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82. Iran Sanctions: The View From Iran
- Publication Date:
- 01-2020
- Content Type:
- Special Report
- Institution:
- World Politics Review
- Abstract:
- The ballistic missiles that Iran fired at two military bases in Iraq housing American troops could only be the start of Tehran’s retaliation. Many observers worry that more blowback could come in the form of Iran’s favored tactic of asymmetric warfare waged through its proxies, such as Hezbollah in Lebanon and pro-Iranian militias in Iraq. This escalation did not begin with the killing of Soleimani, but in May 2018, when Trump unilaterally took the United States out of the international agreement curbing Iran’s nuclear program, known as the JCPOA, and reimposed crippling sanctions on Iran’s economy. What impact has the U.S. exit from the nuclear deal had in Iran? How has it changed the Iranian regime’s foreign policy calculations? And how have Iranian citizens reacted to Trump’s campaign of “maximum pressure” and more sanctions? This WPR report provides an essential view of events from Iran.
- Topic:
- Nuclear Weapons, Sanctions, Military Affairs, Nuclear Power, and Denuclearization
- Political Geography:
- United States, Iraq, and Iran
83. Artificial Intelligence Is Already Transforming the Alliance: It’s Time for NATO and the EU to Catch Up
- Author:
- Kulani Abendroth-Dias and Carolin Kiefer
- Publication Date:
- 05-2020
- Content Type:
- Policy Brief
- Institution:
- Women In International Security (WIIS)
- Abstract:
- For delivery within the European Union, Amazon now sells facial recognition cameras for door locks, webcams, home security systems, and office attendance driven by artificial intelligence (AI) and machine learning (ML)—powerful tools with civilian and military purposes. Germany, France, Spain, Denmark and Romania have tested and often deployed AI and ML facial recognition tools, many of which were developed in the United States and China, for predictive policing and border control. AI and ML systems aid in contact tracing and knowledge sharing to contain the COVID-19 virus. However, the civilian and military strategies that drive use of AI and ML for the collection and use of data diverge across the member states of the European Union and the North Atlantic Treaty Organization (NATO).
- Topic:
- NATO, Science and Technology, Artificial Intelligence, and COVID-19
- Political Geography:
- United States, China, and Europe
84. Stronger Together: NATO’s Evolving Approach toward China
- Author:
- Naďa Kovalčíková and Gabrielle Tarin
- Publication Date:
- 05-2020
- Content Type:
- Policy Brief
- Institution:
- Women In International Security (WIIS)
- Abstract:
- The rise of China poses a strategic challenge for the North Atlantic Treaty Organization (NATO). The Alliance needs a comprehensive political, economic, and security strategy to deal with China’s growing global power. The more assertive a role China plays in world affairs, the more it could undercut NATO’s cohesion and military advantages by translating commercial inroads in Europe into political influence, investing in strategically important sectors, and achieving major breakthroughs in advanced digital technologies.
- Topic:
- NATO, Science and Technology, International Security, Digital Cooperation, and Digital Policy
- Political Geography:
- United States, China, and Europe
85. Spring 2020 edition of Strategic Visions
- Author:
- Alan McPherson
- Publication Date:
- 03-2020
- Content Type:
- Journal Article
- Journal:
- Strategic Visions
- Institution:
- Center for the Study of Force and Diplomacy, Temple University
- Abstract:
- Contents News from the Director Spring 2020 Colloquium …………………2 Spring 2020 Prizes……………………......3 Diplomatic History ……………………….3 Non-Resident Fellow, 2020-2021………...4 Funding the Immerman Fund……………..4 Thanks to the Davis Fellow ………………4 News from the Community …………………... 5 Note from the Davis Fellow ………………….. 9 Spring 2020 Interviews Timothy Sayle ……………………….…..10 Sarah Snyder ………………………….…13 Book Reviews Lincoln, Seward, and US Foreign Relations in the Civil War Review by Alexandre F. Caillot …15 How to Hide an Empire: A History of the Greater United States Review by Graydon Dennison …..17 Enduring Alliance: A History of NATO and the Postwar Global Order Review by Stanley Schwartz ……19
- Topic:
- International Relations, Foreign Policy, NATO, Empire, and Diplomatic History
- Political Geography:
- United States, Europe, and Global Focus
86. Work for Others, not Yourself: Globalization, Protectionism and Europe’s Quest for Strategic Autonomy
- Author:
- Fredrik Erixon
- Publication Date:
- 10-2020
- Content Type:
- Policy Brief
- Institution:
- European Centre for International Political Economy (ECIPE)
- Abstract:
- Protectionism and mercantilism are yet again at the centre of global economic policy. “America First” is the guiding ethos in a good part of US international economic policy. Beijing is taking a larger stake in China’s economy and hand out privileges to domestic firms. Europe is increasingly occupied by achieving “strategic autonomy” and to create European champions at the expense of competition. Old and disreputed economic doctrines are getting a new lease on life. Behind this new orientation in international economic policy stands the old idea that a strong economy is an economy not dependent on others. Human prosperity – our story of rags to riches – tells a very different story. Prosperity is generated when people collaborate and improve our collective intelligence. Open economies are much better at creating wealth because they operate by the principle that people should work for others, not themselves. They specialize – and in the process, they get far more dependent on others. Dependency is a factor of success; economic sovereignty is a sure way of depriving people of opportunity and prosperity.
