Analysis

The Sacrifice Zone

In September 2022, 62 percent of Chilean voters rejected the country's proposed new constitution. The defeat took many by surprise—the demands to rewrite the existing charter had been loud and seemingly unanimous. For followers of Chile’s extractive industries, however, the results were less surprising. In fact, they reflected deep and long standing tensions at the heart of the country’s green energy transition.

Town & City

Earlier this month, Brazilians went to the polls in an election billed as the most momentous since democratization in 1985. Far-right president Jair Bolsonaro faced off against former two-term president Luiz Inácio “Lula” da Silva. Though Lula did win the first-round election by more than 5 percentage points, or 6 million votes, it was not enough to clear the 50 percent threshold needed for first-round victory. The opponents will face a polarizing run-off on October 30. 

Africa’s Century of Growth?

On May 1, 2014, Nigeria’s then-president, Goodluck Jonathan, addressed a crowd of workers in the country’s capital Abuja.  He declared that “the challenge of the country is not poverty, but redistribution of wealth.” The prompt for his comment was a report issued only a few days prior, which labeled Nigeria, Africa’s most populous country, as one of only five nations that are home to two-thirds of the world’s population living in extreme poverty.

The Finance Gap

UN Secretary General Antonio Guterres’ foreword to the UN’s Inter-agency Task Force on Financing for Development’s 2021 Financing for Sustainable Development report, speaks to a prevalent piece of common sense in global development: Financing for sustainable development is at a crossroads. Either we close the yawning gap between political ambition and development financing, or we will fail to deliver the Sustainable Development Goals (SDGs) by the deadline of 2030. 

Technocracy and Crisis

On September 25, Italians will be called to elect a new Parliament. The snap election follows on the heels of the forced resignation of the government in late July, led by former European Central Bank (ECB) President Mario Draghi. That the country would dismiss such an esteemed prime minister to go to early elections—and while the country is lashed by the interconnected crises of Covid-19, the rise in energy prices, and an impending recession—has been a cause of consternation and confusion for many in the international press. 

A Permanent Bailout?

The 2008 crisis heralded a new age in central banking. The scale and nature of central bankers’ interventions was unprecedented. Traditionally, as lenders of last resort, central banks lend at escalating rates against good collateral to solvent institutions in times of crisis. In 2008 central banks broke every rule in the book: deviating from the principle of full collateralization, they lent to non-bank entities and made outright asset purchases. This exposed their balance sheets to various credit, interest-rate, and market risks. The European Central Bank made asset purchases under an “enhanced credit support” program that dealt in public securities of various credit risks and even provided liquidity in foreign currencies, primarily the US dollar.

Rating Sovereigns

As dark clouds gather on the horizon of the global economy in the third year of the pandemic—with debt stocks swollen, interest costs rising, and growth undermined by energy insecurity and war—policy makers and pundits are anxiously watching sovereign credit ratings as the harbingers of the storm. What will it take to save Italy from the fatal downgrade to junk status that could bring down not just the fourth largest economy in Europe, but the entire eurozone with it? Could much of the developing world be a few downgrades away from devastating debt crises? Such concerns are rooted in past experience. In the late 1990s, a series of rapid-fire sovereign downgrades triggered the Asian financial crisis. In the late 2000s and early 2010s, sovereign downgrades played similar havoc with European countries—pushing Greece into default, and forcing eurozone authorities to take desperate measures to save Cyprus, Ireland, Italy, Portugal, and Spain from the same fate. In both instances, sovereign ratings were blamed not only for having failed to predict the debt servicing difficulties of the countries in trouble, but also for exacerbating the crises via belated and panicked downgrades. Sovereign ratings exercise spectacular—and often disastrous—power in times of crisis.

Pragmatic Prices

European and American traditions of economic theorizing on price control are intimately connected with war—practices and debates over price control peaked amid the two world wars. The experience of the First World War had been one of inflation and limited price controls followed by a sudden liberalization when the war was over. The transition from war to peace gave rise to a sharp boom bust cycle and eventually led to the Great Depression. This experience stood as a warning when the world was once

Odious Debts

In the aftermath of its 2003 invasion of Iraq, the United States was eager to restructure the ailing country’s sovereign debt. International sanctions since the Gulf War meant that Iraq was economically isolated, yet the country had a large stock of unpaid debts issued to governments, financial institutions, and commercial trading partners that dated back to its weapons purchases during the 1980 Iran-Iraq war. 

Development Engines

In December 2021, President Joe Biden announced a proposed consumer tax incentive for electric vehicles (EV) made in the US by unionized autoworkers. The tax incentive aims at tackling climate change while also strengthening unionized jobs. It promises to support the transition to “green technologies,” curtail dependence on fossil fuels, and “decarbonize” the economy while strengthening collective bargaining after decades of state-led efforts to weaken unions.

A New Labor Regime

Since coming to power in 2014, India’s right-wing government led by Prime Minister Narendra Modi has introduced sweeping reforms aimed at strengthening the union government at the expense of the states, and catering to large corporations over smaller establishments and workers. 

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.