The Decadence of the People’s Car
by Harold James

PRINCETON – So far, the Volkswagen scandal has played out according to a well-worn script. Revelations of disgraceful corporate behavior emerge (in this case, the German automaker’s programming of 11 million diesel vehicles to turn on their engines’ pollution-control systems only when undergoing emissions testing). Executives apologize. Some lose their jobs. Their successors promise to change the....

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Don’t Fear the IMF
by Harold James

CAMBRIDGE – The International Monetary Fund is, in many places, the organization that everybody loves to hate. According to some, the IMF is bad for the poor, women, economic stability, and the environment. Joseph Stiglitz, whose influence is amplified by his Nobel Prize, blames the IMF for causing and then worsening the economic crises it was called on to resolve. The IMF purportedly does so to save capitalists and bankers, not ordina....

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The Inexorable Logic of the Sharing Economy
by Harold James

MILAN – When Amazon was founded in 1994, and eBay the following year, they harnessed the connectivity of the Internet to create new, more efficient markets. In the beginning, that meant new ways of buying and selling books and collectibles; but now e-commerce is everywhere, offering customers new goods and used goods – and becoming a global force in logistics and retail. Likewise, while today’s sharing-economy companies may....

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A Rule of Law for Sovereign Debt
by Harold James

NEW YORK – Governments sometimes need to restructure their debts. Otherwise, a country’s economic and political stability may be threatened. But, in the absence of an international rule of law for resolving sovereign defaults, the world pays a higher price than it should for such restructurings. The result is a poorly functioning sovereign-debt market, marked by unnecessary strife and costly delays in ....

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The G-7 Embraces Decarbonization
by Harold James

NEW YORK – This week’s G-7 meeting at Schloss Elmau in the Bavarian Alps marked a major breakthrough in climate-change policy. The seven largest high-income economies (the United States, Japan, Germany, the United Kingdom, France, Italy, and Canada) made the revolutionary decision to decarbonize their economies during this century.
For the first time in history, th....

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The Quiet Financial Revolution Begins
by Harold James

LAGUNA BEACH – Steadily and indisputably, the financial services industry – with which we all interact, whether as borrowers, savers, investors, or regulators – has embarked on a multiyear transformation. This process, slow at first, has been driven by the combined impact of two sets of durable forces.
 
On one hand,....

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Inequality, Immigration, and Hypocrisy
by Harold James

CAMBRIDGE – Europe’s migration crisis exposes a fundamental flaw, if not towering hypocrisy, in the ongoing debate about economic inequality. Wouldn’t a true progressive support equal opportunity for all people on the planet, rather than just for those of us lucky enough to have been born and raised in rich countries?
Many thought leaders in advanced economie....

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Climate Change and the Catholic Church
by Harold James

ROME – Pope Francis is calling on the world to take action against global warming, and many conservatives in the United States are up in arms. The pope should stick to morality, they say, and not venture into science. But, as the climate debate unfolds this year, most of humanity will find Francis’s message compelling: we need both science and morality to reduce the risk to our planet.
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Central banks and the bottom line
by Harold James

MUNICH – Around the world, central banks' balance sheets are becoming an increasingly serious concern – most notably for monetary policymakers themselves. When the Swiss National Bank (SNB) abandoned its exchange-rate peg last month, causing the franc to soar by a nosebleed-inducing 20%, it seemed to be acting out of fear that it would suffer balance-sheet losses if it kept purchasing euros and other f....

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Growth, not grexit
by Harold James

ATHENS – The message from the Greek election must not be misunderstood. The fact that more than 36% of the country's voters cast their ballots for Syriza, a far-left political party, does not mean that Greece has suddenly become communist. Rather, the electorate was expressing its indignation, despair, and wounded national pride.
Greece's European partners need to unders....

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Breaking Europe’s Climate-Change Stalemate
by Harold James

LONDON – Europe has a strong tradition as a leader in the fight against climate change. Lately, however, the continent has reached an ideological impasse over how to address the problem, with environmental sustainability and growth often portrayed as being mutually exclusive. If Europe is to remain an environmental leader, as well as a center of innovation and competitiveness, it will have to abandon it....

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The Global Economy’s Chinese Headwinds
by Harold James

BEIJING – Last year, the global economy was supposed to start returning to normal. Interest rates would begin rising in the United States and the United Kingdom; quantitative easing would deliver increased inflation in Japan; and restored confidence in banks would enable a credit-led recovery in the eurozone. Twelve months later, normality seems as distant as ever – and economic headwinds from China ar....

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The Adaptation Imperative
by Harold James

NAIROBI – In the run-up to the recent United Nations meeting on climate change in Lima, Peru, much of the world’s attention focused on how strongly countries would commit to a framework for cutting greenhouse-gas emissions. Governments’ commitment to such a framework, after all, is vital to ensure that the agreement to be signed in Paris in December will keep global temperatures from rising more ....

