Category Archive: Sources

  1. Both Sides of the Moon

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    In September, Hurricane Ian devastated southwestern Florida, with floodwater and power outages causing significant damage to homes and businesses. Rebuilding efforts have since revealed gaps in flood insurance policies.  

    In a 2010 paper, ERWANN O. MICHEL-KERJAN examines the history of the National Flood Insurance Program, looking at forty years of its operation between 1968 and 2008. 

    From the introduction:

    “In 1965, no flood insurance was available, so victims had to rely on friends and family, charities, or federal relief. After that catastrophe, and given the lack of interest by private insurance markets in offering flood coverage, the U.S. government established a new program in 1968—the National Flood Insurance Program (NFIP)—to make flood insurance widely available. Now, after more than 40 years of operation, the NFIP today is one of the longest standing government-run disaster programs in the world.

    In this paper, I present an overview of the 40 years of operation of the National Flood Insurance Program, starting with how and why it was created and how it has evolved to now cover $1.23 trillion in assets. I analyze the financial balance of the NFIP between 1969 and 2008. Excluding the 2005 hurricane season as an outlier, policyholders have paid nearly $11 billion more in premiums than they have received in premiums than they have received in claim reimbursements over that period. However, the program has spent an average of 40 percent of all collected premiums on administrative expenses, more than three- quarters of which were paid to private insurance intermediaries who sell and manage flood insurance policies on behalf of the federal government but do not bear any risk.” 

    Link to the text.

    +  “Being hit by at least one hurricane in the previous year increases net flood insurance purchases by 7.2%. This effect dies out by three years after the storm.” From a 2016 article on insurance takeup by Carolyn Kousky. Link

    +  Emannuel Ubert compares policy responses to hurricanes and subsequent homeowner insurance crises in Florida and Louisiana. Link

    +  “Renters are an overlooked population during implementation of post-disaster retreat programs that predominantly focus on homeownership.” Leah Dundon and Janey Camp on disaster relief for renters. Link. And Eloisa Rodriguez-Dod and Olympia Duhart look at renters’ rights after Katrina. Link


    Rule Evasion and the Financial Crisis of 1974

    In a recent paper, fellow at the Warren Center at Harvard University PIERRE-CHRISTIAN FINK examines the Fed’s actions on rule evasion in 1974. 

    From the abstract: 

    “Recent research holds that periods of market instability offer opportunities to bring rule evasion under control because crises expose hidden market practices. Based on original archival evidence from the financial crisis of 1974, this article shows that rule evasion is disclosed not automatically, but strategically and selectively. To explain the ensuing dynamics, the article develops a Goffmanian framework in which regulators learn of a crisis of rule evasion backstage (in their interactions with companies) but use a conventional definition of the situation frontstage (in their presentations to the public). In an as yet unrecognized outcome, the regulators may find themselves caught between frontstage and backstage: their communications to the public limit their room for maneuver against the companies backstage, forcing them to repurpose their extant crisis-management tools. Because regulators publicly pretend to stay within their mandate, this form of crisis response renders re-regulation of rule evasion less likely.”

    Link to the text. 

    + + +

    +   Join us this Monday, November 21 at 11am ET for a discussion on the political origins of the IMF and global economic governance, with Jamie Martin, Adom Getachew, Aaron Benanav, and Tim Barker. Link to register. 

    +   “Derisking provides a compelling status-quo political message: in the new age of geopolitical tensions, energy competition, higher interest rates and massive global debt pressures, decarbonization is possible without massive public investment.” New on PW, Daniela Gabor on the Wall Street Consensus at COP27. Link

    +   “It’s domestic economic and political interests that determine when and how countries cut emissions—not free riders and prisoners’ dilemmas.” From the latest Polycrisis newsletter, also on COP27. Link

    +   “Almost as soon as the Bretton Woods institutions were created, the eurodollar would emerge to undermine them.” Also new on PW, Harry Whomersley reviews Jeremy Green’s The Political Economy of the Special RelationshipLink

    +   Ángela Vergara on labor conditions in Chile and the draft constitution’s proposed labor reforms. Link. And see Vergara’s recent PW essay on Chile’s mining communities. Link

    +   “We argue that the fragmentation of the production-centred paradigm has weakened both academic research and policy-making related to economic development.” By Ha‑Joon Chang and Antonio Andreoni. Link

    +   Knut Are Aastveit and André K. Anundsen look at the effects of monetary policy on regional housing markets in the US. Link

    +   “This brief calls for changing the Federal Reserve’s policy framework to target an inflation range of 2 to 3.5 percent, using the core personal consumption expenditures (PCE) deflator.” By Justin Bloesch. Link

    +   “The FIFA World Cup has served as a top-down instrument to construct and fortify a distinctly Qatari nationalism.” Jaafar Alloul and Laavanya Kathiravelu on the World Cup and Qatar’s electoral reforms. Link

    +   “While medieval urban centers had a much more rural character than they do today because of urban agricultural practices, the evidence does not bear out the idea that pigs continually ran amuck. The town council and court records show that swine were not free roamers in an ‘organic’ town of the Middle Ages. Because swine were a daily part of urban life, and an integral part of local agricultural production, they required cradle-to-grave controls. Pigs, in particular because of their destructive behaviors, were closely herded and were not permitted to wander in town. Town governments strictly restrained swine movement, limiting them to pigsties or walking in the custody of a pig herder, and even went so far as to forbid the raising of pigs within the town on several occasions. When pigs were let loose, injured parties were not afraid to appeal to the court or complain to the city governments, indicating the unacceptability of free-roaming swine.” By Dolly Jørgensen. Link

  2. Festivities Ended

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    Following years of government subsidies, the Chinese aluminum extrusion industry now threatens to wipe out domestic producers in the EU, UK, and US should tariff rates fall too low (the UK is most at risk, with 10.1% rates compared to the EU’s 22.1% and the US’s 33.3%). 

    Aluminum extrusions play a crucial role in auto manufacturing, infrastructure, and construction. Changes in the market for extrusions thus bear broader implications for the global political economy. In her 2014 book, MIMI SHELLER considers the role of aluminum in shaping global markets.

    From the introduction:

    “The discovery of how to create aluminim on an industrial scale in the late nineteenth century unlocked a new material culture of mobility alongside a technological drive toward progressive acceleration in speed and lightness. The physical qualities of this light metal and its alloys contributed to the existing dream of high-speed travel and gravity-defying flight by finally making it possible. Aluminum became crucial to the making of modernity not simply as a new material out of which to make particular objects, but also as a means of innovating across the entire infrastructure of transport and communication. From 1910 to the 1960s, aluminum came to play a crucial part in the transportation, electrical, construction, aeronautics, and ship-building industries, as well as in domestic design, architecture, technical equipment, and other banal aspects of everyday life (from packaging to makeup, frying pans, and artificial christmas trees).

    Tracing the silvery thread of aluminum across time and space draws together some of the remotest places on earth alongside some of the centers of global power, some of the richest people in the world alongside some of the poorest, and some of the most pressing environmental and political concerns we face. It is a dramatic yet little-known tale that encapsulates the making of global modernity and uneven development, the creation of multinational corporations, the displacement of native indigenous peoples around the world, the entrenchment of the United States as a world economic and military power, the rise of China, the modernization of warfare and significance of air power, and the invention of 1950s suburbia.” 

    Link to the text.

    +  A 2013 edited volume examines the global bauxite industry, including its management in the Soviet Union, its contentious history in East India, and its geopolitical origins across the Caribbean. Link.

