quarta-feira, 30 de abril de 2014

A prolonged crisis in Ukraine spells trouble for all

It is in everyone’s economic interest, both short and long-term, to solve theUkrainian crisis; and therefore they will – or, at least, that is what rational thinking would suggest. But the reality is very different. And it is not necessarily because the parties involved in this crisis are irrational. Rather, it is because they are stuck in what game theorists call a “prisoners’ dilemma”. In the process, the risks of adverse global economic spillovers are on the rise.
The recent escalation of events in Ukraine has narrowed the set of options available to the four major parties involved – the country itself, Russia, central and western Europe and the US. As this occurs, the probability of each party attaining its desired outcome is rapidly declining, let alone them retaining sufficient control over developments on the ground. Indeed, the current course is one that leads to growing internal Ukrainian fragmentation, biting western sanctions on Russia, counter-sanctions by Moscow on western energy supplies, and a mounting financial bill for all.
The result would be economically and financially harmful to all, albeit to different degrees.
Ukraine would suffer the most, risking a deep economic implosion and full-blown financial crisis. In the process it would become even more highly dependent – and for many more years – on external financial assistance, and all the inevitable conditionality that comes with that.
Russia would experience a pronounced economic contraction coupled with high inflation, capital flight and a collapse in foreign direct investment. (Only on Friday Russia’s credit rating was cut to just one notch above junk level, and the central bank was forced to raise interest rates to counter capital outflows and currency pressures.) Moreover, depending on the severity and sector-focus of prospective western sanctions – specifically, whether the financial sector is targeted – Russia could also find it harder to make international debt payments and open trade letters of credit.
Assuming Russia retaliates by imposing its own sanctions – its most likely response to stiff western measures – the resulting disruption in oil supplies would tip western Europe into recession. With neither a healing US or a stabilising emerging world able to compensate fully, the global economywould most likely be tipped into a recession too.
Since it is both in the collective and individual economic interest of all to avoid such a combination of outcomes, it would be reasonable to expect that the major parties would come together to iterate to a better place. Moreover, they still have the means and time to do so. Yet based on the robust insights of game theory – the most instructive framework for analysing the current situation – the probability of this happening is declining, slowly approaching real uncomfortable levels.
Game theorists call this a “prisoners’ dilemma” – no single party can force an outcome on the others. But rather than pursue outcomes that are in the collective and individual interests, each party is forced by initial conditions to opt for suboptimal results relative to what is theoretically possible.
The reasons for this are essentially threefold: insufficient trust among the parties; inadequate infrastructure for enabling internal co-operation and follow-up enforcement; and the absence of a forceful outside party able to provide credible validation, assessment and process accountability. Only a major disruption dislodges the initial conditions that force the suboptimal outcomes.
Applied to today’s Ukraine, this approach points to a material increase in the tail risk of global economic contagion. Western central banks would, of course, do all they can to counter the negative economic repercussions if the damage was no longer contained within Ukraine. But they would struggle to counter a supply shock of that magnitude, particularly given the amount of policy ammunition they have already used to help with the recovery from the global financial crisis.
There is still time for all parties involved to realise what is at stake and return to serious negotiations. But the clock is getting closer to midnight; and conditions on the ground are getting harder to control. The more markets recognise this – as they have started to do – the greater the risk that they would also contribute to an accelerated déroulement that is in one’s short or long-term interest.
Mohamed El-Erian is the former chief executive and co-chief investment officer of Pimco

terça-feira, 29 de abril de 2014

Hayek, Semprun,....

O Brasil, aos poucos, esta se transformando em um país normal, com forte polarização política entre a  centro direita e a  centro esquerda. É verdade que a centro direita ainda tem vergonha de se apresentar como tal, mas as propostas apresentadas fazem parte do  seu receituario em outros países e o eleitorado nacional, ao que tudo indica, sabe que não está comprando gato por lebre.   No meio acadêmico, em algumas áreas , a extrema esquerda é um pouco mais forte que em outros países, e no geral a centro esquerda aqui como lá ainda é hegemônica.  A força do marxismo é, com certeza,  para um visitante do chamado "primeiro mundo" estranha, assim como a da heterodoxia na área econômica. Mas, se compararmos com os anos 80 - anos dourados do marxismo e da heterodoxia no Brasil - , o cenário é de franca decadência. É sempre bom lembrar que naquela decada  os economistas da Unicamp,  eram arroz de festa na midia nacional. O numero de filiais era crescente o que a tornava ainda mais forte e influente. Nenhum outro depto de economia, conseguiu, ser tão poderoso como ele.

Este  novo cenario, ainda assusta alguns e confesso que  fiquei surpreso com o sucesso do  Mises com  a nova geração de economistas. Se fosse o Hayek, seria compreensivel, mas Mises ... A reação dos mais extremados é simplesmente proibir a inclusão destes autores nos programas de cursos ou no máximo permitir a menção e rejeita-los como exemplo da baixa qualidade da produção econômica a serviço do capital.  Nessas horas, lembro sempre, da aula do meu professor  na Bocconi, Zamagni, comparando o ambiente de abertura intelectual na Italia nos últimos anos da decada de 80, com  o sectarismo dos anos 60 e parte dos 70. As vezes, tenho a impressão que em certos circulos intelectuais , 68 ainda não acabou e o muro de Berlim continua firme e forte. Algo parecido ao mundo  do  romance  A Alagaravia  do Jorge Semprun - um dos meus escritores prediletos. Nestes tempos sem memoria é recomendável ler um dos seus melhores livros: A autobiografia de Federico Sanchez.

segunda-feira, 28 de abril de 2014

Branko Milanovic: How we can strengthen the world’s fragile middle class

Globalisation has been a deeply contradictory process whose features are insufficiently recognised by both those who unquestionably support it and its detractors.

Between 1980 and 2000, countries’ gross domestic product per capita diverged, meaning poor countries grew more slowly than rich ones. This was because of the lost decade (or two) in Latin America and post-communist countries, and disasters and wars in Africa.

But after 2000, things changed: these three areas, and of course Asia, grew faster than the rich world. On the negative side, there was a steady and almost universal increase in income inequalities within nations, with the notable exception of Latin America.

When we look at the global population rather than at countries, however, there is a positive side. The unprecedented growth of China and, from the early 1990s, of India, as well as much of the rest of Asia has lifted millions out of poverty. For the first time since the industrial revolution, income inequality among world citizens has fallen.

So, oddly, the world faces today greater than ever concerns with income inequalities within nations – even as global inequality inches down and global poverty has been halved. But the fall in global poverty and the increase of what is described as the “fragile middle” class are two sides of the same coin. People who moved out of absolute poverty (defined as $1.25 per person per day) have swelled the ranks of those marginally better-off – and even of those who may be, with some effort, classified as a new “global middle class”. This term, however, may suggest a level of comfort not supported by the numbers. The global median income in 2011, calculated from the preliminary household survey data covering about 80 per cent of world population, is $5 per day (compared with a figure of slightly over $4 obtained in 2008). Taking a standard approach, used at the national level, the middle class consists of people with incomes from 25 per cent below the median (in this case, less than $4) to 25 per cent above ($6.5). By this measure, only about 13 per cent of world population qualifies. This is a lower share than in Honduras and Guatemala, not countries that one normally associates with a thriving middle class. So the importance of the global middle class is somewhat exaggerated.

It is also a fragile middle class because it is still relatively poor. Even when we include among the global middle the groups whose real incomes increased (in percentage terms) the most between 1988 and 2008 – that is people with incomes from $3 to $16 per day – it is only those at the upper end of the range who overlap with what is considered the lower middle class in rich countries. All others are poorer.

The global middle class is fragile in the sense that negative shocks (reduction in the number of hours of work, illness in the family, increase in housing prices) can easily push them back below the poverty threshold. A recent World Bank study of the Latin American middle class found that only if income goes over $10 per day does the likelihood of slippage back into poverty become small – and only then may a family be said to have escaped the scourge of poverty.

The existence of the global middle class, however fragile, is a great success of globalisation. But will this success deepen (by making slippages less likely) and broaden (by bringing more people into the global middle class)? This depends foremost on the continuation of high rates of growth in large, still relatively poor, countries. While the attention of the world was focused on Asia, the growing population in Africa means the “battlefield” on which both the reduction in poverty and expansion of the global middle class will be fought is gradually moving there. Overall Asia and Africa have survived remarkably well the worst years of the Great Recession. If their growth rates do not decelerate, we can look fairly confidently to the growth of the global middle class.

