Wartime economic planning
This week, reports swirled regarding President Trump's invocation of the Defense Production Act—a 1950 law passed to manage production in the context of the Korean War—to meet the coming demand of crucial medical supplies to treat people with COVID-19. Much of the ensuing commentary has elided necessary distinctions between the Cold War–era DPA and the more memorable interventions into the productive capacity of the US economy that defined the Second World War. (For a helpful disaggregation, see this essay by Tim Barker; for a rundown of the DPA's history, see this summary from the Congressional Research Service.)
In his book, Arsenal of World War II (the fourth in a five-volume series on the political economy of American warfare), PAUL KOISTINEN provides a uniquely comprehensive and detailed account of the often misunderstood economics and administration of America's World War II mobilization effort.
From the book's introduction:
"An ironic legacy of the New Deal was that it helped create the partnership between corporate and military America that was destructive to reform. In the defense and war years, New Dealers took the lead in preparing the nation for World War II. Once hostilities ensued, the same reformers were at the center of devising the structure and controls essential for successfully harnessing the economy for war under stable economic conditions. Many of those same New Dealers became victims of the industry-military alliance that their mobilization policies and methods had assisted in bringing into being.
Despite advancement in weaponry, massive output was the critical World War II development, and that depended on successful economic mobilization policies. The political economy of warfare involves the interrelations of political, economic, and military institutions in devising the means to mobilize resources for defense and to conduct war. In each war, the magnitude and the duration of the fighting have dictated what the nation had to do to harness its economic power, but prewar trends have largely determined how this mobilization took place."
Link to the book page.
- Mark Wilson's 2016 book, Destructive Creation, also on the business-government relationships that defined the World War II mobilization effort. Link.
- A few recent articles on medical supplies: on the ventilator shortage; on mask production in China; on Taiwan's response to the virus; on the EU's plans to airlift masks; on China's increasing medical supply delivery to Europe.
- From Otto Neurath's 1919 "War Economy": "The main result of our investigation may be expressed as follows: war forces a nation to pay more attention to the amount of goods which are at its disposal, less to the available amounts of money than it usually does." Link to Neurath's collected writings on economics.
Industrialization and precarious work in Egypt and India
Newly appointed Assistant Professor of Economics at the American University of Paris PETER H. BENT studies economic history and the history of economic thought. His 2017 paper challenges the belief that precarious work is a result of deindustrialization, taking the industrial developments of colonial-era Egypt and India as case studies.
From the article:
"This paper argues that precarious work can take a variety of forms, beyond those seen in the transition from the stable post-WWII era to the neoliberal era in the West. Egypt and India offer instructive case studies. In the beginning in the nineteenth century, large-scale sugar and cotton production disrupted traditional agricultural and industrial commercial practices in Egypt. As efforts toward industrialisation became more widespread in the early twentieth century, these developments brought further changes to the ways Egyptians earned their living. These changes resulted in new and precarious working arrangements for Egyptians, especially in the industrial sectors. As in the Egyptian case, the transition from rural agricultural lifestyles to urban industrial living and working environments had wide-ranging effects on workers in India. The hand spun cotton industry was devastated by British free trade policies in the nineteenth century. Changes to small-scale weaving and metal industries also brought the rise of uncertain and precarious working arrangements, as previously stable and full-time work was subject to competitive pressures."
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- A selected batch of analysis on the economic impact of COVID-19, and the appropriate policy responses: Emmanuel Saez and Gabriel Zucman urge government to act as a "buyer of last resort." Link. At VoxEU, Richard Baldwin and Beatrice Weder di Mauro introduce an e-book of 14 essays on "Economics in the Age of COVID-19." Link. Adam Tooze surveys existing indicators to assess the extremity of the crisis ahead. Link. At New Consensus, Robert Hockett proposes a range of debt-free mechanisms similar to those used during the Great Depression and WWII. Link. And Yakov Feygin and Skanda Amarnath advocate for the Fed buying munis. Link.
- Another roundup, of recent cash transfer bills: Reps. Ro Khanna and Tim Ryan proposed a universal, $1000 monthly disbursement to all adults, and an additional $500 per child, to be phased out at $140k annual income. Link. Josh Hawley's bill proposes $1,288 per 2-person household with a phase-out at $100k. Link. Mitt Romney's is a one-time transfer of $1,000 to all adults, and Steve Mnuchin's is monthly for two months. Link and link. Tom Cotton adds an additional $500 per dependent, but limits aid to families who have been directly impacted by the crisis. Link. Senators Booker, Brown, and Bennet propose a one-time $2,000 transfer to all adults, supplemented with additional $1,000–$1,500 monthly disbursements until the crisis ends. Link. And finally, Maxine Waters advocates $2,000 per adult and $1,000 monthly per child until the end of the crisis. Link. h/t Halah for the detailed policy comparison.
- At 3P, a new post on inflation and UBI: When critics say, "a UBI is inflationary, they mean that 'disbursing UBI payments without collecting offsetting taxes is inflationary.'" Link. Relatedly, see a recent JFI working paper by Khalil Esmkhani and Jack Favilukis which predicts no housing market inflation resulting from a guaranteed income. Link to the paper and link to the accompanying blog post by Stephen Nuñez.
- Norman Fenton, Martin Neil, and Daniel Berger "review the potential and actual use of Bayesian statistics in legal theory." Link.
- "In this study, we use administrative data on county-level economic conditions from 1969 to 2018 and election results across multiple levels of government to examine the effect of the local economy on elections for local, state, and federal offices in the United States." By Justin de Benedictis-Kessner and Christopher Warshaw. Link.
- Rolando E. Díaz-Caravantes et al. compare patterns of urban growth and water security in Hermosillo, Mexico; Mendoza, Argentina; and Tucson, USA. Link.
- "This article traces the origin of too-big-to-fail policy in modern US banking to the bailout of the $1.2b Bank of the Commonwealth in 1972. During this period, market concentration due to interstate banking restrictions is a factor in most of the bailouts, and systemic risk concerns were raised to justify the bailouts of surprisingly small banks." George C. Nurisso and Edward Simpson Prescott consider the changes in legislative constraints on policymaking over time. Link.
- From 2018, Brian Melican on "How Spanish flu helped create Sweden's modern welfare state." Link.
- "Inflation in the United States has remained remarkably stable since 1990, even in the face of pronounced cycles in economic activity." A new Brookings report by Marco Del Negro, Michele Lenza, Giorgio E. Primiceri, and Andrea Tambalotti asks, "What's up with the Phillips Curve?" Link.
- "Although the Ottomans were quick to adopt advancements in military technology, they waited almost three centuries to sanction printing in Ottoman Turkish (in Arabic characters). Printing spread relatively rapidly throughout Europe following the invention of the printing press in 1450 despite resistance by interest groups and temporary restrictions in some countries. We explain differential reaction to technology through a political economy approach centered on the legitimizing relationships between rulers and their agents (e.g., military, religious, or secular authorities). The Ottomans regulated the printing press heavily to prevent the loss it would have caused to the ruler’s net revenue by undermining the legitimacy provided by religious authorities. On the other hand, the legitimizing relationship between European religious and political authorities was undermined over a century prior to the invention of the press. European rulers thus had little reason to stop the spread of printing as public policy, nor could the Church have stopped it had it wanted to." Metin M. Coşgel, Thomas J. Miceli, and Jared Rubin, "The political economy of mass printing: Legitimacy and technological change in the Ottoman Empire." Link.