Category Archive: Sources

  1. Sun and Lavender

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    The past few months have seen record-breaking heat waves across the globe. In India, a deadly heat wave in May renewed questions around the nation’s health, safety, and economy. 

    In a new article, SOHINI SENGUPTA and MANISH K. JHA examine policy responses to India’s increasingly frequent heat waves, focusing on their implications for labor and national economic strategy.

    From the piece:

    “Increasing heat is described as detrimental to labour in recent policy reports. According to the IPCC 6th assessment report AR6, ‘heat stress conditions reduce outdoor labour productivity (farming and construction)’ since people who work outdoors may fall sick or die. Distress is related to work performed outdoors against work that can be performed indoors under special protection such as ‘cooling’. Framing risk and vulnerability as outdoors/indoors support problematic recommendations. First, advocacy for the structural transformation of national economies such that labour can be shifted from agriculture and construction to services. Second, reducing responsibility of the state from comprehensive social protection to warnings and advisories and health data collection and surveillance and monitoring of working and migrant populations. 

    A ‘heat’ report published by the ILO described heat related stress as affecting the ‘safety of workers’ and reducing their ‘productivity’. Productivity is defined as reduced work capacity and loss of working hours. In the context of heat, the generic workers described in this report apply ‘natural defence mechanism’ such as ‘slow down work’, ‘take more frequent and longer breaks’, ‘limit the number of working hours,’ thereby reducing productivity . Exposed to extreme heat, workers were not just susceptible to disease and death but also inefficient, suggests the above explanation. Drawing insights from the IPCC fifth report and Paris Agreement, the report finds the main consequence of heat stress would be economic costs through productivity loss. The report discusses the vulnerable status of agricultural and construction workers in developing and emerging countries through heat exposure. Such population groups would migrate in large numbers in the context of high informality and inadequate social security where heat stress will compound vulnerability and inequality. India is estimated to suffer maximum (productivity) losses due to a large population and dependence on the two most exposed sectors: agriculture and construction. One of the countries in the region that is presented as a good example of addressing heat stress related losses surprisingly is conflict-affected Myanmar where ‘rapid structural transformation from agriculture to services has taken place. A consistent focus on structural transformation and labour productivity, suggests that heat narratives in this case are less concerned with remedying the inadequate social protection of current workers.”

    Link to the text.

    +  “In the last two decades, an average of 228 billion hours (±27 billion hours/year) of heavy labor have been lost per year due to heat exposure in the 12-hour work day.” On the distribution of global labor losses. Link. And studies of heat and labor productivity in Europe, China, and India. Link, link, link

    +  A 2013 report by the National Resource Defense Council examines rising temperatures in Ahmedabad and its effects on construction workers. Link. And recommendations for the city’s heat action plan, the first of its kind in South Asia. Link

    +  “The National Action Plan on Heat-Related Illnesses does not focus on protecting people from heat exposure, but rather outlines relatively minor strategies for dealing with the consequences…That will do nothing for the 9 out of 10 employed people in India who are engaged in informal activities with no legal or social protection.” By Jayati Ghosh. Link. And Saudamini Das estimates that urban informal sector workers lose INR 195 per heat wave day. Link


    Facial Recognition Technology & Elections

    FEYAAD ALLIE is a PhD candidate in political science at Stanford University. In a recent paper, he examines the effects of facial recognition technology on voter turnout in India. 

    From the paper: 

    “India piloted facial recognition technology (FRT) in polling stations in one municipality in Telangana state during local body elections in January 2020. I focus on the Telangana State Election Commission’s (TSEC) random assignment of FRT in Kompally municipality to study the effect of FRT on voter turnout. I find that polling stations with FRT had 6.7 percentage points lower turnout compared to those without. I outline three possible mechanisms that could play a role in driving this effect and provide suggestive evidence where possible. One piece of suggestive evidence indicates that the negative effect on turnout may have been stronger in polling stations with a greater share of Muslims. Indian Muslims are a marginalized group with heightened concerns about government surveillance and instant facial recognition especially in light of events in 2020 regarding India’s Citizenship Amendment Act (CAA) and the National Registry of Citizens (NRC).”

    Link to the text, link to Allie’s website.

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

    + + +

    +   “The most beautiful theoretical plans for inflation policies crumbled when confronted with the reality of the war economy.” In the latest installment of PW’s series on the price level, Isabella Weber investigates price controls during WWII. Link. See the rest of the series here

    +   Phenomenal World is hiring an editorial intern for the fall semester. This paid opportunity is open to all CUNY undergraduates. Applications should be submitted by August 12. Please share widely, and see further details on how to apply here.

    +   “Based on the CBO score, the legislation would reduce deficits by $305 billion through 2031.” The Inflation Reduction Act and the federal budget. Link

    +   Katie Kedward, Daniela Gabor, and Josh Ryan-Collins propose a green credit policy regime. Link

    +   “Returns of uninsured bonds fall slowly in the weeks following a disaster, by 0.31% on average, translating into investor losses of almost $10 billion.” On natural disasters and municipal bonds, by Jun Kyung Auh, Jaewon Choi, Tatyana Deryugina, and Tim Park. Link

    +   Marcelo Ridenti examines a Cold War-era program that recruited leftist Brazilian students for internships in the US. Link

    +   Devin Wiggs on the rise of the London Interbank Offered Rate (LIBOR) in global finance. Link

    +   “The ratio of mortality rates between ‘normal’ and plague years in the Issyk-Kul’ lake communities (in northern Kyrgyzstan) is not unlike that in Europe during the plague years 1348 to 1350. A proper appreciation of the pandemic outbreak requires setting its timing in a climatic context. After two pluvial episodes in the 1310s and 1320s, precipitation levels in Issyk-Kul’ during the 1330s underwent a sharp decline, thereby depriving sylvatic rodents of sufficient grass to sustain their high population density. Hence, the plague pathogen and its vectors needed an alternative host to maintain their activity.” By Philip Slavin. Link

  2. Polite Conversation

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    This week, Russia’s state-run energy company Gazprom drastically cut gas supplies— delivered via the Russia-Germany Nord Stream 1 pipeline—to Europe. The move amplified longstanding concerns around European dependence on Russian energy. 

    In his 2015 book, STEPHEN F. SZABO examines the expansion of Gazprom into Europe by looking at the company’s role in the evolving Germany-Russia relationship. 

    From the book: 

    “Gazprom’s European strategy is part of its larger international expansion strategy that has been centered around the goal articulated by Alexander Medvedev, director general of Gazprom Export, ‘to become the largest energy company in the world.’ Within Europe its strategy is to diversify its structure to control the distribution and sale of the gas to the European consumer. It has, consequently, diversified into the transportation, distribution, and power-generation industries, including acquiring storage facilities and distribution hubs. It does this through ownership of foreign subsidiaries or shell companies to invest overseas. The liberalization of energy markets in the EU offered an opportunity for Gazprom to expand in Europe, but EU legislation also requires notification of non-EU companies operating in European gas networks, a policy directed against an overdependence on Russian energy. In September 2011, European Commission investigators raided a number of Gazprom’s European offices, including Gazprom Germania in Berlin, with the purpose of investigating allegations that the companies had colluded to divide markets, hindered access to distribution networks and blocked efforts to widen sources of supply. This was part of a wider effort to liberalize European energy markets by making it easier for companies without distribution networks to gain market access through unbundling supply and infrastructure operations.