But many dangers loom. What is the role of national inequalities? On a purely arithmetic level, if real growth is given, greater inequality slows poverty reduction and probably the expansion of the middle class. But those who believe in trickle-down economics argue that without greater inequality there would not be strong growth. While this might have been true for China in the past 20 years, it is doubtful that further growth in inequality there will be so benign. China’s Gini – a measure of inequality – at about 44 is already greater than America’s. Can it rise further, deepening regional and urban-rural divides, without slowing the expansion of the middle? India’s inequality, long thought to be in the mid-30s Gini range, may if assessed in terms of income rather than consumption already be as high as 50, practically at the Latin American level.

It is therefore growth with redistribution (a familiar development formula from the 1970s) that should be our objective in the years to come, if we want both global poverty and global inequality to continue their downward trend.

Branko Milanovic is visiting presidential professor at the Graduate Center City University of New York and senior scholar at Luxembourg Income Study

sexta-feira, 25 de abril de 2014

Krugman: Frustrations of the Heterodox

Difícil discordar da avaliação do Krugman sobre os heterodoxos. Minsky é um bom exemplo que heterodoxo de qualidade consegue ser respeitado pela comunidade de economistas. Vide, também o caso da Joan Robinson, Kaldor e Sraffa, para citar alguns nomes.

It’s kind of a sideshow in the larger scheme of things, but something worth noting is taking place on the fringes (literally) of economic discussion: an upwelling of frustration on the part of heterodox economists. You see it in Thomas Palley’s complaintabout gattopardo economics, which I discussed yesterday; you see it in the demands for a radical change in the economics curriculum, which Simon Wren-Lewis wrote about yesterday.
I understand the frustration, but the heterodox need to realize that they have, to an important extent, been working with the wrong story line.
Here’s the story they tell themselves: the failure of economists to predict the global economic crisis (and the poor policy response thereto), plus the surge in inequality, show the failure of conventional economic analysis. So it’s time to dethrone the whole thing — basically, the whole edifice dating back to Samuelson’s 1948 textbook — and give other schools of thought equal time.
Unfortunately for the heterodox (and arguably for the world), this gets the story of what actually happened almost completely wrong.
It is true that economists failed to predict the 2008 crisis (and so did almost everyone). But this wasn’t because economics lacked the tools to understand such things — we’ve long had a pretty good understanding of the logic of banking crises. What happened instead was a failure of real-world observation — failure to notice the rising importance of shadow banking. Economists looked at conventional banks, saw that they were protected by deposit insurance, and failed to realize that more than half the de facto banking system didn’t look like that anymore. This was a case of myopia — but it wasn’t a deep conceptual failure. And as soon as people did recognize the importance of shadow banking, the whole thing instantly fell into place: we were looking at a classic financial crisis.
What about the lousy policy response — austerity and all that? The key point here was that policymakers weren’t basing their decisions on conventional economics. On the contrary, they decided to blow off textbook macroeconomics and embrace exotic doctrines like expansionary austerity and a mysterious growth cliff at 90 percent debt relative to GDP. The disastrous policy responses that have perpetuated the slump are the result of mainstream economics having too little influence, not too much.
Now, to be fair, there is a civil war within academic macroeconomics, and what I’m calling “mainstream” is the saltwater side of that civil war. But the critics want much more than to boost saltwater macro at the expense of the new classical guys — they want to drive people like me out of the temple, too. And the thing is that they want to do this even though, as Wren-Lewis says, Keynesian macro has actually performed very well since 2008.
What about the new respect given to heterodox thinkers like Minsky, and heterodox ideas like secular stagnation? I agree that mainstream economists didn’t pay enough attention to such people — way back, one of my principles for working in economics was “listen to the Gentiles.” But it’s hard to claim that such work is deeply incompatible with mainstream economics when Janet Yellen embraces Minsky and Larry Summers becomes a secular stagnationist.
And what about inequality? Some people are annoyed at Thomas Piketty by presenting his data and ideas in a form that is fairly comfortable for conventional economists, at least those of eclectic disposition. But doesn’t that show that conventional economics is indeed capable of accommodating big concerns about inequality? You fairly often find heterodox economists insisting that to accept the idea that capital and labor are paid their marginal products, even as a working hypothesis to be modified when you address things like executive pay, is to accept that high inequality is morally justified. But that’s obviously not the case: there are plenty of economists who are willing to use marginal-product models (as gadgets, not as fundamental truth) who don’t at all accept the sanctity of the market distribution of income. So this complaint is, in its own way, as much of a distortion as the right-wing claim that anyone who so much as mentions inequality is a Marxist.
How should the crisis and the reemergence of very high income inequality affect how we do and teach economics? For sure, it says that we need to do a lot more history, including deep history. Events have also reflected very badly on the style of economics that prizes “microfoundations” based on ultra-rational behavior over evidence, and rules any kind of ad hockery out of bounds. But the heterodox want more than that; they want to interpret recent events as a refutation of the kind of economics Wren-Lewis, or Janet Yellen, or Larry Summers (as economist, not public official), or yours truly does. And that interpretation just doesn’t work. By all means, advance heterodox ideas if you believe they’re right. But don’t claim vindication from events that didn’t actually follow the script you wish they did.

quinta-feira, 24 de abril de 2014

South Africa’s chance to repeat the Mandela miracle

The world should expect a clear victory for the ruling African National Congress in South Africa’s national elections on May 7. Far less certain, and of greater importance, is what the ANC does with its fifth consecutive term of office – President Jacob Zuma’s last. The robust national discourse reflects political tensions that remain 20 years to the month after Nelson Mandela became president.

The country’s fortunes read like a balance sheet. On the asset side, the economy has tripled in size during two decades of growth. Inflation has been tamed. Support for the poor has been expanded, with cash grants now being made to 16m people. The middle class encompasses more of society than ever before; in the decade to 2010, 1m people joined its ranks every year. There has been a dramatic broadening of the tax base. And the civil service is no longer staffed exclusively by a white elite.

What was in 1994 a divided country and a broken polity is now an unrecognisably modern, investment-grade economy. It is home to the continent’s deepest and most liquid capital markets; and to innovative companies led by modern managers poised to capitalise on the resurgent economies of sub-Saharan Africa. As one of the five Brics – along with Brazil, Russia, India and China, leading emerging economies – South Africa will play a decisive role in global economic development in the coming decades.

But the liabilities inherited from the apartheid era loom large. South Africa’s 7m unemployed people account for 35 per cent of the workforce. Fifteen million people live on less than $2 a day, and 6.4m are infected with HIV. This reflects the country’s two-speed society: one part modern, sophisticated, skilled, dynamic and increasingly affluent and non-racial; the other, marginalised unskilled, poor and young, mostly rural or peri-urban outcasts, increasingly restless and bereft of hope.

It is the latter society that must now command the attention of the ANC. The struggle for greater social equality is causing deep rifts in society, including inside the party itself and between members of the broader Tripartite Alliance, which the ANC leads.

After 1994 Mandela managed to bring temperatures down from boiling point. But they are once again on the rise. Widespread protests by local communities against failures in delivery of social services are an early warning sign of this growing gap. Serious opposition is more likely to emerge from within the ANC than from outside it. Uniting a sometimes fractious alliance will therefore be among the party leadership’s greatest tests.

For Mr Zuma, it is critical in forming his new administration to professionalise and increase capacity and quality across the entire public service. His choice of generals and foot soldiers to implement his National Development Plan, to drive growth and tackle joblessness, will be the first decisive signs of the trajectory for South Africa in the next five years. And the ruling party will need to regenerate the moral leadership and authority seen under Mandela, which of late the party has lost to scandal, infighting and controversies. For it is this team that will need the credibility to lead the effort to close the gap between the haves and the have-nots.

To achieve the 5 per cent growth- rate target necessary to double gross domestic product per capita, halve unemployment and narrow structural inequalities in the next 20 years, the ANC government will need to focus sharply on better-quality public spending, especially in health, education and infrastructure. The new administration will also need to rein in and punish corruption. It will need to tackle the failing labour environment with its union allies. It will have to tie wage increases to productivity improvements and improve the skills of the workforce. It must revitalise mining. It will need to build trust with business and labour, and be smarter on market regulation.

If all this is achieved it will create the environment to lift annual foreign investment from an average of $2bn to the required $5bn-$10bn.

In five years there will be a new generation of ANC leaders who will succeed Mr Zuma. What they inherit from his leadership over this time will determine whether they are in the driving seat, forced into a coalition or watching from the sidelines.

