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1921. Is There a Case for National Development Banks in Africa? Conceptual Rationale and Empirical Evidence

Author:
Léonce Ndikumana, Karmen Naidoo, and Francisco Perez
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
National development banks remain an important part of modern financial systems in developed as well as developing countries. The attention to the role of national development banks was reinvigorated in the aftermath of the 2008 global financial crisis, and their potential role in promoting access to finance and providing counter-cyclical financing is better appreciated today than in the structural adjustment era of the 1980s and 1990s. In this context, this study examines the landscape of national development banks in Africa and provides empirical evidence of their role in complementing commercial banks to meet the financing needs of the real sector using bank-level data from selected countries and the BankFocus database. The empirical results show that while national development banks do not lend more relative to commercial banks, they tend to focus more on medium-term and long-term lending as prescribed by their mandate. Interestingly, medium-term and long-term lending is associated with lower non-performing loan ratios as well as higher returns on assets. The results are similar for public banks. The evidence suggests that empowering national development banks with enhanced lending capacity and operational autonomy would significantly help alleviate the shortage of medium-term and long-term credit in African economies. The paper includes suggested avenues for further research.
Topic:
Economy, Banks, and Financial Systems
Political Geography:
Africa

1922. Notes on Covid-19, Potential GDP, and Hysteresis

Author:
Thomas Michi
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This note provides a model framework for thinking about stabilization policies in the presence of hysteresis after a negative shock like the Covid-19 pandemic. Headline measures of so-called potential GDP published by the Congressional Budget Office represent only one of many possible inflation-neutral trajectories for output. The term potential GDP is misleading since potential implies a unique limit on output. It is much more accurate to consider a range of possible trajectories or multiple equilibria. Repairing the damages from a shock will require overshooting the inflation target and running the economy above its inflation-neutral equilibrium in order to restore the status quo ante level of output and employment. The model assumes constant trend growth so that path dependence takes the form of pure output-level effects.
Topic:
Political Economy, GDP, COVID-19, and Financial Stability
Political Geography:
Global Focus

1923. The Public Banking Movement in the United States: Networks, Agenda, Initiatives, and Challenges

Author:
Esra Ugurlu and Gerald Epstein
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
In this paper, we analyze the contemporary public banking initiatives in the United States. We first provide a brief historical account of public-oriented banking in the United States. We then map out the central nodes in the contemporary public banking advocacy networks. Based on an online questionnaire and semi-structured interviews we held with public banking organizers and experts across the country, we provide an overview of the achievements of this growing movement, describe the central socio-economic issues they organize around, and examine the challenges they face. We demonstrate that the interest in public banking is a reaction to a number of socio-economic and ecological issues the United States faces, including the infrastructure crisis, ecological crisis, financial exclusion, and problems stemming from the management of state and local government resources. We argue that public banking can be an important tool in addressing these problems and suggest how the federal government, through the Treasury and the Federal Reserve, can support these initiatives.
Topic:
Political Economy, Banks, Advocacy, and Public Banking
Political Geography:
North America and United States of America

1924. Did Alcohol Policy Really Cause the Postsocialist Mortality Crisis? Revisiting the Rebound and Affordability Hypotheses

Author:
Aytalina Azarova, Gabor Scheiring, Michael Ash, and Lawrence King
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper reexamines the argument that alcohol policies were the major factor behind the mortality crisis in postsocialist Russia. We show that the correlation between the Gorbachev anti-alcohol campaign (rebound hypothesis), alcohol prices in the 1990s (affordability hypothesis), and mortality reported in previous analyses is not robust to splitting oblasts into Far- East and the rest of Russia. Our analysis conducted on a sample of 534 towns in the European part of Russia also finds no robust evidence supporting the two hypotheses. In contrast, findings linking privatization to mortality are robust to controlling for the anti-alcohol campaign and the affordability of alcohol.
Topic:
Health, Political Economy, Mortality, Alcohol, and Affordability
Political Geography:
Russia and Soviet Union

