Comments on Richard Kozul-Wright and Daniel Poon "Development finance with Chinese characteristics", 9/06/2015
I think that a new governing model for the Asian Infrastructure Investment Bank (AIIB) could be to seek a balance between economic weights or contributions to the AIIB and members' sovereignty.
Such a governing structure will have the feature of combining both the representative and senate structures in many Western democracies. It will have more desirable properties than both the current governing structures of the World Bank and the IMF. For example, it is more objective as opposed to the arbitrary nature of the existing ones.
Further, it gives an equal weight to each country in the sovereign part of the proposed structure. The objectiveness and fairness are superior to all the current models of governance.
If China and other countries are interested in successfully reforming the current international financing bodies, they are likely to have a much stronger argument should they carefully consider and device a better governing model and mechanism. The model proposed here can help them to advance their goals and endeavors in seeking to reform both the IMF and the World Bank.
Showing posts with label IMF. Show all posts
Showing posts with label IMF. Show all posts
2015-06-21
2014-02-25
Effective decision making key to regional infrastructure investment
Comments on Mahendra
Siregar, BKPM, Andrew Elek, ANU, and Maria Monica Wihardja “Seizing the global
infrastructure opportunity in Indonesia”, 25/02/2014, http://www.eastasiaforum.org/2014/02/24/seizing-the-global-infrastructure-opportunity-in-indonesia/
If I were an Indonesian charged with managing the economy, I
would probably put more emphasis and focus on the most likely and feasible
options that are likely to be outside the G20 and possibly APEC exist multilateral
frameworks. Some commentators have commented that the G20 has become a
talkfest. And it seems indeed very difficult for the G20 to come to a common
position with strong commitment to the issues discussed in the article, given
the very different situations of the members' domestic economies and politics.
On the other hand, the AIIB initiative may be helpful to
regional infrastructure investment, given that China is the sponsor or
initiator and it has the money to invest overseas, as well as its links to the
regional economies and its desire to show leadership with its financial
resources outside of the IMF and world bank frameworks where it does not have
adequate weight of influence due to under-weighted voting power.
Certainly it would be much easier to make decisions among
the parties involved, given the needs for investing in regional infrastructure
and the financial resources available that is fairly concentrated in terms of
decision making, as compared to the IMF or the world bank where understandably
there are more disparities among the major stakeholders.
The authors’ discussion on that may bear more fruit to
advance infrastructure investment in Indonesia and indeed the East Asia region.
And that is likely to contribute to enhanced growth of the region.
In short, the desire for using
existing multilateral organisations to invest in infrastructure is one thing,
the reality of difficulties in getting agreement is likely to be another, not
too dissimilar to the world trade organisation negotiations and other bilateral
or regional free trade agreements negations.
2011-12-29
Protection versus caution
Comments on Karen Maley “Lagarde rings a euro alarm bell”, 29/12/2011, Karen Maley http://www.businessspectator.com.au/bs.nsf/Article/Lagarde-Italy-bonds-euro-debt-crisis-ECB-banks-pd20111229-PYSUE?OpenDocument&src=sph&src=rot
Perhaps it is helpful that there should be a distinction between appropriate caution and inappropriate protection.
One cannot expect either national parliaments or government not o exercise necessary caution and prudent measures when there are real risks, no matter it involves other governments or private sectors.
But at the same time, there are powerful governments and parliaments that take highly inappropriate protectionist policies or measures.
The US and EU, unfortunately, are among those powerful ones.
Nevertheless, the IMF shouldn't ask nations for their blind supports of bailing out some national governments without appropriate rewards.
This is especially so that the IMF has generally been biased more in favour of rich countries and more harsh towards developing countries in its history.
2011-12-09
IMF must be fair to all members
Comments on Lawrence Summers “Why Europe must lean on the IMF”, 9/12/2011, http://www.businessspectator.com.au/bs.nsf/Article/eurozone-debt-crisis-European-summit-IMF-Christine-pd20111209-PCRUM?OpenDocument&src=sph&src=rot
Will the IMF be "independent" enough to be fair enough to all its member countries?
