Analysis

Geographies in Transition

Though it failed to resolve a number of contentious issues, the COP26 meeting in Glasgow solidified a consensus around the need for a global transition towards clean energy. Implicated in this transition is the widescale adoption of renewables—we must build larger wind turbines, produce more electric vehicles, and phase down coal factories in electrifying rapidly urbanizing cities. Climate negotiations often refer to the “common but differentiated responsibility” of countries in promoting this shift. But in reality, the protagonists of such a transformation are European governments and high-tech manufacturing companies involved in the production of renewable goods. And their policies have a cost—if the world meets the targets of the Paris Agreement, demand is likely to increase by 40 percent for copper and rare earth elements (REES), 60–70 percent for cobalt and nickel, and almost 90 percent for lithium in the next two decades. 

Leapfrog Logistics

In Spring 2018, two significant labor disputes broke out at opposite ends of the earth. The first, in Brazil, was a two-week-long mass strike of 400,000 truckers in response to successive price increases unleashed by the state oil company, Petrobras, liberalizing diesel prices. The second was a large national strike which spread across China in response to low fees paid by digital trucking platforms, which account for a growing share of China’s road freight market. 

Farmland Assets

The election of Jair Bolsonaro in 2018 commenced a long agenda of environmental destruction in Brazil. Before taking office, Bolsonaro had openly threatened Indigenous communities with racist attacks, commenting that Indigenous peoples should not have “an inch of land” and that “Indians in reserves are like animals in zoos.” Targeting the land rights of Indigenous peoples, peasants and quilombolas (rural Afro-Brazilian communities), he articulated what was essentially a neocolonial agenda to control the land and natural resources of rural communities. 

The Price of Oil

In October 2021 the price of gasoline in the United States rose to its highest level in seven years. There were many reasons for this: surging demand following a year-and-a-half of lockdown, a slower than expected recovery of oil production, and imbalances in products inventories due to energy shortages in Europe and East Asia. Experts believed prices would fall in the new year. Instead, Russia’s invasion of Ukraine in February 2022 sent prices to new and historic heights, rattling markets and increasing the US price of gasoline to more than $4 a gallon.

Politics and the Price Level

In 1959, the leaders of the Organization for European Economic Cooperation (OEEC, now the OECD) appointed a Group of Independent Experts “to study the experience of rising prices” in the recent history of the advanced capitalist countries. Between the end of World War II and the termination of the Korean War conflict, economic planners had tolerated rising prices as an insurmountable consequence of postwar reconstruction and war-induced commodity speculation. These governments expected inflation to end as economies readjusted following the stalemate in Korea. “In the event, however,” the Group of Independent Experts wrote in their final report, “rising prices proved to be a continuing problem.” 

Persisting Paternalisms

In recent months Brazilian president Jair Bolsonaro appears to have shape-shifted. From a staunch ally of business interests, he now presents himself as a president of the poor. The basis of this transformation is his new conditional cash-transfer programme Auxilio Brasil (Brazil Aid), which in December 2021 replaced the world famous Bolsa Familia (family allowance). Originally denouncing the Bolsa Familia as a scheme to give money to ‘lazy’ people, Bolsonaro now claims that Auxilio Brasil will transfer more cash and will reach more people.

Financing Schools

As the arrival of the pandemic forced schools shut, the Public Schools of Robeson County in North Carolina scrambled to save the rural district’s closed and crumbling buildings. At the same time, they faced the major task of providing education to children taking online classes, in a district where 43 percent of households lacked Internet connection. At South Robeson Intermediate School, 20 percent of students lived in areas lacking cell service. Every two weeks that spring, parents had to pick up flash drives with lessons and instruction from the school, and return drives with completed homework; yellow school buses were repurposed into Wi-Fi hotspots. For Robeson, and for schools across the country, the pandemic’s toll on education foregrounded widespread structural deficiencies.

