Phenomenal World

November 25th, 2020

Phenomenal World

Development, Growth, Power

An interview with Amit Bhaduri

Amit Bhaduri was internationally selected professor at Pavia University and visiting Professor at the Council for Social Development, Delhi University. His six books and more than sixty journal articles have consistently scrutinized the foundations of neoclassical economic theory and presented theoretical and practical alternatives. Among his most widely cited contributions, co-authored with Stephen Marglin, is the Bhaduri-Marglin model. Distinguishing between wage-led and profit-led growth, the model has given way to a wealth of research on the relationship between the functional income distribution and effective demand. In other work, Bhaduri has studied technological change in agricultural societies, articulated and criticized the social consequences of finance-led growth, and developed just and equitable alternatives to standard models of development.

In anticipation of his forthcoming article on social democracy in PSL Quarterly, and a Phenomenal World series on the topic, we begin this interview by discussing alternatives to financial liberalization, before turning to a discussion on the future of welfare politics, development strategy, and contemporary models of economic growth.

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November 18th, 2020

The Student Debt Crisis is a Crisis of Non-Repayment

Think of the student debt crisis as an overflowing bathtub. On the one hand, too much water is pouring in: more borrowers are taking on more debt. That is thanks to increased demand for higher education in the face of rising tuition, stagnant wages, diminishing job opportunities for those with less than a college degree, and the power of employers to dictate that would-be hires have the necessary training in advance. On the other hand, the drain is clogged and too little water is draining out: those who have taken on debt are increasingly unable to pay it off.

The last post in the Millennial Student Debt project used a new database of student debtors and their loan characteristics (matched to demographic and economic data in the American Community Survey) to document the former phenomenon, both in aggregate and particularly as it pertains to disadvantaged communities along multiple dimensions. Specifically, it showed the rapid growth of student debt levels and debt-to-income ratios in the population at large, among people of all income levels. But this growth is concentrated among non-white borrowers, who have higher debt conditional on income and whose increased indebtedness over the past decade-plus is greater than for white borrowers. That racial disparity is particularly pronounced in the middle of the income distribution. It also showed that student-debt-to-income ratios have grown fastest in the poorest communities since 2008. This post uses the same data to document the latter: non-repayment by student loan borrowers is getting worse over time, especially so for non-white debtors.

Over the last ten years, as outstanding student loan debt has mounted and been assumed by a more diverse, less affluent group of students and their families than was the case for prior cohorts, a common policy response has been to wave away its impact on wealth, both individually and in aggregate, by saying that the debt finances its own repayment. First of all, so the claim goes, student debt finances college degrees that in turn pay off in the form of higher earnings, enabling debtors to repay. Second, expanded allowance for income-driven repayment (IDR), by capping debt service as a share of disposable income, eliminates the worst forms of delinquency and default. The first claim says that repayment is inevitable, the second that it need not take place. Both claims together, however, serve to rationalize higher debt, higher tuition, higher attainment, and the forces driving all three.

IDR was designed to address a liquidity crunch: since students are graduating with more debt, they may not earn enough immediately upon entering the workforce to pay it down. That failure of earnings to align with debt service obligations means that a program to defer those obligations until earnings are realized would ameliorate delinquency and default, at the cost of capitalizing unpaid interest into a higher principal balance. The creation and expansion of IDR programs in the early 2010s did indeed serve to stop the growth of delinquency by the mid-2010s and reverse it, to the point that the share of accounts delinquent now is lower than it was before the Great Recession, despite the amount of debt and the number of debtors having increased continuously since then. For that reason, many higher education policy analysts have proposed further expanding the program.

But IDR programs will never be successful as a solution to the student debt crisis, because they’re designed to address a liquidity problem rather than the real problem—solvency. The problem with student debt is a problem of wealth—students and their families are taking on debt because they don’t have enough wealth to afford increasingly-costly, increasingly-mandatory higher education. The debt then itself exacerbates wealth disparities that the higher education it “paid” for doesn’t rectify.

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October 16th, 2020

Data as Property?

The legal structure of data egalitarianism

Since the proliferation of the World Wide Web in the 1990s, critics of widely used internet communications services have warned of the misuse of personal data. Alongside familiar concerns regarding user privacy and state surveillance, a now-decades-long thread connects a group of theorists who view data—and in particular data about people—as central to what they have termed informational capitalism. Critics locate in datafication—the transformation of information into commodity—a particular economic process of value creation that demarcates informational capitalism from its predecessors. Whether these critics take “information” or “capitalism” as the modifier warranting primary concern, datafication, in their analysis, serves a dual role: both a process of production and a form of injustice.

