October 19th, 2021

Gas and Labor

The UK‘s petrol shortage is also a labor shortage driven by worsening conditions of work

As of late September 2021, the UK has suffered a protracted crisis in the supply of petrol. In the face of a plummeting sterling and severe disruptions to essential public services, military tanker drivers have been deployed to transport fuel to the country’s 8000 petrol stations. The lack of truck drivers also led to containers piling up in the UKs most important port Felixstowe, and large shipping companies reroute part of the cargo to continental Europe. On October 1, German news outlet Der Spiegel reported on a “bizarre“ letter sent by the British government to German residents in the UK, asking them to consider work as a trucker. German drivers licences issued until 1999 allow drivers to conduct small trucks until 7.5 tons, even if they never drove a lorry. A similar letter was sent to 1 million potential lorry drivers in the country.

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September 18th, 2021

Developmentalisms

The forgotten ancestors of East Asian developmentalism

2021 marked the centenary of the creation of the Chinese Communist Party, born of the May Fourth Movement of 1919. History textbooks tend to claim that the Movement emerged out of a widespread realization that China’s rights as a victorious power during WWI had been sold out at the Paris Peace Conference by the European Powers. Students were angered by elite collusion with Japan and the corruption of the early Chinese Republic—also known as the “Beiyang Regime.” The activists found hope in the new Soviet model, and May Fourth is credited with bringing Bolshevism to China and beginning its socialist phase.

In Japan, conversely, state-led economic development has often been attributed to a deliberate attempt to mimic the West industrially and militarily since the Meiji era. Japanese developmentalism is perceived to be strategic and straightforward, enabled after WWII by a foundation of free market capitalism.

In fact, state driven economic development in both countries is the product of a long and complex ideological history. In the late nineteenth century, Chinese and Japanese economists drew inspiration from Hamiltonianism (also known as the “American School”) and German State Socialism

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August 31st, 2021

How Schools Lie

The deceptive financial aid system at America's colleges

When prospective students navigate the process of choosing a college, financing is a central and often determining factor in the final decision of enrollment. Students first turn to college websites and the College Board to look at cost data, and many then apply for financial aid through FAFSA, which relies on cost estimates provided directly by colleges to determine aid packages. Prospective students know that college is a steep investment—they take seriously the decision of where and what to study and the costs it incurs. No matter how talented, hard working, and committed a student is, if financing falls through, the dream of obtaining higher education can be dashed. But much of the financial data that prospective students receive is misleading. In the cost information offered to prospective students, higher ed institutions consistently underestimate the non-tuition costs of attending college, and overestimate the amount of incoming aid from grants and scholarships. Discrepancies between estimated and real prices can add up to thousands of dollars in unanticipated costs, burdening students who already struggle to afford college.

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August 24th, 2021

Legitimacy Gap

We live in the age of the central bank. The financial crisis of 2008 and the COVID-19 crash of last year have made visible the central role of the US Federal Reserve and its overseas counterparts in the international financial system, and their dramatic actions earned them applause for avoiding a second and third Great Depression. Rescuing banks and preventing financial collapse are the tasks of central banks, and their success brought relief to the economy. But these actions bore a distributional impact. Most of the financial policies adopted in response to the crisis—quantitative easing, bond purchases, and low interest rates—have protected wealth without creating opportunities to accrue new wealth for those who don’t possess it. As the “K-shaped“ charts of the 2020 recovery made plain, a market rebound did not spell economic wellbeing for ordinary people.

The outsize role of central banks—especially the Fed—in the international financial system has led to some of skepticism about central banks and their independence.

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August 11th, 2021

Built Trades

Employer claims of unavailable labor are rooted in an unwillingness to raise wages and the long-term decline of the nation’s system of training and allocating labor.

As the American economy reopened in the first half of 2021, reports of a “labor shortage” have spread throughout US industries. But there was one sector where employer panic about hiring was old news: the massive and decentralized US construction industry. According to industry surveys, the share of homebuilders who rank the “cost and availability of labor” as their most significant problem has increased every year since 2011. This summer, the complaints continue.

What can the construction example tell us about the increasingly widespread idea of a “labor shortage”? Mark Erlich, the former Executive Secretary-Treasurer (EST) of the New England Regional Council of Carpenters, now a fellow at the Harvard Labor and Worklife Program, laughs at employer claims: “Labor shortage” has been a “chronic cry for decades.

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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 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 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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