And it is the skill with which the ruling party prosecutes its plans in the next five years that will either uphold or deflate the miracle that Mandela symbolised on the world stage: the miracle of reconciliation and transformation in overcoming South Africa’s apartheid past.

The ANC’s performance and record is the barometer that the South African electorate will use to decide whether the 2019 election becomes another passing of the baton from one ANC generation to another or the moment of reckoning for the party.

Colin Coleman is a managing director at Goldman Sachs and author of ‘Two Decades of Freedom’

Fonte: FT

quarta-feira, 23 de abril de 2014

O jenio da USP...

Todo mundo tem direito a expressar as suas idéias, por mais tolas e sem pé nem cabeça que sejam. Este parece ser o caso do recente artigo do Safatle,  Prof. de Filosofia da USP e pré-candidato do PSOL a governador de SP. A  analise  econômica - sendo generoso - peca pela pobreza dos dados e incapacidade de apresentar um argumento minimamente consistente.  O primeiro é perdoável, afinal ele não é economista, mas o segundo é inaceitavel: argumento é o instrumento de trabalho do filosofo. 

Vinicius Torres Freire, da FSP, desmonta, com a competencia de sempre, este infeliz exemplo da  facilidade com que  mambo jambo que se apresenta como argumento econômico é elogiado nas redes sociais.  Para falar de economia, aparentemente, não é  necessario conhecer o o be a ba  da área,  é suficiente  ler o velho Barba  e sair por ai dando os seus pitacos. Com alguma sorte, consegue, ate mesmo ganhar a vida como professor de economia.  Simplesmente, lamentável.... 

Coitado do velho Barba: passou anos na Biblioteca do Museu Britanico estudando seriamente a literatura econômica e hoje os seus discipulos mais fundamentalistas recorrem  a orelhada  que não tenho dúvidas o deixaria profundamente envergonhado. Afinal, ele, alem de  militante político, era um intelectual muito serio.

terça-feira, 22 de abril de 2014

Mudar de rumo é preciso...

A grande novidade no mercado de idéias no grande bananão é a quebra da hegemonia da esquerda  nos grandes jornais, revistas e outras midias. É um dominio  de longa data e exercido em particular, pelos militantes do antigo PCB pró-sovietico, mas  com espaço para  seus adversários historicos: os trotskistas.  Não deixa de ser ironico, encontrar entre os novos cavaleiros da direita  os ex-trotskitas da Libelu(liberdade e Luta) que a revista Isto É, em matéria de capa,  na fase final dos anos de chumbo,  chamou de "esquerda adolescente", Pois é:  envelheceram, mas continuam com o mesmo ardor adolescente e com uma influência que ninguem, absolutamente, ninguem poderia esperar...

Alguns gatos pingados  que seguiam a cartilha de Moscou ou como se dizia à epoca: eram mantidos pelo ouro de moscou, tambem bandearam  para o campo da direita. Neste caso, mantiveram se fieis a cegueira do período sovietico e  continuam com o  odio visceral que tinham dos fundadores do PT que os colocou no seu devido lugar: a lata de lixo da história.

A esquerda, ou melhor o que dela restou está mais perdida que barata tonta e insiste em defender propostas econômicas com prazo de validade expirado bem antes da queda do muro de Berlim. Renovar é preciso, mas nada de construtivo se pode esperar  da geração que  um dia amou a Russia sovietica,  acreditou nas tolices do maoismo  e  acalentou o sonho de transformar a America Latina em uma grande Cuba.

Uma nova esquerda antenada com a realidade do novo seculo e comprometida com a  defesa da democracia e a construção de uma sociedade mais justa deve ter como alicerce  uma  analise econômica que reconheça os aspectos positivos da economia de mercado. Um modelo combinando o que há de melhor na experiência da economia social de mercado e da social democracia europeia parece ser um bom ponto de partida. Esta, alias, era  a rota que estava sendo trilhada pelo Governo Lula, antes da crise econômica de 2008. Ainda não é tarde demais, para reconhecer que o caminho escolhido não nos leva a uma sociedade mais justa...

Quanto a mencionada nova direita ela é muito bem vinda, pois enriquece o debate de idéias e fortalece a democracia brasileira.  É uma grande tolice imaginar uma sociedade plural sem uma direita competitiva no mercado eleitoral e participando ativamente no mercado de idéias. Eu, do meu lado, continuo onde sempre estive: defendendo a construção de uma  sociedade mais justa, sem abrir mão da independência que sempre cultivei...

segunda-feira, 21 de abril de 2014

Ponde e a direita festiva.

Ponde,  escreveu um artigo na Folha dessa segunda-feira que deixou um jovem amigo de esquerda injuriado. Transcrevo, abaixo o inicio do artigo, em que ele apresenta a tese defendida com seu tom costumeiro:

"Ser jovem e liberal é péssimo para pegar mulher. Este é o desafio maior para jovens que não são de esquerda.
Um dos maiores desafios dos jovens que não são de esquerda não é a falta de acesso a bibliografia que seus professores boicotam (o que é verdade), nem a falta de empregos quando formados porque as escolas os boicotam (o que também é verdade), mas sim a falta de mulheres jovens, estudantes, que simpatizem com a posição liberal (como se fala no Brasil) ou de direita (quase um xingamento).
Os cursos em que você encontra jovens liberais (economia, administração de empresas, engenharia e afins) têm muito poucas mulheres e as que têm não têm muito interesse em papo cabeça e política. O celeiro de meninas que curtem papo cabeça e política são cursos como psicologia, letras, ciências sociais, pedagogia e afins, todos de esquerda."

Pelo que leio nas redes sociais, acredito que a falta de acesso a bibliografia é um serio problema, alem, é obvio dos boicotes dos professores, mais preocupados em divulgar o seu pensamento único secular, anti-religião e anti-capitalista.  O pluralismo, palavra de ordem desta turma, significa espaço para uma versão empobrecida do marxismo e literatura anti-capitalista de qualidade similar  e  exclusão do chamado pensamento conservador   O resultado é um empobrecimento geral do debate no grande bananão.  O que se apresenta como pensamento liberal ou de direita compartilha com os seus adversarios de esquerda  a mesma pobreza intelectual.  Cenario entristecedor, porque a oferta de propostas consistentes à esquerda e à direita traria grandes beneficios a nossa democracia.

Não tenho mais 20 anos e por isto não posso avaliar a tese do Pondé. Reconheço, no entanto, que no final dos anos 70 e inicio dos anos 80, ser de esquerda, realmente era uma vantagem competitiva....

quinta-feira, 17 de abril de 2014

Robert Jenkins: Regulators’ attempts to hold back the financial tide are futile

Rain causes flooding and flooding causes damage. Which shall we blame: the rain, the river or an inadequate system of levees? Ocean tides can cause chaos along the coastline. Is the resulting devastation to nearby power plants the fault of nature or of imprudent planning and supervision? What is the proper government response? To regulate the tides and rainfall? No. Would it succeed if it tried? No. Should one focus instead on ensuring essential facilities are solidly built, properly run and protected by levees? Yes.

All obvious and logical. Yet in the area of financial regulation the authorities are flirting with the notion that they can hold back the tides. The US Office of Financial Research has identified the great ocean of capital flows as a source of systemic risk. The Financial Stability Board, which seeks to co-ordinate global regulation, is conducting a consultation with similar questions in mind. And in an otherwise thoughtful speech Andy Haldane, the Bank of England’s rightly respected head of financial stability, said this month that “modulating” investment flows “is the next frontier of macroprudential policy”.

Really? Should we not focus instead on the levees and loss-absorbing capacity of the banking system that powers our economy yet remains vulnerable to the ebb and flow of the capitalist tides?

We are working our way through the biggest credit bubble in history. All bubbles feature greed, stupidity and leverage: what sets apart the latest is the magnitude of leverage. We will not abolish greed or stupidity but we can and must address excessive leverage. Have we done so? No. Until we do, another storm will wreak havoc.

Yes, new global standards have been agreed in Basel. They tighten definitions of risk and place an overall cap on leverage. But as currently set, the rules permit bank balance sheets to balloon to 33 times their equity. At that level bank asset values need fall only 3 per cent to wipe out 100 per cent of capital. A mere 1 per cent drop leaves the institution geared 50 times; a 2 per cent fall, 100 times. How much confidence does that inspire? How long do you think bank creditors will wait around to find out? (Not long in the view of the US authorities. They just announced their intention to reduce leverage a bit further – but, alas, not by much.) Add to the mix the fact that some banks’ balance sheets are equal in size to their home nation’s output and you will grasp central bankers’ admission that we have yet to eliminate the problem of “too big to fail”.

