial markets!’”16 Stiglitz, as one of the few neoclassical economists who has periodically attempted to intellectually refute neoliberalism over the course of his career, should therefore be regarded as someone who had significant credibility tied up in expressing his conviction that the demise of neoliberalism was at hand.

Initially strident demands to abolish global financial (and other) institutions on the part of early neoliberals such as Friedman and some denizens of the Cato Institute were subsequently tempered by others—such as Anne Krueger, Stanley Fischer, and Kenneth Rogoff—and as these neoliberals came to occupy these institutions, they used them primarily to influence staffing and policy decisions, and thus to displace other internationalist agendas. The role of such transnational organizations was recast to exert “lock-in” of prior neoliberal policies, and therefore to restrict the range of political options of national governments. Sometimes they were also used to displace indigenous “crony capitalists” with a more cosmopolitan breed of cronyism. Thus it is correct to observe an organic connection between such phenomena as the Washington Consensus and the spread of neoliberal hegemony, as Dieter Plehwe argues.99 This also helps address the neoliberal conundrum of how to both hem in and at the same time obscure the strong state identified in point 4, above. The relevance of the rise of the neoliberal globalized financial regime to the crisis is a matter of great concern to the thought collective and to others (such as Ben Bernanke) who seek to offload responsibility for the crash onto someone else.


pages: 232 words: 77,956

Private Island: Why Britain Now Belongs to Someone Else by James Meek

Affordable Care Act / Obamacare, Berlin Wall, business continuity plan, call centre, clean water, Deng Xiaoping, Etonian, HESCO bastion, housing crisis, illegal immigration, Martin Wolf, medical bankruptcy, Mikhail Gorbachev, post-industrial society, pre–internet, price mechanism, Right to Buy, risk tolerance, road to serfdom, Ronald Reagan, Rubik’s Cube, Skype, sovereign wealth fund, Washington Consensus, working poor

In Kuwait at the beginning of the year I saw experienced British war correspondents squabble for reporting billets among the frontline troops with the ferocity of those who believe something is being offered for the last time; we thought British and American armies might never fight another war. Few doubted Saddam would be beaten, and he was. That November, as I drove off the ferry at Ostend, heading east, it seemed a racing, expanding tide of victorious free marketism flickered at my wheels, a tide that has gone by many names – consumer capitalism, Reaganism, Thatcherism, neoliberalism, the Washington Consensus. Though the watchtowers still stood at the old border between two Germanys, the border was gone. In eastern Germany, the narrow cobbled streets of medieval towns had jammed solid with second hand cars. I passed a field where an impatient western German DIY chain, unwilling to wait for steel and breeze blocks, had erected a vast, circular retail marquee, blazing with lights. The canvas superstore seemed to have landed, like a spacecraft from a flashier civilisation, come down to offer shrink-wrapped packs of rawl plugs and a choice of bathroom fittings.

They seemed to believe, or talked, made speeches, wrote papers as if they believed, that the entire structure of their own wealthy modern societies – the roads, the electricity grids, the railways, the water and sewage systems, the universal postal services, the telecoms networks, housing, education and health care – had been brought into being by individual entrepreneurs driven by desire for gain, with the occasional lump of charity thrown in, and that a bloated, parasitical state had come shambling onto the scene, seizing assets and demanding free stuff for its shirker buddies. I don’t want to absolve the Russians or Ukrainians of responsibility for their handling of the aftermath of communism, but the template they were handed by the fraternity of the Washington Consensus was based on fake history. If this is what the triumphalists of Wall Street and the City of London told the Russians about the way of the capitalist world, I thought when I moved back to Britain in 1999, what have they been telling us? And what came of it? When Margaret Thatcher’s Conservatives came to power in Britain in 1979, much of the economy, and almost all its infrastructure, was in state hands.


pages: 193 words: 63,618

The Fair Trade Scandal: Marketing Poverty to Benefit the Rich by Ndongo Sylla

British Empire, carbon footprint, corporate social responsibility, David Ricardo: comparative advantage, deglobalization, Doha Development Round, Food sovereignty, global value chain, illegal immigration, income inequality, income per capita, invisible hand, Joseph Schumpeter, labour mobility, land reform, market fundamentalism, mass immigration, means of production, Mont Pelerin Society, Naomi Klein, non-tariff barriers, offshore financial centre, open economy, Philip Mirowski, plutocrats, Plutocrats, price mechanism, purchasing power parity, Ronald Reagan, Scientific racism, selection bias, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, transatlantic slave trade, trickle-down economics, Washington Consensus, zero-sum game

On the other hand, he argues, it is undeniable that the developing countries that most benefited from the gains of globalisation are those that introduced heterodox and gradualist economic policies in their approaches towards economic openness. Still, according to him, empirical data also showed that the vast majority of developing countries which, in recent history, followed the neoliberal orthodoxy, the notorious ‘Washington Consensus’, have had disastrous economic performances (see Box 3.2). In other words, neoliberal criticism of Fair Trade is rather weak from a logical point of view. On the one hand, it cannot attack consumer choices without contradicting its support of the sacred principle of individual freedom. On the other, it cannot argue that it represents a better economic 73 Sylla T02779 01 text 73 28/11/2013 13:04 the fair trade scandal alternative a priori than the model promoted by Fair Trade, because its economic and social results so far are certainly not persuasive.

., 132, 156(n4) Smithsonian Migratory Bird Center, Bird-friendly Coffee programme, 54 Social capital, 101, 117, 119 Solidaridad, 3, 38–9, 114; see also Roozen Solomon Islands, 135 Somalia, 135 SOS Wereldhandel; see Fair Trade Organisatie Spaghetti bowl, 27 South Africa, 136, 137, 159(n20), 162(n21) South South relations, 80, 149, 163(n2) Sri Lanka, 134 STABEX, see Export earnings stabilisation system Starbucks, 77, 78, 150; Coffee and farmer equity practices, 55 Stigler, Georges, 42 Stiglitz, Joseph E. and Charlton, Andrew, 31–3, 66 Structural adjustment policies, 17, 18, 42 Structuralist school, 37–8 Sudan, 135 Sugar, 16, 27, 30, 36, 60–2, 80, 85, 90 Sustainable Agriculture Network, 53 Sustainability, 4, 24, 34, 47, 50, 53, 55, 56, 57, 70, 79, 113, 138, 142, 149–50, 158(n5) Sustainable development, 4, 34, 47, 55, 70, 82, 83, 156(n2), 163(n1) Sustainable Fair Trade Management System, 45; see also World Fair Trade Organization Sweden, 63, 162(n29) Switzerland, 53, 127, 128 System for Minerals (Sysmin), 155(n2) Taiwan, 155(n1) Tanzania, United Republic of, 134, 135 Tariff escalation, 26–8, 30 Tariff peaks, 30 Tax havens, 157(n13) Tea, 40, 49, 52, 53, 54, 56, 80, 130, 133, 134, 136 Ten Thousand Villages, 35–6 Thailand, 155(n1) Thatcher, Margaret, 42 Third Worldism, 36–40, 120 Times (the), 160(n2) Timor Leste, 135 Togo, 134, 135, 155(n2) Torrens, Robert, 65 Trade not aid (slogan), 38, 40, 126 Trade structure, 9, 10, 133–8, 141, 154, 163(n2); see also Developing countries Traders, 20, 44, 49, 86, 106, 116–17, 140 Transfair USA, additional income transferred, 125, 128, 130–1, 153; 161(n9), 161(n11); budget and licensee fees, 127–8, 153; exit from Fairtrade, 161(n13); name change, 161(n9); sales, 161(n10) Tribune (La), 159(n18) Truman, Harry, 34, 35 Turkey, 155(n1) Tuvalu, 135 UCIRI (Union de Comunidades Indigenas de la Region del Istmo), 98, 157(n4) Uganda, 134, 135, 138 Un Comtrade, 20, 134 Underdevelopment, see development Unequal exchange, 1–2, 16–22, 25, 37, 62, 76, 120, 132, 133; unequal ecological exchange, 22–4 United Nations, 10, 144, 155(n4) United Nations Conference on Trade and Development (UNCTAD), 9, 10, 13, 14, 16, 20–1, 38, 133, 134, 135, 154, 162(n19), 162(n21), 163(n2) United Kingdom, 8, 25, 31, 32, 36, 46, 53, 56–7, 60–2, 64–9, 71, 127, 128, 132 United States, 16, 20, 22, 23, 25, 27, 29, 31, 32, 35, 36, 42, 46, 53, 54, 61, 63, 67, 71, 79, 90, 125, 127, 128, 130, 131, 132, 136, 156(n2), 158(n8), 158(n9); American System, 26, 67; United States Agency for International Development (USAID), 138; see also Transfair USA UTZ Certified, 54, 55, 56, 70 Van der Hoff, Frans, 3, 38–43, 87–9, 98, 139, 158(n4), 158(n5), 162(n26), 163(n1) 178 Sylla T02779 02 index 178 28/11/2013 13:04 index Vanuatu, 135 Vent for surplus theory, 65 Vertical integration, 19–21, 41 Vietnam, 74 Wage, 79, 80, 158(n7), 160(n26), 160(n27), 161(n5); minimum wage, 51, 95, 98; reservation wage, 94–5; wage employment, 19, 72, 94, 123–4, 128, 131, 133, 137, 142, 162(n22) Wal-Mart, 78, 79 Washington Consensus, 73 Wealth of Nations, see Smith, Adam West Indies, 60–2, Williams, Eric, 60–2 Williamson, Jeffrey G., 162(n27) World Bank, 17, 31, 42; development indicators, 9, 10–12, 15, 30, 89, 131, 137, 153, 161(n7, n14, n17) World Fair Trade Organization, 44–5, 46, 80, 151 World-system theory, 76 World Trade Organization, 26, 28, 29, 31–3, 74, 144, 155(n3) Yemen, 135 Zambia, 135 179 Sylla T02779 02 index 179 28/11/2013 13:04 Sylla T02779 02 index 180 28/11/2013 13:04


Chomsky on Mis-Education by Noam Chomsky

American ideology, deindustrialization, deskilling, Howard Zinn, invisible hand, means of production, Ronald Reagan, strikebreaker, union organizing, Washington Consensus

Far more instructive is the state of affairs in the “people’s democracies” of Eastern Europe. The point is elementary and applies to the self-designated “gatekeeper and model” as well. Latin America is the obvious testing ground, particularly the Central America–Caribbean region. Here Washington has faced few external challenges for almost a century, so the guiding principles of policy, and of today’s neoliberal “Washington consensus,” are revealed most clearly when we examine the state of the region and how that came about. It is of some interest that the exercise is rarely undertaken and, if proposed, castigated as extremist or worse. I leave it as an “exercise for the reader,” merely noting that the record teaches useful lessons about the political and economic principles that are to be “the wave of the future.” Washington’s “crusade for democracy,” as it is called, was waged with particular fervor during the Reagan years, with Latin America the chosen terrain.

The well-known economic historian Paul Bairoch points out that “there is no doubt that the Third World’s compulsory economic liberalism in the nineteenth century is a major element in explaining the delay in its industrialization,” or even “deindustrialization,” while Europe and the regions that managed to stay free of its control developed by radical violation of these principles.46 Referring to the more recent past, Arthur Schlesinger’s secret report on Kennedy’s Latin American mission realistically criticized “the baleful influence of the International Monetary Fund,” then pursuing the 1950s version of today’s “Washington Consensus” (“structural adjustment,” “neoliberalism”). Despite much confident rhetoric, not much is understood about economic development. But some lessons of history seem reasonably clear and not hard to understand. Let us return to the prevailing doctrine that “America’s victory in the Cold War” was a victory for democracy and the free market. With regard to democracy, the doctrine is partially true, though we have to understand what is meant by democracy: top-down control “to protect the minority of the opulent against the majority.”


pages: 253 words: 79,214

The Money Machine: How the City Works by Philip Coggan

activist fund / activist shareholder / activist investor, algorithmic trading, asset-backed security, Bernie Madoff, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, call centre, capital controls, carried interest, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, disintermediation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, endowment effect, financial deregulation, financial independence, floating exchange rates, Hyman Minsky, index fund, intangible asset, interest rate swap, Isaac Newton, joint-stock company, labour market flexibility, large denomination, London Interbank Offered Rate, Long Term Capital Management, merger arbitrage, money market fund, moral hazard, mortgage debt, negative equity, Nick Leeson, Northern Rock, pattern recognition, purchasing power parity, quantitative easing, reserve currency, Right to Buy, Ronald Reagan, shareholder value, South Sea Bubble, sovereign wealth fund, technology bubble, time value of money, too big to fail, tulip mania, Washington Consensus, yield curve, zero-coupon bond

Free-market enthusiasts also pointed to the success of those Asian countries that had followed a broadly free-market view, such as Singapore, Hong Kong and Taiwan, and the failure of those countries, notably in Africa, that had followed a statist or socialist model. A so-called ‘Washington consensus’ argued that any economy which wanted to prosper should follow the free-market model: lower taxes, reduced government deficits and open capital markets. These policies were often made a condition for countries requiring aid from the International Monetary Fund, the Washington-based organization that underpins the global financial system. The period since 2000 has seen the Washington consensus come under attack. First, the US model looks not quite as attractive as it did in the late 1990s. The dotcom bubble burst in 2000 and then a housing boom ended in a credit crunch in 2007 and 2008.


pages: 515 words: 142,354

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

bank run, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

The story I tell here is a dramatic illustration of several themes that have preoccupied me in recent years—themes that should have global resonance: The first is the influence of ideas, in particular how ideas about the efficiency and stability of free and unfettered markets (a set of ideas sometimes referred to as “neoliberalism”) have shaped not just policies but institutions over the past third of a century. I have elsewhere described the policies that dominated the development discourse, called the Washington Consensus policies, and shaped the conditions imposed on developing countries.10 This book is about how these same ideas shaped what was viewed as the next step in the tremendously important project of European integration, the sharing of a common currency—and derailed it. Today, the same battle of ideas is being fought in myriad skirmishes. Indeed, in some cases, even the arguments and evidence presented are fundamentally the same.

