Galbraith's intro and Global Security Panel

EPS Symposium: Policy Challenges for the New US President: Global Security: Russia, China, Europe and Latin America from Thea Harvey on Vimeo.

A brief note on Venezuela and the turn to the right in Latin America

So besides the coup in Brazil (which was all but confirmed by the last revelations, if you had any doubts), and the electoral victory of Macri in Argentina, the crisis in Venezuela is reaching a critical level, and it would not be surprising if the Maduro administration is recalled, even though right now the referendum is not scheduled yet.

The economy in Venezuela has collapsed (GDP has fallen by about 14% or so in the last two years), inflation has accelerated (to three digit levels; 450% or so according to the IMF), there are shortages of essential goods, recurrent energy blackouts, and all of these aggravated by persistent violence. Contrary to what the press suggests, these events are not new or specific to left of center governments. Similar events occurred in the late 1980s, in the infamous Caracazo, when the fall in oil prices caused an external crisis, inflation, and food shortages, which eventually, after the announcement of a neoliberal economic package that included the increase in the cost of transportation, led to public protests and government repression.

These are the problems of an economy that is excessively dependent on oil exports, and that has been unable to diversify its economic activity. Sometimes this is seen as the result of a Dutch Disease (or the Resource Curse), the deindustrialization associated to the changes in relative prices related to favorable terms of trade, which lead to an inflow of imports of manufactured goods and deindustrialization. I would be reluctant, however, to suggest that this is the case in Venezuela, since Import Substitution Industrialization (ISI) was weak there when compared to say Argentina, Brazil or Mexico, and the industrialization process was never strong in Venezuela.

In both cases, back during the Caracazo and now, the current account deficit has been at the center of all problems (see figure above). And while one can blame the left of center governments of Chávez and Maduro for not being able to break the structural dependence on oil, it is hardly the case that this is a problem just of the left of center governments. In fact, even with this terrible collapse of the economy, for the period as a whole starting in 1999 (or 2003, after the Chávez administration survived the US sponsored coup, and took over the oil company), the economy grew considerably (see figure below).

So growth has been tied to terms of trade and the price of oil. Also, not only the economy collapses when the price of oil collapses, but exchange rate depreciation, in the black market now, leads to high inflation, which goes often with shortages. Anybody that has lived through high inflation in Latin America in the 1980s knows this. It has nothing to do with fiscal policy, or with the central bank printing money. The fiscal situation worsened as a result of lack of growth and the external problems (see figure below).

This is a tragedy, and there are no good solutions. Mark Weisbrot suggests depreciating the exchange rate. But normally this operates by making imported goods more expensive, and leading a recession and lower imports. As he notes, the recession has already done a good chunk of that job, and imports have already collapsed. And Venezuela cannot expect much external help, certainly not from the IMF and the US, not while Maduro is in power. My guess is that there is a good chance that the government of Maduro will not resist and that a right wing government will come to power and adopt a neoliberal program. This would bring almost no relief in the short run, even though access to IMF funds might mitigate the balance of payments for a while, and allow to reduce the worst elements of the crisis, like the food shortages.

I should note also, that while it is not surprising that Maduro's government is unpopular in the middle of this crisis (like Dilma was in Brazil), it would be a stretch to suggest that most people want a return of neoliberal policies (in fact, in Brazil the country remains divided, as much as in Argentina, were the neoliberal Macri only won a narrow victory by deceiving the electorate). The problems of the long cycle of the left in the region, tied to the high prices of commodities, and the reduced popularity of left of center politicians, does not translate into an acceptance of neoliberal policies, and more popular resistance can be expected now, as compared to the 1990s, when the Washington Consensus policies were adopted.

New York Times on the Brazilian coup... I mean impeachment

So for the correct view (yes, it was a coup) see Laura Carvalho here. As she says:

The impeachment process of President Dilma Rousseff started as a retaliation by the speaker of Brazil’s lower house of Congress, Eduardo Cunha, indicted for taking as much as $40 million in a kickback scheme at the state-owned oil company Petrobras. Cunha, whose name is also tied to the Panama Papers, initiated the impeachment process shortly after a public announcement by government allies that they would not stop investigations in the Congressional ethics committee that could lead to his removal.