Excessive leverage in the banking system leaves it vulnerable to collapse; authorities know this. Western governments cannot afford a rerun; treasuries know this. The public would not tolerate a repeat performance; politicians know this. So the failure to increase sufficiently the loss-absorbing capacity of the banking system risks triggering a regulatory campaign to spot and control any and all threats that might lead to bank breakdown. And when you start looking for threats you find the world of investment flows is big, complex and could overwhelm the banks’ meagre capital buffers. Then: “Gosh, we better try and control these flows.”

Well, Mr Regulator, you already control the investment industry. But, since the money belongs to its clients, you cannot control the flows – unless, of course, you are going to prevent people from selling when they want to sell and buying when they want to buy. Oh, and by the way, the funds that money managers channel to loans, bonds and stocks are usually backed by 100 per cent loss-absorbing capital. Even the hedge fund sector operates at a 10th of the leverage of the banks.

The banking crisis caused epic damage. Policy makers are right to act. But let us not confuse pronouncements with progress. Capital is both the foundation supporting and the floodwall guarding our credit system. Banks have too little of it. The new banking regulations do not address excess leverage; they enshrine it. So investment flows, like floods and tides, will overwhelm them. By all means then, let us learn more about those flows. And, as with storms and tides, let us try to predict them. But have no illusions about controlling them. As Canute well demonstrated, even an “all powerful” king could not do so.

Robert Jenkins is a former member of the Financial Policy Committee of the Bank of England

Fonte: FT

quarta-feira, 16 de abril de 2014

Gérard Duménil :Crise vai durar mais de dez anos.

Entrevista com uma das raridades da academia atual:  um bom economista que é, também, marxista.  Gérard Duménil  tem bons trabalhos publicados  com  Dominique Lévy e é sempre uma boa  leitura. Desnecessario lembrar que não, necessariamente, concordo com a analise apresentada, mas reconheço a sua qualidade. Alias, depois da entrevista com o pior representante da conhecida escola de  empulhação econômica e de suas filias Brasil afora, o Valor estava nos devendo uma entrevista com um economista alternativo de qualidade.

Valor: O sr. compara a crise de 2007/08 com outras crises estruturais, de longo prazo, como as de 1890, 1930 e 1970. Quais são as evidências de que esta mais recente crise também é uma crise estrutural, de longa duração?
Gérard Duménil: Você precisa distinguir o que é crise do que é recessão. Recessão é a contração da atividade e geralmente dura cerca de um ano. As crises são o que chamo de crise social, que geralmente duram cerca de dez anos. Como todos sabem, essa crise de 2007-2008 começou como uma crise financeira e então a economia entrou numa recessão. Parte do mundo, como Europa e Estados Unidos, ainda está vivendo a crise de 2008. Por exemplo, na Europa o equilíbrio não foi restabelecido e os Estados Unidos só têm sido capazes de manter um crescimento baixo, e sob fortes políticas macroeconômicas (cada vez com maior intervencionismo do Estado), de forma que o governo ainda tem grandes déficits e o Federal Reserve (Fed) está suportando as atividades da economia. Se essas políticas não estivessem em andamento, a economia americana teria entrado em nova recessão. E isso não é fim da história. Embora crises sociais como durem cerca de dez anos, a de 2008 provavelmente vai durar muito mais. Dadas as políticas fortes que estão sendo usadas para sustentar a economia tanto na Europa quanto nos Estados Unidos (com maior ou menor sucesso), não é possível dizer que a atual crise acabou. É difícil ver a saída hoje nos Estados Unidos e Europa. E é importante ressaltar que essa é uma crise da Europa e dos Estados Unidos e não do mundo todo.
Valor: Se não são dez anos para sair da crise, quantos anos serão?
Duménil: Possivelmente essa crise vai levar mais do que dez anos. Mas não temos ideia de quanto tempo exatamente levará, porque o problema de sair de uma crise dessas é que seria necessário mudar a forma básica de funcionamento da economia, alterar a forma de gerenciamento das grandes empresas, mudar mecanismos de regulação do sistema financeiro e as regras da globalização. Esse tipo de política não existe hoje no mundo. Nos Estados Unidos, eles suportam a economia com políticas do Federal Reserve e também há uma política industrial. Em termos gerais, a situação nos Estados Unidos é melhor do que na Europa, e quando falamos de Europa é preciso distinguir entre Alemanha, França, Itália e Espanha, que não vivem a mesma situação. Mas o que está claro é que na Europa e nos Estados Unidos ano após ano há cada vez menos investimentos. E esse tipo de situação não pode ser mantido por muito mais tempo. Mudanças são necessárias, mas dependem de políticas e de luta social. E é por conta desses fatores que é impossível prever quanto tempo a crise durará. Ninguém sabe. Alguns acham que a economia pode fazer previsões. Mas estou destacando que depende de circunstâncias políticas.
Valor: Assim como outros autores, sua interpretação é de que a crise se iniciou na esfera financeira e se tornou uma crise da dívida pública. Talvez por isso seja uma crise de tão longa duração...
Duménil: Os governos estão tendo que fazer isso [gastos] para manter a atividade econômica. Nos Estados Unidos, por exemplo, a dívida do governo está crescendo de forma muito rápida. Mas isso não pode ser considerada uma crise aguda, porque o resto do mundo ainda compra títulos emitidos pelo Tesouro americano, de forma que grande parte do déficit é financiada pelo resto do mundo, especialmente pela China. Mas essa dívida não pode seguir crescendo para sempre. Em algum momento, eles terão que alterar a política econômica. Na Europa, a política econômica tem sido completamente diferente. Eles estão tentando reduzir os gastos do governo, tentando diminuir o tamanho da dívida. A Europa tenta a austeridade, gastando menos. Mas, como se sabe, a Europa está em recessão constante. E mesmo com austeridade não está conseguindo cortar os gastos. Eles não são capazes de cortar muito nos gastos, porque vão provocar nova contração da atividade. Isso é onde estamos hoje. Para sair dessa situação, é necessária uma reforma profunda, que significa conglomerados empresariais completamente diferentes, menos comprometidos com o mercado financeiro, menos preocupados em gerar dividendos e com a alta das ações.
Valor: O sr. afirma que essa crise estaria levando a uma transição. Que transição seria essa?
Duménil: Nós agora estamos numa ordem social, que é o neoliberalismo. E ele tem uma série de características, como corporações geridas sob o interesse dos donos das grandes empresas e gestores de alto nível hierárquico, e uma situação de globalização com total liberdade de fluxo de comércio, e de fluxo de capitais. A transição seria uma mudança fora dessa ordem. Seria mudar essas especificações.
Valor: O que de fato está ocorrendo nessa direção?
Duménil: Você precisa distinguir entre aquilo que está acontecendo e o que eu gostaria que estivesse ocorrendo. Europa e Estados Unidos vivem situações diferentes. Nos Estados Unidos, a economia, na sua forma básica, ainda funciona da mesma maneira, mas o Estado agora atua com fortes políticas para tentar dar suporte à economia. Não há só uma política industrial para ajudar a retomada da atividade, mas também políticas macroeconômicas, como a manutenção do déficit do balanço, e uma política monetária que mantém a taxa de juros em um nível muito baixo. Já na Europa, a situação é similar, mas diferente. Similar porque a economia ainda está funcionando da mesma maneira, formas parecidas de gerenciamento das grandes corporações ocorrem, mas praticamente sem política industrial para setores específicos, e não há na Europa uma atuação forte do Estado na economia, por uma opção política. Então, não há sinais na Europa que possam ser comparados às ações do governo e do Fed nos Estados Unidos. Nos Estados Unidos, não estamos fora do neoliberalismo, porque a economia funciona de acordo com o interesse de uma minoria, mas é importante observar que a economia funciona de uma forma cada vez menos liberal por causa da ação forte do Estado. Na Europa, isso não está se movendo nessa direção. Então, há um neoliberalismo na Europa, que não é mesmo neoliberalismo que existe hoje nos Estados Unidos.
Valor: Qual é o papel da América do Sul, e do Brasil especificamente, nessa transição?
Duménil: Hoje, o crescimento do mundo ocorre nos países que eram chamados de periféricos, como China, Sudeste Asiático, Brasil, América Latina. Há até países da África crescendo. Claro, outros estão em situação completamente diferente. Mas o fato é que, em geral, o crescimento atualmente está fora dos velhos centros. Na Europa e nos Estados Unidos, praticamente não está ocorrendo. Mas o ponto central é que tipo de sociedade esses países que estão crescendo estão construindo agora. O Brasil, por exemplo, está cada vez mais construindo uma economia neoliberal ou não? Alguns tipos de políticas desenvolvidas por Lula, por exemplo, aprimoraram a proteção social, mas também no Brasil o setor financeiro é muito poderoso, concentrando grandes lucros. Além disso, está se ampliando numa velocidade incrível o número de bilionários no país. Então, é difícil de dizer. Mas há vários aspectos neoliberais. A mesma coisa acontece com a China. Ela está desenvolvendo agora uma grande classe capitalista, com bilionários, e o Estado ainda está controlando muito a economia. Então, a China estaria ampliando o neoliberalismo ou não? Ao mesmo tempo, também estamos vendo mudanças no comércio dos países considerados periferia, como, por exemplo, entre Brasil e China, de forma que esse fluxo não depende dos centros velhos. A situação nesses países dependerá dos desdobramentos das forças políticas e das lutas sociais. Se continuarem aprofundando o neoliberalismo, terão o mesmo problema que hoje há nos países do centro.
Valor: Essas mudanças, principalmente nos Estados Unidos, significam o fim da era do neoliberalismo?
Duménil: O que posso dizer agora é que as coisas estão mudando, em particular nos Estados Unidos. Mas você pode definir o neoliberalismo em dois aspectos. Um é a economia que funciona em prol dos interesses de uma classe privilegiada. Segundo, você pode defini-lo pelos métodos, com quais políticas eles obtêm isso. O que vemos é que nos Estados Unidos, temos o neoliberalismo na sua essência, em que a economia está funcionando de acordo com os anseios das classes de renda mais altas, mas os métodos - parte deles ao menos - para isso estão mudando, em especial, a gestão da política macroeconômica, com o governo dando suporte à indústria no seu território, e o Federal Reserve suportando o déficit do governo porque ele é necessário.
Valor: Por que, na sua avaliação, a hegemonia mundial dos Estados Unidos está em declínio?
Duménil: Eles estão perdendo gradativamente a hegemonia pelo menos do ponto de vista econômico, mas não ainda do ponto de vista militar. Isso não significa que não mudarão suas políticas para reverter esse processo, porque eles têm ficado cada vez mais conscientes da perda de sua hegemonia. Se você pesquisar o que está sendo produzido na National Defense University, que é uma universidade militar americana, você vai ver que eles dizem: 'Nós precisamos parar, nós precisamos da indústria em território americano porque vamos perder nossa hegemonia'. Há agora um compromisso do governo americano de restaurar a indústria no território dos Estados Unidos. Eles estão fazendo uma reindustrialização. O gás de xisto, recém-descoberto, está sendo desenvolvido em uma velocidade incrível. Na França, por exemplo, isso é proibido. E o preço da energia nos Estados Unidos hoje é mais barato do que na Europa. E, além disso, os Estados Unidos estão cada vez mais desenvolvendo políticas protecionistas.

