Phenomenal World

November 21st, 2020

Phenomenal World

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INFORMAL ECONOMY

Recent studies estimate approximately 60% of the world's population earns their wages in the informal economy. Focusing on the prevalence of informal work across Africa, Latin America, and South Asia, analysts frequently advocate for a transition to the formal economy in these regions as part and parcel of development goals. But increased attention on informal work in the US and Europe has complicated how the informal economy is defined across both high-income and low-income nations.

In the introduction to his co-edited 2000 book, sociologist FARUK TABAK considers informalization through a long term, world-systems view.

From the text:

"From the late 1960s to the 1980s, the interest in and literature on the informal economy grew almost exponentially—as did the informal economy itself. The term informal economy originally referred to that great mass and realm of economic activities and transactions lying outside official accounting, more by default than design (at least initially). And during the opening decades of the post-1945 period, its overwhelming presence in what was then referred to as the developing world was no surprise. Indeed, the informal economy was considered one of the developing world's defining characteristics; the failure of these transactions to show up in official statistics was attributed mainly to the inability of state apparatuses to compel compliance and thereby reinforce relations of rule. In fact, in modernization theory, administering and overseeing the eradication of the informal realm was a political priority for buttressing relations of governance. It was a forgone conclusion that once these relations were solidly (re)established, the informal realm would steadily yet inexorably be brought under strict statal regulation.

This paradigm reigned as long as informalization remained an attribute of the periphery, but was eventually undermined by the equally relentless pace of informalization in the core zones after the 1970s. As the research suggests, the inability of state apparatuses to effectively administer and regulate a wide and growing range of productive activities conducted within their jurisdictions contributed to the spread of the informal economy. At other times, a state's unwillingness—not necessarily its inability—to police these activities and transactions was the most salient determinant. In certain locales, corporate restructuring swelled the ranks of of the informal sector by farming out the production of goods and services formerly produced in-house. In other locales, massive rural-to-urban migration and the resulting urban demographic explosion precipitated and sustained the process of informalization. Moreover, state bureaucracies in the periphery—the very agencies expected to preside over the demise of the informal sector—resorted to hiring and farming-out to firms and enterprises in the informal sector as they administered "public" enterprises. Yet the multiplicity of processes underlying informalization and the inability to identify a single cause does not mean the concept or the term itself should be dispensed with in toto. A narrow focus on the variety of the processes underlying the informal economy overlooks the sheer magnitude and cumulative significance of these activities in the functioning of the capitalist world-economy."

Link to the book.

  • A previous JFI Sources examines the International Labor Organization's attempts to quantify the informal economy in the "developing world." Link. And Saskia Sassen's 1997 article looks to the US to understand informalization, asking "whether these systemic conditions in advanced market economies in the post-fordist era are also engendering a new dynamic of informalization in the Third World along with older dynamics." Link.
  • Zoran Slavnic rejects the notion of separate informal and formal economies. Instead, "All economic actors are increasingly ready to adopt informal economic strategies." Link. Martha Alter Chen comes to a similar conclusion, finding "most informal enterprises and workers are intrinsically linked to formal firms." Link.
  • "The common impression that the devaluing of labor is a function of globalization and competition from lower-cost producers in the global south does not appear to be the case." James DeFilippis, Nina Martin, Annette Bernhardt, and Siobhán McGrath examine informal work in Chicago and New York, finding that the bulk of labor violations occur in industries that serve local consumption. Link.
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November 14th, 2020

The Continuous Moment

STATES AND MARKETS

The conclusion of the United States election has prompted a resurgence of commentaries on the state's role in markets. By focusing on the state's capacity to shape and alter market structure, these discussions build on a longstanding academic tradition which overturned classical historical accounts of free markets.

Among the most influential texts is CHARLES TILLY's 1990 book, which examines the co-development of commercial capitalism and nation states.

From the introduction:

"The story concerns capital and coercion. It recounts the ways that wielders of coercion, who played the major part in the creation of national states, drew for their own purposes on manipulators of capital, whose activities generated cities. Men who controlled concentrated means of coercion (armies, navies, police forces, weapons, and their equivalent) ordinarily tried to use them to extend the range of population and resources over which they wielded power. When they encountered no one with comparable control of coercion, they conquered; when they met rivals, they made war. War, and preparation for war, involved rulers in extracting the means of war from others who held the essential resources—men, arms, supplies, or money to buy them—and who were reluctant to surrender them without strong pressure or compensation.