And, as I noted before the actual farce in Congress last Sunday, Dilma is accused of something trivial, delays in payments to public banks, which is certainly not an impeachable crime. The opposite view here, for what is worth.* Hard to agree with the criminalization of fiscal policy. With that criteria several heads of state should be impeached, including in the US (see IMF on this, which suggests that there are several ways to improving fiscal accounts through accounting devices).

It's also important to note that Obama and his State Department have been silent about this coup in a crucial country in the region.** Mark Weisbrot speculated about Obama's role in all of this. He said:

The massive spying on Brazil — and especially state-controlled oil company Petrobras — that Edward Snowden and Glenn Greenwald revealed in 2013 also points in this direction [Washington's support to undermine Workers' Party government]. It could be a coincidence that all this information about Petrobras was gathered by the U.S. government just prior to the scandals at the company; or perhaps Washington shared some information with its allies in the Brazilian opposition. And there is no doubt that the biggest players in this coup attempt — people like former presidential candidates José Serra and Aécio Neves — are U.S. government allies.

What's next? That's the important question. In terms of the economic policy expect more fiscal adjustment, including cuts in social programs (Delfim Neto, which had supported the Workers' Party for most of their governments, today refers to recipients of the Bolsa Familia program as parasites; sign of things to come).

* I'll try to have something longer on this later, but in my view the deep causes of the impeachment are ultimately related to class warfare. The improvement in the minimum wage, and the share of wages in income, ultimately caused the reaction from the elites and a good chunk of the middle class.

** Glenn Greenwald on this here.

Obama's Latin American Legacy

In 2009 I wrote that: "a progressive U.S. policy agenda toward Latin America should express support of and solidarity with the region’s left-of-center governments themselves." And central to that agenda was the need for: "would be reversing the corporate bias of the free trade agreements (FTAs) that have been signed over the past decade and a half." How well has Obama done in his almost 8 years by that yardstick, you ask. Not very well.

Obama never cozied up to the left of center governments in the region, even though they promoted an improvement in income inequality, which has no other parallel in the world in the 2000s, when inequality increased in almost every region. Worse it is very clear that his administration was close to several groups that tried undermine the left of center governments. His role in the 2009 coup in Honduras against democratically elected President Manuel Zelaya, for example, is now plaguing his ex-Secretary of State Hillary Clinton. As noted by Marc Weisbrot a while ago: "both under Clinton and Kerry, the State Department’s response to the violence and military and police impunity has largely been silence, along with continued U.S. aid to Honduran security forces." Which, by the way, makes any claims about human rights violations, including Obama's complaints, during his historic visit to Cuba, seem somewhat hollow.

There is obviously the opening up of relations with Cuba, certainly the highlight of his two terms regarding relations with Latin America. While Obama should be praised for at least not saying openly that the US seeks regime change in the island, it is hard not side with those in Cuba that are skeptical about American intentions. In particular, because the main guidance of American policy in the region remains the defense of the economic interests of its corporations, rather than the improvement of social conditions in the region, which should be a central concern, not just for the obvious humanitarian reasons, but also because in the long run socioeconomic conditions are central for immigration flows.

In fact, Obama, who had campaigned as a critic of the effects of NAFTA going so far as promising to revise it, signed two Free Trade Agreements (FTAs) with countries in the region, Colombia and Panama, and is pushing, with Republican support, the Trans Pacific Partnership (TPP), which includes Chile, Mexico and Peru. And Obama's visit to Argentina, which follows the one to Cuba and starts today, is basically about free trade, and perhaps opening up Mercosur (the regional bloc that includes Argentina, Brazil, Paraguay, Uruguay and Venezuela), and perhaps implementing a regional FTA. Latin America does not need a pro-corporate foreign policy, at least not from a Democratic president, which does not serve the region, or the working class in the US. However, a significant change in the relations with the region must wait for the next president.

