Friday, 27 May 2011

Two events of interest next week

The NGO Support Centre and the Management Center is having a a discussion on Federalism and Europe on Monday 30 May, at 19:00, at Fulbright Center. Speakers include Dr. Michael Keating (politics;Aberdeen), MEP Mr. Takis Hadjigeorgiou, and Turkish republican party member Mr. Ozil Nami.

On Wednesday the first of June at 19:30 the ever active (for which i am grateful) OPEK- Όμιλος Προβληματισμού για τον Εκσυγχρονισμό της Κοινωνίας μας- with the EU parliament invite people to join the discussion with the topic «ΥΠΕΡΒΑΙΝΟΝΤΑΣ ΤΗΝ ΟΙΚΟΝΟΜΙΚΗ ΚΡΙΣΗ: Η Ε.Ε. ΚΑΙ Η ΕΛΛΑΔΑ at the house of the European parliament on Byronos Avenue 30. Speachers will be Λουκάς Τσούκαλης, καθηγητής, πρόεδρος ΕΛΙΑΜΕΠ, and Γιώργος Ευσταθίου, Sec. Gen of ΟΠΕΚ.

hope to see you there!

Thursday, 26 May 2011

The best summing up the elections - written by Patroclos before the results came out.

One of my favourite things in the Cypriot press is the Cyprus mail and the excellent "Tales from the coffeshop" by Patroclos.
If you missed his election sunday column then please read below. As i have reposted below: Please bear in mind credit and reproduction ot be given to Patroclos and the Cyprus mail.

Tales from the Coffeeshop: Feeling sorry for the sad losers
By Patroclos
Published on May 22, 2011

ELECTION DAY poses a big moral dilemma for all us Sunday piss-artists, who have to write for a living. The dilemma arises from the fact that elections are always held on a Sunday, the day that most weekly columns appear.
According to the election law, on this day, any form of electoral campaigning is banned. This means we could not write that the Eurococks have the most progressive policies on immigration, that Diko is the most idealistic party or that Lasok sounds like a drug for constipation, as this could be construed as an attempt to influence voters.
This is the moral dilemma: do we disregard the law and write a column about the elections or comply with it by writing nothing, not getting paid and leaving our family without food for a few days? As a law-abiding citizen I hate to break the law, but putting food on the family table has to be a good reason for doing it.
We could avoid the dilemma by writing about the latest developments in the Cyprob, the comrade’s nine-day visit to Australia and the dirt cheap prices of cucumbers and tomatoes, but we would be letting down our customers, who expect our establishment to advise them who to vote for on election day.
Not wanting to disappoint loyal customers or to leave my kids without food, I have taken the heroically courageous decision to defy the law. I just hope that if I end up behind bars Coffeeshop customers would declare Patroclos a political martyr and stage big protests in all towns and villages demanding his immediate release.

OVER THE last few weeks, several people have asked me, ‘what do you think will happen in the parliamentary elections?’
Every time I have been caught unaware, my stock response being ‘I don’t think,’ which is a civil way of saying ‘I really don’t give a damn, and I feel sorry for you for being such a sad loser, wasting valuable minutes of your life thinking about these boring elections, why don’t you get a life.’
I know I am an even sadder loser writing about the elections, but I feel I need to make this personal sacrifice for the sake of the Coffeeshop’s loyal customers, whose right to be misinformed is non-negotiable and I am willing to risk imprisonment for it.

MISINFORMATION, to use a milder term than lies, has been the key feature of the election campaign. The campaigns of all the big parties have knowingly misinformed or made promises that even the last idiot know they cannot keep. As always worst lies have been uttered with regard to the Cyprob.
Take for instance Edek, which wants us to vote for it because it would ensure a “democratic solution” and ensure the “withdrawal of rotational presidency.” How it would do this, we were not told, because the party does not have a clue.
The Eurococks are no better. A vote for them, would not only lead to the withdrawal of rotational presidency, it would also rid us of the Turkish settlers (Edek hasn’t figured out how to achieve this) and pave the way for the “European solution” that will ensure we live happily ever after.