    Gazprom has tried to increase European energy dependence by attempting to work arrangements with Algeria to establish a cartel to limit Europe’s gas alternatives and to push the South Stream pipeline over over Nabucco, which was designed to limit European dependence on Russian energy. The decision to construct the Trans Adriatic Pipeline (TAP) effectively killed the Nabucco project in 2013. The Nord Stream pipeline is an important component of this strategy. Gazprom does all that it can to prevent a common EU energy policy and prefers bilateral relations and special deals with countries such as Germany and Italy. A common EU policy would foster diversification of sources and unbundle national utilities, in the process cutting profit margins and reducing Gazprom’s incentives to buy European companies. It would also weaken bilateral special relationships with Russia. Gazprom operates in Germany through its fully owned subsidiary, Gazprom Germania. About half the jobs created by Russian firms in Germany are due to Gazprom. These holdings give Gazprom control of 38 percent of the German gas market. The Nord Stream Pipeline is a joint venture in which Gazprom owns 51 percent and Wintershall Holding and E.ON Ruhrgas AG each with 15 percent.” 

    Link to the text.

    +  Jonathan Stern’s 2005 book looks at the history of Gazprom and the Soviet gas industry. Link. And Andreas Heinrich examines Gazprom’s activity in foreign markets in the 1990s and early 2000s. Link

    +  “Gazprom’s share of the domestic market decreased from 80 percent in 2008 to 66 percent in 2016, and fell to approximately half of all gas processed domestically in 2018.” Anna Mikulska on Gazprom’s domestic competition. Link.  

    +  Moniek de Jong and Thijs Van de Graaf on the Nord Stream 2 and the limits of EU power in the Germany-Russia gas relationship. Link. And in a recent Phenomenal World post, Nikhil Kalyanpur speaks to Helen Thompson about the geopolitics of energy. Link


    Mortgages & Marriage

    In new paper, research economist at Danmarks Nationalbank ALINA KRISTIN BARTSCHER looks at the effects of the Equal Opportunity Act on homeownership and labor force participation among married couples. 

    From the abstract: 

    “Until the 1970s, U.S. mortgage lenders commonly discounted half of the wife’s income in couples’ joint mortgage applications. This changed with the introduction of antidiscrimination legislation in the 1970s, providing a natural experiment to study the relaxation of income-related borrowing constraints. I study the effects of the reform by estimating difference-in-differences regressions and solving a simple calibrated life cycle model. I find substantial positive effects of the reform on mortgage borrowing and homeownership rates of married couples with working wives. Moreover, I find a positive effect on married women’s labor force participation, which strongly amplifies the homeownership and borrowing effects.”

    Link to the text, link to Bartscher’s website. 

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

    + + +

    +   “Tortured constructs reflect a stubborn refusal to accept what Powell freely admits: monetary policy simply cannot reverse hyper-wealth concentration nor revive what Petrou calls ‘shared growth.’ ” New on PW, Melinda Cooper on the Fed, unconventional monetary policy, and Karen Petrou’s Engine of Inequality. Link

    +   “The cases of Iraq and Haiti illuminate the persisting importance of odious debt, from colonization to modern day warfare.” Also new on PW, Simon Hinrichsen on the lack of an odious debt doctrine. Link

    +   Phenomenal World is hiring an editorial intern for the fall semester. This paid opportunity is open to all CUNY undergraduates. Applications should be submitted by August 12. Please share widely, and see further details on how to apply here.

    +   “Just as outsiders once pillaged the Caribbean for wealth created by the hands of slaves, investors in those former imperial powers now squeezed former territories for their assets, for access to markets, for interest on loans.” In New York Times Magazine, Abrahm Lustgarten on Barbados, the IMF, and climate finance. Link.  

    +   Lee Harris on the absence of labor protections in the USICA. Link

    +   Gary D. Libecap and Ariel Dinar examine the impacts of climate change on water access and US agriculture. Link

    +   Severin Borenstein and Ryan Kellogg compare the emissions reductions of clean energy standards vs. carbon pricing. Link

    +   “The consensus around twenty-first century skills appears less epistemic in nature and more like an ideational echo chamber.” A new paper on the “core skills consensus” of international organizations and global management consulting firms. Link

    +   “Measuring within-household mortality allows us to understand patterns of quarantine enforcement in settlements across early modern Europe. Here the focus is restricted to three epidemics that occurred in Bristol – one of England’s most populous and prosperous cities. The analysis reveals household quarantine was enforced in 1603–4 with unprecedented vigour. The effects of quarantine are particularly pronounced in the affluent parishes where elite residence was highest. Greater evidence for enforcement is explained by greater elite oversight and control, as well as their desire to protect their own households. The scale of the impact is shocking. Household quarantine could double within household mortality.” By Charles Udale. Link

  3. Compositions in Green

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    This month China narrowly missed its growth targets, sparking speculation over the economic impacts of its zero-Covid policy. The contraction was heavily shaped by local governments, who, struggling to get loans from institutional bond investors, have begun to offer high interest rates to retail investors in return.

    A recent article by YI FENG, FULONG WU, and FANGZHU ZHANG considers the emergence of Local Government Financial Vehicles (LGFV) in China, and examines their operations through a study of Jiaxing.

    From the piece: 

    “To counteract the impacts of the 2008 financial crisis, China took a proactive strategy with extensive urbanization and infrastructure construction to absorb surplus workers. The strategy was centred  an investment package of four trillion Yuan in urban infrastructure. To implement the national strategy, the central government promised to provide 1.8 trillion Yuan, and it devolved the remaining 2.2 trillion Yuan as tasks to local governments. As local governments were not eligible to borrow externally according to the Budget Law before 2014, they were encouraged by the People’s Bank of China to use LGFVs to seek external finance. LGFVs are ‘entities established by the local governments through injection of land, equity and other types of capital and undertake financing functions for governmental investment projects.’ Moreover, ‘the local governments undertake the joint responsibilities for repayment’ (CBRC, 2011). Encouraged by the central government, China has witnessed a boom of LGFVs.

    The state-owned enterprises specialized in urban development are urban development and investment corporations (Chengtou hereafter). Chengtou constitute the majority of LGFVs. Their functions vary from mega-event projects and infrastructure to ordinary land development. We use a municipal level Chengtou called Jiaxing City Construction Investment Co. Ltd Corporation to investigate the operations of LGFVs. First, we find the insufficiency of land collateral or land premiums to offset previous cost, rendering the previous model of ‘land-leverage-infrastructure’ precarious. Second, we observe the effects of Chengtou regroupment—Jiaxing Chengtou regrouped with other LGFVs to form the Jiaxing Chengtou Group. By doing so, it has extensively developed its financial functions. It could also avoid supervision by exiting the monitor list. While it still undertakes urban projects including land development and infrastructure construction, it uses self-raised funds to finance these projects. Ultimately, Jiaxing Chengtou’s rising debt load was cleared by Jiaxing government bonds in 2016. This demonstrates how financial risks are transferred from local governments to LGFVs, and finally transferred back to governments.”

    Link to the text.

    + In a new article, the authors examine the Shanghai Municipal Investment Corporation: “The municipal government internalizes financial techniques to manage state assets, seek funding, and guide urban development projects.” Link.

    +  “A soaring debt burden and increasingly risky debt structures are not bad outcomes caused by dishonest and incompetent individuals. They are fundamental to the way the [Chinese] growth model works.” On Twitter, Michael Pettis responds. Link. And in an article from April, Pettis examines the sustainability of China’s debt. Link.

    +  A 2018 article by Zhonghua Huanga and Xuejun Du finds that “Local government financing vehicles overbid significantly in terms of land prices.” Link. And from May, Yanbing Han, Min Xiong, Shaoming Cheng and Hai (David) Guo examine “Inter-city competition and local government debts in China.” Link.


    The World Bank & Resiliency in Dhaka

    Assistant Professor of International Political Economy at the University of Victoria SARAH E. SHARMA studies global environmental governance. In a 2021 paper, she looks at a World Bank-funded environmental resiliency project in Dhaka, Bangladesh. 