Will the Fed hike the interest rate?

It seems increasingly probable. Stanley Fischer suggested that is possible in his speech last weekend at Jackson Hole. My bet is that unless labor markets numbers are terrible Friday, there is a good chance there will be a minor rate increase in the next meeting. That is a bit of a surprise. It's also not a very good idea, as I noted before, and Mark Weisbrot suggests here.

Brazil's Economic Slowdown Results from Policy Decisions

A new research paper from the Center for Economic and Policy Research examines the causes of Brazil’s recent economic slowdown and finds that policy choices rather than external factors have been the most important cause. The paper shows that the sharp slowdown that Brazil has experienced since 2011 is overwhelmingly the result of a significant decline in domestic demand that resulted from policy choices made by the government. It concludes that this decision to slow the economy was not necessary as there was no external constraint, such as a balance-of-payments problem, that warranted it.

“There have been enormous economic and social gains since the Workers' Party took office in 2003, in terms of reducing poverty (by 55 percent) and extreme poverty (by 65 percent), increasing employment, income growth, and some reduction in inequality,” CEPR Co-Director Mark Weisbrot said. “However, these gains are being eroded and are seriously threatened if the government continues on its current path.”

The paper, “Aggregate Demand and the Slowdown of Brazilian Economic Growth from 2011-2014,” by CEPR Senior Research Associate Franklin Serrano and economist Ricardo Summa, looks in detail at the sharp slowdown in the Brazilian economy for the years 2011-2014, in which economic growth averaged only 2.1 percent annually, as compared with 4.4 percent in the 2004-2010 period. The authors argue that the slowdown overwhelmingly results from a sharp decline in domestic demand led by government policy, rather than from a fall in exports or from any change in external financial conditions.

Read rest here.

Weisbrot: Greece should vote no

Mark Weisbrot on why Greeks should vote no.

"Well, I would go for a no-vote, because you have to look at who is responsible for this mess, who is responsible for six years of depression, who is responsible for the bank closing right now. 

It’s because the European Central Bank decided last Sunday to limit the amount of emergency liquidity assistance, so that the banks wouldn’t have enough money to open. And they did this very deliberately, I think, to intimidate the voters into voting yes. 

Everything that comes out of the mouths of the European officials right now is trying to scare and intimidate people to make them feel this pain and tell them this is what you’re going to get if you vote no. This is what you’re going to get if your government is audacious enough to insist not on everything they want or even half of what they want, but just a deal that allows the Greek economy to recover and unemployment to come down. 

That’s really all that they have been asking for. And the European authorities have been stubborn and frankly pretty mean about it."

The whole transcript here. The whole video of Mark Weisbrot debate on the Greek crisis below.

Mark correctly points out that right now the crisis is caused by the European institutions, and that it is to punish and possibly oust a left of center government.

On free trade and economics consensus: a response to Mankiw

Mankiw tells us in his most recent NYTimes column that economists agree that Free Trade is good. He links to a poll in which, essentially, mainstream economists of different persuasions, some Keynesian and some not, and different political views, some liberal and some conservative, say that trade agreements are good. He backs his argument by suggesting that theoretically the argument is at the heart of the economics profession since the beginning; I guess an argument of authority.

And no better authority than Adam Smith. Mankiw says:

"The economic argument for free trade dates back to Adam Smith, the 18th-century author of 'The Wealth of Nations' and the grandfather of modern economics. Smith recognized that the case for trading with other nations was no different from the case for trading with other individuals within a society."

And it is true, Adam Smith was for laissez-faire, in general, and thought that less intervention in trade would be good. But there is in Mankiw's argument an implication that does not follow from careful analysis of Smith's doctrines, namely: that Adam Smith can be seen as a forerunner of modern neoclassical trade theory based on the Heckscher-Ohlin-Samuelson (HOS) comparative advantage argument (for the limitations of that theory go here).

