Category Archive: Sources

  1. El Ramo De Tirana

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    This is an archived version of the PW Sources newsletter from Saturday, July 13, 2024. Sign up to receive PW Sources directly to your inbox here.

    CHINA-PAKISTAN ECONOMIC CORRIDOR

    Because of the China-Pakistan Economic Corridor’s (CPEC) passage through the long-disputed Kashmir region, India has boycotted three consecutive Belt and Road Initiative (BRI) summits. The Indian-occupied territory of Jammu and Kasmir (J&K) remains one of the most militarized zones in the world.

    In a 2012 paper, SANTOSH SINGH looks back on the origins of the Kashmir issue and China’s strategic investment in the region:

    “Why has Beijing’s activism in Kashmir increased recently? First, as Harrison has argued, China wants high-speed rail and road access to the Persian Gulf region through the Gilgit–Baltistan region of PoK. He stated that once the links were completed, China would be able to transport cargo from its western / eastern regions to the new Chinese built Pakistani naval bases at Gwadar, Ormara and Pasni, just east of the Persian Gulf, within 48 hours instead of two to three weeks. Second, European security expert Andrew Small has opined that China is providing tacit support to Pakistan in its jihadi strategy with an aim to engage half a million Indian troops in J&K (“Tacit China support to Kashmir Militants,” Times of India, 9 July 2010). Third, China finds the Gilgit–Baltistan region valuable because it borders its own Western Xinjiang province, from where it can keep a watch on Uighur separatists. Fourth, Beijing’s sole objective behind questioning India’s legal authority over J&K is to make it defensive and ultimately weaken its locus standi in Pakistan’s illegal possession of PoK. Fifth, China allegedly wants to set up military bases in Pakistan to exert pressure on India and counter US influence in Afghanistan and Pakistan as well (Saibal Dasgupta, “China Eyes Military Bases in Pakistan,” Times of India, 30 January 2010).”

    +  “The example of Pakistan—the biggest national recipient of BRI funding—is illustrative of the successes, failures, and governmental shortcomings hampering China’s ambitions to lead the developing world.” By Joe Leahy, James Kynge, and Benjamin Parkin. Link. “China’s ability to achieve a return on its investment depends on Pakistan’s stability.” By James Schwemlein. Link.

    + “The confusion over CPEC arises when commentators mix up long-term industrial zones, for which little planning or conceptual work has been done, with the energy projects that are already at various stages of execution.” By Dr. Ishrat Husain. Link.  

    +  “In the wake of India’s announcement of the abrogation of Article 370 of the Constitution and the reorganization of the state of Jammu and Kashmir in August 2019, China’s Kashmir policy further drifted away from its traditional line.” By Masahiro Kurita. Link. And see Gurnam Singh on the geo-political implications of the Karakoram Highway system for India. Link.

    NEW RESEARCHERS

    Labor Volatility

    CHRISTINE BRAUN is an assistant professor at the University of Warwick. In a recent journal article, she proposes an adjusted unemployment rate to capture the rise in the proportion of job seekers classified as out of the labor force.

    From the paper:

    “It is well-known that the work-horse search and matching model cannot match the volatility in labour market tightness, when using only the standard pool of unemployed, through reasonable productivity shocks (Shimer, 2005). I show that labour market tightness, constructed using the adjusted unemployment rate or total searchers rate, is 24%–38% less volatile. In fact, the labour market is less volatile in several dimensions than previously thought. Second, I calculate new measures of efficient unemployment and show that these measures have been increasing in the post 2008 recession period. Third, I show that the much-debated flattening of the Phillips Curve is significantly less, and in some specifications absent, when using the adjusted unemployment rate, or total searcher rate, as a measure of the output gap.

    In assessing the volatility of the labour market, I look at three statistics: job seeker rates, vacancy rates, and labour market tightness. The three job seeker rates I compare are the standard unemployment rate, adjusted unemployment rate, and total searcher rate. The vacancy rates I compare are vacancies per labour market participant. Total vacancies are constructed using the Help Wanted Index taken from Barnichon (2010) from 1980 to November 2000, and total job openings from the Job Openings and labour Turnover Survey from December 2000 to July 2020. The standard vacancy rate is calculated as total vacancies per standard number of unemployed and employed. The adjusted vacancy rate is calculated as total vacancies per adjusted number of unemployed and employed.”

    + + +

    +  “Continued disinvestment is the cost for continued occupancy; displacement the condition for investment.” New on PW, Ruthy Gourevitch writes on the lack of safeguards in place to prevent landlords from using IRA-funded repairs as an opportunity for rent hikes. Link.

    +  “China remains a huge market for intermediate and end-user products. Chinese consumer power remains an important aspect for any long-term business strategy for Western firms.” Also new on PW, Jewellord T. Nem Singh on the manufacturing prowess of China and the future of industrial competition between China and the US. Link.

    +  “It is not implausible to estimate that up to 186,000 or even more deaths could be attributable to the current Gaza conflict.” In a Lancet report, Rasha Khatib, Martin McKee, and Salim Yusuf factor indirect deaths into the death toll in Gaza. Link.

    +  James Vernon writes on the outsourcing of services at London’s Heathrow Airport in the 60’s and 70’s, using it as a paradigmatic example of how deregulation reinforces racial hierarchies. Link.

    +  “Between 2020 and 2022, the decrease in poverty levels in Iran was largely due to a significant uptick in consumption growth. Income redistribution from the richest to the poorest contributed only marginally to poverty reduction.” From the World Bank’s Spring 2024 Iran Economic Monitor report. Link.

    +  A Financial Times report examines the Taliban’s initiative in Afghanistan’s mining sector. By Benjamin Parkin, Jana Tauschinski, Steven Bernard, Chris Campbell, Sam Joiner, Peter Andringa and Sam Learner. Link.

    +  “Despite hand-wringing by The Economist, the fact that China’s photovoltaic companies are slaughtering each other by flooding the world with cheap solar panels is prima facie evidence of stunning policy success and value creation.” By Han Feizi. Link. 

    +  “In a significant departure from the proposed rule, the final rule does not require registrants to disclose Scope 3 GHG emissions.” A Heads Up review of the finalized rules for emissions reporting in companies’ SEC filings. Link.

    +  Umair Javed on Pakistani electoral politics and the parliamentary victory of Imran Khan’s PTI party. Link.

    +  “While GDP expanded over time to include forms of unpaid work such as the subsistence agriculture that had so concerned Deane, the exclusion of unpaid household services remains entrenched in international statistical standards, despite contestation by economists, statisticians, and feminist scholars (Braunstein, 2021). According to DeRock, while statisticians in the statistical departments of international agencies such as the United Nations, International Monetary Fund, and World Bank are aware of criticisms, they represent a united front against the inclusion of household services as a result of “shared norms (about the quality of official statistics) and ideas (about the boundaries of markets)” (2021, p. 31). So, although the United Nations System of National Accounts’ production boundary has expanded, unpaid care work remains beyond the pale despite its economic importance.” By Jane Humphries. Link.

  2. Sunrise

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    This is an archived version of the PW Sources newsletter from Saturday, June 29, 2024. Sign up to receive PW Sources directly to your inbox here.

    BOLIVIA

    In an attempted coup, an irregular deployment of troops led by General Juan José Zuñiga stormed the presidential palace in Bolivia on Wednesday night, only to retreat three hours later. The following day, supporters gathered around President Luis Arce, whose popularity has plunged amid an economic crisis and deepening tensions with former President Evo Morales.

    In a 2009 paper, ARINDRAJIT DUBE, ETHAN KAPLAN, and SURESH NAIDU look at coups against governments that had nationalized a considerable amount of foreign investment, and estimate gains for multinationals that stood to benefit from the regime change:

    “The qualitative evidence on links between business and coup planners is substantial. First, much of the early CIA leadership was recruited from Wall Street. A 1945 report on the CIA’s precursor by Colonel Richard Park claimed that the “hiring and promotion of senior officers rested not on merit but on an old boy network from Wall Street” (Weiner 2007, p. 7). Secondly, there was direct contact between the companies that had been nationalized and the CIA. For example, at the time of the coup planning against Arbenz, three high ranking members of the executive branch of government had strong connections with the United Fruit Company. Alan Dulles, a former member of the board of directors of the United Fruit Company, was Director of the CIA. Thomas Dudley Cabot held at different times the positions of Director of International Security Affairs in the State Department and CEO of the United Fruit Company. His younger brother, John Moore Cabot, was secretary of Inter-American Affairs during much of the coup planning in 1953 and 1954. Besides the fact that Anglo-Iranian was a majority state-owned company, the company met with CIA agent (and later historian) Kermit Roosevelt, who alleged in his 1954 history that the initial plan for the coup was proposed by the Anglo Iranian Oil Company. In Belgium, the royal court and the powerful bank Societe Generale tied together a social and financial network of colonial officials and businesses. De Witte writes that “the incontrovertible political conclusion is that the political class, including the [Belgian] court, had a direct material interest in the outcome of the Congo crisis” (De Witte 2001, p. 37). Most directly, the minister of African Affairs, a key instigator and planner of Operation Barracuda, Harold d’Aspremont-Lyden was the nephew of Gobert d’Aspremont-Lyden who was an administrator for Union Mini`ere. The Senate Church Committee reported that the CIA held meetings with U.S. multinationals involved in Chile on a regular basis, even to the point of ITT (whose board included John McCone, a former director of the CIA) notoriously offering the CIA $1 million to overthrow Allende’s government (Weiner 2007). In short, social links between the government officials responsible for the coups and financial interests are well-documented. Secret plans for regime change could have easily made it into the ears of financial actors who, even if not directly connected to the affected companies, could arbitrage this information on the market.”

