Main menu:

History of RPE Thought

Posts by Tag

RSS New from the CCPA

  • Report looks at captured nature of BC’s Oil and Gas Commission August 6, 2019
    From an early stage, BC’s Oil and Gas Commission bore the hallmarks of a captured regulator. The very industry that the Commission was formed to regulate had a significant hand in its creation and, too often, the interests of the industry it regulates take precedence over the public interest. This report looks at the evolution […]
    Canadian Centre for Policy Alternatives
  • Correcting the Record July 26, 2019
    Earlier this week Kris Sims and Franco Terrazzano of the Canadian Taxpayers Federation wrote an opinion piece that was published in the Calgary Sun, Edmonton Sun, Winnipeg Sun, Ottawa Sun and Toronto Sun. The opinion piece makes several false claims and connections regarding the Corporate Mapping Project (CMP), which we would like to correct. The […]
    Canadian Centre for Policy Alternatives
  • Rental Wage in Canada July 18, 2019
    Our new report maps rental affordability in neighbourhoods across Canada by calculating the “rental wage,” which is the hourly wage needed to afford an average apartment without spending more than 30% of one’s earnings.  Across all of Canada, the average wage needed to afford a two-bedroom apartment is $22.40/h, or $20.20/h for an average one […]
    Canadian Centre for Policy Alternatives
  • Towards Justice: Tackling Indigenous Child Poverty in Canada July 9, 2019
    CCPA senior economist David Macdonald co-authored a new report, Towards Justice: Tackling Indigenous Child Poverty in Canada­—released by Upstream Institute in partnership with the Assembly of First Nations (AFN) and the Canadian Centre for Policy Alternatives (CCPA)—tracks child poverty rates using Census 2006, the 2011 National Household Survey and Census 2016. The report is available for […]
    Canadian Centre for Policy Alternatives
  • Fossil-Power Top 50 launched July 3, 2019
    What do Suncor, Encana, the Royal Bank of Canada, the Fraser Institute and 46 other companies and organizations have in common? They are among the entities that make up the most influential fossil fuel industry players in Canada. Today, the Corporate Mapping Project (CMP) is drawing attention to these powerful corporations and organizations with the […]
    Canadian Centre for Policy Alternatives
Progressive Bloggers

Meta

Recent Blog Posts

Posts by Author

Recent Blog Comments

The Progressive Economics Forum

The G20 – Fiscal Austerity or Co-ordinated Recovery?

Further to my earlier post on the turn to fiscal austerity on the part of the IMF, OECD and G20, it increasingly strikes me that there is a fundamental contradiction between G20 goals going into the Toronto summit.

At Pittsburgh, the G20 called for a “Framework for Strong, Sustainable, and Balanced Growth.”

“We will need to work together as we manage the transition to a more balanced pattern of global growth…To put in place this framework, we commit to develop a process whereby we set out our objectives, put forward policies to achieve these objectives, and together assess our progress. We will ask the IMF to help us with its analysis of how our respective national or regional policy frameworks fit together… We will work together to ensure that our fiscal, monetary, trade, and structural policies are collectively consistent with more sustainable and balanced trajectories of growth.

Put simply, the idea is that there in an onus on countries running large trade surpluses (especially China) to expand demand so as to allow chronic deficit countries (especially the US) to grow through exports rather than re balance through domestic austerity.

This approach is hard to square with the request from Prime Minister Harper that G20 countries come to Toronto with concrete plans to reduce deficits over the next few years, not to mention the lurch to austerity in Germany.

From the perspective of closing global balance of payments imbalances, both Germany and Japan (with current account surpluses of 6.0% and 3.3% of GDP respectively) should be expanding domestic demand so that the US and those Euro countries with current account and trade deficits can grow out of their balance of payment and fiscal problems.

But Germany and Japan are running significant fiscal deficits, currently running at 5.4% and 7.6% of GDP respectively. (All data are for 2010 from the statistical annex of the OECD Economic Outlook.)

Should Germany and Japan – which are, after all, major chunks of the global economy – expand or contract domestic demand?

The fiscal hawks – which now seem to include the IMF, the OECD and Canada – seem to be saying that they must cut to restore market confidence.

But both Germany and Japan can readily finance their deficits at home at low cost  (even with debt at 200% of GDP, Japan’s debt servicing costs are only 2% of GDP.)

There is a long-standing pattern for surplus economies like Germany and Japan not to assume responsibility for the stability of the global capitalist system as a whole. Traditionally, that task has been assumed by the US, playing the role of global consumer of last resort.

The question is – will the US come to Toronto with the message that they can no longer play that role and that the torch must be passed to an effective G20?     The Obama Administration seem to recognize that continued stimulus is needed to maintain the global recovery, but they cannot continue to deficit finance a global recovery from which the US domestic economy and US workers are excluded. And that is exactly what will happen if big players like Germany shift to domestic austerity and  are happy to see their currencies depreciate against the US dollar.

In short, there is a lot in play.

Enjoy and share:

Comments

Comment from errol black
Time: June 17, 2010, 5:43 pm

A useful article

Comment from Paul Tulloch
Time: June 18, 2010, 9:49 am

good post Andrew. I also think we need to know, where we are going. If the economies start slowing under austerity that like idiots they are all pushing, land we all know that they will, we need to hear at least some whispers in the hallway that address the simple question- what the hell are we going to do when it all starts coming apart at every nail.

A couple of murmurs will not be enough, we need at least whispers, rumours, etc to start circulating. Instead what we will see is more chest thumping by orthodox that everything is firmly under control and austerity is the way forward.

what a mess.

phrack.

Write a comment





Related articles