Category Archive: Sources

  1. Two People

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    UNRWA

    On Monday, despite US threats to withhold military aid over the humanitarian crisis in Gaza, the Israeli Knesset passed two bills that together would, within ninety days, ban the United Nations Relief and Works Agency for Palestinian Refugees (UNRWA) from operating within Israel’s sovereign territory and prevent state authorities from having any contact with the UN humanitarian aid organization. 

    Months before Oct.7, 2023, UNRWA already faced the possibility of closure due to donor fatigue and funding gaps. A September 2023 report from the International Crisis Group examines UNRWA’s budget crisis and warns of consequential instability in the region: 

    “Even if UNRWA is bailed out at the last moment, as has happened before and could indeed happen again in 2023, the perpetual state of crisis is untenable. It undermines staff morale, prompts salary strikes and reduces an international agency with a proud record of aiding Palestinian refugees to a miserable beggar for alms. It is also inefficient to run what amounts to a welfare state for three million people on a shoestring, as it militates against investing in infrastructure, digitisation, and other updating of outlay, eroding the quality of services. Worse, Palestinians fearing—rightly or not—an end to their status as refugees as a result of UNRWA’s collapse, or even a drastic cut in services, could foment new turmoil in the Israeli-occupied territories and destabilise Jordan and Lebanon.”

    +  See Jalal Al Husseini on how UNRWA has, since its establishment in 1949 as a temporary agency, navigated the conflicting expectations of donor states to emerge as a main stakeholder in the Palestinian refugee crisis. Link. And see the 2024 independent review of UNRWA’s adherence to the humanitarian principle of neutrality. Link.

    +  “The urgency to resolve underlying questions of justice and peace for Palestinians is somehow divorced from the challenge of providing for their human needs.” See Sari Hanafi on UNRWA’s faux-governance in Lebanon’s refugee camps. Link, link. And see UN Special Rapporteur Michael Fakhri’s report on the Palestinian people’s right to food sovereignty. Link.

    +  “The share of aid flow from private operators in Gaza has increased from 5 percent in April to about 60 percent in August and September, according to Israeli military data.” By Malaika Kanaaneh Tapper. Link. And see reporting on the new restrictions faced by Haaretz after the newspaper’s publisher, Amos Schocken, called for sanctions on Israel at a conference in London. Link, link, link.

    NEW RESEARCHERS

    Offshoring

    JIN LIU is a IES Postdoctoral Fellow at Princeton University. In a 2023 working paper, she examines the choices of multinational firms regarding offshoring, and finds that the impact of US trade policies adversely affect multinationals offshoring to China, with significant third-country effects.

    From the paper:

    “Multinational firms account for a large share of global production and innovation. These firms produce and innovate in various countries, choosing the optimal locations for each activity. Whether a firm should produce and innovate in the same host country or region turns on the size of their colocation benefits relative to the force separating them. This separating force arises from the fact that countries with low production costs are usually not countries with high returns to innovation (Arkolakis et al., 2018; Antras et al., 2017). In the data, the former force dominates, and firms tend to colocate production and innovation. As shown in Figure 1, large destinations of offshore production are often also large destinations of offshore innovation for U.S. firms. The colocation benefits are twofold. First, there is synergy between production and innovation as direct interactions reduce communication and coordination costs, spur new ideas, and increase innovation efficiencies. Second, having local production can reduce innovation costs.”

    +++

    +  “Ever since the disputed US Presidential election of 2000, when the Supreme Court halted an electoral recount in Florida and delivered victory to the Republican nominee George W. Bush, Florida has been on the trajectory toward one-party domination.” New on PW, Aida Hozić on Florida’s FIRE economy and the rise of the “anti-woke” American right. Link.

    +  “Home health care, long-term care, childcare, and even education are sectors characterized by huge labor costs, low wages, and poor working conditions. This manifests in unreliable and low-quality service.” Also new on PW, Andrew Elrod interviews Gabriel Winant on the care economy and the 2024 US elections. Link.

    +  “Recent shifts inflect globalization away from a growth promoting process in the global South towards a growth inhibiting process.” By Anastasia Nesvetailova and Herman Mark Schwartz. Link.

    +  Ben Casselman looks into whether wage increases have kept up with the cost of living post-pandemic, and constrasts cost of living to pre-pandemic trends. Link.

    +  Zachary Parolin, Rafael Pintro-Schmitt, Gøsta Esping-Andersen, and Peter Fallesen investigate differences in intergenerational poverty in the US, Australia, Denmark, Germany, and the UK using administrative- and survey-based panel datasets. Link.

    +  For Bloomberg’s Odd Lots podcast, Joe Weisenthal and Tracy Alloway talk to Rebecca Choong Wilkins and Gerard DiPippo about the “Made in China 2025” plan, and how China has emerged as a leader in EVs and solar despite an impedimental US. Link.

    +  “Whereas in 2014 roughly half of households bothered to respond to Britain’s labour force survey, these days the share is closer to one in five. This collapse has exposed figures to volatility and potential bias.” By Soumaya Keynes. Link.

    +  “The nature of ancient economies has been a topic of debate for decades. Disagreement and controversy have been encouraged by the scarcity of ancient economic data. Therefore, it was startling when Slotsky (1997) reported the existence of what appeared to be the longest extant series of ancient prices. This article analyzes these putative price series using time-series methods designed for the study of prices to divine their nature and reveal what they indicate about the economy of ancient Babylonia. The primary issue in the study of the ancient economy has been the extent of markets. Polanyi (1944) argued that ancient markets were limited in scope and peripheral to most economic activity. Others, following Rostovtzeff (1957), have argued that markets were important or even central to ancient economies. This debate has been known as the primitivist/modernist debate or as the Finley debate, following his famous Sather lectures (Finley, 1973). This debate takes place mostly in ancient history journals, but it also has appeared in economic history journals in articles by Silver (1983) and Greene (2000).” By Peter Temin. Link.

  2. Pools

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    THE ESPACIO LEJANO STATION

    In a recent report, Helsinki-based NATO-affiliated group Hybrid CoE details the commercialization of Beijing’s space sector. China’s rapid development of satellite technologies prioritizes what is known as the “military-civil fusion” model—the development of dual-use technology that can support both military and economic expansion.

    In a 2023 report, SAMANTHA LU, BRIANA BOLAND, and LILY MCELWEE investigate Chinese commercial and state-backed investments in Argentina’s space sector:

    “China currently has three deep space ground stations: two within China (in Kashgar and Jiamusi) and one abroad (in Neuquén Province, Argentina). The Espacio Lejano Station thus fills a temporal gap in China’s global coverage. Adding a ground station on the other side of the globe allows China to improve the frequency of communication with its satellites. Since ground stations most easily communicate with satellites when they pass overhead, the additional deep space ground station in Neuquén gives China more continued access to them. Notably, ground stations can also gather information from other satellites that pass overhead, not just Chinese ones. Thus, more deep space ground stations allow for faster and more frequent gathering of data, which can help China understand the behavior of other countries’ satellites. The Espacio Lejano Station reveals two observations about the People’s Liberation Army’s (PLA) position in the CCP Inc. ecosystem. The station agreement and its construction were facilitated by Chinese officials, state owned construction firms, and a PLA-linked organization (CLTC) that now runs the station. Through one lens, this could be seen as a case study of how the PLA rallied other parts of the CCP Inc. ecosystem to advance China’s military interests abroad. At the same time, throughout the process, these military ties featured as key reasons for pushback against the Espacio Lejano Station and setbacks to Chinese investments in Argentina’s space sector.”

    +  “Repaying Argentina’s debt to the IMF depends on continued exports to China, which is pressing Milei to confirm that his administration will maintain Chinese interest in Argentina.” In PW, Maria Haro Sly on how China functions as an investor, trading partner, and creditor to debt-strapped Argentina. Link. And see Rodolfo Chisleanschi on Chinese investments in Argentina’s conflictive hydroelectric projects. Link.

