Plano Marshall e a Grecia de hoje: verdadeiras e falsas analogias - Albrecht Ritschl

Este post necessita ser lido em conjunção com este outro, no qual eu argumentava contra as falsas analogias entre a atual crise financeira europeia -- feita de sobre-endividamento de Estados soberanos -- e a depressão dos anos 1930, feita de ruptura de pagamentos por Estados que tentavam se defender de uma crise, e uma depressão econômica causada por suas próprias más respostas a uma simples crise de bolsa, em 1929, e a uma devastadora crise bancária, a partir de 1931, quando eles decretaram inconversibilidade das moedas, aumentaram o protecionismo econômico, suspenderam pagamento de dívidas e desvalorizaram erraticamente suas moedas.
O post anterior é este aqui: 

QUARTA-FEIRA, 13 DE JUNHO DE 2012

Historiadores exageram nas analogias - Niall Ferguson e Nouriel Roubini

O atual é muito mais interessante, pois se trata de uma reflexão econômica sobre como foram resolvidos os problemas do passado e o que se necessita fazer hoje.
Claramente, para mim, a Grécia e outros países, se encontram na mesma situação da América Latina no início dos anos 1980, quando todos os países tinham tomado enormes recursos externos -- os tais petrodólares reciclados a juros extremamente reduzidos em nosso favor -- e ficaram sem condições de pagar, quando os juros foram elevados pelo Fed. A saída, depois de muita controvérsia sobre as perdas, depois de inúmeros empréstimos-ponto dos próprios bancos credores (para pagar unicamente os juros devidos) e depois de muita choradeira, foi a que se tem de fazer nesses casos: juntar todas as dívidas velhas, trocar por novos a 30 anos, dar um desconto do principal e converter o que sobrou (50% ou mais, ou menos, depende), em novos títulos da dívida em diferentes modalidades de pagamento, com valor face e juros fixos baixo, com valor reduzido e juros flutuantes ou outras fórmulas.
É isso que se está fazendo com a Grécia, e é isso que Portugal talvez necessite. Diferentes são os casos da Irlanda e da Espanha. A Itália, bem a Itália é um problema muito maior, mas o país tem condições de assumir os custos de seu desperdício durante muitos anos.
Paulo Roberto de Almeida 

Free exchange

Economic history

Germany, Greece and the Marshall Plan

The Economist, Jun 15th 2012, 13:48 by Albrecht Ritschl | London School of Economics

Albrecht Ritschl is professor of economic history at the London School of Economics and a member of the advisory board to the German ministry of economics.

OLD myths die hard, and the Marshall Plan is one of them. In the New York Times of June 12th German economist Hans-Werner Sinn invokes comparisons with the Marshall Plan to defend Germany’s position against Eurobonds, the pooling of sovereign debt within the euro zone. His worries are understandable, but the historical analogy is mistaken, and the numbers mean little. All this unnecessarily weakens his case.

Mr Sinn argues against Germany’s detractors that Marshall Aid to postwar West Germany was low compared to Germany’s recent assistance, debt guarantees etc. to Greece. While Marshall Aid cumulatively amounted to 4% of West German GDP around 1950 (his figure of 2% is too low but that doesn’t matter), recent German aid has exceeded 60% of Greece’s GDP, and total European assistance to Greece is now above 200% of Greek GDP. That makes the Marshall Plan look like a pittance. And it strips all the calls for German gratitude in memory of the Marshall Plan off their legitimacy. Or does it?

What Mr Sinn is invoking is just the outer shell of the Marshall Plan, the sweetener that was added to make a large political package containing bitter pills more palatable to the public in Paris and London. The financial core of the Marshall Plan was something much, bigger, an enormous sovereign debt relief programme. Its main beneficiary was a state that did not even exist when the Marshall Plan was started, and that was itself a creation of that plan: West Germany.

At the end of World War II, Germany nominally owed almost 40% of its 1938 GDP in short-term clearing debt to Europe. Not entirely unlike the ECB’s Target-2 clearing mechanism, this system had been set up at Germany’s central bank, the Reichsbank, as a mere clearing device. But during World War II, almost all of Germany’s trade deficits with Europe were financed through this system, just as most of Southern Europe’s payments deficits towards Germany since 2008 have been financed through Target-2. Incidentally, the amount now is the same, fast approaching 40% of German GDP. Just the signs are reversed. Bad karma, that, isn’t it.