    +  “Despite the threat lithium extraction poses to the communities surrounding Salar de Uyuni, ethnographer Revette often encountered the general sentiment that ‘this time it’s different.’ ” Youssef Al Bouchi and Brett R. Caraway on the obstacles to state-led lithium industrialization and how Bolivia risks re-inscribing its subordinate position as a raw material exporter. Link.

    + “Evo Morales’s lithium project was presented as a succesful example of post-neoliberalism. However, ten years later, lithium has become the center of huge controversy due to delays in the different project phases and the technology selected.” By Daniela Sanchez-Lopez. Link.

    +  “The government of Evo Morales chose to cancel contracts with firms from Germany and China, due to protests in Potosí demanding royalties. The now ex-president even attributes his overthrow to foreign interest in controlling the mineral.” By Rocío Lloret Céspedes. Link. And see Sergio Herrera Deza on state-led development in Bolivia and its pilot contracts with the Chinese consortium CBC. Link.

    NEW RESEARCHERS

    Collective Bargaining

    IHSAAN BASSIER is a postdoctoral research economist at the Centre for Economic Performance at the London School of Economics and Political Science. In a working paper, he uses union collective bargaining in South Africa to present a theoretical framework of wage transmissions from covered to noncovered firms.

    From the paper:

    “Bargaining councils have been a central institutional feature of the South African labour market since at least 1981 when Apartheid restrictions on Black worker unionization were significantly repealed (see Bhorat, Westhuizen, and Goga (2009) and Budlender and Sadeck (2007) for overviews). A bargaining council refers to a collection of employer and employee unions from a particular industrial and geographic area which meets over workplace issues. It is established by applying to the country’s Department of Labour under the main criterion that the applicant unions collectively represent 30% of employees in the covered area. One of the most important functions of bargaining councils is to negotiate collective bargaining agreements, which set minimum wages by occupation, though supplementary wages can be establishment-specific. The collective bargaining agreements vary in period, often three years,
    but sometimes shorter and renewed annually or even longer. As in other industrial relations settings, there is a set procedure for negotiations between parties, beginning with consultations with members. While strikes during negotiations may occur, final agreements often preclude strikes and lockouts for the duration of the contract. Prescribed wage increases are most often indexed to inflation and specified as percentage increases applicable to all workers. Working conditions are also negotiated, though union surveys suggest wages are by far the most important item (NALEDI, 2006). After an agreement is reached, the bargaining council may apply for extension (routinely granted) by government mandate to non-party firms falling within its scope. Finally, enforcement is monitored by the bargaining councils which employ inspectors and to which unions may report noncompliant employers.”

    + + +

    +  “The 2003 UFCW strike was very damaging to the union. One of the main lessons was that it was no longer possible for locals to negotiate in isolation from other parts of the country.” New on PW, Andrew Elrod interviews John Marshall of the United Food and Commercial Workers, Locals 324 & 3000 on the Kroger-Albertsons merger and past waves of consolidation within the retail grocery industry. Link.

    +  “Hungary’s bid for battery supremacy is political, not economic. Throughout the past fourteen years, Viktor Orbán has learned that catering to the German automotive industry can protect his regime from EU censure.” Also new on PW, Pálma Polyák on Hungary’s role in Europe’s EV industry. Link.

    +  On July 1, at 4pm EDT, the Carnegie Endowment for International Peace and Phenomenal World will host an online conversation between Noah Gordon, David Wallace-Wells of the New York Times, and Kate Mackenzie and Tim Sahay of the Polycrisis. Link to register.

    +  “If we assume the number of noncombatant men killed equals the number of women killed, which is equivalent to about half of the roughly 14,000 adult male deaths, we can estimate that around 80 percent of the Gazans killed have been civilians.” By Adam Gaffney. Link.

    +  Linda Calabrese, Rhys Jenkins, and Lorena Lombardozzi introduce a special issue of The European Journal of Development Research that examines developmental dynamics between Global China and countries that are host to the Belt and Road Initiative. Link.

    +  “Inferences about the evolution of Treasury market depth, and hence liquidity, are largely invariant with respect to measurement decisions that go into market depth calculations.” By Michael Fleming, Isabel Krogh, and Claire Nelson. Link.

    +  Examining the American Chamber of Commerce as a key source of information for US embassies, Calvin Thrall identifies a new avenue through which informational lobbying can influence foreign policy. Link.

    +  Robert Muggah and Katherine Aguirre detail new trends expressed by recent homicide data for cities in Latin America and the Caribbean. Link.

    +  “When SunZia is completed and running at full blast, it will generate roughly 1 percent of the country’s electricity needs. After that, to fully decarbonize the electricity sector, we will need to run it all back ninety-nine more times.” By Robinson Meyer. Link.

    +  Christina Eckes examines the compatibility of the current Energy Charter Treaty and of its reformed text with the normative and regulatory autonomy of the EU. Link.

    +  “The energy crisis of the early 1970s briefly opened up a radically new horizon of energetic possibilities that played out differently around the world. For India, that energy crisis did not begin with the famous Arab oil embargo of 1973. Instead, like many poor oil-importing nations, it experienced the first oil shock as merely one component of a broader climate-food-energy emergency that reverberated throughout the political system. This crisis brought a twinned set of fateful changes. By June 1975, Prime Minister Indira Gandhi had resorted to imposing a constitutional dictatorship—the Emergency—for the first and only time in independent India’s existence, one among a series of coups and authoritarian takeovers that swept the Global South. Less noticed was a second transformation with planetary ramifications. Rising popular expectations collided with the energy crisis to impel a state-led embrace of coal, despite elite reservations about the environmental damage that would follow.” By Elizabeth Chatterjee. Link.

  3. Takin’ a chance on luv

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    This is an archived version of the PW Sources newsletter from Saturday, June 22, 2024. Sign up to receive PW Sources directly to your inbox here.

    PALESTINIAN AUTHORITY

    In the wake of several countries unilaterally recognizing Palestine, Israel’s extremist Minister of Finance Bezalel Smotrich has promised to strengthen Jewish settlements in the West Bank and is considering further sanctions against the Palestinian Authority for attempting to bring about the formal recognition of Palestinian statehood. The US has urged Israel to release the Palestinian tax revenues that Smotrich froze in early May.

    In a 2024 chapter, TARIQ DANA explains how Israel’s control of the PA’s tax revenue has been implemented as a form of indirect rule in the Occupied Palestinian Territories (oPt) after Oslo:

    “Unlike the Open Bridges’ reliance on the Israeli state’s financial resources to implement economic stimulus projects to stimulate pacification in the oPt, Oslo secured significant resources through donors’ commitments to support the PA under the banner of peacebuilding and economic development. International aid has been instrumental to the pacification process in crucial ways: it mitigates the harmful consequences of Israel’s colonization; it sustains the PA institutions; it provides salaries, social services, and humanitarian assistance to the population; and it supports the PA elite and its authoritarian and neo-patrimonial politics. Therefore, donors’ policies have been consistent with the Israeli position of keeping in place weak institutions and dependent economy through perpetuating the Oslo status quo. The complicity of donor-led peacebuilding in this arrangement is credited by Turner as being a form of counterinsurgency whose goal is to support compliant actors who have vested interests in ensuring stability and to help to embed their power in opposition to others who reject the autonomy arrangement. Moreover, the oPt economic dependency on Israel meant the continuation of Israeli control over vital resources for the PA’s institutional sustainability. In this way, Israel managed to subjugate the PA to heavy pressure to accept its demands. A prominent example is Israel’s control of the PA ‘tax clearance system,’ which is levied and transferred to the PA by Israel on a monthly basis. As the tax transfer accounts for more than 60 percent of all the PA revenues, Israel often uses this financial leverage to extract political concessions through withholding these amounts to force the PA to comply with its policies.”

    +  “The PA revenue structure’s reliance on Israel impeded the PA’s ability to represent Palestinians in international settings. The example of joining and utilising the ICC highlighted Israel’s strategic use of clearance revenue to undermine the PA.” By Anas Iqtait. Link. And see Amal Ahmad on the PA’s revenue structure and Israel’s strategy of containment. Link.

    + “The urgent resolution of the ongoing clearance revenue dispute is critical, alongside addressing the volatility of revenues collected by Israel for the PA, which hampers predictability of fiscal policy implementation.” The World Bank’s 2024 report on the dramatically worsened fiscal and humanitarian crisis in the West Bank and Gaza. Link.

    +  “The two-state solution’s exclusionary nature reveals a fundamental flaw: the authority to define a Palestinian state has always rested with external powers, whether Israel, the United Kingdom, or the US.” By Samer Elchahabi. Link. And Nadia Abu Zaher compiles interviews with Fatah’s Central Committee members concerning the option to dissolve the PA. Link.