Weimar Themes

Putin’s invasion of Ukraine has flung the international order into crisis. Understanding the causes of such cataclysms requires understanding not only the interests of states, but also the shape of society—its internal tensions, as well as its material and cultural transformations. The birth of Nazi Germany is informative in this respect. Within the scholarly literature, the fascist victory has been commonly analyzed through the lens of economic interest. Through this lens, domestic industrialists were seen as reacting to the rise of Hitler in various ways but doing so as an undifferentiated bloc, while a salaried middle class was thought to have formed a major foundation of fascist support. The following reflections weigh these analyses against the existing evidence. In doing so, they highlight the importance of political mobilization in illuminating the intricate dynamics underlying historical shifts.

The Whole Field

In recent years, an intense debate has unfolded over the policy and politics of the green transition. Politically, the tide appears to be receding: As the Biden agenda has lost momentum and rising inflation moves center stage, the near-term prospects for a Green New Deal have faded. At the same time, the COVID pandemic has exploded away the last crusts of economic dogma. Paradoxically, just as the politics of a green transition appear more challenging than ever, the policy debate is flourishing. The time is therefore right for reflecting on the strategic means and political prospects for the green transformation.

Regime Change?

The centerpiece of shock and awe of the West’s economic response to Russia’s invasion and bombardment of Ukraine was the freezing of Russia’s central bank assets. In the March 7 edition of his Global Money Dispatch newsletter, the Credit Suisse investment strategist Zoltan Pozsar writes that the G7 seizure of Russia’s foreign exchange reserves marks a regime change in the global monetary system. Pozsar pronounces this new regime Bretton Woods III. He anticipates that Asian sovereigns, fearing that their dollar- and euro-denominated foreign reserves are at risk of expropriation in the event of future foreign policy disputes, will park their surplus funds outside of the reach of Western financial authorities. For Pozsar, this heralds the rise of “commodity-backed currencies in the East” and spells the denouement of dollar hegemony.

Economic War and the Commodity Shock

In the early weeks following Russia’s invasion of Ukraine, a conversation between journalist Javier Blas and historian Nicholas Mulder on the collision of their areas of expertise—commodity markets and sanctions—in the fallout of the war. Under discussion, the reconfiguration of power in Europe, the and the competition between weapons and the “economic weapon.”

Austerity and Renewables

After weeks of rising domestic pressure, a spiraling economic crisis, and the swift loss of crucial military support, Pakistan’s Prime Minister Imran Khan was removed from office last weekend following a vote of no confidence. The political turmoil is the latest in a worrisome series of events in the country—the price of food has risen sharply in recent months, along with gas and other essentials. And Pakistan’s rupee plummeted against the dollar, raising concern that higher bills for basic imports may deplete its dollar reserves.

A New Public Housing Model

In 2006, the government of Ethiopia embarked on a mission to construct half a million condominium apartments over a twenty-year period in its capital of Addis Ababa—a city of only five million. Now, sixteen years later, the initiative has transformed the city’s housing infrastructure, economy, and urban character. Built upon a unique and complex history of state land ownership, this massive housing initiative has transformed the way of life for a historically rural, agriculture-driven nation. The Integrated Housing and Development Program (IHDP) and the Grand Addis Housing Authority facilitate homeownership for a broad base of local residents by allocating subsidized condos via randomized lottery. The government is responding to the need for affordable urban housing by directly building, financing, and administering sales of condos.

Bargaining Chip?

For the global hegemon, pulling the trigger on crisis management seems to consist primarily of posting PDFs to government websites. During the March 2020 financial panic, as the coronavirus first spread throughout the Global North, the Federal Reserve feverishly published term sheets for lending facilities meant to generate dollar liquidity, and the gears of the financial system moved in response. Since February 22 of this year, when Russian troops invaded Ukraine, the Office of Foreign Assets Control (OFAC)—the Treasury Department section in charge of sanctions—has published announcements meant to drain liquidity from the Russian economy.

