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A few well-written words can convey a wealth of information, particularly when there is no lag time between when they are written and when they are read. The IPS blog gives you an opportunity to hear directly from IPS scholars and staff on ideas large and small and for us to hear back from you.

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Entries since December 2010

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Cancun, Climate Change, and Congress

December 10, 2010 ·

Deal on U.S.-Korea Trade Would Expand Excessive Investor Protections

December 10, 2010 ·

Approval of a White House deal on a trade agreement with Korea appears increasingly uncertain, as several labor unions and key Democrats have announced their opposition.  The deal, announced December 3, includes revisions to the pact negotiated by the Bush administration in the areas of market access for automobiles and beef.  These changes resulted in a split in the U.S. labor movement, with the United Auto Workers and the United Food and Commercial Workers coming out in favor of the deal but the AFL-CIO, Steelworkers, Communications Workers, and the Machinists opposed.

One of the most disappointing aspects of the “deal” is the failure to address widespread concerns over excessive investor protections.  Current U.S. trade and investment agreements allow private foreign investors to bypass domestic courts and sue governments in international tribunals over actions, including public interest regulations, that reduce the value of their investment.

On the campaign trail, President Barack Obama made several promises to revise these rules.  For example, he stated “With regards to provisions in several FTAs that give foreign investors the right to sue governments directly in foreign tribunals, I will ensure that foreign investor rights are strictly limited and will fully exempt any law or regulation written to protect public safety or promote the public interest.  And I will never agree to granting foreign investors any rights in the U.S. greater than those of Americans.”

As Rep. George Miller (D-CA), chair of the House Education and Labor Committee, points out, however, such changes were not made in the Korea deal.  According to Miller, “The rights granted foreign investors are far too broad and allow foreign corporations to skirt the rule of American law, such as for health and environmental protections, and American courts by using private arbitration panels to demand compensation from US taxpayers for upholding our own labor standards and other essential regulations.”

The Communications Workers of America also drew attention to the problems with the deal’s investment rules:  “This agreement gives investment and legal protections to large multi-national corporations which shift jobs offshore in search of the lowest labor and environmental costs and highest profits.  With no counter balance, multi-national corporations whipsaw workers and nations to prevent and eliminate bargaining rights.”

Several major U.S. environmental groups have also emphasized the problems with investor protections.  According to Friends of the Earth, “The Korea trade pact replicates some of the worst aspects of NAFTA (North American Free Trade Agreement), providing foreign investors the right to challenge U.S. public health and environmental regulations that could put a dent in their current or expected profits. Like NAFTA, the agreement would also allow South Korean companies to challenge U.S. environmental laws in secret, unaccountable trade tribunals that completely bypass the U.S. judicial system.”

One little-known aspect of the investment chapters of U.S. trade agreements is that they ban the use of capital controls, a tool that has been used effectively by many countries to prevent or mitigate financial crisis.  New Zealand academic Jan Kelsey has pointed out that recently adopted capital controls by the government of Korea would likely be in violation of the trade pact’s investment rules. According to Kelsey, “a number of measures adopted by South Korea in its national interest appear to conflict with the agreements it has signed with the US and the EU and also reveals inconsistencies in Korea’s obligations under the two agreements and with other international instruments that allow them more flexibility.”

As Boston University professor Kevin Gallagher stated in his article Obama must ditch Bush – era trade deals, “South Korea will join the growing group of nations that have recently resorted to currency controls in the wake of the global financial crisis. As a rash of new research has shown, such controls are legitimate tools to prevent and mitigate financial crises. Yet if the pending South Korea-US free trade agreement had been ratified by now, South Korea’s actions would be deemed illegal.”

Despite strong opposition from civil society groups in the United States and South Korea, the White House is expected to seek Congressional approval of the U.S.-Korea trade deal in early 2011.

Finding Rootedness in the Age of Vulnerability

December 10, 2010 ·

This article was originally published in Yes! Magazine on December 6th, 2010.

