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41. China’s Changing COVID-19 Policies: Market and Public Health

Author:
Zhun Xu
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
After the outbreak of COVID-19 in early 2020, China took fast and decisive measures to successfully contain the spread of the virus within its borders. While the rest of the world saw huge human and social costs in the pandemic, the Chinese mainland for about two years was largely free from COVID. The zero-COVID model, however, met great challenges by early 2022. Despite some efforts to save the zero-COVID model, in November 2022, the Chinese government abruptly abandoned its signature COVID controls during the pandemic and switched to the opposite. This article reviews the evolution of the Chinese COVID policies and places the dramatic turns in the context of the changing Chinese political economy. The findings show that the shifting class interests and actions were an important force behind China’s retreat from zero- COVID.
Topic:
Markets, Political Economy, Public Health, and COVID-19
Political Geography:
China and Asia

42. Individualism and Political Stability

Author:
Minhyeon Jeong and Wongi Kim
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study analyzes the relationship between individualism as a cultural trait and political instability as a political characteristic. The intuition of the analysis is that cultural traits can determine political preferences of members of society. The study considers a specific political belief: “How much should the government protect individual property rights?” which extends to broader political beliefs such as profree market vs. pro-redistribution. According to numerous studies, individualistic cultures tend to support stronger protection of property rights than collectivist cultures. If the degree of protection of property rights is determined by the political choices of the members of society, it can be inferred that the political preferences that lead to strong protection of property rights reflect the individualistic cultures inherent in society members. That is, the political preferences of society members regarding the degree of property rights protection―or, in a broader sense, pro-free market versus pro-redistribution―are influenced by their cultural traits of individualism or collectivism. This study presents a politico-economic model that captures this intuition. The theoretical results are as follows. First, in societies where neither individualism nor collectivism dominates, political preferences for free-market or redistribution contrast more sharply than in societies where individualism or collectivism dominates. Second, this contrast in political preferences leads to political instability, such that societies where neither individualism nor collectivism dominates tend to be more politically unstable. This study provides empirical evidence supporting the theoretical results. This study identifies a relationship between cultural traits, political preferences and political instability, shedding light on the impact of culture on economic growth. In a nutshell, societies with highly heterogeneous cultural traits among their members are prone to polarization of political preferences, leading to political instability, which constrains economic growth in the long run.
Topic:
Political Economy, Political stability, Individualism, and Competition
Political Geography:
Global Focus

43. The political economy of Bitcoin as legal tender in El Salvador: Temporary bandages to permanent wounds?

Author:
Tobias Boos and Juan Grigera
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper provides a contextual analysis of the adoption of Bitcoin as legal tender in El Salvador. First, we outline the historical context and the political situation of the period 2019–24 that serve as context for the passage and implementation of the Bitcoin law (Decree No. 57). We identify the institutional and political context and the main areas of contention. Next, we delve into the macroeconomic context of El Salvador, outlining the fundamental features of its economy and highlighting how they relate to currency issues. Our analysis reveals that the adoption of Bitcoin cannot be understood without factoring in the mounting strains surrounding dollarization, remittances, and foreign debt. We conclude by putting forth a set of hypotheses regarding the potential dynamics and future of Bitcoin as legal tender in El Salvador that point beyond Bukele’s tactics.
Topic:
Debt, Political Economy, Economy, Bitcoin, Digital Currency, Remittances, Dollarization, and Nayib Bukele
Political Geography:
Central America and El Salvador

44. Addressing Loss and Damage through the Mosaic: A Simulation from the Delta Republic

Author:
Michael Franczak and Michael Weisberg
Publication Date:
10-2023
Content Type:
Policy Brief
Institution:
International Peace Institute (IPI)
Abstract:
The 2023 UN Climate Change Conference (COP28) takes place amid change and contestation in the global political economy. High prices for food and fuel are still a problem, particularly for countries that are net importers of both. Sovereign debt also remains a challenge due to rising borrowing costs and inaction from major creditors. Meanwhile, the adverse impacts of climate change are rising in scale and intensity and falling disproportionately on the countries least equipped to address them. In this context, parties to the 2022 Climate Change Conference (COP27) agreed to establish new funding arrangements for addressing loss and damage, including a new Loss and Damage Fund (LDF). The proposal for a fund and funding arrangements coordinated by a Loss and Damage Impact Council presents an opportunity to assemble the mosaic of solutions imagined at COP27. The problem is that we still lack a clear and shared picture of what it means to fully address loss and damage: what needs doing, who needs to do it, and how and when it needs to be done. This paper is an attempt to imagine a well-functioning and coordinated system—a mosaic—with functions, institutions, and results that deliver stability in the face of adverse climate change impacts. First, the paper presents the scenario of the fictional Delta Republic, which is suffering a slow-onset crisis compounded by repeated extreme events. It then identifies elements of an ambitious but practical response from the system we have, including actions, modalities, actors, and timing. The paper identifies gaps in the response and obstacles to the actions envisaged in the scenario, including but not limited to finance and financial arrangements. In its conclusion, the paper uses insights gained through the scenario to propose: (1) the purpose of the funding arrangements for extreme and slow-onset events, (2) an initial list of members for a Loss and Damage Impact Council, and (3) potential actions and interventions for the Loss and Damage Fund. Finally, the paper emphasizes the critical nature of a country- or demand-driven approach to the support provided by the LDF, including the use of accredited entities for implementation.
Topic:
Climate Change, Political Economy, Simulation, Loss and Damage (L&D), and Conference of the Parties (COP)
Political Geography:
Global Focus

