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4101. Bitter Chocolate: Wealth Extraction in Côte d'Ivoire

Author:
Jean Merckaert
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The cocoa sector has been at the heart of Côte d'Ivoire economy since independence. The country has become the largest producer of cocoa in the world (40%). In the two first decades of independence, impressive economic growth was fueled by cocoa exports. But the Ivorian miracle evaporated after the collapse of cocoa prices and the debt soaring. The country plunged into a serious economic crisis, followed by a political crisis that culminated in civil war in the early 2000s. The primary commodity sector in Côte d’Ivoire has been highly vulnerable to illicit financial flows. Large and persistent discrepancies between Côte d'Ivoire’s cocoa export statistics and the cocoa import statistics of major partners such as the Netherlands, Germany and France are indicative of substantial capital flight through export misinvoicing. With a focus on the four major periods in Ivorian political history, this paper analyzes the trend of illicit financial outflows in the cocoa sector, the mechanisms of resource rent capture and personal enrichment that fuel them, the key national and foreign players, and their ongoing responsibilities. Under the Houphouët-Boigny regime (1960-1993), through the management of the country’s Agricultural Product Stabilization and Support Fund, the president had full control over the cocoa sector and used it to enrich himself and his associates. He and his successor Bédié (1993-1999) colluded with exporting companies in which Ivorian political leaders were shareholders. Under Gbagbo (2000-2010), the cocoa rent was the main source of funding for the civil war. The techniques of the Forces Nouvelles in the North and government forces in the South were similar: taxing cocoa production and exports, and illegally exporting part of the output to neighboring Burkina Faso and Ghana. Under the Ouattara regime (2011-2020), despite a series of reforms aimed at good governance, the cocoa sector has remained highly concentrated in the hands of a few corporate giants and plagued with favoritism, while predation in other sectors too persisted. The persistence of capital flight suggests the political economy of cocoa remains deeply rooted in the colonial scheme. Be it state-led or market-led, dominated by foreign or domestic players, the Ivorian cocoa sector has remained the place for wealth extraction to the benefit of a handful members of the elite. Overcoming primary commodity dependence is essential for equitable development.
Topic:
Political Economy, Natural Resources, Capital Flows, Commodities, Capital Flight, Chocolate, and Wealth Extraction
Political Geography:
Africa and Côte d'Ivoire

4102. Explaining Turkey’s Current Economic Crisis

Author:
Erinc Yeldan
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Turkey entered a new phase of recession-cum-real economy crisis starting in the last quarter of 2018. In contrast to the previous crisis episodes of 1994, 2001 or 2009, when the economy had abruptly shrunk with a spectacular collapse of asset values and a severe contraction of output, the 2018- crisis is characterized by a prolonged recession with persistent low (negative) rates of growth, dwindling investment performance, debt repayment problems, secularly rising open unemployment, a spiraling currency depreciation and high inflation. Popular explanations from the mainstream tradition attribute this dismal performance to a lack of “structural reforms” and/or exogenous factors. Per contra, our analysis shows that the underlying sources of the crisis are to be found not in the conjunctural cycles of reform fatigue, but rather in the post-2001 neoliberal speculative-led growth model with excessive reliance on hot money flows and foreign debt accumulation. We argue that following the post-2001 orthodox reforms, a foreign-capital-inflow-dependent, debt-led, and construction-centered economic growth model dominated the economy and caused a long buildup of imbalances and increased fragilities.
Topic:
Emerging Markets, Financial Crisis, Financialisation, and Economic Crisis
Political Geography:
Turkey and Middle East

4103. The U.S.–China Trade Imbalance and the Theory of Free Trade: Debunking the Currency Manipulation Argument

Author:
Anwar Shaikh and Isabella Weber
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The U.S.–China trade imbalance is commonly attributed to a Chinese policy of currency manipulation. However, empirical studies failed to reach consensus on the RMB misalignment. We argue that this is not a consequence of poor measurement but of theory. At the most abstract level the conventional principle of comparative cost advantage suggests real exchange rates will adjust so as to balance trade. Therefore, the persistence of trade imbalances tends to be interpreted as arising from currency manipulation facilitated by foreign exchange interventions. By way of contrast, the absolute cost theory explains trade imbalances as the outcome of free trade among nations that have unequal real costs. We argue that a disparity in real costs is the root cause of the U.S.–China trade imbalance.
Topic:
Exchange Rate Policy, Free Trade, Trade, and Purchasing Power
Political Geography:
China, Asia, North America, and United States of America