The organization of major social classes within a state's territory, and their relations to the state, significantly affected the strategies rulers employed to extract resources, the resistance they met, the struggle that resulted, and the sorts of durable organization that extraction and struggle laid down. These relations varied significantly from Europe's coercion-intensive regions to its capital-intensive regions. The demands major classes made on the state, and their influence over the state, varied correspondingly. The increasing scale of war and the knitting together of the European state system through commercial, military, and diplomatic interaction eventually gave the war-making advantage to those states that could field standing armies; states having access to a combination of large rural populations, capitalists, and relatively commercialized economies won out. They set the terms of war, and their form of state became the predominant one in Europe. Eventually European states converged on that form: the national state. "

Link to the book.

  • A 2019 article by Didac Queralt compares tax-financed and externally-financed wars from 1816 to argue that "globalization of capital markets in the nineteenth century undermined the association between war, state making, and political reform." Link. And a recent article by Roberto Bonfatti, Adam Brzezinski, K. Kıvanç Karaman, and Nuno Pedro G. Palma draws on "money stock and tax revenue data for European states from antiquity to the modern period" to argue that "monetary and fiscal capacity, and by extension, markets and states, have a symbiotic relationship." Link.
  • In the most recent edition of Herman Mark Schwartz's States Versus Markets, a helpful overview of debates on the Great Divergence: "Other ancient agrarian empires, like China and the Ottomans, were successful in monetizing their territory, taxing peasants, and subordinating both merchants and the landed aristocracy. But no European state succeeded in unifying Europe." Link.
  • "The emergence of a peculiarly British version of the fiscal-military state, complete with large armies and navies, industrious administrators, high taxes and huge debts, was not the inevitable result of the nation’s entry into European war but the unintended consequence of the political crisis which racked the British state after the Glorious Revolution of 1688." From John Brewer's classic Sinews of Power. Link. And a recent article by Benoît Maréchaux challenges Brewer's traditional narrative by "analyzing the business organisation and activities of Genoese naval entrepreneurs who managed galleys for the Spanish Empire in the late 16th and early 17th centuries." Link.
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November 7th, 2020

Gathering

WORLD HEALTH ORGANIZATION

With Covid-19 cases again rising around the globe, the World Health Organization (WHO) has faced increased scrutiny from governments on its handling of the early pandemic. Today, the organization plays a key role in defining global public health and coordinating responses to disease, but this mandate has shifted over time.

A 2011 paper by THEODORE BROWN, MARCOS CUETO, and ELIZABETH FEE investigates the origins of WHO's current global public health program and its partnerships with non-governmental institutions.

From the paper:

"In January 1992, the Executive Board of the World Health Assembly decided to appoint a 'working group' to recommend how WHO could be most effective in international health work in light of the 'global change' rapidly overtaking the world. The executive board may have been responding, in part, to the Children’s Vaccine Initiative, perceived within WHO as an attempted 'coup' by UNICEF, the World Bank, the UN Development Program, the Rockefeller Foundation, and several other players seeking to wrest control of vaccine development. The working group’s final report of May 1993 recommended that WHO—if it was to maintain leadership of the health sector—must overhaul its fragmented management of global, regional, and country programs, diminish the competition between regular and extrabudgetary programs, and, above all, increase the emphasis within WHO on global health issues and WHO’s coordinating role in that domain.

