Debates In Political Economy Research Articles

The political economy debate on ‘financialization’ – a macroeconomic perspective

ABSTRACT A number of important contributions to the political economy literature have argued that changes in the financial sector have been amongst the main reflections, or even the driving forces, of recent transformations of capitalism in the rich countries. This hypothesis has been referred to as ‘financialization’. This article argues that the interdisciplinary literature can be enriched if the macroeconomic dimension of financialization is more explicitly taken into account. In particular, important macroeconomic constraints regarding the determination of profits, in the face of a decreasing importance of physical investment and an increased importance of financial operations, are often not explicitly considered. The author compares his macroeconomic approach with contributions from different strands in the existing literature, including empirical analyses of new patterns of profit generation, the ‘varieties of capitalism’ approach, the British ‘social accounting’ literature, and the French ‘regulationist’ literature. The author's theoretical framework is illustrated by means of an empirical comparison of the effects of financialization in the USA and in Germany.

The impact of referendums on the centralisation of public goods provision: a political economy approach

The paper compares decision-making on the centralisation of public goods provision in the presence of regional externalities under representative and direct democratic institutions. A model with two regions, two public goods and regional spillovers is developed in which uncertainty over the true preferences of candidates makes strategic delegation impossible. The political economy argument against centralisation of Besley and Coate (J Public Econ 87:2611–2637, 2003) does therefore not apply. Instead, it is shown that the existence of rent extraction by delegates alone suffices to make cooperative centralisation more likely through representative democracy under reasonable assumptions. In the case of non-cooperative centralisation, the more extensive possibilities for institutional design under representative democracy increase the likelihood of centralisation. Direct democracy may thus be interpreted as a federalism-preserving institution.

Neoliberalism: From New Liberal Philosophy to Anti-Liberal Slogan

In recent years, neoliberalism has become an academic catchphrase. Yet, in contrast to other prominent social science concepts such as democracy, the meaning and proper usage of neoliberalism curiously have elicited little scholarly debate. Based on a content analysis of 148 journal articles published from 1990 to 2004, we document three potentially problematic aspects of neoliberalism’s use: the term is often undefined; it is employed unevenly across ideological divides; and it is used to characterize an excessively broad variety of phenomena. To explain these characteristics, we trace the genesis and evolution of the term neoliberalism throughout several decades of political economy debates. We show that neoliberalism has undergone a striking transformation, from a positive label coined by the German Freiberg School to denote a moderate renovation of classical liberalism, to a normatively negative term associated with radical economic reforms in Pinochet’s Chile. We then present an extension of W. B. Gallie’s framework for analyzing essentially contested concepts to explain why the meaning of neoliberalism is so rarely debated, in contrast to other normatively and politically charged social science terms. We conclude by proposing several ways that the term can regain substantive meaning as a “new liberalism” and be transformed into a more useful analytic tool.

The uses and abuses of political economy: The ANC’s media policy

This article examines the evolution of the African National Congress’ (ANC) media policy, with specific emphasis on policy developed for the party’s 2002 and 2007 national conferences. It considers how the ANC has used critical political economy arguments to justify its media policy, and concludes that the party has shifted recently towards appropriating these arguments selectively to justify positions that are deeply inimical to media freedom: an approach that was not evident in its earlier policy-making. This shift in emphasis suggests an elite drift in the ANC’s policy, where the shielding of its leaders from criticism becomes the party’s overriding concern. While the ANC’s policy has much to offer in helping South Africa to confront the deficiencies in the post-apartheid media system – which is characterised by highly uneven development – the party demonstrates a lack of vision on media diversity questions. The major academic analyses of post-apartheid media transformation have not helped to chart a way forward either, owing in part to the academy’s theoretical flight from critical political economy with its emphasis on concepts like class, determination and totality. The failure to analyse transformation of the media system as a whole has meant that media theorists failed to predict the uneven nature of media transformation. In the absence of a radical counter-discourse on media transformation, the way is clear for the ANC to mobilise popular discontent with the elite nature of much media, which may bolster arguments for more media controls.

Globalization and Protection of Employment

Unionists and politicians frequently claim that globalization lowers employment protection of workers. This paper tests this hypothesis in a panel of 28 OECD countries from 1985 to 2003, differentiating between three dimensions of globalization and two labor market segments. While overall globalization is shown to loosen protection of the regularly employed, it increases regulation in the segment of limited-term contracts. We find economic and political globalization to drive deregulation for the regularly employed, while political and social integration appear responsible for the better protection of workers in atypical employment, outweighing the negative effect of economic integration. We offer political economy arguments as explanations for these differential effects on labor market legislation.