    +  “The first part of the twentieth century was the height of the international cartel movement, and before 1945, it was thought that cartels could bring widespread benefits and that cooperation between producers was a way to avoid the ravages of cut-throat competition.” Espen Storli recounts the history of international aluminum cartels from 1901 to 1940. Link.

    +  “Nkrumah did not just seek to provide electricity for his country and their neighbors, he also wanted to develop a fully integrated aluminum processing system, where bauxite could be transformed into aluminum that could be used in the manufacture of various industrial and consumer products.” Emily Lynn Osborn considers the metal’s trajectory in West Africa. Link.


    GM Wheat and the Regulatory State

    A recent paper by PhD candidate in sociology at the University of Virginia SU YEONE JEON examines Argentina’s regulations of wheat exports. 

    From the abstract: 

    “This paper explores an apparent paradox: why did Argentine regulators initially demur in approving the commercialization of genetically-modified (GM) wheat, one of very few products innovated by the country’s biotech sector? The answer lies in risk mitigation, but the risks Argentine regulators sought to avoid were not the environmental and health risks typically associated with GM products. Rather, they worried about possible disruptions to agricultural trade if exports were found to be contaminated by an unapproved GM product. I define the kind of risk that Argentine regulators sought to minimize as structural risk—that is, risk issuing from structural constraints a country faces given an unfavorable or dependent position in trade relations. By illuminating how risks emanating from structural constraints particular to Southern states shape regulatory frameworks, this analysis advances our understanding of the Regulatory State of the South.”

    Link to the text. 

    + + +

    +   Join us on November 21 at 11am ET for a discussion on the political origins of global economic governance, with Jamie Martin, Adom Getachew, Aaron Benanav, and Tim Barker. Link to register. 

    +   “The rejection of the constitution reveals the complexities of transitioning away from a neoliberal economy which has left many clinging to jobs that, while dangerous and environmentally harmful, offer financial stability for otherwise forgotten workers.” New on PW, Ángela Vergara on mining workers and Chile’s constitutional vote. Link

    +   “The divorce of China, Russia, and the West is providing Modi with a golden opportunity to negotiate a new geopolitical order.” In the latest installment of The Polycrisis, Tim Sahay considers the new non-alignment. Link

    +   “We propose to break the deadlock over climate finance with a $500bn Global Climate Mitigation Trust seeded with IMF Special Drawing Rights.” Avinash Persaud on the Bridgetown Initiative. Link

    +   Elizabeth U. Cascio and Ethan G. Lewis examine 20th-century efforts by the NAACP to equalize teacher salaries in the American South. Link.  

    +   Simon Jäger, Shakked Noy, and Benjamin Schoefer on the “German model” of industrial relations. Link

    +   Brian J. McCabe on administrative discretion and “poverty governance” in the Housing Choice Voucher program. Link

    +   “Control over foreign immigration and the movement of African Americans remained tightly intertwined throughout the antebellum era.” By Kevin Kenny. Link

    +   Anna Beatriz Anjos interviews Luciana Gatti on Amazon deforestation under Bolsonaro. Link. And see a recent Polycrisisnewsletter on Lula’s victory and the global climate agenda. Link

    +   “This essay, which draws on archival sources collected in China, Taiwan, and the United States, examines the power and legacy of US overseas procurement programs by focusing on the case of China and the US effort to acquire hog bristles. Hog bristles, which were used for the production of a vast assortment of brushes, were one of China’s largest wartime exports. The US wartime demand for bristles helped empower a small number of Chinese firms that controlled local production. One of these firms used wartime controls to dominate the industry by 1945, and the head of the firm, Gu Gengyu, was later deemed the ‘hog-bristle king.’ This essay explores the long-term legacies of US wartime procurement programs, revealing how they helped empower a new and powerful class of transnational businessmen with strong ties to the government, as well as deep connections to US markets.” By Judd Kinzley. Link

  3. The Architect

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    Earlier this year, India increased its coal production in response to heat wave-induced electricity shortages. The power crisis prompted new concerns around India’s efforts towards transitioning to renewable energy, and it exposed deep vulnerabilities in country’s fragmented electricity sector.  

    A 2018 edited volume, Mapping Power, examines the politics of electricity reforms across Indian states. In the introduction, SUNILA S. KALE, NAVROZ K. DUBASH, and RANJIT BHARVIRKAR lay out the sector’s main challenges.  

    From the introduction:

    “India has historically struggled to meet rapidly increasing electricity demand, fuelled by rapid economic growth; industrial and commercial activity has grown, and so has household demand as growth has expanded appliance use. As a result, in the first decade and a half of this century thermal power plants were being constructed in India at a rapid clip, with 92 GW added in the Twelfth Five Year Plan from 2012-17, a remarkable 42 percent of the total thermal capacity as of October 2017. However, increasingly mining and transportation sectors have been unable to keep pace, such that India began importing coal for the first time in its history despite the country’s substantial coal reserves, which in turn led to a substantial push to ramp up domestic coal production. More recently, there are strong indications of an overshoot in demand growth projections. Decreased demand for Indian exports due to the global financial crisis, global protectionism, and weak competitiveness have muted industrial demand. 

    This has led to a curious phenomenon where India has rapidly shifted from a chronically scarce power situation to a ‘surplus’ power capacity country. This situation has an effect on the finances of the sector, as existing plants have to back down and run at uneconomically low rates. The term ‘surplus’ is misleading, however, as excess capacity coincides with roughly 40 million without access to power. The coincidence of these two seemingly contradictory facts is due almost entirely to the unresolved political economy of the distribution companies (discoms). As loss-making entities, discoms would rather limit sales to low-tariff rural and poor consumers.” 

    Link to the text.

    +  “If railroads and canals—the quintessential infrastructural technologies of the colonial state—revealed a uniform sense of the state as a particular kind of engine of ‘development,’ the far more messy political economy of electrification displayed a mixed understanding of the state’s role in the economy.” A 2014 article by Kale on electricity in colonial India. Link. And Suvobrata Sarkar on the founding of the Calcutta Electric Supply Corporation. Link

    +  From a 2004 issue of Pacific Affairs, electricity reform in China South Korea, and Thailand. Linklink, and link

    +  “We employ sectoral electricity consumption data for a panel of 733 country-years to examine democracy’s impact on the distribution of electricity across three sectors that represent distinct political interests: industry, agriculture, and residential consumers.” By David Brown and Ahmed Mushfiq Mobarak. Link


    Famine Labor & Informality

    AMAL SHAHID is PhD Researcher in international history and politics at the Geneva Graduate Institute. A recent paper examines “famine labour” in the Indian subcontinent, in which the British colonial state provided famine relief through employment.  

    From the abstract: 

    “In the latter half of the 19th century the Indian subcontinent was wrought with frequent famines. The colonial state provided relief to the affected population through employment on public works such as roads, canals and railways, in addition to charitable relief. Discussing working conditions, wages, and recruitment, this paper argues that famine labour was characterized by informality under a state regulated employment system, and explores how informality can be conceptualized in a historical context. Coinage of and the distinction between the terms formal and informal is fairly recent, being defined by degrees of state regulation and precarity. This paper, through the case of famine construction workers, offers evidence of practice and adds to the corpus of literature that challenges the distinction between the two terms. Therefore, the paper holds implications for current discussions on interpenetrations between formal and informal economies in the global south.”

    Link to the text. 