4104. Inequality in Energy Consumption: Statistical Equilibrium or a Question of Accounting Conventions?

Author:
Gregor Semieniuk and Isabella Weber
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Mitigating climate change requires information about the inequality in energy consumption. Recent contributions (Banerjee and Yakovenko, 2010; Lawrence et al., 2013; Yakovenko, 2010, 2013) have studied energy inequality through the lens of maximum entropy. They claim a weighted international distribution of total primary energy demand should approach a Boltzmann-Gibbs maximum entropy equilibrium distribution in the form of an exponential distribution, implying convergence to a Gini coefficient of 0.5 from above. The present paper challenges the validity of this claim and critically discusses the applicability of statistical equilibrium reasoning to economics from the viewpoint of social accounting. It is shown that the exponential distribution is only a robust candidate for a statistical equilibrium of energy inequality when employing one particular accounting convention for energy flows, the substitution method. But this method has become problematic with a higher renewable share in the international energy mix, and no other accounting method supports the claim of a convergence to a 0.5 Gini. We conclude that the findings based on maximum entropy reasoning are sensitive to accounting conventions and critically discuss the epistemological implications of this sensitivity for the use of maximum entropy approaches in social sciences.
Topic:
Climate Change, Energy Policy, Inequality, Maximum Entropy, and Social Accounting
Political Geography:
Global Focus

4105. Path Dependence and Stagnation in a Classical Growth Model

Author:
Thomas R. Michl and Daniele Tavini
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper embeds a technical progress function in a classical growth model and studies the effects of permanent changes in parameters and temporary shocks such as pandemics. Technical change is driven by dynamic economies of scale and responds to distributional forces: the wage share regulates labor-saving technical change and employment regulates its capital using bias. The model features path dependence in the employment-population rate and the output-capital ratio. Population growth and distribution can respond to the employment rate. Interpreted through the model, secular stagnation under neoliberal capitalism has been driven by a combination of diminished investment.
Topic:
Political Economy, Economic Growth, COVID-19, Wage Growth, Path Dependency, Kaldor-Verdoorn Law, and Hysteresis
Political Geography:
Global Focus

4106. Do Firms With Higher Energy Efficiency Have Better Access to Finance?

Author:
Philipp-Bastian Brutscher
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Improving energy efficiency quickly is key to mitigating climate change and a large part of such improvements has to be implemented in firms. But because most energy efficiency improvements require upfront investments, good access to external finance is important. Theory suggests that information asymmetries may prevent lenders from including energy efficiency into their lending assessment, even though higher energy efficiency makes a firm more cost-competitive and its collateral worth more, especially if stringent climate change mitigation plans are implemented. Empirically, little is known about the impact of energy efficiency on access to external finance. Here we examine for the first time empirically the effect of a firm’s higher energy efficiency on their ability to obtain loans in European Union countries. We exploit a unique firm-level dataset that links a survey from the European Investment Bank on energy efficiency of firms’ building stock and on access to external finance with the ORBIS firm database for European firms. We find that energy efficiency has no effect on the ability of a firm to obtain external financing compared to other indicators on the financial or operational health of the firm. The results reveal an unexploited potential for energy efficiency policy to signal when firms are energy efficient.
Topic:
Climate Change, European Union, Finance, Carbon Emissions, and Energy Efficiency
Political Geography:
Europe

4107. Coronavirus Fiscal Policy in the United States: Lessons from Feminist Political Economy

Author:
Katherine Moos
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Using the U.S. fiscal response to Covid-19 in March and April 2020 as a case study, this paper explores the implications that the U.S. coronavirus legislation had on the societal distribution of responsibility for social reproduction among U.S. households, employers, and the U.S. federal government —and its effect on women and racialized minorities. It builds on feminist political economy research that argues that, prior to the coronavirus pandemic, economic crisis and stagnating conditions for workers in the United States had increased the role of households and the U.S. government in social reproduction, relative to the contribution of employers. This paper argues that the U.S. federal government has responded to the Covid-19 crisis through an infusion of income support, but has failed to increase its long-term socially-reproductive commitments, nor addressed the intensified socially-reproductive burden placed on households or the declining role of employers in working-class social reproduction.
Topic:
Political Economy, Minorities, Women, Feminism, Fiscal Policy, and Social Reproduction
Political Geography:
North America and United States of America