THE BIGGEST disappointment in this campaign has been Diko, which has been very subdued. It drastically toned down its fiery, patriotic rhetoric and made nothing of its idealistic devotion to high principles, sticking instead to bland reminders of its glorious past and its support for the ‘no-vote’ in the referendum, of seven years ago.
The ‘no-vote’ in the referendum is the only thing it has in common with the commies of Akel, which the bash-patriotic party has been very careful not to offend in the campaign. Diko’s slogan, for heaven’s sake, is ‘Yes to stability, No to stagnation.’
What has happened to the proud party of Spy Kyp and the Ethnarch, the party that always acted as our guardian angel protecting us from the vile plots of foreigners and ensuring our national survival? Suddenly, it is acting like an Akel satellite, peddling stability and pandering to our commie rulers. Its most hard-line candidates, very disappointingly, have lost their patriotic voice, avoiding mention of the comrade’s nationally suicidal handling of the Cyprob during the campaign

POLITICAL rivals mischievously claimed that Diko boss Marios Garoyian was acting like Akel’s poodle and had turned his party into a commie satellite because he wanted another term as House president. Of course, nothing could be further from the truth.
Had they read the interview Marios gave to Kathimerini in March 2009, they would not make such scurrilous allegations. “When it comes to matters of principle, matters relating to the survival of the country, no chair interests me, no public post and no spoil.”
Is it his fault that no matters of principle or issues relating to our national survival are at stake in these elections and he is free to show an interest in the chair and the spoils?

WE ALL expect the mass production of misinformation and empty promises on the Cyprob during a campaign because this has proved our most successful industry and is what our politicians know how to do best.
But many customers of our establishment were taken aback by Disy’s advertising campaign, which implied that by voting for the party, by tomorrow, all our problems would be a thing of the past. The message of the ad was that on May 21 youths were sad and depressed (picture showing them), on May 22 ‘Youths took the future in their hands’ by voting for Disy, and on May 23, the picture showed them sitting in the park smiling and laughing.
We can only deduce that they had been smoking marijuana, because there is no way that they had found a job and personal happiness over the election weekend.

THE SAME advertising concept and lay-out was applied to a man leaving a business that has closed down on May 21. On May 22 ‘workers and small business owners took the future in their hands, voted for Disy and on May 23, presto, the man’s business re-opened and he was smiling again.
This guy must have taken something stronger than marijuana to be hallucinating about his business re-opening two days after it had been closed down.

THE WORST election ad by far was the one used by Edek at the start of the campaign which urged voters to ‘Break the moulds’. The visual of the ad had some Neanderthal man leaving what looked like a cave (in reality it was the mould he had broken out of) in search of food. I suspect the ad failed to boost the Neanderthal vote (Edek traditionally does very well in the Paphos district anyway), which is why we have not seen it in the last few weeks.

MANY CANDIDATES used text messages to win support. Top prize in this category goes to the well-known Nicosia beautician who was not standing herself. Her text message said: “I am your friend Maria Papasavva and I am relying on your vote for my son, parliamentary candidate of Diko no. 17 Alexi Papasavva. Thank you.”
This moving plea by the loving mother was based on a sound political argument. Women must vote for Alexi because his mother waxed their legs and bikini line.

COMMIE leader Andros Kyprianou sparked a classic knee-jerk reaction when he was quoted as saying that he would rather have a left-wing Turkish Cypriot as president than a right-wing Greek Cypriot. Everyone turned on him for this treacherous view as political outrage is common currency in public life. Personally I would rather have an illegal immigrant, on welfare, from Pakistan, as president than an Akelite, because our economy’s future would be much safer in non-communist hands.

OUR GOOD friend Charilaos never gives up his efforts of shifting the blame for the economy’s mess on others. What blame could he have. He is just the finance minister.
On Wednesday he said that he was “ashamed” when he saw people who had invested in Cyprus government bonds last October, at an interest rate of 3.8 per cent. Now the yield on these bonds was 6.5 per cent, because there was less confidence in the Cyprus economy, something which had nothing to do with the finance minister.
“Senior officials” were to blame, according to Charilaos, because they questioned the government’s data on the economy, thus creating a bad impression and forcing interest rates to rise. We all know that the “senior officials” he was referring to is one – the Central Bank Governor.
One thing our good friend never asks himself is why international markets and ratings agencies take the views of “senior officials” about the economy more seriously than the finance minister’s? Is it because his optimistic forecasts are as believable as DISY’s election ads?