    NEW RESEARCHERS

    Water Infrastructure

    RÉGIS KOUASSI is a PhD candidate in economics at the University of Montreal. In a working paper, he examines flash floods and water infrastructure quality in the United States.

    From the paper:

    “Drainage systems include a network of sewer pipes with auxiliary structures such as gutters, ditches, and pumping stations, tasked with collecting and evacuating water throughout human settlements (Fema, 2023a). Broadly, we can distinguish three types of sewers: separate stormwater sewers, sanitary sewers, and combined sewers, which respectively carry only stormwater, only sewerage, or both (USDHEW, 1964; USEPA, 2015). The relationship between a system’s capacity and local flood occurrence is more salient for combined sewer systems. Indeed, while they channel both rainwater and wastewater to treatment plants during periods of low precipitation, exceeding the capacity of the system during periods of heavy precipitation can lead to the backflow of untreated wastewater and stormwater into basements or surface streets via manholes (USEPA, 1999). In the case of separate sewer systems, local flooding could occur due to two phenomena termed Infiltration and Inflow. The first term refers to groundwater seeping into defective pipes or sewer joints, while the second refers to surface water, usually stormwater, which flows quickly into sewers. A 1990 report from the EPA to Congress, on rainfall-induced infiltration (RII) into sewer systems, indicates that most collection and treatment systems in the U.S. do not have the capacity to withstand peak flows during the rainy season, resulting in backups into buildings and overflows (USEPA, 1990). A 1970 survey of local jurisdictions in the U.S. and Canada shows that these two problems are pervasive and create significant damages, which include back-flooding of sewerage into public roads and private properties, creating basement flooding, and properties inundation (APWA, 1970). Moreover, most capacity-related separate sewer overflows are related to wet-weather events (ASCE, 2004).”

    + + +

    +  “The UMSCA lacks legal tools to enjoin corporations from defying their obligations to workers or the public good. Like NAFTA, the UMSCA’s main goal is to continue facilitating investments regardless of their social and environmental consequences.” New on PW, Alejandra González Jiménez on labor struggles in the context of Mexico’s electric vehicle boom. Link.

    +  On July 1, at 4pm EDT, the Carnegie Endowment for International Peace and Phenomenal World will host an online conversation between Noah Gordon, David Wallace-Wells of the New York Times, and Kate Mackenzie and Tim Sahay of the Polycrisis. Link to register.

    +  “The price of mobilising private capital under the current austerity-minded Washington Consensus is therefore further dependence on fickle foreign investors.” Advait Arun in The Break Down. Link. And see Arun’s PW essay on the limits of private finance. Link. 

    +  Mick Dueholm, Aakash Kalyani, and Serdar Ozkan consider how tight labor markets incentivize investment and automation. Link.

    +  “The cancellation of congestion pricing jeopardizes key funding and matching federal dollars for a suite of the MTA’s construction projects at the 11th hour.” By Joseph Politano. Link.

    +  “Our proposal to challenge mainstream comparative law’s coloniality lies in the idea of decolonial comparative law: a re-articulation of comparative law on the basis of decolonial theory.” By Lena Salaymeh and Ralf Michaels. Link.

    +  Lenore Palladino and Harrison Karlewicz on public pension funds and the dominance of private financial markets. Link. 

    +  “Contrary to a widely held view that India’s economic growth has been services-led, the article claims that in the last two decades, India has had manufacturing-led economic growth, not service-led.” By Bishwanath Goldar. Link. 

    +  “In over four years, the Israel Leahy Vetting Forum process has failed to approve the identification of a single ineligible Israeli unit.” By Charles O. (Cob) Blaha. Link.

    +  “Zong! #3, one of a cycle of poems written by M. NourbeSe Philip, exposes the tension between different (and sometimes competing) conceptualizations of value that characterised the enslavement of black Africans. ‘Some negroes,’ the equivalent sum of negroes, were jettisoned like any other species of cargo, by Captain Luke Collingwood in the hopes of recovering the value of the insurance funds that had been secured by the slave owners. The slaves did not exist in themselves (as individual human beings) in the eyes of the law, or one may surmise, Captain Collingwood, but rather as a type of property that could be deemed superfluous—an ‘etcetera.’ The simultaneous presence of these competing forms of value in the same object (a slave’s value, however ambiguous, as a person marked by racial difference, and her value as a commodity) speaks to the coemergence of modern conceptualizations of race and modern forms of property.” By Brenna Bhandar. Link.

  4. Abya Yala

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    This is an archived version of the PW Sources newsletter from Saturday, June 15, 2024. Sign up to receive PW Sources directly to your inbox here.

    EUROPEAN PARLIAMENT

    The far right’s gains in the European Parliamentary elections reflect a weakening of partisan attachments and a strengthening of populist sentiments in Europe. Most notably, Marine Le Pen’s Rassemblement National became one of the chamber’s largest delegations, leading President Emmanuel Macron to dissolve parliament and call for snap elections in France.

    In a 2021 essay, SERGIO FABBRINI examines how the EU approaches political agendas, national preferences, and democratic quality:

    “Heuristically, one can argue that the process of institutionalisation of the EU has led to a basic differentiation between two decision-making or governance regimes, one dealing with issues concerning single market regulatory policies and the other dealing with policies close to national sovereignty’s prerogatives that entered the EU agenda after the end of the Cold War. The 1992 Maastricht Treaty was the turning-point for this differentiation in governance structures. The Treaty introduced three distinct pillars, or decision-making regimes: the supranational pillar for the single market (organised around the triangle of the Commission, endowed with the monopoly of legislative initiative, and the Council of Ministers or Council and the European Parliament or EP, with the power to approve the Commission’s proposals) and the two intergovernmental pillars of Common Foreign and Security Policy (CFSP) and Justice and Home Affairs Policy (JHA), where the main decision-making institutions are the Council and the (then informal) European Council of the heads of state and government. Through that Treaty it was formally recognised that the EU could proceed in the integration process into crucial policies (the CSP policies, i.e. policies touching national sovereignty’s prerogatives) provided that the Member State governments were guaranteed an exclusive or predominant decision-making role (through the Council and European Council). The differentiation of the decision-making regimes was further consolidated with the start of the Economic and Monetary Union (EMU) in 1994, the economic policy side of which was put under the control of the intergovernmental institutions, whereas the monetary policy side was assigned to the full control of a supranational institution, i.e. the European Central Bank or ECB.”

    +  “It’s hardly surprising that around half of Europeans didn’t even bother to vote. Ultimately, the EU was built precisely to resist populist insurgencies such as this one.” By Thomas Fazi. Link. And Susi Dennison, Mats Engström, and Carla Hobbs on the EU’s climate agenda after the vote. Link.

    + “Just as the debt crisis threatens to destroy the painstakingly cultured solidarity of the EU, the disintegrating state of its patchwork asylum regime could prove fatal to the principles of mutual trust and cooperation that theoretically bind its member states.” By Lillian M. Langford. Link. And see Ariadna Ripoll Servent’s essay on the role of the European Parliament in the EU’s asylum crisis. Link.

    +  “France’s left-wing parties have succeeded in laying the foundations of a new alliance in record time, ahead of the snap elections on June 30 and July 7.” By Sandrine Cassini and Julie Carriat. Link. And see Elias Dinas and Pedro Riera on how European Parliamentary elections impact national party system fragmentation. Link.

    NEW RESEARCHERS

    Heterogeneous Fiscal Space

    STEFAN WALZ is a Finance PhD candidate at Columbia Business School. In a working paper, he studies the implementation and subsequent relaxing of bank capital requirements in 2018 to show that stricter requirements lead banks to shift their portfolios toward long-term bonds.

    From the paper:

    “The main finding of our paper is that persistent ex-ante differences in the levels of legacy public debt across members of a monetary union can cause an asymmetric response of national economies to union-wide shocks, and to monetary shocks in particular. The economic mechanism behind our finding is the following. In response to symmetric aggregate disturbances, the centralized monetary authority responds to inflation according to a standard Taylor-type rule. The monetary policy response, in turn, transmits differentially across the member states via their budget constraints. In response to a monetary contraction, high-debt countries have limited fiscal ammunition to act counter-cyclically, which translates into a muted response of transfers to households. As a result, they experience a more severe economic recession. Low-debt countries, on the other hand, contract by less than the union-wide average. This implies that the monetary authority faces a trade-off between macroeconomic stabilization and synchronization of economic activity across its members. The more hawkish the central bank is, i.e. the more aggressively it responds to inflation, the starker the increase in the cross-country dispersion of economic activity. We represent this trade-off as a stabilization-synchronization possibility frontier which, to the best of our knowledge, is a novel dimension that monetary authorities within currency unions might want to pay attention to.”

    + + +

    +  “When it comes to Soviet ideology, what I see is an abiding respect for market discourse and for markets themselves.” New on PW, Jamie Martin and Oscar Sanchez-Sibony on Soviet access to Western markets and the coming and going of Bretton Woods. Link.

    +  On July 8, JFI and the Yale Project on Financial Stability are hosting a symposium, organized by Elham Saeidinezhad and Steven Kelly, with support from the Volatility and Risk Institute at NYU Stern. Link to an announcement with the program of speakers. Seating is limited. Email editorial@jainfamilyinstitute.org if you would like to attend. 