4108. Delhi Green Deal

Author:
Rohit Azad and Shouvik Chakraborty
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
In this paper, we propose a carbon tax policy for Delhi, the most polluted capital in the world, which will fundamentally change the energy mix of Delhi's economy toward clean, green energy and will guarantee universal access to electricity, transport and food, up to a certain amount. Any carbon mitigation strategy needs to alter our dependence on fossil fuels, requiring a systemic overhaul of its energy mix. Implementing a carbon tax will mitigate emissions and mobilise revenue for our proposed re-distributive program of Right to Food, Energy and Travel (RFET). The policy is designed to prefer `the poor over the rich' as a way of compensating for `rich hiding behind the poor' in terms of emissions and polluting the environment. Using the input-output analysis, we estimate the class-wise distribution of carbon emissions in Delhi. We find that in order to implement this programme, the necessary estimated tax would be $112.5 per metric ton of carbon dioxide. The free entitlement of fuel and electricity per household comes out to be 2040 kWh per annum and there is an annual universal travel pass of $75 per person for use in public transport, and annual per capita availability of food of $205. The purpose of this proposed policy is two-fold in the context of Delhi: bring emissions under control and provide relief to the people who are at the receiving end of this climate crisis.
Topic:
Climate Change, Energy Policy, Inequality, Carbon Tax, Carbon Emissions, and Green Deal
Political Geography:
South Asia and India

4109. Public Investment in Home Health Care: A Win-Win Strategy for Employment and Public Health

Author:
Lenore Palladino
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Home health care— to the elderly and those with chronic health conditions—is growing in importance in the Covid-19 pandemic era. In the United States, public investment in home health care can be a win-win strategy for public health and economic security. As a fundamental care industry, home health care has remained chronically underpaid and neglected in the policy response to the Covid-19 crisis. This article examines the impacts of large-scale public investment in home care. I find that large-scale public investment in the home health care industry can stabilize employment for millions of low-income women and, through their renewed economic activity, create or stabilize employment in the sectors hardest-hit by the pandemic and where low-income women are concentrated: non-home care health care, food service, and retail.
Topic:
Employment, Public Health, COVID-19, Public Investment, and Home Health Care
Political Geography:
North America and United States of America

4110. Corporate Political Power and US Foreign Policy, 1981-2002: The Role of the Policy-Planning Network

Author:
Philip Luther-Davies
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Recent empirical work has offered strong support for ‘biased pluralism’ and ‘economic elite’ accounts of political power in the United States, according a central role to interest groups as a mechanism through which corporate influence is exerted. Here, we propose an additional channel of influence for corporate interests: the ‘policy-planning network,’ consisting of corporate-dominated foundations, think tanks, and elite policy-discussion groups. To evaluate this assertion, we coded the policy preferences of one key policy-discussion group, the Council on Foreign Relations (CFR), on 295 foreign policy issues during the 1981-2002 period. In logistic regression analyses, the preferences of economic elites and the CFR were positive, statistically significant predictors of foreign policy outcomes while interest group preferences were not. These findings were further supported with a qualitative investigation of the patterns of CFR ‘successes’ and ‘failures.’ We conclude that ‘biased pluralism’ models should include corporate influence exerted through the policy-planning network.
Topic:
Foreign Policy, Think Tanks, Pluralism, and Corporations
Political Geography:
United States of America

4111. Political Economy of the Environment: A Look Back and Ahead

Author:
James K. Boyce
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
The political economy of the environment aims to deepen our understanding of the interplay among the economy, the environment, and human well-being. In contrast to neoclassical environmental economics, it pays attention not only to the net magnitude of costs and benefits but also to their distribution. In the realm of positive analysis – descriptions of how the world works – this means exploring the multiple ways in which the distribution of wealth and power affects environmental outcomes. In the realm of normative analysis – prescriptions for how the world should work – political economists advocate a range of criteria including not only cost effectiveness but also safety, sustainability, and environmental justice.
Topic:
Environment, Political Economy, Sustainability, and Well-Being
Political Geography:
Global Focus

