Private debt, public debt and inflation: the drivers of economic growth for the last 40 years. Image: Mikko Saari/flickr
After 40 years of economic growth based on debt, the era of “debt capitalism” has come to an end, says Wolfgang Streeck. The Managing Director of the Max Planck Institute for the Study of Societies in Cologne gave a remarkable interview (in German) last week that I would like to share with you, in advance of the World Economic Forum‘s meeting in Davos starting today.
Economies must grow in order to increase welfare. This has been the basic requirement for capitalist societies since the industrial revolution. Yet the last time Western societies experienced real economic growth was in the decades following WWII, says Streeck, in his account of recent economic history. Since the 1970s, when this period ended and economic growth slowed, governments started to print money in order to create the illusion of increasing salaries and greater welfare. In reality, however, income stagnated.
When decision-makers realized that high inflation rates could no longer be sustained, they looked for new recipes to keep the economy growing. In the 1980s, they found a solution in increased government spending based on public debt. Ronald Reagan was the unlikely representative of this policy.
Streeck argues that when government debt reached unsustainable levels, the third and final phase of “debt capitalism” (he uses the term Pumpkapitalismus in German) began. From the 1990s on, economic welfare was no longer based on inflation or on public debt but on private debt. Financial markets were liberalized and consumers, especially in the US, were convinced to take out loans in order to pay for their expenses. » More
International cricket in Barbados. Photo: flickr/phik
Cricket, as they say, is a funny old game. Few sports can claim to inspire, in equal measure, its extensive and fanatical support — as the second-most popular sport in the world– and the blank incomprehension and derision of the uninitiated. In India and Pakistan, the emotional lives of a billion people seem implicated in every flash of the willow on leather. In the US, the game is often confused with (or willfully misunderstood as) croquet. » More
China is betting on energy under the ‘South China Sea.’ Photo: offshorinjurylawyer/flickr
This week in New York, the state parties to the UN Convention on the Law of the Sea (UNCLOS) are meeting for the 21st time since the convention’s conclusion in 1982. Major items on the agenda are the reports of the ongoing work of the Convention’s three main organs: 1) the International Tribunal for the Law of the Sea (ITLS), which interprets the Convention and adjudicates disputes 2) the Commission on the Limits of the Continental Shelf (CLCS), which evaluates geological and oceanographic data, and 3) the International Seabed Authority (ISA), which organizes and controls activities related to the sea floor, which lies beyond national jurisdictions.
Three main items are currently before the Tribunal: a boundary dispute between Bangladesh and Myanmar in the Bay of Bengal (of special relevance to Conoco Phillips); the M/V Louisa case, a dispute arising from Spain’s detention since 2006 of the eponymous research vessel, which was flying the flag of St Vincent and the Grenadines in Spanish coastal waters while conducting scientific surveys of the sea floor; and a request for an advisory opinion from the Tribunal on the status of state parties sponsoring private activities on the sea floors outside national jurisdictions, a case arising from commercial activities proposed by Nauru Ocean Resources Inc. and Tonga Offshore Mining Ltd.
While these are hardly the issues making international headlines – and the above two companies remain unlikely, to say the least, to ever become major global players in natural resources – the Law of the Sea can be a genuine battleground of great power politics. » More
How severe has the global economic downturn been and are we on the cusp of a recovery? Test your knowledge in this week’s quiz and read up on the topic in this week’s Special Report.