We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.

The report states that the developed economies resort to subsidizing of export industries, while the developing use a number of different measures, among them imposing tariffs. According to the World Bank, this is testimony of the superior financial strength of the developed economies. The generated deficits might however increase pressure to “wall off” the economy, by which I assume they mean increasing trade tariffs.

When the rich countries of the world resort to direct subsidies for business, as is the case with the American car industry subsidies, the poorer countries should have reason to fear. Neither rich nor poor countries can afford to stop trading, but the fact that the richer countries have access to subsidies and the poor countries must wall off trade might prove very bad news for the poorer countries in the long run.

Find the rather short and easily read report here:

http://siteresources.worldbank.org/NEWS/Resources/Trade_Note_37.pdf

[youtube=http://www.youtube.com/watch?v=Q0zEXdDO5JU]

[youtube=http://www.youtube.com/watch?v=iYhDkZjKBEw]

Thanks to NRKBeta for the tip.

Econtalk is, like its name implies, talking on economics and related spheres – mostly political economy. If you regard the more policy-related parts of economics as being within the interest sphere of political science, there is an abundance of good material here.

By looking up Browse Archives|By category in the left hand menu you can see only those categorized as “political science”, although this seems very narrowly defined. I picked three broadcasts and listened to them a couple of times to make up my opinion. The three were:

• “Acemoglu on the Financial Crisis“
• “Coyne on exporting democracy after war“
• “Weingast on Violence, Power and a Theory of nearly everything.“

The style of the Econtalk series is quite different from the LSE series. These are not recordings of lectures, but radio-style broadcasts made for podcasting. At least all the three I listened appear to be studio-recorded interviews with scientists, some of them being conducted over the phone or otherwise from some remote location. The posting schedule seems to be quite consistently once per week.

The technical quality of the broadcasts is very good, as is to be expected to studio recordings as opposed to lecture halls. There’s no distracting noise (except for telephone voice, but that’s something I can live with) or other things making the broadcasts hard to follow, as was the case with the LSE recordings. This is all in good radio quality as you’d expect from a professional radio station. All the broadcasts appear to be audio only.

The interviews are conducted by Russ Roberts, professor of Economics at George Mason. He’s clearly an economist and not a political scientist, but he is one of those apparently open-minded economists that have a bit broader outlook than only formal models. I’d like to classify him as a proper political economist. Like the great majority of modern day economists he’s clearly very much a neo-liberalist, not very surprising considering the publisher. This clearly also influences both the selection of interview subjects and the questions asked. I occasionally get the idea that he deliberately tries to trick his interviewees into confirming that classical neo-liberal ideas are the logical conclusion of their theories. At other times, however, he comes across as quite moderate in reevaluating these conceptions, as for example in the Acemoglu interview regarding the faults of modern economics.

I could say a lot about the interview format. On the one hand, there is much space for the scientists to express themselves, on the other hand Roberts clearly “leads the witness” in his talks, steering them in the direction he wants the conversation to go. This is both a good thing and a bad. Occasionally it appears he goes a bit too far in offering his own explanations of the theories presented rather than letting the authors themselves explain. On the other hand, he is able to control things and make the conversation stay on topic in a way you can’t in a recorded public lecture.  Still – this has been done with great success on radio for decades, and this is in just that style. It works, but not with the same unpredictability you get from recorded lectures, especially with a Q&A session.

The three broadcasts I listened to were all interviews with authors of recent books that present interesing theories of political economy. Two of them (Weingast and Coyne) are related to the development of democracy, while the third (Acemoglu) deals with new explanations of the finance crisis. They are all very interesting, dealing with new ideas and explanations that make sense. The interviewees are all people who can explain things simply enough to be interesting, yet presenting cutting edge scientific theories. Prof. Roberts also asks insightful questions and help clarify along the way.

What makes the whole thing less interesting, is that there is no opposition or confrontation at any point. This is all conversation without the slightest hint of “difficult” questions or trying to challenge the theories put forward. I’d love to see Prof. Roberts challenging his subjects further, putting their theories a bit more to the test.

So, to sum things up in short: I’ll warmly recommend this podcast, but I miss the academic spirit of critical examination of the theories presented. This could have raised them from good to great. The good technical quality is a big plus.

The finance crisis certainly took a turn for the unexpected today when the US House of Representatives turned down the $700 billion rescue package proposed by president Bush. Of course it was controversial for USA to consider this in the first place, given that they have been the largest driving force in pushing the International Monetary Fund to try and discourage other governments from doing the same in times of crisis. Wall Street seems to have expected them to go through with it this time though, as the news brought the biggest plummet in stock prices in American history. So how could they possibly risk the crisis getting even worse?

There are a lot of different reasons, possibly as many as the 227 congressmen that voted against. Here are a few. Off the top of my head I’ll try to point to a few.

USA would certainly lose some support for their great crusade for economic liberalization throughout the world if they had gone through with it. One of the demands the US has made through the IMF in former finance crises have been that they don’t bail out companies in trouble. The market is supposed to be allowed to weed out companies which have taken too great risks.

One blogger who took this view is former Malaysian Prime Minister, Tun Mahathir Mohamad. On his blog chedet.com, he’s pondering the current finance cisis, as do most of us who take an interest in what goes on in the world. And he’s got some quite understandable grievances. During the Asian finance crisis in the late 90s, he was among those exposed to great pressure to let failing banks go bankrupt, to restrain government spending and generally run a tight ship economically speaking. It’s not hard to feel cheated when USA faces a crise of similar proportions and congress seemed about to deal out an amazingly huge number of dollars to bail out companies on the verge of bankruptcy. And I suspect Tun Mahathir isn’t the only one to feel this way. A lot of world leaders dependent on the IMF in times of crisis would have legitimate reasons to refuse to be forced to take the same measures.

Another important reason could be that the American government doesn’t really have this money. According to IMF, the US government for example only has 72 billion USD in foreign currency reserves. That’s only one tenth of the money they proposed to spend on the rescue package. USA already owes a daunting 13 trillion dollars(!!) (according to the US Treasury) to other countries as a result of buying more from other countries than they sell each year. This certainly isn’t going to help…

Other than this, a lot of congressmen are ideologically opposed to the bailout to begin with. They believe very strongly in the market, and consider it completely wrong to stop the market from punishing the companies that have taken too big risks. Consequences be damned.

A more compelling reason to the man in the street would probably be that a lot of people have gotten extremely rich from managing the economy poorly. Banking exectuives and shareholders have reaped enormous profits from the buying and selling of debts people should never have been allowed to take out to begin with. And of course it’s unfair if the companies that have allowed them to do this are bailed out when their bluff is called.

Whatever the reason – not introducing any measures at all sounds really risky to me as well. As much as I’d like to see the greedy bastards who brought this crisis upon the world punished, it’s hard to see that happening without the rest of us getting punished too.

I’m lucky enough to be living in a country so rich our government will be able to cushion any blow to the world economy enough that nobody will starve. I fear for all those who live in countries who don’t. And the only ones who get a say are the Americans…

Other things written about this:

• The Monkey Cage: “Parallels“
• Voting while intoxicated: “The Fall“
• Chedet.com: “The United States“
• Political Animal on presidential impotence.