    +  Perry Anderson on the European Union, the literature surrounding it, and Brexit. Link.

    +  “China’s SOE system attempts the difficult balancing act of harnessing the forces of competition while intervening to ensure a robust field of competitors.” By Kyle Chan. Link.

    +  “Our findings run against a popular narrative that “trade wars are class wars” (Klein and Pettis, 2020). Rather, trade causes winners and losers at all income levels. The large magnitude of horizontal distributional effects may lead to waning support for free trade.” By Kirill Borusyak and Xavier Jaravel. Link.

    +  Adéwálé Májà-Pearce on the Economic Community of West African States and French interests in the region. Link.

    +  “Compared to Mauritania, where the question of the Haratine has larger national implications, Moroccan debates about Black people are very local and restricted to the Draa valley and the Anti-Atlas.” By Aomar Boum. Link.

    +  “The centrality of oil to the reproduction of the wage makes the ‘necessity’ of cheap oil a matter of economic survival for the majority of workers in the United States.” By Matt Huber. Link. 

    +  “The Constituent Assembly had taken three crucial decisions in 1789. No sooner was it established than it de facto relinquished the right to collect the taxes of the Ancien Regime, while at the same time it announced that it would honour all past debts. At the end of the year, the assignats—in their first form, as state bonds—would, it was hoped, open up new opportunities for borrowing. The Treasury’s financial difficulties were thus exacerbated, for the first of these decisions further reduced the state’s already inadequate fiscal revenues, the second maintained in existence the heavy burden of the royal debt, whereas the third could only yield fairly limited resources. In this situation, there was only a limited number of possible choices. The Treasury could, for example, levy the necessary taxes. Since the Revolution had been made precisely in order to oppose taxation, this possibility was never even entertained. The Treasury could, on the other hand, postpone settling up with its creditors until the advent of better days, but such a decision would certainly cause grave displeasure to the latter, and furthermore could not be regarded as a lasting solution while the country’s finances were in disarray. Thirdly and lastly, it could persevere with the time-honoured method of borrowing heavily and settling old debts with what the new ones yielded, but public opinion was concerned that there be some change in policy.” By Florin Aftalion. Link.

  5. The Earth is a Man

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    This is an archived version of the PW Sources newsletter from Saturday, June 8, 2024. Sign up to receive PW Sources directly to your inbox here.

    THE FOURTH TRANSFORMATION

    Claudia Sheinbaum’s ascension to the Presidency, Morena’s rising majority in congress, and the party’s expansion in local governance occasions the possibility of major constitutional reforms and has left international investors concerned about a less business-friendly environment in Mexico. Outgoing president AMLO’s social programs, cash transfers, pro-worker reforms, and large infrastructure projects successfully undermined the electoral viability of the opposition and have amounted to a state building project AMLO calls Mexico’s “Fourth Transformation.” 

    In a 2020 chapter, NADINE REIS examines the Mexican state-owned bank Banco del Bienestar (Bank of Welfare), and its role in AMLO’s project of creating a “moral economy” in Mexico: 

    “Like previous left-populist governments in Latin America, AMLO follows a proclaimed anti-neoliberal, but decidedly neo-extractivist economic policy. His Government has focused on increasing the income of the poor, primarily through increasing the productivity of the state oil company PEMEX, fighting corruption and imposing harsh austerity measures in the public sector, as well as investments in (highly conflictive) infrastructure megaprojects, including a new oil refinery. The freed resources are supposed to be channelled to the poor, mainly in the form of social benefits paid out to individuals. AMLO therefore seeks to massively expand the role of what the President has called the “Bank of Welfare for the People” (Banco del Bienestar del pueblo). The most important programmes delivered through the BB are cash benefits for disabled people and the elderly (Pensión para Personas con Discapacidad/Adultos Mayores), scholarships for high school students (Beca Benito Juárez), and subsidized employment of youth at participating private companies (Jovenes Construyendo el Futuro). Moreover, the BB runs a microcredit programme for microenterprises (Tandas del Bienestar). 

    Financial inclusion promotes economic well-being by “assisting vulnerable households to build up productive assets, manage risks, and respond to financial shocks” (World Bank 2019: 5). However, critical observers argue that the financial inclusion agenda has served to re-legitimize the instrument of microcredit in light of its huge failure as a poverty reduction strategy (Bateman 2012). With this policy, the Government follows the World Bank’s idea that financial inclusion contributes to economic growth and wellbeing. The BB is the key to implementing financial inclusion as it “promotes and facilitates savings among Mexicans, inside and outside the country, as well as access to first and second floor financing, in an equitable way, for individuals and corporations” (Gob 2020b). To drive home the national financial inclusion message, the Government policy also includes financial education at schools.”

    +  “Most of Morena’s governors as well as many of its legislators were, until recently, part of the PRI. This has given AMLO and his party access to a great deal of operational expertise, but also means that Sheinbaum runs the risk of seeing opportunists jump ship should her leadership falter.” By Juan David Rojas. Link.

    +“Low productivity and growth in Latin America is somewhat explained by the reduced intra-regional trade. We are facing a new chapter in the history of intra-regional logistics.” Gary Drenik interviews Alfonso De los Ríos about nearshoring and Mexico’s emerging role in global markets. Link. 

    +  “Sheinbaum’s government would be keen to avoid Mexico being merely a source of cheap labor and resources in the energy transition, for companies either from the US or who are looking for ways to access that market.” By Kate Arnoff. Link. And see Karen Gabriela Liñán Segura’s thesis on a public sector-led energy transition in Mexico. Link.

    NEW RESEARCHERS

    Bank Capital Requirements

    STEFAN WALZ is a Finance PhD candidate at Columbia Business School. In a working paper, he studies the implementation and subsequent relaxing of bank capital requirements in 2018 to show that stricter requirements lead banks to shift their portfolios toward long-term bonds.

    From the paper:

    “While the traditional view of bank capital regulation focuses on the crowd out effect for lending to the real economy (e.g. Van den Heuvel (2008), Fraisse et al. (2020), Begenau (2020)), I find that the effect on the securities portfolio is economically and statistically significant, and must be weighted against the consequences for lending markets. Furthermore, while the common refrain on the 2023 banking crisis suggests that mid-sized banks (e.g. Silicon Valley Bank) took excessive interest rate risk as a result of deregulation, I argue that the deregulation actually led the bank to take less interest rate risk. This is not to say that SVB was made safer by the deregulation; the key argument of the paper is that capital regulation (along with other regulation) incentivizes holding interest rate risk. To the extent that credit risk is diversifiable and interest rate risk is a source of aggregate risk, the finding suggests that regulation may make banks more similar in terms of systemic risk (Greenwood et al. (2017)). The paper traces out the effect on loans and bond markets if policymakers decide to install counter-cyclical capital requirements, leading to a more robust financial sector that continues to provide credit even if the level of capital requirements changes. I evaluate the impact of state contingent central bank asset purchases, finding that they further enhance the hedging properties of long bonds for banks.”

    + + +

    +  “Contrary to the US, where the wage-price spiral was viewed with enormous concern, the BOJ has actively pursued this positive spiral since the implementation of Abenomics.” New on PW, Kang-kook Lee on wage inequality in Japan. Link.

    +  “El bienestar se está reformulando como un regalo por quien lidera un partido y no como un derecho fundamental que debería enmarcar los términos del contrato social.” Rohan Venkat’s May interview with Yamini Aiyar on the BJP’s “new welfarism” in India is now available to read in Spanish and Portuguese. Read the original piece in English here.

    +  A study by Bjarne Steffen, Valerie J. Karplus, and Tobias S. Schmidt analyzes technology adoption by state-owned utilities in the EU. Link.

    +  “Conduits for the dissemination of far-right discursive frames are hardly unidirectional in nature. We instead foreground the concept of multidirectionality.” A special issue of Nationalities Papers, edited by Nina Paulovičová and George Soroka. Link.

    +  “The sharply reduced margin of 152,513 votes— down from 471,000 in 2019—captures the personal nature of the defeat Narendra Modi was handed by India’s voters today.” By Siddharth Varadarajan. Link.

    +  “As unionized workers in higher education, we are positioned to intervene at the very beginning of the military supply chain.” Isabel Kain and Becker Sharif on the United Auto Workers Local 4811 strike. Link.

    +  “To understand the Palestinian condition in law, this Article proposes an approach that considers Nakba as a legal concept capable of encompassing a phenomenon that has included genocide, apartheid, and military occupation but remains rooted in historically and analytically distinct foundation, structure, and purpose.” By Rabea Eghbariah. Link (And for context around the publication of Eghbariah’s article, see reporting in the Intercept and AP).

    +  Sarena Martinez on building inclusive insurance futures. Link.

    +  Karsten Müller and Emil Verner examine how credit booms to the non-tradable sector contribute to financial fragility and a boom-bust cycle. Link.