Will it treat its European member countries the same way it has treated member countries in other regions?
Or will it has multiple rules for different member countries and play favouritism to some privileged ones, and apply different rules of carrots and sticks?
2011-11-07
International institutions should avoid moral hazards
Comments on Wolfgang Münchau “A G20 comedy of irrelevance”, 7/11/2011, http://www.businessspectator.com.au/bs.nsf/Article/G20-summit-eurozone-debt-crisis-Italy-bonds-ECB-EF-pd20111107-NCR2E?OpenDocument&src=mp
No matter what new world and regional institutions are set up, a key principle should be to avoid moral hazard problems.
People or countries with irresponsibility or mistakes must pay a price.
The IMF or ECB cannot be simply bail out countries without those countries required to pay a reasonable price for that bail out.
On the other hand, whoever contribute to bail out should be explicitly rewarded.
Without this kind of quasi market mechanism being introduced and effectively implemented, future failures cannot be minimised.
2011-05-17
Further reforming IMF
Comments on Peter Hartcher “Perfect time to reform the IMF”, 17/05/2011, http://www.smh.com.au/opinion/politics/perfect-time-to-reform-the-imf-20110516-1eps7.html?posted=successful
Peter, this is a very good article with excellent insights.
Some reforms IMF could include:
1. to introduce some franchise into the IMF system, by having some regional sub-committees, which have decisive says on their regional economic affairs, perhaps similar to a federation structure. For example, an Asia sub-committee to have more power to oversee Asian economies.
2. The voting rights should incorporate more than existing or past financial contributions, with some sort of the nature of a senate introduced into it. More could be considered.
3. Of course, there should be some automatic redistribution of voting rights according to and in line with changed circumstances.
4. Rotating arrangement for top IMF candidates, by at least broad regions, or the top X number of voting countries, unless they agree to not exercise their rights.
An important is to initiate this sort of reforming discussions in the right circles.
Peter, this is a very good article with excellent insights.
Some reforms IMF could include:
1. to introduce some franchise into the IMF system, by having some regional sub-committees, which have decisive says on their regional economic affairs, perhaps similar to a federation structure. For example, an Asia sub-committee to have more power to oversee Asian economies.
2. The voting rights should incorporate more than existing or past financial contributions, with some sort of the nature of a senate introduced into it. More could be considered.
3. Of course, there should be some automatic redistribution of voting rights according to and in line with changed circumstances.
4. Rotating arrangement for top IMF candidates, by at least broad regions, or the top X number of voting countries, unless they agree to not exercise their rights.
An important is to initiate this sort of reforming discussions in the right circles.
2010-12-16
IMF lost its way on Australian housing market!
Comments on “House prices to stay overvalued: IMF report”, see BusinessSpectators, 16/12/2010, http://www.businessspectator.com.au/bs.nsf/Article/Overvalued-house-prices-likely-to-stay-C76J5?OpenDocument&src=hp2
Grant Colbran has made a very good point.
Indeed how did the two poor IMF guys get the figure of 120% growth of Australian house price in the last 20 years? They obviously did not understand the Australian housing market.
While they are correct in saying the strong population growth and high values of terms of trade provide support for the overvalued house market, they have not identified and studied the effects of Australia's geographical location and the impact of other Asian countries on the Australian housing market.
They are important factors, because Australia is a western country with a small population located in the East Asia region, with stable democracy and freedom, and high income, large land and lots of nice beaches. The Japanese bought properties in the 70s and 80s. Now the Chinese are buying properties in Australia.
A small number of people in those big countries can mean a big impact on the Asutralian house market!
Anyone ignores these factors run the risk of getting his analysis wrong.
The IMF has lost its way, just as the Rudd government did as claimed by the current PM!
What to do with IMF as opposed to a PM, not much at the moment it seems.
Grant Colbran has made a very good point.
Indeed how did the two poor IMF guys get the figure of 120% growth of Australian house price in the last 20 years? They obviously did not understand the Australian housing market.