., 266 Camdessus, Michel, 314 campaign contributions, 195, 355 Canada, 96 early 1990s expansion of, 209 in NAFTA, xiv railroad privatization in, 55 tax system in, 191 US’s free trade with, 45–46, 47 capital, 76–77 bank, 284–85 human, 78, 137 return to, 388 societal vs. physical, 77–78 tax on, 356 unemployment increased by, 264 capital adequacy standards, 152 capital budget, 245 capital controls, 389–90 capital flight, 126–34, 217, 354, 359 austerity and, 140 and labor flows, 135 capital flows, 14, 15, 25, 26, 27–28, 40, 116, 125, 128, 131, 351 economic volatility exacerbated by, 28, 274 and foreign ownership, 195 and technology, 139 capital inflows, 110–11 capitalism: crises in, xviii, 148–49 inclusive, 317 capital requirements, 152, 249, 378 Caprio, Gerry, 387 capture, 158–60 carbon price, 230, 260, 265, 368 cash, 39 cash flow, 194 Catalonia, xi CDU party, 314 central banks, 59, 354, 387–88 balance sheets of, 386 capture of, 158–59 credit auctions by, 282–84 credit creation by, 277–78 expertise of, 363 independence of, 157–63 inequality created by, 154 inflation and, 153, 166–67 as lender of last resort, 85, 362 as political institutions, 160–62 regulations and, 153 stability and, 8 unemployment and, 8, 94, 97, 106, 147, 153 CEO compensation, 383 Chapter 11, 259–60, 291 childhood poverty, 72 Chile, 55, 152–53 China, 81, 98, 164, 319, 352 exchange-rate policy of, 251, 254, 350–51 global integration of, 49–50 low prices of, 251 rise of, 75 savings in, 257 trade surplus of, 118, 121, 350–52 wages controlled in, 254 as world’s largest economy, 318, 327 chits, 287–88, 290, 299–300, 387, 388–389 Citigroup, 355 climate change, 229–30, 251, 282, 319 Clinton, Bill, xiv, xv, 187 closing hours, 220 cloves, 230 cognitive capture, 159 Cohesion Fund, 243 Cold War, 6 collateral, 364 collective action, 41–44, 51–52 and inequality, 338 and stabilization, 246 collective bargaining, 221 collective goods, 40 Common Agricultural Policy, 338 common regulatory framework, 241 communism, 10 Community Reinvestment Act (CRA), 360, 382 comparative advantage, 12, 171 competition, 12 competitive devaluation, 104–6, 254 compromise, 22–23 confidence, 95, 200–201, 384 in banks, 127 in bonds, 145 and structural reforms, 232 and 2008 crisis, 280 confirmation bias, 309, 335 Congress, US, 319, 355 connected lending, 280 connectedness, 68–69 Connecticut, GDP of, 92 Constitutional Court, Greek, 198 consumption, 94, 278 consumption tax, 193–94 contract enforcement, 24 convergence, 13, 92–93, 124, 125, 139, 254, 300–301 convergence criteria, 15, 87, 89, 96–97, 99, 123, 244 copper mines, 55 corporate income tax, 189–90, 227 corporate taxes, 189–90, 227, 251 corporations, 323 regulations opposed by, xvi and shutdown of Greek banks, 229 corruption, 74, 112 privatization and, 194–95 Costa, António, 332 Council of Economic Advisers, 358 Council of State, Greek, 198 countercyclical fiscal policy, 244 counterfactuals, 80 Countrywide Financial, 91 credit, 276–85 “divorce”’s effect on, 278–79 excessive, 250, 274 credit auctions, 282–84 credit bubbles, 122–123 credit cards, 39, 49, 153 credit creation, 248–50, 277–78, 386 by banks, 280–82 domestic control over, 279–82 regulation of, 277–78 credit default swaps (CDSs), 159–60 crisis policy reforms, 262–67 austerity to growth, 263–65 debt restructuring and, 265–67 Croatia, 46, 331, 338 currency crises, 349 currency pegs, xii current account, 333–34 current account deficits, 19, 88, 108, 110, 120–121, 221, 294 and exit from euro, 273, 285–89 see also trade deficit Cyprus, 16, 30, 140, 177, 331, 386 capital controls in, 390 debt-to-GDP ratio of, 231 “haircut” of, 350, 367 Czech Republic, 46, 331 debit cards, 39, 49 debtors’ prison, 204 debt restructuring, 201, 203–6, 265–67, 290–92, 372, 390 of private debt, 291 debts, xx, 15, 93, 96, 183 corporate, 93–94 crisis in, 110–18 in deflation, xii and exit from eurozone, 273 with foreign currency, 115–18 household, 93–94 increase in, 18 inherited, 134 limits of, 42, 87, 122, 141, 346, 367 monetization of, 42 mutualization of, 242–43, 263 place-based, 134, 242 reprofiling of, 32 restructuring of, 259 debt-to-GDP ratio, 202, 210–11, 231, 266, 324 Declaration of Independence, 319 defaults, 102, 241, 338, 348 and debt mutualization, 243 deficit fetishism, 96 deficits, fiscal, xx, 15, 20, 93, 96, 106, 107–8, 122, 182, 384 and balanced-budget multiplier, 188–90, 265 constitutional amendment on, 339 and exit from euro, 273, 289–90 in Greece, 16, 186, 215, 233, 285–86, 289 limit of, 42, 87, 94–95, 122, 138, 141, 186, 243, 244, 265, 346, 367 primary, 188 problems financing, 110–12 structural, 245 deficits, trade, see trade deficits deflation, xii, 147, 148, 151, 166, 169, 277, 290 Delors, Jacques, 7, 332 democracy, lack of faith in, 312–14 Democracy in America (Tocqueville), xiii democratic deficit, 26–27, 35, 57–62, 145 democratic participation, xix Denmark, 45, 307, 313, 331 euro referendum of, 58 deposit insurance, 31, 44, 129, 199, 301, 354–55, 386–87 common in eurozone, 241, 242, 246, 248 derivatives, 131, 355 Deutsche Bank, 283, 355 devaluation, 98, 104–6, 254, 344 see also internal devaluation developing countries, and Washington Consensus, xvi discretion, 262–63 discriminatory lending practices, 283 disintermediation, 258 divergence, 15, 123, 124–44, 255–56, 300, 321 in absence of crisis, 128–31 capital flight and, 126–34 crisis policies’ exacerbation of, 140–43 free mobility of labor and, 134–36, 142–44, 242 in public investment, 136–38 reforms to prevent, 243 single-market principle and, 125–26 in technology, 138–39 in wealth, 139–40 see also capital flows; labor movement diversification, of production, 47 Dodd-Frank Wall Street Reform and Consumer Protection Act, 355 dollar peg, 50 downsizing, 133 Draghi, Mario, 127, 145, 156, 158, 165, 269, 363 bond market supported by, 127, 200, 201 Drago, Luis María, 371 drug prices, 219 Duisenberg, Willem Frederik “Wim,” 251 Dynamic Stochastic Equilibrium model, 331 East Asia, 18, 25, 95, 102–3, 112, 123, 202, 364, 381 convergence in, 138 Eastern Europe, 10 Economic Adjustment Programme, 178 economic distortions, 191 economic growth, xii, 34 confidence and, 232 in Europe, 63–64, 69, 73–74, 74, 75, 163 lowered by inequality, 212–13 reform of, 263–65 and structural reforms, 232–35 economic integration, xiv–xx, 23, 39–50 euro and, 46–47 political integration vs., 51–57 single currency and, 45–46 economic rents, 226, 280 economics, politics and, 308–18 economic security, 68 economies of scale, 12, 39, 55, 138 economists, poor forecasting by, 307 education, 20, 76, 344 investment in, 40, 69, 137, 186, 211, 217, 251, 255, 300 electricity, 217 electronic currency, 298–99, 389 electronics payment mechanism, 274–76, 283–84 emigration, 4, 68–69 see also migration employment: central banks and, 8, 94, 97 structural reforms and, 257–60 see also unemployment Employment Act (1946), 148 energy subsidies, 197 Enlightenment, 3, 318–19 environment, 41, 257, 260, 323 equality, 225–26 equilibrium, xviii–xix Erasmus program, 45 Estonia, 90, 331, 346 euro, xiv, 325 adjustments impeded by, 13–14 case for, 35–39 creation of, xii, 5–6, 7, 10, 333 creation of institutions required by, 10–11 divergence and, see divergence divorce of, 272–95, 307 economic integration and, 46–47, 268 as entailing fixed exchange rate, 8, 42–43, 46–47, 86–87, 92, 93, 94, 102, 105, 143, 193, 215–16, 240, 244, 249, 252, 254, 286, 297 as entailing single interest rate, 8, 85–88, 92, 93, 94, 105, 129, 152, 240, 244, 249 and European identification, 38–39 financial instability caused by, 131–32 growth promised by, 235 growth slowed by, 73 hopes for, 34 inequality increased by, xviii interest rates lowered by, 235 internal devaluation of, see internal devaluation literature on, 327–28 as means to end, xix peace and, 38 proponents of, 13 referenda on, 58, 339–40 reforms needed for, xii–xiii, 28–31 risk of, 49–50 weakness of, 224 see also flexible euro Eurobond, 356 euro crisis, xiii, 3, 4, 9 catastrophic consequences of, 11–12 euro-euphoria, 116–17 Europe, 151 free trade area in, 44–45 growth rates in, 63–64, 69, 73–74, 74, 75, 163 military conflicts in, 196 social models of, 21 European Central Bank (ECB), 7, 17, 80, 112–13, 117, 144, 145–73, 274, 313, 362, 368, 380 capture of, 158–59 confidence in, 200–201 corporate bonds bought by, 141 creation of, 8, 85 democratic deficit and, 26, 27 excessive expansion controlled by, 250 flexibility of, 269 funds to Greece cut off by, 59 German challenges to, 117, 164 governance and, 157–63 inequality created by, 154–55 inflation controlled by, 8, 25, 97, 106, 115, 145, 146–50, 151, 163, 165, 169–70, 172, 250, 256, 266 interest rates set by, 85–86, 152, 249, 302, 348 Ireland forced to socialize losses by, 134, 156, 165 new mandate needed by, 256 as political institution, 160–62 political nature of, 153–56 quantitative easing opposed by, 151 quantitative easing undertaken by, 164, 165–66, 170, 171 regulations by, 249, 250 unemployment and, 163 as unrepresentative, 163 European Commission, 17, 58, 161, 313, 332 European Court of Human Rights, 45 European Economic Community (EEC), 6 European Exchange Rate Mechanism (ERM), 30, 335 European Exchange Rate Mechanism II (ERM II), 336 European Free Trade Association, 44 European Free Trade Association Court, 44 European Investment Bank (EIB), 137, 247, 255, 301 European Regional Development Fund, 243 European Stability Mechanism, 23, 246, 357 European Union: budget of, 8, 45, 91 creation of, 4 debt and deficit limits in, 87–88 democratic deficit in, 26–27 economic growth in, 215 GDP of, xiii and lower rates of war, 196 migration in, 90 proposed exit of UK from, 4 stereotypes in, 12 subsidiarity in, 8, 41–42, 263 taxes in, 8, 261 Euro Summit Statement, 373 eurozone: austerity in, see austerity banking union in, see banking union counterfactual in, 235–36 double-dip recessions in, 234–35 Draghi’s speech and, 145 economic integration and, xiv–xx, 23, 39–50, 51–57 as flawed at birth, 7–9 framework for stability of, 244–52 German departure from, 32, 292–93 Greece’s possible exit from, 124 hours worked in, 71–72 lack of fiscal policy in, 152 and move to political integration, xvi, 34, 35, 51–57 Mundell’s work on dangers of, 87 policies of, 15–17 possible breakup of, 29–30 privatization avoided in, 194 saving, 323–26 stagnant GDP in, 12, 65–68, 66, 67 structure of, 8–9 surpluses in, 120–22 theory of, 95–97 unemployment in, 71, 135, 163, 177–78, 181, 331 working-age population of, 70 eurozone, proposed structural reforms for, 239–71 common financial system, see banking union excessive fiscal responsibility, 163 exchange-rate risks, 13, 47, 48, 49–50, 125, 235 exchange rates, 80, 85, 288, 300, 338, 382, 389 of China, 251, 254, 350–51 and competitive devaluation, 105–6 after departure of northern countries, 292–93 of euro, 8, 42–43, 46–47, 86–87, 92, 93, 94, 102, 105, 215–16, 240, 244, 249, 252, 254, 286, 297 flexible, 50, 248, 349 and full employment, 94 of Germany, 254–55, 351 gold and, 344–45 imports and, 86 interest rates and, 86 quantitative easing’s lowering of, 151 real, 105–6 and single currencies, 8, 42–43, 46–47, 86–87, 92, 93, 94, 97–98 stabilizing, 299–301 and trade deficits, 107, 118 expansionary contractions, 95–96, 208–9 exports, 86, 88, 97–99, 98 disappointing performance of, 103–5 external imbalances, 97–98, 101, 109 externalities, 42–43, 121, 153, 301–2 surpluses as, 253 extremism, xx, 4 Fannie Mae, 91 farmers, US, in deflation, xii Federal Deposit Insurance Corporation (FDIC), 91 Federal Reserve, US, 349 alleged independence of, 157 interest rates lowered by, 150 mandate of, 8, 147, 172 money pumped into economy by, 278 quantitative easing used by, 151, 170 reform of, 146 fiat currency, 148, 275 and taxes, 284 financial markets: lobbyists from, 132 reform of, 214, 228–29 short-sighted, 112–13 financial systems: necessity of, xix real economy of, 149 reform of, 257–58 regulations needed by, xix financial transaction system, 275–76 Finland, 16, 81, 122, 126, 292, 296, 331, 343 growth in, 296–97 growth rate of, 75, 76, 234–35 fire departments, 41 firms, 138, 186–87, 245, 248 fiscal balance: and cutting spending, 196–98 tax revenue and, 190–96 Fiscal Compact, 141, 357 fiscal consolidation, 310 fiscal deficits, see deficits, fiscal fiscal policy, 148, 245, 264 in center of macro-stabilization, 251 countercyclical, 244 in EU, 8 expansionary, 254–55 stabilization of, 250–52 fiscal prudence, 15 fiscal responsibility, 163 flexibility, 262–63, 269 flexible euro, 30–31, 272, 296–305, 307 cooperation needed for, 304–5 food prices, 169 forbearance, 130–31 forecasts, 307 foreclosure proposal, 180 foreign ownership, privatization and, 195 forestry, 81 France, 6, 14, 16, 114, 120, 141, 181–82, 331, 339–40, 343 banks of, 202, 203, 231, 373 corporate income tax in, 189–90 euro creation regretted in, 340 European Constitution referendum of, 58 extreme right in, xi growth in, 247 Freddie Mac, 91 Freefall (Stiglitz), 264, 335 free mobility of labor, xiv, 26, 40, 125, 134–36, 142–44, 242 Friedman, Milton, 151, 152–53, 167, 339 full employment, 94–97, 379 G-20, 121 gas: import of, 230 from Russia, 37, 81, 93 Gates Foundation, 276 GDP-indexed bonds, 267 German bonds, 114, 323 German Council of Economic Experts, 179, 365 Germany, xxi, 14, 30, 65, 108, 114, 141, 181–82, 207, 220, 286, 307, 331, 343, 346, 374 austerity pushed by, 186, 232 banks of, 202, 203, 231–32, 373 costs to taxpayers of, 184 as creditor, 140, 187, 267 debt collection by, 117 debt in, 105 and debt restructuring, 205, 311 in departure from eurozone, 32, 292–93 as dependent on Russian gas, 37 desire to leave eurozone, 314 ECB criticized by, 164 EU economic practices controlled by, 17 euro creation regretted in, 340 exchange rate of, 254–55, 351 failure of, 13, 78–79 flexible exchange of, 304 GDP of, xviii, 92 in Great Depression, 187 growing poverty in, 79 growth of, 78, 106, 247 hours worked per worker in, 72 inequality in, 79, 333 inflation in, 42, 338, 358 internal solidarity of, 334 lack of alternative to euro seen by, 11 migrants to, 320–21, 334–35, 393 minimum wage in, 42, 120, 254 neoliberalism in, 10 and place-based debt, 136 productivity in, 71 programs designed by, 53, 60, 61, 202, 336, 338 reparations paid by, 187 reunification of, 6 rules as important to, 57, 241–42, 262 share of global employment in, 224 shrinking working-age population of, 70, 78–79 and Stability and Growth Pact, 245 and structural reforms, 19–20 “there is no alternative” and, 306, 311–12 trade surplus of, 117, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 “transfer union” rejected by, 22 US loans to, 187 victims blamed by, 9, 15–17, 177–78, 309 wages constrained by, 41, 42–43 wages lowered in, 105, 333 global financial crisis, xi, xiii–xiv, 3, 12, 17, 24, 67, 73, 75, 114, 124, 146, 148, 274, 364, 387 and central bank independence, 157–58 and confidence, 280 and cost of failure of financial institutions, 131 lessons of, 249 monetary policy in, 151 and need for structural reform, 214 originating in US, 65, 68, 79–80, 112, 128, 296, 302 globalization, 51, 321–23 and diminishing share of employment in advanced countries, 224 economic vs. political, xvii failures of, xvii Globalization and Its Discontents (Stig-litz), 234, 335, 369 global savings glut, 257 global secular stagnation, 120 global warming, 229–30, 251, 282, 319 gold, 257, 275, 277, 345 Goldman Sachs, 158, 366 gold standard, 148, 291, 347, 358 in Great Depression, xii, 100 goods: free movement of, 40, 143, 260–61 nontraded, 102, 103, 169, 213, 217, 359 traded, 102, 103, 216 Gordon, Robert, 251 governance, 157–63, 258–59 government spending, trade deficits and, 107–8 gravity principle, 124, 127–28 Great Depression, 42, 67, 105, 148, 149, 168, 313 Friedman on causes of, 151 gold standard in, xii, 100 Great Malaise, 264 Greece, 14, 30, 41, 64, 81, 100, 117, 123, 142, 160, 177, 265–66, 278, 307, 331, 343, 366, 367–68, 374–75, 386 austerity opposed by, 59, 60–62, 69–70, 207–8, 392 balance of payments, 219 banks in, 200–201, 228–29, 231, 270, 276, 367, 368 blaming of, 16, 17 bread in, 218, 230 capital controls in, 390 consumption tax and, 193–94 counterfactual scenario of, 80 current account surplus of, 287–88 and debt restructuring, 205–7 debt-to-GDP ratio of, 231 debt write-offs in, 291 decline in labor costs in, 56, 103 ECB’s cutting of funds to, 59 economic growth in, 215, 247 emigration from, 68–69 fiscal deficits in, 16, 186, 215, 233, 285–86, 289 GDP of, xviii, 183, 309 hours worked per worker in, 72 inequality in, 72 inherited debt in, 134 lack of faith in democracy in, 312–13 living standards in, 216 loans in, 127 loans to, 310 migrants and, 320–21 milk in, 218, 223, 230 new currency in, 291, 300 oligarchs in, 16, 227 output per working-age person in, 70–71 past downturns in, 235–36 pensions in, 16, 78, 188, 197–98, 226 pharmacies in, 218–20 population decline in, 69, 89 possible exit from eurozone of, 124, 197, 273, 274, 275 poverty in, 226, 261, 376 primary surplus of, 187–88, 312 privatization in, 55, 195–96 productivity in, 71, 342 programs imposed on, xv, 21, 27, 60–62, 140, 155–56, 179–80, 181, 182–83, 184–85, 187–88, 190–93, 195–96, 197–98, 202–3, 205, 206, 214–16, 218–23, 225–28, 229, 230, 231, 233–34, 273, 278, 308, 309–11, 312, 315–16, 336, 338 renewable energy in, 193, 229 social capital destroyed in, 78 sovereign spread of, 200 spread in, 332 and structural reforms, 20, 70, 188, 191 tax revenue in, 16, 142, 192, 227, 367–368 tools lacking for recovery of, 246 tourism in, 192, 286 trade deficits in, 81, 194, 216–17, 222, 285–86 unemployment in, xi, 71, 236, 267, 332, 338, 342 urgency in, 214–15 victim-blaming of, 309–11 wages in, 216–17 youth unemployment in, xi, 332 Greek bonds, 116, 126 interest rates on, 4, 114, 181–82, 201–2, 323 restructuring of, 206–7 green investments, 260 Greenspan, Alan, 251, 359, 363 Grexit, see Greece, possible exit from eurozone of grocery stores, 219 gross domestic product (GDP), xvii decline in, 3 measurement of, 341 Growth and Stability Pact, 87 hedge funds, 282, 363 highways, 41 Hitler, Adolf, 338, 358 Hochtief, 367–68 Hoover, Herbert, 18, 95 human capital, 78, 137 human rights, 44–45, 319 Hungary, 46, 331, 338 hysteresis, 270 Iceland, 44, 111, 307, 354–55 banks in, 91 capital controls in, 390 ideology, 308–9, 315–18 imports, 86, 88, 97–99, 98, 107 incentives, 158–59 inclusive capitalism, 317 income, unemployment and, 77 income tax, 45 Independent Commission for the Reform of International Corporate Taxation, 376–377 Indonesia, 113, 230–31, 314, 350, 364, 378 industrial policies, 138–39, 301 and restructuring, 217, 221, 223–25 Industrial Revolution, 3, 224 industry, 89 inequality, 45, 72–73, 333 aggregate demand lowered by, 212 created by central banks, 154 ECB’s creation of, 154–55 economic performance affected by, xvii euro’s increasing of, xviii growth’s lowering of, 212 hurt by collective action, 338 increased by neoliberalism, xviii increase in, 64, 154–55 inequality in, 72, 212 as moral issue, xviii in Spain, 72, 212, 225–26 and tax harmonization, 260–61 and tax system, 191 inflation, 277, 290, 314, 388 in aftermath of tech bubble, 251 bonds and, 161 central banks and, 153, 166–67 consequences of fixation on, 149–50, 151 costs of, 270 and debt monetization, 42 ECB and, 8, 25, 97, 106, 115, 145, 146–50, 151, 163, 165, 169–70, 172, 255, 256, 266 and food prices, 169 in Germany, 42, 338, 358 interest rates and, 43–44 in late 1970s, 168 and natural rate hypothesis, 172–73 political decisions and, 146 inflation targeting, 157, 168–70, 364 information, 335 informational capital, 77 infrastructure, xvi–xvii, 47, 137, 186, 211, 255, 258, 265, 268, 300 inheritance tax, 368 inherited debt, 134 innovation, 138 innovation economy, 317–18 inputs, 217 instability, xix