1925. Deindustrialization and the Postsocialist Mortality Crisis

Author:
Gabor Scheiring, Aytalina Azarova, Darja Irdam, Katarzyna Doniec, and Martin McKee
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
An unprecedented mortality crisis struck Eastern Europe during the transition from socialism to capitalism. Working-class men without a college degree suffered the most. Some argue that economic dislocation caused stress and despair, leading to adverse health behavior and ill health (dislocation-despair approach). Others suggest that hazardous drinking inherited as part of a dysfunctional working-class culture and populist alcohol policy were the key determinants (supply-culture approach). We enter this debate by performing the first quantitative analysis of the association between economic dislocation in the form of industrial employment decline and mortality in postsocialist Eastern Europe. We rely on a novel multilevel dataset, fitting survival and panel models covering 52 towns and 42,800 people in 1989-1995 in Hungary and 514 medium-sized towns in the European part of Russia. The results show that deindustrialization was significantly associated with male mortality in both countries directly and indirectly mediated by adverse health behavior as a dysfunctional coping strategy. Both countries experienced severe deindustrialization, but social and economic policies seem to have offset Hungary’s more immense industrial employment loss. The policy implication is that social and economic policies addressing the underlying causes of stress and despair can improve health.
Topic:
Employment, Capitalism, Mortality, Alcohol, Socialism, and Deindustrialization
Political Geography:
Europe, Eastern Europe, and Hungary

1926. Predicting Chinese State-Owned Enterprise Policy Incidence

Author:
Sara Hsu
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
In this exploratory research, we examine the effect of economic and noneconomic indicators on the creation of Chinese state-owned enterprise policies. Using a VAR model, we find indicators that explain state-owned enterprise policy creation variance, which means that we can explain, to some extent, the incidence of state-owned enterprise policies. This reduces economic policy uncertainty, thereby having the potential to increase economic activity and reduce costs.
Topic:
Political Economy, Economy, and State-Owned Enterprises
Political Geography:
China and Asia

1927. The Flimsy Foundations of Neoliberal Macroeconomics: David Gordon on Saving, Investment, and the Natural Rate of Unemployment

Author:
Robert Pollin
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
David Gordon was, at once, a highly creative economist with an enormous range of interests, while also uncompromising in maintaining rigorous research standards. He was focused equally on hard-core academic research and pressing policy issues. He was also openly committed to the political left, with this commitment animating all his work. One distinctive feature of Gordon’s work was his keenness to dive into the most important topics engaging mainstream economists and to inject explicitly left political economy perspectives into these mainstream debates. This paper focuses on two important examples of Gordon’s contributions that examine front-and-center mainstream macroeconomics questions. The first is the relationship between aggregate saving and investment. The second is the development of the concept of the ‘natural rate of unemployment.’ The evolution of mainstream research on these two questions played a critical role in overturning what had been, over the first two post-World War II decades, a prevailing Keynesian/social democratic consensus, at both the levels of analytic economics as well as economic policy. As the paper reviews, Gordon challenges the analytic findings and policy implications of these perspectives at their core. Gordon’s own basic premises and results are straightforward. He argues that, in fact, investment decisions, not saving rates, are the main driver of economic activity in capitalist economies and that operating capitalist economies at something akin to genuine full employment—i.e. in the range of 2 – 3 percent official unemployment—is a realistic goal. As such, these papers by Gordon contribute significantly toward envisioning a post-neoliberal social structure of accumulation that is committed to the egalitarian principles that were central to Gordon’s life work.
Topic:
Political Economy, Neoliberalism, Investment, Macroeconomics, Unemployment, Saving, and David Gordon
Political Geography:
Global Focus