Comparative advantage implies that countries should specialize on the production of commodities for which they have a lower opportunity cost. Specialization would increase productivity domestically, and importation of goods for which other countries have a lower opportunity cost would lead to mutual advantageous trade to all parties involved. This was actually first noted by Ricardo and Torrens more than 40 years after the publication of the Wealth of Nations. Smith believed that absolute advantage, meaning lower costs of production, not comparative advantage determined trade patterns.

Smith thought that free trade was a better policy than protectionism, since he believed that trade would expand the potential markets for home producers, which would lead to more division of labor, that is, higher productivity, leading to lower costs, more access to external markets and additional growth. A cumulative process of export growth and higher labor productivity, referred to as the vent-for-surplus model, was behind Smith trade optimism. It is important to note, however, that Smith's vent-for-surplus works in both directions. Higher costs (e.g. higher real wages) may lead to loss of external markets, no incentives for additional division of labor, and stagnation of domestic industry. In his model, success breeds success, but failure breeds failure.

There were very good reasons for Smith to think that free trade would be good for England in the late 18th century, and there even might be good reasons in the United States now, or at least for American corporations that would gain access to markets abroad. But the argument is far from universal, and the dressing of Smith's theory in modern garb is dangerous (for a classic explanation of Smith views on trade go here; subscription required; or here; also needs subscription).

The idea of absolute advantage, used by Smith, suggests that there is space for managing trade. I noted before that the opposite of Free Trade is not Protectionism, but Managed Trade. Nobody really wants to be in a completely closed economy, probably not even North Koreans. And once you admit a certain amount of management, say for sanitary rules to avoid importing poisoned toys, for example, or for security reasons to preclude defense secrets to leak out, you are discussing what are the good reasons for managing trade. Perhaps employment should be one of the reasons for managing trade. Free trade versus protectionism is a false dichotomy. The question is: how much management and for the benefit of whom (and who bears the costs of more or less trade as a result).

Note that comparative advantage theorems assume that employment is fixed, in the Ricardian system perhaps below full employment, and in the modern neoclassical HOS theory at full employment. Not surprisingly, on employment Mankiw tells us:

"Economists respond that full employment is possible with any pattern of trade. The main issue is not the number of jobs, but which jobs. Americans should work in those industries in which we have an advantage compared with other nations, and we should import from abroad those goods that can be produced more cheaply there."

That full employment is possible with any pattern of trade is theoretically true. But from that does not follow that comparative advantage should guide trade. That is a theoretical non-sequitur and is simply wrong. The US could pursue using macroeconomic policies (not the lower taxes for the rich that Mankiw advocates, but that is another story) full employment.* That would lead to high current account deficits, which for the US, because of the privileged position of the dollar, are sustainable. But that is not true for most countries.

In that case, if free trade is pursued, absolute advantage might determine trade specialization, and lead to large current account deficits that would be unsustainable and lead to a balance of payments crisis, the need for austerity, with lower growth and unemployment following. Even in the US, patterns of trade integration might lead to the elimination of good manufacturing jobs being substituted by low paying service jobs, something that has led to trade unions' reasonable rejection of Free Trade Agreements (FTAs). In other words, "which jobs" one can get if one "import[s] from abroad those goods that can be produced more cheaply there [sic; that's actually absolute not comparative advantage]" might end up leading to lower wages at home.

For that reason it is hard to agree with Mankiw when he says that:

"People tend to underestimate the benefit from conserving on labor and thus worry that imports will destroy jobs in import-competing industries. Yet long-run economic progress comes from finding ways to reduce labor input and redeploying workers to new, growing industries."

And there is evidence for that. The most famous FTA signed by the US with Mexico, has not favored workers in Mexico or the US, the North American Free Trade Agreement (NAFTA), even if corporations and wealthy individuals have benefited in both countries as shown in these reviews of the evidence by Robert Blecker and Mark Weisbrot and co-authors. So if mainstream economists agree on this, once again it is because they ignore logic (that does no require for trade to be determined by comparative advantage) or evidence (which suggests that FTAs might hurt workers).

