Joseph E. Stiglitz's Blog, page 10

Sub-Saharan Africa's Eurobond borrowing spree gathers pace

Why are an increasing number of developing countries resorting to expensive sovereign-bond issues?

In recent years, a growing number of African governments have issued Eurobonds, diversifying away from traditional sources of finance such as concessional debt and foreign direct investment. Taking the lead in October 2007, when it issued a $750m (£485m) Eurobond with an 8.5% coupon rate, Ghana earned the distinction of being the first Sub-Saharan country other than South Africa to issue bonds in 30 years.

Mark Carney: what should he do now? Our panel's verdict

Our panel of experts share their advice for the incoming Bank of England governor as he starts his first day in the job

So-called free trade talks should be in the public, not corporate interest

Instead a negotiation process that is neither democratic and or transparent is likely to perpetuate a managed trade regime

Though nothing has come of the World Trade Organisation's Doha development round of global trade negotiations since they were launched almost a dozen years ago, another round of talks is in the works. This time the negotiations will not be held on a global, multilateral basis. Rather, two huge regional agreements one transpacific, and the other transatlantic are to be negotiated. Are the coming talks likely to be more successful?

We need a fair system for restructuring sovereign debt

If the debt vultures have their way, there will never be a fresh start for indebted countries - and no one will agree to restructuring

A recent decision by a United States appeals court threatens to upend global sovereign debt markets. It may even lead to the US no longer being viewed as a good place to issue sovereign debt. At the very least, it renders non-viable all debt restructurings under the standard debt contracts. In the process, a basic principle of modern capitalism that when debtors cannot pay back creditors, a fresh start is needed has been overturned.

The trouble began a dozen years ago, when Argentina had no choice but to devalue its currency and default on its debt. Under the existing regime, the country had been on a rapid downward spiral of the kind that has now become familiar in Greece and elsewhere in Europe. Unemployment was soaring, and austerity, rather than restoring fiscal balance, simply exacerbated the economic downturn.

After the financial crisis we were all Keynesians but not for long enough

The eurozone may be growing again but, in any meaningful sense, an economy in which most people's incomes are below their pre-2008 levels is still in recession

When the US investment bank Lehman Brothers collapsed in 2008, triggering the worst global financial crisis since the Great Depression, a broad consensus about what caused the crisis seemed to emerge.

A bloated and dysfunctional financial system had misallocated capital and, rather than managing risk, had actually created it. Financial deregulation together with easy money had contributed to excessive risk-taking. Monetary policy would be relatively ineffective in reviving the economy, even if still-easier money might prevent the financial system's total collapse. Thus, greater reliance on fiscal policy increased government spending would be necessary.

Developing countries are right to resist restrictive trade agreements

Corporations are attempting to achieve by stealth through secretly negotiated trade agreements what they could not attain in an open political process

International investment agreements are once again in the news. The United States is trying to impose a strong investment pact within the two big so-called "partnership" agreements, one bridging the Atlantic, the other the Pacific, that are now being negotiated. But there is growing opposition to such moves.

South Africa has decided to stop the automatic renewal of investment agreements that it signed in the early post-apartheid period, and has announced that some will be terminated. Ecuador and Venezuela have already terminated theirs. India says that it will sign an investment agreement with the US only if the dispute-resolution mechanism is changed. For its part, Brazil has never had one at all.

Only an inveterate optimist would say the worst must be over for the eurozone

Try telling people in countries that are still in depression, with per capita GDP below pre-2008 levels and youth unemployment at 50% that the austerity medicine has worked

It has been three years since the outbreak of the euro crisis, and only an inveterate optimist would say that the worst is definitely over.

Some, noting that the eurozone's double-dip recession has ended, conclude that the austerity medicine has worked. But try telling that to those in countries that are still in depression, with per capita GDP still below pre-2008 levels, unemployment rates above 20% and youth unemployment at more than 50%. At the current pace of "recovery" no return to normality can be expected until well into the next decade.

A dismal new year for the global economy

Unemployment levels in the US and the eurozone point to a tough 2014 despite some small signs of optimism

Economics is often called the dismal science, and for the last half-decade it has come by its reputation honestly in the advanced economies. Unfortunately, the year ahead will bring little relief.

The current economic malaise is the result of flawed policies

It is not the result of the inexorable laws of economics, to which we simply must adjust, or even a penance for past sins

Soon after the global financial crisis erupted in 2008, I warned that unless the right policies were adopted, Japanese-style malaise slow growth and near-stagnant incomes for years to come could set in.

While leaders on both sides of the Atlantic claimed that they had learned the lessons of Japan, they promptly proceeded to repeat some of the same mistakes. Now, even a key former United States official, the economist Larry Summers, is warning of secular stagnation.

The benefits of internet innovation are hard to spot in GDP statistics

As economist Robert Solow lamented: 'You can see the computer age everywhere but in the productivity statistics'

Around the world, there is enormous enthusiasm for the type of technological innovation symbolised by Silicon Valley. In this view, America's ingenuity represents its true comparative advantage, which others strive to imitate. But there is a puzzle: it is difficult to detect the benefits of this innovation in GDP statistics.

What is happening today is analogous to developments a few decades ago, early in the era of personal computers. In 1987, economist Robert Solow awarded the Nobel Prize for his pioneering work on growth lamented: "You can see the computer age everywhere but in the productivity statistics." There are several possible explanations for this.