institutions, 93, 247 poorly designed, 163–64 insurance, 355–356 deposit, see deposit insurance mutual, 247 unemployment, 91, 186, 246, 247–48 integration, 322 interest rates, 43–44, 86, 282, 345, 354 in aftermath of tech bubble, 251 ECB’s determination of, 85–86, 152, 249, 302, 348 and employment, 94 euro’s lowering of, 235 Fed’s lowering of, 150 on German bonds, 114 on Greek bonds, 4, 114, 181–82 on Italian bonds, 114 in late 1970s, 168 long-term, 151, 200 negative, 316, 348–49 quantitative easing and, 151, 170 short-term, 249 single, eurozone’s entailing of, 8, 85–88, 92, 93, 94, 105, 129, 152, 240, 244, 249 on Spanish bonds, 114, 199 spread in, 332 stock prices increased by, 264 at zero lower bound, 106 intermediation, 258 internal devaluation, 98–109, 122, 126, 220, 255, 388 supply-side effects of, 99, 103–4 International Commission on the Measurement of Economic Performance and Social Progress, 79, 341 International Labor Organization, 56 International Monetary Fund (IMF), xv, xvii, 10, 17, 18, 55, 61, 65–66, 96, 111, 112–13, 115–16, 119, 154, 234, 289, 309, 316, 337, 349, 350, 370, 371, 381 and Argentine debt, 206 conditions of, 201 creation of, 105 danger of high taxation warnings of, 190 debt reduction pushed by, 95 and debt restructuring, 205, 311 and failure to restore credit, 201 global imbalances discussed by, 252 and Greek debts, 205, 206, 310–11 on Greek surplus, 188 and Indonesian crisis, 230–31, 364 on inequality’s lowering of growth, 212–13 Ireland’s socialization of losses opposed by, 156–57 mistakes admitted by, 262, 312 on New Mediocre, 264 Portuguese bailout of, 178–79 tax measures of, 185 investment, 76–77, 111, 189, 217, 251, 264, 278, 367 confidence and, 94 divergence in, 136–38 in education, 137, 186, 211, 217, 251, 255, 300 infrastructure in, xvi–xvii, 47, 137, 186, 211, 255, 258, 265, 268, 300 lowered by disintermediation, 258 public, 99 real estate, 199 in renewable energy, 229–30 return on, 186, 245 stimulation of, 94 in technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 investor state dispute settlement (ISDS), 393–94 invisible hand, xviii Iraq, refugees from, 320 Iraq War, 36, 37 Ireland, 14, 16, 44, 113, 114–15, 122, 178, 234, 296, 312, 331, 339–40, 343, 362 austerity opposed in, 207 debt of, 196 emigrants from, 68–69 GDP of, 18, 231 growth in, 64, 231, 247, 340 inherited debt in, 134 losses socialized in, 134, 156–57, 165 low debt in, 88 real estate bubble in, 108, 114–15, 126 surplus in, 17, 88 taxes in, 142–43, 376 trade deficits in, 119 unemployment in, 178 irrational exuberance, 14, 114, 116–17, 149, 334, 359 ISIS, 319 Italian bonds, 114, 165, 323 Italy, 6, 14, 16, 120, 125, 331, 343 austerity opposed in, 59 GDP per capita in, 352 growth in, 247 sovereign spread of, 200 Japan, 151, 333, 342 bubble in, 359 debt of, 202 growth in, 78 quantitative easing used by, 151, 359 shrinking working-age population of, 70 Java, unemployment on, 230 jobs gap, 120 Juncker, Jean-Claude, 228 Keynes, John Maynard, 118, 120, 172, 187, 351 convergence policy suggested by, 254 Keynesian economics, 64, 95, 108, 153, 253 King, Mervyn, 390 knowledge, 137, 138–39, 337–38 Kohl, Helmut, 6–7, 337 krona, 287 labor, marginal product of, 356 labor laws, 75 labor markets, 9, 74 friction in, 336 reforms of, 214, 221 labor movement, 26, 40, 125, 134–36, 320 austerity and, 140 capital flows and, 135 see also migration labor rights, 56 Lamers, Karl, 314 Lancaster, Kelvin, 27 land tax, 191 Latin America, 10, 55, 95, 112, 202 lost decade in, 168 Latvia, 331, 346 GDP of, 92 law of diminishing returns, 40 learning by doing, 77 Lehman Brothers, 182 lender of last resort, 85, 362, 368 lending, 280, 380 discriminatory, 283 predatory, 274, 310 lending rates, 278 leverage, 102 Lichtenstein, 44 Lipsey, Richard, 27 liquidity, 201, 264, 278, 354 ECB’s expansion of, 256 lira, 14 Lithuania, 331 living standards, 68–70 loans: contraction of, 126–27, 246 nonperforming, 241 for small and medium-size businesses, 246–47 lobbyists, from financial sector, 132 location, 76 London interbank lending rate (LIBOR), 131, 355 Long-Term Refinancing Operation, 360–361 Lucas, Robert, xi Luxembourg, 6, 94, 142–43, 331, 343 as tax avoidance center, 228, 261 luxury cars, 265 Maastricht Treaty, xiii, 6, 87, 115, 146, 244, 298, 339, 340 macro-prudential regulations, 249 Malta, 331, 340 manufacturing, 89, 223–24 market failures, 48–49, 86, 148, 149, 335 rigidities, 101 tax policy’s correction of, 193 market fundamentalism, see neoliberalism market irrationality, 110, 125–26, 149 markets, limitations of, 10 Meade, James, 27 Medicaid, 91 medical care, 196 Medicare, 90, 91 Mellon, Andrew, 95 Memorandum of Agreement, 233–34 Merkel, Angela, 186 Mexico, 202, 369 bailout of, 113 in NAFTA, xiv Middle East, 321 migrant crisis, 44 migration, 26, 40, 68–69, 90, 125, 320–21, 334–35, 342, 356, 393 unemployment and, 69, 90, 135, 140 see also labor movement military power, 36–37 milk, 218, 223, 230 minimum wage, 42, 120, 254, 255, 351 mining, 257 Mississippi, GDP of, 92 Mitsotakis, Constantine, 377–78 Mitsotakis, Kyriakos, 377–78 Mitterrand, François, 6–7 monetarism, 167–68, 169, 364 monetary policy, 24, 85–86, 148, 264, 325, 345, 364 as allegedly technocratic, 146, 161–62 conservative theory of, 151, 153 in early 1980s US, 168, 210 flexibility of, 244 in global financial crisis, 151 political nature of, 146, 153–54 recent developments in theory of, 166–73 see also interest rates monetary union, see single currencies money laundering, 354 monopolists, privatization and, 194 moral hazard, 202, 203 mortgage rates, 170 mortgages, 302 multinational chains, 219 multinational development banks, 137 multinationals, 127, 223, 376 multipliers, 211–12, 248 balanced-budget, 188–90, 265 Mundell, Robert, 87 mutual insurance, 247 mutualization of debt, 242–43, 263 national development banks, 137–38 natural monopolies, 55 natural rate hypothesis, 172 negative shocks, 248 neoliberalism, xvi, 24–26, 33, 34, 98–99, 109, 257, 265, 332–33, 335, 354 on bubbles, 381 and capital flows, 28 and central bank independence, 162–63 in Germany, 10 inequality increased by, xviii low inflation desired by, 147 recent scholarship against, 24 Netherlands, 6, 44, 292, 331, 339–40, 343 European Constitution referendum of, 58 New Democracy Party, Greek, 61, 185, 377–78 New Mediocre, 264 New World, 148 New Zealand, 364 Nokia, 81, 234, 297 nonaccelerating inflation rate of unemployment (NAIRU), 379–80 nonaccelerating wage rate of unemployment (NAWRU), 379–80 nongovernmental organizations (NGOs), 276 nonperforming loans, 241 nontraded goods sector, 102, 103, 169, 213, 217, 359 North American Free Trade Agreement (NAFTA), xiv North Atlantic Treaty Organization (NATO), 196 Norway, 12, 44, 307 referendum on joining EU, 58 nuclear deterrence, 38 Obama, Barack, 319 oil, import of, 230 oil firms, 36 oil prices, 89, 168, 259, 359 oligarchs: in Greece, 16, 227 in Russia, 280 optimal currency area, 345 output, 70–71, 111 after recessions, 76 Outright Monetary Transactions program, 361 overregulate, 132 Oxfam, 72 panic of 1907, 147 Papandreou, Andreas, 366 Papandreou, George, xiv, 60–61, 184, 185, 220, 221, 226–27, 309, 312, 366, 373 reform of banks suggested by, 229 paradox of thrift, 120 peace, 34 pensions, 9, 16, 78, 177, 188, 197–98, 226, 276, 370 People’s Party, Portugal, 392 periphery, 14, 32, 171, 200, 296, 301, 318 see also specific countries peseta, 14 pharmacies, 218–20 Phishing for Phools (Akerlof and Shiller), 132 physical capital, 77–78 Pinochet, Augusto, 152–53 place-based debt, 134, 242 Pleios, George, 377 Poland, 46, 333, 339 assistance to, 243 in Iraq War, 37 police, 41 political integration, xvi, 34, 35 economic integration vs., 51–57 politics, economics and, 308–18 pollution, 260 populism, xx Portugal, 14, 16, 64, 177, 178, 331, 343, 346 austerity opposed by, 59, 207–8, 315, 332, 392 GDP of, 92 IMF bailout of, 178–79 loans in, 127 poverty in, 261 sovereign spread of, 200 Portuguese bonds, 179 POSCO, 55 pound, 287, 335, 346 poverty, 72 in Greece, 226, 261 in Portugal, 261 in Spain, 261 predatory lending, 274, 310 present discount value, 343 Price of Inequality, The (Stiglitz), 154 prices, 19, 24 adjustment of, 48, 338, 361 price stability, 161 primary deficit, 188, 389 primary surpluses, 187–88 private austerity, 126–27, 241–42 private sector involvement, 113 privatization, 55, 194–96, 369 production costs, 39, 43, 50 production function, 343 productivity, 71, 332, 348 in manufacturing, 223–24 after recessions, 76–77 programs, 17–18 Germany’s design of, 53, 60, 61, 187–88, 205, 336, 338 imposed on Greece, xv, 21, 27, 60–62, 140, 155–56, 179–80, 181, 182–83, 184–85, 187–88, 190–93, 195–96, 197–98, 202–3, 205, 206, 214–16, 218–23, 225–28, 229, 230, 231, 233–34, 273, 278, 308, 309–11, 312, 315–16, 336, 338 of Troika, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 202, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 346, 366, 379, 392 progressive automatic stabilizers, 244 progressive taxes, 248 property rights, 24 property taxes, 192–93, 227 public entities, 195 public goods, 40, 337–38 quantitative easing (QE), 151, 164, 165–66, 170–72, 264, 359, 361, 386 railroads, 55 Reagan, Ronald, 168, 209 real estate bubble, 25, 108, 109, 111, 114–15, 126, 148, 172, 250, 301, 302 cause of, 198 real estate investment, 199 real exchange rate, 105–6, 215–16 recessions, recovery from, 94–95 recovery, 76 reform, 75 theories of, 27–28 regulations, 24, 149, 152, 162, 250, 354, 355–356, 378 and Bush administration, 250–51 common, 241 corporate opposition to, xvi difficulties in, 132–33 of finance, xix forbearance on, 130–31 importance of, 152–53 macro-prudential, 249 in race to bottom, 131–34 Reinhardt, Carmen, 210 renewable energy, 193, 229–30 Republican Party, US, 319 research and development (R&D), 77, 138, 217, 251, 317–18 Ricardo, David, 40, 41 risk, 104, 153, 285 excessive, 250 risk markets, 27 Rogoff, Kenneth, 210 Romania, 46, 331, 338 Royal Bank of Scotland, 355 rules, 57, 241–42, 262, 296 Russia, 36, 264, 296 containment of, 318 economic rents in, 280 gas from, 37, 81, 93, 378 safety nets, 99, 141, 223 Samaras, Antonis, 61, 309, 377 savings, 120 global, 257 savings and loan crisis, 360 Schäuble, Wolfgang, 57, 220, 314, 317 Schengen area, 44 schools, 41, 196 Schröeder, Gerhard, 254 self-regulation, 131, 159 service sector, 224 shadow banking system, 133 shareholder capitalism, 21 Shiller, Rob, 132, 359 shipping taxes, 227, 228 short-termism, 77, 258–59 Silicon Valley, 224 silver, 275, 277 single currencies: conflicts and, 38 as entailing fixed exchange rates, 8, 42–43, 46–47, 86–87, 92, 93, 94, 97–98 external imbalances and, 97–98 and financial crises, 110–18 integration and, 45–46, 50 interest rates and, 8, 86, 87–88, 92, 93, 94 Mundell’s work on, 87 requirements for, 5, 52–53, 88–89, 92–94, 97–98 and similarities among countries, 15 trade integration vs., 393 in US, 35, 36, 88, 89–92 see also euro single-market principle, 125–26, 231 skilled workers, 134–35 skills, 77 Slovakia, 331 Slovenia, 331 small and medium-sized enterprises (SMEs), 127, 138, 171, 229 small and medium-size lending facility, 246–47, 300, 301, 382 Small Business Administration, 246 small businesses, 153 Smith, Adam, xviii, 24, 39–40, 41 social cohesion, 22 Social Democratic Party, Portugal, 392 social program, 196 Social Security, 90, 91 social solidarity, xix societal capital, 77–78 solar energy, 193, 229 solidarity fund, 373 solidarity fund for stabilization, 244, 254, 264, 301 Soros, George, 390 South Dakota, 90, 346 South Korea, 55 bailout of, 113 sovereign risk, 14, 353 sovereign spreads, 200 sovereign wealth funds, 258 Soviet Union, 10 Spain, 14, 16, 114, 177, 178, 278, 331, 335, 343 austerity opposed by, 59, 207–8, 315 bank bailout of, 179, 199–200, 206 banks in, 23, 186, 199, 200, 242, 270, 354 debt of, 196 debt-to-GDP ratio of, 231 deficits of, 109 economic growth in, 215, 231, 247 gold supply in, 277 independence movement in, xi inequality in, 72, 212, 225–26 inherited debt in, 134 labor reforms proposed for, 155 loans in, 127 low debt in, 87 poverty in, 261 real estate bubble in, 25, 108, 109, 114–15, 126, 198, 301, 302 regional independence demanded in, 307 renewable energy in, 229 sovereign spread of, 200 spread in, 332 structural reform in, 70 surplus in, 17, 88 threat of breakup of, 270 trade deficits in, 81, 119 unemployment in, 63, 161, 231, 235, 332, 338 Spanish bonds, 114, 199, 200 spending, cutting, 196–98 spread, 332 stability, 147, 172, 261, 301, 364 automatic, 244 bubble and, 264 central banks and, 8 as collective action problem, 246 solidarity fund for, 54, 244, 264 Stability and Growth Pact, 245 standard models, 211–13 state development banks, 138 steel companies, 55 stock market, 151 stock market bubble, 200–201 stock market crash (1929), 18, 95 stock options, 259, 359 structural deficit, 245 Structural Funds, 243 structural impediments, 215 structural realignment, 252–56 structural reforms, 9, 18, 19–20, 26–27, 214–36, 239–71, 307 from austerity to growth, 263–65 banking union, 241–44 and climate change, 229–30 common framework for stability, 244–52 counterproductive, 222–23 debt restructuring and, 265–67 of finance, 228–29 full employment and growth, 256–57 in Greece, 20, 70, 188, 191, 214–36 growth and, 232–35 shared prosperity and, 260–61 and structural realignment, 252–56 of trade deficits, 216–17 trauma of, 224 as trivial, 214–15, 217–20, 233 subsidiarity, 8, 41–42, 263 subsidies: agricultural, 45, 197 energy, 197 sudden stops, 111 Suharto, 314 suicide, 82, 344 Supplemental Nutrition Assistance Program (SNAP), 91 supply-side effects: in Greece, 191, 215–16 of investments, 367 surpluses, fiscal, 17, 96, 312, 379 primary, 187–88 surpluses, trade, see trade surpluses “Swabian housewife,” 186, 245 Sweden, 12, 46, 307, 313, 331, 335, 339 euro referendum of, 58 refugees into, 320 Switzerland, 44, 307 Syria, 321, 342 Syriza party, 309, 311, 312–13, 315, 377 Taiwan, 55 tariffs, 40 tax avoiders, 74, 142–43, 227–28, 261 taxes, 142, 290, 315 in Canada, 191 on capital, 356 on carbon, 230, 260, 265, 368 consumption, 193–94 corporate, 189–90, 227, 251 cross-border, 319, 384 and distortions, 191 in EU, 8, 261 and fiat currency, 284 and free mobility of goods and capital, 260–61 in Greece, 16, 142, 192, 193–94, 227, 367–68 ideal system for, 191 IMF’s warning about high, 190 income, 45 increase in, 190–94 inequality and, 191 inheritance, 368 land, 191 on luxury cars, 265 progressive, 248 property, 192–93, 227 Reagan cuts to, 168, 210 shipping, 227, 228 as stimulative, 368 on trade surpluses, 254 value-added, 190, 192 tax evasion, in Greece, 190–91 tax laws, 75 tax revenue, 190–96 Taylor, John, 169 Taylor rule, 169 tech bubble, 250 technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 and new financial system, 274–76, 283–84 telecoms, 55 Telmex, 369 terrorism, 319 Thailand, 113 theory of the second best, 27–28, 48 “there is no alternative” (TINA), 306, 311–12 Tocqueville, Alexis de, xiii too-big-to-fail banks, 360 tourism, 192, 286 trade: and contractionary expansion, 209 US push for, 323 trade agreements, xiv–xvi, 357 trade balance, 81, 93, 100, 109 as allegedly self-correcting, 98–99, 101–3 and wage flexibility, 104–5 trade barriers, 40 trade deficits, 89, 139 aggregate demand weakened by, 111 chit solution to, 287–88, 290, 299–300, 387, 388–89 control of, 109–10, 122 with currency pegs, 110 and fixed exchange rates, 107–8, 118 and government spending, 107–8, 108 of Greece, 81, 194, 215–16, 222, 285–86 structural reform of, 216–17 traded goods, 102, 103, 216 trade integration, 393 trade surpluses, 88, 118–21, 139–40, 350–52 discouragement of, 282–84, 299–300 of Germany, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 tax on, 254, 351, 381–82 Transatlantic Trade and Investment Partnership, xv, 323 transfer price system, 376 Trans-Pacific Partnership, xv, 323 Treasury bills, US, 204 Trichet, Jean-Claude, 100–101, 155, 156, 164–65, 251 trickle-down economics, 362 Troika, 19, 20, 26, 55, 56, 58, 60, 69, 99, 101–3, 117, 119, 135, 140–42, 178, 179, 184, 195, 274, 294, 317, 362, 370–71, 373, 376, 377, 386 banks weakened by, 229 conditions of, 201 discretion of, 262 failure to learn, 312 Greek incomes lowered by, 80 Greek loan set up by, 202 inequality created by, 225–26 poor forecasting of, 307 predictions by, 249 primary surpluses and, 187–88 privatization avoided by, 194 programs of, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 197–98, 202, 204, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 348, 366, 379, 392 social contract torn up by, 78 structural reforms imposed by, 214–16, 217, 218–23, 225–38 tax demand of, 192 and tax evasion, 367 see also European Central Bank (ECB); European Commission; International Monetary Fund (IMF) trust, xix, 280 Tsipras, Alexis, 61–62, 221, 273, 314 Turkey, 321 UBS, 355 Ukraine, 36 unemployment, 3, 64, 68, 71–72, 110, 111, 122, 323, 336, 342 as allegedly self-correcting, 98–101 in Argentina, 267 austerity and, 209 central banks and, 8, 94, 97, 106, 147 ECB and, 163 in eurozone, 71, 135, 163, 177–78, 181, 331 and financing investments, 186 in Finland, 296 and future income, 77 in Greece, xi, 71, 236, 267, 331, 338, 342 increased by capital, 264 interest rates and, 43–44 and internal devaluation, 98–101, 104–6 migration and, 69, 90, 135, 140 natural rate of, 172–73 present-day, in Europe, 210 and rise of Hitler, 338, 358 and single currency, 88 in Spain, 63, 161, 231, 235, 332, 338 and structural reforms, 19 and trade deficits, 108 in US, 3 youth, 3, 64, 71 unemployment insurance, 91, 186, 246, 247–48 UNICEF, 72–73 unions, 101, 254, 335 United Kingdom, 14, 44, 46, 131, 307, 331, 332, 340 colonies of, 36 debt of, 202 inflation target set in, 157 in Iraq War, 37 light regulations in, 131 proposed exit from EU by, 4, 270 United Nations, 337, 350, 384–85 creation of, 38 and lower rates of war, 196 United States: banking system in, 91 budget of, 8, 45 and Canada’s 1990 expansion, 209 Canada’s free trade with, 45–46, 47 central bank governance in, 161 debt-to-GDP of, 202, 210–11 financial crisis originating in, 65, 68, 79–80, 128, 296, 302 financial system in, 228 founding of, 319 GDP of, xiii Germany’s borrowing from, 187 growing working-age population of, 70 growth in, 68 housing bubble in, 108 immigration into, 320 migration in, 90, 136, 346 monetary policy in financial crisis of, 151 in NAFTA, xiv 1980–1981 recessions in, 76 predatory lending in, 310 productivity in, 71 recovery of, xiii, 12 rising inequality in, xvii, 333 shareholder capitalism of, 21 Small Business Administration in, 246 structural reforms needed in, 20 surpluses in, 96, 187 trade agenda of, 323 unemployment in, 3, 178 united currency in, 35, 36, 88, 89–92 United States bonds, 350 unskilled workers, 134–35 value-added tax, 190, 192 values, 57–58 Varoufakis, Yanis, 61, 221, 309 velocity of circulation, 167 Venezuela, 371 Versaille, Treaty of, 187 victim blaming, 9, 15–17, 177–78, 309–11 volatility: and capital market integration, 28 in exchange rates, 48–49 Volcker, Paul, 157, 168 wage adjustments, 100–101, 103, 104–5, 155, 216–17, 220–22, 338, 361 wages, 19, 348 expansionary policies on, 284–85 Germany’s constraining of, 41, 42–43 lowered in Germany, 105, 333 wage stagnation, in Germany, 13 war, change in attitude to, 38, 196 Washington Consensus, xvi Washington Mutual, 91 wealth, divergence in, 139–40 Weil, Jonathan, 360 welfare, 196 West Germany, 6 Whitney, Meredith, 360 wind energy, 193, 229 Wolf, Martin, 385 worker protection, 56 workers’ bargaining rights, 19, 221, 255 World Bank, xv, xvii, 10, 61, 337, 357, 371 World Trade Organization, xiv youth: future of, xx–xxi unemployment of, 3, 64, 71 Zapatero, José Luis Rodríguez, xiv, 155, 362 zero lower bound, 106 ALSO BY JOSEPH E.