Germany’s deficits during World War II were mostly robbery at gunpoint, usually at heavily distorted exchange rates. German internal wartime statistics suggest that when calculated at more realistic rates, transfers from Europe on clearing account were actually closer to 90% of Germany’s 1938 GDP. To this adds Germany’s official public debt, which internal wartime statistics put at some 300% of German 1938 GDP.

What happened to this debt after World War II? Here is where the Marshall Plan comes in. Recipients of Marshall Aid were (politely) asked to sign a waiver that made U.S. Marshall Aid a first charge on Germany. No claims against Germany could be brought unless the Germans had fully repaid Marshall Aid. This meant that by 1947, all foreign claims on Germany were blocked, including the 90% of 1938 GDP in wartime clearing debt.

Currency reform in 1948—the U.S. Army put an occupation currency into circulation, and gave it the neutral name of Deutsche Mark, as no emitting authority existed yet—wiped out domestic public debt, the largest part of the 300% of 1938 GDP mentioned above.

But given that Germany’s debt was blocked, the countries of Europe would not trade with post-war Germany except on a barter basis. Also to mitigate this, Europe was temporarily taken out of the Bretton Woods currency system and put together in a multilateral trade and clearing agreement dubbed the European Payments Union. Trade credit within this clearing system was underwritten by, again, the Marshall Plan.

In 1953, the London Agreement on German Debt perpetuated these arrangements, and thus waterproofed them for the days when Marshall Aid would be repaid and the European Payments Union would be dissolved. German pre-1933 debt was to be repaid at much reduced interest rates, while settlement of post-1933 debts was postponed to a reparations conference to be held after a future German unification. No such conference has been held after the reunification of 1990. The German position is that these debts have ceased to exist.

Let’s recap. The Marshall Plan had an outer shell, the European Recovery Programme, and an inner core, the economic reconstruction of Europe on the basis of debt forgiveness to and trade integration with Germany. The effects of its implementation were huge. While Western Europe in the 1950s struggled with debt/GDP ratios close to 200%, the new West German state enjoyed debt/ GDP ratios of less than 20%. This and its forced re-entry into Europe’s markets was Germany’s true benefit from the Marshall Plan, not just the 2-4% pump priming effect of Marshall Aid. As a long term effect, Germany effortlessly embarked on a policy of macroeconomic orthodoxy that it has seen no reason to deviate from ever since.

But why did the Americans do all this, and why did anyone in Europe consent to it? America’s trauma was German reparations after World War I and the financial mess they created, with the U.S. picking up the bill. Under the Dawes Plan of 1924, Germany’s currency had been put back on gold but Germany went on a borrowing binge. In a nutshell, Germany was like Greece on steroids. To stop this, the Young Plan of 1929 made it riskier to lend to Germany, but the ensuing deflation and recession soon became self-defeating, ending in political chaos and German debt default. A repetition of this the Marshall Planners were determined to avoid. And the U.S. led reconstructions of Germany and Japan have become the classical showcases of successful liberal intervention.

So does Greece, does Southern Europe need a Marshall Plan? Is Sinn right to say that Greece has already received one—or a 115-fold one, as he argues? The answer to first question may be yes, in the limited sense that a sweeping debt relief programme is needed. The answer to the second question is a resounding no. Greece has clearly not received a Marshall Plan, and certainly not 115 of them. Nor has anyone else. As far as historical analogies go, what Southern Europe received when included in the euro zone was closer to a Dawes Plan. And just like in Germany in the 1920s, the Southern Europeans responded with a borrowing spree. In 2010 we didn’t serve them a Marshall Plan either, but a deflationary Young Plan instead.

This latter-day Young Plan is not even fully implemented yet. But we see the same debilitating consequences its precursor had around 1930: technocratic governments, loss of democratic legitimacy, the rise of political fringe parties, and no end in sight to the financial and economic crisis engulfing these states, no matter how many additional aid packages are negotiated. Woe if those historical analogies bear out.

Europe should learn from history. But it needs to learn fast. There might be no recovery unless debts are reduced to manageable proportions. That is what ended the Great Depression in Europe in the 1930s, and that is what in all likelihood is needed again. Professor Sinn is right to resolutely ask for action on this, even if his take on the Marshall Plan is wrong.

Egito: democradura ou ditablanda? - The Economist

Egypt's revolution

Slipping backwards?