    +  “There is a growing body of research on petitioning in early modern England. The fruits of much of this are yet to be published, but it is becoming increasingly clear that the act of setting down a grievance in writing and presenting it to an “authority” was a crucial way in which people engaged with, and used, the state. Petitioning was a crucial part of the politics of poor relief. It appears to have been a common tactic across the country: Quarter Sessions papers frequently contain orders relating to poor relief which must have originated in a petition, though the actual petition rarely survives. In addition, an untold number of cases were evidently heard at Petty Sessions, and some especially tricky disputes might even reach the Assizes, when leading common law judges were visiting the county on circuit. Not all petitions were specifically about an individual person’s access to relief: many dealt with settlement, i.e. which parish (or township) had the obligation to support a pauper. Others were about disputed rates. But a subset of petitions presented to England’s institutions of local administration were about the critical issue (for us) of whether a particular person had a justifiable claim to poor relief.” By Jonathan Healey. Link.

  6. Ipili

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    This is an archived version of the PW Sources newsletter from Saturday, June 1, 2024. Sign up to receive PW Sources directly to your inbox here.

    PORGERA JOINT VENTURE

    Last Friday, a massive landslide occurred in the Enga province of Papua New Guinea, killing over 2,000 people and blocking access to the Porgera Gold Mine, which has been able to continue operating without restrictions due to an on-site fuel stockpile. A tectonically volatile region, the frequency of fatal landslides in Papua New Guinea is partially exasperated by deforestation, developmental patterns, and mining practices. 

    In a 2014 book, ALEX GOLUB provides an ethnographic account of how the Porgera Mine affected local Ipili communities: 

    “As birthrates rose and child mortality decreased, an entire generation was coming of age surrounded by a mine they had not chosen, and without the houses and other compensation their elders had received from the mine. Many Porgeran families had a group of Engan or Huli immigrants who were attached to them in a client-patron relationship, and these factors compounded the land shortage caused by the mine’s presence to create a crisis of subsistence agriculture that led in turn to an increased reliance on money from the mine to purchase store-bought food. Ten years into what was supposed to be an age of effortless wealth and health, they felt cheated by what the mine had wrought and deeply entitled to more than they had received.

    The Yakatabari dump was designed as a solution to all of these problems. The plan was attractive to the mine because the proposed new dump site was below the open pit, near the mine’s main plant, and was capacious enough not only to receive waste generated by the current mine plan but possibly even to extend the mine’s life by lowering costs. The plan was also attractive to landowners, whose goal— however unintuitive it might seem—was to be displaced by the Yakatabari dump. Ipili saw relocation as a chance to acquire the millennial affluence they had missed out on in 1988 and as a chance to leave an area increasingly affected by pollution, land shortages, and overpopulation. Throughout the negotiations, the groups which would be displaced by the dump were also those who were the most eager for its construction, while those who would remain felt that they were getting the short end of the stick. As the difficulties of living inside the Special Mining Lease territory grew more and more intractable, compensation and relocation looked more and more like the solution to their problems.”

    +  “Since most of the world’s international mining and exploration companies—including Barrick—are Canadian, one might expect the Canadian government to exercise some oversight over its corporate citizens abroad.” A 2011 Human Rights Watch report on the Porgera Joint Venture. Link. And Ian Morse on protests against Barrick. Link.

    +“Prior to the construction of the Porgera Joint Venture’s power line, communities living along the route had established flexible arrangements regarding land usage. While land issues did lead to violence from time to time, most conflicts could be resolved amicably.” By Kai Lavu. Link. 

    +  “Lack of support for, and investment in, provincial disaster committees will continue to act as a handbrake on PNG’s efforts to implement the four priorities in the Sendai Framework.” Darian Clark on disaster prevention in the Pacific. Link. 

    NEW RESEARCHERS

    Deskilling Technologies

    WILLIAM M. COCKRIEL is a Ph.D. Candidate in Economics at the Booth School of Business at the University of Chicago. His job market paper documents the effects of the McKay stitcher, an unevenly distributed deskilling technology, on the artisanal shoemakers in the nineteenth century.

    From the paper:

    “The children of shoemakers did not pursue other skilled occupations. In high-exposure counties, they entered lower wage occupations and were less likely to continue their education as students. In McKay counties, the children of shoemakers turned to shoe factory work, implying high industry continuance in McKay counties despite plummeting occupation continuance. As was true for their fathers, shoe factory work was temporary, and the children of shoemakers continued in other lower-wage occupations through 1880 and even 1900. The children of shoemakers had limited migration responses, similar to their fathers. Though costs to incumbent workers and their children were high, the McKay stitcher also created new opportunities for workers from less literate and lower wealth fathers. This highlights the deskilling effect of the McKay stitcher. Workers entering the shoe industry prior to the McKay stitcher came from above average wealth fathers with above average rates of literacy, while new entrants after the McKay stitcher came from below average wealth fathers with below average rates of literacy. Though many new occupations were created at the lower end of the skill distribution, there were relatively few new opportunities at the top, and very few children of shoemakers benefited from these occupations. In line with Goldin and Katz (1998), the McKay stitcher did create managerial and machinist occupations in the upper end of the skill distribution along with the new occupations in the lower end. There were only twenty-six machinists employed at shoemaking establishments in 1870 compared with 166,435 workers in the industry in total. Gordon McKay’s firm responsible for producing and repairing the stitchers employed fifty-eight machinists. These eighty-four new machinist jobs are a small number relative to the size of affected individuals. Only 0.3 percent of the children of shoemakers become machinists in 1870, and none of those are in the shoe industry, nor are any of them machinists in later decades.”

    + + +

    +  “It has become more challenging for risk managers to find swaps that precisely match the maturity dates of their funds’ underlying assets. This phenomenon, known as “duration drift,” poses a significant challenge to effective risk management.” New in her Market Microstructures series, Elham Saeidinezhad examines hedge ineffectiveness and shrinking options in the Treasury market. Link.

    +  “Twenty-four years after the launch of Plan Colombia, Ecuador is following a similar path, with the government aiming to increase the military’s arsenal of weaponry in the state’s war on drugs.” New in PW, Renato Rivera Rhon on Ecuador’s position in the global drug trafficking chain. Read in English or Spanish. 

    +  “When a sovereign’s debt is unsustainable, concerns regarding intercreditor equity are exacerbated by the sequential” nature of the restructuring process, where official creditors are generally expected to commit to debt relief terms before private creditors.” By Sean Hagan and Brad Setser. Link.

    +  “Sheinbaum’s climate campaign leans heavily on strengthening and transforming Mexico’s state-owned enterprises.” Kate Aronoff on what Claudia Sheinbaum’s election in Mexico could mean for climate policy. Link. 

    +  Thandika Mkandawire critiques the predictive value of the logic of the neopatrimonialism school as applied to African governance, and its devastating effects on African economies. Link.

    +  “The neo-fascist response to migration brings traditional racism into line with climate denial and a commitment to authoritarian solutions to the eco-social crisis.” By Alberto Garzón Espinosa. Link.

    +  Melanie Brusseler and Chris Hayes on the UK’s Contracts for Difference (CfD) Scheme for private generation capacity. Link.

    +  Renato H. de Gaspi and Pedro Perfeito da Silva use a Polanyian-inspired framework to examine how counter-movements against corporate welfare shaped or didn’t shape Brazil’s automotive, animal protein, and pharmaceutical industries. Link.

    +  “The international rise and fall of inflation since 2020 largely reflected the direct and pass-through effects of headline shocks. Macroeconomic conditions generally played a secondary role.” By Mai Chi Dao, Pierre-Olivier Gourinchas, Daniel Leigh, and Prachi Mishra. Link.

    +  “On 11 September 2015, a conference entitled ‘1965 and the Indonesian Coup: Fifty Years On’ was held at the Australian National University (ANU) under the auspices of the university, the Australian Institute of International Affairs (AIIA), and the Australian Department of Foreign Affairs (DFAT). The conference assembled many diplomatic and journalistic ‘eyewitnesses’ to the experiences in Indonesia in 1965. One of the presenters, Geoffrey Miller, is worth considering. Posted to the Australian embassy from 1 October 1965, he openly supports the Indonesian government’s position that the ‘PKI did it,’ but does not explain how he could have known this in 1965. Writing a pre-conference reflection on 1965 for the Australian Institute of International Affairs (AIIA), he excuses Suharto and mentions nothing of Shann’s relentless propaganda campaign against Sukarno or the PKI (emanating from within the Australian Embassy in which he personally served). He writes at one point that ‘the great blemish on his [Suharto’s] government, and the New Order, was of course the anti-PKI campaign.’ While he concedes that the victims were overwhelming innocent, Miller writes that ‘the retribution [of 1965] was clearly terrible. Set against it must be the great improvements made by the Suharto regime in the lives of most Indonesians…’ It is perhaps not surprising that at a conference organised with the assistance of the DFAT, the role of Australian diplomacy in Indonesia in 1965—particularly the rich pickings available for Keith Shann—are not of any interest as a matter of philosophical and ethical concern.” By Adam Hughes Henry. Link.

  7. Two Snakes

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    This is an archived version of the PW Sources newsletter from Saturday, May 25, 2024. Sign up to receive PW Sources directly to your inbox here.

    HIGH-FREQUENCY TRADING

    In February, Chinese regulators took disciplinary action against Shanghai Weiwan Fund Management for using high-frequency trading (HFT) in stock futures to circumvent transaction limits. And this week, British regulators fined Citi Bank for improperly implementing algorithmic trading in 2022. Analysts have linked HFT practices to flash crashes in the US, Shanghai, and the UK, but there is little consensus regarding how such practices should be regulated.