4112. Capital Flight from South Africa: A Case Study

Author:
Léonce Ndikumana, Karmen Naidoo, and Adam Aboobaker
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper examines the mechanisms, actors, enablers, and the institutional environment that facilitate capital flight from South Africa and the resulting accumulation of private wealth in offshore financial centers. We estimate that from 1970 to 2017, South Africa lost over $300 billion through capital flight, including through overinvoicing of imports and underinvoicing of exports. Net trade misinvoicing amounted to $146 billion over the 1998-2017 period alone. Export underinvoicing appears to be especially rampant in the case of mineral resources such as gold, silver, platinum and diamonds. While capital flight is not a new phenomenon in South Africa, it has accelerated substantially over the past decades, a period marked by aggressive liberalization of the national economy and rapid integration into the global economy. Capital flight is a concern in a country such as South Africa that faces deep financing gaps, high multidimensional poverty, inequality and unemployment. An important challenge faced by South Africa in its quest to tackle capital flight and the associated problems such as tax evasion, base profit shifting, and money laundering is the threat of erosion of the public confidence in state institutions in light of the emerging phenomenon of state capture orchestrated by an intricate network of private ‘enablers’ with deep connections within the state and in the global economy. The adverse effects of capital flight on economic development, state institutions and governance call for urgent attention to prevent even more devastating consequences for the country’s political and social instability.
Topic:
Governance, Global Political Economy, Institutions, Capital Flight, Tax Evasion, Instability, and Money Laundering
Political Geography:
Africa and South Africa

4113. Who Owes? Class Struggle, Inequality and the Political Economy of Leverage as Power in the 21st Century

Author:
Stefano Sgambati
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
The prevalent consensus in critical social sciences is that finance articulates the world economy as a global hierarchy of creditor-debtor relations that reproduce and further aggravate existing income and wealth inequalities. Class struggle is conformingly understood as a conflict between elite creditors, members of the global top 1 percent of wealth holders, and mass debtors burdened by growing costs of servicing public and private debts. The article offers an alternative understanding of how debt, inequality and class relate to one another. At its basis is the recognition that over the past four decades finance has empowered upper class borrowers, including the top 1 percent, as it has magnified their capacity to generate capital gains and capture greater wealth and income shares via levered-up investments and other forms of ‘positioning’ in financial and property markets. The article thus provides a political economy of leverage as power and shows how contemporary global finance has not given shape to a distributional conflict between creditors and debtors as two distinct classes, but has set debtors against debtors, and namely the greater borrowers versus the lesser ones.
Topic:
Debt, Political Economy, Inequality, Finance, Class, Power, and Leverage
Political Geography:
Global Focus

4114. This Time Was Different: The Global Safe Asset Shortage and Shadow Banking in Socio-Historical Perspective

Author:
Photis Lysandrou and Anastasia Nesvetailova
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
Safe assets and shadow banking are two closely linked phenomena in contemporary finance. The link is loan securitisation: at a time of a global safe asset shortage, it falls on the shadow banking system to help make good that shortage by manufacturing extra quantities of asset backed securities. When these quantities cannot keep up with volume of safe asset demand, the shadow banking system comes under pressure to manufacture the type of complex structured securities that can potentially cause a financial crisis. That potentiality became reality with the great financial crisis of 2007-8. If a further financial crisis of this scale is to be averted, the regulation of the shadow banking system should be informed by an understanding of the contemporary socioeconomic circumstances that continue to cause a global safe asset shortage. This paper attempts to contribute to such an understanding.
Topic:
Financial Crisis, Banking, Securitization, and Safe Asset
Political Geography:
Global Focus