While they are correct in saying the strong population growth and high values of terms of trade provide support for the overvalued house market, they have not identified and studied the effects of Australia's geographical location and the impact of other Asian countries on the Australian housing market.
They are important factors, because Australia is a western country with a small population located in the East Asia region, with stable democracy and freedom, and high income, large land and lots of nice beaches. The Japanese bought properties in the 70s and 80s. Now the Chinese are buying properties in Australia.
A small number of people in those big countries can mean a big impact on the Asutralian house market!
Anyone ignores these factors run the risk of getting his analysis wrong.
The IMF has lost its way, just as the Rudd government did as claimed by the current PM!
What to do with IMF as opposed to a PM, not much at the moment it seems.
2010-10-10
G20 and other world and international institutions
Comments on Thom Woodroofe “The G20: More development needed”, 10/10/2010, http://www.eastasiaforum.org/2010/10/10/the-g20-more-development-needed-2/
The G20 should consolidate on its role in world economic and financial affairs first to make it both effective and efficient to steer the world economy and ensure financial stability.
In that role, the G20 should gradually play a leading role in coordinating the agendas of main international economic and financial institutions like the world trade organisation, IMF and the World Bank.
It is possible and indeed desirable for G20 to play a leading role in negotiating a world climate change agreement. The UN should mandate G20 such a role, perhaps as its effective climate change secretariat.
At this stage, it appears more difficult for the G20 to play the role for world security, given the complexity of security issue. Just imagine, if the five UN security permanent members could not reach agreement on some issues, how could the G20 which include all those five to reach agreement on the same issues?
So, the best strategy for the G20 is to play a role in areas it can be successful and gradually to establish itself to be an effective world body, and then to broaden its agenda and influences, including possibly the reforms of UN governing mechanisms
The G20 should consolidate on its role in world economic and financial affairs first to make it both effective and efficient to steer the world economy and ensure financial stability.
In that role, the G20 should gradually play a leading role in coordinating the agendas of main international economic and financial institutions like the world trade organisation, IMF and the World Bank.
It is possible and indeed desirable for G20 to play a leading role in negotiating a world climate change agreement. The UN should mandate G20 such a role, perhaps as its effective climate change secretariat.
At this stage, it appears more difficult for the G20 to play the role for world security, given the complexity of security issue. Just imagine, if the five UN security permanent members could not reach agreement on some issues, how could the G20 which include all those five to reach agreement on the same issues?
So, the best strategy for the G20 is to play a role in areas it can be successful and gradually to establish itself to be an effective world body, and then to broaden its agenda and influences, including possibly the reforms of UN governing mechanisms
2010-10-01
Is IMF credible in lecturing other governments?
Comments on David Uren “Labor facing storm clouds: International Monetary Fund”, 30/09/2010, http://www.theaustralian.com.au/national-affairs/labor-facing-storm-clouds-international-monetary-fund/story-fn59niix-1225932014281
I used to have high respect for IMF the fund, but not any more since its appalling responses to the Asia financial crisis in 1997.
It has changed any bit for any better ever since.
It always lectures other governments in the world on this or that, even though it itself cannot do its job properly.
Isn't that enough to ignore what it says?
I used to have high respect for IMF the fund, but not any more since its appalling responses to the Asia financial crisis in 1997.
It has changed any bit for any better ever since.
It always lectures other governments in the world on this or that, even though it itself cannot do its job properly.
Isn't that enough to ignore what it says?
2010-05-25
IMF has no innovative solution to Greek problems
Comments on John Irish of Reuters “Doubts over Greek aid package remain: IMF”, 25/05/2010, http://www.businessspectator.com.au/bs.nsf/Article/IMF-chief-economist-doubts-over-Greek-aid-package--5RP3D?OpenDocument&src=hp5
It appears that few top economists or government officials have come up with a credible and innovative solution to the problems of some euro members are having.
That is unfortunately a pity.
To me, there is an alternative to the conventional austere approach to Greek and Spain.