    From the paper:

    “In 2015, Dhaka’s Urban Resilience Project (URP) was launched. The URP is a USD 173 million World Bank funded venture. It is locally implemented in partnership with the Bangladeshi state and Dhaka’s northern municipal government, offering a ‘dynamic, coordinated approach to urban resilience.’ Aiming to enhance resilience via preparedness for natural hazards and sustainable growth, the URP is motivated by three factors: first, that Dhaka is overcrowded, polluted and unorganised, second, that the city faces a myriad of shocks, stresses and risks from earthquakes, flooding, heat waves and frequent fires, and third, that it is the central, rapidly growing economic hub in Bangladesh. I argue that resilience under the ambit of the URP depoliticises the problems and proposed solutions to increasing and intensifying environmental hazards in Dhaka. As an expression of the broader resilience policy framework espoused by the World Bank the URP relies on the achievement of development goals through economic and urban growth in Dhaka, combined with small-scale individualistic safety awareness measures that place the onus of environmental safety onto local residents. This approach obfuscates a wider regime of urban development in Dhaka premised upon expansion and densification that exacerbates negative outcomes from environmental hazards such as floods, earthquakes and fires, particularly for individuals living in informal settlements who already face ramifications from urban development including cyclical eviction and displacement.” 

    Link to the text, link to Sharma’s website.

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

    + + +

    +   “The long legacy of this fundamental dependency on foreign capital is that it constrains state action. But with that huge caveat, the most recent wave of Pink Tide nationalizations weren’t really hard nationalizations at all.” New on PW, a conversation on resource nationalism and the green transition, featuring Miguel Angel Marmolejo Cervantes, Martín Obaya, Thea Riofrancos, and Alex Yablon. Link. And see a recording of the PW event here

    +   “Anti-poverty policy in particular was a project that succeeded because it solved certain racial problems for the state.” Also new on PW, Luciana de Souza Leão interviews Beth Popp Berman on her new book, Thinking Like An Economist. Link.

    +   Reto Bürgisser and Donato Di Carlo on European integration and the pitfalls of tourism-led growth in in southern Europe. Link

    +   “We trace how ‘mineralized urbanization’ propels in-migration, rising localized purchasing power, and proliferating service sector and trade activities.” Gold and diamond mining in Ghana, Angola, and Tanzania. Link

    +   “If the ECB’s monetary policy instruments do not support the EU’s vision of the future, they will work against it.” Jens Van ‘T Klooster on ECB strategy, inflation, and the green transition. Link

    +   David Wallace-Wells on heat waves and lower-than-expected mortality rates in Pakistan and India, featuring PW author Tim Sahay. Link

    +   “We document a large racial gap in the UI that unemployed workers receive after filing a new claim.” By Daphné Skandalis, Ioana Marinescu, and Maxim N. Massenkoff. Link

    +   “In my research, I show that one coercive nation building policy—military conscription in Sicily in the 1860s—led to backlash in the form of organized crime. From its establishment in 1861, the Kingdom of Italy’s central government introduced a range of nation building policies, including conscription, to strengthen internal stability. Still, in 1863, a key episode deeply compromised the state’s legitimacy in Sicily: a repressive military campaign ordered by the government to curb widespread draft evasion on the island. I document a positive and significant effect of the 1863 repression on the emergence of the Sicilian mafia in 1875, which persists until 1900 when using a different proxy for mafia presence. The results also hold after controlling for other determinants of the early spread of the mafia in Sicily.” By Gianni Marciante. Link

  4. The Shoemaker

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    In the midst of a global semiconductor shortage, the US Senate is considering a bill that would fund $52 billion in chip subsidies for domestic production. Today, the vast majority of semiconductors are produced in East Asia, and 90 percent of advanced chips are produced by the Taiwan Semiconductor Manufacturing Co.  
    In their 2000 book, JOHN A. MATHEWS and DONG-SUNG CHO examine the origins of Taiwan’s semiconductor industry, which grew from public investment and technology transfers with the US. 

    From the book: 

    “[Taiwan’s Electronics Research and Service Organization] scoured the world for knowledge of integrated circuit (IC) fabrication, emulating Japanese methods of study tours and knowledge leverage. In 1976 RCA was prevailed upon to transfer its obsolete IC fabrication technology to the fledgling ERSO. RCA was at this point thinking of getting out of semiconductors, and saw no harm in earning some royalties on its 7-micron technology, then severely behind the world LSI best of 2-micron circuit design. From ERSO’s perspective, the technology transfer from RCA offered a window into the secret world of advanced technology. A group of young and enthusiastic engineers spent the best part of a year in the US and at ERSO learning the technology of IC fabrication from RCA. It is out of this group that virtually the entire senior echelons of the subsequent semiconductor industry in Taiwan was formed. ERSO built its pilot IC fabrication plant under RCA guidance, and started producing its own experimental chips. ICs such as those needed in electronic watches were produced first, using RCA designs. Later the ERSO engineers were able to produce their own designs, and tweak their equipment to improve the yields, so much so that by 1978 or 1979 ERSO was securing better yields than RCA itself. The US firm started buying chips from its erstwhile pupil, albeit on a very small scale. 

    But Taiwan’s leaders were much more ambitious. Principal among these leaders was Dr K. T. Li. He served as Minister for Economic Affairs and went on from there to the Ministry of Finance. As ERSO was embarking on its semiconductor venture, Li retired from the Ministry of Finance, and looked around for ways to stimulate the country’s high-technology development. His first act was to call together the country’s scientific and technical elite to consider the country’s future. This conference, staged in 1978 and attended by 400 of the country’s best and brightest, proved to be a landmark event. The conference adopted a ‘Science and Technology Development Program’ which was subsequently endorsed by Cabinet. Most significantly, it called for the creation of specialist infrastructure needed to support advanced industries like semiconductors.”

    Link to the text.

    + “The history of the Korean semiconductor industry started with the foreign direct investment of US firms like Fairchild and Motorola in the mid 1960s, which were increasingly investing in low-wage countries in order to reduce their production costs.” A 1996 OECD report on the development of the Korean semiconductor industry, by S. Ran Kim. Link

    +  “By announcing an allocation of US$9.78 billion towards developing a full-stack semiconductor ecosystem, New Delhi made clear that industrial policies are its instruments of choice.” Pranay Kotasthane and Arjun Gargeyas argue that India should follow Taiwan’s path in semiconductor production. Link

    +  “Many of today’s chips will be obsolete in the time it takes Congress to pass legislation affecting them.” A report on semiconductors from the Foreign Policy Research Center. Link. And for some of the best analysis on semiconductors, see Employ America’s 2021 series on the topic. Link.


    Wind Turbines & Land Control in Mexico

    Gerardo A. Torres Contreras is Research Fellow in Energy Justice and Transitions at the University of Sussex Business School. In a recent article, he examines the social and economic effects of wind farms in a Mexican ejido—a parcel of land distributed after the Mexican Revolution of 1910.

    From the paper:

    “In 1994, La Venta, Mexico became the first ejido to have a wind farm installed. Wind energy investment in the ejido has been so significant that, by 2020, they have extended to over 50 per cent of the land, occupying 3,221.8 hectares. Drawing on agricultural censuses on the ejido, discontinuous fieldwork in the region from 2017 to 2019, and 40 semi-structured oral history interviews focused on wind energy expansion and land use dynamics with current and former land authorities, activists and ejidatarios, this paper argues that wind investment has accelerated patterns of social differentiation among landowner subgroups, thereby exacerbating pre-existing land inequalities. In an ejido where land allocations were skewed towards a few hands at its foundation and land deals are regulated by the Agrarian Law, large landholders have capitalised on the wind industry by diversifying their income and differentiating their trajectories from those with less land. The socio-material arrangements brought about by wind energy in the ejido La Venta have allowed small landholders to sustain their livelihoods by relying on their petty agricultural productivity and using wind rents as a safety net. This suggests that, in the ejido land system, pauperisation rather than displacement is a likely outcome for this subgroup.” 

