SuriNews

Inequality: The Silly Tales Economists Like to Tell

Dean Baker

Dean Baker is a US macroeconomist and co-founder of the Centre for Economic and Policy Research. Some economists don't get paid to know about the economy, but to justify the trickle-up of wealth. Economists are "not rewarded for studying the economy", says Baker, as evidenced by the fact that almost everyone in the profession failed to predict the $8 trillion housing bubble that brought the economy to its knees [REUTERS]CEPR; Books; RSS; Last Modified: 30 Oct 2012 07:36

There is no serious dispute that the United States has seen a massive increase in inequality over the last three decades. However there is a major dispute over the causes of this rise in inequality. The explanation most popular in elite and policy circles is that the rise in inequality was simply the natural working of the economy. Their story is that the explosion of information technology and globalisation have increased demand for highly-skilled workers while sharply reducing the demand for less-educated workers. While the first part of this story is at best questionable, the second part should invite ridicule and derision. It doesn't pass the laugh test. As far as the technology story, yes information technologies have displaced large amounts of less-skilled labour. So did the technologies that preceded them. There are hundreds of books and articles from the 1950s and 1960s that expressed grave concerns that automation would leave much of the workforce unemployed. Is there evidence that the displacement is taking place more rapidly today than in that era? If so, it is not showing up on our productivity data. More germane to the issue at hand, unlike the earlier wave of technology, computerisation offers the potential for displacing vast amounts of highly skilled labour. Legal research that might have previously required a highly skilled lawyer can now be done by an intelligent college grad and a good search engine. Medical diagnosis and the interpretation of test results that may have previously required a physician, and quite possibly a highly paid specialist, can now be done by technical specialists who may not even have a college education.

"Most economists are not paid for knowing about the economy. They are paid for telling stories that justify giving more money to rich people."

There is no reason to believe that current technologies are replacing comparatively more less-educated workers than highly educated workers. The fact that lawyers and doctors largely control how their professions are practiced almost certainly has much more to do with the demand for their services. If the technology explanation for inequality is weak, the globalisation part of the story is positively pernicious. The basic story is that globalisation has integrated a huge labour force of billions of workers in developing countries into the world economy. These workers are able to fill many of the jobs that used to provide middle class living standards to workers in the United States and will accept a fraction of the wage. This makes many formerly middle class jobs uncompetitive in the world economy given current wages and currency values. This part of the story is true. The part that our elite leave out is that there are tens of millions of bright and highly educated workers in the developing world who could fill most of the top paying jobs in the US economy: Doctors, lawyers, accountants, etc. These workers are also willing to work for a small fraction of the wages of their US counterparts since they come from poor countries with much lower standards of living. The reason why the manufacturing workers, construction workers, and restaurant workers lose their jobs to low-paid workers from the developing world, and doctors and lawyers don't, is that doctors and lawyers use their political power to limit the extent to which they are exposed to competition from their low-paid counterparts in the developing world. Our trade policy has been explicitly designed to remove barriers that prevent General Electric and other companies from moving their manufacturing operations to Mexico, China or other developing countries. By contrast, many of the barriers that make it difficult for foreign professionals to work in the United States have actually been strengthened in the last two decades. If economics was an honest profession, economists would focus their efforts on documenting the waste associated with protectionist barriers for professionals. They devoted endless research studies to estimating the cost to consumers of tariffs on products like shoes and tires. It speaks to the incredible corruption of the economics profession that there are not hundreds of studies showing the loss to consumers from the barriers to trade in physicians' services. If trade could bring down the wages of physicians in the United States just to European levels, it would save consumers close to $100 billion a year. But economists are not rewarded for studying the economy. That is why almost everyone in the profession missed the $8 trillion housing bubble, the collapse of which stands to cost the country more than $7 trillion in lost output according to the Congressional Budget Office (that comes to around $60,000 per household). Few if any economists lost their 6-figure paychecks for this disastrous mistake. But most economists are not paid for knowing about the economy. They are paid for telling stories that justify giving more money to rich people. Hence we can look forward to many more people telling us that all the money going to the rich was just the natural workings of the economy. When it comes to all the government rules and regulations that shifted income upward, they just don't know what you're talking about.

Suriname ethanol project gets off the ground in 2013

(de Ware Tijd) PARAMARIBO – After a successful pilot phase in Wageningen, oil company Staatsolie is designing its sugarcane plantation and mill. Plans are to start building an ethanol plant by mid-2013, and to have the first liters of fuel flowing by 2015. The company expects to spend at least US$ 250 million to be ready in 2015, Anand Jagessar and Dominique van Dijk of Staatsolie’s Business Development department tell de Ware Tijd. “If all goes according to plan, we will start suppling electricity to Nickerie in 2016, while sugar production will start in 2018,” the experts add.

