Anybody still believing that capture of European policy by the finance lobby is a myth (see previous posts here and here)? Read this article, from Der Tagesspiegel, reproduced in several languages in Presseurop (here is the French version). A tale of lobbies, told by lobbyists themselves, with a robin hood kind of twist.
But things are different now. Mulder has turned a page. When last year financial lobbyists went so far as to “blackmail individual governments by threatening to withdraw capital and jobs, it was the final straw,” he says. “Making finance serve society” is now on his business card as head of the Public Affairs department of an organisation called Finance Watch.
There too he has been hired as a lobbyist – only now he lobbies for a firm that is unique in the world of Brussels politics. At Finance Watch, experienced financial professionals aim to take on the might of the financial lobbyists and steer that power back to their own purposes: mobilising financial services for productive ends.
It is a brand-new, never-done-before experiment. This new lobby group to curb the financial markets has been ordered duly and properly – by the legislators themselves.
What started it off was a phenomenon seen only after the financial crisis broke in autumn 2008. To tackle the root causes of the crisis, some experienced professionals were needed. But there were none present who were truly independent of the financial industry. At every level, the debate was set by bankers, fund managers and other financial experts.
At the same time, it emerged that the European Commission and its Internal Market Directorate General had been thoroughly infiltrated by the financial industry. How far this went was uncovered by the Alliance for Lobbying Transparency and Ethics Regulation (ALTER EU), whose autumn 2009 report entitled A Captive Commission, described how then Acting Commissioner Charlie McCreevy had de facto outsourced law-making to vested interests. Half of Europe was outraged at the EU authorities relying on such one-sided information. In practice, though, no consequences flowed from that outrage.
5.000 millones de dólares: la fortuna escondida de Stroessner
Articulo en El País Internacional sobre la lucha de víctimas de la dictadura para recuperar parte de la fortuna que el dictador paraguayo habría legado a su familia.
“Los libros de historia cuentan que el dictador paraguayo Alfredo Stroessner murió a los 93 años en Brasilia en agosto de 2006, después de haber gobernado el país sudamericano durante 35 otoños hasta 1989, con el apoyo del Partido Colorado. El general cobijó a decenas de nazis en Paraguay y se calcula que desaparecieron unas 400 personas bajo su mandato, pero jamás compareció ante ningún tribunal. Las crónicas periodísticas relatan que su primogénito, el coronel de aviación Gustavo Stroessner Mora, falleció víctima de un cáncer hace 12 meses en Asunción, después de eludir todas las acusaciones de enriquecimiento ilícito que pesaron sobre él. Lo que no alcanzan a detallar los libros ni los periódicos es la fortuna que acumularon entre el padre y el hijo. Ni quiénes tendrían derecho a disfrutarla. El abogado Mario Benítez Acuña estima que la cuantía asciende a unos 5.000 millones de dólares (unos 3.772 millones de euros). Asegura que hay grandes navieras, muchas fincas urbanas y rurales y muchas empresas bajo el nombre de los Stroessner. Y espera que, tarde o temprano, la veintena de víctimas de la dictadura a las que representa consigan de los herederos la parte que les corresponde por daños y perjuicios.”
Para poner en perspectiva, esta suma representa más de 2 veces el stock de deuda pública externa del país (en otras palabras, recuperar aunque sea la mitad del este dinero bastaría para cancelar enteramente la deuda externa), 27% del producto interno bruto del 2010, y cerca de 20 veces la suma que Brasil paga al año al Paraguay en compensación de la electricidad producida en Itaipú.
Has the finance industry captured (European) governments?
This question was raised in some recent contributions by analysts and policy makers, as I reported in a previous post.
Concerning the US, many would answer yes without hesitation. It is the thesis of former IMF chief economist and now MIT economist Simon Johnson, in this 2009 article in The Atlantic. Johnson in particular provides a very neat account of the revolving doors between the US government and the financial sector.
“Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.
One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.
These personal connections were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street. It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service.
