One Law for the Rich . . .

One of the greatest benefits of an academic life is that it forces you to keep in contact with academics from across the world so that you keep an international perspective. For a localist like me, who might otherwise lurk in my burrow with only the occasional foray to the 'big city' (Cardiff) this is a salutory obligation. In Bordeaux I recently had the pleasure of listening to two presentations about radical economics in Latin America. This is not the wishful thinking of pressure groups or smaller parties but the work of governments on behalf of their citizens.

Ana Rosa de Mendonca from Brazil presented a paper about the role of public banks in the Brazilian economy. In Brazil these banks, which are politically managed, control 43% of the credit in the economy. For many people they are their retail bank of choice, in place of the high-street banks we rely on, which exist to maximise profits for their shareholders.

Economic theory suggests that such public banks can play a useful role in underdeveloped economies until the market is sufficiently developed so that the private banks can take over, offering their manifestly superior services. Ana Rosa quite reasonably questioned whether such public banks might in reality play an important role in developed economies too, especially since they can act in an anti-cylical way, i.e. investing more when the economic is in recession and drawing money out to prevent over-heating.

Public banks, operating in the public interest, can also support important economic transitions as they did in Latin America's building of its industrial infrastructure in the 1950s and 1960s. In the UK, if the banks which we already own large portions of were simply turned into public banks, with political governance structures we could see them playing a similar role in our transition to a low-carbon economy.

Meanwhile, Eugenia Correa from the National University of Mexico outlined arguments for politicians to retake political power over the financial structures of the Latin American countries. Venezuela and Bolivia are already controlling their currencies on the foreign exchange markets. All the LA countries, she argued, have been net exporters of foreign capital for decades, as their wealthy citizens have deposite funds abroad, Switzerland being the destination of choice. This has left them short of capital for domestic investment and expansion.

She also proposed a Banco del Sur and a regional exchange currency. The latter already exists in the form of the SUCRE, which already exists to enable countries to settle foreign-exchange balances without needing to hold foreign exchange reserves. This could allow the Latin American economies to create a thriving regional economy that is insulated from the depredations of the rest of the world.

Like Africa, Latin America has for long seen its resources sucked out to benefit corporations sited elsewhere. Its people are no longer engaged in violent revolution in response to economic injustice but are rather electing politicians who are smart enough and courageous enough to defend their interests. Viva la revolucion economica! Tweet

Told Euro So

Smugness is never an appealing characteristic, but I think we Greens are sometimes a little too reticient in taking the credit for being right. On our political wing discussions about the imminent collapse in the financial system were everywhere for a good five years before it happened. And recent events across Europe have shown that we were right about the euro as well.

The central case for the UK not entering the euro was that we would lose political control over our economy, if we gave up the ability to control our national currency. Entering a single-currency area would require us to accept the interest rate of the most powerful economy in that area, in the case of the euro that would mean Germany.

The disasters that have befallen especially Ireland and Greece have arisen from them having to take the euro interest rate, which was much to low for their economies during the last decade, leading to housing-market bubbles and speculative inflation in their economies. Now that the bubble has burst they are having to accept an interest rate that is too high, whereas in the UK our central bank has been able to reduce the cost of borrowing money to a mere administrative charge, giving the economy the best possible chance of recovery.

The lesson is not that we are prudent and the marginal Greeks and Irish are feckless. Rather it is that in global capitalism size matters, and that controlling your own currency matters most of all. Greece's deficit is 12.7% of its GDP, way beyond the euro limit of 3%. But the UK's is already 7% and that takes no account of the potential banking liabilities we have taken on, nor the off-balance-sheet debts represented by PPP contracts.

And beyond these special cases, the wilder baying of the market hounds is, as the Spanish government has claimed, an irresponsible attempt to change investor sentiment. While they are untrammelled by political controls, speculators will seek to gain market advantage by artificially increasing or decreasing the value of currencies and national bonds. Whatever we think of the situation of Greece, the Spanish economy is not demonstrating any inability to make good on its debts: its debt-to-GDP ratio is below the EU average, less than that of the UK and well below the 60% allowed by the European Central Bank.

The conclusion should surely be that what counts is not the view of the bond traders or the power of the markets, but our courage to stand up for ourselves. Greece will come out of this crisis better than Ireland - with fewer cuts to services and wages - because the Greeks have the courage to exercise their democratic freedoms and go onto the streets. The Irish, by contrast, seem to have believed the myth about the battle between capital and labour over economic value as being something historical. In fact, the power games between Europe's politicians, the central bankers, and the speculators is being played out daily in our news bulletins. Tweet