Phenomenal World

September 17th, 2020

Phenomenal World

Unceasing Debt, Disparate Burdens: Student Debt and Young America

Since the Great Recession, outstanding student loan debt in the United States has increased by 122% in 2019 dollars, reaching the staggering sum of \$1.66 trillion in June of this year. Student loan debt has grown faster than other debt types, including auto, credit card and mortgage debt. For many, education is the only pathway towards good employment with benefits, leading to economic and social opportunities later in life. But as college becomes more unaffordable with each passing year, student loans are bridging the ever-expanding chasm between college savings and obtaining an education. The crisis has reached the national political arena, with policymakers recently calling for debt cancellation up to \$50,000 for federal borrowers.

Our research demonstrates that the student debt crisis has exacerbated existing inequalities. We found that all young borrowers are saddled with dramatically rising debt since 2009, but low-income groups, BIPOC, and those in their 30s fare far worse than others. While richer students have higher absolute debt, low-income students experience massive and growing relative debt burdens. And students in majority-Black and Hispanic zip codes, who are more likely to attend for-profit private institutions, have seen larger debt increases than those in majority-white zip codes. Debt levels have jumped in states like Wisconsin, Michigan, Pennsylvania, and Ohio. Gaining insight into broad trends in debt accumulation, as well as details about the particular demographic or labor market characteristics that shape changes in individuals’ debt burden over time, allows us to more effectively tailor our policy recommendations. For example, our research finds that forgiving $50,000 in student loans would make 80% of young adult borrowers student debt free.

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September 5th, 2020

Hot Oil

Gardiner Means, administered prices, and why the Texas Railroad Commission should regulate oil production again

Even at the depth of the Great Depression, oil producers were always paid a positive price for their product. But on April 20 of this year the price of West Texas Intermediate oil traded for negative prices, reaching a record low of negative \$37.86. While oil prices have largely recovered at the time of writing, negative prices indicate deep underlying problems with the oil market. Currently, OPEC+ coordinates with Russia, Mexico, and other oil producing nations to set production quotas and balance supply and demand. Their systematic reduction in oil production prevented the collapse in prices that the United States saw, and the Brent oil contract, a global benchmark, continued to trade for positive prices (on the same day West Texas Intermediate reached subterranean prices Brent Oil traded for +\$17.36, a spread of over \$50). In response to the US disaster, oil producers called for the Texas Railroad Commission (TRC) to regulate oil production to try and balance American oil markets.

Yet the Texas Railroad Commissioners maintained that plunging prices would reduce production and balance the market on their own. It is true that US producers, facing negative prices, have rapidly reduced production. But with prices rising, production may return quickly, setting the stage for another crash.

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August 26th, 2020

Banks, Bubbles, Profits

An interview with Richard Westra

Richard Westra is University Professor at the Institute of Political Science, University of Opole, Poland and international Adjunct Professor of the Center for Macau Studies, University of Macau. His research focuses on the philosophical underpinnings of economic phenomena, with an emphasis on financialization, globalization, and neoliberalism. His many writings also consider the politics of states of exception, legalization of politics, and the study of global apartheid.

Alongside Robert Albritton, Makoto Itoh, and Thomas Sekine, Westra traces his intellectual lineage to Japanese political economist Kozo Uno (1887–1977). Arising largely out of debates about the nature of the transition from feudalism to capitalism in Japan, Uno’s thought responds to a need to comprehend social-economic forms displaying “mixed” characteristics—mixed modes of production (i.e. feudal societies with capitalist characteristics or vice versa) and mixed economies (i.e. socialistic economic forms internal to capitalist economies or vice versa), as well as “capitalist” economic activity in pre-capitalist societies. Both Uno and Westra’s work is therefore concerned with reconciling the “law-like” aspects of economic phenomena with the contingency of empirical history. The task of analytically articulating these mixes necessitates a theoretical understanding of capitalism in its most pure and general form.

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August 20th, 2020

Logistics, Labor, and State Power

An interview with Laleh Khalili

Laleh Khalili is a professor of International Politics at Queen Mary University of London and the author of the books Heroes and Martyrs of Palestine: The Politics of National Commemoration, Time in the Shadows: Confinement in Counterinsurgency and the co-edited volume Policing and Prisons in the Middle East: Formations of Coercion.

Her latest book is Sinews of War and Trade. In it, she connects the themes of war making in the Middle East found in her earlier work with an examination of the contested role of capital, labor and the state in the region—via the infrastructure of maritime logistics.

Breathtaking in ambition, Khalili's analysis draws on a wide range of materials to provide long-view historical perspective on the economic and political development of the Arabian peninsula through the unequal playing field of global maritime trade. Through thematically-organized chapters on the region, Khalili examines the emergence of maritime routes; the development of landside port, road and rail infrastructure; the role of the law in structuring and securing international investment and ownership; the making of economic and political elites; the working conditions and modes of resistance by both seafarers and landside laborers; and the ways in which all of the above are tangled up with war making.

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August 15th, 2020

Another Lost Decade?

The systemic character of the global periphery debt crisis

Contrary to common beliefs on fiscal fundamentals, the current debt crisis in the global periphery demonstrates that the solvency of sovereign states is critically determined by their monetary power. Crucially, liquidity has a cyclical character in the periphery of global capitalism and a countercyclical character in the core.