AFTER the elections, Charilaos has promised he would tackle the state pension problem. He would achieve this through “consent and dialogue” with the parasites’ union PASYDY, which means he and his boss would beg the miserable moaner Hadjiklamouris to make a tiny concession that could be presented as a big compromise and the matter will be closed.
In the last week a complication surfaced with regard to state pensions. The altruistic, public spirited government doctors’ union brought up a long-standing demand – they want the years they spent studying and working to qualify as doctors to count as years of service when their pension is calculated.
At present their pensions are not as high as the rest of the highly-paid public parasites, because they have fewer years of service. Why not also calculate their years at high-school when they spent a lot more hours studying than the rest of us in order to get the grades that would get them into medical school.
I am certain Charilaos will satisfy the doctors’ just demand when he reforms the pension system through dialogue and consent.

WE HAVE reached the end of this week’s Coffeeshop without answering the million dollar question – what is at stake in today’s parliamentary elections? My guess would be ‘nothing’ but more authoritative commentators believe it is the House presidency which will determine the alliances in the 2013 presidential elections.
If DIKO and AKEL secure a majority, Garoyian would get the second term and the alliance of the two parties would contest the presidentials. If they fail to get a majority, DISY would probably back EDEK chief Omirou for the House presidency and pave the way for an alliance in 2013, the socialists backing the Fuhrer’s candidacy.
The country would benefit if Omirou becomes House president (he is not as big a windbag as Garoyian, but he has a better vocabulary) because Garoyian, free of official commitments, would be able to give all his time to matters of principle and ensure the national survival of country, which I fear may face many threats from many directions over the next few months. And we would be in a better position to face them if freedom warrior like Marios does not have the distraction of the House presidency.

I HOPE our establishment will have helped you make the right choices today. To summarise, if you are an unemployed youth and quite enjoy living off your parents do not vote for DISY, because if it wins, tomorrow you will have a job. But if your business has gone bust and you want to re-open it tomorrow, vote for DISY.
If it is stability you are after vote for AKEL and it will make sure Garoyian gets his second term. Personally I would have voted for the Eurococks had they told us how much water would be needed for the European solution, because I would hate the solution being too thick.

Monday, 23 May 2011

Why academics fight... and why community quotas on academic events is repuslive

I always used to find it so amusing to see how serious the interpersonal rifts exist between academics, especially economists (which I had more exposure to it might be valid in other disciplines as well). It is not that I felt there was an ivory tower of academia where all flaws of character are left behind, but I could not understand the real anger people felt for each other.

I know understand why. Academics trade on ideas. Thus not only are ideas very hard to pin down (and thus one can steal and idea from another), they are very easily picked up by another and twisted into something that goes against the principles the original creator had in mind -> thus creating real anger.

A great idea is the emergent Peace economics movement in Cyprus. It was an idea that started by many persons at the same time (the Wolfson inaugural meeting was one of the most inspiring I have ever visited) and that is developed by many at the same time for the same ideal of helping promote and insure a stable solution to the Cyprus question to the benefit of all.

Sadly like many ideas that gain grass root support many then jump in the bandwagon. I happen to know that the latest "forum" that is organised by a foreign university this week (sadly with EU money)was an idea of a person who worked hard form the beginning to make people think the solution in Economic terms. This person was not rejected by the "Forum" organizers to be there and present to present his work (and thus save the organisers the inevitable red faces) with the excuse being that a strict quota of Turkish and Greek Cypriots is applied in the event --> something anyone working on the academics of the Cyprus problem has never accepted.

Ideas and interested academics should be free to meet and promote practical ways of brinigng peace in Cyprus -> Quotas on members based on community is a idea brought from outside from people who do not understand that the Cyprus problem was never a problem of interpersonal relations between the main actors. For once I am angry to see the effort of so many being twisted by persons who come in and might even damage the existing great atmosphere that economists between economists on both sides (and third parties) who are working on the issue. I just wish that the damage caused this week will be minimal by these hijackers, and that those who have truly have been working on the issues can get their just reward for all their effort.