The Economist, Jun 15th 2012, 9:31 by I.A. | CAIRO

EGYPT'S Supreme Constitutional Court ruled on Thursday that Ahmed Shafiq, a former chief of the Egyptian air force and the last prime minister of the deposed president, Hosni Mubarak, will after all be able to contest the second round of the presidential election that will take place on June 16th and 17th. That is a relief for Mr Shafiq and those who dreaded the prospect of last month's first round being annulled and the elections starting all over again. They include Muhammad Morsi, the front-runner backed by the Muslim Brotherhood. Mr Morsi might have had more to fear from alternative candidates than Mr Shafiq, who is closely associated with Mr Mubarak's regime.

But that decision may be less controversial than another ruling by the same court, which effectively dissolves parliament on the grounds that the electoral law under which it was elected, which was passed last year, is unconstitutional. This is a political earthquake. It removes the Islamist parliamentary majority (which is backing Mr Morsi), and transfers legislative authority back to the Supreme Council of the Armed Forces (SCAF), which has led Egypt's haphazard transition since February of last year. The military leaders may now appoint the constituent assembly tasked with writing a new, permanent constitution—a parliamentary privilege—further limiting civilian political forces' say in the country's affairs.

For many Egypt watchers, this amounts to a soft military coup through the proxy of the country's most important court—all of whose judges were appointees of Mr Mubarak. The court found that the third of parliamentary seats that were elected under the first-past-the post system (as opposed to proportional representation through party lists) were invalid; they should have been reserved for independents and should not have been contested by members of political parties. Explaining the ruling, the head of the court, Farouq Sultan, said that resolving this would entail the dissolution of parliament. While the Islamists might have lived with new elections for a third of the seats, how they will react to losing all power is unclear.

That such an important decision comes just two days before the presidential race says a great deal about how judicial decisions have been used as threats and bargaining chips during Egypt's transition. Almost a year and a half after Mr Mubarak stepped down, the country finds itself once again under absolute military rule. Even if a president is elected next week, it is not clear when he will assume his powers, since he is constitutionally required to swear his oath before parliament. He may now have to do so in front of the generals. Combined with a recent government decree (which was to be contested by parliament) giving the army the power to arrest civilians without a warrant, post-Mubarak Egypt is looking as though it is regressing, not advancing, with the armed forces from which Mr Mubarak came firmly in charge.

Egyptians are battle-scarred from this transition. It is not yet clear whether many will join the mass protests already being planned. The Muslim Brothers, who have accepted the decision about Mr Shafiq, have not yet responded to the dissolution of parliament. But if their candidate loses the presidential election, they will be left with little to show for their many compromises with SCAF over the last 16 months.

Mr Morsi has tried—thus far unsuccessfully—to present himself as the candidate of the revolution. But he has won few endorsements from secular-minded revolutionaries, many of whom have preferred to boycott the polls. Mr Shafiq, on the other hand, has rallied both died-in-the-wool power brokers of the Mubarak regime and establishment secularists who fear the Muslim Brotherhood. Within a week, a former general could once again lead the country, with his old colleagues controlling all the other levers of government.

« The Economist: Digital highlights, June 16th 2012

Brasil-China, a parceria estrategica - livro de Henrique Altemani de Oliveira

Um livro a ser lido, anotado, analisado, comentado, refletido...
Paulo Roberto de Almeida 

O Instituto Brasileiro de Relações Internacionais – IBRI tem a satisfação de anunciar  a publicação do livro

Brasil e China: Cooperação Sul-Sul e parceria estratégica

de Henrique Altemani de Oliveira, professor da Pontifícia Universidade Católica de São Paulo – PUC-SP e da Universidade Estadual da Paraíba – UEPB e conselheiro da Revista Brasileira de Política Internacional – RBPI. 

O livro sai pela Coleção Relações Internacionais da Editora Fino Traço, apoiada pelo Centro de Estudos sobre o Pacífico e pelo Instituto de Relações Internacionais da Universidade de Brasília

Brasil e China compreendem que seus objetivos de desenvolvimento entram em choque com os objetivos dos diferentes países, desenvolvidos ou não, promovendo, ao longo do tempo, diversas alternativas estratégicas para atingí-los. Uma dessas alternativas corresponde ao que está sendo denominado de parceria estratégica. 