1928. Financialization and Militarization: An Empirical Investigation

Author:
Pelin Akcagun and Adem Elveren
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Based on Arrighi (1994), we empirically investigate whether financialization and militarization are mutually reinforcing phenomena in the U.S. during the post-WW II period. Military spending during the 1950s and 1960s in the U.S., along with other external stimuli, such as a rising sales effort and expansion in finance, insurance, and real estate, counteracted the stagnation of the monopolistic stage of capitalism. Monopoly capital was transformed into finance monopoly capital as the intensity of financial capital increased during the late 1970s in response to stagnation. Considering alternative financialization variables commonly used in the literature and the profit rate in the financial sector, and using several parametric and non-parametric methods, we found a significant relationship between financialization and militarization in the U.S. for 1949-2019. The findings show that the decline in the profit rates lead to a decline in military expenditure. The overall results suggest that the rise in financialization is parallel to the decline in the profit rates, leading to larger military expenditure in total, but with relatively smaller share in GDP.
Topic:
Political Economy, Military Spending, Financialisation, and Militarization
Political Geography:
United States of America

1929. Predicting Chinese Banking Policy Incidence

Author:
Sara Hsu
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
In this exploratory research, we examine the effect of economic and noneconomic indicators on the creation of Chinese Banking and Insurance Regulatory Commission policies using a VAR model. We find that CBIRC policies are predicted by State Council construction policies and policies set by the State Administration of Foreign Exchange. This indicates that the CBIRC is inward-looking, observing what other regulators are doing rather than responding to changes in the real and financial economy. This may be a product of market distortions due to China’s unique blend of state-oriented and market-based institutions.
Topic:
Political Economy, Regulation, and Banking
Political Geography:
China and Asia

1930. Financialization, Deindustrialization, and Instability in Latin America

Author:
Esteban Perez-Caldentey and Matias Vernengo
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The paper analyzes the relation between premature deindustrialization in Latin America with what is termed premature financialization. Premature financialization is defined as a turn to finance, organized as an industrial concern, which is a vehicle for accumulation before the process of industrialization has reached maturity. This contrasts with developed countries where financialization occurs after an advanced stage of economic and social development is reached, and where the growth of the financial sector, beyond a certain threshold, can be detrimental to economic activity. The paper examines the consequences of premature financialization for investment, growth, and financial stability.
Topic:
Economic Growth, Investment, Financial Stability, Financialisation, Deindustrialization, and Instability
Political Geography:
Latin America

1931. Mapping Religion, Space, and Economic Outcomes in Indian Cities

Author:
Sripad Motiram and Vamsi Valuabharanam
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
We deploy a socio-spatial approach and use a spatially representative survey that we conducted in Hyderabad and Mumbai to analyze the relation between city space and religion. After documenting the relative status of religious groups in urban India and different types of cities using secondary databases, we identify poor-ghettos and elite-enclaves in Hyderabad and Mumbai. In both cities, ghettos have a high proportion of Muslims, while enclaves are dominated by non-Muslim inhabitants. Ghettoization of Muslims is far more pronounced in Hyderabad than in Mumbai. A key finding on the relation between city space and religion is that compared to segregated neighborhoods, mixed (“grayer”) neighborhoods produce better economic outcomes like lower poverty. We argue that while Indian cities are becoming less integrated along religious lines over the last 3-4 decades, this process is far from complete, and needs to be reversed.
Topic:
Economics, Religion, Space, and Cities
Political Geography:
South Asia and India

1932. Stranded Fossil-Fuel Assets Translate into Major Losses for Investors in Advanced Economies

Author:
Gregor Semieniuk, Philip B. Holden, Jean-Francois Mercure, Pablo Salas, Hector Pollitt, Katharine Jobson, Pim Vercoulen, Unnada Chewpreecha, Neil Edwards, and Jorge E Viñuales
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The distribution of ownership of transition risk associated with stranded fossil-fuel assets remains poorly understood. We compute global stranded assets of US$1.4 trillion in the upstream oil and gas sector as expectations change to be consistent with stated climate policies. We trace the equity risk ownership from these 43,439 assets through a global equity network of 1.8 million companies to their ultimate owners. Most of the market risk falls on private investors, overwhelmingly in OECD countries, including substantial exposure through pension funds. Financial markets are exposed to a US$690 billion correction, comparable to the mispricing that triggered the 2007-08 crisis. The ownership distribution also shows the large stake OECD investors have in the continued operation of fossil-fuel facilities incompatible with climate change mitigation goals.
Topic:
Climate Change, Political Economy, Economy, Investment, and Fossil Fuels
Political Geography:
Global Focus