Friday, 20 May 2011

Free Amjad Baiazy


Friend and fellow blogger Amjad has been arrested by Syrian police as he tried to go back to the UK and continue his studies. He was instrumental in letting us know what was happening in Egypt, and helped with text to speech service from Egypt to the world. Please help spread the word.



Amjad Baiazy, age 29, Syrian citizen living in the UK. Arrested at Damascus International Airport on the morning of May 12, 2011 as he was returning to the UK. Amjad is a young Syrian civil activist who has worked with MSF and has spent many years participating in exchanges to build bridges of understanding between youth in Syria, the Middle East, and Europe.

Thursday, 19 May 2011

Great Letter by Cypriot Economist and fellow blogger

Dr. Panicos Demetriades brilliantly encapsulates in a letter in the Financial times what I have been teaching in Economics of the European union for the past two weeks: that it is Germany who is out of step with the rest of Europe and thus it is Germany that needs to readjust its exchange rate to make its export more expensive.

Right now Germany is getting the best of all worlds - it has successfully lobbies for the ECB to raise interest rates in order to cool time domestic spending; it has prevented losses on the German banking system by keeping Greece afloat for enough time for the German Banks to offload their debt; and the concerns about Greece are keeping the Euro low which allow it to massively increase its exports without any accusations of "beggar thy neighbour policy". Yes it gave money for the bail outs but that money was loaned (and has been receiving interest on) and not a handout as the German media have suggested.

Thus it is the German economy that is out of lockstep that the rest of Europe and it is the German economy that needs a separate currency that is to appreciated. The ECB Raising interest rates at a time where at least 3 Eurozone states are already finding it difficult to repay their debts sounds illogical until on factors in that the desire for Germany to cool inflation it its own country takes precedent over what is happening in souther Europe.

Tuesday, 17 May 2011

Beautiful pictures from renowned anthropologist of Cyprus: Dr. Peter Loizoss

Professor Emeritus Peter Loizos taught Anthropology at LSE from 1969 to 2002. He is concerned with the anthropology of Mediterranean societies, particularly of Cyprus. He has been conducting fieldwork since 2000 on a group of Greek Cypriots first studied in 1968. The photographs are reproduced with the kind permission of Moufflon Publications (Nicosia) and the proprietor, Ruth Keshishian.

The Beautiful pictures of his village - Argaki -are available on line here.

Monday, 16 May 2011

A brilliant piece again on Al Jazeera by a very respected Economic Historian

Following the great article By Geoffrey Sachs, All Jazeera ahs published a piece by Dani Rodik of Harvard that points out that regulation is not just necessary for growth, it is nesseary for democracy and hence for proper fuctioning institutions with that democracy. See the orginal article here.

The crucial role of democracy in economics
I have been presenting my new book, The Globalisation Paradox, to different groups of late. By now I am used to all types of comments from the audience. But at a recent book-launch event, the economist assigned to discuss the book surprised me with an unexpected criticism.

"Rodrik wants to make the world safe for politicians," he huffed.

Lest the message be lost, he then illustrated his point by reminding the audience of "the former Japanese minister of agriculture who argued that Japan could not import beef because human intestines are longer in Japan than in other countries."

The comment drew a few chuckles. Who doesn't enjoy a joke at the expense of politicians?

But the remark had a more serious purpose and was evidently intended to expose a fundamental flaw in my argument. My discussant found it self-evident that allowing politicians greater room for maneuver was a cockamamie idea - and he assumed that the audience would concur. Remove constraints on what politicians can do, he implied, and all you will get are silly interventions that throttle markets and stall the engine of economic growth.

This criticism reflects a serious misunderstanding of how markets really function. Raised on textbooks that obscure the role of institutions, economists often imagine that markets arise on their own, with no help from purposeful, collective action.

Adam Smith may have been right that "the propensity to truck, barter, and exchange" is innate to humans, but a panoply of non-market institutions is needed to realise this propensity.