., 393 in US, 35, 36, 88, 89–92 see also euro single-market principle, 125–26, 231 skilled workers, 134–35 skills, 77 Slovakia, 331 Slovenia, 331 small and medium-sized enterprises (SMEs), 127, 138, 171, 229 small and medium-size lending facility, 246–47, 300, 301, 382 Small Business Administration, 246 small businesses, 153 Smith, Adam, xviii, 24, 39–40, 41 social cohesion, 22 Social Democratic Party, Portugal, 392 social program, 196 Social Security, 90, 91 social solidarity, xix societal capital, 77–78 solar energy, 193, 229 solidarity fund, 373 solidarity fund for stabilization, 244, 254, 264, 301 Soros, George, 390 South Dakota, 90, 346 South Korea, 55 bailout of, 113 sovereign risk, 14, 353 sovereign spreads, 200 sovereign wealth funds, 258 Soviet Union, 10 Spain, 14, 16, 114, 177, 178, 278, 331, 335, 343 austerity opposed by, 59, 207–8, 315 bank bailout of, 179, 199–200, 206 banks in, 23, 186, 199, 200, 242, 270, 354 debt of, 196 debt-to-GDP ratio of, 231 deficits of, 109 economic growth in, 215, 231, 247 gold supply in, 277 independence movement in, xi inequality in, 72, 212, 225–26 inherited debt in, 134 labor reforms proposed for, 155 loans in, 127 low debt in, 87 poverty in, 261 real estate bubble in, 25, 108, 109, 114–15, 126, 198, 301, 302 regional independence demanded in, 307 renewable energy in, 229 sovereign spread of, 200 spread in, 332 structural reform in, 70 surplus in, 17, 88 threat of breakup of, 270 trade deficits in, 81, 119 unemployment in, 63, 161, 231, 235, 332, 338 Spanish bonds, 114, 199, 200 spending, cutting, 196–98 spread, 332 stability, 147, 172, 261, 301, 364 automatic, 244 bubble and, 264 central banks and, 8 as collective action problem, 246 solidarity fund for, 54, 244, 264 Stability and Growth Pact, 245 standard models, 211–13 state development banks, 138 steel companies, 55 stock market, 151 stock market bubble, 200–201 stock market crash (1929), 18, 95 stock options, 259, 359 structural deficit, 245 Structural Funds, 243 structural impediments, 215 structural realignment, 252–56 structural reforms, 9, 18, 19–20, 26–27, 214–36, 239–71, 307 from austerity to growth, 263–65 banking union, 241–44 and climate change, 229–30 common framework for stability, 244–52 counterproductive, 222–23 debt restructuring and, 265–67 of finance, 228–29 full employment and growth, 256–57 in Greece, 20, 70, 188, 191, 214–36 growth and, 232–35 shared prosperity and, 260–61 and structural realignment, 252–56 of trade deficits, 216–17 trauma of, 224 as trivial, 214–15, 217–20, 233 subsidiarity, 8, 41–42, 263 subsidies: agricultural, 45, 197 energy, 197 sudden stops, 111 Suharto, 314 suicide, 82, 344 Supplemental Nutrition Assistance Program (SNAP), 91 supply-side effects: in Greece, 191, 215–16 of investments, 367 surpluses, fiscal, 17, 96, 312, 379 primary, 187–88 surpluses, trade, see trade surpluses “Swabian housewife,” 186, 245 Sweden, 12, 46, 307, 313, 331, 335, 339 euro referendum of, 58 refugees into, 320 Switzerland, 44, 307 Syria, 321, 342 Syriza party, 309, 311, 312–13, 315, 377 Taiwan, 55 tariffs, 40 tax avoiders, 74, 142–43, 227–28, 261 taxes, 142, 290, 315 in Canada, 191 on capital, 356 on carbon, 230, 260, 265, 368 consumption, 193–94 corporate, 189–90, 227, 251 cross-border, 319, 384 and distortions, 191 in EU, 8, 261 and fiat currency, 284 and free mobility of goods and capital, 260–61 in Greece, 16, 142, 192, 193–94, 227, 367–68 ideal system for, 191 IMF’s warning about high, 190 income, 45 increase in, 190–94 inequality and, 191 inheritance, 368 land, 191 on luxury cars, 265 progressive, 248 property, 192–93, 227 Reagan cuts to, 168, 210 shipping, 227, 228 as stimulative, 368 on trade surpluses, 254 value-added, 190, 192 tax evasion, in Greece, 190–91 tax laws, 75 tax revenue, 190–96 Taylor, John, 169 Taylor rule, 169 tech bubble, 250 technology, 137, 138–39, 186, 211, 217, 251, 258, 265, 300 and new financial system, 274–76, 283–84 telecoms, 55 Telmex, 369 terrorism, 319 Thailand, 113 theory of the second best, 27–28, 48 “there is no alternative” (TINA), 306, 311–12 Tocqueville, Alexis de, xiii too-big-to-fail banks, 360 tourism, 192, 286 trade: and contractionary expansion, 209 US push for, 323 trade agreements, xiv–xvi, 357 trade balance, 81, 93, 100, 109 as allegedly self-correcting, 98–99, 101–3 and wage flexibility, 104–5 trade barriers, 40 trade deficits, 89, 139 aggregate demand weakened by, 111 chit solution to, 287–88, 290, 299–300, 387, 388–89 control of, 109–10, 122 with currency pegs, 110 and fixed exchange rates, 107–8, 118 and government spending, 107–8, 108 of Greece, 81, 194, 215–16, 222, 285–86 structural reform of, 216–17 traded goods, 102, 103, 216 trade integration, 393 trade surpluses, 88, 118–21, 139–40, 350–52 discouragement of, 282–84, 299–300 of Germany, 118–19, 120, 139, 253, 293, 299, 350–52, 381–82, 391 tax on, 254, 351, 381–82 Transatlantic Trade and Investment Partnership, xv, 323 transfer price system, 376 Trans-Pacific Partnership, xv, 323 Treasury bills, US, 204 Trichet, Jean-Claude, 100–101, 155, 156, 164–65, 251 trickle-down economics, 362 Troika, 19, 20, 26, 55, 56, 58, 60, 69, 99, 101–3, 117, 119, 135, 140–42, 178, 179, 184, 195, 274, 294, 317, 362, 370–71, 373, 376, 377, 386 banks weakened by, 229 conditions of, 201 discretion of, 262 failure to learn, 312 Greek incomes lowered by, 80 Greek loan set up by, 202 inequality created by, 225–26 poor forecasting of, 307 predictions by, 249 primary surpluses and, 187–88 privatization avoided by, 194 programs of, 17–18, 21, 155–57, 179–80, 181, 182–83, 184–85, 187–93, 196, 197–98, 202, 204, 205, 207, 208, 214–16, 217, 218–23, 225–28, 229, 231, 233–34, 273, 278, 308, 309–11, 312, 313, 314, 315–16, 323–24, 348, 366, 379, 392 social contract torn up by, 78 structural reforms imposed by, 214–16, 217, 218–23, 225–38 tax demand of, 192 and tax evasion, 367 see also European Central Bank (ECB); European Commission; International Monetary Fund (IMF) trust, xix, 280 Tsipras, Alexis, 61–62, 221, 273, 314 Turkey, 321 UBS, 355 Ukraine, 36 unemployment, 3, 64, 68, 71–72, 110, 111, 122, 323, 336, 342 as allegedly self-correcting, 98–101 in Argentina, 267 austerity and, 209 central banks and, 8, 94, 97, 106, 147 ECB and, 163 in eurozone, 71, 135, 163, 177–78, 181, 331 and financing investments, 186 in Finland, 296 and future income, 77 in Greece, xi, 71, 236, 267, 331, 338, 342 increased by capital, 264 interest rates and, 43–44 and internal devaluation, 98–101, 104–6 migration and, 69, 90, 135, 140 natural rate of, 172–73 present-day, in Europe, 210 and rise of Hitler, 338, 358 and single currency, 88 in Spain, 63, 161, 231, 235, 332, 338 and structural reforms, 19 and trade deficits, 108 in US, 3 youth, 3, 64, 71 unemployment insurance, 91, 186, 246, 247–48 UNICEF, 72–73 unions, 101, 254, 335 United Kingdom, 14, 44, 46, 131, 307, 331, 332, 340 colonies of, 36 debt of, 202 inflation target set in, 157 in Iraq War, 37 light regulations in, 131 proposed exit from EU by, 4, 270 United Nations, 337, 350, 384–85 creation of, 38 and lower rates of war, 196 United States: banking system in, 91 budget of, 8, 45 and Canada’s 1990 expansion, 209 Canada’s free trade with, 45–46, 47 central bank governance in, 161 debt-to-GDP of, 202, 210–11 financial crisis originating in, 65, 68, 79–80, 128, 296, 302 financial system in, 228 founding of, 319 GDP of, xiii Germany’s borrowing from, 187 growing working-age population of, 70 growth in, 68 housing bubble in, 108 immigration into, 320 migration in, 90, 136, 346 monetary policy in financial crisis of, 151 in NAFTA, xiv 1980–1981 recessions in, 76 predatory lending in, 310 productivity in, 71 recovery of, xiii, 12 rising inequality in, xvii, 333 shareholder capitalism of, 21 Small Business Administration in, 246 structural reforms needed in, 20 surpluses in, 96, 187 trade agenda of, 323 unemployment in, 3, 178 united currency in, 35, 36, 88, 89–92 United States bonds, 350 unskilled workers, 134–35 value-added tax, 190, 192 values, 57–58 Varoufakis, Yanis, 61, 221, 309 velocity of circulation, 167 Venezuela, 371 Versaille, Treaty of, 187 victim blaming, 9, 15–17, 177–78, 309–11 volatility: and capital market integration, 28 in exchange rates, 48–49 Volcker, Paul, 157, 168 wage adjustments, 100–101, 103, 104–5, 155, 216–17, 220–22, 338, 361 wages, 19, 348 expansionary policies on, 284–85 Germany’s constraining of, 41, 42–43 lowered in Germany, 105, 333 wage stagnation, in Germany, 13 war, change in attitude to, 38, 196 Washington Consensus, xvi Washington Mutual, 91 wealth, divergence in, 139–40 Weil, Jonathan, 360 welfare, 196 West Germany, 6 Whitney, Meredith, 360 wind energy, 193, 229 Wolf, Martin, 385 worker protection, 56 workers’ bargaining rights, 19, 221, 255 World Bank, xv, xvii, 10, 61, 337, 357, 371 World Trade Organization, xiv youth: future of, xx–xxi unemployment of, 3, 64, 71 Zapatero, José Luis Rodríguez, xiv, 155, 362 zero lower bound, 106 ALSO BY JOSEPH E.