In 1998, the World Health Assembly reached outside the ranks of WHO for a new leader who could restore credibility to the organization and provide it with a new vision: Gro Harlem Brundtland, former prime minister of Norway and a physician and public health professional. She established a Commission on Macroeconomics and Health, chaired by economist Jeffrey Sachs of Harvard University and including former ministers of finance and officers from the World Bank, the International Monetary Fund, the World Trade Organization, and the UN Development Program, as well as public health leaders. The commission issued a report in December 2001, which argued that improving health in developing countries was essential to their economic development. The report identified a set of disease priorities that would require focused intervention. Brundtland also began to strengthen WHO’s financial position, largely by organizing 'global partnerships' and 'global funds' to bring together 'stakeholders'—private donors, governments, and bilateral and multilateral agencies—to concentrate on specific targets. A very significant player in these partnerships was the Bill & Melinda Gates Foundation, which committed more than $1.7 billion between 1998 and 2000 to an international program to prevent or eliminate diseases in the world’s poorest nations, mainly through vaccines and immunization programs.Within a few years, some 70 'global health partnerships' had been created."

Link to the piece.

  • Anne-Emanuelle Birn and Nikolai Kremenstov offer an account of the 1978 Alma-Ata conference, which was hosted by the Soviet Union and advocated for a WHO focus on primary health care. Link. David A. Tejada de Rivero recounts WHO's move to selective primary health care, relying on smaller, low-cost interventions. Link.
  • "Infectious diseases have gained ground as global health priorities, while non-communicable diseases and the broader issues of health systems development have been neglected." By Eeva Ollila. Link.
  • "Although the [World Bank's] role in generating and disseminating global health knowledge is important, its main advantage compared with other international institutions is its ability to mobilize financial resources." Jennifer Prah Ruger looks at the role of the World Bank, which began to increase its influence in global public health in the 1980s. Link.
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October 31st, 2020

Calling the Dogs

SUPREME COURT

The confirmation of Amy Coney Barrett to the Supreme Court has sparked ongoing debates over the institution's merits and relationship to American democracy. Among liberal democracies, the United States stands apart in the strength and autonomy of its judiciary. A 2010 book by STEPHEN SKOWRONEK demonstrates that this strength originates in political developments following the Civil War and Reconstruction.

From the text:

"The demise of the Radical Republican crusade and the resurgence of the Democrats in 1874 ushered in an extended period of intense electoral competition in American politics. The major parties organized the electorate into two highly mobilized and evenly divided political armies contending for the spoils of the federal government. The creation of more centralized, stable, and functionally specific institutional connections between state and society was impeded by the tenacity of this highly mobilized, highly competitive and locally oriented party democracy. The distinctive logic of institutional modernization in this context was bounded, on one side, by the fact that America had never developed a dynasty, a nobility, a standing army, or an insulated bureaucracy, and, on the other, by the fact that it had far outpaced all other states in the development of organizations of mass democracy. At the very time that parties were developing in Europe to challenge the hegemony of more traditional state institutions, state-building efforts in America aimed at the disintegration of party hegemony as it had developed over the course of a century.

It should come as no surprise that the power of the courts grew with the power of party machines. The judiciary's governing capacities were stretched to their limits in the late 19th century to fill the 'void in governance' left between party hegemony and rapid social change. As Congress tore down the Civil War institutional apparatus with one hand, it vastly expanded the jurisdiction of the federal courts with the other. The expansion of federal judicial power in the late nineteenth century was the natural response of the early American state to demands for national authority in the industrial age. By the 1890s, the Supreme Court had articulated principles of nationalism, substantive due process, and constitutional laissez-faire that extended and consolidated its traditional hold over governmental operations. But no matter how authoritative and aggressive the courts were, they could not hope to supervise the new economy or manage the kinds of conflicts to which it gave rise."

Link to the book.

  • "Beginning soon after the Civil War, 19th century common law understandings of the public obligations of associative communities in a confederated republic were replaced by a new emphasis on the constitutional rights of individual citizens in a nation-state—one insistently expanding its regulatory authority." William J. Novak challenges Skoronek's account, arguing that the American state was "stronger, larger, more durable, and more interventionist" than the literature suggests. Link.
  • Keith E. Whittington on executive interest in strengthening the Supreme Court: "The political incentives that lead presidents to choose either to challenge or to defer to the Court’s constitutional leadership have shaped both the substance of our constitutional understandings and practices and the place of the judiciary within the constitutional order." Link.
  • "I argue that the expansion of federal judicial power in the late-19th century is best understood as the sort of familiar partisan or programmatic entrenchment that we frequently associate with legislative delegations to executive or quasi-executive agencies." Howard Gillman argues that the strengthening of the courts was a "by-product of Republican Party efforts" to enact an agenda of economic nationalism. Link.
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October 24th, 2020

Counter Music

ELECTORAL STRATEGY

India's Bharatiya Janata Party (BJP), led by Prime Minister Narendra Modi, has dominated Indian politics in the past decade, upending the country's long-standing Congress Party rule at the national level and competing with regional and ethnic parties in state elections. While the BJP's Hindu nationalist ideology and economic agenda appeal to elite Hindu voters, the party has also secured votes from marginalized communities, using tactics that fall outside of well-documented clientelist models.