That alternative is to allow temporary intra-euro trade measures to be introduced to increase the relative competiveness of those weak euro economies against those strong ones, within the framework of monetary union and independent fiscal sovereignty.
Greek and Spain should be allowed temporarily to impose a tariff on imports from strong euro members and use the revenue to subsidise their exports to those strong economies. Their competiveness is improved and other members will enjoy lower prices of imports from Greek and Spain.
The temporary trade measures should be scheduled to be removed, either gradually over a number of years or at once at some time in the future.
That is no different from currency devaluation when a country has its own currency.
As long as it is restricted within the eurozone, it will be an “internal” issue and should not cause any issue with WTO rules.
It appears that few top economists or government officials have come up with a credible and innovative solution to the problems of some euro members are having.
That is unfortunately a pity.
To me, there is an alternative to the conventional austere approach to Greek and Spain.
That alternative is to allow temporary intra-euro trade measures to be introduced to increase the relative competiveness of those weak euro economies against those strong ones, within the framework of monetary union and independent fiscal sovereignty.
Greek and Spain should be allowed temporarily to impose a tariff on imports from strong euro members and use the revenue to subsidise their exports to those strong economies. Their competiveness is improved and other members will enjoy lower prices of imports from Greek and Spain.
The temporary trade measures should be scheduled to be removed, either gradually over a number of years or at once at some time in the future.
That is no different from currency devaluation when a country has its own currency.
As long as it is restricted within the eurozone, it will be an “internal” issue and should not cause any issue with WTO rules.
2010-05-17
Learn historic lessons correctly
Comments on peter Drysdale “How should Asia read the Greek tragedy? – Weekly editorial”, 17/05/2010, http://www.eastasiaforum.org/2010/05/17/how-should-asia-read-the-greek-tragedy-weekly-editorial/
Global institutions may or may not be helpful when the need arises in a country or a group of countries.
While David Vines argued strongly the outcomes of those Asian countries in coming out of the Asian financial crisis in the 1990s, many may not necessarily share his reasoning to attribute those countries' success later on to the success of IMF measures and its conduct during that painful process.
World institutions theoretically should have greater capacities than regional institutions in terms of dealing with any financial crises.
That, however, should be balanced by the dilution of accountability or interests, the further away an institution is from a country or a region, the less its interests are aligned with the latter's, due to obvious and various political and practical reasons.
At a time of revisiting the role of IMF in the Asian financial crises in the 1990s, one should be objective and not be distorting the fact from what actually occurred.
Only when approaching history correctly will we be able to learn from it and develop correct strategies for the future.
Otherwise, one may be very disappointed from incorrect foundation on which a theory is to be built.
Global institutions may or may not be helpful when the need arises in a country or a group of countries.
While David Vines argued strongly the outcomes of those Asian countries in coming out of the Asian financial crisis in the 1990s, many may not necessarily share his reasoning to attribute those countries' success later on to the success of IMF measures and its conduct during that painful process.
World institutions theoretically should have greater capacities than regional institutions in terms of dealing with any financial crises.
That, however, should be balanced by the dilution of accountability or interests, the further away an institution is from a country or a region, the less its interests are aligned with the latter's, due to obvious and various political and practical reasons.
At a time of revisiting the role of IMF in the Asian financial crises in the 1990s, one should be objective and not be distorting the fact from what actually occurred.
Only when approaching history correctly will we be able to learn from it and develop correct strategies for the future.
Otherwise, one may be very disappointed from incorrect foundation on which a theory is to be built.
2010-04-08
Create new international and secure financial asset classes
Comments on Yang Yao “China’s growing pains, globalisation and adjustment”, 7/04/2010, http://www.eastasiaforum.org/2010/04/07/chinas-growing-pains-globalisation-and-adjustment/comment-page-1/#comment-109532
There is clearly a need for more international assets classes for investors including sovereign funds and central banks.