Valor: Como outros autores, o sr. acredita que há uma mudança para um mundo multipolar?

Duménil: Provavelmente, porque se a hegemonia dos Estados Unidos está diminuindo, e o poder da China está crescendo, com ampliação dos seus gastos militares, isso quer dizer que outros polos de poderes serão comparativamente mais fortes. O que sabemos hoje é que há mudanças. A extensão dessas mudanças não sabemos, pois há fatores políticos, impossíveis de prever.
Valor: O sr. acredita que as transformações pós-crise levarão a uma nova ordem denominada de "capitalismo neogerencial". O que isso significa?
Duménil: Isso significa que haverá maior equilíbrio entre o poder da classe capitalista e o poder do gestor público e dos gerentes privados de alto nível hierárquico, em benefício do poder desses últimos. Isso já está ocorrendo. O que vemos é que certamente o interesse de algumas classes será preservado, provavelmente com diminuição dos benefícios da classe capitalista, porque é impossível continuar como hoje está. Isso quer dizer mais intervenção do governo, alguma redefinição do gerenciamento das corporações, mas não significa novo compromisso social com a esquerda. Depois da Grande Depressão e da Segunda Guerra Mundial, um novo compromisso social foi estabelecido com a esquerda. O gerenciamento das corporações tinha como meta o crescimento e mudanças técnicas. Os lucros eram conservados com as corporações, em vez de massivamente se tornarem pagamento de dividendos. Os fundos mantidos pelas corporações eram usados para investimento no território, em vez de serem gastos pelas corporações para a compra de suas próprias ações no mercado, para aumentar os seus indicadores. E muito menos investimento era feito fora do seu território. As primeiras décadas do pós-guerra foram um período de progresso social, com aumento do poder de compra dos salários, crescimento dos gastos sociais, progresso na saúde e na educação. Hoje, tanto na Europa como nos Estados Unidos, as tendências sociais apontam para uma direção oposta. Isso pode ser notado pelas permanentes pressões sobre o custo do trabalho em nome da melhora da competitividade. As atuais tendências que se manifestam vinculam-se a uma tentativa de preservar os privilégios das classes mais altas, estabilizando e estimulando a economia.
Valor: A crise pode estar impulsionando novos modelos de desenvolvimento econômico nacional?

Duménil: Hoje, você observa que as empresas americanas investem mais no resto do mundo do que nos Estados Unidos propriamente. O capital está saindo dos Estados Unidos porque as corporações estão cada vez menos investindo no seu próprio país. E mesmo que os Estados Unidos recebam investimentos de outros países, isso não compensa o que os americanos perdem de investimentos de suas próprias empresas. Isso é completamente impossível de se manter. Se mantiverem, os Estados Unidos perdem completamente sua hegemonia numa velocidade incrível. Então, o problema é que de alguma forma precisam limitar a globalização. Já estão restringindo fortemente o comércio exterior, com ampliação do protecionismo. Vários estudos mostram isso. Quantos anos precisam para reverter esse quadro? Cinco, dez anos? Não sabemos. E é importante atentar para o fato de que há uma contradição aí. Ao mesmo tempo em que precisam limitar essa globalização, um dos grandes poderes dos Estados Unidos são as corporações transnacionais americanas. Então, eles precisam incrementar sua indústria local, mas, ao fazerem isso, simultaneamente acabam restringindo o poder das transnacionais 

Fonte: Valor

terça-feira, 15 de abril de 2014

‘Capital in the Twenty-First Century’, by Thomas Piketty

Já recebi o meu exemplar e pretendo aproveitar os feriados para começar a leitura do livro que é bem longo.

Capital in the Twenty-First Century, by Thomas Piketty, translated by Thomas Goldhammer, Harvard University Press RRP£29.95/Belknap Press RRP$39.95, 696 pages

French economist Thomas Piketty has written an extraordinarily important book. Open-minded readers will surely find themselves unable to ignore the evidence and arguments he has brought to bear.

Capital in the Twenty-First Century contains four remarkable achievements. First, in its scale and sweep it brings us back to the founders of political economy. Piketty himself sees economics “as a subdiscipline of the social sciences, alongside history, sociology, anthropology, and political science”. The result is a work of vast historical scope, grounded in exhaustive fact-based research, and suffused with literary references both normative and political. Piketty rejects theorising ungrounded in data. He also insists that social scientists “must make choices and take stands in regard to specific institutions and policies, whether it be the social state, the tax system, or the public debt”.

Second, the book is built on a 15-year programme of empirical research conducted in conjunction with other scholars. Its result is a transformation of what we know about the evolution of income and wealth (which he calls capital) over the past three centuries in leading high-income countries. That makes it an enthralling economic, social and political history.

Among the lessons is that there is no general tendency towards greater economic equality. Another is that the relatively high degree of equality seen after the second world war was partly a result of deliberate policy, especially progressive taxation, but even more a result of the destruction of inherited wealth, particularly within Europe, between 1914 and 1945. A further lesson is that we are slowly recreating the “patrimonial capitalism” – the world dominated by inherited wealth – of the late 19th century.