Consider all that is required. Modern markets need an infrastructure of transport, logistics, and communication, much of it the result of public investments. They need systems of contract enforcement and property-rights protection. They need regulations to ensure that consumers make informed decisions, externalities are internalised, and market power is not abused. They need central banks and fiscal institutions to avert financial panics and moderate business cycles. They need social protections and safety nets to legitimise distributional outcomes.

Governance in economics

Well-functioning markets are always embedded within broader mechanisms of collective governance. That is why the world's wealthier economies, those with the most productive market systems, also have large public sectors.

Once we recognise that markets require rules, we must next ask who writes those rules. Economists who denigrate the value of democracy sometimes talk as if the alternative to democratic governance is decision-making by high-minded Platonic philosopher-kings - ideally economists!

But this scenario is neither relevant nor desirable.

For one thing, the lower the political system's transparency, representativeness, and accountability, the more likely it is that special interests will hijack the rules. Of course, democracies can be captured too. But they are still our best safeguard against arbitrary rule.

Moreover, rule-making is rarely about efficiency alone; it may entail trading off competing social objectives - stability versus innovation, for example - or making distributional choices. These are not tasks that we would want to entrust to economists, who might know the price of a lot of things, but not necessarily their value.

True, the quality of democratic governance can sometimes be augmented by reducing the discretion of elected representatives. Well-functioning democracies often delegate rule-making power to quasi-independent bodies when the issues at hand are technical and do not raise distributional concerns; when log-rolling would otherwise result in sub-optimal outcomes for all; or when policies are subject to myopia, with heavy discounting of future costs.

Independent central banks provide an important illustration of this. It may be up to elected politicians to determine the inflation target, but the means deployed to achieve that target are left to the technocrats at the central bank. Even then, central banks typically remain accountable to politicians and must provide an accounting when they miss the targets.

Similarly, there can be useful instances of democratic delegation to international organisations. Global agreements to cap tariff rates or reduce toxic emissions are indeed valuable. But economists have a tendency to idolise such constraints without sufficiently scrutinising the politics that produce them.

The importance of democratic deliberation

It is one thing to advocate external restraints that enhance the quality of democratic deliberation - by preventing short-termism or demanding transparency, for example. It is another matter altogether to subvert democracy by privileging particular interests over others.

For instance, we know that the global capital-adequacy requirements produced by the Basel Committee reflect overwhelmingly the influence of large banks. If the regulations were to be written by economists and finance experts, they would be far more stringent. Alternatively, if the rules were left to domestic political processes, there could be more countervailing pressure from opposing stakeholders (even though financial interests are powerful at home, too).

Similarly, despite the rhetoric, many World Trade Organisation agreements are the result not of the pursuit of global economic well-being, but the lobbying power of multinationals seeking profit-making opportunities.

International rules on patents and copyright reflect the ability of pharmaceutical companies and Hollywood - to take just two examples - to get their way. These rules are widely derided by economists for having imposed inappropriate constraints on developing economies' ability to access cheap pharmaceuticals or technological opportunities.

So the choice between democratic discretion at home and external restraint is not always a choice between good and bad policies. Even when the domestic political process works poorly, there is no guarantee that global institutions will work any better. Often, the choice is between yielding to domestic rent-seekers or to foreign ones. In the former case, at least the rents stay at home!

Ultimately, the question concerns whom we empower to make the rules that markets require. The unavoidable reality of our global economy is that the principal locus of legitimate democratic accountability still resides within the nation state.

So I readily plead guilty to my economist critic's charge. I do want to make the world safe for democratic politicians. And, frankly, I wonder about those who do not.

Dani Rodrik, Professor of International Political Economy at Harvard University, is the author of The Globalization Paradox: Democracy and the Future of the World Economy.

A version of this article first appeared on Project Syndicate.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

Friday, 6 May 2011

Do you want to know how a real estate bubble sounds in opera?

As music and mathematics are linked the excellent planet money has placed the USA real estate crash into notes and has had baritones sing it.

I think this should be mandatory for all who are in these markets. If people who insisted that the rise was not a bubble (just before it blew in their faces) heard it reach the top range of sounds produced by the wonderful voice of a trained opera singer i wonder if they would have paused and recollected if a condo in Florida could really increase in price by 300% in a year.

