Analysis

Sectoral Strategy

Industrial policy in Africa is back. Beginning last January, Nigeria moved forward with the second phase of  its “Sugar Master Plan,” a flagship industrial policy that began in 2013 to stimulate domestic production. It does this by offering numerous incentives to investors and prohibiting refined sugar imports for retail. Last month, Ghana extended a zero VAT policy on locally manufactured textiles, while Kenya announced plans to impose a 25 percent levy on imported clothes to revive its textile sector. And over the past decade, Benin’s investment in the Glo Djigbé Industrial Zone, a textile industrial park, has helped transform the nation into the continent’s leading cotton producer.

Industrial Experiments

The turn of the twenty-first century brought a reassessment of development economics. The global commodity boom of the 2000s ushered in windfall profits for resource-rich countries in the global South, and with them came new agendas for growth. In 2002, economists like Dani Rodrik were hailing the decline of political support for the Washington Consensus and wondering what would come after neoliberalism.

The Doom Loop

Recent coverage of insurance markets has highlighted the industry’s involvement in the so-called “climate risk doom loop”: looming climate risks and greater disaster damages are raising the price of insurance for real estate and infrastructure assets, exacerbating their owners’ vulnerability to future disasters and feeding into higher insurance prices in the future―or the withdrawal of insurance coverage altogether.

Bearing Risk

For the past two centuries in Britain, the US, and other high income countries, financial markets have been venues in which the government provides a relatively safe investment opportunity in the form of government bonds. At the same time, private investors seeking higher returns have privately issued stocks and bonds in these markets, thereby bearing the risk of financing private productive and innovative activities.

Rate Transformation

On September 28, 2023, the Bank of England opened permanent liquidity facilities to nonbanking financial entities—such as pension funds, insurers, and investment funds— many of whom have a role in the interest rate swap market. The move is unprecedented. Historically, the Bank of England and other Western central banks have assisted banks in managing their cash outflows by creating facilities catering to liquid assets' usability. Since the introduction of swaps in the 1980s, swap market participants were excluded from liquidity programs, and interest rate swaps were not considered a cash management tool. Why the sudden shift? 

The Dollarization Threat

The results of Argentina’s first-round elections on October 22 were not to be expected. Conservative former security minister and election favorite Patricia Bullrich came in third place, knocking her out of the running for the presidency, which will be decided on November 19 at a runoff election between the current Peronist finance minister Sergio Massa and the far-right economist Javier Milei. Having won 36.6 percent of the vote—compared to Milei’s 29.9 percent—Massa remains the frontrunner, but it remains unclear whether Bullrich’s supporters will side with the Peronist figurehead of the crisis-ridden economy or the far-right outsider next month. 

Democratic Preconditions

Poland’s parliamentary elections last Sunday have led to victory for Donald Tusk and his party, Koalicja Obywatelska (Civic Coalition). Although the ruling Prawo i Sprawiedliwość (Right and Justice, or PiS) Party received the largest share of the vote, 35.4 percent, granting them the first opportunity to try to form a government, they are likely unable to do so. An alliance with the far-right Confederation party, which won eighteen seats, would not be enough for a majority. Partnering with the centrist Trzecia Droga (Third Way), and the Nowa Lewica (New Left) alliance, Civic Coalition will be able to lay claim to 248 of the 460 seats in parliament, returning Tusk to the office of prime minister, a position he last held between 2007 and 2014. 

The Oil Revolution

The abrupt quadrupling of the oil price in the final months of 1973 is widely held to have marshalled the end of “a golden age of world capitalism.” Eric Hobsbawm’s standard-setting interpretation defines 1973 as the turning point when the world “lost its bearings and slid into instability and crisis.”[fn]Eric J. Hobsbawm, Age of Extremes. The Short Twentieth Century (London: Abacus, 1994), 403.[/fn] Though Hobsbawm’s assessment was overwhelmingly skewed towards the global North, the radical changes that occurred in the oil market that year were no doubt both of immediate and longer-term global significance.

