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28641. Leveraging U.S. Power in the Middle East

Author:
CAP Middle East Team
Publication Date:
10-2016
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
The geopolitical landscape that emerged after the end of the Cold War is facing recent strains from an unprecedented wave of global migration, climate change, and a more assertive Russia and competitive China—and the Middle East has emerged as a focal point for many of these challenges. The administration of the next U.S. president will face a Middle East challenged by regional power tensions; multiple civil wars; state collapse driven by political legitimacy crises; threats from rapidly evolving terrorist networks; record numbers of refugees; and escalating economic and human development pressures. These challenges, along with a new wave of regressive authoritarian forces limiting basic freedoms, will require the next administration to take a proactive and long-term approach to the Middle East. Dynamics in the Middle East have understandably caused many Americans to question the value of U.S involvement in the region. Indeed, this skepticism is supported by the track record of the past 15 years, particularly the fallout from the 2003 Iraq war. But recent events and trends in the Middle East—from the rise of the Islamic State to the refugee crisis spilling over into Europe—demonstrate that the United States has important stakes in what happens in the region. Because of the threats that the Middle East presents for the homeland and the danger that continued conflict in the region poses to global stability, the United States needs to work closely with regional partners to adopt a long-term approach to the region that advances America’s interests and values.
Topic:
Foreign Policy, International Cooperation, Military Strategy, Hegemony, and Regionalism
Political Geography:
Middle East, North America, and United States of America

28642. How Carbon Pricing Could Span the United States and North America

Author:
Gwynne Taraska and Howard Marano
Publication Date:
11-2016
Content Type:
Policy Brief
Institution:
Center for American Progress - CAP
Abstract:
Carbon pricing is flourishing in North America. Canada, for example, has announced a national price to take effect in 2018, while Mexico has announced a 12-month cap-and-trade pilot that will evolve into a national program. These developments join a network of established pricing instruments, including a carbon tax in Mexico and subnational systems in California, the northeast United States, and several Canadian provinces. Once unlikely, it now seems probable that carbon pricing will proliferate not only across Canada and Mexico but also in the United States. Carbon taxes and cap-and-trade programs have found a diverse set of U.S. proponents, including from the private sector and from across the political spectrum, who view carbon pricing instruments as effective and efficient methods of curbing greenhouse gas emissions and the disruptive effects of climate change.
Topic:
Climate Change, Environment, Regional Cooperation, Carbon Emissions, and Price Control
Political Geography:
Canada, North America, Mexico, and United States of America

28643. 5 Big Ideas for U.S. Policy in the Americas

Author:
Dan Restrepo, Michael Werz, and Joel Martinez
Publication Date:
12-2016
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
The Americas affect U.S. national and homeland security, economic prosperity, and stability perhaps more than any other region in the world. Collectively, they are the destination for more than 40 percent of all U.S. exports,1 the source of 65 percent of all U.S. energy imports,2 and the region of origin or heritage for 17 percent of the U.S. population.3 As the next administration looks to the Americas, it will have a fundamental choice: It can embrace the partnership model that seeks to work with those in the region willing and capable to engage on the wide range of bilateral, regional, and global issues that have predominated the past eight years. Or, in contrast, the administration can unreasonably attempt to wall the United States off from its closest neighbors.
Topic:
Security, Foreign Policy, Diplomacy, Regional Cooperation, Hegemony, and Regionalism
Political Geography:
South America, Central America, North America, and United States of America

28644. Trade Update 2016: Transfers and Transparency

Author:
Irene Pavesi
Publication Date:
06-2016
Content Type:
Special Report
Institution:
Small Arms Survey
Abstract:
The Small Arms Survey’s Trade Update 2016: Transfers and Transparency reports that the world’s ‘top’ and ‘major’ small arms exporters delivered at least USD 5.8 billion worth of small arms in 2013, an increase of 17 per cent compared to the USD 5 billion worth exported in 2012. The United States exported a record USD 1.1 billion worth of small arms in 2013, followed by Italy (USD 644 million) and Germany (USD 557 million). These three states accounted for almost 40 per cent of exports in 2013. In addition, significant increases in exports were recorded by Croatia, Israel, Spain, and Switzerland, whose small arms exports in 2013 pushed them over the USD 100 million mark. Meanwhile, transfers of small arms to the United States (USD 2.5 billion) alone accounted for 42 per cent of all imports.
Topic:
Arms Control and Proliferation, Arms Trade, Transparency, and Trade
Political Geography:
Global Focus