    Link to the text. 

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

    + + +

    +   “Biden’s EV tax incentive and López Obrador’s lithium nationalization are evidence of nascent competition between the US and Mexico around billions in potential green investments in the automotive sector.” New on PW, Alejandra González Jiménez examines the history of Mexico’s automotive sector and the present-day politics of electric vehicle production. Link.

    +   “Abolishing Sri Lanka’s much-hated executive presidential system of government through a comprehensive package of political reforms will have to be a priority in the policy agenda of any new government.” Jayadeva Uyangoda on Rajapaksa’s resignation. Link

    +   Antonio Freitas and Alessandro Miebach compare racial inequality in Brazil and the US in the 21st century. Link

    +   Kate Bayliss, Elisa Van Waeyenberger, and Benjamin O. L. Bowles on private equity in England’s water sector. Link

    +   Su Yeone Jeon on trade policy and GM wheat in Argentina. Link.  

    +   “Real disposable income for the bottom 50% was 20% higher in 2021 than in 2019, but fell in the first half of 2022 as the expansion of the welfare state during the pandemic was rolled back.” Thomas Blanchet, Emmanuel Saez, and Gabriel Zucman construct “real-time” income distributions. Link

    +   Alisha C. Holland examines joint organizing efforts of unionized and contract workers in Peru and Chile. Link.  

    +   “After the Civil War a near-consensus did emerge in the United States regarding key goals that ought to guide U.S. relations with Latin America, and Mexico in particular—including creating new markets for American exports, expanding U.S. investment in Mexico’s mining and agricultural industries, and developing cross-border transportation networks to enable the movement of Mexican minerals and other raw materials into the United States. These aims elicited a considerable degree of unanimity in an otherwise deeply divided post–Civil War society. That fact was not lost on certain prominent editors, journalists, and political leaders who in the early 1870s began to call for a nationwide effort to extend U.S. financial and commercial influence south of the Rio Grande. A unifying mission of national aggrandizement abroad, they hoped, would help Americans forget the wartime resentments many of them still held toward one another.” By Alys Beverton. Link

  5. Nightgown II

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    Amid the ongoing global energy crisis, French Prime Minister Emmanuel Macron has announced the full renationalization of Electricite de France (EDF), the country’s decades old multinational electric utility company.

    In a 2020 article, GUILLAUME YON reflects on the historical origins of the company’s innovative postwar pricing structure.

    From the conclusion: 

    “In the immediate aftermath of the war, EDF’s engineers strongly believed in nationalizing the electricity sector. The prewar situation—with high competition between numerous small producers—was seen an obstacle to reconstructing and modernizing the country’s productive processes. But the available solutions appeared to them as insufficient to achieve this goal. They did not believe in the viability of fully centralized economic calculations performed by a planning board, but indicative planning was seen to be too modest and too defensive.

    EDF’s engineers invented their own solution, drawing on a rich tradition of state engineering. Emerging in 18th century France, state engineers were originally hired to design fortresses or warships. They invented optimization techniques to accommodate multiple technical and political constraints in a single coherent design, and then developed cost and price calculations to control and monitor the work of contractors in construction sites. In the 19th century, these techniques were applied to processes of industrialization—monitoring of the behavior of future users of bridges and railroads through pricing. The aim of this tradition was not to build a general theory of market equilibrium but to optimize concrete existing machines. Since the 18th century, state engineers thus made an explicit connection between the design and construction of large infrastructure and state-building processes. This explains the divergence from a different tradition that paved the way to the contemporary form of economic engineering.”

    Link to the text.

    +  “A study of EDF offers readers the opportunity to examine closely the transformation of French capitalism in the postwar period. This was a profound shift away from small and medium sized family firms towards behemoth enterprises.” From Robert Frost’s 1983 dissertation. Link.

    +  “While the regulatory framework of the French electricity sector has formally changed, the same political and administrative elites control the new regulatory agencies.” Pierre Bauby and Frédéric Varone consider the gap between EU imperatives and EDF’s corporate practices. Link.

    + A report by Francois Ailleret notes that “In mid-1999, EDF had already invested about €4.5 billion in approximately 20 countries in Europe, Latin America, Africa and Asia.” Link. And articles by Francesca Pilo, Laszlo Neumann, and Barbara Khol hint towards EDF’s role in the privatization of energy infrastructure in Brazil, Hungary, and Argentina respectively. Link, link, and link.


    Tea Production in India

    NATALIE LANGFORD is Lecturer in Sustainability at the University of Sheffield. In a 2021 paper, she examines changing dynamics in Indian tea production as a response to an increase in domestic consumption.

    From the paper:

    “Domestic value chains coordinated by domestic lead firms are increasingly prominent within the global South. In India, the expansion of domestic consumption in the late 20th and early 21st centuries has shifted tea production from an export-oriented to a domestic-oriented industry. Thus, the political economy of tea production as a whole is increasingly shaped by domestic rather than global market factors. The significance of local trade and production to Indian tea producers challenges the tendency of development scholars to focus on the global value chain dynamics of commodity production and advocates for a more polycentric approach to the study of global trade and production. Using a value chain framework, this article identifies three processes which have driven the creation of new trade and production structures within India’s domestic tea market: a significant rise in the outsourcing and fragmentation of the production process; the expansion of smallholder-led production; and the introduction of private standards and governance programmes within the domestically oriented segment of production.”

    Link to the text. 

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

    + + +

    +   “Under the guise of integration and inclusion, the reforms bulldoze decades of labor victories and replace them with minimal rights and protections. Why, then, have the codes seen so little resistance?” New on PW, Chirayu Jain investigates the BJP’s new labor reforms and their effects on India’s 25 million building workers. Link

    +   “It seems likely that the post-Bretton Woods institutions will fragment and ultimately decline in importance. But what will replace them?” Also new on PW, a transcript of our event on the IMF after the collapse of Bretton Woods, featuring Karina Patricio Ferreira Lima, Mona Ali, Richard Kozul-Wright, Chris Marsh, and Lara Merling. Link

    +   “Consolidation in the asset management industry increases universal ownership and common ownership of industry rivals.” Amir Amel-Zadeh, Fiona Kasperk, and Martin C. Schmalz on the largest shareholders of US public firms. Link

    +   “In the last decade, Ghana lurched from unprecedented shortages to electricity over-abundance, entailing spiralling debt.” Barnaby Joseph Dye on the “good governance” agenda and Ghana’s electricity sector. Link

    +   Ted Tatos and Hal Singer on the NCAA and monopsony power. Link

    +   “Both local air pollution policies and recent coal-to-natural gas fuel switching have played major roles in reducing U.S. racial/ethnic pollution disparities from electricity.” By Danae Hernandez-Cortes, Kyle C. Meng, and Paige E. Weber. Link

    +   Martha Bernal and Ilich Ortiz examine the structural factors behind Colombia’s mass protests in 2021. Link.

    +   “As is well-known for Europe and the Middle East, wages rose sharply and remained high during the Black Death that began in the middle of the fourteenth century and lasted until the sixteenth century and even later. Our evidence indicates that the Justinian Plague that began in the sixth century and lasted at least until the middle of the eighth century had equally profound consequences on wages and per capita incomes. The environment of labor shortages, high labor incomes and high per capita wealth in the aftermath of the Justinian Plague stimulated agricultural productivity, the urban economy, and long-distance trade by creating demand for income elastic goods, both domestic and imported.” Şevket Pamuk and Maya Shatzmiller examine economic change in the Egypt and Iraq from 700 to 1500. Link

  6. Blue Mountain

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    Among the most notable innovations in trade union strategy since the late 20th century has been the rise of shareholder activism. The approach leverages trillions of dollars in trade union pension funds to navigate the financial sector on behalf of members—as workers and investors.