Poverty through ‘Insufficient Exploitation and/or Globalization’? Globalized Production and New Dualist Fallacies

This article draws a parallel between two different but related debates in international political economy: first, the (Marxist) argument that if there is one thing worse than being exploited in capitalist society, it is not being exploited; second, the argument that developing countries are poor because they are insufficiently globalized. The paper challenges the second argument outright and suggests that the first is too simplistic, and does so by focusing on the question of dualism. In discussing the globalization of manufacturing production, the article demonstrates the reality of continued hierarchies in the world economy, and how these undermine dualist accounts of insufficient exploitation and/or globalization. Finally, I draw some conclusions based on an alternative understanding of globalization and labour. A Chinese version of this article's abstract is available online at: www.informaworld.com/rglo

Editors' Introduction: Taslim Olawale Elias in the Periphery Series

This special issue of the Leiden Journal of International Law on the Nigerian international lawyer Taslim Olawale Elias (1914–91) marks the second of the journal's Periphery Series. The collection of essays featured here serves essentially two functions. On the one hand, it pays tribute to an exceptional jurist whose work marked international legal scholarship during the years of decolonization. On the other, it invites critical engagement with the theme of international law's ‘periphery’. The centre–periphery formulation, as explained elsewhere, owes its provenance mostly to recent debates in political economy. It is a spatial metaphor which postulates a structural relationship between a presumed ‘centre’, typically portrayed as advanced or metropolitan, and a less developed and provincial ‘periphery’. In such debates the centre–periphery opposition is assumed as stable, decisive, and representative of the empirical reality of a ‘world out there’. The Periphery Series was launched in 2007, with a special issue on the Chilean jurist Alejandro Álvarez, to foster engagement with the discursive function of centre–periphery oppositions in public international law in its various iterations, and to confront questions of resource allocation, dependency, geography, and power.

Market Access Asymmetry in Food Trade

Using a bilateral trade equation derived from a monopolistic competition model, we investigated market access reciprocity in food trade among the US, Canada, the EU and Japan. We explore country and industry-specific market access asymmetry through the border effect approach, re-challenging the underlying main explanations. Our findings reveal marked asymmetry in reciprocal trade openness; indeed, access to the food markets of the US and Japan appears significantly easier than reciprocal access to both Canada and, especially, the EU. Policy trade barriers, firstly in the forms of NTBs, the degree of product differentiation and 'home bias' in preferences, are all important factors in explaining border effects. Moreover, several stylized facts suggest that border effect interpretation should also be based on political economy arguments.

From market to non-market: An autonomous agent approach to central planning

AbstractIn the longstanding debate in political economy about the feasibility of socialism, the Austrian School of Economists have argued that markets are an indispensable means of evaluating goods, hence a prerequisite for productive efficiency. Socialist models for non-market economic calculation have been strongly influenced by the equilibrium model of neoclassical economics. The Austrians contend that these models overlook the essence of the calculation problem by assuming the availability of knowledge that can be acquired only through the market process itself. But the debate in political economy has not yet considered the recent emergence of agent-based systems and their applications to resource allocation problems. Agent-based simulations of market exchange offer a promising approach to fulfilling the dynamic functions of knowledge encapsulation and discovery that the Austrians show to be performed by markets. Further research is needed in order to develop an agent-based approach to the calculation problem, as it is formulated by the Austrians. Given that the macro-level objectives of agent-based systems can be easily engineered, they could even become a desirable alternative to the real markets that the Austrians favour.

Trade‐related Job Loss, Wage Insurance and Externalities: An Ex Ante Efficiency Rationale for Wage Insurance

The extension of adjustment assistance to those who have suffered trade‐related job displacement is widely supported on both sides of the economics of globalisation debate. The form that such assistance should take, namely wage insurance, is also the subject of wide agreement. Nevertheless, the formal economic rationales offered for such a policy are varied, including political economy arguments, equity arguments and market failure/ex post efficiency arguments. This note proposes an ex ante efficiency‐based rationale for the provision of adjustment assistance in the specific form of wage insurance. Job displacement imposes pecuniary externalities on displaced workers, which, in a complete markets setting, induce only shifts along the ex ante Pareto‐efficient frontier. However, when markets are incomplete, pecuniary externalities become welfare‐relevant. Without the possibility of diversifying or hedging the risk of pecuniary external diseconomies of job displacement using contingent claims, welfare is reduced ex ante. Wage insurance – whether publicly underwritten, privately underwritten (as in Shiller's (2003) ‘livelihood insurance’), or supplied on a mixed public/private basis – completes the market for contingent claims, allowing workers to diversify or hedge the risk of trade‐related pecuniary external diseconomies. By facilitating risk sharing, wage insurance removes an impediment to ex ante Pareto efficiency. Moreover, wage insurance affects not only post‐displacement behaviour by increasing the incentive to reacquire employment quickly, but it also affects pre‐displacement consumption and investment behaviour, in particular, lowering the threshold at which workers will be willing to undertake irreversible investment in industry‐specific skills.