It seems that almost everyone we know is feeling vulnerable these days—whether they are rich or poor, employed or unemployed, their lives are feeling fragile. So we are setting out to discover places where people are finding ways to counter that vulnerability, creating more secure paths of living based on a concept we are calling "rootedness." We are learning from communities in the United States and also abroad—in the Philippines, Trinidad, and El Salvador.

Fifty years ago, when our parents deposited money in the bank, it was almost certainly a local bank, which then lent the money to people and businesses in that very community. Today, money goes to giant financial institutions that partake in casino-like activities that undermine local economies. Fifty years ago, most farmers grew a variety of crops from traditional seeds and most regions were largely self-sufficient in food; today, most farmers produce a single crop with seeds purchased from global firms.

Indeed, today, so much of what we eat, invest, borrow, and purchase is the product of global assembly lines. As a result, all of us are vulnerable to external shocks. So when the 2008 Wall Street crash spread like wild fire around the world, it hit families and communities everywhere, accelerating unemployment, suffering, inequality, and uncertainty. That same year, billions of people in poorer nations found that wildly fluctuating prices of wheat, corn, rice and other key food products increased their chances of going hungry. And extreme weather events related to climate change have been hitting people hard, in all parts of the globe.

In the United States and around the world many people and some governments are working to reduce their vulnerability to these global shocks by becoming more rooted.

This year, the two of us are taking a pause from our other work to dig into a fascinating array of communities and countries that are finding rootedness in this “age of vulnerability.” We are discovering the same yearning for roots and community in such far flung places as the Philippines, Trinidad, and El Salvador that we are seeing in communities across the United States. We feel it ourselves in our community of Takoma Park, Maryland.

We plan to share our musings with you through a regular blog. We are also exploring these concepts in the United States with a New Economy Working Group that has emerged through the collaboration of the Institute for Policy StudiesYES! Magazine, the Business Alliance for Local Living Economies, and the People-Centered Development Forum. The work we do on this blog, plus your reactions, will help us write a book on finding rootedness in the age of vulnerability.

But how does one define and measure rootedness? There are, we would suggest, several ways:

  • There is economic rootedness, which focuses on producing as much as possible locally, then nationally, then regionally, and only then globally. This notion is sometimes called subsidiarity, and it is very different from old-fashioned protectionism.
  • There is environmental rootedness, wherein communities control their water, their forests, and other natural resources, and hence have a vested interest in managing them sustainably.
  • And there is social rootedness, wherein (among other things) a society is more healthy if it is more equal and it also has a stronger sense of community.

To write this blog, we will visit Filipino rice farmers who are abandoning chemical farming in favor of organic farming, and finding that their finances, their health, and their environment are all benefiting. We will travel to Trinidad, where fisherfolk are fighting to protect their local fishing grounds against giant shrimp trawlers and oil drilling. We will visit communities in El Salvador that have rejected the get-rich-quick promises of gold mining firms in order to preserve their fresh water and their communities. And, we will report on several U.S. communities that are re-rooting different aspects of economic life, such as the rapidly expanding “slow food” and “slow money” movements.

We will also pay attention to nations like Mexico that were overly dependent on global markets and, as we are discovering, are faring the worst in this crisis—exactly the reverse of what mainstream economic theory predicted.

Our insights build on 30 years we have both spent taking on conventional economic wisdom. In particular, we have fought the myth that most community economic activity is inefficient, and that most communities and nations should specialize in a few things they do well and trade widely for the rest. We have always thought that “rooted” communities and nations made more sense than ones that are vulnerable to the whims of global markets.

Our world views have been shaped by the extraordinary range of people from diverse walks of life whom we have met during 35 years of traveling and living in different communities. We have had the privilege of living in some of the world’s poorest communities and visiting the halls of wealth and power in several countries, and we have gotten to know insightful people in both spheres. Imagine: We just spent a month in the Philippines and half of it was living with three different communities where farmers are shifting to planting organic rice. Then, we spent t

Robin is a professor at American University and has worked as an international economist in the U.S. Treasury Department and the U.S. Congress. John has worked at the United Nations in Geneva and, for the past quarter-century, at a leading multi-issue progressive think tank: the Institute for Policy Studies. We have written books on the grassroots environmental movementglobal corporationsthe global justice movement, and rethinking progress.  