    + + +

    +   “Government monitoring, which is actually not so extensive on its own, serves as a scaffold for corporate surveillance from companies.” New on PW, Steven Rolf and Wei Wei interview Karen Levy on surveillance and automation in the long haul trucking industry. Link

    +   “When Lula was last in power, soy and beef moratoriums reduced Brazil’s deforestation of the Amazon by 80% between 2004 and 2012, even as Brazilian agricultural production boomed.” From the latest newsletter of The Polycrisis.Link

    +   “HOLC did not use the City Survey’s now-infamous security maps to deny its mortgage loans. This is because the project was initiated after its refinancing phase was essentially complete.” Todd Michney on the Home Owners Loan Corporation’s redlining maps. Link

    +   A new paper examines avenues for decarbonizing the chemical manufacturing sector. Link

    +   “The IMF is not the kingmaker it once was.” Jamie Martin on the history of IMF interventions. Link

    +   “Observing many researchers using the same data and hypothesis reveals a hidden universe of uncertainty.” By Nate Breznau, Eike Mark Rinke, Alexander Wuttke, and Tomasz Żółtak. Link

    +   Kyle Chan on the internal structure of China’s state-owned enterprises. Link

    +   “This article contends that printers and journalists operating under British common law through the 18th century tended to be successful when they encouraged jury nullification as a primary defence against state libel lawsuits. Jury nullification is the process by which a jury refuses to find a defendant guilty even though the facts of the case point to conviction beyond a reasonable doubt. The jury instead ‘votes its conscience,’  regardless of what the law dictates.Such was the determination in printer James Augustus Hicky’s first trial for libel against Governor General Warren Hastings of India in 1781. Despite overwhelming evidence according to the law at the time, the jury found Hicky not guilty. Upon receiving it, Chief Justice Elijah Impey of the Supreme Court of Bengal ‘flew into a prodigious rage, violently declaring he would not suffer such a verdict to be recorded, it being directly and positively in the teeth of the evidence.’ Impey ordered the jury to reconsider its verdict, but the jurors refused.” By Andrew Otis. Link

  4. The Valley

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    In recent months, over 230,000 claimants have sued multinational conglomerate 3M for faulty products, launching the largest mass tort litigation in US history. In response, the company resorted to the infamous “Texas Two-Step,” a bankruptcy scheme which allows companies to sidestep allegations by dividing into smaller entities.

    In his 2001 book, DAVID SKEEL examines the peculiarities of US bankruptcy legislation, demonstrating how key actors have consistently shaped the legal landscape over the past century.

    From the text:

    “Bankruptcy law in the United States is unique in the world. Perhaps most startling to outsiders is that individuals and businesses in the United States do not seem to view bankruptcy as the absolute last resort. In recent years, the sheer number of bankruptcy filings has proven more newsworthy than even the most glamorous celebrity cases. In 1996, for the first time in the nation’s history, more than one million individuals filed for bankruptcy in a single year. The number of businesses in bankruptcy has also been unprecedented, with tens of thousands invoking the bankruptcy laws each year.

    It is clear that U.S. bankruptcy law is far more sympathetic to debtors than are the laws of other nations. An important benefit of U.S. law for debtors—in addition to generally favorable treatment—is control. When a business files for bankruptcy, its managers determine whether to file for liquidation or reorganization; and, if they opt for reorganization, the managers are the only party who can propose a reorganization plan for at least the first four months of the case. In addition to the benefits for debtors, a second distinctive characteristic of U.S. bankruptcy law is the central role of lawyers. In most other countries, bankruptcy is an administrative process. Decisions are made by an administrator or other official, and debtors often are not represented by counsel. In the United States, by contrast, bankruptcy debtors almost always hire a lawyer, as do creditors, and the bankruptcy process unfolds before a bankruptcy judge.”

    Link to the text.

    +  “Throughout the nineteenth century, merchants and manufacturers involved in interstate commerce sought federal bankruptcy legislation to overcome diverse and discriminatory state laws that raised the cost of credit and impeded interstate trade. In the last two decades of the nineteenth century, they formed a national organization to lobby for bankruptcy legislation.” Bradley Hansen on the historical role of commercial associations. Link.

    +  “The Texas Two-Step sheds light on two prominent areas of concern within bankruptcy law: forum shopping and common law’s continuing role in bankruptcy’s statutory system.” In a recent article, Michael Francus places the legislation in legal context. Link.

    +  A 2021 volume edited by Mauro Bussani and Anthony Sebok takes a global perspective on mass tort law. Link.


    Imperial Migration & Labor 

    Assistant Professor of Anthropology and Asian & Middle Eastern Studies at William & Mary College ANDREA WRIGHT studies South Asian labor migration to the Gulf. A 2020 chapter examines labor and oil production under the British administration.

    From the piece: 

    “This characterization of Abu Dhabi and other Gulf States as ‘primitive societies’ was used by British administrators to reinforce an understanding of sheikhly rule that relied upon the rulers distributing wealth amongst the population and differential treatment between national and foreign workers. This rhetoric by British administrators repeats the discourse that oil companies developed at oil sites in countries as diverse as ‘Mexico, Iran, Venezuela, Colombia, Nigeria, [and] Saudi Arabia.’ In these countries, local populations asked oil companies for development and training. The companies responded with the nineteenth-century idea that ‘long, slow tutelage’ was best for the development of native populations. These oil company policies mobilized the racialized labour hierarchies of colonialism that categorized some peoples as ‘unfit for liberty.’ In the Gulf, this view reinforced the role of the sheikh in a ‘tribal society’ to distribute money, provide social services and protect the nationals in a paternalistic fashion. While this view of labour relations was contested and debated amongst Abu Dhabi governmental employees, the British administration’s insistence upon tightening measures in order to ensure the stability of the sheikhs or the internal security of the state most often won out.”

    Link to the text. 

    + + +

    +   “Bolsonarismo’ is not a preserve of the hinterlands, nor is ‘Petismo’ a metropolitan trend. Rather, large cities in Brazil are sites of polarization and tight margins.” Ahead of Sunday’s presidential runoff, Pedro Mendes Loureiro examines Brazil’s voting patterns. Link

    +   “The window of possible climate futures is narrowing, and as a result, we are getting a clearer sense of what’s to come.” In the New York Times, David Wallace-Wells on a new climate reality, featuring The Polycrisis co-founder Tim Sahay. Link

    +   JFI is seeking a research fellow and a policy fellow to support a series of international research projects and workshops on the strategic decarbonization of the European Union. More details on how to apply here

    +   “Student loans have stifled the once promised pathway to a middle class life.” Two articles, from Fortune and Bloomberg, on JFI’s newest report on the distribution of student debt. Linklink. And link to the report. 

    +   “If we redrew the map to take account of Fanon’s circles of economic pressure, it might look radically different, with some states enjoying outsized freedom to move while others are squeezed from all sides.” J. Benton Heath on sanctions and worldmaking. Link

    +   Safa Joudeh on Chinese industrial cooperation and local development strategy in Egypt. Link

    +   “Why unemployment can stay low while we fight inflation.” By Justin Bloesch. Link

    +   “We use a unique source from the Swedish royal demesnes to examine the work and relative wages of women in sixteenth-century Sweden, an economic laggard in the early modern period. We speak to the debate on the ‘little divergence’ within Europe, as women’s work and gender differentials in pay is a key indicator of women’s relative autonomy and seen as a cause for the economic ascendency of the North Sea region during the period. We find small gender differentials among both unskilled and skilled workers, indicating that Sweden was a part of the ‘golden age’ for women. We argue that despite superficial equality, women’s economic outlooks were restrained in many other ways – including their access to higher-skilled work and jobs in the expanding parts of the economy.” By Jakob Molinder and Christopher Pihl. Link

  5. Flowers

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    Last week, Egypt reached a staff-level agreement with the IMF to receive its fourth loan in six years. The nation struggles with a high debt-to-GDP ratio, and its net foreign reserves have plummeted in value since 2019. 