pages: 470 words: 130,269

The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas by Janek Wasserman

Albert Einstein, American Legislative Exchange Council, anti-communist, battle of ideas, Berlin Wall, Bretton Woods, business cycle, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, David Ricardo: comparative advantage, different worldview, Donald Trump, experimental economics, Fall of the Berlin Wall, floating exchange rates, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, Gunnar Myrdal, housing crisis, Internet Archive, invisible hand, John von Neumann, Joseph Schumpeter, laissez-faire capitalism, liberal capitalism, market fundamentalism, mass immigration, means of production, Menlo Park, Mont Pelerin Society, New Journalism, New Urbanism, old-boy network, Paul Samuelson, Philip Mirowski, price mechanism, price stability, RAND corporation, random walk, rent control, road to serfdom, Robert Bork, rolodex, Ronald Coase, Ronald Reagan, Silicon Valley, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, union organizing, urban planning, Vilfredo Pareto, Washington Consensus, zero-sum game, éminence grise

They shaped post–World War II life through such institutions as the Mont Pèlerin Society (MPS), the RAND Corporation, the General Agreement on Tariffs and Trade (GATT), and the Group of Thirty. They spearheaded the successful conservative counterattack against Keynesian economics in the 1970s and ushered in our current age’s faith in globalization, free markets, rule of law, entrepreneurship, and neoliberalism. They helped inspire the “Washington Consensus” at the World Bank and International Monetary Fund, which has played a significant and troubling role in the Latin American debt crises in the 1980s, the East Asian crisis of the late 1990s, and the 2008 global economic crisis. Hayek and especially Mises also motivated a generation of American libertarian and free-market activists who took Austrianism in a radical, political, and ideological direction.

Austrians played instrumental roles in these communities by persuading institutional actors, state and nonstate, to follow their prescriptions in times of uncertainty and crisis. Through GATT, the Bellagio Group, the RAND Corporation, and others, Haberler, Machlup, and Morgenstern proved adept at behind-the-scenes policy interventions that shaped economic liberalization and Cold War reasoning in the 1960s and 1970s. Perhaps unsurprisingly, the 1980s “Washington Consensus,” which coalesced in the halls of the International Monetary Fund, World Bank, and US Treasury, was articulated by a Machlup student, John Williamson. Austrian ideas appeared in myriad, unexpected locations, even as the Austrians themselves approached retirement.21 As the last members of the original school aged, they and their followers worked to solidify the school’s legacy or legacies.

Relieved of its Austrian historical context and, indeed, even of the very historical reference, this set of assumptions—imported to the U.S. in the suitcases of a handful of disabused Viennese intellectuals—has come to inform not just the Chicago school of economics but all significant public conversation over policy choices in the contemporary United States.”29 The Austrian argument that planning necessarily leads to dictatorship, Judt alleged, paved the way for a reactionary backlash: the destruction of (social) democracy and the rise of neoliberalism; the ascension of Margaret Thatcher and Ronald Reagan; the economic successes of Milton Friedman’s libertarian Chicago School; and the “Washington Consensus” at the World Bank, International Monetary Fund, and US Treasury, which advocated deregulation, privatization of state industries, trade liberalization, and other market-fundamentalist positions. Judt called this ideological turn the “revenge of the Austrians.”30 Similarly, the political theorist Corey Robin saw fin-de-siècle Viennese modernism and Nietzschean cultural criticism in the Austrians’ elitist understanding of subjectivity and entrepreneurship.


pages: 851 words: 247,711

The Atlantic and Its Enemies: A History of the Cold War by Norman Stone

affirmative action, Ayatollah Khomeini, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, British Empire, business cycle, central bank independence, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, European colonialism, facts on the ground, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, Gunnar Myrdal, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, illegal immigration, income per capita, interchangeable parts, Jane Jacobs, Joseph Schumpeter, labour mobility, land reform, long peace, mass immigration, means of production, Mikhail Gorbachev, Mitch Kapor, new economy, Norman Mailer, North Sea oil, oil shock, Paul Samuelson, Ponzi scheme, popular capitalism, price mechanism, price stability, RAND corporation, rent-seeking, Ronald Reagan, Silicon Valley, special drawing rights, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, trade liberalization, trickle-down economics, V2 rocket, War on Poverty, Washington Consensus, Yom Kippur War, éminence grise

But that meant far deeper changes: the Bank of France (and the nationalized banks in general) must not go on giving preferential medium-term credit at low interest rates for industry and housing; the Treasury should just take money from the market, now that one existed. The Rueff reform took a line in financial stabilization that has been familiar since 1923, when Dr Hjalmar Schacht took it in Germany; budget decreases, tax increases, a liberalization of foreign trade and a devaluation of 15.45 per cent. It is political arithmetic, dressed up, and is currently called the ‘Washington consensus’. But the whole was accompanied by a measure that caught the world’s attention - introduction of the ‘heavy franc’, at 100 to one. Now, with a money that could be converted at will, producers were to be stimulated by competition, and this indeed was to happen: France created some world-class industrial concerns in a short time. The five socialists wanted to resign, but de Gaulle browbeat Guy Mollet into staying on patriotic grounds.

By now, ideas of radical change were in the air: otherwise, the Western world would be in thrall to the Arabs, and the Soviet Union, with its vast oil revenues, would predominate. A declaration promising exchange rate stability and restored trade was made; beyond that - a sign of what was to come - the International Monetary Fund was invoked, and at last given a true world role. This was the start of the celebrated formula, the ‘Washington Consensus’, in effect shaped by the USA. It amounted to a recognition that the post-war order, with reference in effect to John Maynard Keynes and Bretton Woods in 1944, had failed. There must be liberalization. The problem of inflation was worldwide, but it was worst in the Atlantic countries. The USA, after the Nixon crash, was in poor shape and needed the formula itself, as the dollar went down.

The only hitch was that the central television aerial could not, for some time, be made to work - the signal to the units to move. The general made his broadcast, on lines by now somewhat traditional, but this time the generals had learned: they did indeed promise a return of democracy, but not at once. Parties were banned. But Turgut Özal went ahead with the IMF programme of 24 January. As was already happening with Pinochet, this was ‘the Washington consensus’ in action, and it was to work remarkably well. 24 The Eighties The 1980s have entered history, in much the same way as the twenties or the sixties or for that matter, before them, the fin-de-siècle nineties have done. Pinning down such things is not possible: pedantic historians can even claim that such decade moments do not exist. They do. Perhaps this is just a matter of technology: bikes, typewriters, telephones; the motor car; the Pill.


pages: 312 words: 91,835

Global Inequality: A New Approach for the Age of Globalization by Branko Milanovic

"Robert Solow", Asian financial crisis, assortative mating, Berlin Wall, bitcoin, Black Swan, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, centre right, colonial exploitation, colonial rule, David Ricardo: comparative advantage, deglobalization, demographic transition, Deng Xiaoping, discovery of the americas, European colonialism, Fall of the Berlin Wall, Francis Fukuyama: the end of history, full employment, Gini coefficient, Gunnar Myrdal, income inequality, income per capita, invisible hand, labor-force participation, liberal capitalism, low skilled workers, Martin Wolf, means of production, mittelstand, moral hazard, Nash equilibrium, offshore financial centre, oil shock, open borders, Paul Samuelson, place-making, plutocrats, Plutocrats, post scarcity, post-industrial society, profit motive, purchasing power parity, Ralph Nader, Second Machine Age, seigniorage, Silicon Valley, Simon Kuznets, special economic zone, stakhanovite, trade route, transfer pricing, very high income, Vilfredo Pareto, Washington Consensus, women in the workforce

It was a time to celebrate the flexibility and small scale of the German Mittelstand (mid-sized manufacturers) and the family enterprises in Emilia-Romagna, Italy. Japan’s rise began to look unstoppable. No one took notice of China yet. And of course the end of communism was not foreseen at all. A final wave of literature that I want to mention here is from the 1990s. It was dominated by the Washington Consensus (a set of policy prescriptions that emphasized deregulation and privatization) and the forecasting of the “end of history” (the title of an influential 1989 article by Francis Fukuyama, leading to the book The End of History and the Last Man [1992]). Japan still appeared to be ascendant, but China made a cameo appearance. Many of the books celebrated neoliberalism and predicted its speedy extension to the rest of the world, including the Middle East.

See also capitalism; inequality of opportunity; labor; scalable jobs; skill-biased technological progress; socialism wars: causes/effects of, 4–5; data access and, 14; forecasts and, 21; rich countries (1918–1980) and, 48; preindustrial period and, 50–51, 56, 62, 69; future and, 56; Piketty on, 64, 97–98; Chile and, 84; Spain and, 89; external investments and, 95; education and, 102; twenty-first and twenty-second centuries and, 163–164; China/United States and, 163–164, 258n6; Africa and, 173; modern era and, 246n5; taxes and, 250n35. See also World War I and other wars Washington Consensus, 157 wealth: income/consumption versus, 39, 40, 244n19; hidden, 40, 244n23; 2013 estimate of, 41; preindustrial period and, 62–64, 65–66, 69; disease and, 63; destruction of, 98; national choices and, 139–142; capital income and, 184; wages and, 215; inequality interventions and, 218; US population share of, 244n19; negative changes in rich peoples’, 244n20; as metric, 244n21; price levels and, 244n24; preindustrial plague and, 247n16; one-person households and, 248n23; pre-1929, 254n7; United States and, 254n7; middle-class, 260n20; financial assets and, 260n21.


pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

"Robert Solow", Apple II, banking crisis, barriers to entry, Bretton Woods, business cycle, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, G4S, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

Furthermore, the Japanese State coordinated the finance system through the Bank of Japan as well as through the Fiscal Investment Loan Program (funded by the postal savings system). Chang (2008) offers similar illustrations for South Korea and other recently emerged economies. China has engaged in a targeted industrialization strategy too, only joining the World Trade Organization once its industries were ready to compete, rather than as part of an International Monetary Fund–backed industrialization strategy. The Chinese strategy showed the weaknesses of the Washington Consensus on development, which denied the State the active role that it played in the development of major industrialized nations such as the United States, Germany and the United Kingdom. If there is strong evidence that the State can be effective in pursuing targeted catch-up policies by focusing resources on being dominant in certain industrial sectors, why is it not accepted that the State can have a greater role in the development of new technologies and applications beyond simply funding basic science and having an infrastructure to support private sector activity?

