Assimilate and Destroy

This is an archived version of the PW Sources newsletter from Saturday, November 11. Sign up to receive PW Sources directly to your inbox here.


On Nov 7, Portugal’s Prime Minister António Costa, of the Socialist Party, resigned as state prosecutors launched an investigation into alleged corruption and “influence peddling” in the context of hydrogen and lithium projects. 

In a 2003 chapter, JOSÉ M. MAGONE examines the structural factors that have entrenched political corruption in Portugal. 

From the text:

“Portuguese MPs receive only £2,000 per month—a low salary compared to the UK, France, or Germany. This can lead to the pursuit of other interests. Parties are legally required to publish financial reports and accounts annually. In reality, as this requirement was never enforced, private donations go unscrutinized, as became particularly observable in the period after 1995, when the Social Democrats lost the absolute majority they had enjoyed since 1987. New leader Marcelo Rebelo de Sousa had to introduce stringent organizational changes in order to repay the debts accumulated in power. The party lost 201.47 million escudos as a result. An absence of clear criteria for public appointments has led to widespread clientelistic practices in the distribution of senior-level jobs in the health, public television, and public telecommunications sectors—part of a patrimonial culture in which private and public interests are mixed to support friendships or personal enrichment, known as amiguismo. The flow of European structural funds since 1986 has opened up new opportunities for fraud, which the main trade union confederation, the General Workers’ Union, which is closely linked to both the Socialist Party and the Social Democratic Party, has also partaken in. Less easily detected is influence peddling. Some ministers may become dependent on a single interest group for the development of policies or the distribution of funds. During the Cavaco Silva government, members from the main agricultural associations sat on the decision-making boards of the Financial Institute for Support of the Development of Agriculture and Fisheries, which was responsible for allocating structural funds from the European Community’s program for the financial support of agricultural associations and cooperatives.”

+  “Some of the most relevant corruption scandals in Portugal involve defendants that fit within the profile of a business politician looking for personal capital.” By Susana Coroado and Luis de Sousa. Link

+  “Revolving doors abound in Portugal’s financial sector, with a disproportionate share of regulators of that sector coming from, and moving back, to the industry.” By Susana Coroado and Pedro C. Magalhães. Link

An investigation by Khadija Sharife and Mark Anderson into how Angolan elites launder money through Portuguese banks. Link


Foreign capital liberalization

NATALIE BAU is an associate professor of economics at UCLA. In a recent cowritten paper, she shows how capital market integration reduces misallocation in India. 

From the abstract:  

“We show that foreign capital liberalization reduces capital misallocation and increases aggregate productivity for affected industries in India. The staggered liberalization of access to foreign capital across disaggregated industries allows us to identify changes in rms’ input wedges, overcoming major challenges in the measurement of the effects of changing misallocation. Liberalization increases capital overall. For domestic rms with initially high marginal revenue products of capital (MRPK), liberalization increases revenues by 23%, physical capital by 53%, wage bills by 28%, and reduces MRPK by 33% relative to low MRPK rms. The effects of liberalization are largest in areas with less developed local banking sectors, indicating that ineffciencies in that sector may cause misallocation. Finally, we propose an assumption under which a novel method exploiting natural experiments can be used to bound the e ect of changes in misallocation on treated industries’ aggregate productivity. These industries’ Solow residual increases by 3-16%”

+ + +

+  “Since the financial crisis of 2008, increasing transparency has been a crucial goal. It took a lot of work to know where interest rate swaps were located, who was facing whom, and what collateral types were used.” New on PW, Elham Saeidinezhad interviews interest rate strategist Ralph Axel. Link. And read her related essay on interest rate swaps. Link

+  “Only after Netanyahu’s resignation will a window of opportunity be opened up to create a more stable settlement between Israel and the Palestinains living in Gaza and the West Bank.” New on The Polycrisis, an interview with Guy Laron. Link

+  “The fervor of the debate over expanding the CTC to families without any income from work is misaligned with the scale of benefits going to this group.” JFI’s report on the expanded child tax credit, by Jack Landry. Link

+  John Lindsay-Poland on the growing firearms trade in the Americas. Link.

+  Three by Joshua Craze: on the follies of humanitarianism, on the civil war in Sudan, and on military violence in South Sudan. Linklink, and link

+  Bas van Aarle, Joep Konings, and Aaron Putseys lay out a policy framework for regulating European energy prices. Link.

+  “The dire conditions an incoming government would inherit—a stagnant economy, a threadbare state, a delayed transition, and millions of children growing up in families routinely skipping meals—at once make Labour’s victory more likely, and their task in office more difficult.” By Mathew Lawrence and Alfie Stirling. Link.

+  A Common Wealth report on the responsibility that the US and UK militaries bare for the climate crisis. Link

+  “The 2010 US sanctions reduced multinational banks’ lending to neighboring countries of Iran and its politically aligned states by approximately 14% and 12% respectively.” By Abraham L. Newman  and Qi Zhang. Link.

+  “Following the discovery of large quantities of alluvial gold in the interior of Brazil in the early 1690s, the Portuguese crown struggled to govern the many frontier settlements that sprang up throughout the backlands of the Brazilian West. Having little or no allegiance to Lisbon, early explorers rushed deeper and deeper into the wilderness like drunken men fleeing a plague. In the midst of this great gold rush, social networks played multifaceted roles in the relationship between colony and crown. On the one hand, patron-client networks permeated every facet of the system—from the crown’s councilors in Lisbon to local governors, magistrates, and municipal officials in Brazil. And yet, the personal nature of the bureaucracy provided a medium in which other associations could take root and grow. Indeed, conspiracies involving graft, bribery, and corruption all sprang from the same teeming earth. In the backlands of Brazil, royal government had traditionally been weak, enabling individuals to exploit the bureaucracy for personal gain.” By Erik Lars Myrup. Link

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

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