New Working Paper

Check out my working paper The Impact of Economics and Financial Literacy in How People Perceive the Effectiveness of the Fiscal Policy of Zimbabwe: Case Study of Harare at SSRN.

The Global Economic and Financial Uncertainty

A lot financial and economic events have happened these past weeks which are significant such as the the increasing fragility of the Chinese economy, the massive global stock market selling and resultant rebound of the respective indices among others

A lot remains unexplained but we can only postulate about the events. What I can say is that the global financial and economic system is still vulnerable post 2008 Financial Crisis and Global Recession. Are the reforms instituted enough? I think its a big NO!!! Why so? The dominant economic thinking has not changed much and fairly speaking the reforms are not effective. What is evident is that the dominant economic thought of the last decade and a half has failed. Not much emphasis is upon the unknown unkowns. We tend to assume that what we don't know we know as non-existent, instead of trying to model such variables.

The causes and implications of the Chinese slowdown and global stock market volatilities is something I will touch upon in a future post. What is evident is that something is not right in our global economy!

The ECB cuts its interest rate

Yesterday the ECB cut its interest rates from 0.75% to 0.50%. It’s the first cut by the ECB in as many months and it is quite interesting because Germany has all along been opposed to any further expansionary policies be it monetary or fiscal and this latest move by the ECB means that the majority of the Eurozone members are finally making bold steps to get their economies on the right footing.

There is something which I find quite puzzling about European policy-makers. They are pushing for monetary expansionary policies and fiscal austerity at the same time. What this implies is that the financial services industry gets help from the authorities to recover from the Great Recession/Lesser Depression by getting cheap loans and having their semi-toxic financial assets purchased for by the authorities at a good price considering that they are basically worthless given how illiquid, the market is currently.

On the other hand, the workers and general public who depend on government services suffer because of the austerity policies being put into effect. It’s hypocritical and the Europeans are ignoring empirical evidence which suggests that fiscal expansion should take a more prominent role in the efforts to get Europe out of the slump it is finding itself in.

The World in a Flash….

Recently I have been posting quite a few posts and its not like I’m losing interest in blogging but just that something has been preoccupying me recently. Anyway on the international scene the Reinhart-Rogoff debacle is still ongoing and the Eurozone is still the sick man of the world. These are some of the things I want to share with my followers now and again. But eishh that’s life and I will just have to let it roll.

UPDATE: World Bank Presidential Elections.

As expected Washington managed to arm-twist its way into making sure that it's preferred candidate (Jim Yong Kim) was appointed as the World Bank President. What I found intresting was the seemingly choreographed & biased responses to the news of the selection by Western media and policymakers.

The press statement by the Center for Economic and Policy Research co-director Mark Weisbrot is a clear example. In it, he says that 'despite being a US citizen, he (Kim) would not take orders from Washington as anyone that might be appointed from another country'. He goes on further saying that the US uses the WB as a foreign policy tool to advance it's political and economic agenda of mainly neo-liberal economic policies of abandoning state-led industrial and development strategies, and tighter fiscal and monetary policies. But he contradicts himself in a Voice of America (English) article in which he says that since Kim doesn't have much financial experience, hence he will have to rely on WB staff on these issues. So how doesn't that prevent Washington from influencing him, since it controls the WB.
Essentially the real decisions at the WB are about allocating resources among the various competing developmental needs.

Other right-wing guys like William Easterly were completely out of touch by commenting that 'why should we rush with the appointment'. Wow. Is it because Kim was under intense scrutiny. Such a call wouldn't have been made if a candidate from a developing country was under scrutiny. What I noticed from media houses such as AFP via Yahoo & Huffington Post is that they talked about how a success Kim would be, but crucially ignored the issue under contestation that if he was the best candidate for the job.

Peter Chowder of Bretton Woods Project which monitors WB work summed it up by declaring the appointment was a stitchup between the US & Europe.

The World Bank Presidential Elections.

With the World Bank meetings coming up. The race is now up to two candidates, American Jim Yong Kim and Nigerian Ngozi Okonjo-Iweala with the Colombian Jose Antonio Ocampo having dropped out already. Originally I wasn't interested in the news pertaining to the jostling for the job among these world actors. But the endorsement of Okonjo ahead of Kim by The Economist got me thinking. It seemed to me that the Western consensus regarding apportioning these key jobs among themselves on reasons other than meritocracy was losing steam among themselves. The failure by the WB and like-minded institutions to reduce poverty substantially and thereby contributing to sustainable development has necessitated a rethink in how development issues are handled and the first step is having a competent person at the top.

On who should lead the WB among the candidates, it is clear that Okonjo is the best person in terms of depth and experience having been previously been a Managing Director at the same institutioon. Of course Kim has had some experience in issues such as public health but what matters at the end of the day is how the scarce resourses are going to be allocated to achieve an optimun result. Okonjo is one who has been there and seen it. Kim is at present struggling to give a clear picture on how the WB under him will look like. If he wasn't nominated he wouldn't have been a contender for the post therefore I dont see how now he could suddenly be the best guy around. Some supporters of Kim have been theorising that he is unorthodox hence he will present a new face and ideas to the WB. But Kim is not competent enough in wholesome development issues including food security, affordable housing, firm state institutions, the funding matrix etc (he's limited to public healthcare, his area of expertise). Like I mentioned before, the key here is how to balance the books to fund and manage these development areas, something Kim lacks. Other people such as Noam Scheiber have been naive to suggest that appointing an American is essential to secure Congress funding. Here's the case, the Chinese Developent Bank's assets are worth more than those of the WB and Asian Development Bank combined. Hence alternative sources of funding are available other than the US Congress.

Lets hope the WB Presidential election doesnt turn out to be a scripted event by Washington. Ngozi Okonjo-Iweala deserves the post.