Soviet Union 37, 39; market failure theory applied to 61; as measure of innovation performance 34, 41; myth of business investment requirements 53–5; myth of innovation being about 44, 159–60; as not enough 142; of pharmaceutical companies 25–6, 188; R&D/GDP 52; SEMATECH funding 99; spending differences 42; of struggling OECD countries 41; technological change investments 59; in wind energy projects 144–5; worker tax credit 54 R&D/GDP 52 R&D Magazine 63 redistributional policies 31 Reenen, John van 46 Reinert, Erik 9n3, 38n5, 73 Reinhart, Carmen 17–18 renewable energy credits (RECs) 115n1 Renewable Portfolio Standards 114 ‘repatriation tax holiday’ 175 ‘representative’ agent 60 research 60, 78, 84, 136; see also science rewards, socialization of 156 risk 58–62, 70; see also socialization of risk risk landscape 22–3, 58, 194, 198 risk–reward nexus framework 186 risk–reward relationships: Apple and the US government 167–8; collective vs. private benefit 165–6, 196; corporate success resulting in regional economic misery 176–8; need for functional dynamic in 182–3, 197–8; overview 165–7; State recognition in 12 Robinson, Joan 34 Roche 82 Rock, Arthur 94 Rodrik, Dani 27, 28 Rogoff, Kenneth 17–18 Roland, Alex 98n7 Roosevelt, Franklin D. 6, 74 Royal Radar Establishment (RRE) 101 royalties 188–9 Ruegg, Rosalie 148 Ruttan, Vernon 62–3 Sanofi 69 Schmidt, Horace 92, 92–3; see also Apple Schumpeter, Joseph 10n4, 31, 35, 58 Schumpeterian innovation economics: creative destruction concept in 10, 10n4, 58, 165; extended protection in 189; influence of on BNDES 5; investment role in 31; macro models of 44; ‘systems of innovation’ view of 35–6; theory of 36n4 science 49, 51, 57, 59n1, 69; see also research Seagate 97 Segal, David 170 Semiconductor Manufacturing Technology (SEMATECH) consortium 99 Shapiro, Isaac 170–71, 171n2 share buybacks 25–7, 67, 171, 175 shareholder-value ideology 184, 186 Shiman, Philip 98n7 Shi Zhengrong 141, 152–4 Shockley, William 76 Silicon Valley 20, 63, 78, 95 Silver, Jonathan 129, 154 SIRI 103, 105–6, 109 SITRA, Finnish Innovation Fund 190 small and medium enterprises (SMEs) 10, 45–6, 45n6, 111n13 Small Business Administration (US) 94 small business associations 19 Small Business Innovation Development Act of 1982 79 Small Business Innovation Research (SBIR) (US) 20, 47, 79–81, 80, 188 Small Business Investment Company (SBIC) (US) 94 Smith, Adam 30; see also Adam Smith Institute; Inquiry into the Nature and Causes of the Wealth of Nations, An; ‘Invisible Hand’ socialization of risk and privatization of rewards: as cause of inequity and instability 185; direct or indirect returns of 187–91; framework for change of 185–7; income-contingent loans and equity 189–90; in the innovation economy 3; ‘innovation fund’ creation 189; IPR 189; mapping innovative labour into division of rewards 184–5; in pharmaceutical development 181; in public–private partnerships 27; skewed reality of risk and reward 181–5 social vs. private returns on investment 3–4 solar power: see wind and solar power Solow, Robert M. 33–4 Solyndra 129–32, 151, 154–5, 162; see also clean technology; ‘No More Solyndras Act’ Something Ventured, Something Gained (documentary) 78 Sony 108 Soppe, Birgit 146 South Korea 40, 61, 120–21 Soviet Union 37–9, 39, 76 Spain 120n4, 121, 121, 157 Spectrawatt 130n11, 162 spillovers 194 spinoff business model 76 SPINTRONICS 97, 97n5 Sputnik launch 76 Stanford Research Institute (SRI) 105–6; see also SIRI State: administrative role of 6, 12; attracting talent 12; capitalintensive investment by 27; ‘crowding in’ of 5–6, 8; ‘Developmental State’ 10, 37–8, 37–8n5, 40, 68; ‘directionality’ provided by 32n2; ‘dynamizing in’ 8; economic role of 1, 29; flexibility of 195–6; funding: see individual US agencies and departments; industrial directives of 21; as leading entrepreneurial force 193; market creation by 62, 167; organizational dynamics consideration 197; performance indicators lacking for 194; as private sector partner 5; response to criticism 19; responsibilities of 13; scope of endeavours of 18–19, 195; sectors funded by 63, 83, 196; targeted catch-up policies of 40; views of 9; see also ‘entrepreneurial’ State; ‘picking winners’ State development banks 2–3, 5, 122, 137–40, 189–91; see also Brazilian Development Bank (BNDES); China Development Bank (CDB); KfW (German Development Bank) stock market 49–50 Strategic Computing Initiative (SCI) 98–9 strategic management 197 Stumpe, Bent 101 Sullivan, Martin A. 174 SunPower 151 Suntech of China 152–5, 152n5 supply-side policies 83, 113–15, 159 sustainability 117, 119, 123, 195; see also green industrial revolution Swanson, Richard 151 Sweden 121 ‘systems of innovation’ approach: defined 36; foundation of 35–7; market failure approach vs. 9–10, 61–2; need for 22; regional 39; State role in 74; see also innovation; innovation ecosystems; Schumpeterian innovation economics ‘systems’ perspective 196 tariffs 108, 157, 157n6; see also feed-in tariffs Tassey, Gregory 32 tax avoidance: by Apple 11, 12, 171–5, 188; corporate 173–5, 187; ‘tax gap’ 187, 187n1 tax breaks 45–7 tax credits: energy 114, 138; impact of on R&D 28, 52–4; and R&D 111n13; and R&E 110; wind and solar power 126n8, 145, 149 tax cuts 10, 19, 23, 54, 69 taxes: antidumping tariffs 108; business as dependent on 69; ‘carbon tax’ 114; Citizens for Tax Justice 174n5; citizens unawareness of uses of 166; global avoidance schemes 174, 174n5; incentives to biotech firms 81; innovation systems not supported by 187–8; insensitivity of investment to 30n1; IRS 529 plans 111, 111n15; ‘patent box’ policy 51–2; policies impacting SMEs 45; policy 51; ‘repatriation tax holiday’ 175; State return from 165; US tax code 174; see also private vs. social returns; risk–reward nexus framework Taxol 188 Tea Party movement 17 technology: causing creative destruction 58; commissioning of advances in 54; core enabler technologies of Apple 95; dual-use 97; and growth 33–4; impact of regions on national performance 39; interagency collaborations in 74; origins of Apple products 109; revolutions 125, 126; SIRI 103, 105–6; State leadership of strategy for 40; unique situations in 59; see also computer field; wind and solar power technology commercialized: from capacitive sensing to click-wheels 99–101, 100n9, 103; cellular 102, 104, 109; from click-wheels to multi-touch screens 102–3; digital signal processing (DSP) 109; GPS 105; GPTs 62; LCD 107–8; lithium-ion battery 108; resistive touch-screens 101; silicon ICs impact on 98; thin-film transistors (TFTs) 107–8; ‘zero-emission’ electric vehicles 108 technology policy 75 Technology Reinvestment Program (TRP) 97 TFP of India vs. 46 TFTs (thin-film transistors) 107–8 Thomas, Patrick 148 ‘trade wars’ 122, 131, 157 ‘traitorous eight’, the 76 Tulum, Oner: on biopharmaceutical industry 67, 69, 82; NIH spending data compilation of 25, 69; on orphan drugs 81–2 United Kingdom (UK): approach to green initiatives 124–6; BBC 16; BERD (business expenditure on R&D) in 24; Big Society theme of 15–16; clean technology investment by 120; energy strategies of 116; government energy R&D spending 121, 121; green revolution in 120; Medical Research Council (MRC) 20, 67; outsourcing in 16; public R&D spending in 61; R&D/GDP 52; sector specialties of 42; SME government support 45; SME performance in 46 United States: Air Force 98, 104, 105; American Energy Innovation Council (AEIC) 26; Apple’s risk– reward relationship with 167–8; Army 107; competitiveness decline in 176; energy policy 158; energy strategies of 116, 137; funding and innovation in 52; funding sources for basic research R&D in 61; funding sources for R&D in 60, 60–61, 60n2; green revolution in 120; ‘hidden Developmental State’ in 38, 38n5; innovation threatened in 24; systems of innovation in 37; tax code 174; tax system 172; ‘trade wars’ of 122, 131, 157; types of venture capital successes in 49; undermining of innovation in 53; wind capacity of 143; see also taxes; specific agencies and departments of University of Southern California 77–8 UNIX 104 USSR: see Soviet Union US Windpower (later Kenetech) 147 Valentine, Don 94 Vallas, Steven P. 67–8 value: extraction 26, 42, 162; measures of 34 Venrock 94 Vensys Energiesysteme 149 venture capital: in Europe 53; Europe’s lag attributed to lack of 20; exit opportunities 48, 67, 81, 130, 138; failure of 107; government stimulation of 116; impatience of 129–32, 146n2; limited role of 131, 138; myth of as risk loving 47–50, 142, 161–2; and NASDAQ’s coevolution 50; presenting as lead risk taker 183; public vs. private 19, 47; short-termist approach of 108, 127; timing of investment by 23; Venrock 94; see also private sector venture capital sector investment: clean technology 161; green revolution 127–8, 128n9; in Solyndra 130; subsectors of within clean energy 128 venture capital stages of investment 47, 48; early stage and seed funding awards by 80; risk of loss in 48 Vestas: Denmark producing 143; DoE research influence on 148; early years of 147; patents purchased by 145; policy responses by 125, 137; rugged designs of 146 vision: Apple’s 93, 94, 99–100; ‘green’ 116, 120, 123; lack of 107; in nanotechnology 83–4; State’s 21–4, 58, 62–4 Warburg Pincus 50 Washington Consensus 40 Washington Post 57 Wayne, Ronald 89, 89n1; see also Apple welfare state institutions 31 Westerman, Wayne 102–3 Westinghouse 107 wind and solar power: clean technology in crisis 158–9; collective failure in 163; decline of US firms in 144, 144n1; grid parity in 141; networks of learning in 146n2; R&D myth in 159–60; small being beautiful myth in 160–61; solar bankruptcies 153–6; symbiotic innovation ecosystems in 162–3; venture capital myth in 161–2; from ‘Wind Rush’ to rise of China’s wind power sector 144–50; withdrawal of government support 149; see also specific corporations; clean technology wind and solar power markets: competition, innovation and market size 156–8; disrupting existing markets 161; global market for 143; growth opportunities in 156–7; growth powered by crisis 142–4; and manufacturing of 144, 146–7, 153 wind and solar power policies: California’s tax programme 147; fostering development 144–5; providing incentives 149–51; subsidies 148–9, 152; tax credits 145, 149 wind and solar power technology: aerodynamics of 148; computer use in 147–8; C-Si 129, 130n11, 151–2, 158; Denmark’s Gedser design 145; oil company role in 161n8; origins of solar technologies 150–53; remote power applications 150; research behind 148–9; see also clean technology wind energy R&D projects 144–6 Witty, Andrew 66–7 World Trade Organization (WTO) 40 World War II 74 Wozniak, Steve 89, 89n1, 94; see also Apple Wuxi-Guolian 152 Wuxi Suntech 153 Xerox 107 Xerox PARC 24 Zond Corporation 147–8 Table of Contents Halftitle Page Title Page Copyright Dedication Epigraph Contents List of Tables and Figures List of Acronyms Acknowledgements Foreword by Carlota Perez Introduction: Do Something Different A Discursive Battle Beyond Fixing Failures From ‘Crowding In’ to ‘Dynamizing In’ Images Matter Structure of the Book Chapter 1: From Crisis Ideology to the Division of Innovative Labour And in the Eurozone State Picking Winners vs.


pages: 288 words: 90,349

The Challenge for Africa by Wangari Maathai

Berlin Wall, Bob Geldof, carbon footprint, carbon-based life, clean water, colonial rule, corporate social responsibility, deliberate practice, F. W. de Klerk, failed state, Fall of the Berlin Wall, Intergovernmental Panel on Climate Change (IPCC), Live Aid, Mahatma Gandhi, Mikhail Gorbachev, Nelson Mandela, Scramble for Africa, sovereign wealth fund, structural adjustment programs, sustainable-tourism, trade liberalization, transatlantic slave trade, urban planning, War on Poverty, Washington Consensus

In what became known as the Washington Consensus, poor countries were encouraged—in some cases mandated—to further liberalize their policies on trade and the free flow of capital. In order to accelerate GDP growth, nations were urged to continue privatization programs, curtail government functions, and deregulate their industries. In the 1990s and the early years of the twenty-first century, some African economies did begin to grow. But by 2001, the number of people in Africa living in extreme poverty had nearly doubled to 316 million, from 164 million twenty years before.5 And along with international campaigners advocating fair trade and working against debt and poverty, a growing number of economists, among them the Nobel laureate Joseph Stiglitz, began to view the prescriptions of the Washington Consensus as neither concerned enough with equity—who benefited from these policies—nor focused sufficiently on the economic sustainability of global GDP growth and its political, social, and environmental ramifications.


pages: 91 words: 26,009

Capitalism: A Ghost Story by Arundhati Roy

activist fund / activist shareholder / activist investor, Bretton Woods, corporate governance, feminist movement, Frank Gehry, ghettoisation, Howard Zinn, informal economy, land reform, Mahatma Gandhi, means of production, megacity, microcredit, Nelson Mandela, neoliberal agenda, Occupy movement, RAND corporation, reserve currency, special economic zone, spectrum auction, stem cell, The Chicago School, Washington Consensus, WikiLeaks

The foundations began to support the ANC. The ANC soon turned on the more radical organizations like Steve Biko’s Black Consciousness movement and more or less eliminated it. When Nelson Mandela took over as South Africa’s first Black president, he was canonized as a living saint, not just because he is a freedom fighter who spent twenty-seven years in prison but also because he deferred completely to the Washington Consensus. Socialism disappeared from the ANC’s agenda. South Africa’s great “peaceful transition,” so praised and lauded, meant no land reforms, no demands for reparation, no nationalization of South Africa’s mines. Instead there was privatization and structural adjustment. Mandela gave South Africa’s highest civilian award—the Order of Good Hope—to his old friend and supporter General Suharto, the killer of communists in Indonesia.


pages: 547 words: 172,226

Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu, James Robinson

"Robert Solow", Admiral Zheng, agricultural Revolution, Albert Einstein, Andrei Shleifer, Atahualpa, banking crisis, Bartolomé de las Casas, Berlin Wall, blood diamonds, BRICs, British Empire, central bank independence, clean water, collective bargaining, colonial rule, conceptual framework, Corn Laws, creative destruction, crony capitalism, Deng Xiaoping, desegregation, discovery of the americas, en.wikipedia.org, European colonialism, failed state, Fall of the Berlin Wall, falling living standards, financial independence, financial innovation, financial intermediation, Francis Fukuyama: the end of history, Francisco Pizarro, full employment, income inequality, income per capita, indoor plumbing, invention of movable type, invisible hand, James Hargreaves, James Watt: steam engine, Jeff Bezos, joint-stock company, Joseph Schumpeter, Kickstarter, land reform, mass immigration, Mikhail Gorbachev, minimum wage unemployment, Mohammed Bouazizi, Paul Samuelson, price stability, profit motive, Rosa Parks, Scramble for Africa, Simon Kuznets, spice trade, spinning jenny, Steve Ballmer, Steve Jobs, trade liberalization, trade route, transatlantic slave trade, union organizing, upwardly mobile, Washington Consensus, working poor

As long as political institutions remain extractive, growth will be inherently limited, as it has been in all other similar cases. The Chinese experience does raise several interesting questions about the future of Chinese growth and, more important, the desirability and viability of authoritarian growth. Such growth has become a popular alternative to the “Washington consensus,” which emphasizes the importance of market and trade liberalization and certain forms of institutional reform for kick-starting economic growth in many less developed parts of the world. While part of the appeal of authoritarian growth comes as a reaction to the Washington consensus, perhaps its greater charm—certainly to the rulers presiding over extractive institutions—is that it gives them free rein in maintaining and even strengthening their hold on power and legitimizes their extraction. As our theory highlights, particularly in societies that have undergone some degree of state centralization, this type of growth under extractive institutions is possible and may even be the most likely scenario for many nations, ranging from Cambodia and Vietnam to Burundi, Ethiopia, and Rwanda.

Nevertheless, the ignorance hypothesis still rules supreme in Western policymaking circles, which, almost to the exclusion of anything else, focus on how to engineer prosperity. These engineering attempts come in two flavors. The first, often advocated by international organizations such as the International Monetary Fund, recognizes that poor development is caused by bad economic policies and institutions, and then proposes a list of improvements these international organizations attempt to induce poor countries to adopt. (The Washington consensus makes up one such list.) These improvements focus on sensible things such as macroeconomic stability and seemingly attractive macroeconomic goals such as a reduction in the size of the government sector, flexible exchange rates, and capital account liberalization. They also focus on more microeconomic goals, such as privatization, improvements in the efficiency of public service provision, and perhaps also suggestions as to how to improve the functioning of the state itself by emphasizing anticorruption measures.


pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business cycle, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, creative destruction, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, lateral thinking, liberal capitalism, Malacca Straits, Mark Zuckerberg, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Paul Samuelson, Peter Thiel, pets.com, plutocrats, Plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Future of Employment, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

Talk of the new Beijing Consensus implied that many countries had come to see the virtues of an active, authoritarian hand guiding the economy, and that this new view was displacing the old Washington Consensus, in support of freedom in markets, trade, and politics. “The Rise of State Capitalism” was the theme of a number of new books and magazine covers in 2011. I watched all this with great skepticism. For one thing, it was mainly the European and American political and business elites who were marveling about China, not their peers in emerging nations. A year before, in the Egyptian seaside town of Sharm el-Sheikh, I had met with Gamal Mubarak, son of his country’s soon-to-be-deposed dictator. When I asked him whether his country would back off from the nascent liberalization process that his government was belatedly undertaking, he responded that the future was still in liberalizing the economy, along the lines of the Washington Consensus, because his country had learned from hard experience that state control doesn’t work.