Although President Desi Bouterse had expressed doubts about the plan when he took office, Staatsolie now has been given the green light to continue the project. The pilot project on 8 hectares shows that Wageningen is suitable for the large-scale growth of sugarcane, while any possible negative effects on the environment or the local community would be negligible. “At first, the mill will be built and 3,000 hectares planted. Each year, 3,000 hectares will be added to the sugarcane fields,” Jagessar says. A total of 9,000 hectares will be planted. “Ethanol will be produced in Wageningen, after which it will be transported to the refinery at Tout Lui Faut to be mixed with gasoline,” the expert explains. By that time, the current preparations for expansion of the oil purification plant should be finished.

Staatsolie estimates it can produce around 40,000 metric tons of sugar a year, a quarter of which will meet the local demand. The remainder will be intended for export. The waste resulting from pressing sugarcane will be used to generate electricity. Sufficient power will be produced to operate the plantation and mill. In addition, an extra 9 to 12 megawatts will be produced each day, enough for a few thousand houses in Nickerie. Other waste products will be used to fertilize the sugarcane fields, in order to limit the amount of waste. Molasses, another byproduct, can also be used to produce ethanol.

Suriname not borrowing from China without thinking, Lackin says

(de Ware Tijd) PARAMARIBO – Although China is an important partner in financing the government’s big plans, Suriname will not borrow from that country without thinking. “We are careful with loans,” Foreign Affairs Minister Winston Lackin says, referring to the law on the state’s debts which imposes limits on how much the state can borrow locally and internationally.

Lackin confirmed to the press yesterday that China plays an ‘important role’ with regard to financing the government’s big plans in sectors including infrastructure, energy and mining. “We are also considering other methods that will not burden the economy so much,” he adds. Suriname is also counting on friendly nations including Brazil and India.

Financial experts and international organizations have repeatedly warned the government recently not to be careless with foreign loans. In spite of the current favourable economic times, Suriname should resist this temptation due to the global financial crisis. Chinese Ambassador in Suriname Yuan Nansheng says relations between his country and Suriname have been intensified in the past three years in the areas of the economy, politics and culture. China sees an interest in helping Suriname alleviate its housing shortage. Besides pre-financing 5,000 government houses, China has increased its financial donations to Suriname each year. “Late this year, 24 containers filled with agricultural machinery will come to Suriname as aid,” the Ambassador states as an example of how his country wants to assist Suriname in “actually becoming a food source.”

Guyana, Suriname moving to regularise backtrack route

Guyana and Suriname have agreed to work to tighten security and regularise the “backtrack” route used by many persons to travel between the two countries.

“We know that there are some security issues that has to be taken care of, that’s why we have decided that technical people from the security institutions from both our countries should meet as soon as possible to discuss the issue in order to see how the regulations can (be put in place),” said Winston Lackin, the Surinamese Minister of Foreign Affairs as he and his local counterpart, Carolyn Rodrigues-Birkett met at the Grand Coastal Inn yesterday, to review the progress made following the February meeting of the Presidents of Guyana and Suriname. Related issues on the bilateral agenda were also expected to be discussed during the meet.

Rodrigues-Birkett added that backtracking has been discussed and representatives of the two countries will be meeting very soon to discuss what both sides would be putting in place. She said that it must be recognised that “it’s the reality,” while pointing out that not everyone who goes through the…..

GlaxoSmithKline Fraud Case: Does Crime Pay?

As the pharmaceutical giant is fined a record sum of $3bn, we ask if the move will be a deterrent for others.

Inside Story Americas Last Modified: 10 Jul 2012 10:01

"Most of the examples ... are of a drug that is approved for disease A and it is thought to be safe and effective for disease A but they're not selling enough. It's still on patent ... as long as it's on patent, as long as they can charge more, they will start pushing it for disease B and C and D for which there is no evidence that the benefits outweigh the risks so this is a strategy widely used by companies to increase their sales." - Dr Sidney Wolfe, co-founder and director of the Health Research Group

In the biggest health care fraud settlement in US history, a federal judge approved a fine totalling $3bn for criminal and civil violations by the British pharmaceutical giant, GlaxoSmithKline, last week.ge more, they will start pushing it for disease B and C and D for which there is no evidence that the benefits outweigh the risks so this is a strategy widely used by companies to i the s ... are of a drug that is approved for disease A and it is thought to be safe and effective for disease A but they're The company admitted illegally marketing the popular antidepressants Paxil and Wellbutrin and also withholding the data on the health risks of its best-selling diabetes drug, Avandia. For seven years Glaxo failed to report data showing drug Avandia increased the risk of heart attack by as much as 40 per cent. And the company claimed Wellbutrin was beneficial for weight loss and treating sexual dysfunction. In the case of Paxil, GlaxoSmithKline promoted the drug for use by children and teenagers, despite the US Food and Drug Administration not approving it for patients under 18. In fact, a clinical trial had found that the drug made adolescents more likely to attempt suicide. Whistleblowers said that the company gave doctors lavish trips and spa treatments in order to persuade them to prescribe the drug for uses not approved of through testing - what are known as off-label prescriptions. Glaxo also hired a company to write a medical journal article downplaying the risks. The US deputy attorney general called the settlement historic, saying it sent a clear warning to any company that chooses to break the law.