We know that many of you have experienced the downside of economies made vulnerable by their reliance on globalization. We invite you to share your own experiences as you travel with us on a search for rootedness in this age of vulnerability.

he other half in the Philippine Congress discussing with lawmakers how to speed the transition from chemical to organic farming, and how to reduce the country’s dependence on call centers and electronic exports.

We were lucky to begin our travels decades ago. Just out of college, Robin spent a year living with indigenous people in the southern Philippines who were fighting against a pineapple agribusiness firm. At the same time, John landed a job in Geneva working with some of the best minds from poorer nations at a UN agency whose mandate was to close the gap between rich and poor. We then met in graduate school, married, and we are raising a son, who is now 13.

 

John Cavanagh and Robin Broad wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Robin is a Professor of International Development atAmerican University in Washington, D.C. and has worked as an international economist in the U.S. Treasury Department and the U.S. Congress. John is on leave from directing the Institute for Policy Studies, and is co-chair (with David Korten) of the New Economy Working Group. They are co-authors of three books on the global economy, and are currently traveling the country and the world to write a book entitled Local Dreams: Finding Rootedness in the Age of Vulnerability.

Obama's New Christmas Carol: Deck the Halls with Windfalls for the Wealthy

December 8, 2010 ·

"Isn't it wonderful to be in a city of misplaced priorities and ass-backward judgments"  says retiring Representative David Obey (D-WI) of the Obama/Republican Tax Breaks for the Rich deal teached Monday night. Obama "negotiated" with Congressional Republicans to produce a roughly $800 B so-called "Second Stimulus" package which lines the pockets of the richest 2% and contains precious little stimulus for the rest of us. The rich get richer, the poor are granted a few more months to survive. Ass-backward, back-assward and every ass and back in between.

First, let's start with what Obama got right: Obama did obtain agreement on a 13-month extension of federal unemployment benefits. This is desperately needed and very stimulative. Mainstream economist Mark Zandi points out that for every $1 spent on Unemployment Insurance, at least $1.61 is put back into the economy. The extension of tax breaks, such as the Earned Income Tax Credit, the Child Tax Credit and the College Tuition Tax Credit indeed help low-income families and stimulate the economy. Good. The very least that we needed. This "negotiation" allowed for a release of those held hostage by Congressional Republicans-- America's working families and jobless.

But at what price and was it necessary to give new yachts to the wealthy so that the rest of us can survive?   The Paris Hilton's and Helmsley pooch Trouble get at least 2 more years of $25,000 in tax breaks.

And, well, that's not all these needy millionaires and billionaires get out of this deal. No siree.

The Bush-era temporary elimination of the Estate Tax is set to expire on Jan. 1 2011, re-imposing the levy of up to 55% on estates valued at more than $1 million. In the deal however, instead of letting the Estate Tax to reinstate fully and pump much needed revenue into our hurting economy, there would be $10 million exemption per couple and a lowered tax rate of only 35% for two years.The deal would make the Estate Tax even weaker than it was under President Bush, and the weakest it has been in seven decades. As OMB watch explains, Obama has done for rich inheritors what Bush tried, but failed to do...significantly weaken the Estate Tax and create a smooth path to its elimination. Merry Christmas Ms. Hilton..and your little dog too..

Further, Obama replaces the progressive Making Work Pay tax credit from the 2009 Recovery Act with a regressive reduction in Social Security payroll tax. The Making Work Pay tax credit benefited households earning up to $75,000 and was highly stimulative. But the payroll tax holiday now proposed is skewed toward the wealthy and is far less stimulative. A low-income family will receive less relief than they did from the Making Work Pay credit, a middle-income family could save $800, but a couple earning over $220,000 will receive an additional windfall of about $4,000.