- Topic:
- International Political Economy, International Trade and Finance, Global Markets, and Strategic Competition
- Political Geography:
- United States, China, and Europe
87. The Tragedy of International Organizations in a World Order in Turmoil
- Author:
- Jean-Jacques Hallaert
- Publication Date:
- 07-2020
- Content Type:
- Policy Brief
- Institution:
- European Centre for International Political Economy (ECIPE)
- Abstract:
- China’s rise and the U.S. response to the perceived threat it represents to its predominance jeopardize the world order and affect international institutions. The paralysis of the WTO and the U.S. withdrawal from the WHO are the most visible examples, but not the only ones. This article presents the case of the International Monetary Fund. Quotas are the cornerstone of IMF governance. They determine each member’s contribution to the institution’s resources and their voting power. As the world evolves, the quota distribution needs to be adjusted. Adjustments in quota shares and thus voting powers have always been politically difficult. However, they were possible. In the early 1990s, members agreed to an increase in the representation of Japan. In the 2000s, they agreed to increase substantially the voting power of emerging economies. In contrast, the 15th General Review of Quotas concluded early 2020, failed to increase and realign quotas. The proximate cause for this was the opposition of the United States to a change in quotas. This paper argues that the U.S. decision was in large part motivated to prevent an increased influence of China. The failure to increase and realign voting powers may have long-lasting consequences. In the absence of a quota increase, the IMF will need to continue to rely on borrowed resources to avoid a drop in its lending capacity. This extension of the “temporary” recourse to borrowed resources undermines the governance of the Fund as voting powers (which are not linked to borrowed resources but only to quotas) are disconnected from member’s total contributions to the Fund and to their economic weight. This may trigger a new legitimacy crisis and provide incentives for countries like China to support the development of new and competing institutions which would better represent their interests and economic weight. Such a development would undermine the complex and fragile international financial architecture.
