Sunday, January 25, 2009

A Glass of Wine in the Face..

Luke Akehurst has written one of his let's have a go at Compass pieces for Progress, he's taken a look at Compass' excellent How To Live in the 21st Century website picked a few ideas and suggested that they are completely ridiculous. Thing is, one of them was mine.

I wrote a piece and an accompanying blog post, advocating restrictions on currency convertability and I stand by it. I believe that unrestricted international capital flows have been a major factor in the current financial crisis. I believe that a look at currency convertability is something that should be seriously considered. The IMF has for too long been run in the interests of the financial community of rich nations and at a time when reform of the international financial institutions is seriously being considered, the fund's attitude to exchange controls is in serious need of consideration.

The basis of the policy I propose is taken from two papers by Ilene Grabel who is Professor of International Economics and Director, MA in Global Finance, Trade and Economic Integration at the University of Denver these are "Averting Crisis: Asessing measures to manage financial integration in emerging economies." and "Trip Wires and speed bumps: Managing financial risks and reducing the potential for financial crises in developing economies". And while I take a bit of license in applying policies intending for the developing world to developed economies I believe that the currenct crisis proves that concerns over capital flows apply equally to developed economies.

I believe that my policy proposal has a fairly sound basis, and I really don't like the suggestion that this proposal is not "Politics for Adults". So Luke, I'm calling you out, I demand you either apologise to me and make a note on your post accordingly or you provide suitable intellectual justification for why you believe that this policy idea deserves such a comprehensive rubbishing.


Milton Keynes said...

"I demand you either apologise to me and make a note on your post accordingly or you provide suitable intellectual justification for why you believe that this policy idea deserves such a comprehensive rubbishing."

Don't hold your breath, dumb ass.

Andreas Paterson said...

Insults from an anonymous coward? I do hope that the Labour right can do better than that.

Ravi Gopaul said...

I think the right's problem with this idea is that they want to maintain the open market system we have. I think they feel by imposing exchange controls might make countries nervous about trading with us and there by impose their own controls (tit for tat). This then would lead to a shrinking of the world economy.

They feel that globilisation is the new internationalism and is a mechanism for eleviating world poverty. Certainly their case is strengthened when you see how China has used its finanical might to lift itself out of poverty.

That said, I happen to think there is market shrinkage is happening anyway, and our economy is slowing down, and considering I am of the left I can see the benefits of the system you propose.

Andreas Paterson said...

Thanks Ravi, I would argue that China doesn't strengthen their case in the slightest, China doesn't allow full convertability for it's currency. Neither does India (to my knowledge). The best economic peformance in the developing world has generally been among countries that have limited foriegn exchange.

Ravi Gopaul said...

It's hard being Devil's Advocate!

With regards to India, they have exchange controls too.

The point I was trying (albeit clumsly) is that globally free markets have made countries richer, although I happen to think globalisation is another way to exploit the poor.

The point really was globalisation
helping elviate poverty (the right's favoured mantra)and how that is used to excuse low government involvement in the economy (even as you rightly say China and India have mixed economies).

However this approach has been utterly trashed in the last few months and I feel we have a climate where labourist socialism (social democracy) is in the acendancy.

Given growth is unsustainable in the long term (dwindling resourses) traditional capialism has be reformed round the social democratic model we (used to) espouse in the party.
This is why I agree with your precis on exchange controls. It is something Crosland might have agreed with.

Looking at the ideas put forward by Compass (via Luke's Blog) some of them sound pretty good to me (including your idea), but looking at the Independent poll today, things are not looking good for us.

Andreas Paterson said...

I’m sure I’m preaching to the choir here, but…I would seriously dispute even the supposed growth benefits of globally free markets; I’ve come across a fair amount of data that shows that even the growth benefits are questionable. There can be no doubt that they have led to greater financial instability.

What I object to is Luke’s tone, he often likes to mock the left more generally and act as if our ideas have no intellectual merit. That’s certainly the case with his Progress post, if Luke really believes that my idea is so readily dismissed he should have no problem coming here and providing a suitable counterargument.

Ravi Gopaul said...

Well I certainly agree with you with regards to Luke's obvious sectarian predjudice.

From what I've read, with special reference to Lord Desai's "Marx's Revenge" he talks about how capitalism has been able to deliver more than statist socialism, vis a vis poverty reduction, but I am happy to read more on the subject.

I agree with you about free markets, and we have been vindicated by what appears to be unfurling at the moment.

Andreas Paterson said...

I've not actually read Desai although I'm not sure our posistions are a million miles apart. I have a preference for the less globalised pre 1980's capitalism over the more recent variety dominated by big finance.

I'd recommend Ha-Joon Chang's Kicking Away the Ladder and Bad Samaritans. The first is more academic and full of tables and stats the second is more polemical and enjoyable.

Ravi Gopaul said...

I could be talking with myself! We seem to agree on everything, unless you don't like fried eggs!

I agree with your vision of a pre 1980's capitalism, as it the state had a role in the running of the economy.

As for the books I'll add them to the list to read, thanks!