Some argue that rising human capital will reduce the economic significance of other forms of wealth. But, notes Piketty, “ ‘nonhuman capital’ seems almost as indispensable in the twenty-first century as it was in the eighteenth or nineteenth”. Others argue that “class warfare” will give way to “generational warfare”. But inequality within generations remains vastly greater than among them. Yet others suggest that intragenerational mobility robs rising inequality of earnings of significance, particularly in the US. This, too, is false: the rise in inequality of earnings in the US over recent decades is the same however long the period over which earnings are traced. High-school dropouts rarely become chairman of GE.

An important finding is that the ratio of wealth to income in Europe has climbed back above US levels, notably in France and the UK. Another is the notably big recent rise in the income shares of the top 1 per cent in English-speaking countries (above all, the US) since 1980. Perhaps the most extraordinary statistic is that “the richest 1 percent appropriated 60 percent of the increase in US national income between 1977 and 2007.” Technology and globalisation can hardly explain this, since both were at work in all high-income countries. Indeed, the two most striking conclusions are the rise of the “supermanager” in the US and the return of patrimonial capitalism in Europe.

Third, Piketty uses simple economic models to explain what is going on. He notes, for example, that the huge rise in labour earnings at the top of US income distribution is overwhelmingly explained not by sports stars or entertainers but by increases in remuneration of managers. He argues that this is the result of the falls in marginal taxation, which have increased the incentive to bargain for higher pay, reinforced by changes in social norms. The alternative view – that the marginal productivity of top managers has exploded – is, he asserts, unpersuasive, partly because the marginal product of a manager is unmeasurable and partly because overall economic performance has not improved since the 1960s.

More interesting is Piketty’s theory of capitalist accumulation. He argues that the ratio of capital to income will rise without limit so long as the rate of return is significantly higher than the economy’s rate of growth. This, he holds, has normally been the case. The only exceptions from the past few centuries are when a sizeable part of the return on wealth is expropriated or destroyed, or when an economy has opportunities for exceptionally fast growth, as in postwar Europe or the emerging economies today.

This theory is built on two pieces of evidence. One is that the rate of return is only modestly affected by the ratio of capital to income. In the language of economists, the “elasticity of substitution” between capital and labour is far greater than one. In the long run, this seems plausible. Indeed, an age of robotics might further raise the elasticity.

The other is that, at least in normal times, capitalists save a sufficiently large share of their returns to ensure that their capital will grow at least as fast as the economy. This is especially likely to be true of the seriously wealthy, who are also likely to enjoy the highest returns. Small fortunes are eaten; big ones are not. The tendency for capital to grow faster than the economy is also more likely when the growth of the economy is relatively slow, either because of demographics or because technical progress is weak. Capital-dominated societies also have low-growth economies.

Fourth, Piketty makes bold and obviously “unrealistic” policy recommendations. In particular, he calls for a return to far higher marginal tax rates on top incomes and a progressive global wealth tax. The case for the latter is that the reported incomes of the richest are far smaller than their true economic incomes (the amount they can consume without reducing their wealth). The rich may even take themselves outside any fiscal jurisdiction, so enjoying the fiscal position of aristocrats of pre-revolutionary France. This fact blunts one of the criticisms of the book’s reliance on pre-tax data: over time, the ability of individual countries to redistribute resources towards the middle and bottom of national income distributions might dwindle away to nothing.

Yet the book also has clear weaknesses. The most important is that it does not deal with why soaring inequality – while more than adequately demonstrated – matters. Essentially, Piketty simply assumes that it does.

One argument for inequality is that it is a spur to (or product of) innovation. The contrary evidence is clear: contemporary inequality and, above all, inherited wealth are unnecessary for this purpose. Another argument is that the product of just processes must be just. Yet even if the processes driving inequality were themselves just (which is doubtful), this is not the only principle of distributive justice. Another – to me more plausible – argument against Piketty’s is that inequality is less important in an economy that is now 20 times as productive as those of two centuries ago: even the poor enjoy goods and services unavailable to the richest a few decades ago.

For me the most convincing argument against the ongoing rise in economic inequality is that it is incompatible with true equality as citizens. If, as the ancient Athenians believed, participation in public life is a fundamental aspect of human self-realisation, huge inequalities cannot but destroy it. In a society dominated by wealth, money will buy power. Inequality cannot be eliminated. It is inevitable and to a degree even desirable. But, as the Greeks argued, there needs to be moderation in all things. We are not seeing moderate rises in inequality. We should take notice.

Martin Wolf is the FT’s chief economics commentator

segunda-feira, 14 de abril de 2014

Jürgen Stark: Doomsayers risk a self-fulfilling prophecy

Is the eurozone entering a “lost decade” with a conjunction of low growth and deflation? The prospect is unsettling. But the current debate triggered by the International Monetary Fund’s recent World Economic Outlook lacks three important points: an in-depth analysis of the forces driving inflation down; a clear distinction between “benign disinflation” and “bad deflation”, with a spiral of decreasing prices, wages and output triggered by negative expectations; and a better understanding of the European Central Bank’s approach.

Inflation in the eurozone fell in 2013. Low inflation in the eurozone since late 2013 has been driven by falling energy and commodity prices, the fading impact of past tax rises in some countries, the appreciation of the euro and relative price adjustments in countries such as Greece, Ireland and Portugal seeking to regain price competitiveness.

Inflation projections for this year by most institutions range from 0.9 to 1.5 per cent; for 2015, from 1.2 to 1.4 per cent; and for 2016 from 1.5 to 1.8 per cent. Against the backdrop of an expected gradual economic recovery and rising domestic cost pressure, ECB staff project inflation of 1.7 per cent at the end of 2016.

Current inflation of 0.5 per cent is interpreted as far below the ECB’s “target”, and deflation is seen as an imminent danger. The IMF advises the ECB, even if deflation is avoided, to fight ultra-low inflation. The reasoning is that ultra-low inflation makes it harder for some eurozone members to regain competitiveness; and that it increases real interest rates with negative effects on growth and the real value of debt.

Yes, inflation is low in the eurozone. But is it too low? Indeed, has it even reached dangerously low levels that would justify widespread concern about imminent deflation? There are no signs of deflation at the eurozone level. Only a few members have experienced negative inflation rates, mainly because of the ongoing and unavoidable adjustment process in relative prices in these countries. According to the IMF, Greece alone will register an inflation rate that is slightly negative in 2014.

It is likely we are living in an extended period of price stability. This is good news. It boosts real disposable income and will eventually support private consumption. Inflation expectations are well anchored, and there is no evidence households and companies are delaying purchases because of negative expectations. Warnings about outright deflation and calls for ECB action are misguided and irresponsible. The longer this discussion continues, and the more intense it becomes, the more likely the risk of a self-fulfilling prophecy.

On the ECB’s “short-term reaction function”, misunderstanding of its strategy and “target” remains. The assumption of many analysts and commentators is that the ECB – like other central banks – is targeting inflation on a relatively short time horizon, and that its target is “below, but close to, 2 per cent”.

This is incorrect. The ECB has never subscribed to inflation targeting. Its strategy is forward looking and medium-term oriented, taking into account the time lag between a monetary policy decision and its economic impact. The ECB does not react mechanically to data like other central banks. It does not react directly to the change in relative prices. And it does not target inflation at a relatively short and fixed-term horizon.

This strategic approach is mirrored in the ECB’s definition of price stability. This has remained unchanged since 1998-99 as a year-on-year inflation rate of below 2 per cent. The ECB clarified in 2003 that, “within this definition”, it aims to keep inflation rates below, but close to, 2 per cent over the medium term.

With the economic recovery in the eurozone stabilising, and leading indicators pointing upwards, the most likely medium-term scenario is stable prices and a modest upturn over the next two years. No further action by the ECB is required.

Any further action would be of questionable impact, and would lead to an unjustified ultra-loose monetary policy stance for too long, with unintended medium-term consequences. Moreover, it would dramatically complicate the exit from low interest rate and liquidity-providing policies. To prevent a lost decade, structural reforms, sound fiscal policies and a strong and well-capitalised banking sector are crucial instead.

Jürgen Stark is a former European Central Bank board member

Fonte: FT

sexta-feira, 11 de abril de 2014

How Nigeria rewrote its growth story

Nigeria overtook South Africa on Sunday to become Africa’s largest economy after the government nearly doubled estimates for gross domestic product.’

Financial Times, April 6

And I’m the Queen of Sheba. How can a country like Nigeria just “find” $163bn worth of GDP?

The wealth of nations has never been easy to agree on. Like beauty, value lies in the eye of the beholder – in this case the statistician attempting to measure it.

If GDP figures are so subjective, why do we care about them so much?

It is generally believed that if we can agree on some common metrics, the data produced will be meaningful.