Another Great Rap video of Keynes Vs HayeK

Should the government spend a country's way in out of resession?

Another great video by Econ stories:



I use them in class and they have a great reception.

New OECD report - the rich are getting richer except in Greece, Turkey, Hungary and Belgium

The excellent blog and radio show "Planet Money" has brought to my attention that even through inequality within countries was rising in the boom, inequality is rising in the recession too.

Very interesting to note that Greece is not one of them - although i think this shows that recession hit everybody badly and the rich did not have the umbrella of government support that the poor have (and not that George Papandreou id following his "socialist principles")

According to the report there are three reasons for still rising inequality even in hard times:
I would however add a very important reason that is not mentioned by the report. The owners of capital were the big winners of globalisation as global wage demands were moderated through competition in the boom and they have successfully managed to protect their margins through the boom --> look at the support of stock markets and financial institution even of capital such as general motors. As a result owners of capital got away with sharing the less of the burden of the recession. Taxpaying public of Iceland, Ireland and the US know all about that. Sadly the UK is misled to focus on public spending and not on the reason that capital ownership was supported when it made bad decisions and is refusing to pay for the support or for future insurance that such things will not happen again.

The other three reasons acroding to the OECD for the rise of inequality:
[Quoting PLanet money]
"Why is this happening? Here are three possible answers from the report.


1. Robots, etc.

Trade barriers have come down. Technology has advanced. The combination of these two factors has disproportionately benefited highly-skilled workers. You want to be the guy building the robot, not the guy whose job got replaced by a robot.

2. Rich people marry rich people

Inequality is calculated by household, not by individual. And a few changes at the household level have driven some of the increase in inequality.

For one thing, it's become more common for people to choose spouses in their own income bracket. In other words, rich people are now more likely to marry other rich people, and poor people are more likely to marry other poor people. (There's a creepy term for this: "assortative mating.")

Single-parent households and single-person households without children have also become more common. Both groups are disproportionately likely to be at the bottom of the income ladder.

3. Free-wheeling job markets

State ownership of corporations has declined. Price controls have become less common. Minimum wages have fallen relative to average wages. Legal changes have made it easier to fire temporary wokers.

Taken together, these changes have actually improved overall employment levels. (Businesses are more likely to higher hire workers when they can pay lower wages and when it's easier to fire people.)

But despite the gain in employment, the same shifts may also have driven up inequality. In the words of the report, "the high-skilled reaped more benefits from a more dynamic economy.""

A divisive article by a very divisive economist: Corruption is a Developed rather than a developing country problem

Reposting form all jazerra a great article by Jeffrey Sachs. Sachs has been a divisive figure but does point out that many of the issues we think as problems of the less developed world (LDCs) originate from the willingness of the advanced world to corrupt and undermine weak institutional systems in the LDCs. In the wake of the latest crisis it is a bit rich to preach corporate governance to LDCs...

The global economy's corporate crime wave
Advanced economies with "good governance" are facing alarming incidents of business corruption at the highest levels.
Jeffrey Sachs

Two years after the US financial crisis, not a single Wall Street executive has faced jail time [GALLO/GETTY]
The world is drowning in corporate fraud, and the problems are probably greatest in rich countries – those with supposedly "good governance".

Poor-country governments probably accept more bribes and commit more offenses, but it is rich countries that host the global companies that carry out the largest offenses. Money talks, and it is corrupting politics and markets all over the world.

Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs. A massive insider-trading ring is currently on trial in New York, and has implicated some leading financial-industry figures. And it follows a series of fines paid by America's biggest investment banks to settle charges of various securities violations.

There is, however, scant accountability. Two years after the biggest financial crisis in history, which was fueled by unscrupulous behaviour by the biggest banks on Wall Street, not a single financial leader has faced jail. When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practises have a solid rate of return. Even today, the banking lobby runs roughshod over regulators and politicians.

Corruption pays in American politics as well. The current governor of Florida, Rick Scott, was CEO of a major health-care company known as Columbia/HCA. The company was charged with defrauding the United States government by over billing for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of $1.7bn.

The FBI's investigation forced Scott out of his job. But, a decade after the company's guilty pleas, Scott is back, this time as a "free-market" Republican politician.

