by Kurt R. Leube*

We are all saddened by the death of Deepak Lal, one of the great minds of our time. We owe him the most seminal insights and ideas in the field of Development Economics. Born and educated in India, Deepak’s work arose and developed from a comprehensive approach to various disciplines that condition and influence one another. His scholarship was not only original and erudite, he was also prolific with a publication list of well over 12 books and numerous academic essays and sundries. Deeply suspicious of governments and politicians, Lal successfully taught at Oxford University, at the University of London and since 1991 at the University of California, Los Angeles. He was also a Senior Fellow of the Cato Institute and served as president of the Mont Pelerin Society from 2008-2010. As a scholar, teacher or colleague, Deepak came as close to the vanishing ideal of a gentleman as perhaps human frailty will ever permit. He died on April 30, 2020 in his home in London.  

To honor his legacy, we reprint here his influential paper, which he presented at the 4th ‘International Gottfried von Haberler Conference’, Vaduz (Principality of Liechtenstein) on Sept. 26, 2008.

Current Travails of Globalizing Capitalism

by Deepak Lal (USA) – James S. Coleman Professor of International Development Studies,University of California, Los Angeles

To start my talk, I would like to thank my friend Kurt Leube for the opportunity to address the 4th International Gottfried von Haberler Conference in the Principality of Liechtenstein.

I first met Gottfried von Haberler when I was a young official at the World Bank in Washington, on leave from University College, London, in the late 1970s. He and his wife became close friends, and I looked forward to our lunches at the American Enterprise Institute (which included William Fellner) as a classical liberal antidote to the daily dirigiste discourse at the World Bank. In 1983 I returned to the World Bank as the Research Administrator in Anne Krueger’s new research vice-presidency, seeking to steer the Bank’s thinking into more market oriented lines. This was the time when the 80s Third World debt crisis was in full flow. I was asked to do the first part of the 1984 World Development Report with Martin Wolf, on the global economy. We commissioned a number of background papers, one of them by Gottfried on “The slowdown of the world economy and the problem of stagflation”, which were published in a book Lal and Wolf (1986). Reading these papers and looking back at that first global financial crisis today, with the world embroiled in another crisis, the parallels are more striking than the differences.
First, both in the 1980’s and in today’s sub-prime mortgage triggered financial crisis, the crisis arose because there was a surplus of savings in a number of countries which was recycled through the international banking system, to maintain world aggregate demand. Second, highly liquid banks funneled cheap credit to borrowers who were not creditworthy by any prudential standards: the fiscally challenged and inflation prone countries of Latin America and Africa in the 1970s, the ninja (those with no income, no jobs, no assets) sub prime mortgagees of the current crisis. Third, there was a rise in commodity prices and a worsening of the terms of trade of the OECD. This posed the dilemma of stagflation for their central banks, having aided and abetted the earlier asset boom. Fourth, the imprudent banks sought bail outs from taxpayers, claiming their demise would fatally damage the world’s financial system …

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Current Travails of Globalizing Capitalism (Word Doc,  139kb)

*Kurt R. Leube is Professor Emeritus and Research Fellow at the Hoover Institution, Stanford University (USA) and Academic Director at ECAEF (European Center of Austrian Economics Foundation) in Vaduz, Liechtenstein.

Essay von Henrique Schneider*, erstveröffentlicht bei insideparadeplatz.ch, 8. April 2020

Environmental, Social and Governance heisst der neue Hype in der Finanzwelt. Was immer gemeint ist: Hauptsache Reibach. Was als aktivistischer Schrei der politischen Linke begann, entwickelte sich zu einem Reputationsproblem.

Jetzt haben aber die Fondsmanager an der Wall Street und am Paradeplatz das volle Potenzial von ESG erkannt: Ihre persönliche Besserstellung, ohne zur Rechenschaft gezogen zu werden. ESG ist die neue Gier.

Was ist ESG? Umwelt, Soziales und Governance (ESG) sind eine Reihe von Kriterien, um Investitionen zu prüfen. Umweltkriterien berücksichtigen, wie sorgfältig ein Investment gegenüber der Natur ist. Bei den sozialen Kriterien werden Beziehungen des Investitionsobjekts zu Menschen und Gemeinschaften untersucht. Die Governance befasst sich mit den Führungs- und Vergütungsstrukturen des Investments. Manchmal wird ESG auch als Nachhaltigkeit bezeichnet. Doch es ist unklar, in welchem Verhältnis diese zwei offenen – nicht genau umschreibbaren – Begriffe zueinanderstehen.

Darüber hinaus ist es noch immer eine offene Diskussion, ob klimabezogene Kriterien in das E passen oder ob sie etwas Zusätzliches zu ESG sind. In der Diskussion um ESG ist es wichtig, auf das besondere Verhältnis zwischen Investor und Fondmanager hinzuweisen. Das Prinzipal-Vertreter-Verhältnis ist eine Vereinbarung, bei der eine Einheit eine andere Einheit beauftragt, in ihrem Namen zu handeln.

In der Finanzwelt ist typischerweise der Investor der Auftraggeber, und die Fondsmanager sind die Agenten. Im Idealfall sollte der Agent keinen Interessenskonflikt haben, wenn er für seinen Auftraggebers handelt …

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ESG ist die neue Gier

*Henrique Schneider ist stellvertretender Direktor beim Schweizerischen Gewerbeverband und Professor of Economics an der Nordakademie Hochschule der Wirtschaft in Elmshorn, Deutschland.

GIS Statement by Henrique Schneider*

• A post-SARS scenario could see a quick economic bounce-back
• A Spanish flu-type scenario would mean a prolonged recession
• Current data suggest a U-shaped recovery

This report is part of a GIS series on the consequences of the COVID-19 coronavirus crisis. It looks beyond the short-term impact of the pandemic, instead examining the strategic geopolitical and economic effects that will inevitably be felt further in the future.

In January 2020, the International Monetary Fund was optimistic. It claimed that “global growth is projected to rise from an estimated 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent for 2021.” That outlook, of course, has changed dramatically since.

Only three months later, various organizations predict that the world economy will grow at a dismal 0 to 1.5 percent in 2020. Can these numbers be trusted? The estimates are only as good as their underlying premises, and therein lies the problem. For all that we know today, it is difficult to make assumptions for two reasons. First, in times of crisis, there is a bias to assume crisis in all models. Second, there are many unknowns to be modeled. The chief unknowns are:

(1) Epidemiological issues | How does COVID-19 spread? How do infection rates change over time? How will immunization and inoculation procedures be established? Does the epidemiological spread follow a steady or a changing pattern, if at all? What are the effects of the various countermeasures taken by governments? …

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RELEVANCE BEYOND THE CRISIS

*Henrique Schneider is a professor of economics at the Nordkademie University of Applied Sciences in Elmshorn, Germany and chief economist of the Swiss Federation of Small and Medium Sized Enterprises in Bern, Switzerland.