There is no money for a public jobs program.There is no money for stimulative aid to state and local governments. There is no money for an extension of the highly stimulative jobs emergency fund which funded jobs for poor people struggling to find work through the Temporary Assistance for Needy Families federal program.

But, Obama insists, he needed to negotiate in this way to get federal unemployment benefits extended for millions of Americans.

The truth is that the White House gave away the farm almost a month ago, well in advance of the deal cut this week. In an interview with The Huffington Post, Obama advisor David Axelrod essentially tipped Obama's hat that tax cuts for the rich would be a-ok with the Administration. This, after a September interview in which now House Speaker-Elect, John Boehner had said he wouldn't let the tax cuts for the rest of Americans expire if no deal was cut for extension of tax cuts for the rich.

Opposition rings loudly from House and Senate Democrats and outrage from Obama's base is palpable. To answer his critics from the center and the left, Obama almost whines "What else did you want me to do?"

Mr. President, we want you to hold true to your campaign promise to let the extra tax cuts for the nation's wealthiest 2% expire. We want you to go to the mat for our nation's millions of jobless and not betray the middle class on the way. We want you to lead the fight to create jobs. We want you to lead the fight for a progressive tax system which makes an American economy that works for all of us. We want you to lead and not capitulate to reckless demands by Republicans shamelessly holding middle and lower-income Americans hostage.

We want you to be the President for the 98% of us who need you. That's what we want you to do.

The Problem with the Obama Tax Compromise

December 8, 2010 ·

The Obama “tax compromise” proposal extends tax cuts for high-income households and institutes a greatly diminished federal estate tax.  President Obama argues that he wants to change the politics of Washington and not hold unemployment benefits and middle class tax cuts  hostage.

But does the ransom always have to be so high?

It is one thing to compromise with people when you agree on similar goals.  You can work in good faith and agree to disagree on strategy.

The problem with continually compromising with the extreme right-wing corporatist faction that has taken over the Republican Party is they have a very different vision for the United States. 

They really don’t want to live in a society with greater equality of opportunity, healthy communities, shared prosperity.  They don’t give a rat’s behind about the quality of life for working class and poor people in the U.S. and around the world.  They do not lay awake at night concerned about hungry children, youth violence, the despair of prolonged unemployment, AIDS in Africa, and the ecological crisis. 

They have an Ayn Rand view of the world where they are the virtuous prime movers –and the rest of the world is parasites and looters, trying to pillage their wealth.

These Republicans are not Dwight Eisenhower, or Warren Rudman, or Lincoln Chaffee, or Ed Brooke.  There have always been political leaders in both major parties genuinely concerned about the common good.

The McConnell-Boehner-Bachmann-DeMint-Paul party would be content to live in a plutocracy –with vast disparities of wealth and power.   For various reasons, they believe this is the natural order of things –and don’t want to disrupt it.

And they are OK with rigging the game so that they and their wealthy constituents keep winning the game –while cloaking themselves in virtuousness and deservedness.

This is not a negotiation over which type of math curriculum will boost our children’s achievement.  This is not a “Getting To Yes” exercise in a Harvard Law School class.  This is a power struggle for the future soul of America:  Plutocracy versus Peace and Plenty.

If power keeps concentrating in the hands of a few –the very wealthy will use this power to further increase their power and privilege. 

There are inspiring examples of the opposite.  The Wealth for the Common Good network is a case in point –wealthy individuals speaking out for policies that would reduce the concentration of wealth and encourage more broadly shared prosperity.

One urgent action we can all take is to support the Responsible Estate Tax Act –which would effectively reduce the concentration of wealth.  See the Other 98 Percent’s petition campaign.

The great moral question of our time is: Does a policy further concentrate wealth and power –or does it disperse wealth and power?

The Obama “tax compromise” fails the test.  It will lead to a further concentration of wealth and power.  It moves us in the wrong direction.

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