Tag Archives: investment

The Global Financial Crisis, Revisited

Blogging at Triple Crisis, Kevin Gallagher noted an interesting development in the “blame game” between the International Monetary Fund, the World Bank, the United Nations, and the World Trade Organization regarding the causes of the global financial crisis last year. As Gallagher notes, the World Trade Organization held its much anticipated session on the WTO and the financial crisis last week, claiming that the WTO played no negative role in the crisis.

The debate centers on the role of financial controls and capital account liberalization in the broader liberalization process. While the International Monetary Fund increasingly recognizes the importance of capital controls in preventing financial crises, the World Trade Organization continues to maintain that the imposition of capital controls may be “actionable” under the General Agreement on Trade in Services. In other words, even as the IMF acknowledges that imposing limits on the ability of speculative investors to move in and out of particular economies may provide an avenue for governments to limit the negative impact of such speculative investment on their national economies, the World Trade Organization’s rules make such restrictions a punishable offense.

The recognition of the importance of capital controls is not new. Joseph Stiglitz made a similar argument following the 1997 Asian financial crisis, arguing that the IMF ignored the importance of sequencing liberalization to avoid economic crises in developing economies. But there are two important take-away points here. First, the fact that the IMF—the former bastion of unrestricted liberalization—now recognizes that liberalization must be paced represents an important development in the international economy. Indeed, as a February 2010 IMF Staff Paper noted, controls on capital inflows “can usefully form part of the policy toolkit to address the economic or financial concerns surrounding sudden surges in capital.” Second, as Gallagher argues in his paper on the topic, capital account liberalization is not associated with economic growth in developing countries. In other words, at least among developing economies, there is little benefit but much risk in liberalizing financial flows. This is something that the government of Brazil recognized early in the global financial crisis, when it imposed a two percent tax on capital inflows attempting to limit portfolio investment tin the county.

The Renewable Energy Rivalry

There’s been a great deal of concern expressed over the past couple of months about the rising influence of China. President Barack Obama’s decision to meet with the Dalai Lama in February, China’s repeated rumblings over the valuation of China’s currency, the rumbai, China’s subtle threats to slow down their purchasing of U.S. Treasury securities, and tensions over U.S. arms sales to Taiwan have all served to increase tensions between the two powers.

But here’s one you might have missed. According to the Guardian’s Datablog, Chinese investment in renewable energies in 2009 was almost twice that of the United States. Chinese investment totaled more than U.S. $34.6 billion, compared to $18.6 billion in the United States. The United States still out produces China, but just barely, 53.4 gigawatt capacity in the U.S., 52.5 gigawatts in China. It appears the Chinese government is serious about its 20 percent by 2020 target, which it set last year.

The dramatic expansion of Chinese investments in renewable energies is particularly interesting given the inability of the United States and China to reach a common agreement at the climate change talks in Copenhagen earlier this year.

The Pew Report from which the data comes makes for some interesting analysis. Among those things which you might not have guessed:

  • Investment in renewable energies in the United States fell by 40 percent in 2009.
  • Globally, more than $162 billion was invested in clean energy production in 2009.
  • The G-20 countries collectively account for more than 90 percent of global investment in renewable energy.