The Renters’ Constituency

In developed economies around the world, housing has been transformed into a major asset. It is no coincidence that rates of homeownership have precipitously increased at the same time as governments in formerly social-democratic countries have reduced basic social safety nets. As state support has been withdrawn, one’s home—now cast as a fixed asset—has taken on responsibility for providing the capital needed for reproduction, illness, and retirement. At the same time, a widespread housing shortage has taken shape in these rich economies, and almost all countries in the OECD are facing a housing affordability crisis. Canada, New Zealand, and the UK all typify this new state of affairs, but the case of Australia provides a particularly stark example of the rapid acceleration of homeownership on a national scale—and the political recalibrations that are emerging from it. 

Downstream Industries

A pillar of Indonesia’s unprecedented economic growth over the last decade has been its ban on the export of raw nickel ore. This national experiment in downstream industrial policy began with the 2009 Mining Law signed by former president Susilo Bambang Yudhoyono, which mandated the domestic processing of all commodities mined in the country. The export ban on nickel was only partially implemented in 2014 amid widespread opposition from the mining sector, and it came into full effect in 2020. 

Crisis in the Bread Basket

In the run-up to the general elections of 2014, Narendra Modi was hailed across mainstream quarters of journalism and policy-making as the crusader of economic reform and growth in India, a spirit that was only bolstered by the resounding majority his party, the Bharatiya Janata Party (BJP), received. Almost a decade on, the spell has worn off—contrary to his initial image as the “strongman” who can “unleash” India, Modi’s economic interventions can only be described as policy misadventures. Overall, investment in the Indian economy has declined, while foreign capital inflows have increasingly come in the form of short-term private equity or venture capital. While industrial growth has been slow for decades, recent indicators suggest that the country may be actively deindustrializing. After two decades of “jobless growth,” a record high unemployment rate suggests that the economy may be actively shedding jobs. 

Labor’s Green Capital

Global investment in solar energy has skyrocketed in recent decades: from 1 TWh of solar power in 2000 to 1,284 TWh in 2022. The trend is likely to be magnified in the United States by the Inflation Reduction Act (IRA), which includes a wide array of tax credits and new sources of investment for renewable energy. Much of the investment in solar remains tied to private asset managers with little obligation to operate in line with the public interest. Among these investors, however, lies one group with duties to a broad swath of the public—pension funds. 

The IRA and Public Schools

Public school buildings in the United States are crumbling. National school infrastructure received a D+ rating from the American Society of Civil Engineers in 2021, and in serious cases, learning environments have become toxic. Given the segregated and unequal nature of public schooling, building quality is closely tied to racial and class-based inequalities, with schools in lower-income communities confronting the most serious health and safety consequences. In addition to these unsafe working environments for teachers and students, a recent study by scholars at the Harvard School of Education finds that schools are one of the largest consumers of energy within the US public sector, consuming energy equivalent to eighteen coal-fired power plants or fifteen million cars each year. This is both costly and necessitates involving schools within the broader project of decarbonization. 

Coercion and Inequality

“Plumbing” is an oft-used metaphor for understanding how sanctions work. Sanctions are intended to stop the flow of money to the targeted government; reserves are frozen, trade is blocked, export revenues dry up, and government budgets are drained. Even the evasion of sanctions is discussed in hydraulic terms. When asked about the circumvention of sanctions against Russia earlier this year, Linda Thomas-Greenfield, the United States representative to the United Nations, replied that the Biden administration was “looking at that leakage.” “Every place we see leakage,” she said, “we’re stopping it up.” On some occasions, talk of plumbing becomes literal. EU export controls ban the export of “bidets, toilets, cisterns and similar plumbing fixtures” to Russia.

Elusive Boundaries

In April 2021, private investors gathered at B3, Brazil’s stock exchange, to bid for water concessions in Rio de Janeiro. The former capital city and its surrounding municipalities had been divided into four “concession blocks,” all of which were up for grabs. Among the bidders were firms owned by private equity and institutional investors, including state-led investment funds. In total, 22.7 billion reais were raised: the largest ever auction of water and wastewater services in the country.

The Agribusiness Pact

Over the past two decades, Brazilian media and political discourse have exalted the uncontroversial success of a magical entity known as “agribusiness.” Closely associated with the rise of commodity exports such as soy, sugarcane, and corn, “agribusiness” has come to define the nation’s dominant agrarian system. The term itself, however, requires greater clarification.