July 20th, 2021

Path Persistence

Global trade hierarchies across two eras of globalization

During the first era of globalization (1870–1913), the global division of labor was stark. Britain and other Western nations largely produced manufactured goods, but they also exported a whole range of temperate agricultural goods like wheat, beef and barley. Elsewhere in the European colonial empires, products like cotton, cocoa and coffee were exported, often at very low prices and sometimes with forced labor, to sate a growing demand in the global economic core for tropical luxuries. More than a century has passed since World War I heralded the collapse of this world order. Today, the globalization wave that has shaped the world since the 1980s is ebbing.

What is the legacy of the First Globalization of the late nineteenth- and early twentieth-centuries on the economic fortunes of countries during the Second Globalization? To what extent have countries’ positions in the international economic order been persistent across the two globalizations, with some trapped at the bottom and others comfortably on top?

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July 12th, 2021

Long Crises

An interview with Benjamin Holtzman

With the victory of Eric Adams in the Democratic mayoral primary, New York City stands at a crossroads. How will the city negotiate the changes brought about by Covid-19? What will be the lasting legacy of Black Lives Matter? How will the metropolis—and other American cities—evolve in the years to come?

As New Yorkers grapple with an uncertain future, the fiscal crisis of the 1970s and its aftermath are often invoked by the press and politicians. Today, “New York in the 1970s” is shorthand for a city facing poverty and crime, running out of money, and suddenly confronting the end of one social order and the rocky emergence of another.

Given these dynamics at play, the publication of Benjamin Holtzman’s The Long Crisis: New York City and the Path to Neoliberalism could not have come at a more opportune time. The book tells the story of New York City in the years that preceded and then followed the fiscal crisis and near-bankruptcy of the city in the 1970s. Holtzman reveals how—with the absence of effective government responses—ordinary political wisdom changed to favor private, market-based solutions, whereas earlier generations might have looked to the city government or collective institutions such as unions. He shows that New York City’s history during this time went beyond austerity, constituting a whole new approach to government. This shift to the right was not just a matter of ideology, nor was it driven entirely by elite actors. Rather, it was built by many different political participants and communities on the ground, ranging from park volunteers, to business groups, to neighborhood patrols and beyond. Raising key questions about the city’s history, The Long Crisis is a critical work for understanding the origins of contemporary New York City—and thinking about where we go from here.

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July 8th, 2021

Phenomenal Works: Davarian Baldwin

Black Metropolis

Even 75 years later, St. Clair Drake and Horace R. Cayton Jr.’s 1945 tome Black Metropolis: A Study of Negro Life in the Northern City remains my aspirational model for social scientific scholarship. Written by two graduate students, with an introduction from their comrade and friend Richard Wright, the text uses interdisciplinary methods strategically to offer a rare materialist analysis of urban inequality and community formation. Their work disrupts the dominant human ecology vision of the day, led by their mentors of the “Chicago School,” which saw the organization of cities emerging from an organic process dictated by the cultural tastes and temperaments of racial groups, rather than being driven by the accumulation of socioeconomic power. Drake and Cayton’s work directly challenged not only those who controlled their immediate professional fate, but also scholars who propped up the segregationist outlook of both the real estate industry and public policymakers in the Federal Housing Administration.

With the text at just under 800 pages, it’s easy to lose sight of the pathbreaking methodological brilliance found in Black Metropolis. For example, Drake and Cayton drew from South Side activists in the 1930s to offer one of the first academic uses of the term “ghetto” as an analytic for engaging the state-sanctioned racial segregation of African Americans in cities. Their “Black Ghetto” chapter overwhelms the dominant human ecological paradigm of their Chicago forbearers with detailed sociological data to document racial disparities in housing, labor, health, income, and other metrics—challenging any claims about the organic structure of cities. Before US politicians and scholars turned their eyes to Nazi Germany, Drake and Cayton used the term “ghetto” to shed light on municipal policies like racially restrictive housing covenants, white vigilante violence, and financial divestment from Black communities to argue that the racial organization of urban space looked not like a human ecology but fascism. Still, the authors immediately placed this sociological rendering of the “Black Ghetto” in conversation with an ethnographic account of what residents called “Bronzeville.”

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July 2nd, 2021

Repressing Labor, Empowering China

Cheap money will boost inequality and geopolitical tension but not inflation

Though the lockdown in 2020 threw many workers out of work, the big fiscal stimulus, fueled by government debt and an unprecedentedly large monetary expansion, offered stimulus checks and elevated unemployment benefits to millions of Americans. In 2020, US federal spending grew by 50 percent, making the deficit share of GDP the largest since 1945, and the M2 in the economy grew by 26 percent—the largest annual increase since 1943. Such fiscal and monetary expansion prevented a collapse in consumption. After an initial fall in Spring 2020, US household consumption bounced back and grew by more than 40 percent in the third quarter.