    In his 2021 book, SANFORD JACOBY examines the history of trade union pension provision. In doing so, he offers insight on transformations in the US financial sector and insurance industry since the late 19th century.

    From the introduction: 

    “Unions have three types of power at their disposal. Two are rooted in the labor market: organizing power and bargaining power. The third is political power. Over the last fifty years, there’s been an ebbing in all of them, particularly in the labor market. Industries with once-high union density, such as manufacturing and transportation, have experienced huge membership losses. About a quarter of the union wage premium vanished between 1983 and 2018. Because the promise of higher wages is a selling point for joining unions, the premium’s decline diminished labor’s organizing power.

    Labor’s political power did not decline as sharply. Unions still serve as aggregators for the Democrats, albeit less so than before. They now compete with the party’s other interest groups. It was difficult for unions to transform their political clout into remedies for their organizing problems. Out of the quandary came a search for new sources of power.  The loss of members made stark the choice between business as usual and the need for new approaches. With their pension funds, unions found a source of power outside the labor market to augment their power within it.”

    Link to the text.

    +  “92.1% of US corporate equity and mutual fund value is owned by white households; Black households own 1.5% while Hispanic households own 1.9%.” A recent article by Lenore Palladino examines shareholder primacy and the racial wealth gap. Link.

    + From March, an article by Amanda Kass, Andrew Crosby, and Brenda Parker exposes the complexities of municipal pension fund policies in Illinois. Link.

    +  “Under the ascendant interpretation of the fiduciary duty of loyalty, public pension trustees owe their allegiance to the fund itself, rather than to the fund’s participants and beneficiaries.” From 2014, David H. Webber “examines ways in which public pension funds invest against the economic interests of their own participants.” Link.

    h/t Lenore Palladino, whose Twitter post compiled many of these sources and others.


    Deforestation in the Amazon

    PhD candidate in government at Harvard University ALICE XU studies social and environmental policy in the Global South. A recent paper examines the politics of deforestation in the Brazilian Amazon.  

    From the abstract:

    “What accounts for subnational variation in deforestation in the Brazilian Amazon? In this paper, I examine the ways in which the institution of local political competition, in particular, affects deforestation in Brazil, which houses the largest remaining tract of tropical rainforest in the world. I argue that politicians concerned with winning the margins under high political competition are pressured to forsake forest cover in the Amazon to cater to private commercial interests that profit from deforestation. Using satellite-based spatial deforestation data for the 783 municipalities in the Brazilian Amazon between the years 2000-2012, I test the theory by systematically examining the effects of local political competition on sub-national patterns of deforestation. Drawing on qualitative evidence from semi-structured interviews, I illustrate the ways in which in their efforts to weaken enforcement, mayors engage in ‘bureaucratic packing,’ a surge in appointments of new municipal personnel who are partial to the mayor’s agenda. As a strategy, ‘bureaucratic packing’ allows the mayor’s cabinet to bypass working with long-serving bureaucrats or to relax enforcement directly through the appointment of new leadership. Such bouts of bureaucratic expansion, therefore, undermine the role of existing personnel in municipal and state secretariats. Using the example of deforestation in the Brazilian Amazon, the argument illustrates the ways in which local political competition, in encouraging forbearance in the enforcement of regulatory standards, in turn generates incentives to weaken bureaucratic capacity.”

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

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

    + + +

    +   “Reluctant to embrace mineral production in their own territories, European governments have leveraged the language of comparative advantage to place the responsibility of mineral production on the shoulders of poor, resource-rich countries.” New on PW, Jewellord T. Nem Singh on mining, development, and the EU’s critical raw materials strategy. Link

    +   View a recording of this week’s event on resource nationalism in Latin America and the global push for decarbonization, featuring Thea Riofrancos, Miguel Angel Marmolejo Cervantes, and Martín Obaya, and moderated by Alex Yablon. Link.

    +   “I investigate how through PAYGO, off-grid solar electricity in sub-Saharan Africa is being transformed into a cash flow, a financial asset and a conduit for consumer debt.” Lucy Baker on “electricity capital” in sub-Saharan Africa. Link

    +   Luciana de Souza Leão on conditional cash transfer programs and state efforts to make poverty visible in Brazil and Mexico. Link

    +   “Restoring our Regional Federal Reserve Banks to their original status as a network of regional development banks – ‘Spreading the Fed’ – will ensure that all assets financed with public capital are productive assets.” Robert Hockett’s proposal for public capital allocation. Link

    +   Seth Schindler, Ilias Alami, and Nicholas Jepson on state capitalism, industrial strategy, and the Wall Street Consensus. Link. And read Daniela Gabor’s PW essay on the WSC at COP26 from last year. Link

    +   Jamie Hansen-Lewis and Michelle M. Marcus measure the effects of US maritime emissions regulations. Link

    +   “Cities, even great industrial cities teeming with immigrants, were not the initiators and propellants of American civil society. Voluntary associations were more apt to flourish in small cities and towns than in large metropolises. The relationship between city size and number of groups—and the relationship between city size and total number of members in these groups—is powerful and negative. Between the mid-nineteenth century and the mid-twentieth century, voluntary associations grew most quickly and proliferated most heavily in the smallest cities and towns. The civic core was in the periphery, away from the big cities and outside the Northeast.” Gerald Gamm and Robert D. Putnam on voluntary associations in the US. Link

  7. Reflected Ray

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    Amidst food shortages, an energy crisis, and a complete collapse” of the economy, Sri Lankan President Mahinda Rajapaksa faces mass protests calling for his resignation. At the same time, the government is in negotiations with the IMF around a bailout deal. 

    In a 2013 article, AHILAN KADIRGAMAR puts the current crisis into context, tracing the rise of foreign debt obligations and capital inflows to Sri Lanka following the end of the civil war in 2009. 

    From the text: 

    “The armed conflict that pitched the state against the Tamil militants began around the same time the Jayawardene regime initiated the open economy policy in the late 1970s. The conjuncture at the end of the war, with concerns regarding security and stability of the country as the guns went silent and the fall out of the global economic crisis of 2008 directing greater flows of capital into the emerging markets, provided the conditions for the acceleration of neoliberal development. The Rajapaska regime seized the moment promising to resolve all problems through a development push. The authoritarian 18th Amendment to the Constitution of 2010 ensured much greater powers to the president to transform the economy. And in turn the patronage that came with development initiatives assisted in the consolidation of the regime.

    The post-war period characterised by a second wave of neoliberalism witnessed great flows of global capital that commenced with the approval by the executive board of the International Monetary Fund (IMF) of US$ 2.6 billion Stand-by Arrangement for Sri Lanka in 2009. This was followed by multilateral and bilateral aid amounting to billions of dollars from actors such as the World Bank, Asian Development Bank (ADB), Japan, China and India, and the sale of sovereign bonds worth US$ 4 billion to foreign institutional investors.  The stock market, domestic banks and real estate also attracted billions of dollars. Many national policies ranging from financial and banking deregulation, to tax reforms with an emphasis on indirect taxes thereby burdening the masses, to controversial land grabs stimulated these global financial flows. And much of this capital has been absorbed in infrastructure from roads to ports and airports as well as hotel and real estate development. In Colombo and other towns, particularly along the coast, financialisation has been tied to urbanisation where financial investments have been sunk into real estate with rosy projections of returns from the tourism industry. National finances consisting of increasing short-term international debt have bound the government to the policies of the IMF. Uneven development, where close to 45% of the GDP is concentrated in Colombo and the Western Province, has been further aggravated by urbanisation policies.”

    Link to the article.