In that context, IMS SDR might be a good candidate. Alternatively, the World Bank could issue WB bonds. But for liquidity purposes, the IMF or the World Bank must be ready to act as a market maker too in case there is not enough liquidity.
Leaving that aside, why can't China be more innovative to set up an international bank to provide loans in foreign currencies at reasonably favourable rates to sovereign countries? In that way it can also have security and reasonable returns for its international reserves.
Alternatively, why doesn’t China work together with the IMF or the World Bank to create some monetary facilities to create some new international financial asset classes.
Once the issues of assets in foreign currencies and current account trade needs are separated, it is easier for China and indeed other countries too to move more freely on exchange rate issues.
There is clearly a need for more international assets classes for investors including sovereign funds and central banks.
In that context, IMS SDR might be a good candidate. Alternatively, the World Bank could issue WB bonds. But for liquidity purposes, the IMF or the World Bank must be ready to act as a market maker too in case there is not enough liquidity.
Leaving that aside, why can't China be more innovative to set up an international bank to provide loans in foreign currencies at reasonably favourable rates to sovereign countries? In that way it can also have security and reasonable returns for its international reserves.
Alternatively, why doesn’t China work together with the IMF or the World Bank to create some monetary facilities to create some new international financial asset classes.
Once the issues of assets in foreign currencies and current account trade needs are separated, it is easier for China and indeed other countries too to move more freely on exchange rate issues.
2010-04-01
Accelerating IMF reforms
Comments on Mark Thirwell “Reinventing the IMF”, 1/4/2010, http://www.businessspectator.com.au/bs.nsf/Article/IMF-Financial-crisis-Greece-Eurozone-pd20100331-43BQ5?OpenDocument&src=sph
IMF quotas should be based on a moving average of countries' contributions over past 5 years, so it is dynamic and can also avoid one off ad hoc influences.
Then the top few can form the board of directors with their quotas reflected in that structure.
Employment should also reflect countries’ contributions, with some degree of minimum guarantee for groups of small developing countries.
IMF quotas should be based on a moving average of countries' contributions over past 5 years, so it is dynamic and can also avoid one off ad hoc influences.
Then the top few can form the board of directors with their quotas reflected in that structure.
Employment should also reflect countries’ contributions, with some degree of minimum guarantee for groups of small developing countries.
2010-02-18
IMF overkill on inflation targets
Comments on Stephen Grenville “The IMF's inflation heresy”, 18/02/2010, http://www.businessspectator.com.au/bs.nsf/Article/IMF-financial-crisis-inflation-interest-rates-pd20100217-2R4QL?OpenDocument&src=sph
The IMF has completely lost its way in being an effective international organisation of monetary authority.
It has shown that it has been in panic and its responses to new issues and crises have been rushed.
Since the Asian financial crisis, it has been an international bad as opposed an international good.
It should be completely "reformed" or dissolved.
This is by no means to be disrespect to Prof. Blanchard, but having some academic economists with little real world policy experience in charge of such an international monetary authority has its own problems.
The IMF has completely lost its way in being an effective international organisation of monetary authority.
It has shown that it has been in panic and its responses to new issues and crises have been rushed.
Since the Asian financial crisis, it has been an international bad as opposed an international good.
It should be completely "reformed" or dissolved.
This is by no means to be disrespect to Prof. Blanchard, but having some academic economists with little real world policy experience in charge of such an international monetary authority has its own problems.
2010-02-15
Responsding IMF reviews of macro policy framework
Comments on “IMF Draws Lessons from the Crisis, Reviews Macro Policy Framework”, 12/02/2010, by iMFdirect, http://blog-imfdirect.imf.org/2010/02/12/imf-draws-lessons-from-the-crisis-reviews-macro-policy-framework/
IMF has got its policy recommendations wrong so many times, especially in relation to crises, re the Asian financial crisis and the recent financial and economic ones.
Now IMF is talking nonsense again in that paper!
For one thing, countries are different in so many ways and as a result, different macroeconomic settings are required for different circumstances. Why is IMF advocating an approach of one-size-fits-all to inflation targets? It just lacks common sense!
