Search

Begin New Search Topic Reform Journal The Cato Journal

1. The 1948 German Currency and Economic Reform: Lessons for European Monetary Policy

Author:
Gunther Schnabl
Publication Date:
10-2019
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Twenty years after the introduction of the euro, the European Monetary Union (EMU) is at its crossroads. Following the outbreak of the European financial and debt crisis in 2008, the European Central Bank (ECB) took comprehensive measures to stabilize the common currency. Interest rates were cut to and below zero and several asset purchase programs have inflated the ECB balance sheet (Riet 2018). Within the European System of Central Banks, large imbalances have emerged via the TARGET2 payments system, which can be seen as quasi-unconditional credit in favor of the southern euro area countries (Sinn 2018). While the ECB terminated its asset purchase program at the end of 2018 and is expected to increase interest rates in late 2019, financial instability is reemerging. Growing uncertainty about the fiscal discipline of the Italian government has triggered a significant increase in risk premiums on Italian government bonds. In particular, in Italy and Greece, but also in Germany, bad loans and assets remain stuck in the banking systems. In the face of the upcoming downswing, European banks do not seem ready for new financial turmoil. In this fragile environment, the future path of the EMU is uncertain. To enhance the stability of the EMU, a group of German and French economists has called for a common euro area budget, for a strengthening of the European Stability Mechanism as lender of last resort for euro area countries and banks, as well as for a common European deposit insurance scheme (Bénassy-Quéré et al. 2018). In response, 154 German economists have warned against transforming the EMU into what they call a “liablity union,” which systematically undermines market principles and wealth (Mayer et al. 2018). In 2018, a French-German initative to introduce a common euro area budget faced strong opposition from a group of northern European countries as well as from Italy, symbolizing the political deadlock concerning reforms of the EMU. This article explains the different views on the institutional setting of monetary policymaking in Europe from a historical perspective. It begins with a description of the economic and monetary order in postwar Germany. It then discusses the positive implications for the European integration process and the economic consequences of the transformation of postwar German monetary order. The final section offers some economic policy recommendations.
Topic:
Economics, History, Monetary Policy, Reform, European Union, Banks, and Currency
Political Geography:
Europe and Germany

2. Assessing China’s Financial Reform: Changing Roles of the Repressive Financial Policies

Author:
Yiping Huang and Tingting Ge
Publication Date:
01-2019
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
When China began economic reform in 1978, it had only one financial institution, the People’s Bank of China (PBOC), which, at that time, served as both the central bank and a commercial bank and accounted for 93 percent of the country’s total financial assets. This was primarily because, in a centrally planned economy, transfer of funds was arranged by the state and there was little demand for financial intermediation. Once economic reform started, the authorities moved very quickly to establish a very large number of financial institutions and to create various financial markets. Forty years later, China is already an important player in the global financial system, including in the banking sector, direct investment, and bond and equity markets. However, government intervention in the financial system remains widespread and serious. The PBOC still guides commercial banks’ setting of deposit and lending rates through “window guidance,” although the final restriction on deposit rates was removed in 2015. Industry and other policies still play important roles influencing allocation of financial resources by banks and capital markets. The PBOC intervenes in the foreign exchange markets from time to time, through directly buying or selling foreign exchanges, setting the central parity, and determining the daily trading band. The regulators tightly manage cross-border capital flows, and the state still controls majority shares of most large financial institutions.
Topic:
Economics, Foreign Exchange, Reform, Financial Markets, and Banks
Political Geography:
China and Asia

3. China's Political-Economic Institutions and Development

Author:
Chenggang Xu
Publication Date:
10-2015
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
After more than three decades of economic reform, China has transformed from being one of the poorest economies in the world to being the second-largest economy measured by nominal exchange rates, or the largest economy measured by purchasing power. As such, it is important to elucidate the determinants of China’s future development. This article will focus on China’s institutions. I argue that although the size of China’s economy is extremely important in terms of its impact on the global economy, it is misleading to ignore political and economic institutions. Indeed, forecasts based on extrapolating past trends could be erroneous (see Pritchett and Summers 2014). China was the largest economy in the world before the end of the 19th century but then lost ground to Western nations that established the rule of law and free trade. To understand China’s past and future development, one has to examine its institutions.
Topic:
Economics, Reform, and Global Political Economy
Political Geography:
China and Asia

4. Canada's Fiscal Reforms

Author:
Chris Edwards
Publication Date:
04-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Two decades ago Canada suffered a deep recession and teetered on the brink of a debt crisis caused by rising government spending. The Wall Street Journal said that growing debt was making Canada an "honorary member of the third world" with the "northern peso" as its currency. However, Canada reversed course and cut government spending, balanced its budget, and enacted pro-market reforms. It reduced trade barriers, privatized businesses, and slashed its corporate tax rate. The economy boomed, unemployment plunged, and the formerly weak Canadian dollar soared to reach parity with the U.S. dollar. The Canadian reforms were hugely successful. Today, the United States is in as bad or worse fiscal shape than Canada was in. U.S. leaders need to make major fiscal and economic reforms, and they can learn many lessons from Canadian efforts to restrain government and create a more competitive economy.
Topic:
Reform
Political Geography:
United States and Canada

5. Curbing Campaign Cash: Henry Ford, Truman Newberry, and the Politics of Progressive Reform

Author:
John Samples
Publication Date:
04-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
No one has yet written a detailed history of campaign finance regulation, even limited to the United States. In 1988, Robert E. Mutch published Campaigns, Congress, and Courts: The Making of Federal Campaign Finance Law. He then embarked on research seeking to fill out that story in the late 19th century. My own The Fallacy of Campaign Finance Reform combines public choice analysis with political theory in a way that historians might not recognize. Ray La Raja's excellent Small Change: Money, Political Parties, and Campaign Finance Reform Examines a larger historical tableau from a political science perspective. Paula Baker is apparently at work on a broader history of campaign finance and its regulation. This work began as a case study in that project and grew into a book. I look forward to the broader history, but I am happy to have this work.
Topic:
Reform
Political Geography:
Europe

6. Honest Money

Author:
Jerry L. Jordan
Publication Date:
09-2011
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article addresses some of the recent proposals for the conduct of monetary policies in the post-bubble environment. Advocacy of higher inflation targets is analyzed, and the challenge of maintaining monetary discipline in the face of massive fiscal deficits and mounting government debts is presented. Proposals for reforms of monetary arrangements must be based on consensus regarding the objectives of such reforms. The article concludes with some suggestions for near- and intermediate-term changes to present arrangements, as well as ideas for longer-term reforms.
Topic:
Government and Reform
Political Geography:
Canada

7. The Effects of Teachers Unions on American Education

Author:
Andrew J. Coulson
Publication Date:
02-2010
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Public school employee unions are politically partisan and polarizing institutions. Of the National Education Association's $30 million in federal campaign contributions since 1990, 93 percent has gone to Democrats or the Democratic Party. Of the $26 million in federal campaign contributions by the American Federation of Teachers, 99 percent has gone to Democrats or the Democratic Party (Center for Responsive Politics 2009). Perhaps not entirely coincidentally, conservatives and Republicans have often accused these unions of simultaneously raising the cost and lowering the quality of American public schools. Many advocates of charter schools, vouchers, and education tax credits have cited union political influence as the greatest impediment to their chosen reforms. But in academic circles, scholars have sometimes disagreed on the unions' impact on wages and educational productivity. The purpose of the present review is to summarize, and attempt to reconcile, the empirical research on the actual impact teachers unions have on American education.
Topic:
Education and Reform
Political Geography:
America