Saturday, February 01, 2014

Random Walk in Political Economy

- America's Atlantic and Pacific Trade deals are under pressure. Not necessarily the last fight as few likes to contend, but Obama Administration must pursue these trade pacts vigorously. Noise by Democrats in Senate - well, it could be all noise after all; which the Administration must ignore. It is a good politics for Congressional Democrats that after some let downs for organized labor (Administration is not necessarily wrong since the case of organized Labor is weak in this dispute between Organized Labor versus ObamaCare); they pretend to put up a fight. Best course for Obama Administration and America is to ignore all this 'mirror and smoke' game between organized Labor and Democratic Party.

- Is Dani Rodrik saying that Aam Adami Party of India is right in opposing Foreign Capital and entry of Foreign firms in Indian Retail Sector? At least that is what his column sounds. Otherwise an erudite column, it is probably undermining the familiar damage done by politics of these emerging economics: failure of politicians to quench doubts in minds of common people that 'rich and powerful' are going ahead by 'rigging the game'. As long as strong smell of such 'rigged games' remain among these populations because of insufficient transparency and wrong headed policies; we are going to see repeat of what is happening either in Turkey or Argentina. AAP in India gets it, but they get unnecessarily embroiled in naming opposition politicians as 'corrupt' without putting any evidence or without bothering why AAP exists in the first place: to institutionalize system of transparency and appropriate enforcement of laws i.e. to improve prosecution. Only by successfully prosecuting 'corrupt politicians', India can hope to address the cancer of corruption. Otherwise, no matter how high and mighty economists like Dani Rodrik imply inherent plausibility of AAP economic policies; AAP is doomed to fail because of such cheap and detrimental politics. AAP must be able to differentiate itself from Shiv Sena; today it looks more like goons of Shiv Sena.

- Clive Crook worries about how Ben Bernanke, otherwise the most competent and accomplished Fed Banker in his eyes, tended to overstep the implicit political mandate of Fed as accorded by Congress. I do not think so. On the other hand Bernanke's dogged pursuit of policies not liked by today's Republicans is a solid proof of Bernanke being faithful to the charter of Fed - be orthogonal to political influences. I am not denying the tension Crook rightly points between Congress with voter's mandate and Fed with the onerous duty of maintaining Economic calm. But in the end Ben Bernanke exactly realized when to call it quits and he did set in motion the unwinding of his policies, QE in specific. It would need more time than what Bernanke though would be a rightful occupancy at Fed; that must be considered beyond Bernanke's control. In the end, the guy had the perfect sense of when to quit the 'battle of nerves' he wedged with his own party. Kudos to Bernanke and to the extent History redeems Paul Volcker; Ben Bernanke will be regarded as one of the most 'the towering and consequential personalities' of early 21st Century. The guy has achieved what we cannot fathom yet.

It is great to see that President Obama was able to get equally competent Janet Yellen and Bernanke's 'guru' - the gold standard Stanley Fischer - on Fed board. All said and done, that may be one of the most significant legacies of this Presidency after all.

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