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August 7, 2012

Latest Posts from Economist's View

Latest Posts from Economist's View

Posted: 18 Jun 2012 04:23 AM PDT
Paul Krugman:
Greece as Victim, by Paul Krugman, Commentary. NY Times: Ever since Greece hit the skids, we've heard a lot about what's wrong with everything Greek. ... Yes, there are big failings in Greece's economy, its politics and no doubt its society. But those failings aren't what caused the crisis that is tearing Greece apart, and threatens to spread across Europe.
No, the origins of this disaster lie farther north, in Brussels, Frankfurt and Berlin, where officials created a deeply — perhaps fatally — flawed monetary system, then compounded the problems of that system by substituting moralizing for analysis. And the solution to the crisis, if there is one, will have to come from the same places. ...
So how did Greece get into so much trouble? Blame the euro. ... Greece joined the euro, and a terrible thing happened: people started believing that it was a safe place to invest. Foreign money poured into Greece... To be sure, the Greeks squandered much if not most of the money that came flooding in, but then so did everyone else who got caught up in the euro bubble.
And then the bubble burst, at which point the fundamental flaws in the whole euro system became all too apparent.
Ask yourself, why does the dollar area — also known as the United States of America — more or less work, without the kind of severe regional crises now afflicting Europe? The answer is that we have a strong central government, and the activities of this government in effect provide automatic bailouts to states that get in trouble.
Consider, for example, what would be happening to Florida right now, in the aftermath of its huge housing bubble, if the state had to come up with the money for Social Security and Medicare out of its own suddenly reduced revenues. Luckily for Florida, Washington rather than Tallahassee is picking up the tab, which means that Florida is in effect receiving a bailout on a scale no European nation could dream of. ...
So Greece, although not without sin, is mainly in trouble thanks to the arrogance of European officials, mostly from richer countries, who convinced themselves that they could make a single currency work without a single government. And these same officials have made the situation even worse by insisting, in the teeth of the evidence, that all the currency's troubles were caused by irresponsible behavior on the part of those Southern Europeans, and that everything would work out if only people were willing to suffer some more. ...
The only way the euro might — might — be saved is if the Germans and the European Central Bank realize that they're the ones who need to change their behavior, spending more and, yes, accepting higher inflation. If not — well, Greece will basically go down in history as the victim of other people's hubris.
Posted: 18 Jun 2012 03:33 AM PDT
This is from Léonce Ndikumana:
Africa Specializing in Capital Exodus?, by Léonce Ndikumana: Even as Africa faces severe shortages of skilled labor at home, it experiences large and increasing outflows of highly-skilled labor migration to industrialized economies in search of better job opportunities. The investments made in the training of these professionals are losses to African countries but translate into hefty gains for receiving countries.  Thus resource-starved African nations are subsidizing developed countries' industries and social services. ...
Parallel to this exodus of human capital is the illicit export of financial capital from African countries – or capital flight. This is not a new phenomenon, and it shows no signs of abating.
Over the past four decades, sub-Saharan Africa has lost a staggering $700 billion due to capital flight. In addition to trade misinvoicing, smuggling, and embezzlement of revenues from natural resource exports, a substantial part of the capital flight was financed by external borrowing. We estimate that every year 40 to 60 cents of each borrowed dollar spins out of the revolving door as capital flight, often returning to the same banks that issued the loans. On net basis, Africa is transferring more money to the rest of the world than it is receiving in terms of borrowing and aid. Once again, Africa is net financier to the rest of the world rather than the other way around as commonly perceived. And unlike in the case of human capital exodus, financial capital flight generates absolutely no flows in the reverse direction; it is an unmitigated loss to the continent.
Capital flight, and the burden of servicing the debts that financed it, are partly to blame for the conditions that create the other economic problems faced by the continent...  Illicit financial flows drain scarce public resources that could have been used to finance public services including education and health. It partly explains why there are not enough schools, clinics, and medical equipment; it also explains the poor working conditions for doctors, teachers, and other professionals that force them to seek greener pastures abroad.
Stemming capital flight could substantially bridge the financing gaps faced by African countries. ...
It is clear that Africa's development pathways, characterized by exodus of human and financial capital, are not sustainable in the long run. Obviously African countries have the primary responsibility to devise and implement strategies to keep capital onshore. But the international community also has an equally important responsibility to root out the perverse incentives and opacity in the financial system that enable and perpetuate the financial hemorrhage faced by the continent. This would enhance the efficiency of donors' support to Africa's efforts to boost investments in education, stimulate private sector development, employment creation, and generally improve domestic living and working conditions that are necessary for optimal utilization of skilled human capital on the continent. ...
Posted: 18 Jun 2012 03:24 AM PDT
An interview with Kenya's Vice President and Minister for Home Affairs Stephen Kalonzo Musyoka:
Kenya in Transition: A Conversation with Vice President Stephen Kalonzo Musyoka: Summary Few countries have experienced transitions as dramatic as those occurring now in the Republic of Kenya. Just in the past year, Kenyans have adopted a new national constitution, deployed security forces to Somalia in pursuit of al-Shabaab militants, and discovered commercially-viable oil deposits. Amid these developments, Kenya is preparing for its first presidential elections since the 2008 election disputes.
On May 22, the Africa Growth Initiative (AGI) at Brookings hosted Kenya's Vice President and Minister for Home Affairs Stephen Kalonzo Musyoka for a discussion on these dramatic transitions and current national challenges and opportunities. Vice President Musyoka was appointed by President Mwai Kibaki in 2008, and previously served as foreign affairs minister from 1993–98 and 2003–04.