    In a 2011 article, ANGELA JOYA examines Egypt-IMF relations under President Hosni Mubarak, looking at structural adjustment and corruption prior to the revolution. 

    From the article:

    “In 1990 Egypt received debt relief from Western powers in return for its support for the Iraq war. The relief was arranged by the IMF and with the intention of enabling Egypt to repay the remainder of its foreign debt by restructuring its economy according to free market principles. As stipulated by the Post-Washington Consensus the role of government is to provide suitable conditions for the smooth functioning of the free market, including the encouragement and facilitation of the private sector through liberalising the economy and privatising state owned enterprises. In 1991 Egypt implemented a major Economic Restructuring and Adjustment Program (ERSAP) which entailed the privatisation of public sector enterprises, the liberalisation of trade and prices, the introduction of flexible labour legislation and the removal of progressive social policies.

    The privatisation of state enterprises transferred public resources into the hands of a new economic elite. This new elite found allies within the ruling National Democratic Party (NDP) and Mubarak’s son, Gamal. The two decades of liberalisation increased collusion between businessmen and bureaucrats, increased the role of businessmen in policy making and turned the state into an active promoter of business interests. Increasingly, businessmen took charge of policy circles as the number of businessmen elected to Egypt’s parliament increased from 8 in 1995 to 150 by the 2005 elections.”

    Link to the text.

    +  “Following the Middle East conflict, Egypt launched a concerted stabilization effort that had as its main elements a large fiscal adjustment, virtually unparalleled in recent years.” An IMF report on Egypt in the 1990s, by Arvind Subramanian. Link. And David Seddon on Egypt and the IMF from 1987 to 1990. Link

    +  “In Egypt, erosion of state autonomy led ultimately to the domination of the system by special interest groups, a decline in the economic role of the state, and the deterioration of development.” From Nadia Ramsis Farah’s 2009 book on 200 years of Egyptian development. Link

    +  “In practice, competition was shaped and constrained by public policy, leading to concentration of economic power.” Karen Pfeifer compares economic liberalization in Egypt and Tunisia in the lead up to the Arab Spring. Link


    Schools & Economic Restructuring

    MENGZHU ZHANG is a Research Fellow at the Chinese University of Hong Kong. A new paper examines emerging school regimes and municipal development in China’s new suburban town areas. 

    From the paper: 

    “This study investigates the emerging variegated school and education regimes (SERs) in urban China during the political–economic restructuring in the 2010s.  We investigate how the municipality used the new SER to facilitate the intended local socio-spatial transformation, and how these actions related to China’s changing national accumulation strategy in the 2010s. In Chengdu, the municipality established the public elite school to attract highly skilled labour and the super rich to develop the new industrial space and real estate economy. In Mianyang, the municipality developed the state-owned education investment group operating for-profit schools to stimulate the property-led land development and to gain additional fiscal revenues. The additional revenues were also used to finance the industrial park upgrade with an aim to foster a competitive electronics production cluster. In Jiangyou, the municipality collaborated with the local developer to develop a top-class private school to attract urban households to purchase the expensive suburban properties and to enhance the city’s residential attractiveness to nearby rural households. The above actions stem from China’s changing accumulation strategy that created a new institutional environment driving the municipalities in different situations to take different spatial strategies to fix certain capital investment and population concerns.”

    Link to the paper. 

    + + +

    +   “Global North countries seem unprepared for the economic and geopolitical agency being exercised by the big middle-income countries. Nor are they responding to smaller and poorer nations.” From the first edition of The Polycrisis newsletter, by Tim Sahay and Kate Mackenzie. Link. Stay tuned here

    +   “Until the late 1990s, venture-backed tech startups were highly concentrated not just in America, but in Northern California. Absent this special formula of risk capital, you don’t get world class tech companies.” New on PW, Nikhil Kalyanpur interviews Sebastian Mallaby on venture capital. Link

    +   “The Biden cancellation plan provides significant relief for millions of these disadvantaged borrowers, but absent systemic change to the higher education financing system, regressive borrowing trends exhibited within this report are unlikely to change.” A new JFI report from Laura Beamer on the distribution of student debtors. Link

    +   “The Fed’s approach to global liquidity provision via both swaps and repos constitutes a spatially variegated strategy to preserve the hegemony of the US dollar.” Yannis Dafermos and Daniela Gabor on FX swaps. Link.

    +   Ali Riza Güngen on mass indebtedness, consumer loans, and the banking sector in Turkey. Link

    +   “Unionization throughout one’s career is associated with a $1.3 million mean increase in lifetime earnings, larger than the average gains from completing college.” By Zachary Parolin and Tom VanHuelen. Link.   

    +   Eric Chyn, Kareem Haggag, and Bryan A. Stuart study segregation resulting from 19th century railroad placement. Link

    +   “Macroeconomic developments and financial innovations have reduced financial actors’ exit options, thus diminishing exit-based structural power.” Benjamin Braun on asset managers’ corporate governance. Link.  

    +   “The rapid and successful expansion of German trade in international markets from the 1870s was facilitated by the establishment of the first Auslandsbanken (foreign banks), able to meet the informational and financial needs of the foreign commerce sector. The particularity of German foreign banking seems to have been the concentration of activities primarily in those markets where German trade was only marginally developed. This contrasts with the banking dynamics of economies that, by that time, already had established themselves in international commercial markets, such as that of Great Britain. The motivation behind British banks going abroad in the 1860s and 1870s was based on intensification of investment flows and trade in overseas settlements. Studies highlight the differences in information and credit policies, showing that German banks provided the export sector with more detailed information about international market conditions and seemingly granted longer periods of credit.” By Wilfried Kisling. Link

  6. Love

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    In late September, India was projected to overtake the UK as the world’s fifth largest economy. Though it has since been modified, the country’s expected growth rate reflects a steady upswing since the late 1980s.

    In his 2017 book, economist TIRTHANKAR ROY examines the historical roots of South Asian growth.From the text:

    “The theory of comparative economic growth does not supply an obvious explanation for the recent convergence between South Asia and the world. There are two distinct traditions in economic theory and history to show why countries diverge or converge in levels of income: one suggests that growth is ‘endogenous’ to the quality of politics, institutions, and human capital. This tradition is able to explain growing international inequality with reference to initial conditions, but it leaves convergence open to a variety of interpretations. The other is the ‘neoclassical’ one, where exogenous innovation gives rise to a clear prediction of convergence that follows from diminishing returns to capital in the capital-rich countries.

    If this book were written in 1990, we would ask why South Asia diverged from the world, and use lessons drawn from these traditions to answer the question. But the question of convergence we face in 2016 is not easy to answer with the help of the same lessons. The region still lacks good quality institutions and human capital, and growth predated reduced barriers to capital mobility. And, despite capital inflow, capital is still expensive for the investors who rely on the domestic market. Existing accounts which argue that the failure of the Indian state from either over-regulation or failed redistribution do not account for other countries of South Asia, and yet the growth turnaround was shared by all. In my reading, the catching up did not originate in a retraction of the state, but from the emergence of a world economy that consumed more services than ever before.”

    Link to the text.

    +  “With a coastline thousands of miles long, skilled artisans, a robust mercantile tradition, states created by warlords and nobles of foreign origin, and kings who sponsored and protected merchants, the Indian subcontinent has long enjoyed a pivotal place within overlapping webs of cross-cultural exchange.” In Roy’s 2012 book, India in the World Economy: From Antiquity to Present.Link.

    +  From August: Louise Tillin finds that “India’s states cluster in ways that suggest the existence of distinctive subnational welfare regimes rather than straightforward variation within a national welfare regime.” Link. And in an article from 2011, Arvind Subramanian examines comparative growth rates at the state level. Link.

