International Economics Update Winter 2005 Copyright (C) 2005 The International Economics Network http://www.internationaleconomics.net Website Additions. More than 200 new items added to the research papers (http://www.internationaleconomics.net/research.html) and news (http://www.internationaleconomics.net/news.html) sections. Interesting Readings. 1. Float Gloat: Michele Cavallo, writing in the FRBSF's Economic Letter, revisits the debate on floating versus fixed exchange rate regimes---an old topic that has recently enjoyed a revival of research interest, especially given the potential contractionary effects of devaluations ("To Float or Not to Float? Exchange Rate Regimes and Shocks", http://www.frbsf.org/publications/economics/letter/2005/el2005-01.html). 2. Debunking Dependencia: In a persuasive article, Ryan McMaken argues that by the pursuit of free-market policies, Chile has catapaulted itself to among the richest nations in the world, and the rising economic star of Latin America ("Chile: Socialism, Dictatorship, and Liberalism", http://www.mises.org/fullstory.aspx?Id=1719). 3. Poverty Plan: Jeff Sachs, via the Washington Post, suggests a "practical plan" to end poverty in the world, based on the findings of an interdisciplinary group ("A Practical Plan to End Poverty", http://www.washingtonpost.com/wp-dyn/articles/A14732-2005Jan16.html). His views are elaborated in an interview by Fran Quigley, in Counterpunch ("The Economics of Global Poverty: An Interview with Jeffrey Sachs", http://www.counterpunch.org/quigley04022005.html). 4. What the World Wants: IHT/NYT's international reporting team document, continent by continent, the wants and desires of the rest of the world vis-a-vis the United States. Although the analysis is superficial, the information is prescient ("Bush's 2nd term: What the world wants from America", http://www.iht.com/articles/2005/01/16/news/roundup.html). 5. More of What the World Wants: Joshua Muravchik makes a convincing case for believing that the so-called Third Wave of democracy will enrapture the world. Ultimately, an empirical question, but certainly interesting food for thought in the light of George W. Bush's second inauguration address ("The Democratic Ideal", http://www.opinionjournal.com/extra/?id=110006205). 6. Democracy's Drum: Are we witnessing the beginning of a social movement pushing for democracy in the Middle East? There may be reasons to believe so, according to Jackson Diehl ("A Mideast Makeover?", http://www.washingtonpost.com/wp-dyn/articles/A58850-2005Feb27.html), Quentin Langley ("Tumbling Dominoes in the Middle East?", http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=4415), and the Economist ("Something stirs", http://www.economist.com/agenda/displaystory.cfm?story_id=3722882&fsrc=nwl). Spengler, writing in Asia Times, offers a contrarian view ("They made a democracy and called it peace", http://atimes01.atimes.com/atimes/Front_Page/GC08Aa02.html). 7. Cold Water on de Soto: While the ideas of Hernando de Soto have captured the imagination of many development economists and policymakers, John Gravois argues that his ideas are, in reality, innocuous at best, and disastrous at worst ("The De Soto Delusion", http://slate.msn.com/id/2112792/). The law of unintended consequences strikes again; still, the deeper underlying question is: Is it a flaw of the theory, or in its practical implementation? 8. Dollar, ad nauseaum: Jeffrey E. Garten and David Dapice offer their two cents on the dollar, courtesy of YaleGlobal ("Dealing with a Declining Dollar, Part I", http://yaleglobal.yale.edu/display.article?id=5237; "Dealing with a Declining Dollar, Part II", http://yaleglobal.yale.edu/display.article?id=5254). 9. Deficit Debacle: The sands of the hourglass in the never-ending Ponzi game seems to be running low; so argues Ken Rogoff in his tongue-in-cheek view of the world's willingness to subsidize American consumption habits ("Loving America’s Deficits", http://www.project-syndicate.org/commentaries/commentary_text.php4?id=1821&lang=1&m=series). A slightly longer (and drier) piece is that of Steve Stein, writing in the Policy Review ("Trade out of whack", http://www.policyreview.org/dec04/stein.html). David Levey and Stuart Brown argue, in Foreign Affairs, of how fears of the U.S. deficit and foreign debt are essentially a myth ("The Overstretch Myth", http://www.foreignaffairs.org/20050301facomment84201/david-h-levey-stuart-s-brown/the-overstretch-myth.html). 10. Revisions in the Revised Bretton Woods: Just when it seems like Asian central banks are bound to the revised Bretton Woods system, as advocated by Dooley and company ("An Essay on the Revived Bretton Woods System", http://www.nber.org/papers/w9971). William Pesek Jr., writing for Bloomberg, makes the case for agency resting on Asian central bankers ("Greenspan Humbled By Asia's Central Bankers", http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_pesek&sid=aKmRPPpmFAfg), a case first alluded to by Nouriel Roubini and Brian Setser ("BW2: Are we back to a new stable Bretton Woods regime of global fixed exchange rates?", http://www.roubiniglobal.com/archives/2004/10/are_we_back_to.html). 11. Euro Eval: At its sixth birthday, the euro has gone through hell and high water, and is currently riding on the back of shorts in dollar holdings worldwide (and East Asian currency interventions). Guido Tabellini takes a sombre view at the euro scorecard ("Building on the Euro", http://www.project-syndicate.org/commentaries/commentary_text.php4?id=1827&lang=1&m=series). 12. Textile Freestyle: Linda Lim, writing for YaleGlobal, argues that free trade is the overwhelmingly positive approach toward the multifiber agreement that just ended this year. By facing the market head-on rather than relying on protectionist policy, the Chinese textile industry is poised to dominate---for reasons beyond low wages ("China Shows the Way in a Quota-Free Market", http://yaleglobal.yale.edu/display.article?id=5310). 13. Wolf at the Bank: Paul Wolfowitz gets the U.S. nomination for the job of running the World Bank ("A hawk to ruffle the World Bank's feathers", http://www.economist.com/agenda/displaystory.cfm?story_id=3763922&fsrc=nwl). This has sparked opposition from the Left in the U.S. ("The Ugly American Bank", http://www.nytimes.com/2005/03/18/opinion/18krugman.html), support from the Right ("Regime Change at the World Bank", http://www.wsj.com/wsjgate?source=jopinaowsj&URI=/article/0,,SB111110298505683090,00.html%3Fmod%3Dopinion%26ojcontent%3Dotep), and concerns at the international level ("Bold choice, message sent", http://www.iht.com/articles/2005/03/17/business/assess.html; "Another Wolf for Russia", http://atimes01.atimes.com/atimes/Central_Asia/GC18Ag02.html). Endnotes. This update is sent by request to subscribers. If you wish to join the mailing list, please click on: http://www.internationaleconomics.net/contact.html And enter your email address on the form there. 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