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June 24th, 2021

Preferred Shares

Inflation, wages, and the fifty-year crisis

In one of her first statements as Treasury Secretary, Janet Yellen said that the United States faced “an economic crisis that has been building for fifty years.” The formulation is intriguing but enigmatic. The last half-century is piled so high with economic wreckage that it is not obvious how to name the long crisis, much less how to pull the fragments together into a narrative. One place to start is with the distribution of national income between labor and capital (or, looked at another way, between the wage share and the profit share of national income). About fifty years ago, the share of income going to labor began to decline, forming a statistical record of the epochal collapse of working class power. Episodes of high employment in the 1990s and the late 2010s did not reverse the long-term pattern. Even today, with a combination of easy money and fiscal stimulus unprecedented since World War II, it is unclear what it would take to reverse the trend in distribution.

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June 18th, 2021

Investment and Decarbonization

A conversation on investment strategies for the green transition

In late March, the Biden administration announced the $2 trillion American Jobs Plan, with approximately half of the sum dedicated to fighting the climate crisis. While the legislation would mark sea change in federal action to avert climate catastrophe, many have argued that it falls dramatically short of the amount required to usher in a green transformation of our infrastructure and energy systems.

Responding to this large investment gap, a recent Phenomenal World essay by Anusar Farooqui and Tim Sahay proposes a plan for a public ratings agency for green finance, which would “be mandated to assess the economic viability and contribution towards decarbonization of project proposals” and “serve as a public signal for the state, investors, cities, and firms to back, fund, and undertake projects that are both viable and contribute significantly to decarbonization and resilience against climate change.”

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June 10th, 2021

Hysteresis & Student Debt

How the Great Recession fueled the student debt crisis

The geographic character of the Great Recession is, at this point, well-known. While everywhere in the United States experienced a sharp increase in unemployment, some areas suffered disproportionate exposure of local employment in harder-hit industries.

The Great Recession is also substantially at fault for the student debt crisis, and the geographic contours of the downturn carry implications for how student debt has subsequently been experienced throughout the country. The number of borrowers and average loan balances were increasing rapidly before the onset of the financial crisis, thanks to the defunding of public university systems following the previous cyclical downturn in the early 2000s. The Great Recession put those trends into overdrive: with fewer jobs available and a more selective labor market, many young people were funneled into a higher education system already in the process of becoming much more dependent on students and their families paying hefty tuition, as opposed to state support. Those who had entered the system seeking credentials to boost their chances in the labor market then graduated (or didn’t graduate) into a labor market still suffering from stagnant wages and disappearing job opportunities. Credentialization cascaded into higher loan balances as a share of income, rising delinquency, and eventually declining repayment rates.

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June 8th, 2021

The Crisis Canal

Trade, bond markets, and the Ever Given

Why did the Ever Given capture our collective imaginations? At the end of its week in the spotlight, the poet Kamran Javadizadeh wrote: “I too am ‘partially refloated,’ I too remain stuck in the Suez Canal.” Two fluorescent yellow-vested construction workers with an excavator—lego-like compared to the gargantuan hulk of the vessel—attempted to wrench the giant ship from the sand bank. Dredgers and tugboats aided by rising tides finally refloated the massive freighter, launching it back on its voyage from Yantian to Rotterdam.

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June 5th, 2021

Phenomenal Works: Laleh Khalili

Decolonizing infrastructure

“What if infrastructure is designed, financed, and adopted into the habits of everyday lives of its users in such a way that it is not a harbinger of apocalypse?” In a recent essay, Laleh Khalili notes a key dilemma of infrastructure projects—in both colonial and postcolonial contexts, and even in the service of revolutionary ideals, infrastructure, a key feature of economic development models, carries destructive environmental impacts. Khalili argues in favor of a conception of infrastructure beyond the bounds of Rostow’s stages of growth, instead looking to projects that are redistributive, participatory, and egalitarian.

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June 2nd, 2021

Risks and Crises

Market makers and risk managers after 2008

In the 1945 film It’s a Wonderful Life, banker protagonist George Bailey (played by Jimmy Stewart) struggles to exchange his well-functioning loans for cash. He lacks convertibility—known as liquidity risk in modern finance—and so cannot pay impatient depositors. Like any traditional financial intermediary, Bailey seeks to transform short-term debts (deposits) into long-term assets (loans). In the eyes of traditional macroeconomics, a run on the bank could be prevented if Bailey had borrowed money from the Fed, and used the bank’s assets as collateral. In the late-nineteenth-century, British journalist Walter Bagehot argued that the Fed acts as a “lender of last resort,” injecting liquidity into the banking system. As long as a bank was perceived solvent, then, its access to the Fed’s credit facilities would be almost guaranteed. In an economy like the one in It's A Wonderful Life, the primary question was whether people could get their money out in the case of a crisis. And for a long time, Bagehot’s rule, “lend freely, against good collateral, but at a high rate,” maintained the Fed’s control over the money market and helped end banking panics and systemic banking crises.

This control evaporated on September 15, 2008, with Lehman Brothers’ collapse. On that day, an enormous spike in interbank lending rates was caused not by a run on a bank, but by the failure of an illiquid securities dealer.

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