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Europe’s Lapse of Reason
by Harold James

NEW YORK – At long last, the United States is showing signs of recovery from the crisis that erupted at the end of President George W. Bush’s administration, when the near-implosion of its financial system sent shock waves around the world. But it is not a strong recovery; at best, the gap between where the economy would have been and where it is today is not widening. If it is closing, it is doing so ....

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The French 9/11
by Harold James

PARIS – “France’s 9/11.” In the immediate aftermath of the massacre at the satirical magazine Charlie Hebdo, the comparison with Al Qaeda’s 2001 attack on the United States has taken hold across France. Indeed, the January 7 attack was the most murderous France has known since the end of the Algerian War in 1962. But how accurate is the analogy?
&....

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Stability and Prosperity in Monetary Union
by Harold James

FRANKFURT – There is a common misconception that the euro area is a monetary union without a political union. But this reflects a deep misunderstanding of what monetary union means. Monetary union is possible only because of the substantial integration already achieved among European Union countries – and sharing a single currency deepens that integration.
If Europ....

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Can Japan reboot?
by Harold James

CAMBRIDGE – Japanese Prime Minister Shinzo Abe’s recent policy decisions – to increase monetary stimulus dramatically, to postpone a consumption-tax increase, and to call a snap election in mid-December – have returned his country to the forefront of an intense policy debate. The problem is simple: How can aging advanced economies revive growth after a financial crisis? The solution is not.....

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The Federal Reserve’s escape from New York
by Harold James

WASHINGTON, DC – The US Federal Reserve System is the world’s most important central bank. Its decisions about interest rates and financial regulation reverberate through global markets and affect millions of lives. Yet its governance structure is of another age – antiquated, increasingly problematic, and urgently in need of sensible reform.
 
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The return of currency wars
by Harold James

NEW YORK – The recent decision by the Bank of Japan to increase the scope of its quantitative easing is a signal that another round of currency wars may be under way. The BOJ’s effort to weaken the yen is a beggar-thy-neighbor approach that is inducing policy reactions throughout Asia and around the world.
 
Central banks ....

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Sustainable Development Economics
by Harold James

PARIS – Two schools of thought tend to dominate today’s economic debates. According to free-market economists, governments should cut taxes, reduce regulations, reform labor laws, and then get out of the way to let consumers consume and producers create jobs. According to Keynesian economics, governments should boost total demand through quantitative easing and fiscal stimulus. Yet neither approach is ....

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The TPP’s Missing Ingredient
by Harold James

WASHINGTON, DC - Looking for ways to stimulate economic growth and create jobs, US President Barack Obama’s administration is seeking to press ahead with the mega-regional free-....

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Hope for Hong Kong
by Harold James

LONDON – Hong Kong’s democracy movement has gained admiration worldwide. The principles, decency, and behavior of its youthful vanguard inspire confidence in the qualities of the generation that one day will run the great city. That said, it is time to move on to a sensible endgame.
 
The longer the standoff between Hong K....

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Europe’s Fiscal Wormhole
by Harold James

BRUSSELS – The International Monetary Fund now estimates a 30% risk of deflation in the eurozone, and growth figures within the monetary union continue to disappoint. But policymakers seem trapped in a cat’s cradle of economic, political, and legal constraints that is preventing effective action. The fulfillment of policy rules appears to be impossible without growth, but growth appears to be impossibl....

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What Water’s Worth
by Harold James

SINGAPORE/ATLANTA – In the early nineteenth century, Lord Byron wrote in Don Juan that “Till taught by pain, men really know not what good water’s worth.” Nearly 200 years later, humanity still does not seem to understand water’s value, exemplified in decades of poor water management and governance practically everywhere. But the impending water crisis is becoming increasingly difficu....

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Markets’ Rose-Tinted World
by Harold James

LAGUNA BEACH – This has been an unusual year for the global economy, characterized by a series of unanticipated economic, geopolitical, and market shifts – and the final quarter is likely to be no different. How these shifts ultimately play out will have a major impact on the effectiveness of government policies – and much more. So why have financial markets been behaving as if they were in a wor....

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The Price of Scottish Independence
by Harold James

NEW YORK. Though the world’s eyes now are on Scotland’s referendum on independence from the United Kingdom, Scotland is not alone in seeking to redraw national boundaries. There are independence movements in many other parts of the world; indeed, 39 new states have joined the United Nations since 1980. Many more aspirants are waiting in the wings, and would likely be encouraged by a Scottish “Yes....

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The people's corporations
by Harold James

LONDON. Two big power shifts are occurring around the world today. First, corporate power is growing relative to that of governments. Second, ordinary people are also gaining greater influence. What does it mean that these seemingly contradictory shifts are happening simultaneously?
 