- Topic:
- International Organization, International Political Economy, Governance, IMF, and WTO
- Political Geography:
- United States, China, and Global Focus
88. Learning to Love Trade Again
- Author:
- Frank Lavin and Oscar Guinea
- Publication Date:
- 06-2020
- Content Type:
- Research Paper
- Institution:
- European Centre for International Political Economy (ECIPE)
- Abstract:
- We are at the moment, the first in seventy-five years, where there is no international consensus in support of trade. Indeed, trade is unloved, unsupported, and even unwanted. There is no shortage of topics in the rhetoric of trade complaints: from the rapid rise of China to Coronavirus as a metaphor for the evils of greater connectivity. Regardless of the validity of these complaints, none of them negate the central truth of trade: countries that engage in trade move ahead, and those that do not, stagnate. Our political leaders disagree. Anti-trade positions are held by leaders across the political spectrum, from Donald Trump to Bernie Sanders. And yet, the public is increasingly warm to the idea of trade. When Gallup asks Americans, “Do you see foreign trade more as an opportunity for economic growth through increased U.S. exports or a threat to the economy from foreign imports?” a record high of 79% see trade as an opportunity, with 18% viewing it as a threat. How did the world arrive at this moment where the benefits of trade are clearly evidenced while trade has become politically toxic? We identify four main factors: (i) U.S. absenteeism from the leadership role; (ii) detachment between trade and security architecture; (iii) no alternative leadership in Europe or elsewhere; and (iv) the cumbersome WTO process. Against this background we put forward five initiatives that will be big enough to count but unobjectionable enough to be adopted. The Big Three. The U.S., EU, and Japan, should establish a consultative body on trade to forge a new approach that allows trade to move ahead in the absence of universal consensus. No harm, no foul. Each of the Big Three should commit to zero tariffs on any item not produced in each particular market. A de minimis strategy. Tariffs should be eliminated on all products where the current tariff is less than 2%. At that level tariffs are simply a nuisance fee. Mind the social costs. Expand the Nairobi Protocols to include health products and green tech. Scrapping import tariffs on medical and green goods would not only encourage additional trade but will also provide health and environmental benefits. Harmonize down. The Big Three should commit that on every tariff line each of the three will be no worse than the next worse. In other words, each of the Big Three will agree to reduce its tariff on every product where it has the highest tariff of the three. These actions will spur the WTO, not undermine it. The measures we propose can be set up on a plurilateral basis that would allow other trading powers to participate. By breaking away from the tyranny of universal consensus, these actions will encourage the trading community – including the WTO – to get back in forward motion. In some respect, convergence between the Big Three is already happening. The EU and Japan signed an FTA that lowers import tariffs between these two economies, while the U.S. and Japan agreed to negotiate a comprehensive FTA. And if China is willing to step up? China should be welcomed into this group if it supports the four initiatives, changing the Big Three to the Big Four.
- Topic:
- International Political Economy, International Trade and Finance, Global Markets, Trade, and WTO
- Political Geography:
- United States, Japan, China, Europe, and Global Focus
89. Europe’s Quest for Technology Sovereignty: Opportunities and Pitfalls
- Author:
- Fredrik Erixon and Matthias Bauer
- Publication Date:
- 05-2020
- Content Type:
- Research Paper
- Institution:
- European Centre for International Political Economy (ECIPE)
- Abstract:
- Covid-19 and its broader implications have highlighted the importance of Europe’s digital transformation to ensure Europeans’ social and economic well-being. It provides important new learnings about Europe’s quest for “technology sovereignty”. While the debate about technology sovereignty is timely, the precise meaning of sovereignty or autonomy in the realm of technologies remains ambiguous. It should be noted that the political discussions about European technology sovereignty emerged far before the outbreak of the Coronavirus. The European Commission’s recently updated industrial and digital policy strategies “institutionalised” different notions of sovereignty, reflecting perceptions that more EU action is needed to defend perceived European values and to secure Europe’s industrial competitiveness. Often the political rhetoric reflected perceptions that Europe is losing global economic clout and geopolitical influence. It was said that dependency on technological solutions, often originating abroad, would require a European industrial and regulatory response. Against this background, the Corona crisis provides two important lessons for EU technology policymaking. Firstly, during the crisis digital technologies and solutions made European citizens stronger. Technology kept Europe open for business despite the lock-down by enabling Europeans to work from home, receive essential home deliveries, home schooling, online deliveries and to use online payments, etc. In addition, Europe’s citizens became more sovereign with respect to accessing information and data that helped track and contain the spread of the virus. Secondly, the crisis tested Europe’s resilience and perceived dependency on (foreign) technology solutions. Early developments indicate that Member States’ homemade solutions did not fare better than existing European and international solutions. A few national and EU IT solutions failed while existing European and global solutions, from cloud infrastructure to communications, payments to streaming services, all continued to work well. Politically, however, the crisis could be used to justify more EU or national government