In a 2011 paper, political scientist TARIQ THACHIL examines the role of nonstate service provision in building lower-caste support for the BJP, which has been central to the party's electoral success.

From the text:

"The Bharatiya Janata Party's (BJP) efforts to woo lower castes were seen as particularly daunting, given that the Brahminical ideology it espouses has largely been understood as one appealing to Hindu elites and not to those subjected to the daily humiliations of caste practice or to those whose spiritual traditions have been denigrated as improper or even uncivilized. Further, the party supported policies that largely appealed to upper castes, whose economic interests and preferences were the diametrical opposite of those of most poor voters. However, recent electoral evidence suggests several instances of counterintuitive support for the BJP from two of India’s most marginalized communities: Dalits (former “untouchable” castes) and Adivasis (India’s indigenous tribal populations).

I analyze how the upper-caste BJP has relied on the services provided by its grassroots affiliates in the Hindu nationalist Sangh Parivar (family of organizations) to make unexpected inroads among lower-caste voters in India. I argue that even when used to win votes, service provision should not be narrowly classified as simply a variant of clientelist strategy. There can be no doubt that a major part of the appeal of services for poor communities is material, particularly in areas where basic health and educational services remain woefully inadequate, as they do still in many parts of India. Yet to be successful, service activists had to provide services over multiple electoral cycles without linking provision to the quid pro quo protocol that underpins clientelist exchange. Further, to provide services reliably, activists must literally embed themselves within communities. This embedded quality generated several nonmaterial mechanisms through which activists could affect political choices, including even those of many voters not directly benefiting from their services. Providers exploit their formally nonpartisan status and the high regard accruing from their dedicated provision to garner credibility and influence within their local communities."

Link to the paper.

  • "Vidya Bharati ran approximately 6,000 schools in the late 1980s, and by 2003 this number had reached a total of 19,741." In an earlier paper, Thachil argues that India's defunding of education facilitated the growth of private schools (called Vidya Bharati) run by Hindu nationalist group RSS, which played a key role in service provision to rural communities. Link.
  • Susan Stokes' definitive account of clientelism emphasizes the centrality of excludable benefits and qui pro quo exchange. Link. James C. Scott's earlier work defines patron-client relationships through their socioeconomic asymmetries. Link.
  • For more on the BJP's rise, see Pradeep Chhibber's 1999 book on the transformation of India's party system and Christophe Jaffrelot's 1996 book on the Hindu nationalist movement. Link, and link.
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October 17th, 2020

Change Point

HEALTHCARE & UNIONS

Explanations for the absence of a universal healthcare program in the United States tend to focus on the obstructive role of the American Medical Association, which, via an extensive lobbying campaign, prevented the passage of a national health insurance plan in 1945. Much less attention has been paid to the diverging and often contradictory interests of organized labor during this period.

In her 2006 book, JILL QUADAGNO considers the relationship between industrial policy and healthcare reform, analyzing how the labor movement came to unify behind private insurance providers by the late 1940s.

From the text:

"Although Taft-Hartley outlawed independent, union-run welfare funds through a provision that employers had to share equally in the administration of any pension or health plan, it had left unresolved the issue of whether employers had to bargain over fringe benefits. In 1948 the National Labor Relations Board ruled that fringe benefits were subject to collective bargaining, a decision that was upheld by the Supreme Court. Then in 1949 the Wage Stabilization Board, whose job was to keep inflation from wage increases under control, determined that fringe benefits were not inflationary. With many options for increasing membership closed off, union leaders made bargaining for fringe benefits a top priority. Fringe benefits became organized labor’s key strategy for recruiting and retaining members. Over half of strikes in 1949 and 70 percent in 1950 were over this issue.