Nenhum dos dois abandonou ou relativizou seu objetivo básico de desenvolvimento, nem buscou implementar um modelo que fosse comum. A parceria estratégica decorreu do consenso de que cada um tem e mantém seus interesses próprios, mas que alguns desses são de proveito comum. Desse modo, a parceria é um meio para se atingir uma coordenação, uma cooperação maior nos assuntos em questão, para a geração de melhores condições de desenvolvimento.

O presente livro procura, assim, realçar temas considerados fundamentais para uma melhor compreensão das bases do relacionamento sino-brasileiro, de seu atual status e de elementos necessários para a projeção de sua continuidade.

Acesse aqui a apresentação e a introdução deste livro.

Este livro pode ser adquirido nas melhores livrarias, ou diretamente no site da Editora Fino Traço – clique aqui para comprá-lo.

Neste link: http://pebrasil.files.wordpress.com/2012/06/miolo_brasil_e_china_1-22.pdf

A crise europeia: muito longe de terminar - Moises Naim

Why Is Europe's Crisis Not Abating?

Moisés NaímHUFFINGTON POST, JUNE 7, 2012

  

 

 

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Why does the economic crisis in Europe keep getting broader and deeper? Ignorance? Too much power concentrated in too few hands? Or perhaps just the contrary: that those who ought to be making the necessary decisions lack the power to do so? I think it is a diabolical combination of these three factors.

Ignorance. It is clear that neither governments nor experts agree on what is the best course of action to deal with the crisis. The debate between the proponents of fiscal austerity and those who favor expansionary measures to reignite growth and stimulate job creation dominates the headlines. As the crisis worsens, this debate heats up into a crossfire of clichés and superficial assertions.

Moisés Naím

SENIOR ASSOCIATE
INTERNATIONAL ECONOMICS PROGRAM

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After all, austerity is rarely an optional behavior. The poor do not live austerely because, having thought it over, they decided they prefer frugality to big spending. For many countries -- and families -- austerity is a fierce, unavoidable reality. On the other hand, to impose more austerity on those who are already unable to make ends meet is not a valid or sustainable option either.

In any case, the debate goes on, and the confidence with which renowned economists offer their recommendations stands in sharp contrast with their analytical performance or their predictive skills before and during the crisis. Andrew Lo, an economist at MIT, has just published in the prestigious Journal of Economic Literature a reviewof 21 of the most widely commented-on books on the crisis. His conclusion:

"No single narrative emerges from this broad and often contradictory collection of interpretations, but the sheer variety of conclusions is informative, and underscores the desperate need for the economics profession to establish a single set of facts from which more accurate inferences and narratives can be constructed."

In other words, if the best economists and commentators cannot even agree on what the relevant facts and data are to explain the crisis, we shouldn't be surprised if they disagree on what to do to get out of it. Not that they seem to care. The crisis has revealed that intellectual arrogance is one of the occupational hazards of economic fame.

Too much power in too few hands. It is obvious that bad politics is as much a culprit of Europe's policy inaction as are the disagreements among economists. Politics is about power and it is evident that a few governments and financial institutions have acquired a lot of it -- Germany and Angela Merkel or the European Central Bank, for example. Or even a few large global banks and large hedge funds. Yet, their power has so far not been sufficient to impose widely accepted and durable solutions. Or effective ones.

In fact, the more these powerful actors push their policy preferences, the worse the crisis gets. Their power has worked best to stop or water down initiatives that do not suit their interests. Angela Merkel and Germany do not have the power to maintain their position and the big banks are only being reactive, hedging their bets and profiting from the opportunities created by the crisis.

The decision-making process in Europe is strangled by a multitude of actors with the power to veto, constrain, push back, or derail the decisions of the most powerful actors.

Too little power in too many hands. This dilution of power is, in fact, a paradoxical and contradictory aspect of power in our time. Power is becoming harder to use and easier to lose; it is therefore more precarious and ephemeral. Even the most powerful actors face huge limitations in how they can exert it. Besides, they have learned that they can lose it with surprising frequency, and have seen how erstwhile powerful players have been suddenly replaced by other well established rivals or even strange and unexpected newcomers.

Again: Angela Merkel cannot do everything she would like to do, and her options are restricted by a myriad of micro-powers which, while without the strength to impose their own preferences, do have enough power to truncate the range of options available to the more powerful players. Not even the current masters of the financial universe with unimaginable resources at their command can relax and assume that they and their institutions are immune to the strong winds that have upturned leaders and institutions that seemed unassailable and secure.