    +  “If the entire crisis was generated because of the build-up of Sri Lanka’s foreign loan obligations, then the solution to take money out of the country’s budget to offset risks perceived by investors is simply another turn on the rack.” Kadirgamar and Devaka Gunawardena respond to the IMF Staff Report’s recommendations for Sri Lanka. Link to the piece, and link to the IMF report. 

    + A 1985 article by W. D. Lakshman, Governor of the Central Bank of Sri Lanka from 2019 to 2021, examines IMF and World Bank interventions in the nation from 1951 to 1977. Link. And Gulbin Sultana looks at Sri Lanka-China relations. Link

    +  “Counterintuitively, it was the Rajapaksas who benefited from the Easter Sunday massacre.” In NLR Sidecar, Rohini Hensman reflects on the legacy of the civil war and ethnic violence in the current crisis. Link


    Debt Sustainability and IFIs

    In her dissertation, CHRISTINA LASKARIDIS examines the history of measuring debt sustainability at the World Bank and the IMF. 

    From the abstract:

    “Since the early 2000s, debt sustainability is assessed by the World Bank and the International Monetary Fund (IMF) through a policy template called Debt Sustainability Analysis (DSA). This thesis examines the origins of Debt Sustainability Analysis (DSA) by identifying specific episodes between the origin of these institutions and the early 2000’s when the DSA template was created. The thesis argues it was the lack of political agreement about how to resolve debt crises that galvanised a number of specific analytical efforts. First, the growth of international loans prompted a large data collection effort, and the growing repayment difficulties that emerged, prompted quantitative techniques to model the likelihood of debt repayment difficulties. Second, the notion of intertemporal debt sustainability marginalised structural and external causes of debt crises and elevated the role of primary balances in restoring debt repayments. Given the lack of an overarching framework to debt crisis resolution, the IMF and World Bank emerged as key actors that developed their technical capacity in debt issues. This served, inter alia, to guide their own lending and decision making, to discipline their own staff assessments and to maintain credibility in managing crises, despite repeated failures. The DSA, launched in 2002, was the culmination of a series of efforts to operationalise tools for measuring repayment prospects in the context of debt crises. Without an overarching and commonly agreed framework however the consequence of this development was that under the appearance of theoretical rigour, these tools attempted to displace political conflict over debt crisis, and at the same time, aspired to increase the credibility of powerful institutions.”

    Link to the paper. 

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

    + + +

    +   Join PW on Friday, July 1 at 1:30 pm ET for a discussion on resource nationalism and the politics of decarbonization, featuring Thea Riofrancos, Miguel Angel Marmolejo Cervantes, and Martín Obaya, and moderated by Alex Yablon. Register here.

    +   View a recording of this week’s event celebrating the launch of Diminishing Returns, featuring Mark Blyth, Lucio Baccaro, Oddný Helgadóttir, Eveleyne Hübscher, and Jonas Pontusson. Link.

    +   Our friends at the Fiscal Policy Institute in New York are hiring a policy analyst. Link for more details. 

    +   Lynn M. Paltrow and Jeanne Flavin examine 413 cases of arrest and forced interventions on pregnant women in the US, in the post-Roe era from 1973 to 2005. Link. And Cynthia R. Daniels, Janna Ferguson, Grace Howard, and Amanda Roberti investigate the prevalence of misinformation in state-level restrictive abortion laws. Link

    +   Serkan Demirkılıç, Gökhan Özertan, and Hasan Tekgüç on exchange rates and food price inflation in Turkey. Link.  

    +   “The paper uses the Post-Keynesian concept of an asset’s own rate of return to assess how susceptibility to the combined effects of erratic capital flows and the vulnerability vis-à-vis the physical and transitional risks of climate change reduces macroeconomic policy space.” By Anne Löscher and Annina Kaltenbrunner. Link

    +   Evelyne Hübscher, Thomas Sattler, and Zbigniew Truchlewski compare political opposition to fiscal adjustments in Germany, Spain, and the UK. Link

    +   Jingyang Huang and Kellee S. Tsai on private-public linkages in China’s digital surveillance industry. Link

    +   “Hellenistic Berenike was a stone-walled, fortified city/base largely built atop a low rocky ridge immediately to the west of what would later become the unfortified Roman port city. Archaeological excavations at Berenike, ongoing since 1994, have exposed the remains of the original Hellenistic site. The associated artefacts, along with studies of groundwater levels and bedrock stratigraphy, allow us to reconstruct the history of this third-century BC hydraulic installation through to its failure during a period of climate instability at the end of century. Evidence suggests that the late third-century BC hiatus in occupation may have resulted from a multi-year drought that caused the city’s freshwater source to run dry. This climatic shift was probably triggered by a volcanic eruption in 209 BC, an event that also caused a failure of the Nile to flood, leading to the famine-induced revolt of 207–186 BC in Upper Egypt.” By Marek A. Woźniak and James A. Harrell. Link

  8. Clinging to the Shoulders

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    In March of this year, the London Metal Exchange suspended trading in nickel after a 250 percent price hike brought its value to $100,000 a ton. The cancellation has shaken the commodities exchange’s reputation, and inspired a series of fierce lawsuits calling bias.

    It’s not the first time that the exchange has become the site of global economic tensions. In a 2020 article, JACK SEDDON examines the organization’s micropolitics at the turn of the century.

    From the text: 

    “Since its inception in 1877, the LME has distinguished itself from futures markets in the United States through its physical-trade-orientated rather than finance-orientated membership and structure. Traditional members understood themselves to be ‘metals men,’ whose personal fortunes, and those of the market collective, depended on the success of the international metals trade. Yet, the growth in financial contracts traded on the exchange relative to underlying physical production has advanced in the three decades since banks and financial groups joined the market. In the 1970s, some 80% of trading on the LME was driven by firms (producers, fabricators, and end users) with a genuine commercial interest in metals as such. The remaining 20% was conducted by financial investors without such an interest. Now, a physical trading base of around 30% supports a huge superstructure of financial activity.

    This transformation is the result of gradual changes at the political and institutional level which weakened the long-standing coalition between traditional metal merchants and the LME stewards who maintained the physical-trade-orientated market structure. Demutualization in 2000 and outside regulation shaped by and for powerful banking groups reduced the number and influence of LME members owned by physical mining companies and end users of metals. As miners, fabricators, and end users were marginalized, a column of high-speed traders on the proprietary trading desks of banks and hedge funds filled the gap, in the process transforming the nature of trading on the exchange. The interests and ideals pursued in the LME are thus conditioned by physical-trade-orientated institutional legacies and intense distributional conflicts between traditional metals merchants and financial market participants.”

    Link to the piece.

    +  “Many observers agree that the LME’s 1978 futures trade for aluminum reshaped global markets and the strategies of the main industry actors, but little attention has been paid to the factors behind this change.” A 2018 article by Marco Bertilorenzi examines how EU policymakers shaped global commodities markets. Link.

    +  “In conjunction with the LME, international metal trading companies effectively checked oligopolistic efforts by large copper producers in an era when other producer industries like oil and steel came to be defined by such competition.” Nathan Delaney’s 2018 dissertation examines the development of the transatlantic copper market from 1870 to 1930. Link.

    + A 1991 ECLAC report on “the metal exchanges and their incidence in the development of mining in Latin America and the Caribbean.” Link. And see the transcript from an April PW event on commodity markets and the Russia sanctions. Link


    Poverty & Race in the American South 

    Regina Baker is Assistant Professor of Sociology at the University of Pennsylvania. In a new paper, she analyzes the impact of state institutions on inequality and poverty in the American South. 