    +  “US firms already provide commercial Space Situational Awareness services from various international locations. Chinese start-ups may follow suit.” By Matthew P. Funaiole, Dana Kim, Brian Hart, and Joseph S. Bermudez. Link. And for more on the commercialization of space, see Matthew Weinzierl. Link.

    +  “The term ‘hybrid threats’ has proliferated in recent years throughout Euro-Atlantic security strategy documents in particular. The European Countering Hybrid Threats Centre of Excellence was launched in Helsinki in 2017.” By Sean Monaghan. Link. And see a RAND Corporation report on the PLA’s operational concepts regarding modern warfare. Link.

    NEW RESEARCHERS

    Bank Antitrust Regulations

    RENPING LI a PhD Candidate in Finance at Washington University in St. Louis. In a 2024 paper, he measures the effects of investment bank consolidation on municipal finance.

    From the abstract:

    “Antitrust regulations in banking have historically targeted deposit-taking and lending activities. Does the consolidation of investment banks have anti-competitive effects? Using the geographically fragmented municipal bond underwriting market as a natural laboratory and employing a stacked difference-in-differences specification, I find that the underwriting spread increases by 4.8 percent relative to the sample mean following within-market M&As. The effects double for larger M&As or in more concentrated markets and do not dissipate over time. These M&As do not yield efficiency gains that benefit issuers. The findings remain robust when examining M&As less likely to be subject to endogeneity concerns and are absent in placebo tests of cross-market M&As, commercial bank M&As, or withdrawn M&As. Further, census data confirm that investment bank consolidation raises financing costs and suggest a reduction in new issuance. My findings offer a novel perspective on bank antitrust regulations, which are currently in the spotlight for revision and modernization.”

    +++

    +  “The IMF succeeded in extracting obligations from Sri Lanka’s weak negotiating position before its own political process could reflect public opinion.” New on PW, Ahilan Kadirgamar, Shafiya Rafaithu, and Yathursha Ulakentheran on Anura Kumara Dissanayake’s historic victory in Sri Lanka. Link.

    +  “Prolonged economic downturns, civil unrest, and sharp increases in poverty are the norm among IMF borrowers. The IMF’s climate policy cannot be separated from this track record.” Also new on PW, Lara Merling on the IMF’s role in the global energy transition. Link.

    +  “The TN government’s actions appear to echo the management position, sidestepping any tripartite resolution so central to industrial relations in India.” Rohan Dominic Mathews on the Samsung India Workers’ Union 37-day strike in the Indian state of Tamil Nadu. Link. 

    +  “To lock middle-income countries out of global value chains with protectionist measures is to deny firms and industries in those countries the benefits of learning-by-doing spillovers.” The World Development Report 2024 on the limitations of investment-driven strategies for lower-middle-income countries. Link.

    +  Caroline Freund, Aaditya Mattoo, Alen Mulabdic, and Michele Ruta explore whether US trade policy interventions have significantly influenced the reshuffling of global supply chains or the US dependence on imports from China. Link. And for the Polycrisis, see Tim Sahay and Kate Mackenzie on increasing bilateral trade despite rising trade restrictions, and on the deepening bipartisan consensus on tariffs in Washington. Link, link.

    +  “While the monetary architecture’s capacity to provide emergency elasticity from firefighter balance sheets to combat financial instability has increased since 1999, the capacity to manage the financing cycle’s final contraction is underdeveloped.” By Andrei Guter-Sandu, Armin Haas, and Steffen Murau. Link.

    +  See the State Climate Policy Dashboard, an interactive state-by-state map of climate policy progress in the US. Link. And see The Big Green Machine’s interactive dashboard, tracking North American projects in wind, solar, battery, and electric vehicle industries since 2010. Link.

    +  “Something about mining between the twelfth and fifteenth centuries announced a change with feudal mining. The word argentifodana, or silver mine, appeared in the text of a grant by Emperor Frederick I in A.D. 1189: cum omnis argentifodina ad jura pertinent imperii et inter regalia nostra sit computata. Decades earlier, in A.D. 1158, the word argentifodina appeared in a decree pertaining to imperial rights to mines, cum omnis argentifodina ad iura pertineat imperii et inter regalia nostra. The word was included in a statement by Frederick II in A.D. 1193: argenti fodinae et omnes venae metallorum. A bishop in Volterra claimed jurisdiction over argentifodina latentibus & apertis in A.D. 1217. The words argentifodina, argentifodinae, argentifodinis, argentifodio, and argentifodii were written in mining law enacted by Premsyl Ottakar I King of Bohemia in A.D. 1227. Thereafter, the word appeared in the Chart of Jihlava or Iglau in A.D. 1247 and 1249 and Bohemia’s mining law of A.D. 1300.” By Jeannette Graulau. Link.

  3. Heat

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    NURSING HOMES

    Kamala Harris’s campaign proposal to create a home care benefit through Medicare would expand upon already existing Medicaid funding for in-home health aides. Home health care provision has grown dramatically in recent decades, a rise often connected to the poor quality and expense of nursing homes—whose strain is indexed by the rush of private equity into the sector—and the overall dysfunction of American elder care.  

    In a 2023 chapter, BRENDAN BALLOU examines private equity ownership in nursing homes, which has been associated with over 20,000 premature deaths over twelve years:

    “By selling ManorCare’s real estate, Carlyle was able to recover the money that it had put into the deal. In other words, with this sale alone, Carlyle had basically broken even and still owned an enormous nursing home chain. But selling ManorCare’s property put a terrible strain on the business. ManorCare needed real estate to operate, and with the sale, ManorCare was obligated to pay nearly half a billion dollars a year in rent to occupy the buildings it was already using. On top of this, under the terms of the deal, ManorCare was still responsible for paying the buildings’ insurance, upkeep, and property taxes. This meant that ManorCare now had all the obligations of owning its properties, with all the costs of renting them. Carlyle extracted money from ManorCare in other ways too, including a $61 million transaction fee for buying the business itself. It also took about $27 million over nine years in advisory fees: fees that ManorCare paid for the privilege of being owned by Carlyle. Like the sale-leaseback, these too are common tactics of the private equity industry writ large. Unsurprisingly, the business suffered. After the sale of its property, ManorCare made hundreds of layoffs. It instituted cost-cutting programs, and some of its nursing homes were unable to afford their rent. Health code violations rose 26 percent between 2013 and 2017, three times faster than at all other nursing homes.”

    +  “In 2019, 68 percent of nursing home profits were hidden by tunneling to related parties through inflated transfer prices.” By Ashvin Gandhi and Andrew Olenski. Link. And see Atul Gupta et al. for evidence linking private equity ownership in nursing homes to increasing mortality rates among patients, and how private equity acquisitions can align with the interests of investors and consumers. Link, link.

    +  “From its 2021 peak to the end of 2023, total healthcare-related private equity deal value fell 60.4 percent—reaching its lowest point since 2016.” By Jessica Hamlin. Link.

    +  For the definitive book on home care in the United States—one of the fastest growing occupations in the twenty-first century—see Caring for America: Home Health Workers in the Shadow of the Welfare State by Eileen Boris and Jennifer Klein. Link. 

    NEW RESEARCHERS

    Corporate Politics

    REILLY STEEL is a PhD candidate in political science at Princeton University
    . In a 2024 paper, he leverages new data on the campaign contributions of over 90,000 executives and directors at over 9,000 firms to trace the ideological fracturing of the US corporate elite.

    From the paper:

    “The possibility that corporate elite preferences are driving firm-level political activity raises additional positive and normative questions about whether corporate involvement in politics is good for shareholders, society, or both, as well as enduring questions about the purpose of the corporation. The perceived growth in corporate political activity in recent years has prompted renewed scholarly interest in these longstanding issues. For those who favor shareholder primacy, one question is whether the alignment between corporate elite political preferences and firm-level political activity reflects managerial agency costs or instead serves the long-term business interests of the firm. When average board, c-suite, and senior manager ideology are separately included as independent variables in the regression models, only the board and senior manager variables consistently predict whether the firm signs the HRC statement. That is, the political preferences of the group arguably most likely to extract private benefits of control—the c-suite—are the worst predictor of firm-level political activity.”