"They are doing the calculation ... and it comes out in their favour that you might as well take the risk here. The basic economics are fairly straight forward, we know that these drugs could be produced, with few exceptions, very cheaply .... There is an enormous incentive for them to lie, cheat, steal, whatever, try and push these drugs." - Dean Baker, co-director of the Center for Economic and Policy Research

But there have been some other big drug companies that have been caught acting illegally. In January 2009, the American pharmaceutical giant Eli Lilly agreed to pay more than $1.4bn for illegally promoting the drug Zyprexa. Prior to Glaxo, the previous record-setting case involved Pfizer Inc., which in September 2009 paid $2.3bn for improperly marketing 13 different drugs, including Viagra. In April 2012, Johnson & Johnson and a subsidiary were ordered to pay more than $1.2bn for minimising or concealing dangers associated with the antipsychotic drug Risperdal. And in May, Abbott Laboratories settled for $1.6bn in regard to false marketing of the antiepileptic and mood-stabilising drug Depakote. So, with the profits over more than a decade of illegal selling far larger than the amount Glaxo agreed to pay, will pharmaceutical companies really be put off? And do drug companies put profits before patients in the US?

Inside Story Americas, with presenter Shihab Rattansi, discusses with guests: Dr Sidney Wolfe, the co-founder and director of the Health Research Group; Dean Baker, the co-director of the Center for Economic and Policy Research; and Wendell Potter, an author and corporate health analyst. Inside Story Americas also invited GlaxoSmithKline to take part in this discussion, but the company declined.

"Many observers, including myself believe that as long as it is just money that's involved, it's not a sufficient deterrent. The drugs that were involved in this settlement earned tens of billions of dollars over a long period of time. So the settlement was less than a single year's sales of just one of those drugs, Avandia, the drug that I was involved in exposing the risks of. And so it's just money, and it's just part of doing business. Many people, particularly on Capitol Hill, believe that it's time to begin holding these executives accountable for actual jail time when they commit this kind of criminal fraud." -- Dr. Steven Nissen, a cardiologist at the Cleveland Clinic who in 2007 published findings that showed the health risks of the drug Avandia

______________________________________________________________________________

THE GLAXOSMITHKLINE FRAUD CASE:

• GlaxoSmithKline promoted antidepressants for unapproved uses

• Glaxo failed to disclose diabetes drug increased heart attack risk

• The company pleaded guilty and agreed to pay $3bn fines - the largest settlement ever by a drug company

• The fine includes $1bn criminal fine and $2bn for the civil settlement

• The $2bn civil settlement involved asthma drug Advair and claims that Glaxo overcharged the US government

• The criminal charges involved Paxil Wellbutrin and Avandia

• The antidepressant, Paxil, brought in $11.6bn in sales for Glaxo

• Sales of the diabetes drug, Avandia, brought in $10.4bn

• Sales of Wellbutrin, another antidepressant, brought in $5.9bn for Glaxo

• [total raked in: $27.9 billion against a fine of a mere $3 billion-dfo’s addition!]

How health care law survived, and what's next

By Richard Wolf, Brad Heath and Chuck Raasch, USA TODAY

WASHINGTON — President Obama 's landmark health care law remains standing today because of one Supreme Court justice's unlikely vote and for one ironic reason with huge political implications: Its key provision is a tax.

By Saul Loeb, AFP/Getty Images

Supporters of President Obama's health care legislation celebrate outside the Supreme Court in Washington, D.C.

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By Saul Loeb, AFP/Getty Images

Supporters of President Obama's health care legislation celebrate outside the Supreme Court in Washington, D.C.

In a splintered 5-4 decision with momentous consequences for the nation's health care system, balance of government power and politics, the high court handed Obama a stunning election-year victory. Chief Justice John Roberts and the court's four liberal-leaning justices held that the law's insurance mandate represents a tax on people who do not get health coverage — a tax the Constitution gives Congress the power to impose.

Ever since three historic days of oral arguments in March revealed broad skepticism among the court's conservative justices that requiring people to buy health insurance was constitutional, the mandate looked to be in jeopardy. Shortly after 10 a.m. on Thursday inside a hushed courtroom, however, Roberts gave the mandate, the law — perhaps even the president — a new lease on life.