In today's world, power is greatly fragmented, and the European crisis is the clearest evidence of this trend. Even those who have the most power can influence the course of events only tenuously and indirectly. The crisis keeps going on, because in Europe, nobody has the power to contain it.

This article was originally posted in the Huffington Post.

Governos vs Mercados: a eterna batalha

O último boletim do The Globalist tem uma série dedicada a essa clássica questão.
Um dilema de todas as épocas, em todos os lugares, e que nunca vai terminar.
Governos são concentradores de poder; mercados são disseminadores de riqueza, e o conflito nasce exatamente daí...
Paulo Roberto de Almeida

The Battle of Markets Vs. Governments

The Globalist, June 15, 2012

http://www.theglobalist.com/storyid.aspx?storyid=9656

In light of the momentous events in financial markets this week, we present a special series of essays by Ravi Menon, managing director of the Monetary Authority of Singapore, the country's central bank. He has a dual message for would-be reformers: Yes, Europe, governments need markets — and yes, America, markets need governments. The key is that markets and governments need to do what they do more effectively.

Markets and Governments: A Historical Perspective

From the Washington Consensus to a Singapore Consensus?   Dateline Singapore: Market Economies and Social Inclusion   Why Supervising the Financial Sector Really Matters Markets and Governments: A Historical Perspective   By Ravi Menon | Wednesday, June 13, 2012   As debates in the United States and other countries have shown, there is no clear consensus as to what role of governments should play in regulating financial markets. This tension, writes Ravi Menon of Singapore's central bank, is not new. In fact, it has been a central issue in the evolution of political economy over the last 200 years. conomic policy is at an inflexion point. The financial crisis of 2008-09 has altered the way we perceive markets. The idea that competitive markets are sufficient to ensure efficient outcomes and stable economies is under heavy intellectual fire. What kind of new economic ideas will emerge from the crisis? Getting the balance between markets and government right will be key to improving the people's standard of living and overall welfare. This question is not just about economics. The crisis has prompted a fundamental re-think of the relationship between markets and governments. The contest is not just between economic theories, but between competing systems of political economy and models of governance. Striking the right balance between markets and government is the central issue in policy debates over economic development — and, thus, is of vital importance to people all over the world. Accordingly, the two key questions currently being asked by policy makers around the world are:   What is the role of governments in promoting economic growth?   What can governments do to seize the opportunities of globalization, while minimizing its downsides? Despite the pressing nature of these questions, we have to recognize that the tension between markets and government is not new. In fact, it has been the central issue in the evolution of political economy over the last 200 years. There have been three distinct phases in this evolution. Phase One: The rise of the market The "rise of the market" began in the late 18th century, shaped by the writings of Adam Smith and David Ricardo. The "invisible hand" of the market guided supply and demand toward equilibrium and efficiency. Free trade promoted specialization along the lines of comparative advantage and fostered economic growth. There was no need for central planning, beyond providing public goods like law and order. There was no macroeconomics as such — no monetary policy, no fiscal policy. This phase came to an end in the 1930s, when the concept of self-correcting markets collapsed under the weight of the Great Depression. Falling prices, instead of bringing demand and supply into equilibrium, locked the world into a deflationary spiral. Thus began the second phase. Phase Two: The rise of government It was John Maynard Keynes who argued that markets were inherently unstable. Left on their own, they may not always self-correct. Government intervention was necessary to boost aggregate demand during periods of high unemployment. From these observations, modern macroeconomics was born. In a more globalized and complex economy, governments have fewer levers to pull, and these levers are less potent than before. The rise of government went beyond managing aggregate demand. The 1940s also saw the advent of the welfare state. Following the Beveridge Report, the United Kingdom — and soon, the rest of Europe — embarked on providing social insurance for health care, education, employment and social security. The welfare state was enabled through redistributive taxation and government regulation. Across the Atlantic in the United States, Lyndon Johnson's "Great Society" of the 1960s expanded the role of the state in the pursuit of social justice. Phase Three: The return of the market This phase began with growing disenchantment with government's ability to deliver and was driven forward mainly by U.S.