1933. Sectarianism and Sectarianisation in Iraq: Ambassadorial Appointments as an Exemplar

Author:
Dlawer Ala'Aldeen
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Middle East Research Institute (MERI)
Abstract:
Sectarianisation of Iraq’s governance has already become a powerful driver of conflict. Left unaddressed, it can become irreversible. Here, ambassadorial appointments are used to underline the depth of sectarian divisions within the legislative and executive institutions, and offer ways forward.
Topic:
Governance, Sectarianism, Leadership, and Conflict
Political Geography:
Iraq and Middle East

1934. Work and Social Reproduction in Rural India: Lessons from Time-Use Data

Author:
Smita Ramnarain, Sirisha Naidu, Anupama Uppal, and Avanti Mukherjee
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Even as the literature on work in the Global South acknowledges the importance of forms of non-waged work, it has not sufficiently incorporated consideration of the labor of social reproduction. We propose understanding work through four conceptual dyads: waged productive labor, non-waged productive labor, waged reproductive labor, and non-waged reproductive labor. Through an in-depth description of three specific cases from a Time Use Survey we conducted in rural Punjab, India, we argue not only that all four dyads are required to encompass the world of work, but that this more expansive conceptualization can help us produce richer analyses of the intersections of class, caste, and gender.
Topic:
Political Economy, Labor Issues, Class, Caste, Gender, and Social Reproduction
Political Geography:
South Asia and India

1935. National Policy Space: Reframing the Political Economy of Globalization and Its Implications for National Sovereignty and Democracy

Author:
Thomas I. Palley
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper critiques the trilemma framing of the political economy of globalization, and offers an alternative framing rooted in the construct of national policy space. Globalization causes changes in policy space that have drop-down implications for national sovereignty and democratic politics. Globalization involves choices regarding the “degree,” “type,” and “dimensions” of international economic integration. Contrary to the trilemma, the multi-faceted nature of the choices means there are no inevitable implications for sovereignty or democracy. Globalization is an intrinsically political project. To the extent it is now driving a nationalistic anti-democratic turn in politics, responsibility lies with political elites.
Topic:
Globalization, Political Economy, Sovereignty, and Democracy
Political Geography:
Global Focus

1936. Oil and Capital Flight: The Case of Angola

Author:
Nicholas Shaxson
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Angola’s “paradox of plenty,” as a country with rich resources and poor development outcomes, makes it ideal for the study of capital flight. With the fifth largest economy in sub-Saharan Africa, the country is known not for what it has done with its vast natural resource endowment, but what it has failed to do with it. The country features prominently in the literature on the ‘resource curse,' as the discovery and exploitation of petroleum has suffocated the development of other economic sectors while profiting the national elite and its foreign partners. This has been accomplished notably through establishment of a powerful parastatal to manage oil, Sonangol, which observers have described as “an island of competence” yet has been instrumental to wealth extraction. Angola’s oil and diamonds also played a critical role in motivating and financing the country’s prolonged and devastating civil war.
Topic:
Development, Oil, Political Economy, Natural Resources, Conflict, and Capital Flight
Political Geography:
Africa and Angola