    +  “In the seventeenth and eighteenth centuries the advanced regions of Europe and Asia were more alike than different, both characterized by sophisticated and growing economies.” Drawing on the Indian experience, Prasannan Parthasarathi revisits classical debates on ‘The Great Divergence.’ Link.


    Firm Pay & Wage Inequality in South Africa

    IHSAAN BASSIER is a PhD candidate in economics at UMass Amherst. In a recent paper, he examines links between firm pay, unemployment, and inequality in South Africa. 

    From the paper: 

    “I provide the first estimates of the wage inequality accounted for by firm pay policies and the associated mechanisms in South Africa. Using matched employer-employee tax data from 2011 to 2016 for the universe of South African formal sector workers, I show that the dispersion of firm wage premia is high. I find that the firm wage premia explain 28% of the total wage variance. Including the sorting of high-wage workers to high-wage firms, firms explain more than a third of wage inequality in South Africa. The dispersion of firm wage premia is substantially higher than comparable estimates for other countries, and even more so when considering the raw variance rather than the proportion explained, given that South Africa is one of the most unequal countries in the world. My framework, as in the literature, relates a lower firm labor supply elasticity to a higher firm wage dispersion. I suggest that the low estimated firm labor supply elasticity may be related to the high unemployment rate in South Africa. When unemployment is high, there is less wage competition between employers, and workers are more reluctant to quit when paid poorly. Cross-regional correlations support this relationship, though are only tentative. If correct, South Africa’s two world-ranking labor market features, unemployment and inequality, may be partially linked through a firm-based mechanism, whereby unemployment contributes to a low labor supply elasticity, which in turn drives up the firm wage dispersion.”

    Link to the paper. 

    + + +

    +   “We should remember that we do want an institution to manage the financial and banking system. The problem is that we’ve also tasked that same institution with managing the macroeconomy, which it is not very well suited to do.” New on PW, a conversation between JW Mason and Samir Sonti on the politics of inflation, the Fed, and labor. Link

    +   “The state has been remade during the Covid-19 and energy crisis: what the state is allowed to intervene in, and at what level and scale it is intervening.” Also new on PW, a transcript of “The Geopolitics of Stuff,” featuring Kate Mackenzie, Tim Sahay, Skanda Amarnath, Thea Riofrancos, and Joe Weisenthal. Link. Watch a recording of the event here, and sign up to follow The Polycrisis, a new project on the political economy of climate founded by Kate and Tim, here

    +   Henry Farrell and Abraham L. Newman model information and financial networks, state coercion, and “weaponized interdependence.” Link

    +   Suresh Naidu and Michael Carr on monopsony power in the labor market. Link

    +   “The article makes the case for viewing wheat rust—a fungal plant disease—as a key component of the evolution and demise of the Italian occupation of Ethiopia.” Michele Sollai on wheat development in Ethiopia. Link

    +   Musa Nxele on platinum mining in South Africa. Link

    +   A study of private equity and the privatization of global airports, by Sabrina T. Howell, Yeejin Jang, Hyeik Kim, and Michael S. Weisbach. Link

    +   “The Netherlands is a good example of a country where part-time work has contributed significantly to the growing female employment rate. From a country with an exceptionally low female labor force participation rate in the 1950s, it changed into a country with one of the highest female labor force participation rates in the OECD. Yet, in the 1950s and 1960s, initial support for part-time employment was a coordinated response by employers and other consultative bodies in the Dutch economy, reacting to important developments in the Dutch and international labor markets—developments that challenged the fixed moral economy of Dutch employers, which was firmly based in the ideology of the breadwinner model. In a period of two decades, however, a policy instrument initially designed to reduce the hours women worked in industry came to be seen as a suitable way to increase the working hours of the female labor force without undermining the breadwinner model. The voluntary nature of part-time work fit well with the rationale of the corporatist welfare state. Part-time workers did not need any social protection in the breadwinner-based social insurance system and thus automatically ended up in the precarious working population.” By T. J. (Timon) de Groot. Link

  7. Schism

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    In the first round of Brazil’s presidential elections last Sunday, former President Luiz Inácio Lula de Silva received the highest percentage of votes, followed by President Jair Bolsonaro, who performed better than expected to force a runoff. 

    In a 2020 paper, ROSANA PINHEIRO-MACHADO and LUCIA MURY SCALCO use an ethnographic approach to understand how former Lula voters shifted their support to Bolsonaro in 2018. From the paper:

    “Porto Alegre, capital of the southernmost state of Rio Grande do Sul, is one of the paradigmatic places to investigate the rise of a far-right candidate in Brazil because it was the cradle of the Workers’ Party’s participatory budgeting (PB) in the 1990s and the site of the landmark World Social Forum in 2005. Not long before the election of Bolsonaro, the city was widely known as largely left-wing, ‘a possible utopia,’ a model for the world of grassroots democracy at the local level. However, in 2018, Bolsonaro won in all neighborhoods of the city, including the poorest ones. During the PT’s administration of the city in the 1990s, PB meetings were intense and constituted a fundamental channel to foster new political subjectivities among the poor. In the Morro, women were active political mobilizers. In 2002, Lula won the presidential race and started a new era for the party. After years of popular mobilization, this period was marked by poverty reduction and the adoption of social and financial inclusion policies. However, this phase of PT institutionalization also brought about depoliticization of the party base and gradual emptying of community forums, such as PB. Lulism focused on empowering disadvantaged groups through visibility, recognition, and affirmative action. Consumption, financial inclusion, and the fact that the poor had access to air travel for the first time, for example, became a national emblem. Through access to manufactured goods, our interlocutors challenged race- and class-based structures that perpetuated the monopoly held by the elite on distinction. Yet, in contrast to their parents’ and grandparents’ modes of collective organization (e.g., participatory budgeting), this process now occurred in a more diffuse, contradictory, and individualized manner.

    Since we left the field site at the start of 2014, Brazil has undergone drastic changes. The mass demonstrations in June 2013 inaugurated an era of political instability. In 2014, the right-wing demonstrations in support of the impeachment of former president Dilma Rousseff started, Brazilian cities hosted the World Cup, and Rousseff was narrowly reelected. This year also marked the commencement of the so-called Car Wash—a criminal investigation focused on corruption by the federal police—resulted in the imprisonment of former president Lula in 2018. The ‘Brazilian dream’ proved to be unsustainable in the long term: economic growth plunged from 7.5 percent in 2010 to -3.77 percent in 2015. This state of limbo led to the degradation of daily life in Morro. In Porto Alegre in particular, this period coincided with one of the worst state public security crises, derived from a fierce dispute between drug trafficking factions. When we returned to our fieldwork in November 2016, our interlocutors reported that they no longer had economic resources or access to credit. They were indebted to credit cards, banks, chain stores, and informal moneylenders. By adopting a conservative, populist narrative, Bolsonaro offered simple solutions to complex problems in the midst of political and economic collapse.”

    Link to the text.

    +  “Bolsonaro’s presidency ended up having a paradoxical effect at the regional level: instead of strengthening the radical Right, he mostly weakened them, and few wanted to appear by his side.” Pablo Stefanoni on the election results Link

    +  “If elected in November 2022, will Lula da Silva’s Workers’ Party challenge the hegemony of big finance and rescue the economy from rentierism?” From earlier this year, an essay by Guilherme Leite Gonçalves & Lena Lavinas. Link. In 2021, a PW panel featuring Lavinas, André Singer, and Barbara Weinstein centered on financialization and social policy in Brazil. Link to the transcript. 