During economic booms, when many contracts look safe, private actors are more prone to purchase assets denominated in peripheral currencies, which typically reward higher interest rates. But during busts, perceptions of asset safety may quickly change. Peripheral currency states are more vulnerable to suffering quick withdrawals from contracts denominated in their currency. Private investors seek the safest assets in the global economy, which, despite lower interest rates, guarantee low credit and market risks, high market liquidity, and limited inflation, exchange rate and idiosyncratic risks.

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August 13th, 2020

Geoeconomics and the Balance of Payments: A Reading List

Suggested background reading for the August 13 panel

Below is a rough reading list assembled by the panelists in the August 13, 2020 discussion on “Geoeconomics and the Balance of Payments.”

A recording of the discussion—with Mona Ali, Daniela Gabor, Izabella Kaminska, Matt Klein, JW Mason, Michael Pettis, Brad Setser, Jon Sindreu, Colby Smith, and Nathan Tankus, and moderated by Adam Tooze—can be found here.

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August 8th, 2020

Economics, Bosses, and Interest

An interview with Stephen Marglin

Stephen Marglin is Walter S. Barker Professor Economics at Harvard University, where he has taught since he received tenure in 1968. Somewhat infamous for his post-tenure radicalism, Marglin has published extensively on a wide range of topics over his decades-long career. Among his most cited early works is the two-part "What Do Bosses Do?", which sought to explain hierarchical production as a function of accumulation, not technical efficiency. Divisions of labor between workers, managers, and bosses do not, Marglin argued, serve increases in productivity and material prosperity, but rather the consolidation of wealth and power.

Similarly influential work conducted with Amit Bhaduri contested neoclassical models that view economic growth as a product of technological advancement and increases in the factors of production. Drawing on a Kaleckian framework which sees output as a function of effective demand, their paper distinguishes between "wage-led" and "profit-led" growth regimes. In the former, income redistribution increases employment and productivity, and in the latter it does not.

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July 27th, 2020

Essential Infrastructures

The case for sovereign investment in telecommunications infrastructure

As social distancing became norm and law in the early days of the Covid-19 pandemic, people turned to video teleconferencing to meet with friends and family, attend religious services, and go on dates. Zoom work accounts became a conduit for maintaining nonwork social ties and, as people came to depend on this enterprise tool, Zoom's stock valuation soared. The pandemic has widened the sphere of life dependent on such market technologies, heightening existing questions around the political, legal, and economic governance of these companies. How should the fabric of social life, especially as it is rewoven by the pandemic, relate to the private ownership of telecommunications?

Two legal regimes regulate the ownership of and access to telecommunications technology: the market disciplining forces of antitrust law (along with allied concepts like public utilities regulation), and the national security protections of critical infrastructure regulation. Certain applications of the former, concerned primarily with market power, identify privately-owned infrastructures that are “essential,” and regulate firms to ensure that access to that infrastructure is made available to competitors and consumers on reasonable terms. The latter, on the other hand, identifies infrastructures that are “critical,” and regulates them to serve the US’s national and economic security interests.

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July 22nd, 2020

Laws of the Land

Property rights and extraction in the mineral frontier

“The Mining Law of 1872,” reported California Democrat Alan Lowenthal in May 2019, "is one of the most obsolete laws still on the books.” At a hearing before the House Subcommittee on Energy and Mineral Resources, Lowenthal was rehearsing a longstanding critique of antiquation against hard rock mineral legislation—a law to privatize federal mineral lands that has remained in place since the nineteenth century.

For decades, this statute has come under scrutiny, with Congressional hearings on its merits held under every President since George H. W. Bush. Two objections are raised consistently. The first is that, in contrast to developers in other extractive industries, hard rock mining corporations may purchase Western mineral lands from the federal government for the minuscule price of \$5.00 per acre, and are charged no royalties on the resources they extract. This nearly 150-year-old arrangement remains a major gift to multinational corporations: in 1994, the US Interior Department sold about 1,949 acres in Nevada to the Barrick Resources Corporation. The land contained 30 million ounces of gold, which was valued at \$380 per ounce. Sold for just under \$10,000, the land was worth billions. A small royalty commensurate to those of other extractive enterprises would by now have generated hundreds of millions of dollars for the public.

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July 16th, 2020

The Dollar and Empire

How the US dollar shapes geopolitical power

What does the US dollar’s continued dominance in the global monetary and financial systems mean for geo-economic and geo-political power? In a recent article, Yakov Feygin and Dominik Leusder question whether the United States actually enjoys an “exorbitant privilege” from the global use of the USD as the default currency for foreign exchange reserves, trade invoicing, and cross-border lending. Like Michael Pettis, they argue that the USD’s primacy actually imposes an exorbitant burden through its differential costs on the US population.

Global use of the dollar largely benefits the top 1 percent by wealth in the United States, while imposing job losses and weak wage growth on much of the rest of the country. This flows from the structural requirements involved in having a given currency work as international money. As Randall Germain and I have argued in various venues, a country issuing a globally dominant currency necessarily runs a current account deficit. Prolonged current account deficits erode the domestic manufacturing base. And as current account deficits are funded by issuing various kinds of liabilities to the outside world, they necessarily involve a build-up of debt and other claims on US firms and households.

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