., 259, 304, 310 technology: automation, 214 cycle of, 8, 124, 218–21 driverless cars, 54 and immigration, 51–52 investment in, 218–21, 229, 233, 255 and jobs, 101, 211, 212 and leisure time, 199 and productivity, 20, 51, 119, 220–21 robot workers, 27, 36, 54–57, 214 and service businesses, 210, 211–13 3-D printing, 8, 214 Tetlock, Philip, 400 Thailand, 47–48, 189–90 capital flight from, 272, 292 commodities economy in, 342, 379 credit binge in, 199, 297, 298–302, 306, 315, 328, 380 currency of, 217, 267, 271–73, 273, 285–86, 292 economic contraction in, 286, 349, 379 economic growth in, 79, 217, 256, 348, 380 economic recovery of, 288, 302, 325, 327 and hype, 330, 349 infrastructure in, 207–8, 230 and international trade, 174, 178, 179–80, 216 investment in, 206, 217, 225, 230–31 leadership in, 78–79, 97, 379–80 manufacturing in, 216–17, 225, 227, 379 military coup in (2014), 379–80 population growth rates in, 30, 47 social unrest in, 78–79, 189, 190, 217 state banks in, 151, 321, 323–24 Thatcher, Margaret, 64–65, 68, 94 Thiel, Peter, 104, 119, 125 thrift, 16, 277–79 Time, 331, 334–35, 347, 349, 350, 352 tourism, 2, 37, 199, 211, 288, 384–85 trade balance, 269 Transatlantic Trade and Investment Partnership, 173, 179 Trans-Pacific Partnership, 173, 178, 361, 377, 378, 383, 384, 386 Trudeau, Justin, 386 Trump, Donald, 53, 364 Tsai Ing-wen, 383 Tunisia, 91–92, 224 Turkey, 190, 326 currency of, 273–74, 280, 283, 291, 292, 293, 396 debt of, 291, 306, 327, 328 economic growth in, 66, 69, 72 financial deepening in, 327 government spending in, 139, 247–48 hype about, 345, 348 immigration to, 48 inflation in, 241, 242, 246, 247–50, 326 leadership in, 60, 66, 71–72, 74, 349, 395 and location, 395–96 per capita income in, 68, 331, 348 population growth in, 31 populist nationalism in, 60, 72, 247 reforms in, 67–68, 72, 248, 249, 331 social unrest in, 4, 61, 72, 73, 74 wealth in, 114, 116, 120 Tusk, Donald, 74–75 Uganda, 87, 181, 354–55 United Arab Emirates, 167, 170 United Kingdom, see Britain United Nations (UN), 10, 47 on population growth, 19, 25, 27, 33, 44–45 United States, 194–95, 360–64 billionaires in, 107, 108, 114, 116, 118–19, 121, 123–25, 364 birth rate in, 26 checks and balances in, 364 credit markets in, 13, 298, 303–4, 305–6, 316 currency of, 266, 271, 272, 362–63 current account deficit in, 278, 362–63 debt in, 363 economic growth in, 3, 288, 337–38, 340 economic recovery in, 24, 64–65, 102, 360 economic strength of, 266, 400 financial speculation in, 102 and geopolitics, 172–73 and global trade, 184, 185, 402–3 government spending in, 138, 139 and hype, 361–62 and immigration, 45, 49–50, 52, 53, 360 industrialization in, 144, 215 inflation in, 240–41, 258 infrastructure in, 207, 208 life expectancy in, 39, 40 and location, 176–77, 200 long boom of, 255–56 manufacturing in, 204, 213, 214, 215, 361 oil and gas in, 228–29, 362 per capita income in, 32, 66, 339, 346 polarization in, 62–63, 132, 363–64 productivity in, 20, 51–52, 220–21, 257, 303 recessions originating in, 2, 132, 303–4, 305–6, 308–9, 327–28, 362 and regional alliances, 173–75, 178, 183, 188, 199, 361, 383, 384, 386 “second term curse” in, 70–71 technology in, 20, 218, 221, 294, 303, 361–62 Treasury bonds, 280 Washington Consensus, 132–33 and wealth gap, 101, 102, 364 workforce in, 19, 32, 37, 41–42, 43–44, 360 Uribe, Álvaro, 77, 183, 350 Uruguay, 300 Velasco, Juan, 98 Venezuela, 4, 158 economic cycle in, 87, 346, 365 leadership in, 64, 69, 76, 77, 98, 365 oil in, 333, 334 and regional alliances, 182, 366 Vietnam, 42, 202 billionaires in, 118 Communist Party in, 377–78 currency in, 295 fiscal deficit in, 377 and global trade, 174, 176–78, 180, 295 hype about, 345 inflation in, 378 investment in, 378 leadership in, 90–91 location of, 168, 177–78, 185, 378 manufacturing in, 213, 378 per capita income in, 178, 378 population centers in, 190, 191, 199 Viravaidya, Mechai, 47 Volcker, Paul, 241, 245, 335 wage-price spiral, 240 Walton family, 119 Wang Jianlin, 114 wealth: balance in, 103 billionaire lists, 100, 103, 104, 116, 117, 120–21 and capital flight, 52–53, 107, 279–81, 292 creation of, 99, 103, 115 crony capitalism, 105–6, 112, 130, 332 of entrepreneurs, 118–19, 122 in family empires/inherited, 104, 116–21 measures of, 101 redistribution of, 95, 96–98, 99, 101, 126 of robber barons, 124 scale of, 107–10 and state meddling, 127–29 wealth gap, 95–96, 99–102, 364 and corruption, 127–29 and easy money, 101–2, 108 and economic declines, 125–27 rise of, 129–31 welfare states, 64, 65, 93, 97, 126, 138, 140–41 Wen Jiabao, 307, 308, 311–12 Widodo, Joko, 143, 157, 163, 376–77 Wiesel, Elie, 331–32 wildebeest, survival of, viii, ix, xi women: and birth rates, 18, 25–26, 28, 33–36, 43, 44, 47, 392 economic restrictions on, 42 education of, 26, 41 working, 28, 34, 35, 36, 40–44, 47 workforce: aging, 392 and available jobs, 32, 37, 55 and baby bonuses, 33–36 and economic growth, 24, 26, 52 global, 55–56 growth rate in, 28–32 highly skilled, 48–54 hours worked by, 18 and immigration, 28, 44–54 manual labor, 213 new people in, 28, 36, 57 participation rate in, 36–37 and pension funds, 279 and population declines, 24–32, 35, 38, 43, 44, 56 and productivity data, 18–19, 39 replaced by machines, 16, 24 and retirement, 36–40 robots in, 54–57 skilled, 48–54 wages, 101, 184, 185, 204, 214, 243, 257 women in, 28, 34, 35, 36, 40–44, 47 World Bank: on convergence, 339, 341 data set of, 407 on economic growth factors, 12, 18, 342, 346 forecasting record of, 336, 338 on inflation, 242 on infrastructure, 186, 187 on middle-income trap, 345 on new business, 48 on service sector, 210–11 Spence Commission, 341–42 on wealth gap, 100 on workforce, 42, 51 world economy, 358–401 absence of optimism in, 359 combined scores of, 358–59 crisis (2008), see global financial crisis disruptions of, 358–59 potential growth rate of, 359 world maps, 356–57, 402–3 see also specific nations World Trade Organization, 177 Wu Jinglian, 314 Xiao Gang, 311 Xi Jinping, 120, 156, 187, 208 Yellen, Janet, 101 Yeltsin, Boris, 67, 242 Yemen, 92 Yudhoyono, Susilo Bambang (SBY), 93, 157 Zambia, 96, 354 Zambrano, Lorenzo, 219–20 Zeihan, Peer, 184 Zielinski, Robert, The Kiss of Debt, 297–98, 299, 323 Zimbabwe, 86, 88–89, 96–97, 373 Zoellick, Robert, 242 “zombie companies,” 318–19 Zong Qinghou, 113 Zuckerberg, Mark, 104, 119, 124 Zuma, Jacob, 352, 397 ALSO BY RUCHIR SHARMA Breakout Nations: In Pursuit of the Next Economic Miracles ABOUT THE AUTHOR Ruchir Sharma is head of emerging markets and chief global strategist at Morgan Stanley Investment Management, with more than $20 billion of assets under management.


pages: 586 words: 160,321

The Euro and the Battle of Ideas by Markus K. Brunnermeier, Harold James, Jean-Pierre Landau

Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, battle of ideas, Ben Bernanke: helicopter money, Berlin Wall, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, currency peg, debt deflation, Deng Xiaoping, different worldview, diversification, Donald Trump, Edward Snowden, en.wikipedia.org, Fall of the Berlin Wall, financial deregulation, financial repression, fixed income, Flash crash, floating exchange rates, full employment, German hyperinflation, global reserve currency, income inequality, inflation targeting, information asymmetry, Irish property bubble, Jean Tirole, Kenneth Rogoff, Martin Wolf, mittelstand, money market fund, Mont Pelerin Society, moral hazard, negative equity, Neil Kinnock, new economy, Northern Rock, obamacare, offshore financial centre, open economy, paradox of thrift, pension reform, price stability, principal–agent problem, quantitative easing, race to the bottom, random walk, regulatory arbitrage, rent-seeking, reserve currency, road to serfdom, secular stagnation, short selling, Silicon Valley, South China Sea, special drawing rights, the payments system, too big to fail, union organizing, unorthodox policies, Washington Consensus, WikiLeaks, yield curve

Interestingly, these patterns very much resemble the buildup of imbalances within the euro area prior to the eruption of the euro-area crisis (with the role of Italy being taken by many periphery economies). In the end, the Bretton Woods system collapsed; it simply did not incorporate a sustainable and credible way of dealing with the adjustment problem. Afterward, the global exchange rate system started to move very close to the German ideal: free capital flows and floating exchange rates. Later (in the 1980s), this became part of the Washington Consensus (which, interestingly, was also pushed by various French politicians, for example, Jacques Delors), as we discuss in chapter 14. European Exchange Rate Mechanism In Europe, however, matters continued to look different. European governments felt that volatile intra-European exchange rates would be detrimental to the European project, and so, in 1978, they launched the European Exchange Rate Mechanism (ERM for short), an attempt to recreate the Bretton Woods system in a European context.

Equally, there is no country that can safely receive fugitive funds, which constitute an unwanted import of capital, yet cannot safely be used for fixed investment.”4 The possibility of a sudden reversal makes countries that use these funds for long-run investment projects with low market liquidity vulnerable to a crisis. But the pendulum swung, and capital movements resumed. In the 1980s, in the new “Zeitgeist” of deregulation, the new “Washington Consensus” emerged—a consensus that shares many similarities with the German Ordoliberalism discussed in chapter 4. In the international arena, the IMF was at the forefront of designing a system in which rules were developed for a new era of economic but also financial globalization. Free international capital and trade flows were the guiding North Star of a new global architecture. This view was consistent with German economic thinking.

., 142 Rathenau, Walter, 59–60 recapitalization, 203–4; of banks, 357; direct, 195–97 recessions, 143 Rechtsstaat (rule of law), 57–58 redemption pact, 112–13 redenomination risks, 226–27 refinancing, 321, 344 refugee crisis, 39–40, 378, 379, 381–82 Regling, Klaus, 24, 128, 146 Rehn, Olli, 306–7 Reichsbank Law (1924; Germany), 344 renminbi (Chinese currency), 281–82 Renzi, Matteo, 8, 36, 248 repo rate, 164 repos (sale and repurchase agreements), 164, 321; ELAs as, 322 reputation, in monetary policy, 91–93 reversal rate, 190–91 ring-fencng of assets, 213–14 risk-bearing capital, 204–6 Ritschl, Albrecht, 62–63 Rocard, Michel, 47 Rodrik, Dani, 375 Ronaldo, Cristiano, 192 Roncaglia, Alessandro, 238 Roosevelt, Franklin Delano, 102, 177 Röpke, Wilhelm, 60, 61, 65 Rostand, Edmond, 71 Rostowski, Jacek, 263 Rougier, Louis, 65 Roumeliotis, Panagotis, 303 Rueff, Jacques, 55, 67–68, 71, 72, 77 ruler model, 143 Russia, 283–86; Crimea annexed by, 36, 381; debts of, 295 Rüstow, Alexander, 65 Sachs, Jeffrey, 250, 266 safe assets, 182–83, 222–26 sale and repurchase agreements (repos), 164, 321 Samaras, Antonis, 230, 231 Santo e Silva, José Maria do Espírito, 201 Sapin, Michel, 39, 163, 233 Sapir, Jacques, 73 Saraceno, Pasquale, 238 Sargent, Thomas, 110, 252 Sarkozy, Nicolas, 1, 87; on Berlusconi, 246; Cameron and, 272; economic philosophy of, 73; on EFSF, 128–29; in election of 2012, 33–34; after flash crash, 25; on Greek debt restructuring, 119, 121, 307; on IMF, 297; meets with Berlusconi, 336; Merkel and, 28, 328–30; on Schuldenbremse, 149–50; Strauss-Kahn nominated as IMF director by, 22, 295–96; on Weber, 347–48 Sauvy, Alfred, 67 savings banks (Sparkassen), 160 Say, Jean-Baptiste, 6, 57, 69–70 Say’s Law, 69 Sberbank Europe AG, 283–84 Scandinavian Currency Union, 252 Schäuble, Wolfgang, 7; asssassination attempt against, 25; on Cyprus, 200, 341; in debate with Summers, 147; on deposit insurance, 221; Draghi and, 354; European Monetary Fund proposed by, 20, 297; on exiting from euro area, 228; Gaithner and, 263; on Greece, 232, 264–66; IMF and, 24; Outright Monetary Transactions supported by, 123; on saving eurp, 5; Varoufakis and, 231 Schengen agreement, 249 Schlesinger, Helmut, 325 Schmidt, Christoph, 64 Schmidt, Helmut, 48 Schmoller, Gustav, 58 Schröder, Gerhard, 146, 285 Schuldenbremse, 150 Schulz, Martin, 37 Scotland, 278 Scottish National Party (SNP), 278 secular stagnation, 143 Securities Markets Program (SMP), 335, 345–49 Seehofer, Horst, 63 Sen, Amartya, 73 Shafik, Nemat, 304 Shakespeare, William, 267, 383 short-term funding, 169–70 Sicily (Italy), 241 Siemens (firm), 49 Sikorski, Radek, 285 Single Bank Resolution Fund, 220, 221 Single European Act (1986), 22–23, 81 Single Resolution Mechanism, 220–21 Single Supervisory Mechanism (SSM), 371–72 Sinn, Hans-Werner, 63, 228, 266, 325, 359 Sinn Fein (Irish party), 232 Slovakia, 130 small and medium enterprises (SMEs), 49 Smith, Adam, 57 Smithianismus, 58 Snowden, Edward, 269 Socialist Party (France), 35, 37, 46 Social Security Act (US; 1935), 102 Société Générale (French bank), 159, 166 Sohmen, Egon, 55 solidarity, 380 solvency, 116, 118–19; liquidity versus, 125–28, 215, 380 Sombart, Werner, 58 Sorel, Albert, 43–44 Soros, George, 81–82, 163, 265, 267 sovereign debt, 89; foreign owned, 214; IMF on, 291–95; liquidity risk and, 332–33; restructuring of, 126–27 Sovereign Debt Reduction Mechanism (SDRM), 294 Soviet Union, 47 Spain: bank mergers in, 174; capital flows to, 167–68; diabolic loop in, 183; direct recapitalization of banks in, 196–97; ECB and, 94, 336; economic stimulus in, 148; ESM and, 353; euro crisis in, 31, 32; European Parliament elections in, 36; GDP boost in, 118; during global financial crisis, 261–62; IMF and, 310; inflation rate in, 178; national debt of, 121, 127–28; under Philip II, 96; Podemos in, 232; sovereign debt of, 224; zombie banks in, 189 special drawing rights (SDRs), 132–33, 281, 292; IMF and, 307–9 special purpose vehicle (SPV), 25 Spielberg, Steven, 45 spillover risk, 180–82 Spitzenkandidaten, 376 Sraffa, Piero, 11, 238 Staatswissenschaft, 57 Stability and Growth Pact (SGP), 28–29, 86, 92, 99; German attempts to repair, 148–50; negotiations leading to, 135–36; rules of, 146 Stark, Jürgen, 87, 135, 301, 350 Steinbrück, Peer, 163 Steinnson, Jon, 142 Stiglitz, Joseph, 73, 250 stimulus, debate over austerity versus, 148–54 Strauss-Kahn, Dominique, 73; arrest and resignation of, 304–5; during Greek crises, 298; as IMF managing director, 22, 260, 288, 295–96, 307; in troika, 301, 303, 304 stress tests for banks, 217, 254–55 structural conditionality, 301 subsidiary sovereign debts, 121 Süddeutsche Zeitung (newspaper), 64 Suharto, 293 Summers, Lawrence, 143, 144, 147, 151 Svensson, Lars, 53 Sweden, 381 Syrian refugee crisis, 39–40, 285–86, 382 Syriza party (Greece), 38, 152–53, 231, 232, 342 systemic risk, 180–82, 388 Szász, André, 85 tail risk, 389–90 TARGET2, 226–27, 302, 307, 323–25; Greece and, 343 targeted longer-term refinancing operations (TLTROs), 352, 360, 366 taxes: on Cypriot bank deposits, 199; in Cyprus, 340; financial transactions taxes, 205; in Ireland, 338 Taylor, John, 311 technological liquidity, 161 temporary monopoly rents, 203–4 terrorism, 36, 382 Tesobono crisis (Mexico), 292 Thatcher, Margaret, 92, 273; on single European market, 274; TINA (There Is No Alternative) principle of, 145 Thorning-Schmidt, Helle, 272 Tietmeyer, Hans, 132, 212, 316, 369 time-inconsistency problem, 87–88 TINA (There Is No Alternative) principle, 145 Tirole, Jean, 72 Tobin, James, 188 Tocqueville, Alexis de, 42, 43 Tomasi di Lampedusa, Giuseppe, 242 transfer unions, 106–11 Treaty on the Functioning of the European Union, 27, 220, 316 Tremonti, Giulio, 335 Trichet, Jean-Claude, 94; on Deauville agreement, 30; as ECB president, 316–18; on ECB’s price stability mandate, 320; on European Union, 374; Greek debt and, 304; on IMF, 23, 327–28; on Ireland, 338, 339; on Italy, 246; on private sector involvement, 329–31; on purchasing government bonds, 345; replaced by Draghi, 349–50; on unity of euro areas, 170 trilemma of international macroeconomics, 75–76 troika (European Commission, IMF, and ECB; the institutions), 25, 328; Greek adjustment program and, 334; IMF in, 300–304 Trump, Donald, 256 Tsipras, Alexis: at Brussels meeting, 266; elected prime minister of Greece, 342; in Greek election of 2014, 231; on IMF, 311–12; referendum called by, 232; Soros and, 267 Tusk, Donald, 20, 27, 275 UKIP Party, 276 Ukraine, 36, 284; conflict between Russia and, 285–86, 381; debts of, 295 unemployment: countries with high rates of, 108–9; Euro-wide unemployment insurance, 101–3 Unicredit (Italian bank), 215 unions, 51–53 United Kingdom, 241; Anglo-Saxon financial capitalism in, 162–63; under Brown, 267–70; under Cameron, 270–72; on ECB intervention, 131; economic theory in, 375; European Parliament elections in, 37; gold standard used by, 90–91; Icelandic assets seized by, 213; on IMF board, 296, 305; national debt of, 121; nineteenth-century economic philosophy in, 58; not in euro area, 249; reputation in monetary policy of, 91–92; threatened exit from European Union by, 272–79; withdraws from European Exchange Rate Mechanism, 82 United States: Anglo-Saxon financial capitalism in, 162–63; bankruptcies in, 256–59; banks and capital market in, 159; bilateral operation with Mexico, 21; divisions on economic theory in, 375; dollar currency of, 46–47; economic history of, 251–54; economic perspective of, 249–51; euro crisis and, 261–67; federal assumption of states’ debts in, 110–11; Federal Reserve System in, 95, 314; Greek exit and, 230; housing bubble in, 170; on IMF board, 296; international inflation tied to, 55; labor mobility in, 104; Landesbanken investments in, 165; New Deal programs in, 102; as polarizing influence, 286; Treasury bonds of, 224, 361 universal banking, 159–60 unsecured interbank markets, 164 Uruguay, 295 Valls, Manuel, 35, 182 vampire banks, 189, 205 Van Rompuy, Herman, 20, 23, 122, –219 Varoufakis, Yanis, 231, 233, 267, 342 Vesti, 239–40 Vienna initiative, 21 Vietnam War, 55 VLTROs (very long-term refinancing operations), 345–46, 349–52, 357 volatility paradox, 104, 182 Voltaire, 124 von Mises, Ludwig, 65 von Rompuy, Herman, 151, 304 wages, 106–7 Wagner, Adolph, 58 Waigel, Theo, 135 Walters, Alan, 79 Warsh, Kevin, 363 Washington Consensus, 79, 290 Weber, Axel: on IMF, 297; on monetary targeting, 53; resignation of, 345, 348; on Secondary Market Purchase program, 25; on Securities Markets Program, 347 Weber, Max, 2, 4 Weidmann, Jens: Bundesbank president, 307; as Bundesbank president, 132; Draghi and, 354; on European Union vulnerabilites, 66; on Goethe, 356–57; on IMF, 22; on VLTROs, 350 Weimar Republic, 44, 46; Great Inflation in, 54–55; Hayek on, 59 Welcker, Carl Theodor, 57–58 West LB (German bank), 165 White, Harry Dexter, 288–91 wholesale funding, 163–64 William III (king, England), 88 Wolf, Martin, 151, 268 World Bank, 269, 288 Wren-Lewis, Simon, 250 Xi Jinping, 275, 282 Yugoslavia, 47 Zapatero, José Luis, 23, 261–62, 336 zero lower bound (ZLB), 140, 364 Zhejiang Geely Group (Chinese firm), 282 Zhou Xiaochuan, 281 zombie banks, 188, 189, 205


