This is an archived version of the PW Sources newsletter from Saturday, June 8, 2024. Sign up to receive PW Sources directly to your inbox here.

THE FOURTH TRANSFORMATION

Claudia Sheinbaum’s ascension to the Presidency, Morena’s rising majority in congress, and the party’s expansion in local governance occasions the possibility of major constitutional reforms and has left international investors concerned about a less business-friendly environment in Mexico. Outgoing president AMLO’s social programs, cash transfers, pro-worker reforms, and large infrastructure projects successfully undermined the electoral viability of the opposition and have amounted to a state building project AMLO calls Mexico’s “Fourth Transformation.” 

In a 2020 chapter, NADINE REIS examines the Mexican state-owned bank Banco del Bienestar (Bank of Welfare), and its role in AMLO’s project of creating a “moral economy” in Mexico: 

“Like previous left-populist governments in Latin America, AMLO follows a proclaimed anti-neoliberal, but decidedly neo-extractivist economic policy. His Government has focused on increasing the income of the poor, primarily through increasing the productivity of the state oil company PEMEX, fighting corruption and imposing harsh austerity measures in the public sector, as well as investments in (highly conflictive) infrastructure megaprojects, including a new oil refinery. The freed resources are supposed to be channelled to the poor, mainly in the form of social benefits paid out to individuals. AMLO therefore seeks to massively expand the role of what the President has called the “Bank of Welfare for the People” (Banco del Bienestar del pueblo). The most important programmes delivered through the BB are cash benefits for disabled people and the elderly (Pensión para Personas con Discapacidad/Adultos Mayores), scholarships for high school students (Beca Benito Juárez), and subsidized employment of youth at participating private companies (Jovenes Construyendo el Futuro). Moreover, the BB runs a microcredit programme for microenterprises (Tandas del Bienestar). 

Financial inclusion promotes economic well-being by “assisting vulnerable households to build up productive assets, manage risks, and respond to financial shocks” (World Bank 2019: 5). However, critical observers argue that the financial inclusion agenda has served to re-legitimize the instrument of microcredit in light of its huge failure as a poverty reduction strategy (Bateman 2012). With this policy, the Government follows the World Bank’s idea that financial inclusion contributes to economic growth and wellbeing. The BB is the key to implementing financial inclusion as it “promotes and facilitates savings among Mexicans, inside and outside the country, as well as access to first and second floor financing, in an equitable way, for individuals and corporations” (Gob 2020b). To drive home the national financial inclusion message, the Government policy also includes financial education at schools.”

+  “Most of Morena’s governors as well as many of its legislators were, until recently, part of the PRI. This has given AMLO and his party access to a great deal of operational expertise, but also means that Sheinbaum runs the risk of seeing opportunists jump ship should her leadership falter.” By Juan David Rojas. Link.

+“Low productivity and growth in Latin America is somewhat explained by the reduced intra-regional trade. We are facing a new chapter in the history of intra-regional logistics.” Gary Drenik interviews Alfonso De los Ríos about nearshoring and Mexico’s emerging role in global markets. Link. 

+  “Sheinbaum’s government would be keen to avoid Mexico being merely a source of cheap labor and resources in the energy transition, for companies either from the US or who are looking for ways to access that market.” By Kate Arnoff. Link. And see Karen Gabriela Liñán Segura’s thesis on a public sector-led energy transition in Mexico. Link.

NEW RESEARCHERS

Bank Capital Requirements

STEFAN WALZ is a Finance PhD candidate at Columbia Business School. In a working paper, he studies the implementation and subsequent relaxing of bank capital requirements in 2018 to show that stricter requirements lead banks to shift their portfolios toward long-term bonds.

From the paper:

“While the traditional view of bank capital regulation focuses on the crowd out effect for lending to the real economy (e.g. Van den Heuvel (2008), Fraisse et al. (2020), Begenau (2020)), I find that the effect on the securities portfolio is economically and statistically significant, and must be weighted against the consequences for lending markets. Furthermore, while the common refrain on the 2023 banking crisis suggests that mid-sized banks (e.g. Silicon Valley Bank) took excessive interest rate risk as a result of deregulation, I argue that the deregulation actually led the bank to take less interest rate risk. This is not to say that SVB was made safer by the deregulation; the key argument of the paper is that capital regulation (along with other regulation) incentivizes holding interest rate risk. To the extent that credit risk is diversifiable and interest rate risk is a source of aggregate risk, the finding suggests that regulation may make banks more similar in terms of systemic risk (Greenwood et al. (2017)). The paper traces out the effect on loans and bond markets if policymakers decide to install counter-cyclical capital requirements, leading to a more robust financial sector that continues to provide credit even if the level of capital requirements changes. I evaluate the impact of state contingent central bank asset purchases, finding that they further enhance the hedging properties of long bonds for banks.”

+ + +

+  “Contrary to the US, where the wage-price spiral was viewed with enormous concern, the BOJ has actively pursued this positive spiral since the implementation of Abenomics.” New on PW, Kang-kook Lee on wage inequality in Japan. Link.

+  “El bienestar se está reformulando como un regalo por quien lidera un partido y no como un derecho fundamental que debería enmarcar los términos del contrato social.” Rohan Venkat’s May interview with Yamini Aiyar on the BJP’s “new welfarism” in India is now available to read in Spanish and Portuguese. Read the original piece in English here.

+  A study by Bjarne Steffen, Valerie J. Karplus, and Tobias S. Schmidt analyzes technology adoption by state-owned utilities in the EU. Link.

+  “Conduits for the dissemination of far-right discursive frames are hardly unidirectional in nature. We instead foreground the concept of multidirectionality.” A special issue of Nationalities Papers, edited by Nina Paulovičová and George Soroka. Link.

+  “The sharply reduced margin of 152,513 votes— down from 471,000 in 2019—captures the personal nature of the defeat Narendra Modi was handed by India’s voters today.” By Siddharth Varadarajan. Link.

+  “As unionized workers in higher education, we are positioned to intervene at the very beginning of the military supply chain.” Isabel Kain and Becker Sharif on the United Auto Workers Local 4811 strike. Link.

+  “To understand the Palestinian condition in law, this Article proposes an approach that considers Nakba as a legal concept capable of encompassing a phenomenon that has included genocide, apartheid, and military occupation but remains rooted in historically and analytically distinct foundation, structure, and purpose.” By Rabea Eghbariah. Link (And for context around the publication of Eghbariah’s article, see reporting in the Intercept and AP).

+  Sarena Martinez on building inclusive insurance futures. Link.

+  Karsten Müller and Emil Verner examine how credit booms to the non-tradable sector contribute to financial fragility and a boom-bust cycle. Link.

+  “There is a growing body of research on petitioning in early modern England. The fruits of much of this are yet to be published, but it is becoming increasingly clear that the act of setting down a grievance in writing and presenting it to an “authority” was a crucial way in which people engaged with, and used, the state. Petitioning was a crucial part of the politics of poor relief. It appears to have been a common tactic across the country: Quarter Sessions papers frequently contain orders relating to poor relief which must have originated in a petition, though the actual petition rarely survives. In addition, an untold number of cases were evidently heard at Petty Sessions, and some especially tricky disputes might even reach the Assizes, when leading common law judges were visiting the county on circuit. Not all petitions were specifically about an individual person’s access to relief: many dealt with settlement, i.e. which parish (or township) had the obligation to support a pauper. Others were about disputed rates. But a subset of petitions presented to England’s institutions of local administration were about the critical issue (for us) of whether a particular person had a justifiable claim to poor relief.” By Jonathan Healey. Link.

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