28645. Toward a More Perfect Union: The Struggle for Security in Libya

Author:
William Danvers
Publication Date:
12-2016
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
Libya’s militia problem—which is a primary source of political and economic instability—is more complicated than defeating IS because it is more widespread. Dealing with it is a fundamental part of any effort to build a unified Libyan state. There are said to be as many as 2,000 militias across Libya, and while most are independent, they do fall into three general categories.10 There are those militias aligned with the GNC, many of which are Islamist but not necessarily jihadi. There are those that are generally anti-Islamist, loyal to the HoR and its military strongman supporter General Khalifa Haftar. Then there are those that are radical jihadis, such as IS and Ansar al-Shariah, which have ties to Al Qaeda.11 These militias form coalitions when it suits their purpose and at other times are at odds with each other. Regardless, they have helped create a failed Libyan state with no central authority or security structure.12 The criminal underground in Libya has been functioning since the time of Gadhafi. There are a number of groups, but there is no real central power structure similar to the mafia. Instead, these criminal groups operate independently, and they traffic in a variety of things, including guns, drugs, and people. They work with whoever serves their purpose, including IS. The role of the criminal underground has increased as the Libyan economy continues to crumble. In a very real sense, these criminal groups are the connective tissue between the jihadis and the militias, with all three impeding efforts to rebuild Libya.13 If Libya devolves into further instability—in effect becoming a failed state—it creates a threat to the region; a threat to Europe because of the increased flow of refugees and migrants from Libya; and a threat to both the United States and European Union because of the presence of IS and Al Qaeda affiliates. While addressing Libya’s security crises is an essential piece of the effort to build a functioning state, it will certainly be a difficult and complicated process. Nonetheless, there are things that can be done that will help make Libya more secure.
Topic:
Security, Fragile/Failed State, Peace, and State Building
Political Geography:
Africa and Libya

28646. Orbán’s Hungary

Author:
William Danvers
Publication Date:
11-2016
Content Type:
Policy Brief
Institution:
Center for American Progress - CAP
Abstract:
The recent U.S. presidential election caught much of the world by surprise and raised a number of questions about how the new administration will govern. Was the rhetoric on the campaign trail a harbinger of things to come, was it a divisive campaign strategy to get elected, or a bit of both? Either way, there is reason for concern and dismay. Taking a closer look at the Trump campaign, there are parallels to the right-wing national populist political movements in Europe. The recent transformation of Hungarian politics—in particular, the metamorphosis of Hungarian Prime Minister Viktor Orbán, leader of the ruling Fidesz Party—offers a cautionary tale of what can happen when a right-wing national populist leader gets elected. Unfortunately, Orbán, who has been invited to Washington by President-elect Donald Trump,1 is only one part of a larger right-wing national populist phenomenon that has taken root in Europe. For example, he is an inspiration for Jarosław Kacszyński, head of the Polish Law and Justice Party, or PiS, which now controls Poland’s government.2 The PiS, taking a page out of Orbán’s playbook, has been trying to consolidate its power by doing such things as attacking Poland’s Constitutional Tribunal, its highest court.3 The idea behind this and related moves in Hungary and Poland is to ensure that once the party is in power, it will remain there by rigging the system to make sure its leaders can get specific programs enacted and create a more favorable electoral climate.
Topic:
Nationalism, Authoritarianism, Leadership, Populism, and Far Right
Political Geography:
Europe and Hungary