45. Amérique latine. L'année politique 2022

Author:
Olivier Dabène
Publication Date:
01-2023
Content Type:
Special Report
Institution:
Centre d'Etudes et de Recherches Internationales (CERI)
Abstract:
Amérique latine. L’Année politique 2022 est une publication de l’Observatoire politique de l’Amérique latine et des Caraïbes (Opalc) du CERI-Sciences Po. Il prolonge la démarche du site www.sciencespo.fr/opalc en offrant des clés de compréhension d’un continent en proie à des transformations profondes.
Topic:
Democratization, Environment, Political Economy, Sovereignty, Regional Integration, Transnational Actors, and Social Policy
Political Geography:
Latin America

46. The New Wave of Defensive Trade Policy Measures in the European Union: Design, Structure, and Trade Effects

Author:
Fredrik Erixon, Oscar Guinea, Philipp Lamprecht, Vanika Sharma, and Renata Zilli
Publication Date:
05-2022
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This study undertakes a comprehensive review of proposed and adopted defensive trade policy instruments in the EU, with the purpose of better understanding their design, functioning, and implications. The study covers eight policy instruments at different stages of development. These are: Anti-Coercion Instrument (ACI), International Procurement Instrument (IPI), Carbon Border Adjustment Mechanism (CBAM), Foreign Subsidy Instrument (FSI), Corporate Sustainability Due Diligence (DD), Level Playing Field Provisions in the EU-UK Trade and Cooperation Agreement (LPF), Enforcement Regulation (ER), and the Deforestation Initiative (DI). It is understandable that the EU seeks both redressive and retaliatory measures in its trade policy. However, these measures would have the total effect of Europe producing more for itself and being less dependent on imports. This is a significant policy shift, because in their totality the defensive trade policies make the EU more inward-looking. This can lead to major negative consequences. An extensive distortion of trade and markets would reduce the gains from trade and prompt a reallocation of European resources. Notably, the EU is a larger supplier of goods and services than it is a buyer, and an inward-looking policy that leads to retaliation from EU’s trading partners can harm its exports and trade surplus. There are also potential strategic consequences that could follow, and their importance has increased considerable as a result of the Russian war against Ukraine. Under these measures, the EU could introduce new trade frictions with friends and allies, and with countries that the EU seeks closer cooperation with to provide for a safer geopolitical environment. For each of these defensive measures, the study takes an extensive look at the objectives of the instruments, their legality, proportionality, and subsidiarity, the working of the instruments and the division of labour between institutions, as well as their enforceability in conjunction with existing multilateral and bilateral rules affecting the EU. It also attempts to capture the impact and potential for retaliation for the EU and its partners as a result of the implementation of the instruments. The study highlights the areas where the instruments lack clarity, particularly in the implementation of the instrument, the division of labour between the EU and EU member states, and the compliance of the instruments with WTO rules and bilateral FTA provisions. The instruments share some general characteristics. Many of the instruments have been created as retaliatory measures against coercion and unfair trade practices by partner countries. Very often, the partner countries most affected by the instruments are also the same. The United States, China, Russia, the UK, and Turkey are likely to be on the receiving end of the instruments due to the significant volumes of trade and economic interdependence with the EU, but also because they either do not follow the same trade rules as the EU, or the EU wants to maintain with them the current level of competitiveness. Most instruments also use restrictions to the EU market as the main policy lever. The objective is not just about creating an equal playing field but also ensuring that the rest of the world follows EU rules. Particularly, the EU aims at regulating non-EU companies directly and unilaterally through EU policies, which increases the risk of retaliation against the EU. At the same time, there are also important areas of departure in the specifics of each instrument, as illustrated by the varying objectives, measures, compatibility with international obligation, affected sectors, and whether the measures apply automatically or at the discretion of the EU.
Topic:
Defense Policy, Political Economy, European Union, and Trade
Political Geography:
Europe