When Barack Obama wanted somebody to help with the bailout of the US automobile industry, he turned to a Wall Street "fixer," Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.

But why stop at governors or presidential advisers? Former Vice President Dick Cheney came to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in illegal bribery of Nigerian officials to enable the company to win access to that country's oil fields – access worth billions of dollars. When Nigeria's government charged Halliburton with bribery, the company settled the case out of court, paying a fine of $35m. Of course, there were no consequences whatsoever for Cheney. The news barely made a ripple in the US media.

Impunity is widespread – indeed, most corporate crimes go un-noticed. The few that are noticed typically end with a slap on the wrist, with the company – meaning its shareholders – picking up a modest fine. The real culprits at the top of these companies rarely need to worry. Even when firms pay mega-fines, their CEOs remain. The shareholders are so dispersed and powerless that they exercise little control over the management.

The explosion of corruption – in the US, Europe, China, India, Africa, Brazil, and beyond – raises a host of challenging questions about its causes, and about how to control it now that it has reached epidemic proportions.

Corporate corruption is out of control for two main reasons. First, big companies are now multinational, while governments remain national. Big companies are so financially powerful that governments are afraid to take them on.

Second, companies are the major funders of political campaigns in places like the US, while politicians themselves are often part owners, or at least the silent beneficiaries of corporate profits. Roughly one-half of US Congressmen are millionaires, and many have close ties to companies even before they arrive in Congress.

As a result, politicians often look the other way when corporate behaviour crosses the line. Even if governments try to enforce the law, companies have armies of lawyers to run circles around them. The result is a culture of impunity, based on the well-proven expectation that corporate crime pays.

Given the close connections of wealth and power with the law, reining in corporate crime will be an enormous struggle. Fortunately, the rapid and pervasive flow of information nowadays could act as a kind of deterrent or disinfectant. Corruption thrives in the dark, yet more information than ever comes to light via email and blogs, as well as Facebook, Twitter, and other social networks.

We will also need a new kind of politician leading a new kind of political campaign, one based on free online media rather than paid media. When politicians can emancipate themselves from corporate donations, they will regain the ability to control corporate abuses.

Moreover, we will need to light the dark corners of international finance, especially tax havens like the Cayman Islands and secretive Swiss banks. Tax evasion, kickbacks, illegal payments, bribes, and other illegal transactions flow through these accounts. The wealth, power, and illegality enabled by this hidden system are now so vast as to threaten the global economy's legitimacy, especially at a time of unprecedented income inequality and large budget deficits, owing to governments' inability politically – and sometimes even operationally – to impose taxes on the wealthy.

So the next time you hear about a corruption scandal in Africa or other poor region, ask where it started and who is doing the corrupting. Neither the US nor any other "advanced" country should be pointing the finger at poor countries, for it is often the most powerful global companies that have created the problem.

Jeffrey D. Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also Special Adviser to United Nations Secretary-General on the Millennium Development Goals.

The article was first published by Project Syndicate.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

Thursday, 5 May 2011

While the Government Berates the best Technocrat we ever had, Europe rewards

Dr. Orphanides of the central bank of Cyprus by placing him at the head of of the steering committee of the European Systemic Risk Board (ESRB). In a period that we celebrate even the tiniest victory for our beleaguered economy this acclaim has gone unnoticed by the local media. The committee will have a great role to play in shaping the future rules and regulations of the financial industry and no doubt it will seek to enforce and shape new Basel rules of banking as well as additional banking directives.

Thus the comment by Dr. Orphanides that ""A crucial weakness is that insufficient progress has been made, and one that needs to be addressed urgently, on how to allow major institutions to fail," must have made the big banks sweat with anxiety and made them call their army of lobbyists to the fray.

Of course Dr. Orphanides is right: the feeling that banks got away with paying for the damage when the crisis they fueled hit, even though they profited in the (personally and as corporations)in the bubble is not just a moral argument but an economic one. Removing the chance of bankruptcy removed the proper calculation of risks as moral hazard meant that there was money to be made if suspenseful and the looses would be borne by others. Great to see Dr. Orphanides trying to refocus the world on what got us in such a big financial crisis in the first place.