28647. Advancing Climate-Compatible Infrastructure Through the G-20

Author:
Gwynne Taraska, Peter Ogden, Nancy Alexander, and Howard Marano
Publication Date:
12-2016
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
To date, 17 G-20 countries—which account for 67 percent of global greenhouse gas pollution—have officially joined the Paris Agreement, bringing the pact into effect sooner than anyone expected.1 If they follow through with their commitments to reduce emissions, it will represent unprecedented progress in the global effort to curb climate change. U.S. President-elect Donald Trump, meanwhile, has suggested a number of actions, including dismantling the Clean Power Plan and pledging to “cancel” the Paris Agreement, that would drive the United States—and potentially other countries—in the opposite direction.2 In light of this, the G-20 summit in July 2017 provides an important opportunity for committed major powers to resist backsliding by any and all G-20 countries—and even to make some progress in meeting the climate challenge. To its credit, the German government, which officially assumed the G-20 presidency in December 2016, has taken steps that position the summit well for just such an effort. When German Chancellor Angela Merkel announced her three “pillar” objectives for the summit, she explicitly identified climate change as a priority. These pillars include fostering global economic stability; making the global economy viable for the future, including through the Paris Agreement and the 2030 Agenda for Sustainable Development; and establishing the G-20 as a “community of responsibility,” including by promoting a compact with Africa that would address infrastructure investment, among other topics.3
Topic:
Climate Change, International Cooperation, Infrastructure, G20, and Green Technology
Political Geography:
Europe, Germany, and Global Focus

28648. Moscow on the Potomac

Author:
CAP National Security and International Policy
Publication Date:
12-2016
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
On October 16, 2016, the U.S. Director of National Intelligence James Clapper and Secretary of Homeland Security Jeh Johnson issued an extraordinary statement, indicating that the “U.S. Intelligence Community is confident that the Russian Government directed the recent compromises of e-mails from U.S. persons and institutions, including from U.S. political organizations.”1 The release of this hacked information was all directed at the Democratic presidential campaign and its affiliates, with no hacked information leaked regarding the campaign of the Republican presidential nominee, and now president-elect, Donald Trump. These senior U.S. intelligence officials pointed out that Russia, under President Vladimir Putin, had used similar tactics across Europe and Eurasia to bolster right-wing nationalist parties and that “[t]hese thefts and disclosures are intended to interfere with the U.S. election process.” Director Michael Rogers, head of the National Security Agency, noted, “There shouldn’t be any doubt in anybody’s minds, this was not something that was done casually, this was not something that was done by chance, this was not a target that was selected purely arbitrarily. This was a conscious effort by a nation-state to attempt to achieve a specific effect.”2
Topic:
Security, Corruption, National Security, and Leadership
Political Geography:
Russia, Europe, North America, and United States of America

28649. A Practical Plan on the Israeli-Palestinian Front

Author:
Mara Rudman and Brian Katulis
Publication Date:
12-2016
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
The incoming U.S. administration has an opportunity to increase stability and advance U.S. security interests in the Middle East by outlining a framework for Israelis and Palestinians to make independent, coordinated, and constructive steps toward a two-state solution. This solution would support a safe and secure Israel and a sustainable, contiguous, and sovereign Palestine. At a time when the broader region continues to experience threats from civil wars, state fragmentation, and terrorist networks, the Israeli-Palestinian front is one area where the incoming administration can build on decades of investments to help enhance security and construct lasting institutions to achieve a sustainable resolution to the Israeli-Palestinian conflict. President-elect Donald Trump has declared that he wants “to be the one that made peace with Israel and the Palestinians.”1 Direct negotiations between Israelis and Palestinians are unworkable right now, but Trump can move toward this goal if he starts to lay the groundwork with five key steps:
Topic:
Diplomacy, Territorial Disputes, Conflict, and Borders
Political Geography:
Middle East, Israel, and Palestine

28650. U.S. and Russia Relations Under Trump and Putin

Author:
William Danvers
Publication Date:
12-2016
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
The detritus of the U.S.-Soviet Union relationship remains a part of the U.S.-Russian relationship. During the Cold War, U.S. policy went from containment to détente to confrontation. Today, the vicissitudes of Russian President Vladimir Putin’s engagement with the United States range from the productive—the Iran nuclear deal is one example—to confrontation—Ukraine is a good example—to doing a bit of both—Syria is an example of this. Putin wants Russia to not only have a seat at the table where decisions are made about global international issues but also wants the seat once held by the former Soviet Union.1 In other words, Putin wants a return to the great power politics of the Cold War and a free hand in the territory that was part of the Soviet Union. In this regard, Putin needs the United States as an adversary, though not necessarily as an enemy.2 This sort of dynamic allows him to maintain political support at home—he is protecting Russia from an outside threat—which allows him to avoid fixing an economy that is faltering3 and addressing the corruption that is a significant part of the political scene.4
Topic:
Corruption, Diplomacy, Bilateral Relations, Leadership, and Conflict
Political Geography:
Russia, Europe, North America, and United States of America