    In a 2024 working paper, VINCENT GLODE and GUILLERMO ORDONEZ model the effect of industry-wide technological advancements on firms’ allocation of resources in a HFT context:

    “In the last couple of decades, equity trading changed dramatically. What used to happen verbally or manually in a centralized physical location (like the NYSE) now happens digitally though a network of interconnected and automated trading venues. Computing improvements and communication advances sped up the generation, routing, and execution of trade orders—some trades now being implemented within less than a millisecond (for context, the blink of an eye takes about 400 milliseconds). This astonishing reduction in trading latency had clear social benefits by helping intermediaries find trading partners and provide liquidity to their clients at unprecedented speeds. Yet, the same technological progress has also been exploited to take advantage of transactions intended to match buyers and sellers rapidly and efficiently. Surplus created by these transactions could now be appropriated by third parties designing predatory trading strategies that include rebate arbitrage, latency arbitrage, but perhaps most importantly electronic front-running. This strategy involves using speed and sophisticated computer algorithms to identify large incoming orders and take favorable positions before these large orders are fulfilled. If an institutional investor sends a large buy order to multiple exchanges, an HFT firm can learn about it from a partially unfulfilled buy request on one exchange, outrace the institutional investor’s order to a second exchange and buy all available shares, in order to later resell them to the institutional investor at a higher price. This strategy relies on similar technologies, platforms, and execution protocols to what market makers use to provide liquidity, but uses the faster trading speeds to step in between the ultimate buyers and sellers of assets and appropriate a fraction of their gains to trade, without generating any social surplus in the process.”

    + “We refer to what many other commentators refer to as ‘electronic front-running’ as anticipatory order cancelation, a term which, while infelicitous, more accurately describes what HFTs do and avoids prejudging the practice’s welfare effects.” By Merritt B. Fox, Lawrence R. Glosten, and Gabriel V. Rauterberg. Link. And see Ricky Cooper, Michael Davis, and Ben Van Vliet on the ethics of regulating algorithmic trading strategies. Link.

    +  “Investment companies operate under the guise of companies that trade physical goods. Skeptics point out that this model allows trading firms to obtain Chinese yuan through fake transactions, encouraging, as a result, the inflow of ‘hot money.’ ” By Yue Yue, Wang Shiyu, and Joe Zhang. Link. “FX trading venues have succumbed to a perverse incentive to monetize informational asymmetries.” By Dan Marcus and Miles Kellerman. Link.

    +  “Viewing firm balance sheets as a pipeline of equity flows can uncover hidden market structure vulnerabilities and triggers for broader market failures.” In PW, Elham Saeidinezhad on regulating equity markets, part of her ongoing series on market microstructures. Link to the piece, link to the series. 

    NEW RESEARCHERS

    Coeducation

    FRANCESCA TRUFFA is a Lazear Liang Postdoctoral Scholar at the Stanford Graduate School of Business. Her job market paper, coauthored with Ashley Wong, asks if coeducation has led to a greater research focus on underrepresented populations.

    From the paper:

    “By 1924, over 75 percent of students were already enrolled in coed institutions and the switch to coeducation between 1960 and 1975 only increased the share of undergraduate women taught in coeducation settings by 4 percentage points (Goldin and Katz, 2011). However, the transitions to coeducation of these universities enabled women to enter some of the most prestigious and research-productive universities. The dramatic increase in coeducational universities during this period was driven by a combination of cultural and economic factors. The decades of the 60s and 70s were a period of political and social unrest. Increasingly, students demanded integration both in terms of gender and race, and sought to be educated at coeducational institutions (Miller-Bernal and Poulson, 2004). This shift in demand led to a reduction in enrollment growth and declining student quality at male-only universities compared to coeducational institutions (Goldin and Katz, 2011).While cultural factors increased the demand for coeducation among students, male-only universities eventually switched to coeducation for financial reasons that were largely unrelated to universities’ demand or supply of gender-related research, a feature that we will exploit in our empirical strategy.”

    + + +

    +  “Iran is demonstrating an unprecedented capability to coordinate with its proxies in the Red Sea region. This all motivates more active US and EU involvement in the Red Sea, which is exactly what we are seeing.” New in PW, Andrew Elrod interviews Kaleb Demerew and Gregory Brew on interests and conflicts along the Red Sea. Link.

    +  “Doing away with classical development theories opens the way for pro-poor intervention and for the state to cultivate a fiscal mechanism to compensate the losers of development processes.” In PW, Amit Bhaduri on corporate-led industrialization in India. Link.

    +  “For Arrubla, the violent dissolution of the campesino structures had severe implications under neocolonial conditions in Colombia, requiring a particularly high quota of pain for the popular masses.” Also new in PW, Sandra Jaramillo Restrepo revisits the dependency debates in Colombia through the lens of the 20th-century-economist Mario Arrubla. Read in Spanish or English.

    +  “After years of growth, batteries have reached a level of operations where they now play a newly impactful role on the grid.” A Grid Status report on the role of batteries in the California grid. Link.

    +  Thomas Ferguson and Servaas Storm provide a macroeconomic background analysis of key issues pertaining to Biden’s 2024 election odds, with a particular focus on the decline in real wages under inflation. Link.

    +  “The role of the US hidden industrial policy as well as China’s protectionism, the weakening of antitrust, a more stringent and extensive IPRs regime, new technologies, and globalization have contributed to perpetuating intellectual monopolies.” By Cecilia Rikap. Link.

    +  “Although multilateral trade agreements now seem out of reach, tax multilateralism is ascendant.” By Rebecca M. Kysar. Link.

    +  “Samir Amin advocates a transition to a model of introverted accumulation through delinking from the world market. By contrast, Marini locates underdevelopment in the productive sphere.” Louis O’Sullivan reviews Ruy Mauro Marini’s Dialectics of Dependency. Link.

    +  Howard W. French reviews Wang Feng’s new book, China’s Age of Abundance: Origins, Ascendance, and Aftermath. Link.

    +  “The British Indian decision to demonetize silver disregarded the colony’s position within the wider subcontinental system of currencies based on the metal. This was a costly mistake. No other state followed in British India’s footsteps, while merchants and bankers lost no time in exploiting profitable swap opportunities opening up now between the British rupee, bar silver and state coins. The slump in world silver prices after the metal’s demonetization in British India also boosted subcontinental demand, which resulted in silver imports into Bombay surging tenfold to £250,000 per week between July and September 1893. ‘We are getting into a very serious hole,’ the Bombay accountant-general, A. F. Cox, who occupied a ringside view of the markets and reported about them at frequent intervals to the Government of India’s Finance and Commerce Department in Calcutta, gloomily remarked of these shipments at the end of September 1893. Worse was to follow, with weekly silver imports climbing to £350,000 in early December.” By G. Balachandran. Link.

  8. To Pass

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    This is an archived version of the PW Sources newsletter from Saturday, May 18, 2024. Sign up to receive PW Sources directly to your inbox here.

    TRANSMISSION CORRIDORS

    On May 13, the Federal Energy Regulatory Commission approved Order No. 1920, the most comprehensive overhaul to electric transmission policy in over a decade. The new rule adopts requirements for transmission operators to conduct long-term transmission planning over a 20-year time horizon and includes a provision to discourage states from opting out of paying for transmission upgrades.

    In a 2002 paper, HOANG DANG details the deregulation of the electricity industry and advocates for expanding the FERC’s jurisdiction over transmission:

    “Increased wholesale competition was supposed to yield significant benefits to consumers in the form of lower retail prices for electricity. The actual results, in many parts of the country, are that the benefits of competition have been negated by the strain on the nation’s system of interconnected high-voltage transmission lines. ‘By 1990, non-utility generation [of electricity] had grown to supply more than half of the marginal generation capacity added to the industry, and more than 10 percent of cumulative generation capacity.’ The transmission grid was not designed for this enormous increase in the flow of electricity and, as a result, problems have occurred in the form of transmission congestion, otherwise known as bottlenecks. Very little has been done to expand the transmission grid in order to meet the demands of increased competition. In recognition of the growth of the electricity generation and the new stresses on the transmission grid, the FERC issued Order No. 2000, which provided for the formation of regional transmission organizations (RTOs) responsible for providing full and open access to all market participants in its region. RTOs are limited in their ability to make the necessary expansion to the transmission grid because the federal government has limited authority to eliminate the many barriers to transmission expansion. The current structure provides utilities little incentive to invest in transmission lines. Furthermore, state siting processes pose many barriers to an RTO’s attempt to construct interstate transmission lines.”

    + “Making the case for more aggressive decarbonization targets in the utility sector basically means calling for bundled utilities to invest more in transmission, storage, and low-carbon generation.” By Nolan Lindquist. Link. And see Jeff St. John on FERC member Mark Christie’s dissenting opinion on the new rules and the growing clean energy backlog. Link.

    +  “Even with proactive regional planning, regional transmission will remain undermined by utilities’ preference for local and supplemental projects. Order 1920 also does nothing to resolve the fundamental lack of independent planning outside RTOs.” By Devin Hartman. Link. And see David Roberts’s conversation with Lorenzo Kristov on a “bottom-up” grid. Link.

    +  “Proximity to interconnection points is driving site selection for data center demand, but these edge deployments tend to be smaller. Secondary markets continue to compose almost 20% of capacity under construction.” A JLL report on the expansion of data center preleasing and construction. Link.