INTERACTIVE: Health care by the numbers

"The Affordable Care Act 's requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax," Roberts wrote. "Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness."

Using that logic, the chief justice saved what both sides call "Obamacare" — the most sweeping overhaul of the U.S. health care system since the creation of Medicare and Medicaid in 1965, one that presidents from Richard Nixon to Bill Clinton tried and failed to achieve.

Now it's full steam ahead for the law, which already has provided limited benefits for some seniors, young adults and people with pre-existing conditions. By January 2014, unless Congress intervenes, millions of Americans will have to obtain insurance or pay penalties, insurers will be banned from denying coverage based on pre-existing conditions, states will have to decide whether to expand Medicaid and create new insurance exchanges where people can shop for affordable coverage, and many small businesses will have to cover workers with the help of tax credits or pay penalties.

Videos from the Supreme Court ruling on the health care law.

With a 59-page stroke of his pen, Roberts — a George W. Bush nominee whose 2005 confirmation as chief justice was opposed by one Sen. Barack Obama — sided with the court's four liberal justices in upholding the most consequential and controversial piece of legislation enacted during Obama's presidency.

The law now "survives largely unscathed," said Justice Ruth Bader Ginsburg, who like most justices on the court was unhappy about some part of the decision. Four justices, in fact — just one short of a majority — would have struck down the entire law, jeopardizing provisions that are already benefiting young adults, seniors and others.

"The Affordable Care Act now must operate as the court has revised it, not as Congress designed it," lamented Justice Anthony Kennedy on behalf of himself and Justices Antonin Scalia, Clarence Thomas and Samuel Alito . He called it "a vast judicial overreaching."

Overreaching or not, it's certainly a rewrite. The majority's decision means that Medicaid will be expanded in many states, but with a ban on federal reprisals for states that choose otherwise. And it means most Americans must get health insurance — with some exceptions, based largely on income — but not because Congress has authority over interstate commerce, the government's main argument. The four liberal justices believed that, but Roberts said the Constitution doesn't give Congress power "to regulate what we do not do" or "to regulate the individual from cradle to grave."

How the justices voted

It was hard to tell Thursday which justices were on which side of the decisions on federal health care law without a score card. A look at how they voted:

Uphold the law under the Constitution’s taxing clause, 5-4

Yes: Chief Justice John Roberts, Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, Elena Kagan

No: Justices Anthony Kennedy, Antonin Scalia, Clarence Thomas, Samuel Alito

Strike down the law under the Constitution's commerce clause, 5-4

Yes: Roberts, Kennedy, Scalia, Thomas, Alito

No: Ginsburg, Breyer, Sotomayor, Kagan

Strike down federal reprisals on states over Medicaid expansion, 7-2

Yes: Roberts, Breyer, Kagan, Kennedy, Scalia, Thomas, Alito

No: Ginsburg, Sotomayor

Claim jurisdiction over the law despite Anti-Injunction Act, 9-0

Yes: All nine justices

Rather, Roberts lent his vote because, he said, Obama and his Democratic allies had enacted a new tax — one that the Congressional Budget Office has projected will raise $4 billion annually by 2017.

Never mind that Democrats avoided the word "tax" in writing the law, choosing to call the levy for failing to buy health insurance a "penalty" or "shared responsibility payment." And never mind that Obama ran for president in 2008 and is doing so again on the promise that he will not tax anyone with household income below $250,000.

"I think it's very clear that Chief Justice Roberts wanted to avoid the outcome of taking the whole law down," said former Florida attorney general Bill McCollum, who filed the first lawsuit on the day the law was enacted in 2010. He called the ruling "very contrived."

Obama was able to stand in the East Room of the White House shortly after noon and claim a sorely needed victory because the law, in 2016, will tax those who decline to buy insurance up to $2,085 per family or 2.5% of income, whichever is larger.

The president, who seemed to have one eye on November and the other on history, tried to defuse the political backlash that began minutes after the court majority's opinion was released.

"The highest court in the land has now spoken," Obama said. "We will continue to implement this law. And we'll work together to improve on it where we can. But what we won't do — what the country can't afford to do — is refight the political battles of two years ago."

That wasn't the way Republican challenger Mitt Romney was reading things just a few blocks from the court's marble chambers.

"Our mission is clear," the presumptive GOP presidential nominee said. "If we want to get rid of Obamacare, we're going to have to replace President Obama."

Limits on federal power

The decision shows once again that the high court is willing to weigh in on legislative issues and influence the political balance of power. Since its 5-4 decision affirming Bush's election as president over Al Gore in December 2000, the justices have tackled issues ranging from affirmative action to campaign finance with equal aplomb.