And are they?

It’s the best technique we have for putting a figure on the size of the economy. But what we consider valuable can change over time.

How do you mean?

Look at women’s work – for many years overlooked by national statistics. Only when women traded housework for salaried employment did their labour begin to have a meaningful impact on measured GDP. But that doesn’t mean the work they did before had no value.

Still, if you keep calculating the figures in the same way, they’ll tell you whether things are getting better or worse.

Exactly. To come up with a growth rate, statisticians compare one snapshot of the economy with another. They do this by looking at what’s spent in the economy in two different periods.

Sounds simple.

The trouble is inflation. If prices and wages go up, then the amount of money spent can also increase even though living standards stay the same. It’s no good just counting beans if what you really care about is value, and the value of a bean changes from year to year. So the statisticians have to make adjustments.

And how do they do that?

Diane Coyle explains it all in GDP, A brief but affectionate history. The trick is to pick a base year – which might be, say, 2010 – and pretend that prices were frozen in time at that point. When you calculate GDP in subsequent years, you in effect go through each sector of the economy and estimate how much its output would have sold for if prices had not moved since 2010. That way, GDP measurements reflect increases in output, but when prices change GDP doesn’t budge.

That still doesn’t explain Nigeria’s hidden GDP.

The trouble is that you need to change the base year every once in a while. Imagine you were still calculating GDP using 1990 prices. Then you’d be baffled by products such as iPhone apps, e-cigarettes and George Foreman grills, which didn’t have a price in 1990 because they hadn’t been invented yet.

What’s this got to do with Nigeria?

Until last week Nigeria was in fact using 1990 as its base year. It’s now brought it up to date – well, to 2010. This has allowed government statisticians to start measuring activities that previously went unrecorded or didn’t exist. For example, there are now 46 activities included in the GDP compilation instead of 33.

Such as?

A lot of the growth has come from the telecoms and information sector, which are now thought to account for 8.7 per cent of economic activity instead of 0.9 per cent. “Nollywood” – Nigeria’s answer to Hollywood – has also found the limelight. Together with the music and recording industry it has made an entry at 1.4 per cent when previously it was totally overlooked. Services in general have prospered; other sectors, such as agriculture, have declined.

How come no one updated the numbers before now?

There are many reasons why politicians might want to delay this kind of change. For example, developing countries might not want to look richer if it diminishes their eligibility for foreign aid.

So is anyone else planning to rebase?

Actually, yes. Kenya is expected to add about $50bn to measured GDP when it conducts a statistical review next month. Ghana ran a similar exercise in 2010, raising its estimate of economic activity by $13bn. The UK plans to overhaul its national accounts this autumn, which could add significantly to its measuredsavings level. US output figures jumped 3 per cent last July when it changed its treatment of intangibles.

This has made me question the point of statistics.

When Nigeria’s GDP numbers nearly double overnight, you should certainly ask questions. But GDP growth is still our best barometer of economic prosperity. It isn’t perfect – but it isn’t pointless, either.

Izabella Kaminska

Fonte: FT

quarta-feira, 9 de abril de 2014

Beware a heady bond market rush in Athens

Anybody – whether householder, businessman or government debt manager – who has not taken advantage of historically-low interest rates to raise capital or refinance borrowings may have squandered a never-to-be-repeated opportunity. Greece does not want to look the fool.

The country’s return to international bond markets shows a determination to act again like a normal, rational-thinking European state. Greece came close to economic collapse, and defaulted in 2012.

But its earlier-than-expected decision to raise perhaps €2bn or €3bn in five-year bonds is not necessarily something to cheer. Instead, the strong demand for Greek debt highlights the frothy conditions in credit markets – and how they are masking deep underlying problems in economies and financial systems.

From Athens’ point of view, Thursday’s move makes a lot of sense. Two years is a not untypical wait after a default before rebuilding relations with international investors, and the timing looks propitious. Government borrowing costs have tumbled across the eurozone with yields, which move inversely with prices, falling further after last week’s hints of imminent “quantitative easing” by the European Central Bank. Wait any longer, and it may have to pay more.

The urgent wish is that a successful pilot Greek bond market issue boosts confidence, highlights impressive progress in reforming public finances and encourages further foreign investment. Not uncoincidentally it could rally support for Antonis Samaras, prime minister, ahead of May’s European elections.

For adventurous investors, buying Greek bonds also makes sense. Even if the yield falls below the target of around 5 per cent, it will look attractive compared with alternatives.

Although not strictly comparable, yields on European speculative-grade, or “junk”, bonds have dropped below 3.5 per cent, according to Barclays’ indices – lower than on US junk bonds. The spreads over yields on ultra-safe German Bunds have not been lower since the pre-2007 boom.

Buying Greek government bonds, however, is not the same as investing in other western European sovereigns. Greece is categorised formally as an emerging market, and this is fitting given its need to build a record of stable governments and financial as well as social stability.

Ahead of Thursday’s book building, the signs were that conservative, northern European “real money” investors would hold back. “You will always find fast money accounts willing to take the risk, without paying over the odds,” says Gilles Moec, European economist at Deutsche Bank. “But can you build a stable investor base?”

Inflows into Greek bonds may prove fickle. Wait for the next bout of investor nervousness and yields could quickly rise. The trigger could be political tensions in Athens – the bond launch coincided with a nationwide anti-austerity strike. Or it could be stronger than expected polling in next month’s European elections by anti-euro and nationalist political parties – or a global sell-off as the US Federal Reserve moves towards higher interest rates.

In a tougher trading environment, Greece may compare less favourably with other emerging markets. Even after the 2012 restructuring, its public sector debt to gross domestic product ratio – at roughly 175 per cent – remains perilously high. Brazil and South Africa, which were buffeted by the recent emerging market turmoil, have ratios of 67 per cent and 47 per cent.

Whereas other European countries can blame banks, overheating property or credit markets for the crises of the past seven years, Greece’s woes were the clear result of out-of-control public borrowing in a low interest rate environment.

Greece’s finances look more sustainable now it is running a primary budget surplus, before interest payments. Moreover, its 2010 rescue left European Union partners owning most of its debt and immediate servicing costs are low. But this week’s bond offer is not about reducing further its borrowing costs; the average interest rate it pays on official loans is slightly below 2 per cent. It is about proving that Greece has broken out of crisis mode – and giving Athens more flexibility over its finances.

This bond issue is just a modest first step. The danger, however, is that a rush of capital market success distracts from essential reforms such as overhauling a bloated public sector, implementing a meaningful privatisation programme and improving tax collection – building an efficient advanced economy, in other words. I have got into trouble before for suggesting Greece’s return to debt markets is like giving an alcoholic a bottle of Ouzo. But beware a heady feeling in Athens.

Ralph Atkins

Fonte: FT

terça-feira, 8 de abril de 2014

Mario Draghi’s ‘whatever it takes’ may not be enough for the euro

“Whatever it takes.” Mario Draghi’s declaration that he would save the euro could well go down as the most effective three-word statement by a Roman since Julius Caesar’s veni, vidi, vici.

The European Central Bank president’s statement, followed up with a portentous and vaguely threatening – “and believe me it will be enough” – was made in July 2012. Almost two years later, Mr Draghi’s intervention is widely regarded as the turning point in the euro crisis. Investors who were running screaming from the eurozone in the summer of 2012 are now rushing back in.

But whatever the thundering herd of investors may think, it is too soon to declare that Mr Draghi has won the war for the euro. The eurozone still faces deep underlying economic and political problems that are beyond the control of the president of the ECB and his colleagues.

What Mr Draghi has managed to do is to buy the euro some time. The borrowing costs of Spain, Italy and even Greece have fallen sharply – easing the pressure on their economies and government finances. But the underlying economic situation in many eurozone countries is still grim. And the political consequences of prolonged slumps are only just beginning to emerge.

When I asked one of Europe’s most influential economic policy makers recently whether the euro crisis really is over, he replied: “No, it’s just moving from the periphery to the core.” The argument is that while worries about Portugal, Greece, Ireland and Spain have become less acute, concerns about Italy and even France should actually be rising. The statistics for Italy, in particular, are shocking. Since the onset of the crisis in 2008, Italy has lost 25 per cent of its industrial capacity and the real level of unemployment is now, according to senior Italian officials, about 15 per cent. Italy’s scope for economic stimulus is limited by EU rules and by the fact that the country’s ratio of debt to gross domestic product is now more than 130 per cent. France’s economic statistics are less bleak but unemployment is still in double digits and the national debt is creeping up to the symbolic level of 100 per cent of GDP.