Wall Street is a very seductive place, imbued with an air of power. Its executives truly believe that they control the levers that make the world go round. A civil servant from Washington invited into their conference rooms, even if just for a meeting, could be forgiven for falling under their sway. Throughout my time at the IMF, I was struck by the easy access of leading financiers to the highest U.S. government officials, and the interweaving of the two career tracks. I vividly remember a meeting in early 2008—attended by top policy makers from a handful of rich countries—at which the chair casually proclaimed, to the room’s general approval, that the best preparation for becoming a central-bank governor was to work first as an investment banker.”
It is also the thrust of the argument found in the documentary Inside Job (here is an online version, in English, subtitled in Greek!):
At toulouse School of Economics, we recently had a public meeting on “Crisis, debt & ethics“, where the above documentary was shown, followed by a debate. Many students were in attendance. It’s not that the participants did not address some of the bold questions on conflict of interest and capture with interesting suggestions, but this sensation that we were discussing under the assumption that “this is an American story from 2008, which is hardly relevant for today’s Europe” left me slightly uneasy. And when the natural question came from a student in the audience, about what we should expect from the fact that our current European Central Bank President Mario Draghi also was vice chairman and managing director of Goldman Sachs International from 2002 to 2005, it was virtually left unanswered.
Maybe we should wake up to the fact that we European are not so different after all…
One Laptop per Child: Where do we stand?
Following up on a previous post on access to internet for Paraguayan children, which mentioned the small One Laptop per Child (OLPC) program there, here is a rather bleak review of the existing evidence to date on these programs, by Mark Warschauer and Morgan Ames in the Journal of International Affairs (Vol. 64 No. 1, Fall/Winter 2010):
“The One Laptop per Child (OLPC) program is one of the most ambitious educational reform initiatives the world has ever seen. The program has developed a radically new lowcost laptop computer and aggressively promoted its plans to put the computer in the hands of hundreds of millions of children around the world, including in the most impoverished nations. Though fewer than 2 million of OLPC’s XO computers have been distributed as of this writing, the initiative has caught the attention of world leaders, influenced developments in the global computer industry and sparked controversy and debate about the best way to improve the lot of the world’s poor. With six years having passed since Nicholas Negroponte first unveiled the idea, this paper appraises the program’s progress and impact and, in so doing, takes a fresh look at OLPC’s assumptions. The paper reviews the theoretical underpinnings of OLPC, analyzes the program’s development and summarizes the current state of OLPC deployments around the world. The analysis reveals that provision of individual laptops is a utopian vision for the children in the poorest countries, whose educational and social futures could be more effectively improved if the same investments were instead made on more sustainable and proven interventions. Middle- and high-income countries may have a stronger rationale for providing individual laptops to children, but will still want to eschew OLPC’s technocentric vision. In summary, OLPC represents the latest in a long line of technologically utopian development schemes that have unsuccessfully attempted to solve complex social problems with overly simplistic solutions.”
The initial philosophy of giving up evaluation and any supporting investments is particularly striking, and may explain partly the subsequent failures observed:
“Our interviews and observations in Paraguay suggest that XO use there is stratified, with a minority of youth making use of the XOs in creative and cognitively challenging ways, and a majority using them only for simpler forms of games and entertainment. We also found that the children who are already most privileged socially and economically tend to make use of the XOs most creatively. Thus, independent XO use by children might exacerbate divides rather than overcome them.
Such an outcome would be consistent with what has been found in a substantive body of prior research on children’s use of technology. Simply put, when children are just handed computers without any accompanying technical or social support, usage tends to be stratified.57 Youth in low-income families and marginalized communities, who ostensibly have fewer family members or friends that are sophisticated users of new technologies and have less supervision as their parents work long hours, tend toward more basic uses of computers: chatting with friends, playing simple games and downloading media.58 Research suggests that reading and math test scores of low-income youth tend to decline after receiving access to computers, whether in school or at home.59 In contrast, youth in high-income families and privileged communities are more likely to use computers for sophisticated media creation, programming and participation in complex multiplayer games.”