28651. Syrian Immigrants in the United States

Author:
David Dyssegaard Kallick, Cyierra Roldan, and Silva Mathema
Publication Date:
12-2016
Content Type:
Policy Brief
Institution:
Center for American Progress - CAP
Abstract:
Syrian immigrants and refugees have frequently been in the news over the past year, and not always in a positive light. President-elect Donald Trump lashed out against Syrians coming to the United States during his campaign, promising a ban on immigration from countries “compromised by terrorism,” calling for “extreme vetting” of immigrants from Muslim and Arab nations, and saying of people already granted refugee status who fled Syria, “If I win, they’re going back.”1 Considering this negative rhetoric, it may come as a surprise to some that immigrants from Syria who live in the United States are in fact doing very well. They are learning English, getting good jobs, owning homes, and starting businesses at impressive rates. These findings are reassuring and should provide the basis for more informed and thoughtful consideration of how to think about current and future Syrian immigrants and refugees. The Syrian immigrants in the study conducted for this issue brief are overwhelmingly people who came to the United States before the recent refugee crisis. Their success is a positive sign that the United States is a place that can provide opportunity for a wide range of people and shows that immigrants from Syria, like other immigrants, are making a real contribution to local economies around the country. Their success is also encouraging as the United States continues to accept refugees fleeing the horrific Syrian war zone. Those refugees will find that it can help to have a receiving community that includes people who speak the same language; share cultural and, in many cases, religious backgrounds; and understand both sides of the transition that ref
Topic:
Migration, Immigration, Border Control, Refugee Crisis, and Humanitarian Crisis
Political Geography:
North America and United States of America

28652. Undermining Violent Extremist Narratives in South East Asia: A How-to Guide

Author:
Sara Zeiger
Publication Date:
08-2016
Content Type:
Special Report
Institution:
Hedayah
Abstract:
This report contains practical advice for civil society organizations and practitioners to develop effective narratives that counter the approaches of Daesh, Al-Qaida, Jemaah Islamiyah, and other violent extremists in the region. The guide also contains clear examples of counter-messages, case studies, and links to videos and websites that are relevant to supporting the development of counter-narratives.
Topic:
Civil Society, Violent Extremism, Al Qaeda, Islamic State, and Countering Violent Extremism
Political Geography:
Indonesia, Malaysia, Philippines, and Southeast Asia

28653. Counter-Narratives for Countering Violent Extremism (CVE) in South East Asia

Author:
Sara Zeiger
Publication Date:
05-2016
Content Type:
Special Report
Institution:
Hedayah
Abstract:
This meeting report is a summary and analysis of the preliminary results of the Expert workshop on South East Asia Collection of Counter-Narratives. Terrorism and violent extremism have been threats to South East Asia for decades, with local and international terrorist organizations such as Al-Qaeda historically establishing networks aligned with local conflicts. For example, Al-Qaeda has established connections with the Abu Sayyaf Group (ASG) in the Philippines; Lashkar Jundullah in Indonesia; Kumpulan Mujahidin Malaysia (KMM) in Malaysia; and Jemaah Islamiyah (JI) in Indonesia, Malaysia, the Philippines, Singapore and Thailand. The terrorist attack in Jakarta in January 2016 has served as a reminder that terrorism in South East Asia is still a current and ongoing threat. Moreover, it revealed that ad-Dawla Islamiyah fi al-Iraq wa asSham (Daesh or Islamic State of Iraq and as-Sham/ ISIS) is utilizing a similar model as Al-Qaeda has historically: establishing international networks and recruiting local actors in South East Asia to carry out their aims and objectives.
Topic:
Terrorism, Violent Extremism, Al Qaeda, Islamic State, Networks, and Recruitment
Political Geography:
Indonesia, Malaysia, Philippines, Singapore, Thailand, and Southeast Asia

