Yotta Point

Unionization and Jobs/Wages in Today's Economy

Evan Soltas’ blog posts and chart, following his Bloomberg View article ("Is the U.S. Better Off Without Unions?"), are quite interesting and worth reading. I tend to agree with his observations on why unionization has declined in the US (and apparently other developed countries) in the second half of the 20th century and I also question the focus on unions as a key method of addressing unemployment and wage pressure challenges faced by US workers. However, I am not convinced that Soltas' ideas to address the issue are that effective. So, I'd like to offer a different perspective on this subject given my background as an executive in the Silicon Valley tech industry. This perspective focuses on the after-effects of stock-based compensation on various macro factors.

First, some context. In Silicon Valley, tech labor has tended to be non-unionized for quite some time. Additionally, over the last two decades, I've seen software design, hardware manufacturing, hardware design and other functions move outside of the US (I have also been in positions where I have moved certain jobs overseas). The reasons are simple. There are qualified workers who can do these jobs outside the US, typically at a much lower cost. Moreover, when a company's competitors move jobs or are located overseas in cheaper labor markets, for financially competitive reasons the company ends up having to do the same. Additionally, some of the larger tech companies that sell directly in non-US end markets need workers in those regions. Despite this trend, and despite many tech jobs being non-unionized, Silicon Valley has managed to maintain a decent jobs picture (example) for well-paid employees - I think primarily because US tech companies continue to be at the forefront of driving significant innovation where more experienced US workers have an advantage over workers is job markets outside the US. My experience suggests that at least in Tech, where workers tend to be paid relatively well because of their skills, unionization has not been a significant factor in driving employment or wage trends. I can’t extrapolate from this to infer that the tech experience should be applied to every other industry but it is suggestive that we need to look for deeper explanations for increases in income inequality and decline in unionization in the US and other economies.

The Stormy Petrel of Eurozone Budget Deficits: Current Account Deficits

[NOTE: The second part of this analysis is posted in the next post: Eurozone Government Debt and Current Account Deficits]

Background

In my previous post discussing the recent EU "fiscal union" summit, I said:

You'll notice that Spain and Ireland were running fiscal surpluses with acceptable debt/GDP in the years immediately preceding the financial crisis - yet these countries are amongst the worst affected by the meltdown and and in the crosshairs of the ECB and austerity hawks. Slovenia had run modest deficits ahead of the financial crisis and its debt to GDP ratio was low and declining ahead of the crisis - yet, Slovenia's bond yields have been in crisis territory recently and its debt situation is worsening as the economy teeters into recession. Undoubtedly, countries like Greece made their problems much worse with very high levels of deficits and debt prior to the crisis. That said, even Germany ran significant deficits and had high debt levels prior to the crisis - yet, Germany remains relatively unscathed because it has run massive current account surpluses thanks in part to the Eurozone periphery that ran massive trade deficits that benefited countries like Germany.

This is a point that has been made by many people before: rather than fiscal profligacy, the main root cause of the current European financial crisis can be traced back to large current account deficits run by many EU members following the establishment of the Euro as a common currency, culminating in a sudden stop (in the vicinity of the Great Recession) that pummeled the economic and fiscal health of those countries. A useful chart is available from Kash Mansori at The Street Light - along with his follow-up observations...

In their book "This Time is Different: Eight Centuries of Financial Folly", Carmen Reinhart and Kenneth Rogoff point out:

An even stronger regularity found in the literature on modern financial crises is that countries experiencing sudden large capital inflows are at high risk of experiencing a debt crisis [15]. The preliminary evidence here suggests that the same is true over a much broader sweep of history, with surges in capital inflows often preceding external debt crises at the country, regional, and global levels since 1800, if not before.

[I've discussed some of these issues in more detail in a couple of other prior posts: Capital Flow Bonanzas and Their Aftermath and Q&A with President Bill Clinton at the 2011 Clinton Global Initiative, Part 2 - The Financial Crisis in Europe]

Given the known impact of large net capital inflows and current account deficits on fiscal stability, here's a natural question that came to mind in the context of the Eurozone:

Do pre-crisis current account balances, as opposed to pre-crisis fiscal balances, better predict crisis-period fiscal balances (quantitatively) for countries that are part of the European currency union (EMU)?

This post focuses on that question. The answer, as it turns out, is yes and the implications of this are obviously significant in the context of the recently concluded EU summit.