Between 1946 and 1957 the number of workers covered by negotiated health insurance plans rose from 1 million to 12 million, plus an additional 20 million dependents. Close to 95 percent of industrial workers represented by the CIO were covered, compared to only 20 percent of skilled craft workers affiliated with the AFL. As for national health insurance, most industrial unionists now 'gave [it] only lip service.' Private health insurance 'had taken the heat off.' The expansion of private health benefits divided the working class into those who had health insurance and those who did not, and it transformed the way organized labor mobilized politically. Instead of requiring leaders who could inspire the troops to stand by the barricades, the labor movement needed leaders who could master complex financial instruments. The next battle would be won by policy experts with calculators, not charismatic militants who could issue a call to arms."

Link to the book.

  • "Labor unions, senior citizens, socialists, and other groups have certainly participated in campaigns to redesign the health care system, but the campaigns themselves have most often been initiated and run by elite organizations and individuals with little connection to a popular base of support." Beatrix Hoffman on "Health Care Reform and Social Movements in the United States." Link.
  • Maryaline Catillon, David M. Cutler, and Thomas E. Getzen analyze US healthcare provision since 1800. [Link'(https://voxeu.org/article/two-hundred-years-health-and-medical-care).
  • "By the early 20th century, Britain had a strong civil service and competing, programmatically oriented political parties. However, the contemporary United States lacked an established civil bureaucracy and was embroiled in the efforts of Progressive reformers to create regulatory agencies and policies free of the 'political corruption' of 19th century patronage democracy." Ann Shola Orloff and Theda Skocpol compare healthcare provision in the US and UK. Link. And a 2011 article by Howard Glennerster and Robert C. Lieberman argues that "there are more parallels and points of tangency between the two systems than are readily apparent." Link.
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October 10th, 2020

Supermoon

RENTAL HOUSING

With millions facing housing insecurity, the economic downturn has sparked concerns of a new housing crisis. Where the subprime mortgage crisis thrust the centrality of unsustainable housing financing practices in the global economy into view, the Covid-19 recession has brought increased attention to widespread housing insecurity among the roughly forty-three million renter households in the US. And these units, too, are increasingly financialized.

A 2017 article by geographer DESIREE FIELDS examines these trends with a focus on New York City:

"Rental housing today constitutes an important new node for financializing projects globally, most noticeably in the US single-family market, as well as Spain and Ireland. Private equity funds have taken advantage of sharp price drops, surging rental demand and constrained mortgage credit to buy distressed real estate assets, convert them into rental housing and roll out novel rent-backed financial instruments. Tenants' homes may be subject to financialization even though residents themselves do not have mortgages.

Whereas private equity firms only discovered single-family rental post-2008, they had established themselves in New York City’s rental market in the years leading up to the crisis. New York has been characterized as a testing ground for neoliberal urban restructuring, experimentation made possible by its 1970s fiscal crisis. Three decades later, the city's mid-2000s real estate boom, together with the incomplete dismantling of postwar-era state rent protections in the 1990s, created the conditions for another round of experimentation: private equity firms, in concert with local banks and landlords, set about transforming the city's rent-regulated housing into a novel asset class for capital seeking investment opportunities, subjecting tenants to harassment, displacement and unsafe living conditions to extract financial yield. This experiment represents an important step towards incorporating rental housing into global circuits of capital."

Link to the piece.

  • In another paper, Fields and co-authors Rajkumar Kohli and Alex Schafran trace the growth of single-family rental securitization in the US post-2008. Link.
  • Joe Beswick et al. document the rise of corporate landlords in post-crisis London's rental market. Link. Manuel B. Aalbers and Andrej Holm compare privatized social housing in Amsterdam and Berlin. Link. Michael Byrne examines asset-management companies and financialized real estate in Ireland. Link.
  • For more on the financialization of real estate, see Herman Mark Schwartz's work linking the US housing market and global capital flows. Link. See also: Saskia Sassen on mortgages, and David Harvey on capital and urbanization. Link, and link.
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October 3rd, 2020

Adoration of the Calf

PRESIDENTIALISM

Recent weeks have seen proliferating analyses of the constitutional infrastructure of the US, and speculation over its ability to hinder the behaviors of a disruptive incumbent. New concerns reflect longstanding apprehension over the stability of presidential regimes.