This accords with findings from the US (see the paper by Jacob L. Vigdor and Helen F. Ladd), which suggest “that providing universal access to home computers and high-speed internet access would broaden, rather than narrow, math and reading achievement gaps”:
“Our paper replicates some existing results in documenting a positive association between home computer access and achievement in across‐student comparisons, but shows that these results do not hold for within‐student comparisons. Students who gain access to a home computer between 5th and 8th grade tend to witness a persistent decline in reading and math test scores. Using local variation in the timing of introduction of broadband internet service, as well as the within‐student analysis employed in the case of computer ownership, we find support for the hypothesis that access is in practice more detrimental for some students than others. The evidence is consistent with the view that internet service, and technology more broadly, is put to more productive use in households with more effective parental monitoring of child behavior.”
Luis María Benítez Riera: la nueva justicia paraguaya
Días atrás, Luis María Benítez Riera hizo noticias al demostrar una vez más lo que significa probidad en el desempeño de funciones públicas.
Alrededor de 1996, tuve la suerte de conocerlo, cuando ambos enseñábamos en la universidad católica de Ciudad del Este. Ya entonces, sus compañeros se referían a él como a un incorruptible, el primer juez que había tenido el coraje de condenar un representante de la dictadura de Stroessner a principios de los noventas.
En el siguiente video, Luis María Benítez Riera se refiere a estos acontecimientos y al Centro de Documentación Centro de documentación y archivo para la defensa de los derechos humanos de la Corte Suprema de Justicia de Paraguay, en Asunción.
También, recomiendo la lectura de este documento extraordinario: “Es Mi informe. Los archivos secretos de la policía de Stroessner“. (Boccia Paz, Alfredo; González, Miriam Angélica; Palau Aguilar, Rosa. CDE (Centro de Documentación y Estudios) Asunción 1994), que detalla el funcionamiento, a través de la décadas, del sistema de represión de una de las dictaduras más duras de América Latina.
Should we increase (or remove) speed limits?
Arthur van Benthem‘s answer is a clear no. In his job market paper, which uses data from the US, he shows that the potential social benefits are largely dominated by the social costs, which result among others from an important increase in fatal accidents, but also in the health consequences of increased pollution.
When choosing his speed, a driver faces a trade-off between private benefits (time savings) and private costs (fuel cost and own damage and injury). Driving faster also has external costs (pollution, adverse health impacts and injury to other drivers). This paper uses large-scale speed limit increases in the western United States in 1987 and 1996 to address three related questions. First, do the social benefits of raising speed limits exceed the social (private plus external) costs? Second, do the private benefits of driving faster as a result of higher speed limits exceed the private costs? Third, could completely eliminating speed limits improve efficiency? I find that a 10 mph speed limit increase on highways leads to a 3-4 mph increase in travel speed, 9-15% more accidents, 34-60% more fatal accidents, and elevated pollutant concentrations of 14-25% (carbon monoxide), 9-16% (nitrogen oxides), 1-11% (ozone) and 9% higher fetal death rates around the affected freeways. I use these estimates to calculate private and external benefits and costs, and find that the social costs of speed limit increases are three to ten times larger than the social benefits. In contrast, many individual drivers would enjoy a net private benefit from driving faster. Privately, a value of a statistical life (VSL) of $6.0 million or less justifies driving faster, but the social planner’s VSL would have to be below $0.9 million to justify higher speed limits. The substantial difference between private and social optimal speed choices provides a strong rationale for having speed limits. Although speed limits are blunt instruments that differ from an ideal Pigovian tax on speed, it is highly unlikely that any hidden administrative costs or unforeseen behavioral adjustments could make eliminating speed limits an efficiency-improving proposition.
Including as external costs, through their impact on social security schemes, some of the health related consequences of single-vehicle accidents (about half of all accidents), which van Benthem considers here as private costs, could only reinforce the conclusions.
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