The theory of optimal taxation: what is the policy relevance?

The paper discusses the implications of optimal tax theory for the debates on uniform commodity taxation and neutral capital income taxation. While strong ad- ministrative and political economy arguments in favor of uniform and neutral taxation remain, recent advances in optimal tax theory suggest that the information needed to implement the differentiated taxation prescribed by optimal tax theory may be eas- ier to obtain than previously believed. The paper also points to the strong similarity between optimal commodity tax rules and the rules for optimal source-based capital income taxation.

Bread: The Eruption and Interruption of Politics in Elizabeth Inchbald’s Every One Has His Fault

Every One Has His Fault was in rehearsal when the Edict of Fraternity was passed, opened eight days after Louis XVI was executed and three days prior to the declaration of War with France. Inchbald’s play provides a valuable case study for understanding the intersection of theater and politics not only because it was the occasion for political performance in the audience, but also because it was the object of direct censure by the royalist press. Much of the play’s intervention in the debate surrounding the morality of Britain’s war with France hinges on the utterance of four words: “Provisions are so scarce.” Inchbald’s deployment of the phrase raises the specter of unrest among the poor and also invokes debates in political economy regarding the production and reproduction of social surplus. Through a close analysis of how this phrase is deployed, this essay argues that Inchbald is exploring how regulation in the sexual economy of middle‐class life is implicated in the amelioration of social inequities at both the national and the imperial level. It is my contention that in a period of intense censorship, Inchbald’s play lays bare the political force of the middle ranks and forces its audience to contemplate crises in national subjectivity brought on not only by the revolution in France, but also by the failed war with America.

The Chinese GDP Growth Rate Puzzle: How Fast Has the Chinese Economy Grown?

The Chinese statistical authorities recently revised the Chinese GDP level and real growth rate for the period 1993–2004 following China's first national economic census for 2004. However, the methodology used in their revision is opaque. Using a trend- deviation interpolation approach, this study has managed to replicate the basic procedures of the revision and reproduced the official estimates. Through this exercise, we have found that the estimates that could be obtained by the straightforward interpolation procedures were significantly modified. Based on a political economy argument, we attempt to explain why the revision had to leave the growth rate of 1998 intact and why it had to bypass the price issue and directly work on the real growth rate revision. Based on previous studies and other observations, we also question the census results on non-service industries.

Old bottles – new wine: The new dynamics of industrial relations

This contribution engages recent debates in comparative political economy, arguing that labels such as divergence or convergence are ultimately unsatisfactory in analysing German industrial relations and labour market policy. The persistence of formal institutions goes hand in hand with rapid and dramatic change – a neo-liberal re-orientation among political elites in government and a more bellicose stance on the part of employers. Business attempts to shift the bargaining arenas to the micro-level, knowing that at this level its bargaining power is greater and its exit threat more compelling. However, internal divisions within the employers and the unions further complicate the picture. Business does not simply exit, it seeks to press for advantageous outcomes within existing institutions.

A Strategy for EMU Enlargement

This paper summarizes the results of CASE's research project on 'Strategies for Joining the EMU' and proposes policy recommendations both for new member states (on how to manage their accession to the Eurozone) and for the European Commission, ECB and old member states (on how to manage and absorb EMU enlargement in an optimal way). Both the economic and the political economy arguments point to fast EMU accession of NMS. Looking at the 'classical' optimum currency area criteria, i.e. trade integration, co-movement of business cycles and actual factor mobility, NMS' record is not worse, on average, than that of the current Eurozone members, and should further improve before Eurozone entry, decreasing risk of their exposure to idiosyncratic shocks. After joining the EMU, the common currency should help NMS to develop additional intra-EMU trade links, further synchronize business cycle and increase factor mobility. Both theoretical arguments and empirical experience demonstrates that so-called real convergence accompanies nominal convergence, and that there is synergy rather than a trade-off between the two. The credibility of the Euro and price stability in the Eurozone will not be threatened by fast EMU Enlargement. Neither can the accession of fast growing NMS create an additional 'recessionary' impact on slow growing incumbent members. The biggest challenge for the common currency in the medium to long run may come from widespread breaches of EU fiscal rules. So the incumbents should replace their 'don't rush' advice by active encouragement of NMS to proceed with fast nominal convergence in order to meet the Maastricht criteria and join the EMU as quickly as possible.