4115. The Spatialisation of the Future

Author:
Photis Lysandrou
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
This paper argues that the growth of the securities markets signifies the spatialisation of the future. The possibility of this spatialisation is explained in terms of Marx’s commodity principle: it is because that principle has been expanded to encompass financial securities that the future now exists as a socially constructed space that parallels physical space. The necessity for this spatialisation is explained in terms of the financial pressures on the world’s major public and private organisations: security-issuing governments and corporations need to use the future to escape financing constraints in the present just as security-buying institutional investors need to use the future to meet financial commitments in the present. As the precondition for the continuing growth in scale of the securities markets is compliance with the rules of commodity exchange, and as the ‘liberal market economy’ variety of capitalism is the only one in which this condition is unreservedly met, it follows that a key by-product of the increasing need to colonise the future to take the overspill of the pressures of the present will be an increasing convergence on this variety of capitalism.
Topic:
Capitalism, Economy, Commodities, Securities, Karl Marx, and Spatiality
Political Geography:
Global Focus

4116. Eternal return on capital: Nihilistic repetition in the asset economy

Author:
Amin Samman
Publication Date:
05-2020
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
What can the idea of eternal return tell us about contemporary financial society? In this essay I follow Nietzsche by deploying it as an existential provocation, linking the prospect of endless recurrence to the daily routines of the asset economy. This entails a departure from simple notions of cyclical time, typically associated with political economy and the study of economic history, in favor of a more complex view that sees recurrence and return as figures that organize and reflect the experience of life under the sign of finance. In particular, I argue that the reordering of class around the axis of asset ownership has produced two seemingly distinct structures of feeling— one based on the thrill of endless turnover and return on capital, the other on the drudgery of recurring payment schedules and debt rollovers. Though on the surface at odds with each other, both are anchored in a deeper libidinal economy associated with the asset form and ultimately nihilistic in character. The asset economy should therefore be seen as producing a very peculiar form of eternity based on the abolition of time through repetition. I conclude by foregrounding questions of culture and imagination, exploring these in connection with contemporary forms of on-demand television and the possibility of a time beyond the bad eternity of the asset economy.
Topic:
Economics, History, Capitalism, Finance, Digital Economy, Temporality, Assets, Nihilism, and Historical Imagination
Political Geography:
Global Focus

4117. Beware Chinese Anger

Author:
Tuvia Gering
Publication Date:
12-2020
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
The growing friction between China and Australia is a function of Beijing’s swagger and self-confidence. Israel must take note of Beijing’s aggressive behavior, and cautiously navigate its own relations with China.
Topic:
Diplomacy, Hegemony, Conflict, and Regionalism
Political Geography:
China, Asia, and Australia

4118. Understanding Israel’s War in the ‘Grey Zone’

Author:
Jonathan Spyer
Publication Date:
12-2020
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
Israel seeks to disrupt Iran’s efforts to develop nuclear weapons, and to reverse the Iranian project to entrench its forces in Iraq, Syria and Lebanon.
Topic:
Defense Policy, Nuclear Weapons, Military Strategy, Conflict, and Regionalism
Political Geography:
Iraq, Iran, Middle East, Israel, Lebanon, and Syria

4119. From the Ocean to the Gulf: Normalization takes Hold

Author:
Efraim Inbar and Eran Lerman
Publication Date:
12-2020
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
Morocco has maintained open channels with Israel for many years, and it values the unique Jewish contribution to its heritage. A new pattern of normalization with Israel now extends from the Atlantic to the Gulf. Morocco’s coordination with the US also is a vital part of the emerging alignment of forces of stability in the region. Israel now should give this breakthrough a firm grounding in policies beneficial to both peoples.
Topic:
Diplomacy, Bilateral Relations, Conflict, Peace, and Normalization
Political Geography:
Africa, Middle East, Israel, and Morocco

4120. The Collapse of Palestinian Grand Strategy

Author:
Eran Lerman
Publication Date:
12-2020
Content Type:
Working Paper
Institution:
Jerusalem Institute for Strategy and Security (JISS)
Abstract:
The Palestinian quest for an internationally imposed “solution,” which would not require them to negotiate a compromise deal with Israel, has failed. Palestinian leaders may attempt this again after Joe Biden becomes US president, but this will fail yet again, since the collapse of their past strategy is due to much more than the policies of the Trump Administration. Indeed, evolving regional and global realities allow for a new Israeli peace initiative, which can preserve the underlying principles of the Trump outline for peace.
Topic:
Territorial Disputes, Conflict, Strategic Stability, and Strategic Interests
Political Geography:
Middle East, Israel, Palestine, North America, and United States of America