    From the abstract:

    “Building on literatures on racial regimes and the legacy of slavery, this study conceptualizes and constructs a novel measure of the historical racial regime (HRR) and examines how HRR influences contemporary poverty and racial inequality in the American South. The HRR scale measures different manifestations of the U.S. racial regime across different historical periods—slavery and Jim Crow—and is based on state-level institutions including slavery, sharecropping, disfranchisement, and segregation. The analyses use Luxembourg Income Study data (2010–18) for 527,829 Southerners. Results show that residing in a state with stronger HRR is not significantly associated with greater poverty for all and especially not among White Southerners. Rather, a higher level of HRR worsens Black poverty and especially Black-White inequalities in poverty. Further, HRR explains a significant share of the Black-White poverty gap. This study demonstrates the enduring influence of historical state institutions on contemporary poverty and racial inequality.”

    Link to the paper. 

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

    + + +

    +   Join us on June 22 at 4pm ET (note the time change) for the launch of Diminishing Returns, a new book on the politics of secular stagnation. Featuring: Mark Blyth, Lucio Baccaro, Oddný Helgadóttir, Eveleyne Hübscher, and Jonas Pontusson. Register here.

    +   “Helleiner shows that neomercantilism could be highly exploitative and autocratic, harnessed for liberation movements, or provide a basis to pursue social reform.” New on PW, Justin Vassallo reviews Eric Helleiner’s The Neomercantilists. Link.

    +   On July 1 at 1:30pm ET, join us for a conversation on resource nationalism in Latin America and the politics of decarbonization, moderated by Alex Yablon and featuring Thea Riofrancos, Miguel Angel Marmolejo Cervantes, Martín Obaya. Link to register.

    +   Skanda Amarnath on the recession risk following the announcement of the Fed interest rate hike. Link. And Robert Armstrong on the current state of the US economy. Link

    +   A new Employ America report on anti-inflation strategy, by Amarnath, Arnab Datta, and Alex Williams. Link. And from the new Center for Public Enterprise, a report by Paul Williams, Yakov Feygin, Chirag Lala, and Mitch Green, on targeting inflation by reducing oil consumption. Link

    +   “This paper builds a new dataset on bank ownership and finds no evidence of a negative correlation between state-ownership of banks and economic growth.” New research from Ugo Panizza. Link

    +   Mukul Kumar looks at the expansion of coal plants on India’s coasts over the past three decades. Link

    +   Fulya Apaydin and Mehmet Kerem Çoban on dependent financialization in Turkey. Link. And see a recent PW Sources newsletter on Turkey’s financial crisis here

    +   Robert Huang and Matthew Kahn find that the carbon footprint of US public transit has not significantly decreased from 2002 to 2019. Link

    +   “To conduct this investigation into the relative importance of mechanization, we analyze the remarkably detailed data in the U.S. Commissioner of Labor’s 13th Annual Report on Hand and Machine Labor (HML). It recorded all individual tasks from start to finish associated with the production of over 620 highly specific manufactured goods using ‘machine methods’ in the late 19th century, along with those involved in the production of the same good by the traditional ‘hand methods.’ We find that (1) the more frequent use of inanimate power in factory production had significant positive effects on labor productivity but that (2) these effects accounted for just one-third of the average difference in production operation times between hand and machine labor. We then conduct a broader study of the roles of other factors, including the division of labor and the adoption of high-volume production. We find that these additional factors are of roughly similar importance in accounting for the average difference in productivity between hand and machine labor.”  By Jeremy Atack, Robert A. Margo, and Paul W. Rhode. Link

  9. First Class Road

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    This week, President Biden invoked the Defense Production Act (DPA) to boost clean energy production, including solar technology, heat pumps, insulation, green hydrogen, and transformers. In recent years, the DPA has strayed from its wartime connotations, from coordinating Covid-19 responses, and more recently, addressing the baby formula shortage. 

    In a January 2022 report for the Roosevelt Institute, TODD TUCKER explains the primary authorities of the DPA, informing the Act’s potential use in future industrial policy. 

    From the report: 

    “Priorities and allocations are tools currently authorized under the Defense Production Act (DPA). Priorities are among the government’s most powerful tools for using demand channels to structure industries, through both its own purchases and for those of private firms that receive priority orders. Businesses that receive priority orders are required to accept them and cannot charge higher prices or impose more onerous terms than they would in the normal course of business. There is a very limited set of instances where rejection of a rated order is possible: if the order is impossible to fill by the requested date (in which case the order must be rejected, but the earliest later delivery rate must be offered), or if the requested order or service is not or is no longer provided. The recipient is in turn empowered to push the requests down their supply chain to expedite action from their suppliers as well. The timeline for acceptance/rejection can be as little as six hours or as long as 15 days. 

    In contrast to priorities, the allocation power allows the government to use supply channels to shape industrial activity. With priorities, the state is essentially one procurer among others (even if it can push itself to be first in the queue). In contrast, allocations are a more direct economic planning tool. Under current regulations, the allocation power includes set-asides (requiring businesses to reserve materials, services, or facilities capacity in anticipation of priority orders), directives (orders to take or not take certain actions, such as to stop or reduce production of an item; prohibit the use of specific materials, services, or facilities; or divert such resources from one purpose to another), and allotments (caps on the maximum quantity of a material, service, or facility authorized for a specific use). Allocation orders present even less flexibility than priority orders. Even if full compliance is impossible for some reason, the recipient must comply to the fullest extent possible for as long as the Department of Commerce (or another agency under delegated power) tells them to. For decades, the Department of Defense has been the primary user of DPA authorities, issuing around 300,000 priority orders annually for routine procurement needs. But the Act’s powers have a longer and more varied usage in earlier decades, and the year 2020 may be a turning point back toward more regular use of these powers.”

    Link to the text.

    +  “Never before had any President used the emergency powers conferred by the subject federal statutes to compel domestic fuel suppliers to sell fuel to a civilian buyer.” Frank Lindh’s 2001 article on Bill Clinton’s decision to invoke the DPA during California’s utilities crisis. Link.  

    +  Jake Stieber examines labor members’ 1951 decision to withdraw from the Wage Stabilization Board, an authority created under Title IV of the original DPA and terminated in 1953. Link. Richard Field’s 1950 article examines the wider range of stabilization measures that were part of the original legislation. Link. And for more on price stabilization measures in US history, see Andrew Yamakawa Elrod’s recent essay on price controls. Link

    + “When the federal government invoked the DPA, it inadvertently put two interests at odds with each other—providing medication for a rare but serious disease and speeding up vaccination rates against the coronavirus.” Gabriella Smith on the DPA’s dilemmas in pharmaceuticals. Link. Thomas Bollyky and Chad Bown on the DPA and vaccine supply chains. Link. And Lee Harris this week, on the limits of the DPA: “A full-stack industrial policy would likely go beyond the DPA and rely on more agencies for financing.” Link.


    Maternity Leave & Formal Employment

    PhD student in applied economics at the University of Minnesota KHOA VU studies health, education, and labor. A recent paper co-authored with Paul Glewwe investigates the labor market effects of a maternity leave requirement. 

    From the abstract:

    “This study examines how extending the maternity leave requirement affects women’s decision to work in the informal or formal sector in Vietnam. We use a difference-in-differences approach to evaluate the 2012 Amendments to the Vietnam Labor Law, which imposes a longer maternity leave requirement than before. We find that the law increases formal employment and decreases unpaid work among women. This is driven by women switching from agricultural household work to employment in the private formal sector, especially in the manufacturing industry and among the middle-skilled occupations such as plant and machine workers, craft and related workers, as well as clerks.”

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

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

    + + +

    +   Join us on June 11 at 10am ET for the launch of Diminishing Returns, a new book on the politics of secular stagnation. Featuring: Mark Blyth, Isabella Weber, Lucio Baccaro, Oddný Helgadóttir, Eveleyne Hübscher, and Jonas Pontusson. Register here.

    +   “Brazil and China constitute two of the world’s largest logistics markets. Both experienced booms in road-based infrastructure investment during the past two decades. And in their road freight sectors, digitalization has advanced far more quickly than in the Global North.” New on the site, Jörg Nowak, Steven Rolf, and Wei Wei examine the growth of digital trucking platforms in Brazil and China, and their impacts on labor relations in the sector. Link.