In arguments levied against informational capitalism, the creation, collection, and use of data feature prominently as an unjust way to order productive activity. For instance, in her 2019 blockbuster The Age of Surveillance Capitalism, Shoshanna Zuboff likens our inner lives to a pre-Colonial continent, invaded and strip-mined of data by technology companies seeking profits. Elsewhere, Jathan Sadowski identifies data as a distinct form of capital, and accordingly links the imperative to collect data to the perpetual cycle of capital accumulation. Julie Cohen, in the Polanyian tradition, traces the “quasi-ownership through enclosure” of data and identifies the processing of personal information in “data refineries” as a fourth factor of production under informational capitalism.

Critiques breed proposals for reform. Thus, data governance emerges as key terrain on which to discipline firms engaged in datafication and to respond to the injustices of informational capitalism. Scholars, activists, technologists and even presidential candidates have all proposed data governance reforms to address the social ills generated by the technology industry.

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October 10th, 2020

Change the Furniture

An interview with Mark Blyth

Mark Blyth is William R. Rhodes Professor of International Political Economy at Brown University and a Faculty Fellow at Brown’s Watson Institute for International Studies. His research examines how the interests of states and economic actors shape ideological consensus and institutional development at the global scale. He is the author and editor of many books, including Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century (2002), The Future of the Euro (2015), and Austerity: The History of a Dangerous Idea (2013).

His latest book is Angrynomics, in which he and co-author Eric Lonergan argue that the rising tide of anger dominating global politics has its roots in decades of macroeconomic policymaking. Earlier in the pandemic, I spoke with Blyth about the economics of the Covid-19 crisis, the various approaches that governments and central banks across the globe have followed in order to tame it, and what an alternative program for the global economy might look like.

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October 1st, 2020

A Popular History of the Fed

On Populist programs and democratic central banking

Since Lehman collapsed in 2008, central banks have broken free of historical norms, channelling trillions into the banking system to prop up global finance and the savings of depositors from Germany to Hong Kong. The corona crash has only accelerated this emancipation. In April, the Bank of England helped the Johnson government finance an ambitious furlough scheme, while the European Central Bank stepped up their older quantitative easing program, pumping liquidity back into the bank sector. Swap lines by state banks have been set up in the United States, while the latest European recovery plan ratified an extension of the Pandemic Emergency Purchase program. Adam Tooze cast all of this as “a remarkable display of technocratic energy and imagination in western financial centers”—necessary to both “control the epidemic” and “restore the world economy.”

Amongst these institutions none possess as much luster as the American Federal Reserve. While other banks waver or bow to political leadership, the Federal Reserve’s action is swift and decisive, protecting against financial collapse at home while safeguarding assets abroad. Unsurprisingly, the Fed is often singled out as one of the greatest triumphs of capitalist statecraft, from its creation in 1913 under Woodrow Wilson to its decisive role in the neoliberal counterrevolution of the 1980s under Paul Volcker. Yet while the bank seemed deeply conservative for the intermittent period, its proactive capacity asserted itself with a vengeance in 2008, when Timothy Geithner’s New York Fed almost single-handedly saved the global financial system from collapse.

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September 25th, 2020

Direct Effects

How should we measure racial discrimination?

A 2018 National Academy of Sciences report on American policing begins its section on racial bias by noting the abundance of scholarship that records disparities in the criminal justice system. But shortly thereafter, the authors make a strange clarification: “In many cases there is little informative quantitative data on whether… policing is influenced by the racial or ethnic identity of citizens in a causal sense.”

On the one hand, troves of studies demonstrating racial disparities across a range of policing situations. On the other, a lack of data showing policing to be causally influenced by race. What accounts for the gap between evidence of racial disparities and proof of race as a causal influence on those disparities? The report presents a vignette that offers some clues:

"[A] police officer may decide to stop and question or frisk a Black citizen but may decide not to question a White citizen, creating a racial disparity in stops… Based solely on measures of officer’s behavior, however, it is impossible to know whether this behavior was actually racially biased. If the Black and White pedestrians, for instance, acted differently as the officer approached (e.g., nervous versus calm), or if the officer encountered them in different surroundings (at night in an alley versus at noon in the park), or if the officer was searching for a suspect described as Black, an objective observer might conclude that the officer was simply responding to the situation at hand."

The takeaway is that robust correlations in observational data offer satisfactory descriptive statistics, but they cannot, at least not on their own, meet the gold standard of scientific explanation—causal explanation. Only social scientists pursuing causal inference methods are equipped to answer sought-after “why” questions: Why are there racial disparities in policing? Is the disparity because of race or because of something else?

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September 17th, 2020

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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