    +++

    +  “Traditional ways to dismantle illegal market behaviors will not affect its hold on the AI value chain.” New on PW, Cecilia Rikap on the structure of Google’s monopoly and the limits of antitrust. Link.

    +  “As the Chinese leadership pricks the country’s dangerous real estate bubble, exporting high-value clean tech is a key part of the government’s strategy for maintaining growth.” New on The Polycrisis, Kate Mackenzie and Tim Sahay on the geoeconomic contest between the US and China. Link.

    +  In a new paper, Thiago R.T. Ferreira, Nils Gornemann, and Julio L. Ortiz examine how household excess savings after the onset of Covid-19 dampened the effect of monetary policy on economic activity and inflation. Link.

    +  “The push continues to build up BRICS Pay, a platform aimed to circumvent the US dollar taking advantage of digital and decentralized technologies.” By Sarang Shidore. Link.

    +  Chris Bragg and Julia Rock examine Mayor Eric Adam’s indictment and the Turkish government’s influence in NYC politics. Link.

    +  “Syrian and Palestinian populations comprise both migrants and refugees. These sections are doubly disadvantaged within Lebanon’s working population.” By Nadia Bou Ali and Ray Brassier. Link.

    +  Rachel M. Cohen on the CTC and the Democratic party’s care economy agenda. Link. And in PW, see Andrew Yamakawa Elrod’s sweeping analysis of Bidenomics. Link. 

    +  “Between the triumphal entry of the revolutionaries into Havana in early January 1959 and the Cuban Missile Crisis that came to a head in October 1962, Khrushchev’s agenda to advance what Czechoslovak reformists would call a few years later ‘socialism with a human face’ came unstuck. Bureaucratic resistance combined with his own impetuousness and overreach are familiar explanations, and they are not wrong. Not for nothing did the phrase Pravda used in its editorial announcing Khrushchev’s ouster in October 1964—’hairbrained scheming, immature conclusions and hasty decisions and actions divorced from reality’—become inextricably associated with him. But a less top-down perspective would cite “Bloody Saturday,” the massacre of striking electric locomotive factory workers in the southern Russian city of Novocherkassk. There, on June 2, 1962, in front of the city party headquarters on Lenin Square, soldiers fired on thousands of assembled workers, killing twenty-four and wounding scores of others.” By Lewis H. Siegelbaum. Link.

  4. Container Shift

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    CARE ECONOMY

    Care work, which encompasses paid and unpaid labor, lacks adequate accounting conventions and protections across the globe. Ahead of the US elections, both parties have incorporated caregiving policies into their platforms, with proposals reminiscent of those struck down during the 2021 Build Back Better negotiations. 

    In a 2024 essay, GABRIEL WINANT links the precarious expansion of care labor with the failure of the Fordist family model:

    “Fordism established certain rigidities of self in correspondence with routinised production. In contrast, zero-sum economies of effort in the low-productivity service economy have no fixed typologies; individuals negotiate their own positions through their relations of interdependency, a process which accelerates slippage in the performance of gender. No example illustrates this mechanism as decisively as the hikikomori phenomenon first recognised and named in Japan, although now observed globally: long-term stagnation of economic growth has been greeted with radical social withdrawal by hundreds of thousands of Japanese young people as worsening economic opportunities became de-aligned from the steps on a rigidified life-course pathway. Hikikomori also exemplify in extremis how the social damage wrought by economic stagnation expands feminised reproductive labour: the arrival of the phenomenon was met with a new industry of ‘rental sisters’ to gradually coax young men back out into public life: rental sisters are to hikikomori as nurses are to Pittsburgh steelworkers. Even short of such extremities, breakdown in intergenerational transmission of gender norms emerges as a generative global possibility, one fiercely resisted by new fascist movements.

    What I have argued is that the socialisation of reproductive labour by capitalist development and underdevelopment is producing systematic processes of both working-class social differentiation and social interdependency, processes which are determined by the qualitative characteristics of both supply of and demand for service labour. But the circumstances of their realisation seem unlikely to repeat those of the classic cases. There are possibilities of solidarity within this differentiation…In the United States, the struggles of teachers and nurses have been central to the revival of the labour movement.”

    +  “Opportunity for organized labor lies in the post-industrial growth of semi-public healthcare and education services.” In PW, Benjamin Y. Fong on the current American labor movement. Link. And from JFI, Jack Landry on the recent congressional push for the Child Tax Credit reforms. Link.

    +  “The demand for home health and personal care aides is expected to be seven times higher by 2030.” By Leigh Wedenoja. Link. And see Monica Gordon on Caribbean healthcare and domestic workers in the US. Link.

    +  “Whether in the geographical west or in colonial India, the fight for registration of nurses was primarily intended to eliminate working-class women as unregistered nurses or attendants.” By Panchali Ray. Link. And see Deblina Roy on systemic challenges to staffing nurses in India. Link.

    NEW RESEARCHERS

    Belt and Road

    RAYMOND WANG is a PhD candidate in Political Science at MIT
    . In a 2023 article coauthored by Eleanor Atkins, M. Taylor Fravel, Nick Ackert, and Sihao Huang, he examines the impact of China’s Belt and Road projects and what compels countries to join or refuse the initiative.

    From the abstract:

    “Although China’s motives for developing the Belt and Road Initiative (BRI) have been well studied, scholars have yet to comprehensively examine why states seek to join the initiative. We fill this gap by examining how and why states join the BRI. Countries join by signing a Memorandum of Understanding (MOU) with China on cooperation under the BRI framework. These MOUs create few or no obligations for the states who sign them but increase the possibility of reaping future economic benefits. Thus, we argue that most states should join the BRI unless they view the costs of participation as higher. We hypothesize, and find support for, the argument that democracies are less likely to join because they view participating in a Chinese-led initiative as more costly than non-democracies. Our statistical analysis using a new dataset of BRI participants and paired case studies provides quantitative and qualitative support for this argument.”

    +++

    +  “Record high production volumes indicate that Iran’s home appliances market has shrugged-off sanctions disruptions. But many home appliances manufacturers are contending with negative cash margins as they face intense competition in a fragmented market.” New in PW, Esfandyar Batmanghelidj and Barzin Jafartash on the domestic market for home appliances in Iran under sanctions. Link.

    +  “Na crise do Haiti, não basta questionar quem são as gangues, mas também por que as gangues, e por que agora” New on PW, Mamyrah Dougé-Prosper , Ernst Jean-Pierre, Georges Eddy Lucien, Sabine Lamour on popular uprising in Haiti, now available in Spanish.

    +  “US spending on Israel’s military operations and related US operations in the region total at least $22.76 billion and counting since October 7, 2023. This estimate is conservative and does not consider indirect economic costs.” By Linda J. Bilmes, William D. Hartung, and Stephen Semler. Link.

    +  “A lower market price of military equipment stands to increase the demand for war services and war. A larger military will tend to increase the likelihood of war on the principle of ‘If you build, you will use it.’ ” By Thomas Palley. Link.

    +  “Successive waves of tariffs have done little more than create a Potemkin solar industry, while putting a tax on clean power as the climate crisis festers.” By David Fickling. Link.

    +  “Insofar as corporate pledges are concerned, net-zero has always tended to be more of a vibe. Companies’ net-zero plans and talking points typically promise gargantuan amounts of negative emissions and rely heavily on dubious carbon-offset credits.” By Kate Aronoff. Link.

    +  “Big Tech has leveraged its market influence and sophisticated analytical abilities to morph renewable power purchase agreements from simple contracts into complex structures that shift considerable risks onto renewable developers.” By Akshat Kasliwal, Jesse Gilbert, and Anirudh Mathur. Link.

    +  “Initially claiming to be ‘movements,’ both Macron’s and Mélenchon’s outfits have operated above all as personal parties: mobilizing and disciplining instruments at the service of their leaders.” By Nathan Sperber. Link.

    +  Ambika Vishwanath and Ruth Gamble on India’s effort to renegotiate the Indus Water Treaty with Pakistan, and the need for a sustainable re-examination of the treaty. Link.