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Summary

In this post, I summarize the results of a simple analysis of the average current account (CA) and fiscal balances, as a percentage of GDP, for nearly a dozen European countries that use the Euro as their currency [Section 1]. The analysis focused on CA and fiscal balances in the 7 years preceding the start of the Great Recession (pre-crisis) and fiscal balances in the 2008-2010 (crisis) time period. Countries that joined the Euro currency union in 2007 or beyond were excluded from the analysis since they were not on the Euro long enough in advance of the financial crisis. The key finding from this analysis is that the average CA balance/GDP by country for 2000-2007 [Section 3a, 3b] is a much better quantitative predictor of the average fiscal balance/GDP for the same country in 2008-2010, than is the average fiscal balance/GDP of the country in 2000-2007 [Section 2a, 2b].

The analysis was completed with and without Ireland in the mix. Ireland is a massive outlier in the data when it comes to fiscal deficits - likely due to the fact that the main issue in Ireland was large-scale private debt rather than sovereign debt, and sovereign debt ballooned only later because of the Irish government's huge borrowing to bail out private banks during the crisis. With the exclusion of Ireland, the positive correlation between average pre-crisis CA balance/GDP to crisis-era fiscal balance/GDP is very high and even more stark [Section 3c, 3d]. It is significantly higher than the correlation between average pre-crisis fiscal balance/GDP to crisis-era fiscal balance/GDP [Section 2c, 2d]. 

The findings here raise more questions about the effectiveness of the recently touted EU "fiscal union" which was largely a fiscal austerity pact, with inordinate emphasis on fiscal balances as opposed to CA balances. Specifically, the data shown here indicate that pre-crisis fiscal balances do not effectively predict fiscal balances during downturns/crises - they are less effective in doing so than pre-crisis CA balances. Hence, a "fiscal union" that demands fiscal austerity as a way to ensure low fiscal deficits in the future, with no attention paid to CA balances, is unlikely to consistently prevent large future fiscal deficits. Further, given the limited direct correlation between CA and fiscal balances over the same period of time [see "Baseline Charts" in Section 3], it is quite possible that countries might run fiscal surpluses along with large current account deficits over the same time period, and yet have little or no protection against future fiscal deficits during downturns [as shown in Section 3a-3d]. Finally, a misguided focus on short-term fiscal deficits and debt (as opposed to longer-term fiscal health) is more likely to drive deflationary results as well in the current environment - which could be another negative consequence of the recently announced EU "fiscal union".

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1. The Eurozone Countries

Required and Excess Reserves of US Banks - Is It Time for a Policy Change by the Federal Reserve?

In his recently released book - "Back to Work: Why We Need Smart Government for a Strong Economy" - President Bill Clinton has evidently proposed a slew of ideas to boost job growth and the US economy. Although I've not read the book yet, he has been discussing many interesting ideas through this year, including at the 2011 Clinton Global Initiative (my discussions on the Q&A with President Bill Clinton at CGI 2011 are available here: Part 1, Part 2, Part 2A, Part 2B, Part 3). One of his ideas apparently ties to the reserve policy set by the US Federal Reserve according to Dave Johnson's review of the book in Alternet [the use of bold text is my emphasis throughout this post]:

...Clinton offers a three-part economic and jobs growth strategy:

(1) put as much of the $4 trillion now held in banks and corporate treasuries back into the economy as fast as we can; (2) concentrate on the areas most likely to produce good jobs that have a positive ripple effect, jobs in modern infrastructure building, high-end manufacturing, green technologies, and exported goods and services; and (3) do literally dozens of other things that, when combined, can make a real impact now and also increase our long-term economic growth.

The list is full of smaller policy ideas, like #3, the Federal Reserve has to give banks an incentive to lend. The Fed should charge banks for parking money, maybe .25% and/or require banks to pay their customers a minimum 1% interest on deposits...

Dave's fairly detailed review is worth reading in full but I'm inclined to disagree with his characterization of the latter idea as a "smaller policy idea". I'll use this post to explain why an idea like this could have a substantial impact on increasing lending and thereby boosting nominal GDP (NGDP). In fact, arguably pioneered by economist Scott Sumner who blogs at The Money Illusion, numerous economists across the political spectrum are advocating the need for NGDP targeting by the Fed (rather than prices or inflation), as a response to the large and persistent nominal and real output gap in the US economy. This becomes even more important given recent indications from historically reliable leading indicators that the U.S. could be headed into another recession.