* And also there is not tendency to a natural rate of unemployment, which Mankiw, of course, also defends.

Is Venezuela a threat to the US?

I published not long ago on the sanctions imposed on Venezuela, in the middle of the easing of relations with Cuba. Now the US has imposed additional sanctions on Venezuela, and declared that the country is "an extraordinary threat to the national security of the United States." That this statement is, at face value, ridiculous is fairly evident. The sanctions are imposed allegedly on the basis of violations of human rights, which is also not credible, since the US (not just in the past, but right now) supports governments with a very poor record on human rights. In Latin America the US gives full support to the government of Colombia were human rights violations are the norm.

The media coverage in the US about Venezuela is, as noted by Mark Weisbrot, worse than the coverage during the build up to the Iraq war. I normally don't discuss non-economic issues in the blog. But it is worth listening to Mark on the Diane Rehm show today. Note that as Mark says, it is the US that is isolated on Venezuela, with almost all the governments in the region decrying the US policies. And as he says, there are problems with the economic policies in Venezuela (and other left of center governments in the region), but nothing justifies the US support for "regime change" in Venezuela, in particular, and the region. And no the government is NOT a dictatorship. Not only it was elected in clean elections, but also the vast majority of the media is anti-Chávez and they do have freedom of expression, as Mark notes, probably more than in the US.

Note that the pressure on Venezuela takes place at the same time that in many countries, the right wing forces which historically have received support from US administrations, both Republican and Democratic ones, are pushing for impeachments and veiled threats of coups. Part of the reason for right wing pressure, and the hate these left of center governments have generated on the wealthy and the middle classes (which in the past were for military coups) is, as noted by Bresser-Pereira in Brazil, related to the improvement of income distribution and the conditions of the poorest in the region. Note that the region is the exception in the last decade, with inequality falling, even if it is still high.

PS: Beyond the political questions, which of course do have an economic impact, there is very little sensible written about the long run problems of growing with abundance of foreign currency (something often referred to as a resource curse or Dutch Disease). A precursor to that discussion can be found in the work of Celso Furtado, written in 1957, when he was at the Economic Commission for Latin America (ECLA). See more here.

Mark Weisbrot on Latin American Growth

This was one of the several presentations at the Eastern Economic Association meetings. Mark suggested that the the period of high growth from 2003 to around 2008, was not related essentially to the commodity boom, although "commodity exports did not lead growth but helped avoid balance of payments problems."* He argued that the IMF's loss of influence was also important. This point, which I think is essentially correct for many left of center governments, was discussed later over lunch. I argued, and I guess so did Esteban Pérez and Ricardo Summa, that the IMF still does have influence indirectly, now internalized in the training of several of the local bureaucrats that are for devaluation and fiscal austerity as a solution for, real or imaginary, external crises and inflationary pressures.

Two important caveats to the good news of growth, better income distribution and lower poverty that he discussed. We are "still long way from achieving pre-1980 growth rates, when industrial and development policies were common [and] exchange rate problems can still cause trouble." On the latter, in particular, the Argentinean and Venezuelan stories, with negative real rates of interest, and a large gap between official and black market exchanges was emphasized. Not sure what he would say, but I think he would agree that if growth remains lackluster in the near future for the region, then it would have more to do with the domestic policy choices that with an overwhelming need for adjustment.

* His paper on that with David Rosnik here.

Mark Weisbrot on BRICS reserve fund & development bank

CEPR: Latin American Growth in the 21st Century - The 'Commodities Boom' That Wasn't

By David Rosnick and Mark Weisbrot

This paper looks at whether the data support such a conclusion. It finds that there is no statistically significant relationship between the increase in the terms of trade (TOT) for Latin American countries and their GDP growth. There is, however, a positive relationship between the TOT increase and an improvement in the current account balance. It may be that this allowed countries to avoid balance of payments crises or constraints.