This case, however, stood out from the crowd — and the ruling was intoned before a crowd that included several members of Congress, spouses of justices and at least one former justice: 92-year-old John Paul Stevens .

"There's no modern precedent for the gravity of (the decision)," said Neal Katyal, who represented the Obama administration in court as acting solicitor general in 2010-11. "You'd have to look all the way back to the New Deal or Brown v. Board of Education in 1954 to find something similar, of comparable dimension."

The legal fallout from the decision and various dissenting and concurring opinions looms large, particularly because the ruling embraces potentially significant limits on the federal government's authority to regulate commerce and spend money.

Roberts joined the court's conservatives in finding that Congress' power to regulate commerce does not give lawmakers the authority to force people to buy insurance. And he joined six other justices in saying that Congress cannot use its checkbook to coerce states into going along with policies they don't like — the first time in more than a generation that the court had put any real limits on the federal government's power to spend money.

Those findings mean nothing for the future of the health care law, because its status as a tax made it constitutional. But lawyers on both sides of the case said they could change the contours of the federal government's authority for years to come.

Although lawyers who challenged the law said they were disappointed that they had not persuaded Roberts — and, by extension, the court — to find that the individual mandate was unconstitutional, many said they were encouraged by his reasoning. As recently as two years ago, many constitutional scholars had dismissed the constitutional objections to the health law as baseless; on Thursday, most of those objections commanded a majority of the justices.

"All of us, of course, are disappointed with the ultimate outcome today, but we cannot lose sight of what we've accomplished," said Pam Bondi , the attorney general in Florida, which led the 26-state challenge to the law. "We learned that there are enforceable limits on Congress' power under the commerce clause. We've always said that is very important."

Similarly, Paul Clement , the former Bush administration solicitor general who argued most of the challenge before the justices, said that "it would be hard to think of a case where more of the arguments we made were accepted by the court" in a lost cause. He said the court's 7-2 tilt for limiting the penalties states could face for opting out of a Medicaid expansion was "really quite significant."

Still, not all of the challengers shared that view.

"You can look for silver linings in the cloud, but it's still a cloud," said George Mason University law professor Ilya Somin, who wrote a brief opposing the health law. He said the decision offers Congress a road map to enact similar laws by crafting them as taxes instead of mandates.

The ruling won't mark the end of court action over the law — far from it. Already, religious groups challenging the law's inclusion of contraception among the services to be covered by insurers are vowing more lawsuits.

"People would be mistaken to think that upholding the constitutionality would mark the end of the litigation," said Sheila Burke, a Harvard University health professor who was former Senate Republican leader Bob Dole 's top aide.

States face difficult decisions

The decision is likely to grease the current state of gridlock in many states, particularly those controlled by Democratic proponents of the law.

"It provides a substantial push to accelerate implementation, at the state legislature level in particular," said Larry Levitt, a senior vice president at theKaiser Family Foundation , a health research organization.

The decision also gives states more wiggle room in how to implement the law by making Medicaid expansion voluntary. The court struck down a portion of the law that would have forced states to accept a major expansion of Medicaid to all Americans earning up to $30,733 for a family of four or risk losing all federal funds under the program.

Roberts called that part of the Affordable Care Act "a gun to the head" by threatening as much as 10% of states' budgets. But states also will be required to comply with the rest of the act, such as by setting up insurance exchanges; only 15 states have done so already.

A uniform pace of action in the states is unlikely. Some governors hailed the decision as an affirmation of changes they have made already. Others called it a misguided ruling and said they would comply only begrudgingly.

Michigan Gov. Rick Snyder , a Republican, said his state would create a health insurance exchange. But the law, he said, "misses the point on the most important reforms needed in our health care system": cost controls.

Clement, the states' lawyer, acknowledged that their victory in court on the Medicaid language might prove Pyrrhic. Because new federal Medicaid funds will "come from the federal tax revenues that are imposed on all 50 states," Clement said, "there's still going to be real practical incentive for them to take the new money."

Not all of them will, predicted David Merritt , a senior adviser at Leavitt Partners, a health consultancy headed by former Republican secretary of health and human services Michael Leavitt . While the federal government initially will pay for the Medicaid expansion, cash-strapped states eventually will have to kick in at least 10% of the cost.

"Long term, they're going to be on the hook," Merritt said. "They're not going to be on the hook for a lot, but any amount is huge when you're broke."

Next stop: Voting booths

In the wake of the decision, Republicans had one message: November has never been more important. Romney, GOP officials and strategists said the ruling only raised the stakes for the 2012 election and would provide the fuel needed to get their most enthusiastic supporters to the polls.

"What the court did not do on its last day in session I will do on my first day if elected president of the United States," Romney said in a four-minute statement at a building across from the U.S. Capitol . "I will act to repeal Obamacare."