Second, there are other macro policy instruments that can be used in case of the so-called liquidity trap or zero or near zero official interest rate. Why introducing additional costs unnecessarily as a means to deal with a situation that can be better dealt with using other means?
Has IMF considered any cost-benefit effects of the costs of permanently higher inflation and the potential benefits in the context that there are other policy tools available?
IMF has been out of touch with reality and is now even more out of touch.
It appears to be a panic response to its past failures in policy recommendations.
That will not improve but further harm its standing.
One has to wonder what is the use for such an ineffectual and harmful international organisation that is funded by world taxpayers.
IMF has got its policy recommendations wrong so many times, especially in relation to crises, re the Asian financial crisis and the recent financial and economic ones.
Now IMF is talking nonsense again in that paper!
For one thing, countries are different in so many ways and as a result, different macroeconomic settings are required for different circumstances. Why is IMF advocating an approach of one-size-fits-all to inflation targets? It just lacks common sense!
Second, there are other macro policy instruments that can be used in case of the so-called liquidity trap or zero or near zero official interest rate. Why introducing additional costs unnecessarily as a means to deal with a situation that can be better dealt with using other means?
Has IMF considered any cost-benefit effects of the costs of permanently higher inflation and the potential benefits in the context that there are other policy tools available?
IMF has been out of touch with reality and is now even more out of touch.
It appears to be a panic response to its past failures in policy recommendations.
That will not improve but further harm its standing.
One has to wonder what is the use for such an ineffectual and harmful international organisation that is funded by world taxpayers.
IMF should be completely reformed or dissolved
Comments on Michael Stutchbury “IMF's inflation call recipe for rate hike”, 15/02/2010, http://www.theaustralian.com.au/news/opinion/imfs-inflation-call-recipe-for-rate-hike/story-e6frg6zo-1225830282996
Yes, it does look like the IMF is now working as an advocate for the US to inflate its way out of its punishing public debt, at the expense of those US T bond holders.
The IMF's formula for 4% inflation target, if it is true, proves it’s out of touch with economic reality and its panic state in the wake of its own failures as a public international finance organisation in charge of international macroeconomic policies, especially in the wake of the current financial and economic crises.
Countries have different economic situations and require different macroeconomic policies. A one size-fit-all approach advocated by the IMF will be disastrous.
The IMF should be completely reformed, or dissolved.
Australia has done well to weather the world crises and is the only developed economies that avoided a recession due to the legacy of its previously sound macroeconomic management including inflation target at 2-3%.
Why didn’t the IMF study the Australian experience?
Yes, it does look like the IMF is now working as an advocate for the US to inflate its way out of its punishing public debt, at the expense of those US T bond holders.
The IMF's formula for 4% inflation target, if it is true, proves it’s out of touch with economic reality and its panic state in the wake of its own failures as a public international finance organisation in charge of international macroeconomic policies, especially in the wake of the current financial and economic crises.
Countries have different economic situations and require different macroeconomic policies. A one size-fit-all approach advocated by the IMF will be disastrous.
The IMF should be completely reformed, or dissolved.
Australia has done well to weather the world crises and is the only developed economies that avoided a recession due to the legacy of its previously sound macroeconomic management including inflation target at 2-3%.
Why didn’t the IMF study the Australian experience?
2009-09-28
Swan shoots at his foot by relying on what G20 says generally
Comments on Michael Stutchbury “Will Wayne plan pass the IMF test?”, 28/09/2009, http://www.theaustralian.news.com.au/story/0,25197,26133477-5017771,00.html
It will be interesting to see how much those countries will adhere to their pledges to let the IMF to prescribe economic policies for those individual countries. But I doubt that will ever work for any of the large countries in the group.
Swan and Rudd may backfire if they rely too much on what the G20 is prescribing now as a matter of principle for the group as a whole but not necessarily applicable to every individual country.
Australia is very different from all other developed countries in the group. As a result, the policy positions should naturally be different too. But the government does not admit this on political grounds.