    +  “Initially, the Chinese government selectively denied VAT refunds to exporters for the familiar reasons adopted by developing and transitional economies, such as the desire to retain revenue and concerns about VAT fraud. However, despite an improved fiscal position, the Chinese government still selectively applies different VAT rebate rates on exports to different industries in line with the shifting emphasis of the Chinese government’s industrial policies. Cui notes that the Chinese administration views the zero-rating of exports as a ‘merely aspirational objective,’ and he claims that ‘whether exports should receive a full VAT rebate has become deeply entangled with hugely controversial issues relating to China’s exchange rate and trade policy.’ In the use of VAT refunds as an ‘intentionally non-neutral…instrument of trade policy,’ China has reduced the rate at which the VAT is refunded to carbon-intensive exports (to zero on selected items) but increased rates of refund to promote high-technology industries.” By Kathryn James. Link.

  5. Falling Mist

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    EXPORT CURBS

    Pakistan and India are in a tit–for–tat trade dispute over rice exports, each matching the other’s moves by withdrawing minimum export prices on rice products. Prime Minister Modi—caught between the needs of rural farmers and domestic consumers—had until recently curbed rice exports as part of his effort to keep domestic prices in check, which led to a Basmati export boom in Pakistan.

    In a 2024 article, PUSPA SHARMA and SWADHI KARTHIKEYAN examine the domestic objectives behind India’s rice export restrictions and the consequences for farmers and neighboring countries:

    “Prioritising domestic availability of rice and ensuring price stability has been a leading cause of rice export restrictions. During the election season, this becomes even more visible, as was the case in India. However, many Indian farmers were not happy with the export restrictions. According to the National President of the Kisan Mahapanchayat (Farmers Union), the government policy to ban food exports and allow cheaper imports reduced farmers’ meagre agricultural incomes. Moreover, despite the export restrictions, domestic food prices did not stabilize. India’s food inflation reached an all-time high of 190.6 points, which was up by 7.68 percent compared to the previous year. This had a double impact on a majority of the farmers who lost their income on the one hand, and as consumers, they had to face high food prices. Hence, justifying the rice export restriction policy as a preference towards domestic price stability and peace is perhaps a specious argument. The rising inflation and farmers’ discontent that was seen in the 2024 election results are evidence for that.”

    +  “The agrarian crisis in Punjab has intensified. Industry has seen a reversal, and corporate investments in agriculture have been unable to catalyze sustained development, alternative forms of employment, or economic diversification.” In PW, Shreya Sinha looks at the effects of Modi’s policies in the agriculturally-dependent Indian Punjab. Link. “In India, Punjab has almost no competitor in the field of rice production. Robust production in recent years did not really translate into gains for
    farmers as prices remained subdued.” By Suvidh Shah. Link.

    +  “Despite large input subsidies and price support, trade restrictions, among other things, reduce farmers’ actual price realization.” By Shweta Saini and Siraj Hussain. Link. “Rigidity of the export prices is likely to lead to national loss of foreign exchange, since the demand for fine rice is elastic.” Syed Mushtaq Hussain on the potential of Pakistani rice exports. Link.

    +  “The uncertainty caused by a sudden rise or fall in commodity prices has the potential to exacerbate the consequences of price declines relative to gains. Pakistan can achieve sustainable growth in agriculture by putting farmers back at the core circle of policy-making processes.” By Umair Kashif, Junguo Shi, Snovia Naseem, Muhammad Ayaz, Rehan Sohail Butt, Waris Ali Khan, and Mamdouh Abdulaziz Saleh Al-Faryan. Link. 

    NEW RESEARCHERS

    Water quality

    CLAIRE LEPAULT recently obtained her PhD from the Paris School of Economics. In her job market paper, using evidence from water quality and infant mortality, she assesses the effectiveness of wastewater treatment in India.

    From the abstract:

    “In developing countries, untreated sewage exposes people to alarming water pollution levels, yet there is limited knowledge about the effectiveness of wastewater treatment investments. I evaluate the effect of wastewater treatment on water quality and infant mortality in India, exploiting the staggered introduction of urban sewage treatment plants over the period 2010–2020. I match granular data on sewage treatment plants, river water quality, as well as child births and deaths using the hydrological network. I show that after starting wastewater treatment, levels of fecal coliforms—a commonly used measure of fecal contamination in water—decreased by 53 percent. Mortality under the age of six months declined by 20 percent downstream of the plants, with larger effects for boys and children from the bottom wealth quintiles. The results are consistent across several estimators robust to heterogeneous treatment effects, are not driven by selective migration, and are only found downstream of the plants, which rules out confounding effects from other local policies. A back-of-the-envelope calculation suggests that starting wastewater treatment earlier—from 2010—in urban areas later selected into treatment—after 2020—would have prevented over 40,000 child deaths in downstream sub-basins.”

    + + +

    +  “As we near the end of the Biden administration, revisiting the debates surrounding the 1990s’ neoliberal settlement reveals troubling parallels with the present political juncture.” New on PW, Henry Tonks reviews When the Clock Broke by John Ganz and A Fabulous Failure by Nelson Lichtenstein and Judith Stein. Link.

    +  “The reach of Morena’s popularity—leading twenty-two out of thirty-two states with its allies—is astounding. Morena has gained more electoral support than any party throughout the country’s quarter century of democracy.” Also new on PW, Camilo Ruiz Tassinari on the limits of Morena’s rise to power in Mexico. Link.

    +  In two recent ProPublica reports, Brett Murphy details how Secretary of State Anthony Blinken and the State Department have consistently disregarded legal limitations and internal objections to Israel’s human rights violations, instead working with lobbyists and weapons contractors to fulfill weapon transfer requests. Link, link. And in PW, see Tim Barker and Dylan Saba’s interview with former DoD attorney Sarah Harrison on US legal limitations regarding weapons transfers to countries that are arbitrarily blocking humanitarian aid. Link.

    +  “HRAs would provide public disaster insurance—filling gaps in private-sector coverage—and coordinate comprehensive disaster risk-reduction activities, taking the burden off individuals to “harden” their homes against extreme weather events.” By Kate Aronoff. Link.

    +  “The South remains poor, underdeveloped, and lags behind the rest of the country by every measurable standard.” By Keri Leigh Merritt. Link.

    +  Florian Kajuth uses evidence from Germany to examine the pivotal role of land prices for house prices, housing supply, and residential investment. Link.

    +  Alexander Hertel-Fernandez focuses on the labor movement to explore how private and public sector unions with increasingly left-leaning leadership engage conservative and Republican members. Link.

    +  “The failure of the Social Democrats and Communists in Germany to resist the rise of Nazism and to offer the German workers a socialist alternative to unemployment and fascism had its effects in Czechoslovakia. Industry in the Sudetenland was more severely hit than elsewhere in Czechoslovakia by the slump of the thirties, and unemployment among German speakers was about twice the national average. The appeal of pro-Nazi German nationalism grew among the Sudeten population, until in 1935 the pro-Nazi party polled 62–63 percent of the Sudeten votes. Nevertheless 300,000 Sudetens continued to vote for the Social Democrats and about 120,000 for communists. After Munich 40,000 of these suffered heroically for their internationalism in Nazi concentration camps, where about half of them perished.” By Chris Harman. Link.

  6. Les Lulua et les Baluba à Kananga

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    DUAL ECONOMY

    In a series of INET-sponsored working papers written between 2015–2018, economists Peter Temin, Servaas Storm, and Lance Taylor took W. Arthur Lewis’s dual economy theory of development (which describes split labor markets between rural and urban sectors characteristic to developing countries) and reapplied it to unbalanced output, employment, and income flows in the US economy over recent decades. While Lewis postulated a natural transition of employment from the subsistence zone to higher productivity sectors such as manufacturing, this trend is observed to be running in reverse in the US service-based economy.