1937. Post-American Moments in Global Financial Governance in the New Millennium

Author:
Ilene Grabel
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
It is difficult to find much to celebrate about the current conjuncture, marked as it is by deeply destructive incoherence. The best that can be said is that we are in an interregnum. But I suggest that today’s incoherence also includes productive and even transformative moments. I argue that incoherence in global financial governance should be understood as productive in several respects. It is creating and widening alternative spaces in which some of the values, practices, tools, objectives, and goals associated with embedded liberalism can be rearticulated in a world in which there is no “order,” American-led or otherwise. The silver lining of incoherence is that it creates space for experimentation and innovation unconstrained by an overarching “ism.” Incoherence is creating exits or leakages from noxious national and global policy environments, rendering it less poisonous than it would be in the absence of ideational aperture and contestation, competing policies, institutions, networks, and poles of power. The abdication by the US of its traditional role of global coordination and discipline, as exerted under the post-war embedded liberal or the neoliberal American-led orders, is creating opportunities for more permissive and varied “reembededness” and diverse forms of economic integration. The emerging regime reflects neither your grandmother’s American-led order 1.0 or 2.0. In this morbid post-American interregnum there is no singular “ism” or “alternative order,” a fact that I do not mourn.
Topic:
Governance, Finance, Global Political Economy, and Neoliberalism
Political Geography:
Global Focus and United States of America

1938. Drug Policy and City Government

Author:
Global Commission On Drug Policy
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Global Commission On Drug Policy
Abstract:
As cities and urban settlements grow and are home to increasing numbers of people, the problems related to drug policies are becoming more visible and dire in cities around the world. Mayors and municipal councilors, the closest policymakers to their constituencies, increasingly have to respond to the presence of the illegal drug market and to the negative outcomes of national repressive drug policies. While they are not mandated with drug control policies, cities have been able to provide the most innovative and protective drug policies, policies that have inspired the adoption by the national institutions of policies such as harm reduction, effective prevention and peaceful law-enforcement. The members of the Global Commission on Drug Policy, many having been mayors and municipal councilors, provide their analysis and recommendations on drug policy at the municipal level, and how pragmatic reforms on the ground can effectively address a top-down policy such as drug control.
Topic:
Law Enforcement, Reform, Public Policy, Drugs, Cities, and Harm Reduction
Political Geography:
Global Focus

1939. The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power

Author:
Joseph Baines and Sandy Brian Hager
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
The COVID-19 pandemic has amplified longstanding concerns about mounting levels of corporate debt in the United States. This article places the current conjuncture in its historical context, analysing corporate indebtedness against the backdrop of increasing corporate concentration. Theorising leverage as a form of power, we find that the leverage of large non-financial firms increased in recent decades, while their debt servicing burdens decreased. At the same time, smaller firms experienced sharp deleveraging alongside increasing debt servicing costs. Crucially, smaller corporations also registered severe losses over this period, while large corporations remained profitable, and in fact doubled their net profit margins from the early-1990s to the present. Taken together, the results from our mapping exercise uncover a series of dramatic changes in the financial fortunes of large versus smaller firms in recent decades, a phenomenon we refer to as the great debt divergence. We explain this divergence with reference to the dynamics of power in the era of µshareholder capitalism, and we argue that the US political economy in the post-COVID 19 world is likely to resemble the pre-COVID 19 one, only with more market turmoil, more concentration, more inequality, and even less investment.
Topic:
Debt, COVID-19, Corporations, Power, Leverage, and Shareholder Value
Political Geography:
North America and United States of America

1940. Fiscal Policy as Credit Policy: Reassessing the Fiscal Spending vs. Private Debt Trade-Off

Author:
Etienne Lepers
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
This paper revisits the dominant narrative that explains the substantial household credit boom as a substitute to fiscal redistribution, i.e. the “substitution” hypothesis, according to which fiscally-constrained governments substituted public safety nets by private credit. I argue instead that the credit and welfare state constituencies may not necessarily be the same and that far from fiscally constrained, governments have been actively using “fiscal policy as credit policy”. I provide two sets of empirical evidence for such account: First, I find a positive within-country relationship between household debt and fiscal spending. Second, compiling a unique dataset of 550 fiscal subsidies adjustments in 50 countries since 1980, I show that fiscal and tax subsidies have been instrumental in driving household credit. These dynamics have distributional and financial stability implications as such tax subsidies typically favour higher income households and household debt booms have proven more dangerous than corporate ones.
Topic:
Debt, Financial Crisis, Welfare, Financialisation, Subsidies, Household, and Public Finance
Political Geography:
Global Focus