It appears that both are choosing what is good for them at the moment, but there will be a day of reckoning ahead when they will have to contradict what is prescribed as the medicine for a general situation.
I personally don’t place too much trust on Swan’s reliance on what the G20 is saying now, although I stand ready for correction if I am proven to be wrong.
It will be interesting to see how much those countries will adhere to their pledges to let the IMF to prescribe economic policies for those individual countries. But I doubt that will ever work for any of the large countries in the group.
Swan and Rudd may backfire if they rely too much on what the G20 is prescribing now as a matter of principle for the group as a whole but not necessarily applicable to every individual country.
Australia is very different from all other developed countries in the group. As a result, the policy positions should naturally be different too. But the government does not admit this on political grounds.
It appears that both are choosing what is good for them at the moment, but there will be a day of reckoning ahead when they will have to contradict what is prescribed as the medicine for a general situation.
I personally don’t place too much trust on Swan’s reliance on what the G20 is saying now, although I stand ready for correction if I am proven to be wrong.
2009-09-24
International public goods for poor countries' growth?
Comments on Andrew Elek “The G20 and enhancing the availability of international public goods”, 24/09/2009, http://www.eastasiaforum.org/2009/09/22/enhancing-the-availability-of-international-public-goods/
The development process is very complex and there are so many factors that can contribute to both the failures and successes of a country's development.
The statement "In a series of papers, Raghuram Rajan, former chief economist of the IMF, and I were unable to find any positive effects of aid on long-run growth but did find evidence consistent with some of the negative effects of aid in depressing manufacturing exports and worsening domestic institutions,’ does not necessarily prove that the proposed alternatives will be able to achieve better outcomes than what the world bank has done in the past.
Firstly, there is no surety that the findings of that study are correct, given the so many factors in play.
Secondly, if specifically targeted aids cannot achieve positive long run growth, how can one reasonably think that the proposed by increasing the provisions of public goods by international financial organisations will do a better job to promote long run growth? Weren't public goods available in the past? Why will new public goods be different?
The proposal will make the link between inputs and outputs/outcomes much more weak and less transparent. It is unbelievable that will work.
It is like to treat a particular disease, the specifically developed medicine is only effective to some patients but not all patients. Now let's try something different. How about using a medicine that is for general health to cure that particular disease?
Will that approach work? Few would agree, probably. At least conventional logic suggests it will not.
The development process is very complex and there are so many factors that can contribute to both the failures and successes of a country's development.
The statement "In a series of papers, Raghuram Rajan, former chief economist of the IMF, and I were unable to find any positive effects of aid on long-run growth but did find evidence consistent with some of the negative effects of aid in depressing manufacturing exports and worsening domestic institutions,’ does not necessarily prove that the proposed alternatives will be able to achieve better outcomes than what the world bank has done in the past.
Firstly, there is no surety that the findings of that study are correct, given the so many factors in play.
Secondly, if specifically targeted aids cannot achieve positive long run growth, how can one reasonably think that the proposed by increasing the provisions of public goods by international financial organisations will do a better job to promote long run growth? Weren't public goods available in the past? Why will new public goods be different?
The proposal will make the link between inputs and outputs/outcomes much more weak and less transparent. It is unbelievable that will work.
It is like to treat a particular disease, the specifically developed medicine is only effective to some patients but not all patients. Now let's try something different. How about using a medicine that is for general health to cure that particular disease?
Will that approach work? Few would agree, probably. At least conventional logic suggests it will not.
2009-08-10
This time the IMF has better insight and foresight than Aussie Treasury
Comments on Michael Stutchbury “IMF sees problems here even after global crisis passes”, 10/08/2009, http://www.theaustralian.news.com.au/story/0,25197,25906807-5017771,00.html
While the IMF has got its forecast wrong many times as any other economic forecasters did in the past, its assessment of this time seems more reasonable than the Treasury's used in the may budget. The destruction to the Australia's capacity may not be very big, but to the main OECD countries are very large indeed. This is one reason why the media term growth cannot be as those in previous recoveries from recession.