Excess v. Required Reserves

To explore this topic more broadly, it's worth starting with the post "Cash Is Not The Problem" by Paul Krugman back in July 2011. Krugman discussed the massive cash balances that corporations have accumulated and briefly discussed the large amount of excess reserves held by depository institutions (banks), well above the level of required reserves:

Second, banks are also sitting on large amounts of cash that they aren’t lending...

At face value, Krugman has a point - banks are holding well over $1 Trillion in excess reserves. Given that we have a serious NGDP gap with anemic employment growth, it would seem appropriate for the Fed to drive banks to reduce their excess reserves via increased lending in order to stimulate faster economic growth, especially in a political environment where stimulative fiscal policy seems out of reach. However, the fact that banks have large and growing excess reserves does not automatically mean that loan growth is not occurring. To understand this better, we need to look at both excess reserves and required reserves.

I've included below a reserves chart from the St. Louis Federal Reserve Economic Database (FRED). Note that the scales for required reserves (left) and excess reserves (right) are completely different - by over an order of magnitude - meaning that excess reserves have been growing more than order of magnitude faster than required reserves since the start of the Great Recession. Excess reserves have grown from zero prior to the Great Recession to almost $1.5 T now, with the most rapid growth beginning in Fall 2008 when the Fed started aggressively intervening to prevent another Great Depression - via liquidity facilities, loans, asset purchases, etc. (QE1 and QE2 are good examples). The Fed also modified its policy on reserves starting in October 2008 and started paying 0.25% interest on reserve balances - the first time in its history.

Making Public Private Partnerships Successful

One of the key themes from the Clinton Global Initiative (see my discussions on the Q&A with President Bill Clinton at the most recent CGI 2011 - Part 1, Part 2, Part 2A, Part 2B, Part 3) was the notion of leveraging public-private partnerships to drive solutions to large scale problems. For instance, in my discussion of shared value v. shareholder value in Part 3, I made some related observations [note that all of the bold text in this post is used for my own emphasis]:

A few other related observations from the above CGI panel discussions:

• Unilever CEO Paul Polman, in the discussion on redefining business as usual to drive sustainability, remarked that in today's social media environment, the people in Egypt were able to bring down their government in "17 days" and as consumers could bring Unilever down in "nanoseconds" if, as a company, they are not sensitive to their impacts on society
• Dow Chemical CEO Andrew Liveris, who has been vocal about the need for a manufacturing renaissance in the U.S., made several noteworthy comments:
  • The need for "inclusive democracy" through a "golden triangle" of public (government), private (business), and non-profit (NGO) partnership
  • A world view has finally arrived where we need to value the planet
  • It is challenging to run long cycle investments with a focus on public good when - you are measured on a quarter-by-quarter basis, some investors don't fully understand the notion of long-term value, and there is ten times more money going around the world (from an investment standpoint) than you can deal with
  • "Poor people are poor, not stupid", i.e., it takes a certain level of creativity to survive when one is poor

Liveris has previously stated that while he is a supporter of free markets, we should recognize that free markets don't naturally allow for strategic decisions at a country level and that public policy and government need to step in to address that - "I would not let free markets rule without also addressing what I want manufacturing to be 20 or 30 years from now". That is very much aligned with what I wrote about a year ago:

What I believe is sorely missing in the US today is any kind of broad strategic thinking or position on the type of manufacturing leadership that we believe the U.S. should continue to have in order to preserve our leadership and security over the next 50 years - and - a vision on how we should concomitantly engage with governments and private enterprises to make that strategy a reality. In the absence of a strategic long-term view and any substantive broad-based dialog with the U.S. business community (not in the vein of political talking points, but in the spirit of driving American leadership through enlightened policy and deep engagement), dreams of re-building US manufacturing leadership will remain out of reach.

The key motivation for public-private partnerships (PPPs or P3s) is that, often times, neither the public sector nor the private sector is able to completely shoulder the costs and responsibilities for solving serious large-scale problems - so, a PPP might therefore be a more effective solution path in those circumstances. Note that I use the term PPP to refer not just to the public and private sectors, but also non-governmental organizations (usually non-profits or NGOs) that are funded through public or private means.

