News and Analysis: 4-16 Jan 2013 | EmergingFrontierMarkets.com

Based in: Manila, Philippines

Posted on Wed, 16 Jan 13:

Paul Krugman: Japan steps out, New York Times, 16 Jan 13 [via Boulder Daily Camera]:
For 3 years econ policy throughout the advanced world has been paralyzed, despite high unemployment, by a dismal orthodoxy. Every suggestion of action to create jobs has been shot down with warnings of dire consequences. If we spend more, the bond markets will punish us. If we print more money, inflation will soar. Nothing should be done because nothing can be done, except ever harsher austerity, which will someday, somehow, be rewarded, writes Nobel Laureate '08/Princeton prof (High gov't debt threatens growth prospects, IMF Survey Mag)

Developing world prospects solid, but bumpy road ahead, World Bank, 15 Jan 13:
Four years after the onset of the global financial crisis, the worst appears to be over. But the world economy remains fragile and growth in high-income nations is weak. Developing nations need to focus on raising the growth potential of their economies, while strengthening buffers to deal with risks from the euro zone and US fiscal policy, says the latest twice-yearly 'Global Economic Prospects'. Last year developing nations recorded one of their slowest growth rates of the past decade, partly because of the heightened euro-zone uncertainty

Francis Fukuyama: A tribute to the development economist Albert Hirschman, American Interest, 6 Jan 13:
Hirschman did not observe the methodological straitjacket his discipline imposed, but wandered off instead into other fields like politics and philosophy in an attempt to recover some of the unified social theory of the 18th and 19th centuries--hoping to avoid, as he put it, the "specialization-induced intellectual poverty in this field." His legacy is not data collection or micro results, but rather some very big concepts that continue to shape the way we think about not just dev't but public policy more generally, writes Stanford U senior fellow on int'l political economy

Posted on Mon, 14 Jan 13:

Eichengreen/Park/Shin: Growth slowdowns redux--Avoiding the middle-income trap, Vox EU, 11 Jan 13:
The rapid econ growth of emerging markets is one of the leading storylines of our age. For some time now the question on everyone's minds has been how long this rapid growth can continue, both for emerging markets in general and for the group's largest and most dynamic member, China. Attempts to answer that question have given rise to a discussion on what is variously referred to as 'growth slowdowns' and 'middle-income trap', write UC-Berkeley prof, Asian Dev't Bank senior economist, and Korea U prof (Agenor/Canuto/Jelenic: Avoiding middle-income growth traps)

World more at risk from markets and Mother Nature--report, World Econ Forum, 8 Jan 13:
The world is more at risk as persistent econ weakness saps our ability to tackle environmental challenges, acc to the WEF's 'Global Risks 2013'. It highlights wealth gaps (severe income disparity) followed by unsustainable gov't debt (chronic fiscal imbalances) as the top 2 most prevalent risks, in a survey of over 1,000 experts and industry leaders, which reflects a slightly more pessimistic outlook overall for the coming 10 years. Respondents rated rising greenhouse gas emissions as the 3rd most likely global risk

Kenneth Rogoff: Financial crisis - or innovation crisis?, Proj Syndicate, 4 Dec 12:
Was the global financial crisis a harsh but transitory setback to advanced-country growth, or did it expose a deeper long-term malaise? Is the current slow growth due to technological stagnation? Recently, a few writers, incl internet entrepreneur Thiel and political activist/fmr world chess champion Kasparov, have espoused a fairly radical interpretation of the slowdown, writes co-author with C Reinhart of award-winning book This Time is Different (2009)/fmr IMF chief economist (Innovation or stagnation--a great debate, Oxford U)

Posted on Fri, 11 Jan 13:

As much as 2 billion tons of all food produced ends up as waste--report, Inst Mechanical Engineers/UK, 10 Jan 13 [MS Word]:
A new report has found that as much as 50% of all food produced around the world never reaches a human stomach due to issues as varied as inadequate infrastructure and storage facilities, to overly strict sell-by dates, buy-one-get-one free offers, and consumers demanding cosmetically perfect food. The report, Global Food: Waste Not, Want Not, notes that the world produces about 4 bln metric tons of food per year; by improving processes and infrastructure, we would have the ability to provide 60-100% more food to feed the world's population

Coffers: Rethinking the financial crisis--Q&A with MIT's Andrew Lo, Russell Sage Foundation, 9 Jan 13:
An MIT finance prof, Lo is an editor of a new book Rethinking the Financial Crisis (2012). It shows how the study of econ needs to change to deepen our understanding of the financial sector: Q--One topic that has been particularly controversial concerns the efficient-market hypothesis (EMH). Burton Malkiel discusses the issue in his chapter in the book, but I wanted to ask your opinion of this idea that EMH fed a hands-off regulatory approach that ignored concerns about faulty asset pricing

Andres Velasco: Monetary regime transition in the emerging world, Proj Syndicate, 7 Jan 13 [via Les Echos/France]:
Is inflation targeting--the rule that most of the world's major central banks (though not the US Fed) use to set interest rates--in its death throes? Many analysts seem to think so. Inflation targeting has also been losing its hold on policy makers in emerging markets. Emerging markets need a monetary-policy regime that takes explicit account of capital-flow volatility, asset-price misalignments (incl the exchange rate, which is the price of foreign currency), and the resulting financial instability, writes Chile's fmr finance minister/Columbia U visiting prof