Another main reason is the inevitable adjustment to rebalance internationally, especially in the US and China in particular to their economic structures and savings and consumptions. That adjustment process of the main international economies on top of the damage to productive capacities by the great recession will see a slower world growth. That in turn will mean a slower growth for the Australian economy, both in the recovery phase and thereafter.
The Treasury needs to have another very careful examination of its assumptions used in its economic forecast. The structural parameters have changed and one cannot simply extrapolate the past experience without taking into account the new international situation.
While the IMF has got its forecast wrong many times as any other economic forecasters did in the past, its assessment of this time seems more reasonable than the Treasury's used in the may budget. The destruction to the Australia's capacity may not be very big, but to the main OECD countries are very large indeed. This is one reason why the media term growth cannot be as those in previous recoveries from recession.
Another main reason is the inevitable adjustment to rebalance internationally, especially in the US and China in particular to their economic structures and savings and consumptions. That adjustment process of the main international economies on top of the damage to productive capacities by the great recession will see a slower world growth. That in turn will mean a slower growth for the Australian economy, both in the recovery phase and thereafter.
The Treasury needs to have another very careful examination of its assumptions used in its economic forecast. The structural parameters have changed and one cannot simply extrapolate the past experience without taking into account the new international situation.
2009-05-12
A new voting mechanism
Comments on Joel Rathus’ “The Chiang Mai Initiative: China, Japan and financial regionalism”, 11/05/2009, http://www.eastasiaforum.org/2009/05/11/the-chiang-mai-initiative-china-japan-and-financial-regionalism/comment-page-1/#comment-27065
I'd like to propose a new voting mechanism. I work for the Australia federation and there are eight state level governments in Australia. In our work, we often are faced with the question: what is the average policy of the states in a particular area? The following thought has benefited from that work.
The agreement between China and Japan is helpful in progressing the CMI cause and should be congratulated. It is, however, still in the confine of the traditional “power” representation of politics and governance. There is no “breakthrough” in thinking to combine the “representative style” of the IMF voting mechanism and the somewhat more “senate style” voting mechanism of the United Nations. The latter is more reflective of equal rights for every nation, irrespective they are big or small, although it can suffer its own shortcomings.
An alternative to either of those mechanisms is to have a voting mechanism combined both. Half of the votes will be decided by the representative style votes based on economic contributions and the other half by an equal vote of every member. This will give the community more humanitarian flavour and also recognise the economic reality and accountability.
In fact this voting mechanism, if adopted, could be better than or superior to the current parliamentary system of two separate chambers, with the requirement that both have to pass in majority. Indeed, some of the parliamentary dramas in the Australian system where a minority senator can hold the whole parliament and the nation as “hostage” have shown some of the serious shortcomings with that system. Maybe one day they will be reformed.
I'd like to propose a new voting mechanism. I work for the Australia federation and there are eight state level governments in Australia. In our work, we often are faced with the question: what is the average policy of the states in a particular area? The following thought has benefited from that work.
The agreement between China and Japan is helpful in progressing the CMI cause and should be congratulated. It is, however, still in the confine of the traditional “power” representation of politics and governance. There is no “breakthrough” in thinking to combine the “representative style” of the IMF voting mechanism and the somewhat more “senate style” voting mechanism of the United Nations. The latter is more reflective of equal rights for every nation, irrespective they are big or small, although it can suffer its own shortcomings.
An alternative to either of those mechanisms is to have a voting mechanism combined both. Half of the votes will be decided by the representative style votes based on economic contributions and the other half by an equal vote of every member. This will give the community more humanitarian flavour and also recognise the economic reality and accountability.
In fact this voting mechanism, if adopted, could be better than or superior to the current parliamentary system of two separate chambers, with the requirement that both have to pass in majority. Indeed, some of the parliamentary dramas in the Australian system where a minority senator can hold the whole parliament and the nation as “hostage” have shown some of the serious shortcomings with that system. Maybe one day they will be reformed.
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