    In a 2020 book, LANCE TAYLOR stresses how wage repression is the biggest driver of rising inequality in the US since the 1980’s:

    “As discussed, “real” output levels are calculated by deflating production flows at market values by price indexes. With this methodology in action, the signal that a sector is enjoying relatively high productivity growth is that the current price value of its real output is falling relative to the rest of the economy. In other words, its “terms of trade” are deteriorating. The terms of trade will shift in favor of a sector with lagging productivity in line with the “Baumol effect” (Baumol and Bowen, 1966). Computer power has become relatively less expensive over time while the cost of health care has gone up.

    Both Storm (2017b) and Rada (2007) assume that workers who do not find dynamic sector jobs are driven into the stagnant part of the economy. To paraphrase Storm: for rich economies, especially the USA, this “full employment” assumption reflects the fact that, in the absence of unemployment insurance and social security worth the name, workers must find jobs, if not in the better paid core, then in a low-end job in some peripheral activity. In contrast to standard models, endogenous adjustment of productivity in the stagnant sector allows employment (supplemented by fiscal transfers) to be maintained.”

    +  “The American dual economy appeared unable to provide basic public services at full employment, and it took the world-historical shock of the Covid-19 pandemic to make such deformations part of genuine legislative struggle.” New on PW, Andrew Elrod on the forgotten promise of Build Back Better and the prioritization of national security and corporate profitability over social reform in deficit spending. Link. And see JW Mason on the Biden administration’s trade war with China and whether the pursuit of industrial policy can be disentangled from militarism and economic nationalism. Link.

    +  “Even after the pandemic made their critical role clearer than ever, care workers have experienced one of the most incomplete economic recoveries post-pandemic.” By Alí R. Bustamante. Link. “Government-supported investments in chips, renewable energy, and military hardware contribute to growth and to massive corporate profits. Such investments do create jobs. But they add nothing visible to living standards.” By James K. Galbraith. Link.

    +  See Peter Temin’s 2015 working paper for his application of W. Arthur Lewis’s dual economy model in an American context. Link. “If we want to revive our vanishing middle class, which Temin so eloquently describes, we’ll need to do more to undermine the dual economy structures he so accurately details.” By Chief Economist for the Invest in America Cabinet at the White House Heather Boushey. Link.

    NEW RESEARCHERS

    Ecologically unequal exchange

    CHRISTOPHER OLK is a PhD candidate in the Otto Suhr Institute for Political Science at the Freien Universität Berlin. In a 2024 research article, he examines currency hierarchy as a driver of ecologically unequal exchange (EUE).

    From the paper:

    “Ecologically unequal exchange describes a self-reinforcing dynamic whereby peripheries are driven to export large quantities of embodied resources in exchange for less resource-intensive imports from core countries. Such large-scale outflows of resources from the periphery typically lead to persistent poverty, ecological degradation, and political instability, all of which impair peripheral states’ capacity to follow a path of autonomous social, political, economic, and technological development (Bunker and Ciccantell, 2005, Rice, 2007, Costantini et al., 2022). Lack of such development and of productivity growth, in turn, reproduces the initital inequality. Core countries, in contrast, can satisfy high levels of domestic resource consumption while offloading onto peripheries the most socially and environmentally destructive effects, such as biodiversity loss (Shandra, Leckband, McKinney, & London, 2009), water pollution (Fitzgerald & Auerbach, 2016), or deforestation (Jorgenson, Dick, & Austin, 2010). Access to cheap biophysical resources also allows core countries to continually further their technological advantage, thereby increasing their factor productivity (Hornborg, 2014). Asymmetric resource transfers and technological disparities thus feed each other, creating a self-reinforcing cycle of global technological and economic divergence, alongside an ecological collapse of planetary scale but very unevenly distributed harm. While EUE is a structural feature of the world system since the early modern period, the volume of asymmetric resource flows has increased in absolute terms over time, especially over the last decades.”

    + + +

    +  “In the current wave of deglobalization, decoupling is an option only for nations that can afford it. Friendshoring, as a trade and national-security policy, is reserved for those who can choose their friends.” New on PW, Marcos Nobre on the international call for a “new Bretton Woods” occasioned by the recovery from the Covid-19 pandemic. Link.

    +  “There are now governments, left and right, across Europe, the US, and beyond that oppose the powers and structures of independent central banks in their entirety.” Also new on PW, Leah Downey on the democratic politics of central banking. Link.

    +  A new ProPublica report reveals that Secretary of State Anthony Blinken disregarded assessments by the US Agency for International Development and the State Department’s Bureau of Population, Refugees and Migration, which both concluded that Israel had deliberately blocked deliveries of food and medicine into Gaza. Link. And in PW, see Tim Barker and Dylan Saba’s interview with former DoD attorney Sarah Harrison on US legal limitations regarding weapons transfers to countries committing human rights violations. Link.

    +  “African countries borrow at rates that are up to eight times higher than Germany’s and four times higher than the United States’. It is a reverse Marshall Plan, in which the poorest finance the richest.” See Brazilian President Luiz Inácio Lula da Silva’s speech at the opening of the 79th session of the United Nations General Assembly in New York. Link.

    +  “We advocate for a combination of end-user, worker, and community-member deliberation and control that varies based on specific vulnerability and the risk of different groups in each provisioning system.” By Julia Steinberger, Gauthier Guerin, Elena Hofferberth, and Elke Pirgmaier. Link.

    +  Shiuli Vanaja, Niruj Deka, and Amit Basole conduct a field study of Rajasthan’s urban employment guarantee program, focusing on how it promotes the participation of women in the labor market and whether it provides income stability for participants. Link.

    +  Ilaria Mazzocco, Ryan C. Berg, and Rubi Bledsoe offer an overview of Chinese firms’ involvement in various segments of the EV supply chain in Latin America and the Caribbean and the implications for US strategy. Link.

    +  “In any attempt to account for the prosperity of the domestic American market, which is inseparable from its capacity to expand, the first point to underscore is the privileged fiscal regime of patronage in the United States, with benefits flowing alike to private persons, foundations, corporations, and museum supporters. Although the way US legislation deals with capital gains and the portion of an asset allowed for usufruct is complex, tax deductions are made on the basis of the current market value (fair market value) of a work subsequently donated to a museum, and not on its purchase price. The repercussions of this procedure on rising prices and on speculation are obvious. The number and size of corporate collections have grown steadily since the 1960s and represent a significant part of the domestic market.” By Raymonde Moulin. Link.

  7. Water Mill at Kollen

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    TAX RULE

    On Thursday, a new multilateral treaty signed at OECD will allow early implementation of a global minimum tax rule for cross-border payments, as part of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). The framework is meant to update global tax policy in response to how large multinational companies have adapted to globalization and digitalization.

    In a September 2024 paper, Mona Barake and Elvin Le Pouhaër simulate the impact of the BEPS framework’s Pillar 1 proposal, which would repeal digital service taxes in certain countries and disallow the allocation of profits to countries that retain them:

    “The total tax base to be redistributed annually is estimated to range from €30.8 to €57 billion if Pillar One had been implemented over the 2016 to 2022 period. The Marketing and Distribution Safe Harbor (MDSH) adjustment reduces substantially redistributed Amount A from its initial level of €75–150 billion. After accounting for double tax relief, this results in net revenues of €5.7 billion in 2020 to €10.9 billion in 2022. Revenues would be unequally distributed across the globe. We find that the largest beneficiaries will be the United States, with between €3.1 billion and €3.4 billion in 2022, and China, with net gains ranging from €1.8 billion to €2 billion that same year. In absolute terms, high-income countries would gain more than middle and low-income countries, which should be expected given the size of their market and the purchasing power of their consumers.”

    +  “The relevance of low-taxed profit in high tax jurisdictions implies that domestic minimum taxes could raise considerable revenue not only in jurisdictions with low average rates, but also in jurisdictions with average rates above the minimum tax.” By Felix Hugger, Ana Cinta González Cabral, and Pierce O’Reilly. Link. And see Thomas Tørsløv, Ludvig Wier, and Gabriel Zucman on the tax avoidance strategies of multinational companies. Link.