28654. Brexit and Baltic Sea Security

Author:
Riina Kaljurand, Tony Lawrence, Pauli Järvenpää, and Tomas Jermalavicius
Publication Date:
12-2016
Content Type:
Special Report
Institution:
International Centre for Defence and Security - ICDS
Abstract:
The result of the UK’s June 2016 referendum on continued membership of the EU was unexpected and its consequences may be wide-ranging and grave. This report considers the impact of the UK’s exit from the European Union (‘Brexit’) on the security of Estonia, the Baltic Sea region and Europe more widely. Its focus is hard security – military security and defence. The UK is a defence and security actor of considerable prominence, able to contribute significant military capability to the organisations and operations in which it participates. It is, however, sceptical about the place of the EU in defence matters and has achieved a certain level of infamy for its perseverance in obstructing the further development of an EU defence dimension. One immediate consequence of the Brexit referendum result was a burst of ideas for further EU defence integration, which has led to an agreement on the first steps for implementing the EU Global Strategy in the area of security and defence. Not all member states, however, are enthusiastic for these ideas. Interviews conducted for this report with officials and researchers in the Baltic Sea states of Denmark, Germany, Estonia, Finland, Latvia, Lithuania, Poland, Sweden, and also in the UK found that interviewees believed that their countries shared with the UK approaches to security that would be harder to pursue after Brexit without the active support of the UK itself, and were largely sceptical about the need for further defence integration in the EU. In general, though, interviewees felt that the character of the European security environment post-Brexit is very difficult to forecast and the many factors that will contribute to shaping it are highly uncertain, complex, and intertwined. In these circumstances, scenario planning methodologies offer perhaps the best means of thinking about the future and informing policy decisions. The report thus identifies a range of possible post-Brexit scenarios as a vehicle for testing policies and identifying those likely to result in maximum benefit and minimum cost.
Topic:
Security, Defense Policy, European Union, and Brexit
Political Geography:
United Kingdom, Europe, Nordic Nations, and Baltic States

28655. Soldiers of Peace: Estonia, Finland and Ireland in UNIFIL

Author:
Tony Lawrence, Tomas Jermalavicius, and Anna Bulakh
Publication Date:
12-2016
Content Type:
Special Report
Institution:
International Centre for Defence and Security - ICDS
Abstract:
Estonian, Finnish and Irish troops serve under a combined battalion in the UNIFIL mission in south Lebanon. The size of the contribution these three states make to UN peacekeeping is perhaps not well known – they are respectively the fourth, second and first largest European contributors, per capita, to UN missions. For each of them, UNIFIL is their single largest contribution to peace support operations. In this report, commissioned by Ireland’s Department of Foreign Affairs and Trade, we examine the role of small states in United Nations peacekeeping through the lens of UNIFIL. Despite the different backgrounds and military cultures ofthe participating states, the Finnish/Irish Battalion is a successful partnership, bringing direct benefits to each of the countries involved. The partnership allows the three states to make the kind of contribution to peacekeeping which, for different reasons is an important aspect of
Topic:
United Nations, Peacekeeping, Military Affairs, and Partnerships
Political Geography:
Middle East, Finland, Estonia, North Africa, and Ireland