A 1990 article by sociologist JUAN JOSE LINZ offers insight into the structural limitations of presidential systems, and their political consequences.

"Presidential constitutions incorporate contradictory principles and assumptions. On the one hand, such systems set out to create a strong, stable executive with enough plebiscitarian legitimation to stand fast against the array of particular interests represented in the legislature. Interest group conflict then bids fair to manifest itself in areas other than the strictly political. On the other hand, presidential constitutions also reflect profound suspicion of the personalization of power. The fundamental contradiction between the desire for a strong and stable executive and the latent suspicion of that same presidential power affects political decision making, the style of leadership, the political practices, and the rhetoric of both presidents and their opponents in presidential systems. It introduces a dimension of conflict that cannot be explained wholly by socioeconomic, political, or ideological circumstances.

Among the oft-cited advantages of presidentialism is its provision for the stability of the executive. This feature is said to furnish a welcome contrast to the tenuousness of many parliamentary governments, with their frequent cabinet crises and changes of prime minister. But the superficial volatility of parliamentary systems obscures the continuity of parties in power, the enduring character of coalitions, and the way that party leaders and key ministers have of weathering cabinet crises without relinquishing their posts. Precisely by virtue of their surface instability, they often avoid deeper crises. An embattled president can use his powers in such a way that his opponents might not be willing to wait until the end of his term to oust him, but there are no constitutional ways-save impeachment or resignation under pressure-to replace him. There are, moreover, risks attached even to these entirely legal methods; the incumbent's supporters may feel cheated by them and rally behind him, thus exacerbating the crisis. The intense antagonisms underlying such crises cannot remain even partially concealed in the corridors and cloakrooms of the legislature. What in a parliamentary system would be a government crisis can become a full-blown regime crisis in a presidential system."

Link to the piece.

  • "Parliamentary constitutions in Europe emerged after a gradual period of negotiation between the monarch and the nobles, in which the parliament ultimately displaced the monarchy as the center of effective governance. In Latin America, by contrast, initial governments, whether revolutionary or not, emerged from a system of monarchy in which a single individual sat at the center of the political system." Jose Antonio Cheibub, Zachary Elkins and Tom Ginsburg with a comparative history of presidentialism in Latin America. Link. In another paper, the authors find that "the classic presidential-parliamentary distinction is not a systemic one." Link.
  • Thomas Sidelius examines the historical-institutional factors behind the adoption of semi-presidential systems in post-communist countries across Central and Eastern Europe. Link.
  • A 2012 article by Paul Chaisty, Nic Cheeseman and Timothy Power analyzes "how presidents build legislative coalitions in different regional contexts," focusing on the role of agenda power, budgetary authority, cabinet management, partisan powers, and informal institutions in shaping political relations in Latin America, sub-Saharan Africa and the former Soviet Union. Link.
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September 28th, 2020

An Evening, Chapter 32

THE SERVICE SECTOR

It is well known that the share of the global labor force working in services has risen precipitously over the past several decades, with nearly half of all workers around the globe now counted in the service sector. Scholarly work on the source and effects of this transition has risen in tandem, producing attempts to variously project visions of a "knowledge economy" in the global north and account for premature deindustrialization across the global south.

In a 1992 volume, Jean-Claude Delaunay and Jean Gadrey shed light on the history of services as a concept, with a chronological summary of three centuries of theories of service work. From the introduction:

"It is difficult to interpret correctly the major characteristics of what has been called the 'services revolution,' even though these characteristics are clearly visible. As economic activities, services have appeared fragile and unimportant, not suitable to ensure employment or economic prosperity. Yet services have fundamentally changed economic and social structures.