    +  Ernesto Crivelli, Ruud A. de Mooij, and Michael Keen assess to what extent developing countries are affected by corporate tax base erosion, profit shifting, and tax competition. Link. “Corporate taxation increases the cost of capital and limits corporate investment. Hence, tax avoidance might also spur investment and produce some benefits for the economy as well, particularly in the case of financial constraints.” By María T. Álvarez-Martínez et al. Link.

    +  Dhammika Dharmapala reviews the empirical literature on base erosion and profit shifting. Link. “Profit shifting could be reduced dramatically using policies like a minimum global corporate income tax, but these policies would also reduce global output substantially.” By John Budd, Jozef Konings, and Matthew J. Slaughter. Link.

    NEW RESEARCHERS

    Public services

    MARIANNA SEBO recently obtained her PhD from the Economics Department at Barcelona University. In her dissertation, she examines local public service provisions and inter-municipal cooperation in the context of delivery costs and waste collection service quality.

    From the paper:

    “Public procurement is frequently used to contract solid waste collection services. Incomplete contracts and transaction costs increase the need for monitoring and supervision. In Barcelona, solid waste collection is regulated by competition, with four delivery zones being contracted out separately. Therefore, it is possible to make relative performance assessments, especially in the areas where the contracted firms operate close to each other. Private firms anticipate stronger competitive pressures near competitors’ zones, even after the contract has been awarded, and they compete on quality. Monthly data on the number of complaints regarding waste collection in the city’s 73 neighborhoods between 2014 and 2019 is used to evaluate quality. Using count model approaches, our results show that higher quality is provided in neighborhoods closer to other neighborhoods served by a competing firm. Moreover, lower quality is delivered in peripheral neighborhoods, where a comparison with competitors’ neighborhoods is much harder, if possible. The results are consistent with the hypothesis that firms strategically manage quality performance and tend to deliver higher quality where they anticipate that monitoring by the regulator is easier.”

    + + +

    +  NYC Climate Week is already here: Join JFI and the Center for Active Stewardship for several upcoming events!

    +  “What will happen in a region like the valley region of the Magdalena Medio, which has historically depended on the oil industry and is a hub for production, exploitation, refining, and transportation? A social transformation can’t be achieved overnight.” New on PW, Camilo Andrés Garzón interviews César Loza, President of la Unión Sindical Obrera, representing Colombia’s oil and gas workers. Link.

    +  “The number of public firms increased sharply in the first half of the 1990s. However, the number of listed firms peaked in 1997 and has since fallen by half, such that there are fewer public corporations today than 40 years ago” By Sebastian Dyrda, Guangbin Hong, and Joseph B. Steinberg. Link.

    +  “Case studies of the aeronautics and microelectronics industries provide evidence that the Pentagon has implemented a de facto industrial policy in the name of national defense.” By Gregory Hooks. Link. See Domhoff for a critique of Hooks and state autonomy theory, and a reply from Hooks. Link, link.

    +  “The increase in the Selic rate distinctively reduces inflation in groups such as “Food and beverages,” “Household items,” and “Clothing,” but has an insignificant impact on subgroups such as “Housing” and “Communication.” ” By Rafael S. M. Ribeiro, Gilberto Tadeu Lima, Gustavo Pereira Serra, and Marina Sanches. Link.

    +  “Microsoft’s nuclear deal is also the second major one inked by a technology company just this year. Amazon purchased a data center site co-located at another Pennsylvania nuclear plant in March.” By Matthew Zeitlin. Link.

    +  Elizabeth Pancotti, Todd N. Tucker, and Matthew Yglesias share opposing views on the usefulness of tariff policies in shaping markets. Link.

    +  “For the editors of Flame, structural location in capitalist production offered migrants from the Caribbean the possibility of imagining themselves as a global actor. The historical significance of the publication derived less from the originality of its form during a moment of global radicalism than its capacity to delineate the end of a decade when identities were in flux. Whilst Flame sought to platform the voices of black workers during the rise of fascist and racist violence in Britain, industrial restructuring in the advanced capitalist countries, and revolutionary expectations in the Caribbean, it also bookends a certain moment of political time. For its founder and co-editor, Anthony (Tony) Bogues—who would go on to be a Professor of Africana Studies at Brown University – Flame was historically significant because it aimed “to be a black radical, black workers newspaper at a specific moment when the political identity of being black British was being consolidated and formed.” ” By Casey Walsh. Link.

  8. The Bridge of Planets

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    CIRCULAR ECONOMY

    In July, UN Trade and Development released their Digital Economy Report 2024, which gives special attention to the intersection between environmental sustainability and production within the rapidly evolving digital economy. The report recommends “a more circular digital economy that would seek to reduce, reuse and recycle digital devices and infrastructure, including by extending their lifespan.” 

    In a 2022 paper, Pablo Alonso-Fernández and Rosa María Regueiro-Ferreira study the impact of extractivism and ecologically unequal exchange (EUE) on South America:

    “Free trade is a key factor in explaining the EUE, as it facilitates both productive relocations and the control of natural resources by more developed countries. The promotion of development through commodity exports has deepened the extractivist specialisation of South American countries. At the same time, unfavourable terms of trade, resulting from the significant difference in value added between their imports and exports, and the usual strategy followed by many developed countries of setting progressive tariffs according to the value added of the traded goods, has led to South America being caught in a specialisation trap. The only way for these countries to increase their incomes and finance imports or meet debt payments is to increase commodity production, because in the commodity market it is not easy to raise prices, they have hardly any internationally competitive industries, and their industrial exports are constrained by the tariff strategy of developed countries.”

    +  “The Social Metabolism concept shows the economy’s physical growth and its widening of the frontiers, scales and extraction speeds at the heart of the environmental problems. There has been a large growth of the social metabolism (the flows of energy and materials) in the economies of the Andean countries.” By Mario Pérez-Rincón, Julieth Vargas Morales, and Zulma Crespo-Marín. Link. And see José Gabriel Palma on the consequences of different patterns of specialization and export for the long-term growth paths of developing countries. Link.

    +  “Lithium resources are highly concentrated in South America. Geopolitical realignments, the urgency to decarbonise and the race to lead 5G and AI in a digitalised world have placed critical minerals centre-stage in the competition among leading industrial actors.” By Sophia Kalantzakos. Link. “Successful implementation of direct lithium extraction technologies in the Lithium Triangle would appear to reduce externalities on the local water supply and the concomitant effects on indigenous communities.” By Ryan C. Berg and T. Andrew Sady-Kennedy. Link.

    +  “We call for an explicit ban against planned obsolescence. We also propose that a unified and mandatory durability and reparability labeling system may prove beneficial. These labels should inform and empower consumers.” By Samuel Becher and Anne-Lise Sibony. Link. And see an ILO report on how a circular economy can provide solutions for youth employment in the global South. Link.

    NEW RESEARCHERS

    Land reform

    JEN-KUANG WANG is a PhD candidate in the Department of Economics at Penn State. In a 2024 paper, coauthored by Oliver Kim, he challenges the longstanding view that land reform was a major factor behind Taiwan’s economic takeoff.

    From the paper:

    “Unlike with public land, private lands redistributed under land-to-the-tiller did not benefit from freer crop choice, since they were not previously contracted to the Taiwan Sugar Company. But another important factor to consider is the operating size of farms: the land-to-the-tiller reform may have created holdings that were too small to fully support most households economically. Applying the 1961 average rice yield (2.4 tons/hectare) and the implied median farm sizes of the mean treated townships (0.2 hectares) as a rule of thumb, the average holding produced just 480 kilograms of rice a year—less than what it takes to support a single adult on 2,000 calories a day, and far too little to support a whole household. By contrast, areas with more public land redistribution saw operating farm sizes largely unchanged, with the median farm (still relatively small at half a hectare) able to comfortably support the annual caloric needs of two adults with its rice output.”

    + + +

    +  Join JFI and our affiliate initiative the Center for Active Stewardship for several events during NYC Climate Week later this month:

    +  “The stifling political atmosphere in the West Bank gives rise to a fear of the mukhabarat, the intelligence state, in a now-typical Arab fashion—but here in the West Bank we just have the repressive capabilities of the state, without the actual state.” New on PW, Fathi Nimer on recent escalations in the West Bank, the state of the occupation post-Oslo, settlement expansion, and the Palestinian Authority. Link.