PPPs are generally much more complicated to plan and execute than purely public sector or purely private sector projects. In the aftermath of the Great Recession, there has been increased skepticism in some circles about the effectiveness of PPPs in achieving their goals given that reckless private sector risk-taking on a large scale got socialized into public sector budgets. For example, Toby Sanger and Corina Crawley of the Canadian Centre for Policy Alternatives wrote:

Q&A with President Bill Clinton at the 2011 Clinton Global Initiative - Part 3: Shared Value and Shareholder Value

[Part 1 includes links to President Clinton's comments on a number of topics; Part 2 was focused on his comments on Greece, the Euro and the financial crisis in Europe; Part 2A and Part 2B were focused on food security - the role of commodity market speculation & corn-ethanol conversion on food prices and sustainable agriculture]

The focus of this post is President Clinton's observations on the role of shared value vs. shareholder value when it comes to corporations, their impact on society and job creation.

Summary

The key takeaways from this post are the following:

a) President Clinton strongly endorsed the need for U.S. businesses to focus on shared value as opposed to merely shareholder value, in order to be successful in the long-term and create more jobs in the US. According to Michael Porter and Mark Kramer, the "principle of shared value...involves creating economic value in a way that also creates value for society by addressing its needs and challenges." [Section 1]

b) Shared value does not refer to "corporate social responsibility" but a very different way to shape and run a business which recognizes that societal and environmental impact should not be viewed as externalities for firms but rather as key factors that shape business strategy and practices. As Porter and Kramer have illustrated with examples, if this is done correctly, perceived "harms and constraints [do] not necessarily raise costs for firms, because they can innovate through using new technologies, operating methods, and management approaches—and as a result, increase their productivity and expand their markets." [Section 2]

c) There are many examples of firms that are achieving great success by focusing first on key stakeholders other than shareholders, e.g., Apple, which has become one of the most successful companies in the world with a focus first on customers, rather than shareholders. [Section 2]

d) There is growing recognition, as was particularly evident from some of the CGI panel discussions [Section 3], that:

• Corporations should focus on creating shared value and be given the legal flexibility to operate as such - e.g., via the creation of a new corporate legal entity called a benefit corporation
• A pure focus on profit is not necessarily likely to lead to long-term success or profitability - e.g., the massive collapse of financial companies worldwide recently, given financial companies perhaps more than any other class of companies, are ostensibly focused solely on financial profitability
• Free market principles by themselves do not allow for optimal outcomes at the level of individual countries; country-level strategies require the cooperation of public, private and non-profit entities.

In the following sections, I'll explore the above points in greater detail.

1. President Clinton's Observations

Q&A with President Bill Clinton at the 2011 Clinton Global Initiative - Part 2B: More on Food Security

[Part 1 is here and included links to President Clinton's comments on a number of topics; Part 2 is here and was focused on his comments on Greece, the Euro and the financial crisis in Europe; Part 2A is here and was focused on the role of commodity market speculation and corn-ethanol conversion on food prices]

In this post, I discuss some of President Clinton's comments around food security at CGI2011. He was asked a question on his views about the impact of climate change on food security, especially in Africa. He started by saying that the countries likely to be affected are mostly in Africa, but not exclusively so - he also mentioned Haiti, Afghanistan, other Caribbean states, etc. He then emphasized the importance of local agricultural infrastructure as a critical element of preserving food security in places like Africa. I've not provided the complete transcript but only the most pertinent excerpts from his comments, with any bold text being my emphasis and italics representing President Clinton's emphasis. There are sections where my audio recording was unclear and I've included question marks in those portions:

In the places which can clearly feed themselves based on their top soil and their agricultural practices, and that’s virtually every place in Africa [...] what we should do is what Bill Gates said [...] we should rebuild the infrastructure of sustainable agriculture. I think it’s really, really important. Therefore I am strongly opposed to the completely understandable efforts of the Chinese, the Saudis and others who cannot possibly produce enough food for themselves, to either lease long-term [???] land and in effect turn these farmers into cogs [???] because what they will do is they will quickly use up the top soil and undermine their long term sustainability, but that doesn’t mean they’re bad people [...] I’d like to see the world get together and actually develop a food sustainability model for the 21st century. And that at least in the early years, not to cut these countries out of the market, but to build their own agricultural [practices?], I think the US and Canada and Europe, coz we have big surpluses [...] we should offer longer-term contracts to the Chinese and Saudis for the basic grains at prices that will guarantee decent profits but not exorbitant ones and stop price spikes. Keep price high enough to get investment into agricultural activities in Africa, Latin America, South-East Asia. I don’t have any objection to big money going to Africa but the most important thing is until you develop a sustainable agricultural framework in these countries, they’re not going to benefit. [He then discussed Ethiopia and the dearth of sustainable agricultural infrastructure, food storage capacity and food co-op mechanisms there and that with a "boom crop" they were not able to transport and store food effectively].