A Strategy for EMU Enlargement

This paper summarizes the results of CASE's research project on 'Strategies for Joining the EMU' and proposes policy recommendations both for new member states (on how to manage their accession to the Eurozone) and for the European Commission, ECB and old member states (on how to manage and absorb EMU enlargement in an optimal way). Both the economic and the political economy arguments point to fast EMU accession of NMS. Looking at the 'classical' optimum currency area criteria, i.e. trade integration, co-movement of business cycles and actual factor mobility, NMS' record is not worse, on average, than that of the current Eurozone members, and should further improve before Eurozone entry, decreasing risk of their exposure to idiosyncratic shocks. After joining the EMU, the common currency should help NMS to develop additional intra-EMU trade links, further synchronize business cycle and increase factor mobility. Both theoretical arguments and empirical experience demonstrates that so-called real convergence accompanies nominal convergence, and that there is synergy rather than a trade-off between the two. The credibility of the Euro and price stability in the Eurozone will not be threatened by fast EMU Enlargement. Neither can the accession of fast growing NMS create an additional 'recessionary' impact on slow growing incumbent members. The biggest challenge for the common currency in the medium to long run may come from widespread breaches of EU fiscal rules. So the incumbents should replace their 'don't rush' advice by active encouragement of NMS to proceed with fast nominal convergence in order to meet the Maastricht criteria and join the EMU as quickly as possible.

Max Weber's Inaugural Address of 1895 in the Context of the Contemporary Debates in Political Economy

Max Weber's Inaugural Address of 1895 in the Context of the Contemporary Debates in Political Economy

Governance or financialisation: the Turkish case

This article critically evaluates the governance discourse that the Washington consensus has extended to the case of Turkey after the financial crisis there in 2001. In the United States and United Kingdom the debates on governance are ultimately about the rules of optimal managerial behaviour that will ensure the efficient use of capital. The political economy argument of financialisation, on the other hand, questions the achievability of the objectives set by the governance model and, instead, argues that the present day capitalism is characterised by a coupon pool system - where the capital markets are no longer simple vehicles of financial intermediation but instead regulate firm and household behaviour in a destabilising manner. This article argues that the financialisation framework can be successfully applied to the Turkish experience, a developing economy, where the financial intermediation process was corrupted and became the source of economic instability as a result of the International Monetar...

Rethinking the Developmental State Model: Divided Leviathan and Subnational Comparisons in India

For some time, concept of developmental has been at center of debate in comparative political economy.1 It encompasses view that intervention is necessary not merely to correct for market failures arising out of scarce capital, externalities, and technological improvement but also to achieve long-term capital accumulation and society-wide developmental goals. While history of concept of developmental may lie with economist Friedrich List, its recent reincarnation was implicit in writings of post-World War II development economists.2 It owes its current usage to Chalmers Johnson, who, in addition to socialist and free market systems, posited a third category, capitalist developmental state. Johnson used this conceptual innovation to offer a revisionist account of Japan's rise to power.3 The concept has survived public choice onslaught because of its empirical robustness in explaining East Asian countries.4 The World Bank for first time in 1993 recognized that played a role in sustaining high growth, and subsequently its 1997 world development report was devoted to analyzing role of the in changing world.5 India, regarded as a developmental failure, seems to challenge this emerging consensus by confirming public choice position that states negatively affect growth by constraining private activity and generating rent-seeking. Amidst other relatively prosperous Asian nations, negative images depict Indian as at once weak, predatory, and interventionist. India has become model of failure that helped usher in antistate, promarket Zeitgeist of 1980s. Krueger's analysis of rent-seeking state originated in Indian experience.6 The dirigiste developmental in India outlined a powerful vision of state-led industrialization for whole nation-state in 1947, embodied in autonomous bureaucratic agencies, regulations, and legislation. One high official in New Delhi is reported to have told a friend: If you want me to move file faster, I am not sure I can help you; but if you want me to stop a file I can do it immediately.7 The common and dominant view was that central was responsible for India's slow growth rate.8 India's unenviable reputation as a negative case continues to this day. While economic reforms in 1991 ushered in a more promising scenario, their success is interpreted

International trade and political conflict: commerce, coalitions, and mobility

This work unveils a potent new approach to one of the oldest debates in political economy - that over whether class conflict or group competition is more prevalent in politics. It goes on to outline the conditions under which one type of political conflict is more likely than the other. Michael Hiscox focuses on a critical issue affecting support for and opposition to free trade - factor mobility, or the ability of those who own a factor of production (land, labour, or capital) to move it from one industry to another. He argues that the types of political coalitions that form in trade politics depend largely on the extent to which factors are mobile between industries. Class coalitions are more likely where factor mobility is high, Hiscox demonstrates, whereas narrow, industry-based coalitions predominate where it is low. The book also backs up the theory it advances with systematic evidence from the history of trade politics in six nations since 1800, using a combination of case studies and quantitative analysis. It makes fresh conclusions about the forces shaping trade policy outcomes - conclusions that yield surprising insights into the likely evolution of the global trading system and US trade policy in particular.