    +  “Although Dilma was not the favorite candidate of businesspeople, there was a high expectation that the president would be re-elected—and it was this expectation that determined the apparent maintenance of industrial support until June 2013.” Also new on PW, Nicole Herscovici on the circumstantial alliance between the Workers’ Party and the business sector in Brazil. Link.

    +  “Chinese estimates of capacity utilization show that manufacturers, particularly those in green industries, seem to be increasing their capacity to produce far faster than their actual production.” By Matthew C. Klein. Link.

    +  “Founded in December 2017 by eight central banks and financial supervisors, the Network for Greening the Financial System is already credited with managing “to shift the discursive boundaries” in international policy debates.” By Eric Helleiner, Monica DiLeo, and Jens van ‘t Klooster. Link.

    +  Peter Eckersley, Katarzyna Lakoma, Pete Murphy, Tom Caygill, and Charlotte Pell conceptualize the overlap between different governance paradigms to provide a framework for how future studies may be operationalized in governance arrangements. Link.

    +  “The IRS was unable to collect almost $1 trillion a year in owed taxes because of lack of staff. The IRA included $80 billion to rebuild the capacity of the IRS, but some of that has been clawed back through subsequent budget fights.” Suzanne Kahn on rebuilding state capacity. Link.

    +  “Israeli attacks on aid organizations have become routine, despite systems in place to avoid humanitarian deaths. Aid groups share their coordinates with Israeli authorities and then are attacked by the IDF at those same coordinates.” By Stephen Semler. Link.

    +  “Antitrust law represents a vital tool for confronting undue market power and top-down domination in our economy. A true renewal of our anti-monopoly tradition will require not just stricter enforcement but a shift in philosophy.” An LPE Project round-up of back catalogue pieces covering antitrust law. Link.

    +  “In 1554, the Crown asked local governments in Mexico to identify “big lakes or notable springs whose waters have some particular virtue” or usefulness due to some essential characteristic of that water. These virtues and their agency were not human, and “virtue” does not refer to the moral principles or forms of reasoning that philosophers in the Western tradition have long debated. Rather, virtues were qualities of the waters identified by their material effects on other bodies, human and nonhuman, and grouped by those effects and their assumed underlying causes. As time passed, the virtues of waters were increasingly defined in terms of therapy and medicine, and the long medical tradition coming down from antiquity through the Arabs identified categories of waters by their effects on human bodies, such as aiding in rheumatism, healing skin disease, or dissolving kidney stones.” By Casey Walsh. Link.

  9. The Triumph of David

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    DEFICIT HAWKS

    A recent brief by the Penn Wharton Budget Model estimates that the Harris Campaign’s tax and spending proposals would increase primary deficits by $1.2–2 trillion over the next ten years. While Vice President Harris’s cost-of-living platform remains ambiguous, and Trump’s disruptive policy proposals fall outside the scope of basic budget models, both are expected to contribute to a bigger fiscal deficit. 

    In a September 2024 brief from the Roosevelt Center, David Stein traces the history of deficit politics and argues for a deeper shift in fiscal and monetary policy away from the deficit-hawk paradigm:

    “While the New Deal’s social compact had imagined—if never fully realized—employing deficit spending to ensure economic stability, the commitment to balanced-budget orthodoxy heralded a retreat from these aspirations and techniques. The official platforms of the Democratic Party track this transformation in policy priorities and prevailing ideologies, from the rise of full employment in the 1940s to the dominance of balanced budgets after the 1980s. The 1972 Democratic Party platform, reflecting the power of the full-employment agenda, emphasized that “full employment—a guaranteed job for all—is the primary economic objective of the Democratic Party” (The American Presidency Project 1976). Such a view was echoed again in 1976 and 1980, as it had been in prior decades. But by 1984, full employment barely warranted a mention in the platform—the federal budget deficit, meanwhile, drew 37 references (The American Presidency Project 1984; see Figure 2). That shift in focus would persist during the Clinton years and beyond. This was not just an effort to score political points in election years. At a core level, deficit-hawk politics were about reordering governmental priorities, constraining the ambitions and achievements of the public sector. These policies would eventually undermine efforts to ameliorate the harms of the 2008 recession, and they continue to curtail the prospect for adequately addressing climate change, or making other necessary investments in the care sector that are needed to make the 21st century livable. In short, Democrats need to slough off the shackled imagination of deficit-hawk politics to meaningfully confront the clear challenges ahead.”

    +  “If all the people who worry and spend sleepless nights—all for fear of the debt—could forget about it and spend their efforts toward achieving a growing national income, their contribution to the solution of the debt problem would be far greater.” By Evsey Domar. Link. And in PW, see JW Mason on the implications of Keynes’s alternate vision of monetary production for the politics of sovereign debt and monetary policy in the US. Link.

    +  “There’s little evidence of a link between deficits and inflation for the US economy where monetary policymakers are free to pursue low inflation. But developing countries, requiring seigniorage revenue, show a strong link between fiscal deficits and inflation.” By Keith Sill. Link. 

    +  “As long as the Fed believes that deficit spending is inflationary, government deficits are likely to lead to tight monetary policy and rising interest rates.” By L. Randall Wray. Link. “An increase in the deficit reduces national saving and hence future national income, regardless of its effects on interest rates.” By William G. Gale and
    Peter R. Orszag. Link.

    NEW RESEARCHERS

    Shale Shock

    ALEXANDER F. GAZMARARIAN is a PhD candidate in the Department of Politics at Princeton University. In a 2024 working paper, he analyzes presidential elections from 1972 to 2020 with a difference-in-differences design to find that the shale gas shock increased the Republican vote share by 4.9 percentage points.

    From the paper:

    “This historical advantage for the Democrats in coal country was due partly to union ties (Dark 1999). Other issues also drew voters to the Democratic Party since rates of unionization vary (Gaventa 1982), and there are also some regional differences in baseline support. This average Democratic advantage created the conditions for a partisan reversal. Democratic voters in these areas were cross-pressured. The Democratic Party, in addition to defending labor, also backed environmental regulations that threatened coal (Mildenberger 2020). The Democratic Party has long “owned” environmental issues, being seen as more competent and consistent, while the Republican Party has been more pro-business and antiregulatory (Egan 2013). As early as 1988, the Democratic platform included a call to address climate change, while the Republican platform promised to defend the coal industry. To the extent that Democratic voters were aware, they faced a dilemma: supporting a party that protects workers’ rights could jeopardize their industry’s viability. I argue that the decline of coal due to the shale shock increased Republican support through two mechanisms. First, the decline of coal raised the salience of the Democratic Party’s environmental issue ownership since voters increasingly saw a conflict between their economic self-interest and partisan preference. Second, the Republican Party also sought to politicize the issue by blaming environmental regulations, which mobilized new voters.”

    + + +

    +  Join JFI and our affiliate initiative the Center for Active Stewardship for several events during NYC Climate Week later this month:

    +  “Unions have become quite good at winning large-unit elections. From 2014–2021, 63 percent of large-unit certification elections were successful.” New on PW, Benjamin Fong focuses on the role of large-unit NLRB elections in labor’s resurgence. Link.

    +  “Preference convergence between centre-left and centre-right workers is only visible in export-oriented Germany, while significant differences remain in consumption-led Britain.” By Erik Neimanns and Lucio Baccaro. Link.

    +  “China and Africa account for one-third of the world population. Without our modernization, there will be no global modernization.” See the full text of the keynote address by Chinese President Xi Jinping at the opening ceremony of the 2024 FOCAC Summit. Link.

    +  Suresh Naidu’s 2022 essay on the future of the US labor movement. Link.

    +  “Israeli soldiers shot and killed American activist Aysenur Ezgi Eygi on Friday. Earlier this year, two 17-year-old Palestinian Americans were killed in the West Bank. The US government decried the killings but have yet to launch investigations.” By Jonah Valdez. Link.