-based economists — although the problems they sought to address manifested themselves all over the developed world. The stagflation of the 1970s — persistently high inflation and unemployment — called into question the ability of governments to fine-tune the economy. Meanwhile, the welfare state began to impose an unsustainable fiscal burden, not to mention a creeping entitlement mentality among the people. Friedrich Hayek and Milton Friedman led the charge against "Big Government." They argued eloquently how an overreaching government dulled the fundamental human instincts that power the capitalist system: initiative, enterprise and the competitive spirit. The idea that markets — for all their faults — were more effective than governments in allocating resources and driving structural change, gained ascendancy. In the 1980s, U.S. President Ronald Reagan and UK Prime Minister Margaret Thatcher reduced taxes, deregulated industries, privatized state-owned enterprises, curbed union power, and scaled back welfare programs. The global economy boomed. The collapse of the Soviet Union and the opening up of China seemed to vindicate the triumph of market capitalism. The Washington Consensus held sway from Bangkok to Budapest. Phase Four: Balancing markets and governments The third phase ended in 2009 with the onset of the global financial crisis and recession. We are once again at an inflexion point, but with no clarity on the paradigm going forward. The choice is not between biggovernment andsmall government. What matters is what governments do, not how big they are. The financial crisis has revealed significant imperfections in market mechanisms: information asymmetry, moral hazard, systemic risks and behavioral or nonrational motivators of choice. It has also revealed the inherent limitations of government: In a more globalized and complex economy, governments have fewer levers to pull, and these levers are less potent than before. Neither market fundamentalism nor central planning has worked. Yet one thing is certain: The choice is not betweenbig government and small government. It is about creating effective government. What matters is what governments do, not how big they are. The size of governments may well have to shrink. (The revenue base in most countries will be capped by competition and demographics.) But the responsibilities of government may well have to expand — to enable, regulate, stabilize and legitimize markets so they can work better. Getting the balance between markets and government right, then, will be key to improving the people's standard of living and overall welfare. From the Washington Consensus to a Singapore Consensus?   By Ravi Menon | Thursday, June 14, 2012   While the global financial crisis has prompted a reexamination of the roles of markets and governments, there is no clear agreement as to the proper balance between the two. Ravi Menon makes the case that yes, Europe, governments need markets — and yes, America, markets need governments. The key is that both be effective in what they do. he key fallout of the global financial crisis is a battle between markets and governments. This is no idle matter. It is one of the bigger and most consequential battles of our time. Yet we may find that there is no universal balance between markets and governments that applies at all times and in all places. The ideological conflict over the role of governments vis-à-vis markets is a false choice. Governments need markets and markets need government. Each country may have to find its own balance. The balance between markets and government may have to calibrated and re-calibrated continually, adapting to circumstance and context. This has been the central insight of Singapore's experience. And while Singapore is a small nation compared to most others, it potentially offers insights that could be relevant elsewhere. Singapore's approach to policymaking is not based on any of the usual "isms" so beloved of intellectuals. The two "isms" that perhaps best describe Singapore's approach are pragmatism (an emphasis on what works in practice rather than abstract theory) and eclecticism (a willingness to adapt to the local context best practices from around the world). The ideological conflicts over the role of governments vis-à-vis markets often present a false choice. For that reason, public policy in Singapore has been guided by a deep appreciation of the critical interdependence between markets and government. Indeed, Singapore's approach can be summed up as follows: Governments need markets and markets need government. Yes, Europe, governments need markets That the market plays a central role in Singapore is well-known. According to the World Bank, Singapore is the easiest place in the world to do business. According to the Heritage Foundation, Singapore is the second freest economy in the world, after Hong Kong. There are virtually no import tariffs, no export subsidies, no exchange restrictions, no price ceilings, no minimum wage, no rent control. Income tax rates are among the lowest in the world, and government expenditures as a percentage of GDP are well below most countries. Equally — if not more importantly — government policies have been strongly guided by the application of market principles. Be it in industrial policy, medical insurance, congestion pricing, social security, regulation of utilities, or allocation of land, Singapore has assiduously applied market mechanisms and price signals. A key feature of Singapore's approach has been a shift towards lighter regulation, accompanied by a more intense focus on risk-based supervision. "Getting the economics right" has been a hallmark of governance in Singapore. Yes, America, markets need governments Economic development does not occur naturally. It needs preconditions, and if these do not exist, government needs to create them. Markets function best under some rather exacting conditions — rule of law, perfect information, absence of coordination failures, and no monopoly power. But the irony is that governments sometimes have to be in markets to enable these conditions. This is where free marketers become disenchanted with Singapore. The government has never hesitated from guiding the development process or intervening in markets where it believes such intervention will lead to superior outcomes. The objective of government intervention is neither to suppress nor to supplant markets, but to support and sustain them. In Singapore, government intervention has sought to harness the power of the market to manage and grow the economy. Not all of the Singapore government's interventions have worked, but that is a reason to scale back, modify or even withdraw the intervention — not to reject the role of government altogether. Adapting from a framework first proposed by Dani Rodrik to describe the role of institutions, we can illustrate four key aspects of how Singapore's government has intervened to try to make markets work better:   First, the government has sought to "enable" markets. This includes ensuring rule of law, property rights, and public infrastructure — functions that most governments perform. But in Singapore, enabling markets has also included industrial policy and capability development — subjects of continuing controversy in policy circles around the world. Both markets and governments have been found wanting. What we need is not more of one and less of the other. We need both to be more effective.   