His effort received an immediate fundraising boost. By late afternoon, spokeswoman Andrea Saul tweeted that the campaign had raised $2.5 million in the wake of the ruling. And in those hours, the National Republican Congressional Committee — the party's House campaign arm — issued a series of e-mails that said the health care law would become permanent unless many Democratic incumbents are "replaced" in the fall.

Republican strategists said the Supreme Court decision made sure the GOP's conservative base would be out in full force.

The conservative group Americans for Prosperity announced it would launch a $9 million television advertising blitz Friday in 16 states to highlight opposition to the law.

Within an hour of the decision, Majority Leader Eric Cantor, R-Va., said the House would vote on a repeal of the law July 11. Nothing new there: The House has voted 30 times already to repeal parts or all of the law, but the measures have gone nowhere in the Democratic-controlled Senate.

Senate Republican Leader Mitch McConnell said GOP efforts to push a repeal are just beginning: "There is only one way to truly fix Obamacare, only one way, and that is a full repeal."

Republicans' best chance to make changes in the law, however, lies in the budget process, because they can avoid the Senate's 60-vote threshold. That means everything with a dollar sign — Medicaid expansions, subsidies for the poor, Medicare savings, new taxes — can be attacked now and in future years.

Douglas Holtz-Eakin , an economist and former senior policy adviser for Sen. John McCain's 2008 presidential campaign, said Republicans' message should be "framed very carefully" in terms of the law's impact on jobs and the economy.

"If conservatives are to realize their hopes of repealing the Affordable Care Act, the electoral process is their only remaining recourse," said William Galston , aBrookings Institution analyst and an adviser in former president Bill Clinton's administration. "Once the dust settles, expect them to mobilize and work even harder for unified government under Republican control. And expect Mitt Romney to wave the bloody shirt all the more vigorously."

Indeed, in a presidential election year, the court's ruling will only be amplified between now and November.

"The Supreme Court has spoken," said Randy Barnett , the Georgetown University law professor who helped represent businesses challenging the health care law. "Now, the people will decide."

Contributing: Jackie Kucinich, Aamer Madhani and Kelly Kennedy

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TEXT-S&P: 'BB' category sovereigns in South and Central america

Mon Jun 11, 2012 9:58pm IST

June 11 - Six sovereigns in Latin America have 'BB' category ratings, which

on the surface might imply that the countries are similar in many respects--from

their economies to their political systems--said Standard & Poor's Ratings

Services in a report titled "A Comparative Look At 'BB' Category Sovereigns In

South And Central America".

The reality, it turns out, is that even though the six share some

characteristics, there are also many differences between them.

"Our report highlights the complex interplay of factors that can land

distinctly different sovereigns in the same rating category and illustrates

how the vicissitudes of the global economy can support or constrain a

sovereign's rating," said Standard & Poor's credit analyst Olga Kalinina.

The three South American countries--Bolivia, Paraguay, and Suriname--have

benefited greatly from high world prices for their primary commodities:

natural gas, soya, and gold. Combined with rising industrial production, this

has boosted their economies, and, in the case of Bolivia and Suriname,

government revenues as well.

By contrast, the three less commodity-rich sovereigns in Central America were

hurt more by the global recession and have recovered from it slowly. Costa

Rica's, El Salvador's, and Guatemala's public finances, which were already

weak, have worsened as their budget deficits have widened and their government

debts climbed. Nevertheless, these three countries have maintained relatively

stronger public institutions and continued pursuing predictable and

market-oriented policies. This has partially offset their economic

vulnerabilities.

Bottom line, the two sets of countries seem to be moving along opposite

trajectories. On balance, creditworthiness is improving in Bolivia, Paraguay,

and Suriname--we've upgraded all three to the 'BB' category from 'B' in the

past two years, as their governments have proven able to cash in on the

favorable commodities cycle.

The Central American sovereigns, by contrast, are facing rising credit risks.

We have a negative outlook on our 'BB' rating on Guatemala, and we have

downgraded El Salvador by two rating notches over the past three years. These

countries are trying to stave off rising credit risks.

The report is available to subscribers of RatingsDirect on the Global Credit

Portal at www.globalcreditportal.com. If you are not a RatingsDirect

subscriber, you may purchase a copy of the report by calling (1) 212-438-7280

or sending an e-mail to research_request@standardandpoors.com. Ratings

information can also be found on Standard & Poor's public Web site by using

the Ratings search box located in the left column at www.standardandpoors.com.

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Caricom and Cariforum: Two better than one?