President Clinton's points of emphasis were:

• Self-sustainability of farming communities (a theme also advanced by Secretary of State Hillary Clinton)
• Stable prices and profits over the long run while avoiding exorbitant prices
• Paramount importance of food security

Let's explore this topic further, by looking at a few distinct but related threads.

1) Impact of Free Trade Policies

It's instructive to start with some history that runs closest to president Clinton's comments - his public apology in front of a Congressional panel in 2010 for the impact of trade liberalization policies that the US pressed Haiti to implement, that devastated local agriculture in Haiti. Here's a short video clip on that and a partial transcript of the Kim Ives interview of President Clinton in the video (via Amy Goodman at Democracy Now):

Q&A with President Bill Clinton at the 2011 Clinton Global Initiative - Part 2A: Food Security -- Commodity Market Speculation & Food Prices

[Part 1 is here and included links to President Clinton's comments on a number of topics; Part 2 is here and was focused on his comments on Greece, the Euro and the financial crisis in Europe]

One of the discussion topics in the Q&A with President Clinton was the topic of food security, an area that he said could use more attention from the journalist/blogger community. In a follow-up post [see here], I'll discuss some of President Clinton's comments on this topic, but before I do that, I'd like to lay a better foundation by exploring the role of market speculation on food prices, and by extension food security, across the world. That's the focus of this post.

Summary

The key findings in this post, discussed in the ensuing sections, can be summarized as follows.

1. Massive food price increases/bubbles were not unique to the 2000s but the recent price increases do appear to be unprecedented in modern history. Since the massive food price spike in the early 1970s, food prices experienced a long period of decline or relative stability until roughly late-2006, after which prices spiked. (Section I)
2. The two huge spikes in food prices - in 2007-08 just before the darkest period of the Great Recession and since late 2010 during the ensuing recovery - have been accompanied by food-related riots or unrest in several countries across the world, some of which were part of the so-called Arab Spring. Addressing the cause of the price spikes is therefore paramount to maintaining stability in the world. (Section II)
3. Recently published research shows that food price increases in the 2000s have been dominated by two factors - a secular shift upwards in the price baseline due to corn-to-ethanol fuel conversion (which reduces the supply of grains available for food consumption) and massive spikes tied to speculation in commodity markets. (Section III)
4. An assessment of key market data indicates that the first food price spike in the 2007-2008 time period was fueled at least in part by money moving out of a collapsing housing market bubble looking for alternative safe-havens. However, since the depth of the Great Recession, food prices have become strongly correlated to the broad stock market. (Section IV)
5. The strong positive correlation between commodity/food prices and stock markets since mid-2008 is historically anomalous and is suggestive that in the absence of alternative investments (e.g., housing), trillions of dollars are finding their way into commodity markets as primary investment options, not merely as a hedge against equities. (Section V)

Implications: The implications of the data presented in this post are fairly grave. For one thing, the criticality of appropriate regulation of commodities has likely increased even more during the recovery from the Great Recession than was the case during past recoveries. A world in which food or other essential commodities become not low-yielding hedge investments for businesses that are in the commodities sector and sometimes for outside entities like pension funds but mainstream speculative investment vehicles with returns equaling or exceeding equities - is a world that could become staggeringly more unstable and prone to crises. We therefore ought to invest enormous attention to solving this challenge.

Section I: Historical Food Prices

The massive rise in food prices in recent years appears to be unprecedented as noted by Randall Wray at Credit Writedowns. Sharp food price increases are not unique to the 2000s - for example, there is evidence from the early 1970s that speculative bubbles were at least partly behind large commodity price increases at that time. However, since the early 1970s and prior to the second half of the last decade, the historical trend in food prices has generally been downward to flat, as can be seen from this chart published earlier this year in the report "Hungry for Justice - Fighting Starvation in an Age of Plenty" by the NGO aid organization Christian Aid.