interference in Europe’s digital transformation. Indeed, for some the debate about European technology sovereignty is largely about designing prescriptive policies, which paradoxically risk reducing Europeans’ access to the innovative technologies, products and services that helped Europe through the crisis. Policies taken into consideration include new subsidies to politically picked companies, or new rules and obligations for certain online business models. Policy-makers advocating for such policies tend to ignore critical insights from the Covid-19 crisis and failed industrial policy initiatives, including sunk public investments and protracted subsidies for industrial laggards. In a time of economic hardship, the EU and national governments should be wary of spending even more taxpayer money to replicate existing world-class technology solutions, that in most cases are used in combination with local technologies, with “Made in EU” services of inferior quality and reliability. Moreover, due to different levels of economic development and differences in regulatory cultures, prescriptive technology policies would exclude many Member States from utilising existing and new opportunities that arise from digitalisation, slowing down economic renewal and convergence. The EU cannot be considered a monolithic block that thrives on a unique set of prescriptive technology policies. Before the Corona pandemic, initiatives towards European technology sovereignty were mainly pushed by France and Germany, fed by concerns over their companies’ industrial strength in times of growing economic and geopolitical competition. Industrial and technology policies favoured by the EU’s two largest countries will have a disproportionately negative impact on Europe’s smaller open economies, whose companies and citizens could be deprived from cutting-edge technologies, new economic opportunities and partnerships on global markets, undermining these economies’ development and international competitiveness. Any EU-imposed technology protectionism along the lines suggested by some policy-makers in large EU Member States would leave the entire EU worse off. It would disproportionately hurt countries in Europe’s northern, eastern and southern countries more than the large countries whose economies are generally more diverse than Europe’s smaller Member States. It would, however, make sense for the EU to agree on a shared definition of “technology sovereignty”. Different interpretations could cause serious policy inconsistencies, undermining the effectiveness of EU and national economic policies. Anchored in technological openness, technology sovereignty can indeed be a useful ambition to let Europe’s highly diverse economies leapfrog by using existing technologies. To become more sovereign in a global economy, Europeans need to focus on becoming global leaders in economic innovation – not just in regulation. If anchored in mercantilist or protectionist ideas, technological sovereignty would make it harder for many Member States to access modern technologies, adopt new business models and attract foreign investment – with adverse implications on future global competitiveness, economic renewal and economic convergence. Policymaking towards a European technology sovereignty that benefits the greatest number of Europeans – not just a few politically selected “winners” – should aim for a regulatory environment in which technology companies and technology adopters can thrive across EU Member States’ national borders. The European Single Market has deteriorated in recent years and significantly during the crisis. The new von der Leyen Commission has now repeatedly called for a strengthening of the Single Market. Becoming a world leader in innovation requires a real Single Market in which companies can scale up, with as few hurdles as possible, and then compete globally. It should be supplemented by pro-competitive policies and incentives for research and investment. Brussels cannot set the global standards in technology policymaking alone. Europe’s policy-makers should aim for closer market integration and regulatory cooperation with trustworthy international partners such as the G7 or the larger group of the OECD countries. It is in the EU’s self-interest to advocate for a rules-based international order with open markets. International cooperation should be extended beyond trade to include cooperation on technology policies, e.g. artificial intelligence. Regulatory cooperation with allies such as the USA is essential to jointly set global standards that are based on shared values. Both the EU and the US have much more to gain if they prioritise such alignment, to advance a shared vision for a revamped open international trading system, in a world increasingly influenced by regimes with fundamentally different views on state intervention and human rights. Anchored in technological openness, the EU and the US can promote technology sovereignty that allows for development and renewal elsewhere in the world.
- Topic:
- Industrial Policy, International Political Economy, Science and Technology, Sovereignty, European Union, and COVID-19
- Political Geography:
- United States, Europe, and Global Focus
90. The Millennials' Transition from School-to-Work
- Author:
- Yuet-Yee Linda Wong and Audra J. Bowlus
- Publication Date:
- 03-2020
- Content Type:
- Working Paper
- Institution:
- Centre for Human Capital and Productivity (CHCP), Western University
- Abstract:
- We present the first study of the high school-to-work transition for American Millennial males and females. Using data from the PSID Transition to Adulthood from 2005-2011, we estimate the Burdett and Mortensen (1998) model and study changes between Generation X and Millennials. We find convergence in racial differences in transition patterns across the generations and in gender earnings by the Great Recession. These patterns are driven by a large decline in search efficiencies for white males. Finally, we show the labor market deteriorated for high school graduates prior to, with a further decline during, the Great Recession.