    NEW RESEARCHERS

    Hydrogen economy

    STEFAN SCHOPPENGERD is a research associate in the Economics Department of the Berlin School of Economics and Law. His working paper analyzes industrial relations, hydrogen, and working time policies in the German steel industry.

    From the paper:

    “The switch to hydrogen-based direct reduction is the technological option for decarbonization being pursued by a broad consensus of all stakeholders. Its enormous potential for reducing CO₂ emissions can only be realized using ‘green’ hydrogen. Both the corresponding conversion of the steel mills and the necessary development of the hydrogen economy are moving along the lines of profit-oriented entrepreneurial activity, despite enormous government expenditure of public funds, research and development, and needs assessment and capacity planning (another lesson in the fact that functioning markets are not natural institutions, but ones that require a high degree of political preconditions). Essential for trade union policy here is the effort to persuade state institutions to adopt an industrial policy that makes invests in ‘green’ production capacities attractive for steel companies at the existing locations. How these positions are advocated corresponds to the established paths of social partnership corporatism. The competences within the framework of coal and steel co-determination can be used to press for a long-term transformation strategy at the company level; political frameworks at the state, national, and European levels can be influenced by lobbying, sometimes flanked by appealing action days or demonstrations. In terms of content, the focus is on positions formulated in consensus with companies on behalf of the industry: subsidies, green protectionism, and targeted development of sales markets. In addition, there is advocacy for the qualification of employees in order to prepare them for the new requirements.”

    + + +

    +  “The cash transfer mode allows you to bypass all the intermediaries…Its political salience is really significant because it draws a direct connection between the leadership and the beneficiary.” New on PW, Rohan Venkat interviews Yamini Aiyar on India’s “techno-patrimonial” welfare model. Link.

    +  “The years with the greatest distribution of income across all countries in the region—2002 to 2003 and 2013 to 2014—correspond to the years with the greatest economic growth and the best labor market performance.” Also on PW, Camilo Andrés Garzón and Maria Camila González interview José Antonio Ocampo, Colombia’s former Minister of Finance. Read in English or Spanish.

    +  “The tariff war is ultimately about geopolitics, not the cat and mouse game of supply chains. No one knows if China will respond performatively or powerfully.” New on the Polycrisis, Tim Sahay and Kate Mackenzie on Biden’s decision to raise tariffs on Chinese imports. Link.  

    +  “Há uma trajetória ideológica, política e econômica, construída ao longo de décadas, que obriga hoje o governo Lula 3 a adotar um figurino fiscalista.” Leda Paulani on Brazil’s “New Fiscal Framework.” Link. 

    +  Ricardo Fornasari on the antisystemic potential of climate change litigation. Link.

    +  “This paper offers some of the first clear empirical support for the long-standing theoretical claim that traceable policy designs generate stronger mass feedback effects than do less traceable policy designs.” By Brain T. Hamel. Link.

    +  “We observe that between 2004 and 2013, Chinese solar firms increased their annual production by 76% per year, and by 2016, China’s dominance of global solar manufacturing had become all-encompassing.” By Ignacio Banares-Sanchez, Robin Burgess, David Laszlo, Pol Simpson, John Van Reenen, and Yifan Wang. Link.

    +  Andrea Silva on Rural Property and Land Administration Plans and land titling in Colombia. Link.

    +  Meryem Gökten, Philipp Heimberger, and Andreas Lichtenberger apply a Beveridge (full-employment-consistent) rate of unemployment to analyze deviations from full employment in EU countries. Link.

    +  “In many instances such as pre-civil rights United States and pre-Mandal India, poor and wealthy voters exhibited partisan and redistributive preferences in accordance to their class location because in these periods their status rank was unchallenged. In the Indian case, upper caste voters were more sympathetic to the statist and redistributive focus of the Congress Party between 1947 and the 1980s when those policies did not disturb Brahman hegemony in education and the state. When those policies began to target these ‘status’ goods, however, an anti-redistribution coalition was able to take shape in support of the BJP. The psychic and material dimensions of status suggest that the poor are not misunderstanding their economic interests when they vote for right-wing anti-redistribution parties as suggested in the US case. Instead they are rationally seeking to protect their status which holds both economic and social benefits, even if the material component doesn’t completely compensate what they could gain from state-led redistribution.” By Pavithra Suryanarayan. Link.

  9. Aeon

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    This is an archived version of the PW Sources newsletter from Saturday, May 11, 2024. Sign up to receive PW Sources directly to your inbox here.

    SHALE REVOLUTION

    Last Thursday, Exxon completed its $60 billion acquisition of Pioneer Natural Resources, thereby becoming the largest shale oil producer in the Permian basin. The FTC has approved the merger on the condition that Pioneer CEO Scott Sheffield be banned from joining Exxon’s board due to alleged collusive activities and anticompetitive conduct.

    In a 2020 chapter, BINLEI GONG analyzes the shale revolution, its impacts on crude oil and natural gas globally, and the future of energy sectors in the US and China:

    “Marketization and commercialization are the keys to a significant breakthrough in the shale gas boom in the United States. In the United States, there is no mutual restraint among natural gas production, transportation, and sales activities. Third parties also have the right to bid for the transportation business that transports natural gas to downstream markets. This guarantees that natural gas producers and users have non-discriminatory access conditions for pipelines. As a result, thousands of companies are active in the shale gas industry, thereby ensuring the diversification of shale gas exploration and production entities. In many developing countries, however, state-owned oil companies or municipal engineering companies have monopoly power over natural gas supply infrastructure and have no motivation to innovate new technologies. The cooperation between large companies and small to medium size enterprises has promoted the rapid growth of the U.S. shale gas industry. Since 1999, two-thirds of the world’s oil and gas discoveries have come from only five private oil companies, including BP, ExxonMobil, Shell, Chevron and Total, all of which are active in the U.S. shale gas market. 50 percent to 70 percent investments of these large companies are spent on unconventional resources. In the medium and long term major projects, 91 percent of ExxonMobil’s funding and 88 percent of Shell’s funding are used in unconventional resources. The exploration and production business of large companies is outsourced to small companies and service companies. Given these stable supports, thousands of small and medium-sized independent oil and gas developers have the motivation and funding to innovate in different technical fields, which not only enriches and improves the industrial chain, but also promotes the rapid development of shale gas industry in the United States. This kind of cooperation mode is worthy of reference and attention of state-owned oil companies such as CNPC, Sinopec and CNOOC.”

    + “The oil industry as a whole is not especially, let alone perfectly, competitive; if it were, consumers would probably be worse off, not better.” Kate Arnoff on the FTC’s Sheffield ban. Link. And Ilia Murtazashvili looks at compulsory pooling and the shale boom. Link.

    +  “Given the widespread benefits of increased domestic oil and gas production and the bundle of technologies that have helped give rise to those gains, one might consider why the resistance has coalesced around fracking and not some other aspect of development.” By Timothy Fitzgerald. Link. And see a GAO report on the effects of the 2015 repeal of the crude oil export ban. Link.

    +  “We find that air quality effects and employment effects follow the boom-and-bust cycle, while climate impacts persist for generations well beyond the period of natural gas activity.” By Erin Mayfield, Jared Cohon, Nicholas Muller, Inês Azevedo, and Allen Robinson. Link. 

    NEW RESEARCHERS

    Insurance markets

    EILIDH GEDDES is an Assistant Professor of Economics at the University of Georgia. Her job market paper examines the effects of price regulation in markets with strategic entry.

    From the abstract:

    “Regulators often enact price restrictions with the goal of improving access to affordable products. However, the design of these regulations may interact with firm strategic entry and exit decisions in ways that mitigate the effects of pricing regulation or eliminate access to certain products entirely. In the US individual health insurance market, the Affordable Care Act established community rating areas made up of groups of counties in which insurers must offer plans at uniform prices, but insurers do not have to enter all counties in a rating area. The exact design of each market has been left to individual states. Allowing partial entry creates trade-offs in rating area design: larger areas may support more competition, but heterogeneous areas may promote partial entry as firms choose to not enter high cost areas. To evaluate these trade-offs, I develop a model of insurer entry and pricing decisions and investigate how insurers respond to rating area design. I find that banning partial entry increases overall entry, average prices, and consumer welfare. I quantify the trade-offs of increasing rating area size and find returns to size concentrated when marginal costs are similar across counties in a rating area. Regulators must balance promoting competition with pooling high and low-cost consumers in rating area design.”

    + + +

    +  “As its capital base has grown, the US healthcare sector has become more—rather than less—labor intensive.” New on PW, Adam Gaffney writes on healthcare reform, competition, and the essential difference between adequate service provisions and hospital supply expansion. Link.

    +  “A luta por justiça social contra a austeridade determinará o destino do terceiro governo Lula e, talvez, da própria democracia brasileira.” New on PW in Portuguese, Pedro Paulo Zahluth Bastos on Brazil’s budget debate. Link. 

    +  “Para México, la transición hacia vehículos sin emisiones significa una oportunidad para recuperar cierto control sobre los recursos naturales que se escaparon de las manos públicas durante los veinticinco años de NAFTA.” Alejandra González Jiménez’s 2022 PW essay on NAFTA, EVs, and Mexico’s auto industry is now available to read in Spanish. Link. Read the original essay in English here. 