28656. Strengthening the Strategic Balance in the Baltic Sea Area

Author:
Kalev Stoicescu and Henrik Praks
Publication Date:
04-2016
Content Type:
Special Report
Institution:
International Centre for Defence and Security - ICDS
Abstract:
The Defence Committee of the Riigikogu (Estonian Parliament) commissioned ICDS to conduct a study on the strategic balance in the Baltic Sea region with aim to contribute, in the run up to the Warsaw Summit, to the discussion on the optimum Alliance military posture in the region. Assumptions: Russia follows an increasingly aggressive anti-Western policy of revisionism and has become a direct and open threat to NATO. It is implementing an ambitious military modernisation programme and has demonstrated a tendency to use force against weaker neighbours. NATO´s overall superiority vis-à-vis Russia is not reflected equally in the Baltic Sea region, especially by taking into account geography and force postures. The Alliance military power is not sufficiently available in the region. Russia will strive to avoid a full-scale war with NATO, but it could be tempted, nevertheless, while being guided by misperceptions, to provoke and exploit a “local conflict” to test and undermine the Alliance. Key findings: Credible NATO deterrence in the eastern flank of the Alliance requires an optimum balance between deterrence by punishment and deterrence by denial. Present NATO defence posture in the Baltic Sea region is inadequate for the effective deterrence by denial. Notable capability gaps exist as regards air and missile defence and naval presence. Russia has the ability to impose an A2/AD “bubble” over the Baltic states and large parts of the Baltic Sea. The major concentration of Russian forces in the areas surrounding Baltic states clearly exceeds defensive needs. Many of these units are offensive in their nature. Russia is frequently exercising military actions against Baltic states and their separation from the rest of the Alliance In military terms Belarus is an extension of Russian armed forces and performs an important geopolitical role, especially with regard to the “Suwalki gap”. The most likely worst scenario is not a “hybrid crisis” or limited incursion, but the separation and possible conquest of the Baltic states by conventional military means. Conclusions and recommendations The Russian threat has to be clearly acknowledged, treated as a strategic long-term challenge and taken fully into account in NATO’s defence planning and future posture in the Baltic Sea area. Effective deterrence requires a clearly increased presence of Allied forces in the region. NATO’s forward defence has to move from a symbolic to a meaningful presence. The Alliance’s forward presence must balance two key aspects: military effectiveness and multinationality. Military effectiveness requires the forces to be combat ready. The United States should exercise leadership by providing the framework and certain key capabilities, which would then be complemented by contributions from other Allies. In terms of manoeuvre formations, the baseline consideration should be brigade-sized units. A continuous presence of two brigades would be necessary, in addition to the indigenous forces of the Baltic countries. An increased presence of air assets, including transition from Air Policing mission to Air Defence, and maintenance of a robust naval presence in the Baltic Sea, is required. The Baltic countries will need to allocate additional resources for the Host Nation Support, including the development of necessary infrastructure. Alongside the strengthening of the forward presence component, the Alliance needs to refine capabilities for the deployment of reinforcements and follow-on forces, and for the neutralization of Russia´s A2/AD capabilities. The Allies should demonstrate their ability, in collective defence exercises, to rapidly move large numbers of troops to the Baltic region.
Topic:
NATO, Alliance, and Deterrence
Political Geography:
Russia, Nordic Nations, and Baltic States

28657. Closing NATO’s Baltic Gap

Author:
Wesley K. Clark, Juri Luik, Egon Ramms, and Richard Shirreff
Publication Date:
05-2016
Content Type:
Special Report
Institution:
International Centre for Defence and Security - ICDS
Abstract:
This report was prepared as an input to the forthcoming NATO’s Warsaw Summit by three former NATO commanders with considerable experience of Allied strategy, operations and capabilities: a former Supreme Allied Commander Europe (SACEUR), a former Deputy SACEUR and a former Commander of the Allied Joint Force Command Brunssum. Political experience and context are provided by a former ambassador to NATO.
Topic:
NATO, Alliance, and Deterrence
Political Geography:
Russia, Nordic Nations, and Baltic States

28658. How and Why Government, Universities, and Industry Create Domestic Labor Shortages of Scientists and High-Tech Workers

Author:
William Lazonick, Philip Moss, and Joshua Weitz
Publication Date:
12-2016
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
On June 2, 1965, under a mandate established by Title VII of the Civil Rights Act of 1964, the U.S. Congress created the Equal Employment Opportunity Commission (EEOC) to enforce federal anti-discrimination laws related to employment. The expectation was that African Americans would be prime beneficiaries of the EEOC. There was no assumption that the EEOC, on its own, could reverse deep-rooted employment discrimination against blacks. But in the late 1960s there was optimism that, in combination with equal educational opportunity and the strong demand for unionized workers in the well-paid manufacturing jobs that marked the post-World War II decades, the EEOC could help to ensure that an ever-increasing number of blacks would ascend to the American middle class. African Americans as a group are better educated than they were in the 1960s, and, as discriminatory norms and practices have lessened, large numbers of college-educated blacks have experienced upward employment mobility into professional, technical, and administrative occupations. But the promise of a large-scale ascendancy of blacks to middle-class status, characterized by secure and well-paid employment, has not been fulfilled. Our basic thesis is that, in combination with the institutions of racism which remain widespread in American society, the erosion of secure and well-paid employment opportunities is a major reason for the persistence since the 1980s of African Americans as disproportionately disadvantaged. Our contribution to the larger debate on the economics of race is to focus on the role of corporate resource allocation as the prime determinant of the quantity and quality of employment opportunities in the economy. The decline of middle-class employment opportunities has adversely affected the majority of the U.S. labor force of all races, ethnicities, and genders. African Americans, however, have been more vulnerable than other demographic groups to this decline. U.S. institutions of corporate governance vest power over major resource-allocation decisions in the hands of senior executives, supported by their hand-picked corporate boards. Given the enormous size of the major business corporations and their centrality to economic activity, the resource-allocation decisions made by senior executives of major U.S. corporations profoundly influence the operation and performance of the economy as a whole—including the availability, or not, of secure and well-paid employment opportunities. The failure to include an analysis of corporate resource allocation and how it has changed over the past half century in the policy debate on income inequality is what we call the “equal employment opportunity omission.”
Topic:
Race, Employment, Inequality, Civil Rights, Legislation, and Equality
Political Geography:
North America and United States of America