Acute Dollar Dominance

In early 2020, the “dash for cash” in the US Treasury market prompted the Fed to relaunch its dollar swap lines, which it eventually did in mid-March of that year. In the aftermath of the 2008 Global Financial Crisis (GFC), the New York Fed had established permanent arrangements to supply dollars to five key foreign central banks. But as the emerging pandemic rattled global financial markets, dollar swaps were temporarily extended to nine more foreign central banks. Less privileged foreign central banks not extended such swap lines were instead given access to the Fed’s brand-new Foreign and International Monetary Authorities (FIMA) repurchase agreement facility (FIMA Repo Facility), which allowed them to exchange their US Treasury securities for dollars as an alternative to dumping the securities for cash in the open market.

Controlled Prices

In the decades after the Civil War, Andrew Carnegie captured the American steel industry by pushing down prices. So effective was the Scottish-born telegraph operator at reducing costs, breaking cartels, and driving competition into bankruptcy during the downturns of the 1880s and 1890s, that J.P. Morgan bought out the 66-year-old Carnegie to protect the profitability of his holdings and stabilize the nation’s industrial life. When Morgan incorporated U.S. Steel in 1901, the unprecedented combine controlled two-thirds of the nation’s steelmaking capacity. For the next six decades, the company set the price of steel in the American market, anchoring industry prices by cutting last in recessions and raising last in expansions.

Stop, wait, go

The new coalition government in Germany, led by Social Democrat Olaf Scholz, is the first time that the SDP, the Greens, and the Liberals have joined together in a single government. The cooperation agreement, published on November 24, was the result of months of multi-level deliberations between the representatives of the three parties. In 178 pages, the text summarizes the key issues that will occupy the government over the next four years, including the response to the pandemic, foreign policy, and regulation of important issues such as the increase of the minimum wage and the legal framework for gender identity. The coalition partners have declared that they have “Lust auf Neues”, i.e. desire for something new. Despite these statements, the agreement contains two components which indicate a return to the status quo. 

Homeownership & the Student Debt Crisis

The benefits of owning a home in the United States cannot be overstated. The housing market in the United States both reflects and causes widening cleavages in American society; owning a home is a functional prerequisite for financial security. The Federal Reserve’s latest Survey of Consumer Finances finds a massive wealth disparity based on housing status: in 2019, homeowners had a median net worth of $255,000, while renters or others had a median net worth of merely $6,300.

Death or glory?

In October 2019, a proposed thirty peso hike in public transport fares triggered protests in Santiago that spread to other major cities across the country, denouncing the country’s economic infrastructure with the slogan, “It’s not thirty pesos, it’s thirty years.” Chileans took to the streets to protest political corruption, the rising cost of living, the privatization and commodification of education, health and pension systems; and the privatization of natural resources like copper and water. While Pinochet’s dictatorship ended thirty years ago, its constitution still governs the country. A resurgent feminist movement and the reignition of the historical struggle between the Indigenous Mapuche and the state also contributed to this wave of unrest.

Trade and Growth

According to a survey on free trade from the University of Chicago, economists overwhelmingly agree that free trade’s net effects are good. A recent article by several  IMF economists affirms that, “perhaps more than on any other issue, there is agreement among economists that international trade should be free.”

The Wall Street Consensus at COP26

Wednesday, November 3, was private finance day at COP26. For those who follow central banks closely, the event was a chance to gauge whether their recent turn to climate-conscious policy making would translate into ambitious decarbonization announcements. After all, private finance is essential to the survival and profitability of the fossil-dependent economy—it creates dirty credit at prices that ignore climate effects. Such a pervasive market failure, central bankers now routinely argue, is significant enough to generate financial stability risks and to justify new climate policies within independence-centered mandates.    

Growth Towns

The ongoing crisis for Chinese property developer Evergrande has made the giant company the focal point of global concern. Creditors, investors, contractors, customers, and employees of Evergrande within and outside China have watched anxiously to see whether the Chinese government would decide that Evergrande was too big to fail. If Evergrande were to collapse, the repercussions for both the financial system and construction supply chains are impossible to predict. Reportedly, the central government in Beijing has issued a warning to local governments to brace for the possible social and political fallout.