Read rest here.

Mark Weisbrot - Who Shot Argentina?

By Mark Weisbrot

When Cristina Kirchner first ran for president of Argentina in 2007, she had a campaign commercial with adorable young children answering the question, “What is the IMF (International Monetary Fund)?” They offered cute little ridiculous answers like “The IMF is a place where there are many animals,” and the punch line from the narrator was: “We have succeeded in making it so that your children and grandchildren won’t know what the IMF is.” To this day, there is no love lost between the IMF and Argentina, since the fund presided over Argentina’s terrible economic collapse of 1998-2002, as well as numerous failed policies in the years prior. But when the U.S. Court of Appeals for the Second Circuit ruled in favor of vulture funds trying to collect the full value of Argentine debt that they had bought for 20 cents on the dollar, even the IMF was against the decision.

Read rest here, and for another piece by Weisbrot, see here, and for posts on the issue by Matias, see here & here

Mark Weisbrot - The Debt Vultures' Fell Swoop

By Mark Weisbrot

Last week, the United States Supreme Court decided not to review a ruling in the Second Circuit Court of Appeals whose effect is that Argentina must pay “holdout” creditors who refused to participate in debt restructuring agreements that Argentina reached with the majority of bondholders following the 2001 default on its sovereign debt. Argentina’s lawyers warned that the court’s decision created “a serious and imminent risk” that the country would again be forced to default. But the ruling also has profound and disturbing implications for the functioning of the international financial system, and even the United States would most likely be adversely affected. Parties as diverse as the International Monetary Fund and leading religious organizations wanted the Supreme Court to overturn the decision, and briefs supporting this position were filed by the governments of France, Brazil and Mexico, as well as by the Nobel Prize-winning economist Joseph E. Stiglitz. The I.M.F. — which has had mostly sour relations with Argentina since its involvement in that country’s 1998-2002 recession — was also planning to file a brief on Argentina’s side to the Supreme Court, but was blocked by the American government from doing so. This action may have influenced the court’s decision not to hear the case.

Read rest here, and for recent posts on the topic by Matías, see here & here

Is Venezuala's SICAD II Resolving Exchange Rate Problems?

 By Mark Weisbrot

All economies have major structural and policy problems, but some problems are more important and urgent than others at particular times. In Venezuela, the most important economic problem is in the exchange rate system. A fixed exchange rate system with periodic devaluations tends to be more crisis-prone than other exchange rate regimes, especially in a country like Venezuela where inflation has historically been higher than that of its trading partners. This is particularly important right now because opposition leaders who have called for the overthrow of the government have pointed to 57 percent inflation and widespread shortages of consumer goods as justification for (often violent) street protests over the past two months. Although the protests have failed to attract the working and poorer people who are most hurt by the shortages, they are still a major complaint – as is inflation – for most Venezuelans.

Read rest here

Mark Weisbrot: Will Venezuela's New Floating Exchange Rate Curb Inflation?

Since Venezuela exports petroleum and petroleum byproducts and imports most of what it needs, the exchange rate is crucial for economic stability. Food scarcity and inflation has been cited among the reasons why there is ongoing protests in Venezuela. Hoping to quell some of this protest, last week the Bank of Venezuela introduced another exchange system, Sicad II, hoping to take control of inflation and scarcity of essential goods.To discuss all this and more is our guest, Mark Weisbrot, who recently returned from Venezuela. Mark Weisbrot is an economist and codirector of the Center for Economic and Policy Research in Washington, D.C.