    +   “The coming energy order will be defined by something that few analysts have fully appreciated: government intervention in the energy sector on a scale not seen in recent memory.” Jason Bordoff and Meghan L. O’Sullivan in Foreign Affairs. Link

    +   “Given vastly different starting conditions under slavery, racial wealth convergence would remain a distant scenario, even if wealth-accumulating conditions had been equal across the two groups since Emancipation.” Ellora Derenoncourt, Chi Hyun Kim, Moritz Kuhn & Moritz Schularick construct the first continuous series of the US racial wealth gap from 1860 to 2020. Link

    +   A study of tax enforcement and planning strategy in Chile, by Sebastián Bustos, Dina Pomeranz, Juan Carlos Suárez Serrato, José Vila-Belda, and Gabriel Zucman. Link

    +   Ben Fine and Seeraj Mohamed analyze industrial policy in late industrializing countries. Link

    +   “This paper seeks to answer the question of when is the long run in demand-led growth models.” By Ettore Gallo. Link

    +   “In this article we argue that Ming China had a fundamental impact on the rise and decline of the Spanish Empire. China’s demand for silver was of such magnitude that private mining profits in the Spanish Empire remained high until about 1640. The decline of these profits led to abandon production. Spain faced a deepening financial crisis due to the fall of silver’s value. The loss of purchasing power from the Crown’s American enterprise was inevitable and the state’s relentless pressure for increased taxation within Castile and elsewhere was mandatory in order to compensate for lost external purchasing power.” By Dennis O. Flynn and Arturo Giráldez. Link

  10. From Line

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    In recent decades, the global financial system has undergone a series of profound crises. While the impact of these crises has been felt globally, comprehensive reforms have been less immediate.

    In a 2013 article, THOMAS OATLEY, W. KINDRED WINECOFF, ANDREW PENNOCK, and SARAH BAUERLE DANZMAN consider structural change in the financial system through the lens of network theory.

    From the piece: 

    “The defining characteristic of financial interdependence is the inability to separate the system into independent national units or distinct levels of analysis. Horizontal ties connect states as they negotiate and implement regulatory structures. Other horizontal ties connect financial institutions in distinct national jurisdictions and connect private actors engaged in governance. Vertical relationships tie domestic policy-makers to domestic private financial actors, and link large money-center banks to small community banks. The system also contains ‘diagonal’ relationships, ties between public entities located in one jurisdiction and private entities located in another.

    The evolution of network topology has only recently received attention from network scholars. We draw on one approach which considers ‘fitness’ and ‘preferential attachment.’ Differences in node fitness provide an initial advantage, and preferential attachment reinforces this advantage via positive feedback. As the network develops over time, a hierarchical structure forms and is reinforced. Within this framework, the growth and evolution of the global financial network results from the interaction between country level characteristics and positive feedback. The more agents that are active in any national financial system, the more appealing the market becomes to other agents. A national financial system will thus attract new business because it already attracts a lot of business. As other national financial systems emerge as fit alternatives to the center, the fitness advantage that the existing center once enjoyed eventually disappears. Yet network externalities continue to pull portfolio investment to the center country, thereby maintaining the hierarchical structure. The system evolves gradually toward a condition in which an existing hierarchical structure no longer corresponds to the underlying distribution of fitness. Once this gap widens beyond some threshold, the system shifts abruptly to align network topology with the new fitness distribution.”

    Link to the article.

    +  “The power of the global financial network is ‘sticky’—established structures of the network are historically durable, and embrace ascendant centers of economic power.” A new book by Daniel Haberly and Dariusz Wójcik considers the longterm trajectory of financial networks in the world economy. Link.

    +  “Through self-reinforcing behavioral patterns as a community, merchant busness culture formed a private-order institution that facilitated trade around the Atlantic during the turbulent period of 1750-1815.” Sheryllynne Haggerty on the integral role of merchant networks in shaping the Seven Years War, the American Revolution, and the Trans-Atlantic Slave Trade. Link.

    +  “Credit relations combine the personal and the impersonal, the informal and the formal, face-to-face contact and distance.” A 2012 article by Claire Lemercier and Claire Zalc on credit networks in modern history. Link.


    Property Rights & Coal in India

    In a 2021 paper, MATTHEW SHUTZER examines the legal framework that governed rights and access to coal mining in India from 1870 to 1975, looking at continuities in agrarian regimes of property ownership. 

    From the paper:

    “In the area that would become colonial and postcolonial India’s most important site of energy extraction, mining firms in the 19th century encountered an agrarian property regime centered on the rule of a large landowning class known as zamindars. Zamindari control over the land stemmed from the colonial property system created by the East India Company in the 18th century, in which the Company delegated the rights of land revenue collection to regional elites under a legal framework intended to recognize preexisting hierarchies of agrarian custom. During the mining boom of the 1890s, the rush of subterranean property claims undercut the apparent juridical stability of these customary norms, as contradictory legal claims over the land revealed that the zamindari settlement lacked any recognition of coal as a formal property right.

    In reassembling the hitherto neglected archives of colonial mining firms and civil court judgements from before and after the boom, I document how this absence of legal certainty nevertheless allowed for the commodification of the geological wealth of the mining region. In the resource frontier of the coal region, the legal codification of coal as property did not precede the expansion of mining capital, but was, rather, recursively assembled within Indian civil courts during and after the commodity boom. Mining firms, landowners, company lawyers, and Indian jurists pushed at the limits of customary jurisprudence in order to legitimate new financial and extractive claims.”

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

    Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations:

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    +   “Not content to demolish the mainstream neoclassical synthesis, Marglin charges into the wreckage to offer his own novel formalization of Keynesian theory, reconstructed by means of mathematical tools that its originator lacked.” New on PW, Nina Eichacker reviews Stephen Marglin’s Raising Keynes: A Twenty-First-Century General Theory. 

    +   “92.1 percent of US corporate equity and mutual fund value is owned by white households.” Lenore Palladino on corporate equity and the racial wealth gap. Link

    +   Callum Ward, Frances Brill, and Mike Raco on the Qatari Investment Authority’s role in London’s real estate market. Link

    +   “Are major advanced economies on the verge of a wage-price spiral?” A BIS report by Frederic Boissay, Fiorella De Fiore, Deniz Igan, Albert Pierres-Tejada, and Daniel Rees. Link

    +   Orazio Attanasio, Kieran Larkin, Morten O. Ravn, and Mario Padula examine consumption by tracking car purchases and loans after the Great Recession. Link

    +   “We construct an aggregate data set of sovereign debt holdings by foreign and domestic bank, non-bank private, and official investors for 95 countries over twenty years.” By Xiang Fang, Bryan Hardy, and Karen K. Lewis. Link

    +   Amir Lebdioui on Malaysia’s industrial policy in its petroleum, rubber, and palm oil sectors. Link

    +   “Although local demand inspired the early development of a luxury cigarette industry in Egypt, it was demand from abroad that played a key role in the rapid growth of the industry. In 1889, S. Anagyros began to export the brand Egyptian Deities from Egypt to the United States. Nestor Gianaclis was perhaps the first Egyptian manufacturer to export cigarettes actively to the United States, and his Nestor cigarette was later branded ‘the original Egyptian.’ In the early 20th century, when he realized that exports from Egypt could not adequately supply the growing local demand, he opened a factory in Boston. Because the industry in the United States was initially developed by Armenian, Greek, and Turkish immigrants from the Ottoman Empire, Greece, and Egypt, handmade Eastern tobacco brands maintained their reputation and continued to enjoy popularity among consumers. As late as 1903, Eastern brands constituted about 25 percent of the national US market.” By Relli Shechter. Link