Mecklinburg Autumn


As the Fed moves towards tightening its post-pandemic monetary policy, developing countries around the world face growing risks of capital flight. The deep political constraints posed by this risk are not new, but their implications for contemporary policymaking are persistent.

In a 2014 book chapter, Léonce Ndikumana and James Boyce consider strategies to overcome the tension.

From the text:

“On the African side, capital flight is associated with the embezzlement of national resources, corruption and political instability. But external agents and institutions also contribute to capital flight from the continent, in particular through the opacity of the international banking system and inadequate enforcement of rules on financial transparency.

This implies that efforts to stem and prevent capital flight must be organized on both domestic and international fronts. At the national level, the effectiveness of official institutions in preventing capital flight is contingent on the existence of a dynamic network of civil society entities committed to financial transparency and accountability. Civil society needs to be given ample space to operate as a counterbalancing force to executive power. In turn, civil society must take advantage of this position to consolidate action plans in the fight against illicit financial flows. Internationally, the establishment of a body to adjudicate questions of debt legitimacy would add an important missing piece to the current financial architecture. The coordination and harmonization of regulatory frameworks and enforcement mechanisms are critical to increase effectiveness in preventing illicit financial flows and tax evasion, and in facilitating stolen asset recovery. A more transparent international financial system will benefit developing and developed countries alike.”

Link to the piece.

  • “Paradoxically, even as African countries have become more attractive to foreign private capital, they have continued to experience capital exodus in the context of improved economic performance, especially since the turn of the century.” A 2019 article by Ndikumana and Mare Sarr. Link.
  • “To what extent did the threat of a relocation of assets cause the dismantling of progressive taxation on wealth and income introduced in European countries during the First World War?” Christophe Farquet analyzes the French tax cuts of 1922-28. Link.
  • From 1990, Manuel Pastor on capital flight and IMF restructuring across Latin America: “4 of the 5 low-flight countries in our sample—Brazil, Chile, Colombia, and Peru—had at least creaky exchange controls through most of the period. Meanwhile, Argentina, Mexico, and Venezuela, free of the ‘impediments to social welfare’ imposed by capital controls, hemorrhaged resources over the same period.” Link.
  • “[Capital owners have] a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness.” Michael Kalecki’s seminal paper on the “Political Aspects of Full Employment.” Link.


Macroeconomic Modeling & Policy

Juan Acosta is a historian of economics at Universidad del Valle in Calí, Colombia who studies the production of economic knowledge in central banks. In recent paper co-authored with Erich Pinzón-Fuchs, he examines the Social Science Research Council’s Committee on Economic Stability.

From the paper:

“The Committee on Economic Stability of the Social Science Research Council (SSRC) was established in 1959 and played a key role in the construction of large-scale macroeconometric models during the 1960s and early 1970s. Using archival material from the SSRC, we discuss the two projects that the Committee carried out during its first three years of existence: (i) the construction of a macroeconometric model (1960-1963) and (ii) the organization of a conference on quantitative policy analysis (1963). We focus on the effect of the Committee’s activities on public economic discourse and argue that, while the Committee did not participate directly in the policy debate, it did purposefully contribute to the growing importance of macroeconometric models in policy analysis. Thus, with its activities, the Committee helped usher in an age of quantified and model-based economic discourse that was not, however, exclusively technical but that recognized both the importance of the political character of the policy-making process and the limits of the economists’ toolkit.”

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

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

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  • Yu-Ling Chang, Jennifer Romich, and Marci Ybarra examine SNAP, the EITC, TANF, unemployment insurance, and the CTC from 2009 to 2019. Link.
  • “Notes on the Gini Coefficient” by Rajiv Sethi, with responses from Debraj Ray, as well as Samuel Bowles and Wendy Carlin. Link to Sethi’s post. Link and link to the responses.
  • Justin Sandefur explains the Doing Business scandal. Link.
  • Diverging debt servicing burdens among large and small corporations, by Joseph Baines and Sandy Brian Hager. Link.
  • Amir Kermani and Francis Wong on the racial gap in distressed home sales. Link.
  • Felipe Fernandes Cruz on the role of aviation technology in Brazil’s frontier colonization in the 1940s. Link.
  • A study of union membership composition in four European countries over the past 60 years. By Cyprien Batutl, Ulysse Lojkine, and Paolo Santini. Link.
  • Pedro Teixeira on the Columbia Labor Workshop in the 1960s and 70s. Link.
  • “This article provides a novel framework within which to evaluate real household incomes of predominantly rural working families of various sizes and structures in England in the years 1260–1850. We reject ahistorical assumptions about complete reliance on men’s wages and male breadwinning, moving closer to reality by including women and children’s contributions to family incomes. Our framework suggests living standards varied widely by family structure and dependency ratio. Incorporating detailed demographic data available for 1560 onward suggests that small and intact families enjoyed high and rising living standards after 1700, while large or disrupted families depended on child labour and poor relief until c. 1830.” By Sara Horrell, Jane Humphries, and Jacob Weisdorf. Link.

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

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