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The good news is that both Italy and France have just appointed charismatic new prime ministers, with liberal economic views. But while Matteo Renzi in Italy and Manuel Valls in France are relatively popular, as politicians go, they are also both operating in countries that are notoriously resistant to liberal economic reforms – and against a backdrop of rising support for illiberal, anti-establishment political parties. It is far from clear that a dash of youthful vigour will allow Mr Renzi to bust through systemic barriers that defeated well intentioned predecessors such as Mario Monti. As for Mr Valls, he has already worried economic liberals by promoting Arnaud Montebourg, the most flamboyantly leftwing minister in the French government.

The new Italian and French prime ministers are also under threat from external political forces – in the form of a potential clash with the EU, and a potential shock from events in Ukraine.

Both Italy and France are increasingly chafing at the budgetary constraints imposed on them from Brussels, and policed from Berlin. Mr Renzi argues that Italy’s problem is not deficit spending but a lack of economic growth, which is making its debt burden ever more crushing. President François Hollande of France is said to have argued that the EU can have a live France with a deficit of more than 3 per cent of GDP or a dead France that has succeeded in meeting the EU’s budget constraints. However, those arguments are unlikely to be met with much sympathy in Germany.

A further struggle looms over whether Mr Draghi and the ECB can counter the threat of deflation with a European version of quantitative easing. Mr Draghi seems to be edging towards such a policy. But he too faces deep scepticism in Germany, whose finance minister, Wolfgang Schäuble, bluntly insists that Europe does not have a deflation problem. Indeed, one of the paradoxes of Mr Draghi’s situation is that while he is regarded as a hero in financial markets and in much of Europe, he is still treated with deep suspicion by much of the economic establishment in Germany – which happens to be the country in which he lives. Mr Draghi is said to find this situation wearing.

All of these conflicting forces mean that the political and economic situation of the eurozone remains finely poised and vulnerable to a significant external shock. A worsening of the Ukraine crisis could deliver precisely that shock. If Russian forces move into eastern Ukraine – and, unfortunately, the signs are mounting that this may be imminent – then the EU will be forced to impose tougher economic sanctions on Russia. The Russians can be expected to retaliate by using the most powerful weapon they have at their disposal: energy. Much higher energy prices would have a severe impact on Europe’s fragile economy. And a return to deep recession would almost certainly favour the radical fringes in Europe.

Unfortunately, Mr Draghi has no sway over the Russian government – and not that much influence over the domestic politics of France, Italy or Germany. Yet developments in all of these nations could yet reverse the progress in the eurozone that the ECB president did so much to engineer.

I do not doubt that Mr Draghi will try to do “whatever it takes”. I just fear that, ultimately, it may not be enough.

Gideon Rachman

Fonte: Ft

segunda-feira, 7 de abril de 2014


Plural, palavra chave no discurso politicamente correto é usado à esquerda e à direita para  demandar reservas de mercado para o respectivo conjunto de idéias que deixado ao livre jogo do mercado seriam devidamente ignoradas. Nos Estados Unidos, a direita reclama que não tem espaço no mundo acadêmico e defende como solução a contratação de um numero maior de acadêmicos conservadores e fim da perseguição aos alunos conservadores. Dificil, mesmo com toda  a boa vontade atende-la: conservadores no mercado acadêmico é raridade. Aparentemente, argumenta, a esquerda contrária a demanda, estão mais interessados em ganhar dinheiro.  Pode ser verdade, mas, convenhamos,  que somente sendo masoquista para aceitar a combinação salário baixo e ambiente hostil.
No grande bananão, apesar de não ser necessario advogar esse tipo de política - aqui, como  lá, conservadores, aparentemente, são minorias, pelo menos na área de ciencias sociais - o pluralismo é  parte  importante do discurso para justificar por ex, uma carga maior de disciplinas que em condições normais não teriam o espaço que tem no curriculum de alguns cursos.  É um pluralismo que passa a falsa impressão que  o autor/escola de pensamento x tem a mesma relevancia que a y, mesmo sabendo-se não ser este caso, recorre-se ao argumento, falso, que se isto não ocorre é porque não tem o mesmo espaço na maioria das instituições. Ninguem, está interessado em saber as razões reais do desconhecimento ou pouco apreço por ela: é mais confortável viver no mundo da fantasia, afinal como afirma um cantor e compositor: ninguem acredita na vida real.

sexta-feira, 4 de abril de 2014

Mario Draghi has to back QE words with action

The power of a central bankers’ jawbone is awesome. But there are limits. After a point, words must be backed by actions to have any effect. That point may be approaching in the eurozone.

The story so far: until the summer of 2012, the eurozone seemed to be caught in a death spiral. Confidence in the debt of peripheral countries ebbed, putting pressure on them to leave the euro. That drastic step would have opened for them the option of devaluation, which would make it easier for them to pay their debts.

Then, in the summer of 2012, the new head of the European Central Bank, Mario Draghi, promised to do “whatever it takes” to save the euro. He added portentously: “And believe me, it will be enough.”

The markets believed him. The spread of Italian and Spanish debt yields over German Bund yields is not quite back to pre-crisis levels, but it is close. Conventional wisdom is now that the euro will survive, without even the loss of Greece. And all of this without Mr Draghi ever having to back up his words with action.

The problem now is that the ECB is trying to work the same trick again, this time to avert deflation in the eurozone – described by Christine Lagarde, head of the International Monetary Fund, as the “ogre of deflation”. The trick might not work this time.

A sluggish European economy is a natural consequence of the policies that staved off the debt crisis. The countries whose debt came under threat had to agree to tough austerity programmes that in the short term lead to high unemployment.

The hope is that this pain will eventually lead to a slimmed down economy and resumed growth. The risk is that instead the eurozone slides into a “Japanese scenario”.

Prices fall, thanks to sluggish economic activity. Consumers do not buy now, as goods will be cheaper in future. This lack of consumption slows growth further, and pushes prices down even further.

Inflation in the eurozone has been decreasing for a while, to 0.5 per cent. This is far below the ECB’s 2 per cent target.

Economists expect the eurozone economy to expand, but not fast. The ECB expects 1.2 per cent growth this year, rising to 1.8 per cent in 2016.

The natural response to this would be some form of quantitative easing, known as QE – buying bonds to push down their yields and push up asset prices. The UK and the US have both resorted to this measure.

The ECB, the successor to Germany’s Bundesbank, has a far deeper aversion to inflation than other central banks. But even Bundesbank officials have talked in recent weeks about possible justifications for QE.

But no QE, or indeed any change to monetary policy, was forthcoming at this week’s ECB meeting. Mr Draghi tried to talk down the euro by talking up the possibility of QE – but with no hint that bond purchases were imminent.

In a hypothetical situation of persistent low inflation, the ECB’s board would be “unanimous” in taking “radical” measures. He confirmed that QE had been discussed.

That pushed the euro down but only by about 0.3 per cent in the hours after Mr Draghi spoke. The power of the jawbone is weakening. In any case, Mr Draghi forecast that inflation will move up again, even without QE. Traders must see action as well as words, or they will soon stop listening.

Markets, meanwhile, send contradictory signals. It is hard to make sense of equity valuations unless they assume that Europe will soon receive its own sugar rush of cheap money. European equities are still cheaper than in the US, but then Europe is dominated by companies that tend to trade on lower multiples, such as utilities. Since the “whatever it takes” speech, European stocks have grown faster than those in the US, attracting significant inflows.

Bonds suggest deep concern about deflation. As the chart shows, the yield on German Bunds has not been this far below the yield on equivalent US Treasuries since 2005.

With the Fed removing support for bond prices, while the ECB prepares to support them, a weaker euro against the dollar should result. As the chart shows, this has been the pattern over time, but not now. The euro remains remarkably strong. This is a clear bet by the forex market that the ECB will continue to do nothing.

That creates its own problem. A stronger currency makes exports less competitive, and reduces inflation. Mr Draghi himself estimated that the rise in the euro since its latest low in 2012 has reduced eurozone inflation by about 0.4 percentage points. So if the forex market continues to bet this way, it might force the ECB to act.

The logic points inexorably towards a continent that slowly slides into deflation, with the ECB not resorting to QE until this deflationary pattern is clear – by which time it may be too late.

At present, therefore, buying European equities requires faith that the situation will become so bad as to force the ECB to act. That is a convoluted, and dangerous, rationale.

John Authers