    +  “Chinese demand for safe US assets (linked to its own undervalued currency) created a scarcity of safe assets which incentivized financial actors in the US and Europe to reach for yield via the US mortgage market.” Brad Setser reviews the Sino-American trade relationship since 2004 and China’s funding of the US trade deficit. Link.

    +  “The choice of interventionist forms of industrial policy or market-driven strategies is shaped by the position of the domestic industry in global supply chains, that is, whether global supply chains are emerging or mature and whether the domestic industry is an entrant or incumbent.” By Bentley B. Allan and Jonas Nahm. Link.

    +  A forthcoming paper by Ivan Boldyrev explores the work of Soviet mathematicians in optimization, game theory, and probability theory as used in Western economics. Link.

    +  “Mining companies no longer feel confident that local populations will accept their operations, which has resulted in a whole cottage industry of consultants on corporate social responsibility, green credentials, and ethical certification schemes.” An interview with Thea Riofrancos. Link. 

    +  Jaison R. Abel, Richard Deitz, Jonathan Hastings, and Joelle Scally on the uneven geographic recovery from the pandemic recession. Link.

    +  “By the end of the nineteenth century, Denmark, New Zealand and Uruguay enjoyed a virtuous integration into the world economy as small, peripheral, export-oriented countries with natural aptitudes for producing and exporting agricultural goods, mainly from livestock rearing. Despite these similarities, the three countries experienced different trajectories in GDP per capita, the volume of exports, and agricultural productivity until 1970. This article aims to study the dynamics of technological change from a neo-Schumpeterian perspective in the livestock systems of the three countries and their impact on agricultural growth from 1870 to 1970. Land and livestock productivity indices are estimated to measure the performance of each country’s livestock system. Results verify the existence of differences in the growth rates and levels of productivity of land, meat and dairy in the three countries. Diverse agents (government, academia and the productive sector) and their links were fundamental for adapting to a new technological paradigm and for promoting innovation processes related to land improvements in the livestock systems.” By Jorge Alvarez Scanniello and María de las Mercedes Menéndez. Link.

  10. Castle

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    This is an archived version of the PW Sources newsletter from Saturday, May 4, 2024. Sign up to receive PW Sources directly to your inbox here.

    ENDOWMENTS

    In the past month, students have occupied 142 universities across the world to demand an academic boycott and divestment from companies and institutions that profit from the Israeli occupation of Palestine. More than 2,000 protesters have been arrested across US campuses. 

    In a 2016 article, CHARLIE EATON, JACOB HABINEK, ADAM GOLDSTEIN, CYRUS DIOUN, DANIELA GARCIA SANTIBANEZ GODOY, and ROBERT OSLEY-THOMAS consider US higher education’s growing reliance on financial investment returns:

    “Endowments play an increasing role in financing US higher education. Since the 1980s, more institutions have sought to build endowments and thereby assume the role of financial investors. NACUBO reports show that just 148 undergraduate-enrolling systems reported operating endowments to NACUBO in 1977 and just 36 of them were public. By 2009, the number of public systems reporting endowments had grown to 158, with an increase to 501 for undergraduate-enrolling systems overall. The total endowment asset values reported by NACUBO increased tenfold in 2012 constant dollars from $39.8 billion in 1977 to a high of $456 billion in 2007. From 2003 to 2012, when more detailed data are available, assets at public institutions doubled from $61 to $122 billion, while private college endowment assets grew by 49% from $201 billion to $300 billion,

    Together with fundraising, investment returns provided for net growth of both public and private endowments. Although the use of endowments has diffused to less wealthy colleges, the growth in asset values has been concentrated disproportionately at the wealthiest institutions. Among the nine undergraduate-enrolling private institutions that held more than 1 billion dollars in endowment assets in 1977, the total endowment assets more than quadrupled from $17.2 billion in 1977 to $77.8 billion in 2003, an average of 594 thousand dollars in assets per FTE student. Using more detailed data for years since 2003, we find that the exponential growth of endowment assets has continued among the wealthiest institutions.”

    + “Schools with very high dependence on endowments may continue to be challenging targets for activists.” Alexander Baron, Rachel Venator, Ella Carlson, Jane Andrews, and Junwen Ding track the progression of fossil fuel divestment in US higher education. Link. 

    +  “What Columbia does publish is enough to show us that at least in financial and economic terms, Columbia is not one simple thing—an educational institution, or an alumni social network. It is a $5.8 billion-revenue organization consisting of at least seven main entities.” Adam Tooze on protesters’ demands and Columbia’s financial structure. Link. “As universities become more active in the financial markets, their credit ratings become an important metric of their success.” Alex Katsomitros on the emerging university bonds market. Link.

    +  UN special rapporteur David Kaye details forms of anti-BDS legislation currently in place in over two dozen US states. Link. And see Catalina Gaitán on Evergreen State’s agreement with student activists. Link.

    NEW RESEARCHERS

    Environmental shocks

    JHIH-YUN LIU recently defended her dissertation on rural resilience in the Department of Applied Economics at the University of Minnesota. In her job market paper, she examines how the Dust Bowl influenced inter-generational occupational choices in agriculture.

    From the paper:

    “Using the historical census data with the DiD model that relies on the variation of topsoil erosion across counties, I explore how children of farmers choose their occupation after experiencing the Dust Bowl, one of the remarkable environmental catastrophes in the U.S. mid-20th century. This study contributes to a better understanding of the Dust Bowl’s possible consequences on inter-generational occupational choice in agriculture. The findings show that the Dust Bowl plausibly decreases the probability of occupational persistence in agriculture, even though the magnitude is not substantial (approximately decreasing by 2%). While living in high-erosion counties appeared to deter children of farmers from being self-employed farmers, a portion of them opted to work as wage-paid farmers. This shift towards wage employment in the agricultural sector implies that some of the children of farmers remained engaged in agriculture but chose to work for other farms as employees, potentially as a strategy to mitigate the impact of environmental shocks. Furthermore, relocating to non-Dust Bowl states was identified as an alternative strategy during this period. Children of farmers who chose to move out of the Great Plains were more likely to pursue non-agricultural occupations.”

    + + +

    +  “In its nation-building ethos, Tata stands apart from the extravagance and aggressiveness of the new tycoons. Despite these differences, it now appears to be just as firmly embedded in Modi’s agenda as Ambani or Adani.” New on PW, Mircea Raianu examines Tata’s history, and the salt-to-software conglomerate’s investment in domestic manufacturing. Link.

    +  “The continued gamble on political attrition in the farm bill process may be lengthening its own odds. Since the 2012–14 negotiations, Freedom Caucus-types have demanded unacceptable cuts to nutrition programs and, now, a ban on the mailing of the abortion pill mifepristone.” Also new on PW, Ariel Ron on the IRA’s climate goals and agricultural policy coalitions. Link.

    +  “A shareholder proposal calls for the company’s utility subsidiary, Berkshire Hathaway Energy (BHE), to disclose Scope 1 and Scope 2 emissions. That sounds compelling, but, digging in, it’s apparent that this ask is about form over substance.” Nolan Lindquist on emissions reporting and the upcoming Berkshire Hathaway annual meeting. Link.

    +  Maximilian Kotz, Friderike Kuik, Eliza Lis, and Christiane Nickel identify global warming’s contribution to welfare losses and price instability by modeling the causal effects of weather variations on national-level inflation across 121 countries. Link.

    +  An analysis prepared for The New York Times by the Urban-Brookings Tax Policy Center shows that President Biden, while promising corporate tax increases, has cut taxes overall. By Jim Tankersley. Link.

    +  Yuxuan Jia, Wendy Wu, and Zichen Wang examine China’s low consumption and unusually high savings rates. Link. 

    +  A new publication on the militarization of European space policy, edited by Thomas Hoerber and Iraklis Oikonomou. Link.

    +  “Maricá in Brazil serves as an empirical backing of a theoretical proposition about the productive interaction of UBI and EBI, and should inform current policy reflection on pandemic preparedness and the role of basic income within this perspective.” By Jurgen De Wispelaere, Leticia Morales, and Fabio Waltenberg. Link.

    +  “Instead of stockpiling financial assets, the UAW is investing in high-visibility strikes and ambitious organizing programs that are capturing the imagination of workers throughout the world.” By Chris Bohner. Link.

    +  “The excavation of a large administrative building at the city of Tell Brak in northern Syria saw the recovery of a considerable quantity of charred cereals dated to the mid-third millennium B.C.E. This remarkable discovery provides a rare snapshot into the nature of agriculture in Upper Mesopotamia during the Early Bronze Age. The material has been studied using a combination of primary archaeobotanical analysis, crop stable isotope determinations, and functional weed ecology to deliver new insights into cultivation strategies at Tell Brak as well as to contribute to the wider debate regarding trade and crop importation in this region. Specific crop regime choices also reveal how the farmers of Tell Brak were able to reduce the overall risk of crop failure by careful water management, a vitally important factor in this semi-arid region, with potential implications for the analysis of other large-scale urban agro-economies in the Middle East and beyond.” By Charlotte Diffey, Geoff Emberling, Amy Bogaard, and Michael Charles. Link.