Understanding Capitalism

Nobel-winning economist Amartya Sen argues, in an article published on The New York Review of Books, that the way out from the crisis passes through a better understanding of the ideas that contributed to build the actual economic system. Adam Smith, John Maynard Keynes, Arthur Cecil Pigou, should be read, not just quoted. And I quote

Smith viewed markets and capital as doing good work within their own sphere, but first, they required support from other institutions—including public services such as schools—and values other than pure profit seeking, and second, they needed restraint and correction by still other institutions—e.g., well-devised financial regulations and state assistance to the poor—for preventing instability, inequity, and injustice. If we were to look for a new approach to the organization of economic activity that included a pragmatic choice of a variety of public services and well-considered regulations, we would be following rather than departing from the agenda of reform that Smith outlined as he both defended and criticized capitalism.

We must understand how institutions work and make them work better. But not just aiming at economic growth.

There is a critical need for paying special attention to the underdogs of society in planning a response to the current crisis, and in going beyond measures to produce general economic expansion.

A crisis not only presents an immediate challenge that has to be faced. It also provides an opportunity to address long-term problems when people are willing to reconsider established conventions. This is why the present crisis also makes it important to face the neglected long-term issues like conservation of the environment and national health care, as well as the need for public transport (…).

Sunday, 22 March 2009

Wars in the Backyard

The National Security Archive has just declassified eleven documents on the extra judicial arrests conducted 25 years ago by the government of Guatemala. It appears that the US embassy clearly knew that the security forces were involved in the kidnappings. In a Department of State secret report, dated March 1986, we can read:

While criminal activity accounts for a small percentage of the cases, and from time to time individuals “disappear” to go elsewhere, the security forces and rightist paramilitary groups are responsible for most kidnapping. Insurgent groups do not normally use kidnapping as a political tactic, although they did resort to kidnapping for ransom in their formative years.
First used systematically by security forces against Communist Party and members of the moderate left beginning in 1966, the practice of kidnapping became institutionalized over time. Some 6500 persons have been kidnapping or disappeared since 1977, far short of the 38,000 claimed by critics of the previous Guatemalan governments. The average number of monthly kidnapping peaked in 1984 under regime of General Mejia. At first security forces utilized kidnappings to intimidate the left and convince potential guerrilla supporters to remain neutral. Kidnapping of rural social workers, medical personnel, and campesinos became common between 1979-83. Often innocent victims were accused of being insurgents by military commissioners, other village leaders or an individual’s personal enemies or business competitors. (…) In the cities, out of frustration from the judiciary’s unwillingness to convict and sentence insurgents, and convinced that kidnapping of suspected insurgents and their relatives would lead to a quick destruction of the guerrilla urban networks, the security forces began to systematically kidnap anyone suspected of insurgent connections. This tactic was successful. Most of the insurgent infrastructure in Guatemala City was eliminated by 1984.

The Guatemalan Civil War ended formally in 1996. But violence did not. According to national newspaper Siglo XXI, in the last fourteen months, an average of 17.6 persons have been killed every day. How many during the 36 years of civil war? 15.2.

Thursday, 19 March 2009

Detained and Dismissed

Human Rights Watch has just published a detailed report on Women’s Struggles to Obtain Health Care in United States Immigration Detention. Immigration detention facilities are black holes all around the world. For one thing it is difficult to understand or explain why a state should imprison somebody who has committed no crime at all. At least for those who tend to consider existing as a right and not as a crime. HRW writes that in the United States

the number of individuals held in administrative detention while their immigration cases are determined has skyrocketed in recent years. The detained population on any given day is now over 29,000 nationwide, up almost 50 percent from 2005.

And according to the report the overshadowing sanitary problems for women in this condition are

delays and denials of testing and treatment, obstacles to obtaining medical care, distortions in the doctor-patient relationship, detrimental and unnecessary use of restraints and strip searches, discontinuity of care, lack of effective remedies.