There is, no doubt, more power in the hands of com....

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ITALY'S DOWNWARD SPIRAL
by Harold James

MUNICH. Italy is now in a triple-dip recession. But it didn’t get there by itself. Yes, the economy’s long slide reflects Italian leaders’ failure to confront the country’s loss of competitiveness; but it is a failure that is widely shared in Europe.
 
When the financial crisis erupted in the fourth quarter of ....

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The Fed in denial
by Harold James

WHASHINGTON, DC. The United States Federal Reserve System is one of the most powerful governmental organizations in the history of the world. America’s central bank has control over the supply of dollars, and currently exerts great influence over interest rates, both for short-term and long-term borrowing. And, though the Fed was partly responsible for the regulatory failures that led to the....

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Europe's debt wish
by Harold James

CAMBRIDGE. Eurozone leaders continue to debate how best to reinvigorate economic growth, with French and Italian leaders now arguing that the eurozone’s rigid “fiscal compact” should be loosened. Meanwhile, the leaders of the eurozone’s northern member countries continue to push for more serious implementation of structural reform.
 
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Booming until it hurts?
by Harold James

NEW HAVEN. In recent months, concern has intensified among the world’s financial experts and news media that overheated asset markets – real estate, equities, and long-term bonds – could lead to a major correction and another economic crisis. The general public seems unbothered: Google Trends shows some pickup in the search term “stock market bubble,” but it is not at its peak 2007 le....

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The trade delusion
by Harold James

LONDON. Since 2008, global trade has grown slightly more slowly than global GDP. The Doha Round of World Trade Organization negotiations ended in failure. Transatlantic and transpacific trade negotiations are progressing slowly, held back by the resistance of special interests. But, though many experts fear that protectionism is undermining globalization, threatening to impede global economic growth, slower growth....

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Europe's Options
by Harold James

STANFORD. Many Europeans have come to believe that they have weathered the economic and financial storm. In the last two years, deficits and debt have stabilized. Yields on the sovereign debt of the eurozone periphery’s weak economies have fallen sharply. Portugal and Ireland have exited their bailout programs. Talk of Greece leaving the euro has subsided.
 
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The Renminbi’s Grand Tour by Barry Eichengreen
by Harold James

REYKJAVIK – European and Chinese officials have made two notable announcements in recent weeks. On June 18, China’s second largest financial institution, China Construction Bank, was designated as the official renminbi clearing bank for London. The next day, the Frankfurt branch of the Bank of China, the country’s largest commercial bank, received the same designation for th....

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Growing Green Cities
by Harold James

MUNICH – The future of the world’s climate will be decided in our cities. Urban areas already account for up to 70% of global CO2 emissions, and that share is likely to increase in the coming decades, as more people – billions more – ....

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The Government as Venture Capitalist
by Harold James

BERKELEY – The American public’s attitude toward government, especially toward the federal government, recalls a classic scene in Monty Python’s “Life of Brian.”

“....

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The Wolves of Wall Street
by Harold James

LONDON – “What a commentary on the state of twentieth-century capitalism,” mused “motivational speaker” Jordan Belfort as he looked back on his life of fraud, sex, and drugs. As head of the brokerage firm Stratton Oakmont, he fl....

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The Global Economy’s Tale Risks
by Harold James

TOKYO – Fluctuations in the world’s economies are largely due to the stories we hear and tell about them. These popular, emotionally relevant narratives sometimes inspire us to go out and spend, start busi....

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Overshooting in Emerging Markets
by Harold James

MILAN – Until relatively recently, countries’ so-called middle-income transitions were largely ignored – in part because what was supposed to be a transition often became a trap. A few economies in Asia – particularly Japan, South Korea, and Taiwan – sailed through to high-income status with relatively high growth rates. But the vast majority of economies slowed down o....

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Europe’s Crisis in Ukraine
by Harold James

STOCKHOLM – How Ukraine’s profound crisis will end is impossible to predict. We in the European Union and the United States are doing what we can to secure a peaceful transition to a more stable democracy, and the implementation, at long last, of urgently needed reforms. And the 

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The Power to Develop
by Harold James

CANBERRA – Trade-offs are an inherent part of life. We all recognize this from our private budgets. To fix the roof, we may have to accept a less extravagant summer vacation. When we pick a cheaper wine, we can splurge on dessert.

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In Praise of Debt Ceilings
by Harold James

MUNICH – The wrangling about raising the US government’s borrowing limit – now thankfully over, at least for a few months – underscores the hazards posed by excessive state indebtedness. Governments nowadays are essentially ....