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Posted: 18 Jun 2012 02:43 AM PDT
Dayo Olopade does not believe Kenya's "Operation Linda Nchi" -- it's war against terrorism -- is worth the cost:
Kenya's Forever War, by Dayo Olopade, Commentary, NY Times: NAIROBI — A bomb exploded in downtown Nairobi on Monday [May 28] — the eighth such attack in as many months. It was a far more sophisticated operation than the makeshift grenades that have been tossed from moving cars and into small churches and bars in the recent past. This bomb was big enough to send at least 30 Kenyans to the hospital. ...
Al Shabab, the Somalia-based terrorist group, has claimed responsibility for previous attacks in Kenya. But there are other culprits closer to home: Odinga, President Mwai Kibaki and the Kenyan military brass who last year unilaterally declared open-ended war against Al Shabab, with unacceptable side effects.
"Operation Linda Nchi" ("Protect the Nation"), which began in October, was sold to Kenya with the same "offense as defense" playbook that took the United States into war with Iraq. Ministers assured Kenyans that the invasion would be quick and easy, focused on the "hot pursuit" of kidnappers and pirates who had been terrorizing Kenya's northern coast.
Like the promises of a slam dunk in Iraq, none of those projections have been true. Eight months on, the fight against Al Shabab — which even Somalia's president has called "unwelcome" — is proceeding with only middling success. ... Taming Somalia is like taming Afghanistan: no nation has done it, though plenty have bled their treasuries trying.
Living in the Horn of Africa over the past year, I've been humbled by the complexities of regional politics. The Kenyan establishment had its reasons to invade Somalia: fighting for vital tourist dollars, punishing rogue pirates and petty kidnappers, protecting the $24 billion port under construction in the northern town of Lamu. Pressure from an America that has itself soured on military intervention is also said to play a role. But I still believe that none of these justifications is worth it. ...
The mounting belief that this foreign war is causing domestic violence has become a growing chink in the unified front that Kenyan citizens first projected when Linda Nchi began. Kenya's failure to confront this could prolong the violence in both places.
Posted: 18 Jun 2012 12:06 AM PDT
Posted: 17 Jun 2012 03:24 PM PDT
Paul Krugman on "What A Real External Bank Bailout Looks Like":
...Something I've been looking at: Texas after the savings and loan crisis of the 1980s.
The cleanup from that crisis cost taxpayers about $125 billion (pdf), back when that was real money. As best I can tell, around 60 percent of the losses were in Texas (pdf). So that's around $75 billion in aid — not loans, outright transfer.
Texas GDP was about $300 billion in 1987. So this was equivalent to giving — not lending, not even taking an equity stake — Spain 25 percent of its GDP to bail out its banks.
And in the US it wasn't even treated as an interstate political issue. ...
I think you can make a strong case that if Texas had been an independent country in 1986-87 it would have experienced a huge financial and fiscal crisis.

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