Around the world there are growing rumbles about globalization, and these rumbles are not confined to activist anti-globalization movements. In East Asia, the financial crisis of 1997 left a jaundiced sense of globalization, though robust economic recovery has tempered that. Globalization’s standing has also been badly damaged in Latin America by the meltdown of the Argentine economy in 2000 and successive financial crises in Brazil in 1999 and 2001. In Europe, new fear about globalization is surfacing in a range of countries. In Poland it has taken the form of concern about foreign capital taking over the Polish banking system, and foreign takeover fears also permeate France and Italy. In France and Germany, working people link globalization with pressures to dismantle the social democratic state. Read the rest of this entry »
Can Globalization Fail? Lessons from History
April 26th, 2006Pressure China to Change
April 13th, 2006China’s President Hu Jintao will visit Washington DC next week (April 20) where he will meet with President Bush. For the last several years, China’s under-valued exchange rate has been imposing large costly distortions on the American economy. Unfortunately, the Bush administration has taken no action. Instead, it has allied itself with multi-national corporations who are profiting handsomely from the current U.S. – China economic relationship, which allows them to import cheap Chinese products on which they earn huge margins. If the President won’t take decisive action to get China to significantly revalue its exchange rate, Congress should. Here is an economic indictment against China that justifies such action. Read the rest of this entry »
The House Price Bubble: Won’t Get Fooled Again
April 8th, 2006One of my all time favorite rock albums is The Who’s “Who’s Next†and one of my favorite tracks on that album is “Won’t Get Fooled Again.†Right now there is much talk of a housing bubble, making for the possibility that a lot of people are getting fooled. Read the rest of this entry »
The Split Within Organized Labor
March 25th, 2006For the last year there has been a widening split within the ranks of American organized labor, and this split risks hardening as the new Change to Win (CTW) coalition increasingly takes on the complexion of a rival labor federation. Read the rest of this entry »
The Weak Recovery and the Coming Deep Recession
March 15th, 2006To quote Yogi Berra, “It’s tough to make predictions, especially about the future.†Many (including myself) expected that the bursting of the stock market and Internet bubbles in 2001 would cause a deep recession owing to large excesses of borrowing and spending by both the household and corporate sectors. Now we know that the recession of 2001 was fairly mild and of short duration, though the economic recovery has also been the weakest since World War II. Read the rest of this entry »
Old Democrats vs. New Democrats: Faux vs. Sperling
March 2nd, 2006Jeff Faux and Gene Sperling are two titans of democratic economic policy. Last week (February 23, 2006) they debated the core economic policy differences that define and divide old Democrats from new Democrats. Read the rest of this entry »
Who’s Afraid of China?
February 16th, 2006In the early 1980s the U.S. suffered record trade deficits and severe de-industrialization as a result of an overvalued dollar. Those problems were tackled by the 1985 Plaza accord – an agreement between the U.S. and its major trading partners – which depreciated the dollar, reduced the trade deficit, and helped keep the economic expansion going. Read the rest of this entry »
The China Effect: A Reply to The China Business Forum
February 3rd, 2006The China Business Forum recently (January 2006) released a report titled “The China Effect†that claims “the long-term benefits to the United States of Trade with China are substantial and likely to endure (Executive Summary).†The top line conclusion of the report is that the average US household stands to be one thousand dollars better off by 2010 as a result of lower prices and increased productivity in the U.S. due to the China effect. The bottom line take-away from reading the report is that it is flawed and misleading. Here is why. Read the rest of this entry »
Asset-Based Stability: A Proposal for the Euro Zone
February 3rd, 2006The establishment of the euro represents an important step in the creation of an integrated European economy. Over time it should yield dividends as increased competition and lower transaction costs generate increased efficiency. However, member countries have had to give up their own exchange rates and interest rates, which has created problems for economic management by reducing the number of policy instruments. In particular, the European Central Bank (ECB) must wrestle with how to set interest rates when some countries are booming, while others suffer high unemployment. Asset based reserve requirements (ABRR) can fill this policy instrument gap. Read the rest of this entry »
Debunking the Saving Shortage Theory of the Trade Deficit
January 30th, 2006Americans are justifiably confused by what they hear from economists. On one hand they are repeatedly told that America has a saving shortage problem and it must increase national saving. On the other hand, no sooner do households increase saving and reduce consumption, economists start worrying about recession and possible need to lower interest rates to maintain spending. Read the rest of this entry »