Wednesday, 18 March 2009

Brain matters

Saying that education strengths economic growth sounds good old common sense. But proving and measuring this relation is not immediate and therefore interesting. A reasearch, published last year, does it. Eric Hanushek, Dean T. Jamison, Eliot A. Jamison and Ludger Woessmann estimate that

each additional year of average schooling in a country increased the average 40-year growth rate in GDP by about 0.37 percentage points. That may not seem like much, but consider the fact that since World War II, the world economic growth rate has been around 2 to 3 percent of GDP annually. Lifting it by 0.37 percentage points is a boost to annual growth rates of more than 10 percent of what would otherwise have occurred, a significant amount.

Nonetheless, the research suggests that what really matters for economic growth is the quality of education. In other words it is not enough to send children to school: you have to teach them something. Using test-score performances around the world to measure the cognitive skills of students appears

that countries with higher test scores experienced far higher growth rates. If one country’s test-score performance was 0.5 standard deviations higher than another country during the 1960s (…) the first country’s growth rate was, on average, one full percentage point higher annually over the following 40-year period than the second country’s growth rate. Further, once the impact of higher levels of cognitive skills are taken into account, the significance for economic growth of school attainment, i.e., additional years of schooling, dwindles to nothing. A country benefits from asking its students to remain in school for a longer period of time only if the students are learning something as a consequence.

These results are extremely important especially for the countries of the Bottom Billion. What they are saying is that it is better to invest on the quality of the education (where rate of return is much higher) rather than spending to keep students in schools longer.

Tuesday, 17 March 2009

Crisis from the South /3

The Inter-American Development Bank publishes today on its web-site previsions for remittance flows in 2009 to Latin America: they will go down for the first time since 2000. And different countries are experiencing different situation. The Andean region is effected worse by the decline of the euro whereas the Mesoamerica region sees a strong dollar partially counterbalance the decrease in money flow.

According to the Banco de Guatemala, in the first two month of 2009 remittances to the country have diminished by 9.59% comparing with same period of 2008.

Monday, 16 March 2009

Crisis from the South /2

And it appears that the  problem is not just limited to remittances. According to The Institute of International Finance, private financial flows from rich countries to poor ones will decrease by 63% this year: from US$ 456,8 billions in 2008 down to 165,4 billions in 2009. In 2007 these flows amounted to US$ 928,6 billion.Talking about Latin America, inflows will be down  51% from 2008 level and 76% considering 2007 level.

Money are basically heading home.

Tuesday, 10 March 2009

Truth, finally. Maybe

Guatemalan newspaper La Hora affirms that, for the first time, the  government will hand to the ministerio público (attorney general) the military archives regarding cases of genocide occurred during the civil war (1960-1996). The decision was taken after the constitutional court notification to president Álvaro Colom.  In particular, the military files concern the campaign plans named “Victoria 82”, “Firmeza 83” and the operational plans named “Ixil” (1982) and “Sofía” (July 15, 1982).

So far, it is not known when this will happen. But the Secretary of peace, Orlando Blanco, confirmed that this will happened.

The archives will effect the trial for violation of human rights and genocide, began in 2000, against the former presidents of Guatemala Lucas García and Ríos Montt.

According to the Comisión para el Esclarecimiento Histórico, during the Guatemala civil war (conflicto armado interno) 200,000 people had been killed . Most of them (93%) were victims of state security forces and most of them (83%) were Maya. Between 500,000 and 1.5 million people were displaced.

Friday, 20 February 2009

Crisis from the South

According to Banco de Guatemala, for the first time since 1999, in January 2009 remittances from abroad decreased by 7.75% compared to the same month in 2008. In Guatemala remittance  flows represent 11.89% of GDP. According to the World Bank remittances can represent more than 50% of rurally-based family income and for the International Organization for Migration 30.4% of the population receives money from abroad.

Causes? Probably economic crisis and deportation of  illegal immigrants from the US.

Something is certain: remittances are a strong factor in reducing poverty in Guatemala. If flows continue to decrease is more than probable that poverty will rise in a country where, according to the government, 45,6% of children are already underweight.

Monday, 16 February 2009

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