    +  “Examination of the relationship between financial capital and other bourgeois fractions in this context disputes the hypotheses of a bourgeois united front and of a convergence around rentism.” André Flores Penha Valle on the impeachment of President Dilma Rousseff, in a recent issue of Latin American Perspectives on Brazil. Link


    Infrastructure Investment in Ottoman Iraq

    CAMILLE COLE is a Junior Research Fellow at Cambridge University studying Ottoman Iraq. In a 2018 paper, she investigates infrastructure investments and Ottoman-British relations in the late-nineteenth century. 

    From the paper: 

    “Ottoman Iraq presents a revealing case in thinking about the forms that British economic interests were able to take globally: although it encompassed zones of Britain’s informal empire, the Ottoman state intensified its own imperial ambitions towards the end of the nineteenth century. Ottoman policies in southern Iraq were neither always at odds nor always in alignment with British aims in the region. A few central contradictions shaped the Ottoman approach towards British involvement in Iraq. Most basically, Ottoman suspicions of British motives restricted the expression of British economic interests. At the same time, Ottoman policies encouraged the kind of technologically enabled economic intervention embodied by British steamship and irrigation projects. Steamship trade not only seemed to exemplify modernity, but also represented a relatively easy source of tax revenues. Irrigation fulfilled important governing priorities and promised larger tax revenues. This kind of local consideration was entangled with controversial empire-wide questions, including British oversight of Ottoman finances and the Capitulations.”

    Link to the paper. 

    + + +

    +   Watch a recording of Thursday’s event on “The Geopolitics of Stuff” featuring Kate Mackenzie, Tim Sahay, Skanda Amarnath, Thea Riofrancos, and Joe Weisenthal. Link. The discussion marked the launch of The Polycrisis, a new project led by Mackenzie and Sahay and published by Phenomenal World. Sign up to follow The Polycrisis here

    +   “In just four days, between March 29 and April 1, the Apruebo (approve) vote lost its comfortable lead in the polls over the Rechazo (reject) and never recovered.” Macarena Segovia and Paulina Toro on the Chilean constitutional vote. Link.  

    +   Daniela Gabor in The Guardian on the Truss tax cuts. Link

    +   Erik Bengtsson on agrarian politics and labor in the formation of Sweden’s democracy. Link.  

    +   “The IRA’s total spending is likely to be more than $800 billion, double what the CBO projects.” Robinson Meyer on the IRA and the climate economy. Link

    +   Nicholas Mulder on the Russia sanctions and the Global South. Link. And see the transcript of an April PW event featuring Mulder and Javier Blas on sanctions and economic war. Link

    +   A study of intergenerational mobility in Brazil, by Diogo G. C. Britto, Alexandre Fonseca, Paolo Pinotti, Breno Sampaio, and Lucas Warwar. Link

    +   “The carbon intensity of the US economy exhibits a sharp and unambiguous peak in 1917. This was a time in world history that is notable for at least two reasons: World War I ended, and the Spanish Flu broke out one year later in 1918. This paper contends that these events, coupled with (not unrelated) turmoil in the domestic coal industry, were largely responsible for the turning point in carbon intensity. After 1918, reliance on coal plummeted while oil and gas use were on the rise. After the disruptive events of the Flu and WWI, energy derived from oil rapidly increased as a share of GDP. Both coal and gas energy intensities fell until 1921. Then, after the recessions following the pandemic and the war, energy from gas climbed quickly while reliance on coal continued to fall. Reduced reliance on coal, coupled with real GDP growth, though at a modest 1.6% pace until the U.S. began to participate in WWII, resulted in precipitous reductions in carbon intensity. In fact, between 1918 and 1940 CO2 emissions fell at an annual rate of 1.3%.” By Nicholas Muller. Link

  8. Gold Face Type

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    Ongoing interest rate hikes by the Federal Reserve combined with the recently published “mini-budget” have sent the UK economy into turmoil, prompting the Bank of England to buy £65 billion in long term government securities.

    In a 2021 article, DANIELA GABOR examines the reemergence of monetary financing, and its implications for central bank independence.From the paper: 

    “Revolutions in central banking do not occur very often. That, it is typically agreed, is a good thing. Yet, since the global financial crisis, we seem to be on the verge of a revolution, as central banks have resorted to increasingly large purchases of government bonds. The return to monetary financing threatens the common wisdom of the past 40 years, that the monetary and fiscal arm of the state should operate separately from each other to avoid ‘fiscal dominance’. But even its most zealous guardians—central banks —recognise that monetary policy cannot single-handedly address deep economic crises without support from fiscal policies. Even as their footprint in government bond markets grows rapidly, central banks have been at pain to argue that the ‘inevitable strengthening of the interplay between monetary and fiscal policies’ should not be interpreted as a return to fiscal dominance. Rather, large scale purchases of government bonds can be a legitimate and effective monetary policy tool.

    This paper disentangles the claims that we are witnessing a revolution in central banking. It argues that not all central bank purchases of government bonds are alike, but they should be evaluated against the objectives of the interventions and the broader macro-financial setup of the economy. It distinguishes two regimes of monetary financing—shadow vs sub-ordinated—across (a) objectives of intervention, (b) targets, (c) institutional hierarchy, (d) macroeconomic paradigm, and (e) accumulation regime/distribution of political power. From this perspective, w are living through a revolution without revolutionaries, in which large central bank purchases of government bonds should not be interpreted as a return to Keynesian powerful fiscal authorities and emasculated central banks.” 

    Link to the text.

    +  “In the 1990s and 2000s central banks relied on private balance sheets which could expand cheaply and easily in order to absorb ‘risk free assets’ to implement monetary policy. This meant they didn’t need large scale asset purchases.” Nathan Tankus places the Bank’s actions in historical context. Link.

    + From Tankus’s newsletter: a 1966 Federal Reserve memo examining “Contingency Planning for the Government Securities Market.” Link.

    +  “We study how from its foundation as a private corporation in 1694 the Bank of England extended large amounts of credit to support the British private economy and to support an increasingly centralized British state.” On the Economic History Society Blog, Patrick O’Brien and Nuno Palmaconsider the Bank of England’s role in Britain’s fiscal-military state. Link.


    Pollution & Interstate Waters

    In her job market paper, PhD candidate at the Wharton School at UPenn ANGELA GUNN investigates the effects of state and federal policy on interstate waters. 

    From the abstract: 

    “I investigate spillover effects of state-level water quality enforcement on interstate waters. To separate the effect of state-level policy from other sources of water quality variation, I measure water quality downstream of a state before and after the state receives federal authorization to conduct its own pollution permitting program.  I construct an index of water quality at the stream segment-year level using dissolved oxygen saturation readings from 1977 through 2020. I match this water quality index to a geospatial data set of virtually all rivers and streams in the continental United States in order to classify a segment’s exposure to upstream out-of-state waters. I find negative downstream spillover effects of up to 0.08 standard deviations, concentrated in the Northeast and Southeast. I additionally investigate whether interstate water compacts and political cooperation reduce cross-state spillovers. I find suggestive evidence that water quality on border rivers increases when neighboring states share political affiliation. Finally, I find evidence that interstate cooperative agreements have potential to resolve cross-state inefficiencies, but that cooperation is fragile.” 

    Link to the paper, link to Gunn’s website. 

    + + +

    +   Join us next Thursday, October 6, at 4PM ET for a discussion on commodities, supply chains, and climate. Featuring: Isabella Weber, Skanda Amarnath, Kate Mackenzie, Tim Sahay, and Joe Weisenthal. Link to register.