Posted on Wed, 9 Jan 13:

Top 10 risks for 2013, Eurasia Group, 7 Jan 13:
Emerging Markets take top billing in the '13 list. As this year marks the end of the global financial crisis that began in '08, attention will now shift from the developed back to the developing world, acc to a report from a leading global political risk consulting firm. It identifies the key geopolitical areas to watch for global investors and market participants, as well as a few 'red herrings': issues that, despite media attention, the firm does not perceive will pose any significant threat or instability in the coming year

Joseph Stiglitz: The post-crisis crises, Proj Syndicate, 7 Jan 13 [via Today's Zaman/Turkey]:
In the shadow of the euro crisis and the US fiscal cliff, it is easy to ignore the global economy's long-term problems. As we struggle with today's crises, we should be asking whether we are responding in ways that exacerbate our long-term problems. The irony is that, with insufficient aggregate demand the major source of global weakness today, there is an alternative: invest in our future, in ways that help us to address simultaneously our long-term problems, writes Nobel Laureate '01/fmr World Bank chief economist

Changyong Rhee: Asian manufacturing slows, but services have been slow to fill the gap, South China Morning Post, 14 Oct 12:
The euro-zone crisis has dominated policy discussions over the past few years, but the econ slowdown in Asia's 2 giants--China and India--has become a source of growing public concern as well. Weak external demand is partly responsible for the slower growth, but internal factors--namely, slowing investment and stagnating consumption--are also holding back expansion. Maintaining growth in a global slowdown requires rethinking the future of 'factory Asia', writes Asian Dev't Bank chief economist

Posted on Mon, 7 Jan 13:

World's current level of globalization still lower than pre-crisis peak--report, Deutsche Post DHL, 28 Nov 12:
The world today is less globally connected than it was in '07, acc to the Global Connectedness Index, an analysis of the state of globalization around the world. The report draws on over one million data points from '05 to '11. It documents how global connectedness, measured by int'l flows of trade, capital, information and people, grew robustly from the baseline year of 2005/07, and then dropped sharply at the onset of the financial crisis. Despite modest gains since '09, global connectedness has yet to recapture its pre-crisis peak (Country rankings)

Andrew Cooper: Small states are trying to shake up global system, Ctr Int'l Gov'nance Innov, 15 Oct 12:
The financial crisis accentuated the impression that big nations have enormous privileges in int'l relations. Not only have the bigs held onto their traditional status through the retention of features such as the Permanent 5 in the UN and the top jobs at the IMF and the World Bank, but the tilt towards informal institutions notably the G20 accent the image of an accentuated unequal world. Yet small states have not been completely passive, and several have tried to push back--albeit with mixed results, says fmr Ctr distinguished fellow

Alvin Rabushka: The flat tax's silver anniversary, Stanford Hoover Inst, Apr '07 [PDF]:
In Dec '81, Robert Hall and I first published in a WSJ op-ed our proposal to replace the federal income tax with a low, simple, flat tax. The article displayed the iconic postcard that became the symbol of the flat tax. Our system was so simple that an individual or business could file a income tax return on a postcard-sized form, says Inst senior fellow (The Flat Tax (2007) | The ups and downs of flatter taxes, OECD Observer | Study separates Russian flat tax myth and fact, EurekAlert)

Posted on Fri, 4 Jan 13:

Global affairs -- trends to watch in 2013, Toronto Star, 3 Jan 13 [courtesy Ctr Int'l Gov'nance Innov]:
For better or for worse? The Mayan meltdown never materialized. The world hasn't ended, so we're stuck for one more year with the same head-scratching questions: the same mutters from the think tanks, the book lists and the streets. Is the world going to hell in a hand basket? Are we 'transitioning' to chaos or contentment? Should we uncork the Champagne or the Prozac to usher in 2013? Here are some of the trends that will help us decide

Acemoglu and Robinson: Marcos vs. Park, Why Nations Fail, 2 Jan 13:
As we noted in our post on cacique democracy, there is a more charitable account of the Marcos dictatorship after '72 in the Philippines than brought to mind by Imelda's 3,000 pairs of shoes. Marcos himself argued that the move to autocracy was needed to discipline the oligarchs. In this, he was similar to S Korea's Park Chung-Hee. The difference between the Marcos and the Park experiences is that while the latter was a huge econ success, the 1st collapsed into an orgy of rent seeking and looting of the state. Why the difference?, ask authors of Why Nations Fail (2012)/ MIT and Harvard profs

Birdsall/Meyer: Is India's middle class big enough for. . .?, Ctr Global Dev't, 26 Nov 12:
For global producers of consumer products, the rise of a middle class in India is great news. The dev't community has high hopes for India's middle class too. Middle-class households are expected to make their nation not only a bigger consumer market, but more inclined to more market-friendly policies, less corrupt, and more democratic. So who are the middle class in India, and how big is the group?, ask Ctr pres and research asst (Oops: Economists in confused search for the middle class in the developing world)

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