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The undeserving one percent?

By Raghuram Rajan CHICAGO: It is amazing how the “one percent” epithet, a reference to the top 1 percent of earners, has caught on in the United States and elsewhere in the developed world. In the United States, this 1 percent includes all those with a 2006 household income of at least $386,000. In the popular …


Washington and the Art of the Possible

By Raghuram Rajan CHICAGO: These days, the United States media are full of ordinary Americans venting their rage at the incompetence and immaturity of their politicians. Even though the US government’s debt limit was raised in the nick of time, the process was — and remains — fraught with risk. Why, the public asks, can’t politicians …


Lagarde’s challenges

By Raghuram Rajan CHICAGO: Now that the dust has settled over the selection of the International Monetary Fund’s managing director, the IMF can return to its core business of managing crises. Christine Lagarde, a competent and well-regarded technocrat, will have her hands full with three important challenges. The first, and probably easiest, challenge is to restore …


Money magic

By Raghuram Rajan CHICAGO: Economic growth in the United States seems to be slowing again. This might reflect temporary factors, like the Japanese tsunami, which disrupted supply chains and caused some factories to suspend operations. Also, high oil prices have taken a toll on disposable income, impeding growth in consumption demand. This has led to a …


The blackboard monopolists

By Raghuram Rajan and Brian Barry CHICAGO: US President Barack Obama, like many Western leaders nowadays, made improving education one of his main promises to voters during his election campaign. But other domestic issues — health-care reform, budget battles, and high unemployment — have understandably loomed larger. And the United States is not alone: education reform …


Three paths for indebted democracies

By Raghuram Rajan CHICAGO: Democratic governments are not incentivized to take decisions that have short-term costs but produce long-term gains, the typical pattern for any investment. Indeed, in order to make such investments, democracies require either brave leadership or an electorate that understands the costs of postponing hard choices. Brave leadership is rare. So, too, is …


Will next time be different?

By Raghuram Rajan CHICAGO: Carmen Reinhart and Kenneth Rogoff, in their excellent, eponymous book on debt crises, argue that the most dangerous words in any language are “This time is different.” Perhaps the next most dangerous words are “Next time will be different.” These words are often uttered when politicians and central banks want to bail …


Demand or supply?

By  Raghuram Rajan CHICAGO: Economics is all about demand and supply. Typically, the two are equal, and, if not, powerful forces push them towards each other. But, with high and persistent levels of unemployment in the United States, there is a real question about the nature of the problem: is aggregate demand too low, or are …


Doing poorly by doing good

By  Raghuram Rajan KIEL: The new catchphrase in business seems to be “do well by doing good.” In other words, undertaking socially responsible activities boosts profits. For example, Pepsi bolsters its bottom line by shifting to more nutritious, healthier food. Yet, in much of the world, doing well still implies that you must be up to …


The Big Blink

By Raghuram Rajan CHICAGO: World growth is likely to remain subdued over the next few years, with industrial countries struggling to repair household and government balance sheets, and emerging markets weaning themselves off of industrial-country demand. As this clean-up from the Great Recession continues, one thing is clear: the source of global demand in the future …


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