    +  “For a generation of Northeast Valley residents, community revitalization meant leaving, not staying, in their community to find jobs that might proffer the relative stability their parents enjoyed as workers at GM Van Nuys.” By Julia Brown-Bernstein. Link.

    +  “By early 2016, Lava Jato had helped create the conditions for Rousseff’s impeachment, and it was working publicly toward the arrest of likely 2018 presidential candidate Lula—while also sparing members of the Partido da Democracia Social Brasileira (Party of Brazilian Social Democracy—PSDB), the PT’s main center-right rival. Even as the U.S. press was reporting on US collaboration with Lava Jato, most outside Brazil saw the operation as a legitimate, even heroic, investigation. Thus, that collaboration might have seemed morally justified. By 2017, Lava Jato’s neutrality was coming under scrutiny, with critiques of the operation finding their way into publications such as Foreign Affairs (Robertson, 2017) and reporting on the economic devastation wrought by Lava Jato appearing in the Washington Post (Lopes and Miroff, 2017). It is noteworthy that as US consensus about Lava Jato’s benevolence faded, so did reporting on US involvement. By Brian Mier, Bryan Pitts, Kathy Swart, Rafael R. Ioris, and Sean T. Mitchell. Link.

  10. Meandering the Dark Blue

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    DEFORESTATION REGULATION

    Restrictions on the consumption of products associated with deforestation have been implemented by private companies via zero deforestation commitments (ZDCs), and have been adopted by developing countries for the incentive of result-based financing through REDD+. As of December 2024, the European Union Deforestation Regulation (EUDR) in the European Green Deal (EGD) will prohibit certain raw materials and related products from being exported to the European Union if they involve the use of deforested land.

    In an August 2024 working paper from the Center for Distributive, Labor, and Social Studies (CEDLAS), PABLO DE LA VEGA uses Comparable General Equilibrium modeling to examine the potential environmental and economic impacts of the EUDR in Argentina:

    “The potential economic impacts of the EUDR in Argentina are considerable. Using Comtrade data and the list of products covered by the regulation, Calvo et al. (2024) estimate that the EUDR would reach approximately 40 percent of the value of Argentina’s exports of goods to the EU (about US$ 5 billion, 5 percent of total exports of goods), which is the second most important destination for Argentina’s exports of goods. The main production chains affected are soybean and livestock, which account for 80 percent and 15 percent of the value of exports to the EU reached by the EUDR, respectively. As a consequence of the EUDR, between 2025 and 2030, GDP would be reduced by an average of 0.46 percent with respect to the baseline scenario. However, of greater magnitude is the potential environmental impact. Deforested hectares would be reduced by 6.64 percent and emissions of polluting gases by 0.39 percent.”

    +  “Implementation of commitments to reduce deforestation is hampered by different perceived financial risks, differences in the levels of influence and power held by different actors, and a perceived entitlement to deforest.” Angela M. Guerrero, Natalie A. Jones, Helen Ross, Malika Virah-Sawmy, and Duan Biggs explore multiple sustainability initiatives targeting deforestation in the soy supply chain, using a mental model perspective. Link. In PW, see Fernando Rujitsky on Brazilian agribusiness and the green transition. Link.

    +  “It is the EGD that has fundamentally shaped the EU’s response to the major crises and challenges associated with the emerging geopolitical reality.” By Mathieu Blondeel. Link. And see a 2023 policy paper from the Real Instituto Elcano on the EGD as a driver of EU-Latin American cooperation. Link.

    +  Charolette Streck argues that REDD+ programs can prevent deforestation leakage via national and jurisdictional programs that integrate local investments. Link. See Nicolas Kreibich and Lukas Hermwille on the post-2020 voluntary carbon market, and see Allegra Dawes on the current voluntary carbon market landscape. Link, Link.

    NEW RESEARCHERS

    Dutch Disease

    SANTIAGO GRANA-COLELLA is a PhD candidate at the Universidad Nacional de San Martín. In a 2024 working paper, coauthored with Ignacio Silva Neira, he assesses the suitability of the Dutch Disease hypothesis as an explanation for the commodity boom and accompanying appreciation of the real exchange rate in Latin American countries between 2003–2019.

    From the paper:

    “The policy recommendations developed from heterodox currents, particularly from New Developmentalism (ND) and post-Keynesian criticism, are varied due to the diversity of approaches established and the assumptions considered. The ND approach advocates mainly for export taxes to mitigate the DD’s effects (Bresser-Pereira, 2008). In this regard, Dvoskin and Feldman (2018), while formalizing ND proposals in a model that endogenizes the productive structure of a small open economy, show that export duties might be a more feasible policy than export taxes since they will not raise costs for primary producers, thus avoiding repercussions on the prices of commodities derived from these products. However, as demonstrated by Dvoskin, Feldman, and Ianni (2020) through a Sraffian model, conflict inflation is a limit to export diversification through exchange rate policies. Another significant limitation of the ND approach is its foundation in addressing market failures, which consequently disregards the role of industrial policies as crucial elements for fostering new competitive advantages. Palley (2021) states that these policy recommendations do not substantially differ from neoliberal ones. The ND simplifies the development issue by not considering the global productive structure (i.e., not considering the long-term dynamics explained in the center-periphery theory) and thus avoiding discussions surrounding productive transformation. Furthermore, Palley (2021) asserts that the implementation of an export tax establishes a development strategy based on the inflow of foreign currencies that impacts financial vulnerability due to the dependence on external finances.”

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    +  “Patronage systems helped to stabilize the initial path of neoliberal reform by undergirding the ANC’s legitimacy, but under Zuma they began to critically undermine conditions for corporate accumulation.” New on PW, Niall Reddy on the ANC, opposition parties, and circuits of the informal economy in South Africa. Link.

    +  “The natural rate, says the ECB, ‘while unobservable … provides a useful guidepost for monetary policy.’ The idea of an unobservable guidepost perfectly distills the contradiction embodied in the idea of R*.” Also new on PW, JW Mason on orthodox assumptions of money neutrality in monetary policy. Link.

    +  “Country platforms are now an increasingly hot topic, and are being advanced by the Brazilian hosts of this year’s G20, along with the IMF, multilateral banks, G7 governments, and the financial sector.” New on the Polycrisis, Kate Mackenzie and Tim Sahay on country platforms, a new concept for coordination between international finance institutions, private finance, and states. Link.

    +  “The Employee Free Choice Act would allow unions to be certified if a majority of workers sign certification cards. This would assess workers’ support or opposition to unionization without requiring the government to run costly elections.” By Matt Bruenig. Link.

    +  A Department of Commerce press release announces the preliminary memorandum of terms for providing $50 million in proposed direct funding to HP Inc., which specializes in microfluidics and microelectromechanical systems, under the CHIPS and Science Act. Link.

    +  A new working paper by Melissa Arnold Lyon, Matthew A. Kraft, and Matthew P. Steinberg examines how teacher strikes affect compensation, working conditions, and productivity, using an original dataset of 772 teacher strikes between 2007–2023. Link.

    +  “My finding that fines are associated with increased financial distress, declines in credit reputation, and reduced employment stability suggests that, on average, US households cannot easily absorb typical, but unplanned, expense shocks.” By Steven Mello. Link.

    +  “The Gujarati merchants belonged to the Jain sect, similar to the Buddhists, who carried non-violent, pacific principles to extremes. In general, no merchant community in the Indian Ocean traded with sword in hand and most of the commercial emporia were neutral ports of trade without defensive walls, standing armies, and naval fleets. The main political principle which governed the policy of their rulers was to provide complete protection to an international community of merchants who were often granted extra-territorial juridical rights in exchange for not violating the port’s neutrality. Even when a great trading city such as Canton in China or Cambay in Gujarat was part of a strong empire or a military state, the rulers treated the port as if it lived from the profits of trade. The local governors were given a certain measure of independence in formulating the administrative and political structure of the towns. Underlying the entire system of trade and the balance of power was the assumption that the ocean was not an area of armed conflict in which warring states should exercise their sovereignty.” By Kirti N. Chaudhuri. Link.