Mark Weisbrot on Venezuela’s Struggle - Widely Misrepresented, Remains a Classic Conflict Between Right and Left

By Mark Weisbrot

The current protests in Venezuela are reminiscent of another historical moment when street protests were used by right-wing politicians as a tactic to overthrow the elected government. It was December of 2002, and I was struck by the images on U.S. television of what was reported as a “general strike,” with shops closed and streets empty. So I went there to see for myself, and it was one of the most Orwellian experiences of my life. Only in the richer neighborhoods, in eastern Caracas, was there evidence of a strike, by business owners (not workers). In the western and poorer parts of the city, everything was normal and people were doing their Christmas shopping – images unseen in the U.S. media. I wrote an article about it for the Washington Post, and received hundreds of emails from right-wing Venezuelans horrified that the Post had printed a factual and analytical account that breathed air outside of their bubble. They didn’t have to worry about it happening again. The spread of cell-phone videos and social media in the past decade has made it more difficult to misrepresent things that can be easily captured on camera. But Venezuela is still grossly distorted in the major media. The New York Times had to run a correction last week for an article that began with a statement about “The only television station that regularly broadcast voices critical of the government …” As it turns out, all of the private TV stations “regularly broadcast voices critical of the government.” And private media has more than 90 percent of the TV-viewing audience in Venezuela. A study by the Carter Center of the presidential election campaign period last April showed a 57 to 34 percent advantage in TV coverage for President Maduro over challenger Henrique Capriles in the April election, but that advantage is greatly reduced or eliminated when audience shares are taken into account. Although there are abuses of power and problems with the rule of law in Venezuela – as there are throughout the hemisphere– it is far from the authoritarian state that most consumers of western media are led to believe. Opposition leaders currently aim to topple the democratically elected government – their stated goal – by portraying it as a repressive dictatorship that is cracking down on peaceful protest. This is a standard "regime change" strategy, which often includes violent demonstrations in order to provoke state violence.

Read rest here.

Weisbrot on why the European authorities are still punishing Greece

Mark Weisbrot

Alexis Tsipras has a tough job. He is leader of the Syriza Party of Greece, a left party that has risen meteorically in the past three years: from 4.6 percent of the vote in 2009 to 27 percent last June. It is now the most popular party in the country and Tsipras could be the next Prime Minister. Unlike most of the eurozone's leaders, he knows what is wrong with Greece and the eurozone, and so does his party: austerity. "We have become the guinea pig for barbaric, violent neoliberal policies," he said at a forum at Columbia University Law School last week, in which I participated. Tsipras notes that Greece's fiscal problems could be resolved if the rich paid their taxes. The IMF's latest numbers [PDF] concur on this: according to the Fund, "annual uncollected net tax revenue [is] at 86 percent of collections in Greece, against an OECD average of 12 percent."

Read rest here.

Mark Weisbrot on Economic and Social Policy and the Problems of the Eurozone and European Integration

By Mark Weisbrot

It was not because of the power of financial markets or because the Germans didn't want to "help" the Greeks that Europe suffered through about three years of recurring crises, in which the continued existence of the euro was thrown into question, until August 2012. It was because the European authorities were using these acute crises and did not want to resolve them until they had extracted certain "reforms" from the weaker European economies (and possibly even some of the stronger ones, if we consider the European Fiscal Compact and what the French government has been doing recently). We know this because as soon as the European Central Bank (ECB) wanted to do so, it put an end to these crises in a matter of weeks, in July-August 2012, by effectively establishing a ceiling on the interest rates of Italian and Spanish bonds - something it could have done at any time in the prior three years.

Read the rest here.

Mark Weisbrot: Why the European Economy Has Done So Much Worse Than That of the United States

 

By Mark Weisbrot,

If we compare the economic recovery of the United States since the Great Recession with that of Europe – or more specifically the eurozone countries – the differences are striking, and instructive. The U.S. recession technically lasted about a year and a half – from December 2007 to June 2009. (Of course, for America’s 20.3 million unemployed and underemployed, and millions of others, the recession never ended – but more on that below.) The eurozone had a similar-length recession from about January 2008 to April 2009; but then it fell into a longer recession in the third quarter of 2011 that lasted for about another two years; it may be exiting that recession currently.

Read the rest here.