Second, the government has sought to "regulate" markets. This includes supervision of the financial sector, competition regulation, and taxation of negative externalities. A key feature of Singapore's approach has been a shift towards lighter regulation, accompanied by a more intense focus on — and practice of — risk-based supervision.   Third, the government has sought to "stabilize" markets. This is the bread-and-butter of macroeconomic management. Singapore's basic approach in monetary and fiscal policy is not far from global practices. But its efforts to address asset price inflation and credit crises are interesting examples of targeted interventions that harness market forces.   Fourth, the government has sought to "legitimize" markets. Globalization, free trade and open markets lead to significant dislocations. Some of the sharpest debates over the role of government focus on the extent to which governments should facilitate adjustments, redistribute incomes or provide social safety nets, so as to maintain public support for market-oriented policies. Singapore has sought to find its own middle ground on this complex challenge. Addressing these four dimensions explicitly and using them as a guidepost to strike the right balance in the tension between markets and governments will be critical, all the more so because the global financial crisis has profoundly shaken our confidence in both markets and governments. But mistakes and failures are bound to occur. They occur not because market participants are greedy or government officials incompetent. They occur because the world we live in is fundamentally complex and uncertain. Both markets and governments have been found wanting. What we need is not more of one and less of the other. We need both to be more effective and to work in closer collaboration, so that public interest and private initiative are better aligned. "The invisible hand of the market has often relied heavily on the visible hand of government." As the Nobel prizewinning economist Amartya Sen has said: "The invisible hand of the market has often relied heavily on the visible hand of government." Overall, Singapore's experience is that market principles are necessary to help government work better, and that good government is necessary to help markets work better. This is not to suggest that Singapore has got the balance right. Far from it. Singapore is still an experiment, a work in progress. If anything, the key take away from Singapore's story is to keep an open mind, measure outcomes, continually review policies and to learn from mistakes. Pragmatism and experimentation must become the watchwords in public policy. Why Supervising the Financial Sector Really Matters   By Ravi Menon | Wednesday, June 06, 2012   When it comes to the role of government in regulating markets in the wake of the recent crisis, it is regulation of the financial sector that is of greatest interest. Stability is fundamental to a well-functioning financial system. But this stability does not occur naturally, argues Ravi Menon of Singapore's Monetary Authority. hile financial markets are generally efficient, they are subject to market failure and occasional bouts of instability. The global financial crisis of the late 2000s is a perfect example of that. As the recent financial crisis has shown, stakeholder governance and market discipline can fail quite spectacularly. Moral hazard occurs when those who make loans are not the ones who bear the risk of default — or at least, theythought they did not bear the risk. Information asymmetry occurs when debt instruments are packaged into complex products whose risks investors do not understand. When risk is neither monitored nor understood, it gets underpriced and builds up in the system. Effective regulation and supervision of the financial sector is therefore critical to promote prudent behavior and sound risk management. The question is how to do it without stifling the market? There are no easy answers. At Singapore's central bank, the Monetary Authority of Singapore (MAS), we try to do this in three ways. First, we set healthy prudential standards. Second, we take a risk-focused approach to supervision. Third, we leverage on the market by relying on stakeholders to complement official oversight. Healthy prudential standards. Singapore's central bank has consistently emphasized healthy prudential standards, especially in good times. Many of these are higher than international norms:   Banks keep a minimum 10% capital adequacy ratio, with at least 6% in Tier 1 capital.   Banks set aside general impairment provisions of not less than 1% of net loans and receivables, so that cushions are built up ahead of loan losses.   