- Topic:
- Economics, Education, Global Recession, Human Capital, Labor Market, and Productivity
- Political Geography:
- United States
91. Optimal Contracting with Altruistic Agents: A Structural Model of Medicare Payments for Dialysis Drugs
- Author:
- Martin Gaynor, Nirav Mehta, and Seth Richards-Shubik
- Publication Date:
- 05-2020
- Content Type:
- Working Paper
- Institution:
- Centre for Human Capital and Productivity (CHCP), Western University
- Abstract:
- We study physician agency and optimal payment policy in the context of an expensive medication used in dialysis care. Using Medicare claims data we estimate a structural model of treatment decisions, in which physicians differ in their altruism and marginal costs, and this heterogeneity is unobservable to the government. In a novel application of nonlinear pricing methods, we theoretically characterize the optimal unrestricted contract in this screening environment with multidimensional heterogeneity. We combine these results with the estimated model to construct the optimal contract and simulate counterfactual outcomes. The optimal contract is a flexible fee-for-service contract, which pays for reported treatments but uses variable marginal payments instead of constant reimbursement rates, resulting in substantial health improvements and reductions in costs. Our structural approach also yields important qualitative findings, such as rejecting the optimality of any linear contract, and may be employed more broadly to analyze a variety of applications.
- Topic:
- Economics, Government, Health, Health Care Policy, Human Capital, Productivity, and Medicare
- Political Geography:
- United States
92. The EITC and Maternal Time Use: More Time Working and Less Time with Kids?
- Author:
- Jacob Bastian and Lance Lochner
- Publication Date:
- 08-2020
- Content Type:
- Working Paper
- Institution:
- Centre for Human Capital and Productivity (CHCP), Western University
- Abstract:
- Parents spend considerable time and resources investing in their children's development. Given evidence that the Earned Income Tax Credit (EITC) aects maternal labor supply, we investigate how the EITC aects a broad array of time-use activities, focusing on the amount and nature of time spent with children. Using 2003-2018 time-use data, we nd that federal and state EITC expansions increase maternal work time, which reduces time devoted to home production, leisure, and time with children. However, for children of all ages, almost none of the reduction comes from time devoted to investment activities, such as active learning and development activities.
- Topic:
- Economics, Labor Issues, Children, Women, Income Inequality, Tax Systems, Human Capital, Family, and Productivity
- Political Geography:
- United States
93. Global giants and local stars: How changes in brand ownership affect competition
- Author:
- Vanessa Alviarez, Keith Head, and Thierry Mayer
- Publication Date:
- 11-2020
- Content Type:
- Working Paper
- Institution:
- Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
- Abstract:
- We assess the consequences for consumers in 76 countries of multinational acquisitions in beer and spirits. Outcomes depend on how changes in ownership affect markups versus efficiency. We find that owner fixed effects contribute very little to the performance of brands. On average, foreign ownership tends to raise costs and lower appeal. Using the estimated model, we simulate the consequences of counterfactual national merger regulation. The US beer price index would have been 4-7% higher without divestitures. Up to 30% savings could have been obtained in Latin America by emulating the pro-competition policies of the US and EU.
- Topic:
- Economics, International Political Economy, and Multinational Corporations
- Political Geography:
- United States, United Kingdom, Latin America, and Global Focus
94. Corporate tax avoidance and industry concentration
- Author:
- Farid Toubal, Mathieu Parenti, and Julien Martin
- Publication Date:
- 07-2020
- Content Type:
- Working Paper
- Institution:
- Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
- Abstract:
- This paper argues that tax avoidance by large corporations has contributed to the 25% increase in concentration among U.S. firms since the mid-1990s. Corporate tax avoidance gives large firms a competitive edge, which translates into larger market shares and an increase in the granularity of the economy. We develop IV and difference-in-differences strategies that show the causal impact of tax avoidance on firm-level sales. Had firms not resorted to tax avoidance in 2017, our results imply that the average industry concentration would have been 8.3% lower, which is around its early 2000 level.