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China’s Wake-Up Call from Washington
by Harold James

NEW HAVEN – Yes, the United States dodged another bullet with a last-minute deal on the debt ceiling. But, with 90 days left to bridge the ideological and partisan divide before another crisis erupts, the fuse on America’s debt bomb is getting shorter and shorter. As a dysfunctional US government peers into the abyss, China – America’s largest foreign creditor – has much at stake.

It began so innocently. A....

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David Cameron’s Euro-Nemesis
by Harold James

LONDON – Unlike some in Britain’s Conservative Party, Prime Minister David Cameron has not previously given the impression of being obsessed with Europe. He demonstrated no enthusiasm for the European Union, but he appeared clearly less exercised by its supposed iniquities than many Tories are.

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The Eclipse of British Reason
by Harold James

BERLIN – When placed under too much strain, chains tend to break at the weakest link. Figuratively speaking, the same applies to the European Union. So the entire world quite naturally assumed that any process of EU disintegration would start primarily in the crisis-ridden Europe....

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Innovation crisis or financial crisis?
by Harold James

CAMBRIDGE – As one year of sluggish growth spills into the next, there is growing debate about what to expect over the coming decades. Was the global financial crisis a harsh but transitory setback to advanced-country growth, or did it expose a deeper long-term malaise?

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Avoiding a New American Recession
by Harold James

CAMBRIDGE – The United States may be headed for a recession in 2013. Even if the country avoids going over the “fiscal cliff,” a poorly designed political compromise that cuts the deficit too quickly could push an already weak economy into recession. But a gradual phase-in of an overall cap on tax deductions an....

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The New Shape of China’s Economy
by Harold James

 

BEIJING – China’s leadership transition attracted global attention in 2012, and deservedly so, given the country’s global significance. But, more important, strategic transformations now underway seem certain to influence its future pattern of growth.

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Britain’s European Destiny
by Harold James

LONDON –The toughest challenge in politics right now is resolving the tension between the best long-term policy and the best short-term politics. Nowhere is this tension clearer than in Britain’s debate over Europe.

Europe has disturbed and div....

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America’s Global Election
by Harold James

NEW YORK – Most people around the world will not be able to vote in the United States’s upcoming pre....

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Fiscal Closing Time?
by Harold James

 

 

BRUSSELS – Is it time for fiscal consolidation or stimulus? Should governments cut or increase spending? Once again the issue is a matter of dispute among policymakers and economists. Citizens, having been told in 2008-2009 that the imperati....

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Monetary Mystification
by Harold James

NEW YORK – Central banks on both sides of the Atlantic took extraordinary monetary-policy measures in September: the long awaited “QE3” (the third dose of quantitative easing by the United States Federal Reserve), and the European Central Bank’s announcement that it will purchase unlimited volumes of trou....

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Clicks over Bricks in India
by Harold James

SINGAPORE – After years of debate, India’s government recently announced that will open the country’s retail sector to foreign investment. The move was met with howl....

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Finding the Keys to National Prosperity
by Harold James

NEW YORK – In many of history’s most successful economic reforms, clever countries have learned from the policy successes of others, adapting them to local conditions. In the long history of economic development, eighteenth-century Britain learned from Holland; early ni....

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Should Europe be Fracking?
by Harold James

BRUSSELS – The global energy community is abuzz with excitement about hydraulic fracturing, or “fracking,” a newish technology that has opened formerly inaccessible reserves of gas trapped in underground shale formations. The boom in this so-called shale-gas production has allowed the United States to become almost self-sufficient in natural gas.

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The Federal Reserve and the Currency Wars
by Harold James

NEW YORK – The United States Federal Reserve’s recent decision to launch a third round of “quantitative easing” has revived accusations by Brazil’s finance minister, Guido Mantega, that the US has unleashed a “currency war.” In emerging-mar....

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Mitt Romney’s Fair Share
by Harold James

NEW YORK – Mitt Romney’s income taxes have become a major issue in the American presidential campaign. Is this just petty politics, or does it really matter? In fact, it does matter – and not just for Americans.


A major theme of the underlying political debate in the United States is the role of the state and the need for collective action. The private sector, while central in a modern economy, cannot ensure its s....

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Ending the Financial Arms Race
by Harold James

CAMBRIDGE – People often ask if regulators and legislators have fixed the flaws in the financial system that took the world to the brink of a second Great Depression. The short answer is no.
Yes, the chances of an immediate repeat of the acute financial meltdown of 2008 are much reduced by the fact that most investors, regulators, consumers, and even politicians will remember their financial near-death experience for quite some time....

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Fiddling at the Fire
by Harold James

PARIS – Financial markets have rallied since July on the hope that the global economic and geopolitical outlook will not worsen, or, if it does, that central banks stand ready to backstop economies and markets with additional rounds of liquidity provision and quantitative easing. So, not only has good – or better-than-expected – economic news boosted the markets, but even bad news has been good news, because it increases the pro....

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