Q&A with President Bill Clinton at the 2011 Clinton Global Initiative, Part 2 - The Financial Crisis in Europe

Like last year, I had the opportunity this year to participate in a Q&A session with former President Bill Clinton, along with a handful of journalists and bloggers, on the sidelines of the 2011 Clinton Global Initiative Annual Meeting in New York. In my previous post, I included links to some posts from others who attended the Q&A. The focus of this post is on President Clinton's comments on the Eurozone crisis and what we should be doing in the future to address these types of problems.

The discussion was prompted by a question from Edward Harrison at Credit Writedowns around the potential impact of the financial crises in Europe on the world economy. President Clinton's response in excerpted below - I've not provided the complete transcript but only the most pertinent portions from his comments, with any bold text being my emphasis and italics representing President Clinton's emphasis. There are sections where my audio recording was unclear and I've included question marks in those portions:

A lot of European banks in successful countries have bought the sovereign debt of Greece and other European countries and a lot of American investors have invested not so much in Greece but in those banks […..] The fundamental problem the Europeans have in my opinion […] in following the plight of Greece as compared to, name an American state in economic trouble [Ed suggests California and President Clinton hints California due to the size of its economy is perhaps not the best comparison but runs with this example…] both California and Greece have accumulated obligations that they couldn’t finance in the current economy [...President Clinton then mentions austerity in Greece and California…] but what happens, because California is a state in a united economy, yes [California Governor Jerry Brown] has to have a balanced budget […but] because it’s a state, when CA cuts back, there’s still Federal unemployment flowing, there’s still Federal food stamps flowing […mentions the shocking depth of the recession…] so, if you have a genuine national economy, you have Federal cash flows which offset the austerity that is being imposed on the states….

…So, what happened when the Europeans decided to go for the Euro for financial integration for political [???], it worked on the way up, and its trouble on the way down. And when I was President, we had two examples in Latin America where Argentina tied the value of its currency to the dollar, and Ecuador believe it or not, flat out adopted the dollar. One of the reasons Ecuador joined with Venezuela and Bolivia in electing more populist leadership if you will, is that, when they rode the dollar up it was pretty, but it was really ugly riding down. So they had to get rid of it. And Argentina got rid of it, and was able to default and restructure, and they got one of the strongest economies in Latin America now, but if you are a little country in a big currency union without offsetting cash flows, you get all the benefits going up, but when the escalator starts going down, you’re just three seats to the wind. How in the world can the Greeks ever get ahead of this? They’ve already imposed enormous austerity. They’ve already cut back…and why is it not helping? Because there is no demand [???] in other words, they get all the macroeconomics that exists now and there is no offsetting stimulus. Same reason I’ll be surprised if some of the austerity measures for the Europeans work right now, so that’s the drill. So, number one, what you should want is, for the Europeans to develop either a system more like the American states, so that if you zap it to a Greece, there’s something you can do for the Greeks, coz most average Greeks are not responsible for the fact that Greece still had too many inefficient state owned [???] You should want either that or you should want some more orderly procedure for a Greece or someone else on the bottom end of the Euro to opt out or to take themselves out for a period of years without causing a run on the Euro or otherwise causing a stock panic.

My take on President Clinton's comments:

• At face value, he appeared more skeptical of Greece's austerity plan and its benefits than Secretary of State Hillary Clinton was, not unlike his comments earlier regarding the ill-timed austerity measures in the U.K.
• He identified the crushing problems faced by countries that benefit enormously from capital inflow bonanzas (sometimes tied to currency decisions) but whose economies and budgets could crumble as the money starts flowing out in a time of distress, especially when they do not have a sovereign currency or do peg their currencies to or adopt major reserve currencies (like the Euro or US Dollar)
• He emphasized the need for such countries that are fiscally constrained by the lack of their own sovereign currency to be supported externally, very much like states within the U.S. that get Federal stimulus support when they have to retrench fiscally
• He seemed willing to suggest that the Euro experiment should be restructured to even allow countries like Greece to temporarily "opt out" during such tumultuous times to avoid a collapse of financial integration altogether, in the absence of offsetting fiscal stimulus to protect them during the aftermath of "sudden stops"

His observations were a refreshing departure from the remarkable combination of ideological rigidity and incompetence that has been the hallmark of key players at the European Central Bank (ECB). For more on the topic of Greece and the Eurozone, see this post by Ed Harrison at Credit Writedowns - "On Greek Haircuts".