The notion of a post-industrial society was particularly popular in the late-1960s because it offered to intellectuals, who were tired of the technocratic power of enterprises and governments, the perspective of an intelligence-based society, which would finally do away with the notion of production for no other purpose than production itself. The services with which we are concerned today are not the same as the ones observed by Adam Smith. They differ in the way they are produced, in their results and in their diversity. Moreover, services, as we know them now, cannot be separated from goods; they are intimately interwoven with production and use. In the 18th and 19th centuries, economists discussed the role of services in society. Today, they study the service society."

Link to the book.

  • A 2013 article in the Cambridge Journal of Economics by Guarav Nayyar looks at the "black box" of services in India. Link. In a 1988 commentary paper also in the CJE, Deepak Nayyar examines the political economy of international trade in services. Link.
  • "Little is known about the size of the informal economy either across the service sector as a whole, or in particular service industries, either globally, in particular global regions, or nations." An overview article by Abbi Kedir, Colin Williams, and Levent Altinay on services and informality introduces a journal issue dedicated to the topic. Link.
  • In a 2008 paper, Fiona Tregenna examines the relationship between manufacturing and services in South Africa, "focussing on the ‘Hirschmanian’ channels through which sectoral growth can lead or support aggregate economic growth." Link. A 2009 paper by Tregenna looks at services as a concept in the history of Marxian economic thought. Link. (See also a 2018 paper by Tregenna on the question of sectoral analysis and definition more broadly. Link.)
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September 19th, 2020

Shape in the Green

SPECIAL ECONOMIC ZONES

Since the first export processing zone was established in Puerto Rico during the 1940s, special economic zones (SEZs) have proliferated to number 5,400 across 147 countries and employ more than 100 million workers. While the zones have been lauded for generating economic growth and allowing for infant industry development, recent work has documented their concerning impact on labor markets and domestic regulatory frameworks.

In a recently published book chapter, PATRICK NEVELING analyzes the history of SEZs throughout the postwar period:

"The Roosevelt administration injected significant sums of money into Puerto Rican infrastructure after 1934, in response to massive strikes and riots across all economic sectors on the island. From the 1940s onward, Puerto Rico set up three crucial institutions: a planning board that oversaw the implementation of industrial standards, a development bank that supplied new industries with capital, and a parastatal development corporation that managed new import-substitution industries. However, the import-substitution phase in Puerto Rico was to be short-lived. Five years after those factories had opened in 1942, Puerto Rico lured mainland manufacturers with tax holidays and financial subsidies to relocate their production. As the Puerto Rican export-oriented industrialization programme coincided with the beginning of US international development aid for pro-capitalist allies across the Third World, the Truman administration’s Point Four programme made extensive use of the island’s success story. Thousands of officials from postcolonial nations were flown in and other European colonial powers in the Caribbean were pushed to embrace similar programmes.

The World Bank and IMF made EPZs an integral part of the many structural adjustment programmes that postcolonial nations had to sign up to during the 80s debt crisis. Subsequently many other nations across the world would sign SAPs and be forced to privatize national industries and establish tripartite institutions of the Puerto Rican kind, with national standard boards that now oversee compliance with the International Organization for Standardization’s ISO norms series, national development banks, and development organizations with private-sector majorities on executive boards. Why did Western nations promote SEZ in developing nations even though heart-lands of textile and garment production in the United States, the United Kingdom, Germany, and elsewhere went into rapid decline with deindustrialization? Emerging multinational corporations in the textile and garment sector and later also in consumer electronics, automobile production, and so forth could use their increased and low-risk capital mobility to play off manufacturing locations against one another by forcing trade unions to accept wage cuts in exchange for relocation waivers."

Link to the piece.

  • "While EPZs have flourished as a vehicle for globalized production, as an employer strategy for low-cost exports, and as a governmental strategy to absorb surplus labour and attract FDI, they have failed to create decent jobs." A 2011 ILO report by Jamie K. McCallum offers a comparative review of labor market impacts of EPZs in China, Honduras, Nicaragua and South Africa. Link.
  • Nathalie Picarelli on the distributional impacts of export processing zones in Nicaragua: "the policy benefited the upper-tail the most." Link.
  • Another piece by Neveling analyzes "Free Trade Zones, Export Processing Zones, Special Economic Zones and Global Imperial Formations 200 BCE to 2015 CE. Link.
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