47. Processing Trade and Global Supply Chains: Towards a Resilient “GVC 2.0” Approach

Author:
Lucian Cernat
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
In the current global context marked by economic fragility, growing uncertainty and geopolitical conflicts, ensuring the smooth functioning of global supply chains becomes more important than ever. Supply shortages, higher freight costs, higher commodity prices and strong demand increase will trigger inflationary pressures for all economic sectors dependent on global value chains (GVCs). As part of global efforts to enhance the resilience of GVCs, this paper makes the case for a broader discussion about the untapped potential of processing trade, a relatively unknown trade facilitation option available in many countries around the world. Processing trade has been credited with stimulating China’s participation in GVCs, in combination with foreign direct investment (FDI) attraction and industrial upgrading. However, processing trade is not just a Chinese phenomenon. In the EU, significant trade flows (over 200 billion euros in 2021 alone) benefitted from a double-digit trade cost reduction, thanks to the EU processing trade provisions. Different types of processing trade arrangements exist in over 70 countries worldwide (including in the EU), as a way to facilitate the integration of developing countries in global production chains. However, these unilateral schemes have different requirements and co-exist without any attempt to facilitate their inter-operability along complex global supply chains. This paper argues that there is a pressing need for a global reflection on how best to promote a better integration between these national processing trade schemes. One option is to promote a “GVC 2.0” approach that offers key recommendations and best practices for processing trade along GVCs. Such a coordinated “GVC 2.0” trade facilitation initiative would not only make GVCs more resilient for countries that depend on global sourcing for their critical economic activities, but it will also reduce the inflationary effect generated by the unnecessary trade costs associated with GVC activities.
Topic:
Political Economy, European Union, Trade, Resilience, and Supply Chains
Political Geography:
Europe, Asia, and Global Focus

48. Policy Experimentation in China: The Political Economy of Policy Learning

Author:
Shaoda Wang and David Y. Yang
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Determining what policies to implement and how to implement them is an essential government task. Policy learning is challenging, as policy effectiveness often hinges on the nature of the policy, its implementation, the degree that it is tailored to local conditions, and the efforts and incentives of local politicians to make the policy work.
Topic:
Political Economy, Politics, Policy Implementation, and Economic Policy
Political Geography:
China and Asia

49. No Strings Attached: Corporate Welfare, State Intervention, and the Issue of Conditionality

Author:
Fabio Bulfone, Timur Ergen, and Manolis Kalaitzake
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
This paper contributes to Comparative Political Economy (CPE), developing an analytical concept of corporate welfare. Corporate welfare — the transfer of public funds and benefits to corporate actors with weak or no conditionality — is a prominent form of state-business relations that CPE scholarship regularly overlooks and misinterprets. Such transfers should be understood as a structural privilege of business in a globalized post-Fordist capitalism, and an increasingly common strategy through which states attempt to steward national economic dynamism within a highly constrained range of policy options. However, with- out a well-developed concept of corporate welfare – premised upon the key criterion of conditionality – studies that identify a “return” of the state in industrial planning misrepre- sent these transfers to business as a reassertion of state influence and control, rather than a reflection of state weakness and subordination. The paper provides the analytical building blocks to properly conceptualize transfers to business, works out the core challenges for em- pirical research, and provides empirical illustrations of this burgeoning phenomenon from the fields of unconventional monetary policy, privatization, and urban political economy.
Topic:
Industrial Policy, Political Economy, Privatization, Monetary Policy, Welfare, and Public-Private Partnership
Political Geography:
Global Focus

50. Statesmanship for Political Economy in the National Interest

Author:
Nathan Hitchens
Publication Date:
01-2022
Content Type:
Journal Article
Journal:
Humanitas
Institution:
The Center for the Study of Statesmanship, Catholic University
Abstract:
As we emerge unevenly from the ravages of a global pandemic, the new world upon us is summoning statesmanship for political economy in the national interest. 2020 was apocalyptic in the true sense of the word. The depth of our dependence on Chinese manufactures for everything from face masks, respirators, ventilators, to basic pharmaceuticals was revelatory. This emergency unveiled the gaunt figure of American industry. Yet, our industrial thinning-out was there for all to see during America’s decades-long, neoliberal diet of globalized supply chains, offshored manufacturing, and international trade based on economic comparative advantage and specialization. An optimist might object to this dire picture and point to Operation Warp Speed, the massive effort of industrial policy in pharmaceuticals and drug development, which produced vaccine formulae in record time by relying on a World War II model of public-private sector mobilization and on powers of the federal government in the 1950 Defense Production Act.
Topic:
Security, Political Economy, Governance, and Leadership
Political Geography:
North America and United States of America