Kash Mansori at Street Light, in a follow-up to his analysis of what caused the Eurozone crisis - that I discussed here - provides his view on policy implications. Key excerpts are below although you should read his entire post with the chart included [colored text is my emphasis]. It's interesting that some of his ideas are similar to the comments from President Clinton:

Q&A with President Bill Clinton at the 2011 Clinton Global Initiative

UPDATE: Part 2 is here discussing the financial crisis in Europe...more coming in the next week.

Like last year, I had the opportunity to participate in a Q&A session with former President Bill Clinton, along with a handful of journalists and bloggers, on the sidelines of the 2011 Clinton Global Initiative Annual Meeting in New York. A variety of topics were discussed during this meeting and Tom Watson at Cause Wired has some overall commentary. Some of the other attendees of the Q&A have published articles based on the discussion and I'll mention some excerpts here.

1) Amanda Terkel at The Huffington Post: Bill Clinton weighs in on Troy Davis execution

2) Josh Rogin at The Cable, one of the foreign policy blogs at Foreign Policy Magazine, initially posted this - Bill Clinton: Netanyahu Killed the Peace Process; Rogin then wrote about the initial response of Israeli PM Benjamin Netanyahu here and another response here. I don't have time to get into parsing the he-said she said, but I'll make one quick comment. One of President Netanyahu's comments was the following:

You know, I regretfully and respectfully disagree with former President Clinton. He should know, more than anyone else, that in the peace conference he presided in at Camp David in 2000 with [Yasir] Arafat and former Prime Minister [Ehud] Barak, it was the Palestinian side who walked away from his own parameters...

In fact, during the Q&A, President Clinton did blame Yasser Arafat for the failure of the 2000 peace conference.

3) Brian Merchant at Treehugger: Creating 1 Million Energy Efficiency Jobs is a No Brainer - Bill Clinton

4) Penelope Chester at UN Dispatch: President Clinton: "We've Got a Shot in Haiti"

5) Eli Clifton at Think Progress: Clinton: ‘There Is Not A Single Solitary Example’ Of A Country That Has Succeeded With A Tea Party Philosophy

[Clinton] responded to a question from ThinkProgress about Texas Gov., and GOP presidential frontrunner, Rick Perry’s position that Social Security is unconstitutional, and about the Tea Party’s anti-social spending sentiment more generally. Clinton blamed the “continuing dominance of non-fact based political debate,” saying:

You can stand up and say anything and nobody rings a bell if the facts are wrong. There’s no bell ringing. It’s crazy, we’re living in a time when it’s more important than ever to know things. And not just to know facts but to put them in a coherent. sensible pattern. And we live in a time, if you just want to talk about the economy, where the model that works for economic growth and prosperity is cooperation. But the model that works in politics is conflict.

Clinton went on to challenge the emerging GOP consensus that government size and spending require dramatic cuts, observing that the most prosperous parts of the U.S. “look nothing like the anti-government ideal of the Tea Party crowd”:

You know, there’s not a single solitary example on the planet, not one, of a country that is succesful [sic] because the economy has triumphed over the government and choked it off and driven the tax rates to zero, driven the regulations to nonexistent and abolished all government programs, except for defense, so people in my income group never have to pay a nickel to see a cow jump over the moon. There is no example of a succesful [sic] country that looks like that.

6) Brad Johnson at Think Progress: Bill Clinton On Claims That Solyndra Means All Green Energy Is Bad: ‘Don’t Insult My Intelligence’

Asked by ThinkProgress Green about how to fight the corrupting influence of climate deniers, Clinton said that people need to defend the facts about the green economy as vigorously as the opponents of the clean economy promote lies:

They can take nothing like Solyndra and say that proves all green energy is bad. Why? Because those of us on the other side don’t say: Whatever the truth is, here’s the mega truth. We can’t burn up the planet. We’ve got to find an economically sustainable way to save it. Green energy jobs have grown at twice the rate of overall economy jobs in the last decade, they pay 20 to 30 percent more, they’re directly responsible for a $60 billion trade surplus.
Do whatever you want about Solyndra, but do not insult my intelligence by trying to say that the big oil [companies] are right and the green tech people are wrong.

Clinton was citing the analysis by the Brookings Institution of the clean energy economy, which found that employment in the clean-tech sector, which includes companies like Solyndra, grew at 8.3 percent from 2003 to 2010, twice as fast the overall economy.