    +   “I argue that the Chinese central government’s investment in high-speed railways is shaped by the bottom-up bargaining efforts of the territorial governments.” New on PW, Lizhi Liu interviews Xiao Ma on China’s high-speed rail network. Link

    +   “Given the challenges of our own day, policymakers could learn from Burns’s commitment to collaborating with Congress and the White House to bring all the possible tools to bear to support price and financial stability.” Chris Hughes rethinks the legacy of Arthur Burns. Link

    +   Phillip B. Levine and Dubravka Ritter on the US racial wealth gap and access to financial aid. Link. And see JFI Lead Researcher Laura Beamer‘s report on financial aid and cost deception at US universities. Link.  

    +   Eric Vázquez on Bitcoin and dollarization in El Salvador. Link

    +   “The Big Three automakers are using the transition to electric cars as an opportunity to bring on an underclass of nominally unionized but lower-tier workers, or to skip unions at new factories altogether.” Lee Harris’s investigates worker conditions and unionization in the electric vehicle industry. Link

    +   Kai Zhou, Jaroslav Koutský, and Justin B. Hollander on “urban shrinkage” in China, the US, and the Czech Republic. Link

    +   Conor McCabe on Irish industrial policy, tax avoidance, and the case of Apple. Link

    +   “In 1960, as part of the early People’s Republic of China’s (PRC) cultural diplomacy, a troupe of almost one hundred Chinese performers and officials visited Canada, where they were widely identified as the ‘Peking Opera.’ This was the high Cold War, ten years before Canada would recognize the PRC. Internal government documents show that granting permission for the opera visit constituted a considerable shift in Canadian policy, allowing a large-scale exchange with Communist China at a time when it was not possible for such a tour to visit the United States. For China, visits of performing arts groups were a major part of international diplomacy. For Canadian impresarios, hosting the Peking Opera was a way of legitimizing their festivals and theatres internationally. Among Chinese Canadian communities, reactions to the visit showed that the pendulum had begun to swing away from Taipei and toward Beijing, and for the Royal Canadian Mounted Police the tour members were suspicious figures to be put under close surveillance as they interacted with Canadians.” By John Stenberg. Link.  

  9. Now You Are Found

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    Hurricane Fiona’s landfall last week left all of Puerto Rico without electricity, exposing weaknesses in the island’s electricity grid following a controversial privatization in June 2021. 

    Some have called increased federal control and cuts to Puerto Rico’s public expenditures a necessary corrective for the island’s slow growth and mounting debt. In a 2018 article, PEDRO CABÁN places these measures in the context of twentieth-century Puerto Rican development. 

    From the paper: 

    “[Section 936] allowed U.S. firms that invested in possessions in Puerto Rico to retain profits without assuming a federal tax liability. According to a senior official at Moody’s Analytics, ten years after expiration of Section 936 [in 2006], Puerto Rico’s economy was ‘far and away the weakest of any state in the country. By many measures, including the loss of output, GDP and wealth, it was already suffering a depression. The pharmaceutical industry recently acknowledged that Section 936 had failed to generate employment growth and to make an enduring contribution to Puerto Rico’s economy. The president of the Puerto Rico-USA foundation, a trade organization that represents the interests of U.S. firms operating in Puerto Rico, expressed his disapproval of the use of federal tax breaks to reactivate the island’s economy and emphasized that ‘the important point here is the fact that the economic model possible as a territory using manufacturing tax breaks has not and will not any longer work.’ Growth in Puerto Rico was stunted during the Section 936 period, ‘In fact between 1980 and 2000 the mainland U.S. GNP rose 90 percent, while during the same period the GNP for Puerto Rico grew only 60 percent.’ 

    The period of sustained economic growth between 1950 and 1970 was seemingly attributable to the ‘American connection.’ However, Puerto Rico was successful because it was competing against manufacturing regions in the United States with higher labor costs, and exporting to the mainland market. This favorable investment situation quickly ended with the onset of globalization. But by the mid 1980s and through the 1990s technological advances in production, communications and transportation undermined Puerto Rico’s competitive position. International treaties and multilateral agreements on trade irrevocably ended any inherent advantages that the American connection offered Puerto Rico. Puerto Rico’s economy was kept afloat during this period primarily because Section 936 continued to generate huge profits for the pharmaceutical industry. While the Section 936 helped enrich foreign corporations, these did have not enduring impact for Puerto Rico’s economy. Investors were the primary beneficiaries of Section 936, and not the residents of Puerto Rico who received wages substantially below mainland wages for the same work. Puerto Rico development strategy was designed to promote growth without equity.” 

    Link to the text.

    +  “Is PREPA simply a ‘failed experiment’ of a public energy utility in the United States, or are other factors to blame for its current sub-par state of operations and lack of financial stability?” Kobi Naseck on Puerto Rico’s public utility. Link. And Germá Bel on the island’s first privatizations, from 1948 to 1950. Link

    +  “Although a large share of the Puerto Rican population relies on federal transfers to sustain a living standard over the poverty threshold, these funds also play a major role sustaining the viability of Puerto Rico as a tax haven for U.S. transnational corporations.” A 2007 article by Emilio Pantojas-García. Link

    + “PROMESA, signed by President Obama on June 30, 2016, authorizes the president of the United States to appoint a financial control board with extraordinary powers and with a mandate to enforce measures to compel Puerto Rico to repay its creditors.” Cabán on federal control. Link. And in The Nation, Simon Davis-Cohen examines the legal theory behind the island’s Federal Oversight and Management Board. Link


    India’s Informal Economy

    SURBHI KESAR is Lecturer in economics at SOAS University of London. In a 2018 paper co-authored with Snehashish Bhattacharya, she examines the persistence of informality in India’s manufacturing sector. 

    From the text: 

    “In literature on development and modernisation, it has been expected that, with economic growth and a consequent increase in per capita income, the dualism between ‘traditional’ and ‘modern’ economic spaces will wither away, leading to a structural transformation and formalisation of the economy. However, in India,
    in spite of a long period of sustained economic growth, the ‘traditional’ informal sector has continued to persist and to provide employment to the vast majority of the population. We identify an ingrained dualism between the ‘traditional’/non-capitalist segment and ‘modern’/capitalist segment in the informal manufacturing sector (IMS) and find that there has not been a marked tendency towards a transformation of the IMS even during the period of high growth. One possible channel for this transformation is through the process of ‘traditional’ enterprises transitioning into larger, ‘modern’ ones. However, the  own account manufacturing enterprises (OAME) (the ‘traditional’/non-capitalist enterprises), which comprise the vast majority of IMS enterprises, were not able to retain any substantial fund for accumulation during this period. Not only did the dualism between the ‘traditional’ and ‘modern’ segments of the IMS remain intact, but it seems that it was reinforced and became further entrenched during the high-growth decade.” 

    Link to the paper. 