28659. The Value-Extracting CEO: How Executive Stock-Based Pay Undermines Investment in Productive Capabilities

Author:
William Lazonick
Publication Date:
12-2016
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The business corporation is the central economic institution in a modern economy. A company’s senior executives, with the advice and support of the board of directors, are responsible for the allocation of corporate resources to investments in productive capabilities. Senior executives also advise the board on the extent to which, given the need to invest in productive capabilities, the company can afford to make cash distributions to shareholders. Motivating corporate resource- allocation decisions are the modes of remuneration that incentivize and reward the top executives of these companies. A sound analysis of the operation and performance of a modern economy requires an understanding of not only how much these executives are paid but also the ways in which the prevailing system of executive pay influences their decisions to allocate corporate resources. In the United States since the last half of the 1980s the overriding goal of U.S. corporations has been to “maximize shareholder value,” with corporate performance measured by a company’s “total shareholder return”: percentage stock-price appreciation plus dividend yield. Also since the 1980s, the most important components of the total compensation of senior executives have been modes of stock-based pay in the forms of stock options and stock awards. This stock-based pay is structured to incentivize executives to make corporate allocation decisions that will boost the stock prices of the companies that employ them and reward them for achieving that objective. There are three drivers of stock prices: innovation, speculation, and manipulation. The first critical question that this paper addresses is which of these drivers, individually or in combination, contribute to a company’s stock-price performance. Then we can ask the second critical question: Does executive compensation reflect the success of the company in value creation, or the power of senior executives to engage in value extraction? The “value- extracting CEO” hypothesis posits that, in the United States, a significant portion of senior executive compensation rewards them for making decisions that foment speculation and manipulate stock prices, and thereby extract value for their own personal gain. In section four of the paper, I invoke the theory of innovative enterprise to support this hypothesis and debunk the dominant ideology that companies should be run to “maximize shareholder value.” Finally, I elaborate the policy implications for controlling the power of the value-extracting CEO, including a) banning stock buybacks, b) requiring executive compensation that rewards innovation rather than speculation and manipulation, and c) placing stakeholders representing households as taxpayers, workers, and consumers on boards of directors of publicly listed companies, along with shareholders who represent households as savers. An intellectual precondition for these reforms is the rejection of the ideology that companies should be run to maximize shareholder value, which means replacing agency theory with innovation theory as a mode of analyzing how the operation of an economy, supported by the strategies and structures of the business enterprises within it, can attain the objectives of stable and equitable economic growth.
Topic:
Leadership, Investment, Corporations, Redistribution, Stock Markets, and Wage Growth
Political Geography:
North America and United States of America

28660. The EuroZone “Debt” Crisis: Another “Center” – “Periphery” Crisis Under Financial Globalization?

Author:
Arturo O'Connell
Publication Date:
11-2016
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper analyzes the Euro crisis in light of the experience of center-periphery relations over the last 40 years of renewed financial globalization. The crisis shows the characteristic pattern evident in so many other crises in the developing world: i.e. “boom” and “bust” phases of cross-border financial flows of massive magnitude, dominated by “push” factors from the center. Financial institutions at the center play a crucial role. The “boom” phase leads to serious imbalances in the peripheral economies - losses of competitiveness among them -ending in a “sudden-stop” that poses acute problems for the overexposed creditors, which then turn to their own governments for bailouts.
Topic:
Debt, Globalization, Regional Cooperation, Financial Crisis, and European Union
Political Geography:
Europe