[...]

Later in the roundtable, Clinton offered some thoughtful analysis of why the government is “picking winners and losers,” as some have described the loan guarantee program that supported Solyndra. He explained that the understanding that corporations have a responsibility to all stakeholders has been lost to the idea that they only answer to shareholders. The role of government in setting market fundamentals has been attacked relentlessly. So government policies that define the market — like clean energy standards, cap and trade, or carbon taxes — can’t get passed, even though those are the most efficient at supporting economic innovation.

People need to understand that the government should play a role in making markets, Clinton said, and “part of the market making should be designed be create a mentality of shared value rather than just shareholder value.”

Note: The last bit on shared value was in response to a question I asked and I'll write about that in a separate post.

7) Morra Aarons Mele at BlogHer: What President Clinton, Maternal Health and Blogging Have in Common

CGI: Notes on Panels on Women and Girls, Market Based Solutions, Environment, Haiti

In my two previous posts, I discussed comments on the American job market by former President Clinton at the Clinton Global Initiative. In this post, I'd like to briefly comment on some of the panel discussions on other topics.

Women and Girls

President Clinton's remark that it is amazing that we even need panels discussing the protection and empowerment of women and girls in the year 2010 set the stage for CGI's focus on this topic. The panel discussion on Empowering Girls and Women (see Michelle Kraus' piece at the Huffington Post and Ken Houghton's notes at Angry Bear) was one of the better ones in my view. A superb video worth watching and sharing - The Girl Effect - was aired during this session. Joan Walsh at Salon.com wrote more about this and about Secretary of State Hillary Clinton's announcement on a new initiative:

I'm attending the first day of the Clinton Global Initiative, where Secretary of State Hillary Clinton just announced the launch of the Global Alliance for Clean Cookstoves, a public-private partnership. Before you shake your head at the former president's powerful wife being confined to the kitchen, the toxins released by open fires and inefficient stoves create one of the five most serious health risks to people in developing countries, putting them at risk for pneumonia and lung cancer.

The participants on the main panel were Queen Rania Al Abdullah from Jordan, President Ellen Johnson Sirleaf of Liberia and Muhtar Kent, CEO of the Coca Cola Company, with Katie Couric of CBS moderating. I was particularly impressed by Queen Rania Al Abdullah (her outspokenness and willingness to take strong positions), although President Sirleaf was engaging as well.

The breakout session on Securing the Heath and Safety of Girls and Women, moderated by The Daily Beast's Tina Brown, was interesting as well (see Ken Houghton's notes at Angry Bear). The panelists were Gary Cohen, EVP of BD, Geeta Rao Gupta, Senior Fellow at the Gates Foundation, Richard Holbrooke, Special Representative for Afghanistan and Pakistan (US State Department), and actress Ashley Judd, Board Member of Population Services International (PSI). Holbrooke was vocal about what he felt were some shortcomings in traditional approaches to deal with women's rights and security in countries where women face suppression or sexual violence. He said that we also have to address the men in order to fix the problem of violence against women, that he rarely sees programs where men are the target of appropriate outreach - he gave an example of police training (not sure if he was referring to Pakistan) where he said there was nothing in the training really about how women need to be shown respect. He mentioned that both he and Secretary of State Hillary Clinton see eye to eye on this topic. Gupta countered this by stating that there are programs that target men and boys - not just women - and with a broader community-level focus these programs aim to show how the men and the community can benefit (especially in terms of growing their income or wealth) if women are allowed more freedom to pursue their goals and are respected. Holbrooke also spent some time discussing the recent devastating floods in Pakistan and what he thought it would take to help Pakistan recover from this unprecedented calamity. He cautioned that any aid given to Pakistan should not be linked to any commitments on social re-engineering because it would be counter-productive - he said, aid should be provided to save lives and livelihoods, not just for security alone. Judd spoke passionately about her travels and experiences in Africa.

(NOTE: I was unable to attend the session on Profiting From The Poor? A Discussion on Microfinance IPOs - where Muhammad Yunus (Nobel-Prize winning Founder of Grameen Bank) and Vikram Akula (Founder of SKS Microfinance) evidently had an energetic debate. Megha Bahree of Forbes has a brief write-up on the debate in her blog and Rina Chandran has more at Reuters).