Analysis

Illusions of Decontrol

The founding myth of modern Germany can be traced back to June 20, 1948, when Ludwig Erhard, economic director of the Anglo-American occupation zone in Germany, created the Deutsche Mark. To stabilize the new currency, he paired the paper issue with the removal of price controls. By spring 1949, German production rose from 51 percent to 78 percent of its 1936 level. Over the next eleven years, GDP grew at an annual average of over seven percent. 

The Eurochip

The headline “World trade war looms over microchip accord” might recall current commercial disputes around semiconductor supplies. In fact, it appeared in an issue of Nature in February 1987, when the US had signed bilateral agreements with Japan to promote its own semiconductor exports and limit imports from the latter. European governments, in turn, were angry at what they saw as the cartelization of the global market. The then-European Economic Community (EEC) (now the European Union) threatened to take the US and Japan to the then-General Agreement on Tariffs and Trade (now World Trade Organization) for violating international trade procedures. Like today, concerns on all sides were linked to the role that microchips play in crucial military and civilian industries.

Banks as Hedge Funds?

Silicon Valley Bank’s (SVB) short lifespan—from October 17, 1983 to March 10, 2023—has been witness to crucial transformations in the world of modern banking. The bank’s collapse has sparked wide ranging reflections on the roots of the crisis, the utility of government bailouts, and appropriate responses.

The Imperial Fed

The Federal Reserve is commonly depicted as an institution set up to fulfill domestic functions, only later taking on its significant international and geopolitical dimensions. This view sees the Fed’s origins in various domestic concerns, such as bankers’ desire to cartelize themselves, exporters’ bid to make the American financial system more stable and liquid so as not to rely on London for loans, farmers’ project to break up New York’s “money trust” and spread financial services more evenly throughout the country, and the collective desire to put an end to the apparently endemic panic in US money markets.

Red Finance

In terms of its size, dynamism, and degree of global integration, China’s market economy is extraordinary. Though it’s known officially as a “socialist market with Chinese characteristics,” its market features far predate the 1978 decision on “reform and opening.” The reformist Chinese growth model has always been characterized by a distinct pragmatism. This involves integrating macro programming and regulations, a mix of public and private ownership and control, market allocation to various degrees of resources and distribution, bureaucratic cronyism in productive and business organizations, and international “free trade.”

Profits, Prices, and Power

If they are remembered at all, the 1950s are now thought of as a lost golden age of stable growth and political economic consensus. But the second half of the decade saw rising prices, tightening financial conditions, diminished industrial employment, and stagnant investment. If contemporaries did not yet use the word “stagflation,” they might as well have, referring to this “new inflation” with terms such as “recession-cum-inflation.”

Wall Street Consensus a la Française

Since his election in 2017, French President Emmanuel Macron has periodically committed to resetting France’s relationship with Africa. In 2020, his so-called Macron Doctrine denounced the Washington Consensus for creating a “capitalism that has become financialized, that has become over-concentrated and that is no longer capable of handling the inequalities in our societies and internationally.” He called for a Europe-Africa partnership of equals to underpin the material and ideological work that would reverse financialized capitalism and its destruction of the climate. 

The IMF Trap

Massive demonstrations that swept Sri Lanka last year exposed the serious challenges at the heart of the global economy. In July 2022, former President Gotabaya Rajapaksa was forced to flee the country, only a few months after announcing a hasty default of Sri Lanka’s foreign debt obligations. He faced a wall of opposition as the nation suffered infamous kilometers-long fuel queues, power outages, and food and medicinal shortages, crippling everyday life. 

Debt and Power in Pakistan

The subcontinent’s embattled debtor isn’t merely the passive victim of the climate crisis—it is being plundered by its elites.

Crisis Response

At the dawn of the newly implemented Eurozone, Lorenzo Bini Smaghi and Daniel Gros argued that three broad issues might present problems for Europe’s Economic and Monetary Union (EMU). Bini Smaghi, then Director for International Affairs at the Italian Treasury, and Gros, then Deputy Director and Senior Research Fellow at the Brussels-based Centre for European Policy Studies and Head of its Economic Policy Programme, wrote and published their concerns in their 2000 book Open Issues in European Central Banking. 

The Long Run

Few economic terms over the last few decades have been more influential than “austerity,” invoked by governments and financial institutions as a blanket solution for economic crises, and inspiring intense debate in the public sphere. Austerity, defined by economists as “a policy of sizable reduction of government deficits,” or by the general dictionary as an “enforced or extreme economy,” is related to the size of a contractionary fiscal shock.

Unraveling Dollarization

The financial crises of the 1990s in Asia, Argentina, and Russia sparked growing interest in the phenomenon of dollarization—the use of a foreign currency to perform national currency function. Dollarization, however, has a history dating back to the nineteenth history. More recently, a growing body of work has outlined how dollarization limits the independence of monetary policy in host countries and restrains local central banks from acting as lenders of last resort.

Gender and the Great Resignation

The much anticipated “return to normal” after the Covid-19 pandemic has been anything but. In contrast to the aftermath of previous economic crises, workers have not rushed back to work. Each month over a period of nine months in 2021, an average of four million people in the United States left their jobs. Similar trends were reported elsewhere. Resignation rates and job changes have been at a historical high in the UK; rates are rising in other wealthy countries like France, Australia, Netherlands, Spain, and even Singapore.

Unmaking Orthodoxies

After a decade of low or negative interest rates, central banks are back in the business of fighting inflation. One of the clearest signs of the change in monetary policy stance is the largely synchronized tightening across high-income countries—last year, interest rates were increased by the central banks of Australia, Canada, the Euro Area, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States, which together account for around half of global gross domestic product (GDP). As interest rates go up, however, so do the risks of economic contraction. 

The Dollar and Climate

The climate crisis offers a new angle from which to evaluate US dollar hegemony, since carbon emissions are tied to economic activity.