pages: 330 words: 99,044

Reimagining Capitalism in a World on Fire by Rebecca Henderson

Airbnb, asset allocation, Berlin Wall, Bernie Sanders, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, collaborative economy, collective bargaining, commoditize, corporate governance, corporate social responsibility, crony capitalism, dark matter, decarbonisation, disruptive innovation, double entry bookkeeping, Elon Musk, Erik Brynjolfsson, Exxon Valdez, Fall of the Berlin Wall, family office, fixed income, George Akerlof, Gini coefficient, global supply chain, greed is good, Hans Rosling, Howard Zinn, Hyman Minsky, income inequality, index fund, Intergovernmental Panel on Climate Change (IPCC), joint-stock company, Kickstarter, Lyft, Mark Zuckerberg, means of production, meta analysis, meta-analysis, microcredit, mittelstand, Mont Pelerin Society, Nelson Mandela, passive investing, Paul Samuelson, Philip Mirowski, profit maximization, race to the bottom, ride hailing / ride sharing, Ronald Reagan, Rosa Parks, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, sovereign wealth fund, Steven Pinker, stocks for the long run, Tim Cook: Apple, total factor productivity, Toyota Production System, uber lyft, urban planning, Washington Consensus, working-age population, Zipcar

In the 1980s and 90s political thinking in both the developed and developing world focused on the role of free markets in driving economic prosperity and political freedom. Global economic development was guided largely by the “Washington Consensus,” a view of the world that focused overwhelmingly on the power of free markets to drive growth. The Consensus led influential bodies such as the World Bank and the International Monetary Fund (IMF) to push developing countries to enact far-reaching deregulation and privatization, to open domestic markets to global trade, and to permit free capital flows as roots of development—all without explicit attention to the health of local political or social institutions. It’s now clear that this was a mistake. Empirically, many of the states that implemented the Washington Consensus failed to do as well as expected. In post-Soviet Russia in particular, the rapid liberalization of markets was followed by a descent into an extreme form of crony capitalism, while the so-called Asian tigers—especially Taiwan, Singapore, and the Republic of Korea—found economic success by pairing the development of their own markets with heavy government intervention.


pages: 376 words: 109,092

Paper Promises by Philip Coggan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, balance sheet recession, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Madoff, Black Swan, Bretton Woods, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, carried interest, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, Kenneth Rogoff, Kickstarter, labour market flexibility, light touch regulation, Long Term Capital Management, manufacturing employment, market bubble, market clearing, Martin Wolf, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, plutocrats, Plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

When the property bubble burst, and the banks collapsed, Asian countries had to turn to the outside world for help. In the 1980s and 1990s, sovereign debt crises forced governments to turn to the International Monetary Fund. The demise of the Bretton Woods system had caused the fund to remake itself as an emergency provider of finance to the developing world. These loans often carried strict conditions that reflected what was known as the ‘Washington consensus’, in favour of free markets and reduced public spending. The negotiations between governments and the fund carried an echo of the ‘bankers’ ramp’ that Britain faced in 1931. Governments that followed the IMF prescriptions faced street protests and were often accused of selling out to Western creditors. The accusation of financial colonialism carried greatest weight in Africa. That continent suffered from continued crises in the 1980s and 1990s.

Rubin, Robert Rueff, Jacques Rumsfeld, Donald Russia Sack, Alexander St Augustine Saint-Simon, duc de Salamis (city) Santelli, Rick Sarkozy, Nicholas Saudi Arabia savings savings glut Sbrancia, Belen Schacht, Hjalmar Scholes, Myron shale gas Second Bank of the United States Second World War Securities and Exchange Commission seignorage Shakespeare, William share options Shiller, Robert short-selling silver Singapore Sloan, Alfred Smith, Adam Smith, Fred Smithers & Co Smithsonian agreement Snowden, Philip Socialist Party of Greece social security Société Générale solidus Solon of Athens Soros, George sound money South Africa South Korea South Sea bubble sovereign debt crisis Soviet Union Spain special drawing right speculation, speculators Stability and Growth pact stagnation Standard & Poor’s sterling Stewart, Jimmy Stiglitz, Joseph stock markets stop-go cycle store of value Strauss-Kahn, Dominque Strong, Benjamin sub-prime lending Suez canal crisis Suharto, President of Indonesia Sumerians supply-side reforms Supreme Court (US) Sutton, Willie Sweden Swiss franc Swiss National Bank Switzerland Sylla, Richard Taiwan Taleb, Nassim Nicholas taxpayers Taylor, John tea party (US) Temin, Peter Thackeray, William Makepeace Thailand Thatcher, Margaret third world debt crisis Tiernan, Tommy Times Square, New York tobacco as currency treasury bills treasury bonds Treaty of Versailles trente glorieuses Triana, Pablo Triffin, Robert Triffin dilemma ‘trilemma’ of currency policy Truck Act True Finn party Truman, Harry S tulip mania Turkey Turner, Adair Twain, Mark unit of account usury value-at-risk (VAR) Vanguard Vanity Fair Venice Vietnam War vigilantes, bond market Viniar, David Volcker, Paul Voltaire Wagner, Adolph Wall Street Wall Street Crash of 1929 Wal-Mart wampum Warburton, Peter Warren, George Washington consensus Weatherstone, Dennis Weimar inflation Weimar Republic Weinberg, Sidney West Germany whales’ teeth White, Harry Dexter William of Orange Wilson, Harold Wirtschaftswunder Wizard of Oz, The Wolf, Martin Women Empowering Women Woodward, Bob Woolley, Paul World Bank Wriston, Walter Xinhua agency Yale University yen yield on debt yield on shares Zambia zero interest rates Zimbabwe Zoellick, Robert Philip Coggan is the Buttonwood columnist of the Economist.


pages: 354 words: 105,322

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis by James Rickards

"Robert Solow", Affordable Care Act / Obamacare, Albert Einstein, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Bayesian statistics, Ben Bernanke: helicopter money, Benoit Mandelbrot, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bitcoin, Black Swan, blockchain, Bonfire of the Vanities, Bretton Woods, British Empire, business cycle, butterfly effect, buy and hold, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, cellular automata, cognitive bias, cognitive dissonance, complexity theory, Corn Laws, corporate governance, creative destruction, Credit Default Swap, cuban missile crisis, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, disintermediation, distributed ledger, diversification, diversified portfolio, Edward Lorenz: Chaos theory, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, fiat currency, financial repression, fixed income, Flash crash, floating exchange rates, forward guidance, Fractional reserve banking, G4S, George Akerlof, global reserve currency, high net worth, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Isaac Newton, jitney, John Meriwether, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, mutually assured destruction, Myron Scholes, Naomi Klein, nuclear winter, obamacare, offshore financial centre, Paul Samuelson, Peace of Westphalia, Pierre-Simon Laplace, plutocrats, Plutocrats, prediction markets, price anchoring, price stability, quantitative easing, RAND corporation, random walk, reserve currency, RFID, risk-adjusted returns, Ronald Reagan, Silicon Valley, sovereign wealth fund, special drawing rights, stocks for the long run, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Bayes, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transfer pricing, value at risk, Washington Consensus, Westphalian system

The ascent of globalized elites occurred after 1989, the dawn of a second age of globalization, a distant echo of the first age of globalization from 1870 to 1914. In 1989, the cold war ended, the Berlin Wall fell, and the Washington Consensus was announced in a seminal article by John Williamson, an English economist working in Washington, D.C. Williamson’s article summarized views that had been evolving since the 1970s. He condensed these views into a playbook for a newly globalized world. Williams called for free trade, open capital accounts, direct foreign investment, and protection of intellectual property. He also called for fiscal discipline, yet in practice this was reserved for emerging markets, and not followed by developed economies themselves. The Washington Consensus was enforced ruthlessly throughout the 1990s by the IMF, urged on by Bob Rubin’s U.S. Treasury. The 1990s were a zenith for ostensibly free trade.


pages: 1,066 words: 273,703

Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze

Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, Boris Johnson, break the buck, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, dark matter, deindustrialization, desegregation, Detroit bankruptcy, Dissolution of the Soviet Union, diversification, Doha Development Round, Donald Trump, Edward Glaeser, Edward Snowden, en.wikipedia.org, energy security, eurozone crisis, Fall of the Berlin Wall, family office, financial intermediation, fixed income, Flash crash, forward guidance, friendly fire, full employment, global reserve currency, global supply chain, global value chain, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, paradox of thrift, Peter Thiel, Ponzi scheme, predatory finance, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, structural adjustment programs, The Great Moderation, Tim Cook: Apple, too big to fail, trade liberalization, upwardly mobile, Washington Consensus, We are the 99%, white flight, WikiLeaks, women in the workforce, Works Progress Administration, yield curve, éminence grise

For decades, Latin America had been lectured that “the market would solve everything.” Now Wall Street was failing and President Bush was promising that the US Treasury would come to the rescue. But was the United States in a fit state to respond? “[T]he present intervention,” Fernández pointed out, was not just “the largest in memory,” it was being “made by a State with an incredible trade and fiscal deficit.”4 If this was to stand, then the “Washington Consensus” of fiscal and monetary discipline to which so much of the emerging world had been subjected was clearly dead. “It was a historic opportunity to review behaviour and policies.” Nor was it just Latin American resentment on display. The Europeans joined the chorus. “The world is no longer a unipolar world with one super-Power, nor is it a bipolar world with the East and the West. It’s a multipolar world now,”5 intoned Nicolas Sarkozy, speaking as both president of France and president of the European Council.

IV If one compares American and European policy discussion in the early 2000s, one sees that they shared many preoccupations. Policy experts on both continents were focused on fiscal discipline and international competitiveness, supply side incentives, efficient government spending, deficits, evidence-based welfare policy, education reform and flexible labor markets. These were the shibboleths of the watered-down, supply-side market economics inherited from the days of Reagan and Thatcher and the Washington Consensus of the 1990s. The policy communities on both sides of the Atlantic also shared blind spots. Sharing a deep faith in markets, neither realized the threat posed by the new, market-based model of banking. On both sides of the Atlantic they were oblivious to the risks accumulating in overleveraged banks, relying on vast quantities of wholesale funding. Why, then, did both sides find it so hard to recognize the risks that they shared?

At the G20 in Seoul in November 2010 they had lambasted Bernanke for adopting QE2, dropping US interest rates and allowing the dollar to slide. By 2013 many emerging markets had gone beyond the war of words to adopt capital controls. Brazil, South Korea, Thailand, Indonesia all took steps to slow the inflow of funds and curb the appreciation of their currencies. Fifteen years earlier in the heyday of the “Washington consensus” this would have put them beyond the pale. Restraining international capital movement was a retreat from the most fundamental liberalizing policy of the 1970s and 1980s. But the advocates of the market revolution had foreseen neither the emerging market crises of the 1990s nor monetary policy on the scale of QE. Faced with the giant flux of the global credit cycle, amplified by spillover effects from the Fed’s crisis fighting, controls on capital inflows were grudgingly accepted as a pragmatic necessity, even by the IMF.13 It was, the Economist magazine commented, “as if the Vatican had given its blessing to birth control.”14 II As far as the markets were concerned, everything depended on when and how the Fed changed course.


pages: 474 words: 120,801

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim

additive manufacturing, barriers to entry, Berlin Wall, bilateral investment treaty, business cycle, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, creative destruction, crony capitalism, deskilling, disintermediation, disruptive innovation, don't be evil, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intangible asset, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, liberation theology, Martin Wolf, mega-rich, megacity, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, plutocrats, Plutocrats, price mechanism, price stability, private military company, profit maximization, Ronald Coase, Ronald Reagan, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Washington Consensus, WikiLeaks, World Values Survey, zero-sum game

For starters, thanks to the integration of the world economy, the dependence of any one country on supplies, customers, or financing from any one other country has loosened enormously. Falling trade barriers and more open capital markets were long-held goals of the United States and other rich nations in international trade talks. Their victory—along with the widespread promotion of the “Washington consensus” as a condition for lending by the World Bank, International Monetary Fund, and other institutions—has had the paradoxical effect of weakening the hold that the United States or former colonial powers like Britain and France once had over countries in their sphere of influence. The imposition of sanctions against Iran in an effort to bring its nuclear program into compliance with international regimes is the exception that proves the rule.

See also Elections Wagstyl, Stefan, 133 Walker, Scott, 202 Wall Street, 49. See also Banks; Occupy Wall Street movement Wall Street Journal, 6, 174, 212 Waltz, Julie, 145 Wars, 10, 16, 17, 28, 42, 48, 111, 115, 135, 243 asymmetric/irregular wars, 5, 108, 109–114, 124 generations of warfare, 116–118 rules of war, 121–128 See also Conflict; Cyber-crime/warfare; individual wars Warsaw Pact, 139, 141, 142. See also Soviet Union: ex-Soviet bloc Washington Consensus, 144 Washington Post, 28, 95, 162, 200 Watergate, 68 Wealth, 6–7, 8, 13, 15, 42, 46, 48, 49–50, 130, 167, 195, 197, 198, 207, 210, 236. See also Billionaires Weapons, 44, 54, 110, 116, 118–121, 141, 144, 149 precision weapons, 111–112 See also Nuclear issues Weber, Max, 38–42, 43, 47, 50, 52, 75, 76, 79, 103, 115, 116 Weiss, Gary, 190 Wells, Peter, 166 Welzel, Christian, 67 Westinghouse, 36 White Collar: The American Middle Classes (Mills), 47 White House, 76 White people, 67 Who Rules America?


pages: 131 words: 41,052

Why Europe Will Run the 21st Century by Mark Leonard

Berlin Wall, Celtic Tiger, continuous integration, cuban missile crisis, different worldview, European colonialism, facts on the ground, failed state, global reserve currency, invisible hand, knowledge economy, mass immigration, non-tariff barriers, North Sea oil, one-China policy, Panopticon Jeremy Bentham, pension reform, reserve currency, Robert Gordon, shareholder value, South China Sea, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, Washington Consensus

The ‘Stockholm Consensus’ amounts to nothing less than a new social contract in which a strong and flexible state underpins an innovative, open, knowledge economy. This contract means that the state provides the resources for educating its citizens, treating their illnesses, providing childcare so they can work, and integration lessons for newcomers. In exchange, citizens take training, are more flexible, and newcomers integrate themselves. The ‘Stockholm Consensus’ stands in opposition to much of the waste of the ‘Washington Consensus’: low levels of inequality allow Europeans to save on crime and prison; energy-efficient economies protect them from hikes in oil prices; the social contract gives people leisure and a helping hand back into work if they lose their jobs; while the European single market and the euro will allow European countries to benefit from economies of scale in a global market without giving up on the adaptability and dynamism that come from being small.


pages: 492 words: 118,882