- Topic:
- Economics, International Political Economy, Markets, Tax Systems, Corporations, Tax Evasion, and Corporate Tax
- Political Geography:
- United States and Global Focus
95. Far, Far More Than Meets the Eye: Extended Deterrence in Complex Crises in Northeast Asia
- Author:
- Brad Glosserman
- Publication Date:
- 06-2020
- Content Type:
- Special Report
- Institution:
- Pacific Forum
- Abstract:
- The Pacific Forum, with support from the Defense Threat Reduction Agency (DTRA), brought 41 officials and experts from the United States, Japan, and the Republic of Korea (ROK), along with eight Pacific Forum Young Leaders, all attending in their private capacity, to Maui, Hawaii, Sept. 5-6, 2019 to explore the three countries’ thinking about extended deterrence and prospects for and obstacles to strengthened trilateral security cooperation. A two-move tabletop exercise (TTX) was focused on concerted and coordinated efforts by China and North Korea to revise the status quo in Northeast Asia. Key findings include: Despite political difficulties, there was little difference among participants regarding assessments of the situation and dynamics in Northeast Asia. They were generally aligned and this was evident in responses to the TTX: they sought to prevent opportunism, provide off-ramps for adversaries, and didn’t rush to connect the incidents. Official statements notwithstanding, there is rising anxiety in Seoul and Tokyo for a variety of reasons. In the ROK, some concerns focus on the role of nuclear solutions to national security problems. In Japan, the issue is often the US-China balance of power. Tokyo and Seoul remain committed to their alliances with the US, however. Participants acknowledged that conventional strength among allies and the ability to coordinate more seamlessly strengthened extended deterrence.
- Topic:
- Deterrence
- Political Geography:
- United States, Japan, Northeast Asia, Korean Peninsula, and Pacific Ocean
96. On the Value of Nuclear Dialogue with China
- Author:
- David Santoro and Robert Gromoll
- Publication Date:
- 11-2020
- Content Type:
- Special Report
- Institution:
- Pacific Forum
- Abstract:
- This material is based on research sponsored by DTRA and managed by the US Air Force Academy (USAFA), and Pacific Forum International under agreement number FA7000-19-2- 0012. The US Government is authorized to reproduce and distribute reprints for Governmental purposes notwithstanding any copyright notation thereon. The opinions, findings, views, conclusions or recommendations contained herein are those of the authors and should not be interpreted as necessarily representing the official policies or endorsements, either expressed or implied, of the USAFA, DTRA, or the US Government. This paper was written by Dr. David Santoro, Vice President and Director for Nuclear Policy at the Pacific Forum, and Dr. Robert Gromoll, former Director of the Office of Regional Affairs at the US Department of State’s Bureau of International Security and Nonproliferation; Dr. Gromoll is now retired. Both Drs. Santoro and Gromoll participated in numerous dialogue rounds, and Dr. Santoro was a co-organizer. The paper is based primarily on the contents of the dialogue’s written reports, several of which were authored or co-authored by Dr. Santoro. By and large, the paper draws directly from these reports and reviews how the topics addressed in the dialogue were approached and discussed by the US and Chinese sides over time. (A list of these reports is included at the end of the paper; some have been published, others have not.) The paper is also based on the authors’ broader experience in participating in the Track-1.5 dialogue; the conversations they have had with US and Chinese participants on these issues over the years, both during the dialogue and on the margins; and their own personal research. This paper represents the views of the authors and not those of Pacific Forum or the US State Department.
- Topic:
- Arms Control and Proliferation, International Cooperation, Nuclear Weapons, Treaties and Agreements, Nonproliferation, and Denuclearization
- Political Geography:
- United States and China
97. How Market Sentiment Drives Forecasts of Stock Returns
- Author:
- Roman Frydman, Nicholas Mangee, and Josh Stillwagon
- Publication Date:
- 05-2020
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- We reveal a novel channel through which market participants’ sentiment influences how they forecast stock returns: their optimism (pessimism) affects the weights they assign to fundamentals. Our analysis yields four main findings. First, if good (bad) “news” about dividends and interest rates coincides with participants’ optimism (pessimism), the news about these fundamentals has a significant effect on participants’ forecasts of future returns and has the expected signs (positive for dividends and negative for interest rates). Second, in models without interactions, or when market sentiment is neutral or conflicts with news about dividends and/or interest rates, this news often does not have a significant effect on ex ante or ex post returns. Third, market sentiment is largely unrelated to the state of economic activity, indicating that it is driven by non-fundamental considerations. Moreover, market sentiment influences stock returns highly irregularly, in terms of both timing and magnitude. This finding supports recent theoretical approaches recognizing that economists and market participants alike face Knightian uncertainty about the correct model driving stock returns.