A recent article by the Jamaica Observer raises the question of whether should there be two Secretariats for the ACP group of states in the Caribbean region, namely Caricom and CARIFORUM, the latter comprising Caricom and the Dominican Republic . “The dilemma is that there are now two secretariats, namely the Caricom Secretariat, an inefficient underfunded bureaucracy, and a CARIFORUM Secretariat which is really a fictitious institution in which the number two spot is given to a national of the Dominican Republic […] The same person serves as Secretary General of both the Caricom and CARIFORUM secretariats […] should there be one or two secretariats and, if there are two secretariats, should there be one or two secretaries general?”

While Caricom, which represents 15 Caribbean countries, is quite far along in the regional integration process and has the aim of creating an "economic union”, CARIFORUM is a group whose members are signatories to the CARIFORUM-EU Economic Partnership Agreement.

The main concerns on this issue are raised by the Dominican Republic, as “[it] has no input in the selection of the secretary general of CARIFORUM […] and has no say in the superintending of the EPA Implementation Unit”.

Source: Jamaica Observer

CARICOM Environment Ministers Meet to Tackle RIO+20 Agenda

CARICOM Secretariat, Guyana - April 19, 2012 - The 39th Special meeting of the Council for Trade and Economic Development (COTED), slated for Georgetown, Guyana on Friday, will provide the last ministerial platform for environment and sustainable development ministers to frame a regional strategic approach for the upcoming Rio+20 United Nations Conference on Sustainable Development.

Set for the Rio de Janeiro on 20-22 June, the Conference on Sustainable development hopes to “secure renewed political commitment for sustainable development, assess the progress to date and the remaining gaps in the implementation of the outcomes of the major summits on sustainable development, and address new and emerging challenges.” The Conference will focus on two themes: a green economy in the context of sustainable development and poverty eradication; and the institutional framework for sustainable development.

Sustainable development has been the overarching goal of the international community since the 1992 United Nations Conference on Environment and Development in Rio de Janeiro. It emphasizes a holistic, equitable and far-sighted approach to decision-making at all levels and “rests on integration and a balanced consideration of social, economic and environmental goals and objectives in both public and private decision-making.” It also recognizes the special development challenges and concerns of small vulnerable developing states such as those in the Caribbean.

The Rio Conference has the potential to be transforming for its member states, but that depends largely on the political commitment of both developed and developing countries. Regrettably, such commitment may waver in the face of global economic and geopolitical realities: Developed, rapidly developing and developing nations are now grappling with huge fiscal challenges and massive debt levels. Political elections in seven EU countries, including France with the second largest economy in Europe, will also usher in new political thinking that will definitely sway the dialogue on new avenues or envelopes of financing. Such dialogue may not necessarily be in favour of Small Island Developing States (SIDS) such as those which comprise CARICOM. Arriving at any consensus on new envelopes of financing will be a sticking point.

It is against this background that the Special COTED on environment and sustainable development will have to shape its agenda for its Georgetown meeting on Friday. CARICOM ministers will need to establish and agree on clear regional priorities as well as a concrete approach on how they intend to engage their counterparts at the Rio+ 20 Conference.

The issue of our approach to developing the green economy has to be at the top of the agenda. The concept of green economy focuses primarily on the nexus between the environment, the economy and the social realities facing the Caribbean region. The underlying challenge for CARICOM is to determine how its focus on a green economy, in the context of sustainable development and poverty eradication, can foster regional development and a better quality of life for its peoples. In this regard, the 39th COTED will need to discuss and adopt an approach to developing a green economy and be ready to articulate what it considers the minimum architecture for the green economy framework to guide us in the next decade. For it to do so however, all Member States have to be in the choir, singing from the same hymn sheet regarding a common understanding and approach to developing a green economy. This must be done before the Rio de Janeiro Conference where a cleaner definition will be established.

In preparing for Rio+20, CARICOM Environment Ministers will also need to address the structural issues that impact its poverty alleviation and eradication efforts within the Caribbean Region. The Region needs appropriate financing mechanisms, policies, regulations and governance framework to be able to implement any sustainable development strategy that it develops. We also need to address the challenging issue of escalating energy and labour costs as well as the cost of raw materials. In the absence of new financing mechanisms, as part of the Rio strategy, the COTED may need to look at how it can re-shape existing funds disbursement and present a plan of action to the conference.

Institutional reform of the global architecture for sustainable development is also a burning issue, as countries within the prevailing economic climate grapple to decide which or what form of intergovernmental system is best suited and equipped to take on sustainable development and to address the implementation deficit which has posed a challenge for CARICOM over the years. This deficit has become even more pronounced in light of the complex and defused issues surrounding sustainable development. The COTED will need to examine these carefully.

The anticipated outcome from the 39th Special COTED therefore cannot be any “urging,” it must be a decision for a clear regional agenda for sustainable development. If we fail to set our own agenda, then someone else will do so through their own country development assistance programs. The region is only too familiar with the notion that “one size doesn’t fit all.”