Housing loans are subject to an 80% loan-to-value limit. In other words, a lender has at least a 20% buffer against a reduction in collateral value. These buffers have served Singapore well, allowing its financial institutions to ride out successive regional and global financial market stresses. Risk-focused supervision. The crisis has highlighted the importance of getting the supervisory approach and intensity right. MAS evaluates the relative risk posed by each financial institution. It subjects the financial institution that potentially has the largest impact on the financial system to the greatest supervisory intensity. In Singapore, the financial institution that potentially has the largest impact on the financial system receives the greatest supervisory intensity. MAS demands substantial information and data from financial institutions in order to review their financial situations and their risk profiles. And where there are gaps, MAS makes sure the institutions provide additional, detailed answers. Also, rather than having a fixed view of what is an acceptable level of business risk, MAS assesses this against the institution's risk management standards. Institutions engaging in complex financial businesses must be able to demonstrate that their risk-management capabilities match their risk profiles. A risk-focused approach allows greater business latitude for well-managed institutions while retaining higher prudential requirements or tighter restrictions for weaker ones. Relying on stakeholders. Primary responsibility for the safety and soundness of a financial institution must lie with its board of directors and senior management. It is their job to maintain adequate risk oversight of the institution's business activities. It is neither feasible nor desirable for the regulator to do this. The government also leverages market discipline to foster prudent behavior among financial institutions. Stakeholders — such as shareholders, creditors and counterparties — have an interest in the continued financial health of the institution. Likewise, one can assume professionals such as rating agencies and external auditors - chastened by their experiences and failings during the past crisis - will provide an independent assessment of the risks inherent in the institution and the adequacy of internal controls. Of course, as the recent financial crisis has shown, stakeholder governance and market discipline can fail quite spectacularly. Herd behavior and irrational exuberance can lead the market to overvalue assets or underestimate risks. This is why regulation remains necessary and important. But it would be a mistake to substitute tighter regulation for stakeholder governance and market discipline. Rather, governments should examine how to better align market forces and private incentives with regulatory objectives. A stable financial system is better assured with a combination of robust regulation, prudent corporate governance and effective market discipline. Stabilizing markets during a credit crisis The other key role of governments in financial markets is stabilization. While it has been convenient to blame governments for not preventing the financial crisis, let us not forget that it was action by governments around the world that prevented a complete meltdown of markets. Consider Singapore's experience in fighting the credit crisis. When credit conditions had recovered sufficiently, the government pulled back. Knowing when and how to exit is an important consideration in any government intervention. When the financial crisis broke out in September 2008 in the United States, the ripple effects were felt throughout the world. A systemic seizure of credit was underway and threatened to have dire spill-over effects on the real economy if the situation was not stabilized. Trade financing dried up significantly, impacting Singapore's exporters and offshore trading companies. Singapore's Ministry of Trade and Industry (MTI) and Ministry of Finance (MOF) got together to analyze the situation. The market failure was at two levels: the supply of credit and the price of credit. For some sectors and geographies, there was an unwillingness to provide trade financing or working capital at anyinterest rate. For other kinds of loans or borrowers, banks were willing to lend but at much higher interest rates. The way out of the logjam was for the government to underwrite a sufficiently large share of the default risk to induce banks to resume lending. But how to do this without moral hazard? The fear was that government would end up with "lemons" — that banks would push less creditworthy loans to the government while keeping safer ones for themselves. There was real fear that the government could end up losing a lot of money without improving the access to credit for deserving firms. In all the credit schemes drawn up by MTI and MOF, the principle that government must harness the power of the market was strictly applied. That is, the government was seeking not to replace the lending market, but to complement it. First, the government refrained from direct lending. (Assessing credit risk is not a civil servant's area of expertise.) All government-facilitated loans were made through financial intermediaries in order to tap on their expertise in risk assessment. Second, despite strong pressures from both banks and the industry, the government refrained from taking on 100% of the risk on any loan. For every subsidized loan, the bank assessing the loan had to have "skin in the game." Singapore's credit enhancement schemes worked. When credit conditions had recovered sufficiently by early 2010, the government scaled back the credit enhancement schemes, reducing loan volumes and the risk-share. This let the market revert to normalcy, so that risk would not be mispriced over the longer term. Knowing when and how to exit is an important consideration in any government intervention.

A Frase da Semana - Darwin

Uma para refletir...


It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.
Charles Darwin


Comento (PRA): 
Também acho; para o bem e para o mal. 
Alguns intelectuais parece vegetar na mesmice.
Alguns simplórios são espertos o suficiente para aproveitar as chances do meio, qualquer que seja ele...