    + + +

    +   “Morten Jerven’s new book begins with an assertion that startles our notions of racial hierarchy and global economic history: in the long run, Africa’s rate of economic growth is unexceptional.” New on PW, Alden Young reviews Morten Jerven’s The Wealth and Poverty of African StatesLink

    +   “In the sphere of development, discussion of the finance gap tends to paper over the political dynamics of financial resources.” Also new on PW, Nick Bernards on the history of the “finance gap.” Link

    +   “IMF surcharges are pro-cyclical financial penalties imposed on countries precisely at a time when they can least afford them.” By Joseph Stiglitz and Kevin Gallagher. Link

    +   “Europe’s austerity bias was bolstered by a convenient external option: positive external demand shocks from China and the United States alleviated the employment costs of weakened home markets.” Palma Polyak on austerity and foreign demand. Link

    +   Ian Bowen, Dinesh Madan, Lavkesh Rajwani, and Shanthi Muthiah on the Inflation Reduction Act’s impact on the clean energy sector. Link

    +   “Access to high speed railways reduces travelers’ exposure to extreme air pollution and temperature by 7% and 10%, leading to substantial health benefits.” Panle Jia Barwick, Dave Donaldson, Shanjun Li, Yatang Lin & Deyu Rao on China’s railways. Link

    +   Jason Monios on the collapse on Hanjin shipping in 2017, “then the seventh-largest shipping line in the world and the biggest bankruptcy in the 50-year history of container shipping.” Link

    +   “Using a database of about 375,000 individual observations, which represent over two million days worked, this article studies building workers’ remunerations and how labour markets functioned in eighteenth-century Madrid. This research is based on a source that is already known but has been barely exploited: the payrolls for the construction of the Royal Palace in Madrid. We provide an explanation for the wage stickiness found in Madrid, one in which economic factors, principally the evolution of the cost of living and the family income, prevail over other common explanations in the literature (customary practices or guild regulations). Wage rates were always linked to skills and that there were different labour markets with different wage determinants. While the earnings of craftsmen increased as they gained skills, in the case of the unskilled workforce the returns to experience were negligible.” By Mario García-Zúñig and Ernesto López Losa. Link.  

  10. Magnolia Flower

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    Last week, the referendum to overhaul Chile’s Pinochet-era constitution lost by more than 20%. The result was surprising: in 2020, nearly 80% of the population voted in favor of rewriting the constitution, and the country’s most recent elections brought progressive Gabriel Boric to power with more than 55% of the vote.

    With an 86% particiation rate, mobilization around the vote was unparalleled since the country’s transition to democracy in 1988. In a 1989 article, BARBARA STALLINGS reflects on the economic circumstances leading up to that monumental shift.
    From the paper: 

    “Why did a transition not occur in Chile during the difficult years of 1982-84? This question becomes especially intriguing from the vantage point of 1988. Leaving social questions aside, there were major problems with the type of growth that was occurring by the late 1970s. The most obvious issue was the current account deficit that reached some 15% of GDP in 1981. This gap was filled by a huge volume of foreign loans, most of which was spent on consumer imports and/or speculation. Productive activities were becoming unattractive, and industry in particular was in decline. By 1981, many firms were in bankruptcy, and the financial system was increasingly insolvent. The end of foreign lending the next year brought the ‘miracle to an abrupt halt.

    The crisis in Chile was part of the world-wide economic problems that emerged in the early 1980s. As recession hit the advanced industrial countries and interest rates rose, these trends were passed on to Latin America through balance-of-payments problems. At the same time, foreign loans that had stimulated growth in the 1970s were cut off as a result of the Mexican debt crisis. Despite being part of this international pattern, however, Chile’s crisis had some unique characteristics. Inflation more than doubled between 1981 and 1982, from 9.5% to 20.7%, while the fiscal balance went from a surplus to a deficit equivalent to 2.3% of GDP. Chile’s GDP fell by 14% in 1982, and open unemployment jumped to 22% of the labor force. Likewise, a balance-of-payments crisis manifested itself in a large loss of reserves, even though the trade balance moved into a small surplus. In addition, there was a domestic financial crisis of enormous proportions, involving the largest banks in the country as well as industrial firms. Allowing the crisis to run its course would have threatened the government’s very survival. To prevent such a scenario, Pinochet and his political advisors began to take a more active role in economic policy making. Over the next few years, they allowed or even encouraged policies that deviated substantially from the laissez-faire model of the Chicago Boys.”

    Link to the text.

    +  Miguel Ángel Fernandez and Eugenio Guzman analyze the outcome in light of geographic divisions, internet access, religious preferences, demographic factors, and more. Link.

    + In Bloomberg, Clara Fereira Marquez reflects on the referendum’s consequences for the country’s mining industry: “The world’s top copper-producing nation will remain stuck in a period of political turbulence certain to hamper investment at a time when it is sorely needed: pits are maturing, grades declining and the green boom is revving up demand for both the red stuff and the key battery ingredient lithium.” Link.

    +  “After the overthrow of the Spanish King by Napoleon’s forces and the arrest of Ferdinand vii, power was briefly devolved from the centre. Then again, in the 1820s, Ramón Freire resisted a Santiago dictatorship. Under Salvador Allende in the early 1970s, local assemblies once again emerged.” From May, an NLR interview with Camila Vergara explores Chile’s constitutional history. Link.


    Chinese & Indian Railways 

    In a new paper, PhD candidate in sociology at Princeton University KYLE CHAN studies state capacity by comparing railway bureaucracies in China and India. 

    From the text: 

    “This article proposes an alternative typology of state organizational forms that better accounts for the important role of bureaucratic structure in shaping state capacity: nodal versus diffuse forms.To show how this typology works in practice, this article compares two paradigmatic empirical cases: the state railway bureaucracies of contemporary China and India. China’s railway bureaucracy is a paradigmatic example of the nodal form of organizational structure: decision-making power is concentrated in a limited set of key actors across the bureaucratic hierarchy. For most railway projects, a single nodal actor—the state-owned project corporation—is responsible for coordinating work and seeing the project through to completion. India’s railway bureaucracy is a paradigmatic example of the diffuse form: decision-making power is distributed widely across many overlapping authority structures, including regional bureaus, functional divisions, and informal tenure-based hierarchies. I [show] how the nodal structure of China’s railway bureaucracy facilitates the completion of railway projects by providing mechanisms for coordination and accountability while the diffuse structure of India’s railway bureaucracy hinders railway work by making these same processes more difficult. These findings suggest that the organizational structure of state bureaucracies plays an important yet under-studied role in shaping state capacity.”

    Link to the paper. 

    + + +

    +   “For the past thirty years, Italy’s perpetual state of emergency has periodically necessitated the formation of expert-led national-emergency governments.” New on PW, Lucio Baccaro on Italy’s upcoming elections. Link

    +   “Electric passenger cars made impressive gains between 2019 and 2021…but those numbers pale in comparison to the global fleet of electric two- and three-wheelers.” Erin Wong on EV scooters in Asia. Link

    +   “Soy production in Brazil has become a key part of food security policies and has contributed to China’s development and social stability since the early 2000s.” By Giorgio Romano Schutte and Reinaldo Campos. Link.

    +   “Embracing efficiency-oriented, ‘rational’ and ‘objective’ arguments offered an antidote to right-wing representations of liberalism as un-American.” Landon Storrs on Beth Popp Berman’s Thinking Like an Economist, in the LPE project’s symposium on the book. Link. And read Luke Herrine’s recent review of the book in PW here

    +   Sebastian Dellepiane-Avellaneda, Niamh Hardiman, and Jon Las Heras on construction-based bubbles and the “financial resource curse” in Spain and Ireland. Link.  

    +   “We predict the propensity to secede of 3,003 subnational regions in 173 countries.” On secession, identity, and income, by Klaus Desmet, Ignacio Ortuño-Ortín, and Ömer Özak. Link

    +   Suresh Kumar and Subhasis Mandal on India’s wheat export ban and its effects on farmer incomes. Link

    +   “In the 1980s, historical demography began a reorientation from reconstructing trends to studying socioeconomic differentials in demographic behaviors. The most important contributions of the earlier generation had been aggregate-level reconstructions of trends in population sizes, fertility, and mortality, which were often interpreted within a framework derived from Thomas Malthus and Demographic Transition Theory. The next generation of research paid much more attention to individual-level analysis presented in a statistical rather than a demographic framework. This work emphasized differences within societies due to socioeconomic status, ethnicity, and community and to life-course models highlighting the importance of gender and age. New methods took advantage of changes in computer technology, advances in multivariate statistical models, and the emergence of large data collections.” George Alter on European historical demography. Link