For this COTED therefore, it cannot be business as usual; it must spawn a foolproof strategy on how CARICOM is going to the Rio+20 to help shape the future we want for our children and their children.

Trinidad and Tobago's Newsday

Caricom going...going...almost gone

Thursday, April 19 2012

RECENTLY, Caricom Secretary General, Irwin La Rocque stated that Caricom was “overly ambitious in its implementation of targets”. The Chamber views this statement with some concern – particularly as it comes from a regional official who is at the helm of the machinery that is responsible for overseeing the execution and implementation of regional plans.

At this critical juncture, with a new Secretary General at the helm, we anticipate that strong, clear and decisive leadership will be demonstrated in order to resuscitate the Caricom initiative. Our country leaders cannot continue to only pay lip service to integration.

With 22 years passed since the Declaration of Grand Anse, it seems that the growing array of stalled regional integration initiatives is due moreso to a problem of implementation, rather than to overly ambitious deadlines.

If Caricom hopes to be more results-oriented, it needs to address what former Caricom chairman, (Grenada Prime Minister) Tillman Thomas called: the “Implementation Deficit”. Key to perpetuating this deficit, is the lack of legal arrangements to bind member states to comply with their commitments within a particular time frame that will make the 15-Member grouping more effective.

For instance, some member states who still have an environmental levy, have committed to removing this levy as it goes against the Revised Treaty of Chaguaramas (RTC), and for the past ten years have been “strongly urged” by the Caricom Secretariat to remove the levy. To date, this has not happened. However, the secretariat can do little more than “urge” its members to comply – and so the levy remains, threatening development of intra-regional trade and undermining the significant promise of the treaty.

Implementation is also stymied by an apparent lack of transparency, citizen participation and stakeholder engagement in decision-making. In recent times, the region has attempted to alter the treaty provisions relating to the suspension of the Common External Tariff – but at no point was there an attempt to consult the regional private sector on this decision. The top-down construct of Caricom leads to technocrats and officials taking too long to make decisions, while many region-changing discussions take place behind closed doors. While we understand that some discussions must be held in private, as Ken Gordon stated recently, “...we must adjust the way we communicate”. The Caricom Secretariat must ensure that all stakeholders are part of the decision-making process, as this is vital to the integration process. A third flaw with the Caricom implementation framework is that it is meeting-centric, but with no systematic approach to organising. However, these meetings often conclude without decisions, since national officials are given little time beforehand to consult with stakeholders and prepare proper national policies. Clearly, there is growing frustration within the Caribbean Community. We tend to agree with former Caricom chairman, Mr. Thomas, that there is a “loss of momentum with regard to the regional implementation agenda”. This seems to be a recurring theme year after year – one which is certainly not being addressed in a timely manner. Caricom is too important an initiative to fail, and the Chamber calls on its current secretariat to take more decisive action to push forward the Caricom regional agenda. We need a secretariat with a new ethos that is decision-oriented. If we continue down our current path, Caricom and all its promised ambitions are doomed to remain unfilled, and wither away.

Breaking News

The staff at Royal Bank in Suriname are apparently on strike.

This report came from someone who just came from the bank after standing there for one hour. He was told the staff were not providing service.

Three years after acquisition by Royal Bank of Canada, RBTT branches in Suriname were scheduled to be rebranded in July, 2011. The RBC Royal Bank name and logo was supposed to have replaced the RBTT. In Suriname, however, this was not done until Februrary of this year. No reason was given for the delay

Royal Bank of Canada acquired the operations of RBTT Financial Group in 2008 for US$2.2 billion in one of the largest deals to be recorded in the Caribbean. The regional holdings are now managed out of Port-of-Spain under RBC’s Caribbean division headed by Suresh Sookoo, a carry-over from RBTT. The move is part of a wider plan to integrate the businesses onto a common platform to take advantage of RBC global and regional strengths, as it seeks to become the undisputed financial services leader in Caribbean markets in which it has a presence.

RBTT was incorporated in Suriname in November 2000, as a subsidiary of RBTT Financial Holdings Limited; in December 2000 the bank acquired the assets of ABN AMRO NV, headquartered in The Netherlands.

Now, following the acquisition of RBTT by RBC, RBTT operations across the Caribbean — from Jamaica to the Eastern Caribbean and Barbados, to Curacao and Suriname — will all adopt the new RBC brand in the coming months.

Royal Bank of Canada is among the 20 largest banks globally, and top in its home country, with market capitalisation of US$86 billion as at May 26, 2011.

RBC Caribbean, with combined assets of TT$74 billion at financial year ended October 2010, now has a presence in 19 countries in the region, with 125 branches and close to 7,000 employees serving more than 1.6 million clients.