- Topic:
- Economics, Markets, and Stock Markets
- Political Geography:
- United States
98. Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016
- Author:
- Alina K. Bartscher, Moritz Kuhn, Moritz Schularick, and Ulrike I. Steins
- Publication Date:
- 04-2020
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level dataset that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. household debt between the 1970s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility.
- Topic:
- Debt, Finance, Income Inequality, and Economic Growth
- Political Geography:
- United States
99. How the Disappearance of Unionized Jobs Obliterated an Emergent Black Middle Class
- Author:
- William Lazonick, Philip Moss, and Joshua Weitz
- Publication Date:
- 06-2020
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- During the 1960s and 1970s, blacks with no more than high-school educations gained significant access to well-paid unionized employment opportunities, epitomized by semi-skilled operative jobs in the automobile industry, to which they previously had limited access. Anti-discrimination laws under Title VII of the 1964 Civil Rights Act with oversight by the Equal Employment Opportunity Commission supported this upward mobility for blacks in the context of a growing demand for blue-collar labor. From the late 1970s, however, the impact of global competition and the offshoring of manufacturing combined with the financialization of the corporation to decimate these stable and well-paid blue-collar jobs. Under the seniority provisions of the now beleaguered industrial unions, blacks tended to be last hired and first fired. As U.S.-based blue-collar jobs were permanently lost, U.S. business corporations and government agencies failed to make sufficient investments in the education and skills of the U.S. labor force to usher in a new era of upward socioeconomic mobility. This organizational failure left blacks most vulnerable to downward mobility. Instead of retaining corporate profits and reinvesting in the productive capabilities of employees, major business corporations became increasingly focused on downsizing their labor forces and distributing profits to shareholders in the form of cash dividends and stock buybacks. Legitimizing massive distributions to shareholders was the flawed and pernicious ideology that a company should be run to “maximize shareholder value.” As the U.S. economy transitioned from the Old Economy business model, characterized by a career with one company, to the New Economy business model, characterized by interfirm labor mobility, advanced education and social networks became increasingly important for building careers in well-paid white-collar occupations. Along with non-white Hispanics, blacks found themselves at a distinct disadvantage relative to whites and Asians in accessing these New Economy middle-class employment opportunities. Eventually, the downward socioeconomic mobility experienced by blacks would also extend to devastating loss of well-paid and stable employment for whites who lacked the higher education now needed to enter the American middle class. By the twenty-first century, general downward mobility had become a defining characteristic of American society, irrespective of race, ethnicity, or gender. Since the 1980s, the enemy of equal employment opportunity through upward socioeconomic mobility has been the pervasive and entrenched corporate-governance ideology and practice of maximizing shareholder value (MSV). For most Americans, of whatever race, ethnicity, and gender, MSV is the not-so-invisible hand that has a chokehold on the emergence of the stable and well-paid employment opportunities that are essential for sustainable prosperity.
- Topic:
- Labor Issues, Civil Rights, Unions, Black Politics, African American Studies, and Workforce
- Political Geography:
- United States
100. Immaculate Deception: How (and Why) Bankers Still Enjoy a Global Rescue Network
- Author:
- Edward J. Kane
- Publication Date:
- 07-2020
- Content Type:
- Working Paper
- Institution:
- Institute for New Economic Thinking (INET)
- Abstract:
- Dodd-Frank is an example of counterfeit reform. It is designed principally to benefit very big banks and it has helped these banks to increase their market share greatly during the last 10 years. The Act provides lesser and contradictory forms of costs and comfort to smaller US bankers and taxpayers, foreign bankers (especially the managers of Deutsche Bank), and foreign governments. Small bankers and taxpayers are encouraged to believe that the 2007-2009 US rescue of the world’s biggest banks was a one-time maneuver. But an opposite message is sent through the press as (with great fanfare) the industry absolves and congratulates ex-officeholders: (1) for having transferred massive amounts of subsidized support not just to stakeholders in US megabanks, but also to European bankers and governments, and (2) for keeping the subsidies flowing long past the panic’s expiry date. Genuine reform will require changes in fraud laws and an effort to post on a continuing basis the value of the safety-net subsidies individual megabanks enjoy.
- Topic:
- Government, Reform, Regulation, Finance, Global Financial Crisis, and Banking
- Political Geography:
- United States