Political Economy Challenges Research Articles

Challenges to Regional Services Integration in South Asia

Regional integration in services in South Asia holds considerable potential across many services. This article highlights the scope for and potential benefits from regional integration of services in this region and the many sectoral as well as cross-cutting challenges to this process. The article argues that there are regulatory, infrastructural, institutional and business environment related constraints in the SAARC member countries, which impede regional services integration. There are also political economy challenges which prevent progress on critical cross-cutting issues such as intraregional mobility of service providers and investment. The article argues for a broad-based, flexible regional services agreement, which takes a progressive approach to services integration alongside regional efforts to address issues of investment, regulatory harmonization, labour mobility and connectivity, national efforts to address issues of regulatory, institutional, infrastructural and human resource capacity and a favourable policy orientation and mindset at the individual country level.

The Political Economy of Capital Markets in Latin America

Empirical studies of Latin American finance suggest that domestic capital markets are less developed than expected in light of the region’s economic fundamentals. One of several potential causes for this underdevelopment may be tied to the dominance of the 'grupos', family-controlled business groups that extract significant rents from existing institutional arrangements. Although the 'grupos' have driven economic development in Latin America, they also have powerful incentives to block the reforms that would enhance access to capital markets. Without these reforms, the 'grupos' will continue to have privileged access to the region’s stock markets, crowding out standalone firms in the process.This paper describes some of the political economy challenges to capital market development in Latin America and explores how regional integration under the Pacific Alliance and the Latin American Integrated Market (MILA) may create the space for institutional reform.

Die Bedeutung der Wettbewerbsfähigkeit auf dem Weg aus der Krise im Eurogebiet

Several countries in the euro area still face a competitiveness problem. This problem is to a considerable extent due to wage growth in the past that was excessive, relative to productivity growth and relative to the performance of their competitors. As a result, firms in these countries invest less than desirable to create new jobs. This article reconfirms price and cost considerations at the core of competitiveness and explains why this concept is of fundamental importance in a monetary union. It explains how wage growth could be misguided in the past in the euro area and discusses policy options ahead. In doing so, it highlights the economic and political economy challenges of adjusting wage policy between surplus and deficit countries. The article also touches upon structural competitiveness issues and outlines the scope for reform in this area.

Malaysia: A Success Story Stuck in the Middle?

AbstractThis study examines the Malaysia development record in the context of widespread concerns that the country, and others like it, may encounter major difficulties in graduating to the ranks of high‐income economies. It stresses the country’s rapid socioeconomic development, built on openness, reasonably competent macroeconomic management and attention to equity issues. It then investigates the country’s significant slowdown in investment and economic growth since the late 1990s, and asks whether this trend is related to the more general graduation issue. Our principal conclusion is that the slowdown has less to do with the problem of graduation and more to do with a set of country‐specific institutional and political economy challenges. Thus, the current concern within the country that it is in some sense ‘stuck in the middle’ points to the need for a set of major policy reforms to accelerate growth.

Sharing the Future: Financial Innovation and Innovators in Solving the Political Economy Challenges of Development

The failure to align the incentives of self-interested groups in favor of beneficial reform is often considered a major cause of persistent underdevelopment around the world. However, much less is known about strategies that have been successful at overcoming such political economy challenges. One approach that holds much promise, and in fact appears to have had some historical success, is the provision of financial assets that align the interests of winners and potential losers from reform by providing claims on the future. This paper analyzes the role of financial instruments as a means for fostering broad political coalitions that favor beneficial reforms. It takes as a departure point the benchmark theory of portfolio choice, in which all agents hold the same (market) portfolio and thus all beneficial reforms are adopted. It then analyzes a range of historical cases in which innovative financial assets, often introduced by technocratic reformers, have succeeded at making politics less conflictual overtime, focusing on three revolutionary states that subsequently led the world in economic growth: England, the early United States and Meiji Japan. The paper draws upon the theory and the historical cases to assess the promise of finance in solving political economy challenges in contemporary settings.

China’s Reform and Opening Process – A Fundamental Political Project

The reform/opening process led to a dramatic and persistence economic growth and catapulted China among the major economic nations in the world. Yet, when focusing on this economic success it is all too easy to neglect the crucial role politics played in this process. It is critical to remember that in the aftermath of the Cultural Revolution the Chinese Communist Party (CCP) faced a fundamental political crisis, which informed the underlining dynamics of the subsequent reform process. Consequently, it should be emphasised, that the reform/opening process provides an illustrative example of a political project. In order to develop a deeper insight into the complex political-economic changes we observed in China since the reform process begun, I am focusing on particular issues encompassing the change in ideology; changes in the role of the market; and the response to the political-economic challenges arising in rural China.

Care, Social (Re)production and Global Labour Migration: Japan's ‘Special Gift’ toward ‘Innately Gifted’ Filipino Workers

The Economic Partnership Agreement (EPA)1 concluded by the Japanese and the Philippine governments on 9 September 2006, was described in the Japanese media as a ‘new step toward opening Japan's lab...

Urban water supply in India: status, reform options and possible lessons

Large numbers of households in cities around the developing world do not have access to one of the most basic of human needs–a safe and reliable supply of drinking water. This paper uses the experience of India as a lens through which to view the problems of access to water in urban areas and the various options available for reform. Using two sets of data from the National Family Health Survey, as well as published and unpublished secondary sources, the paper presents the status of access to drinking water in urban India, the performance of India's urban water sector compared to other Asian metropolitan regions and the reform efforts that are under way in several Indian cities. A review of these ongoing reforms illustrates some of the political economy challenges involved in reforming the water sector. Based on this analysis, we draw out directions for more effective research, data collection and policy reform. While each country faces unique challenges and opportunities, the scope and range of the Indian experience provides insights and caveats for many low-income nations.

Why it Matters Who Runs the IMF and the World Bank

Increasing integration has made the great challenge of reducing poverty and advancing human development more achievable than ever, and more dependent than ever on good global economic governance. In this paper I set out the economic logic for why good global economic governance matters for reducing poverty and inequality in the world, and then develop several arguments for how better representation of developing countries in the IMF, the World Bank, and other multilateral institutions would make those institutions more effective in that task. The arguments include the long-run viability of new financing of the institutions, and their effectiveness in managing the political economy challenges of using conditionality. To illustrate the possible link between better representation and effectiveness, I discuss the example of the Inter-American Development Bank, where the developing country borrowers control 50 percent of the votes and the Presidency. I close with a discussion of the dilemma of reconciling the need for sustaining the financial and political support of the rich country members of these global institutions, with stronger poor country representation to ensure their long-run legitimacy and effectiveness.

La economía política de la justicia distributiva en Colombia

Siguiendo un enfoque “Hirschmaniano” este artículo examina críticamente varios postulados para establecer su verdadera validez conceptual y su consistencia con las reformas que serian deseables. Se cuestionan “creencias” y “expectativas” sobre temas fiscales, redistributivos y sobre el papel de las “elites”. Para el caso de Colombia se argumenta que gran parte del gasto social, por haber sido “capturado”, por monopolios de oferta y por una estructura perversa de incentivos, es poco redistributivo; donde es mas critico que lo sea, a saber, en generar igualdad de oportunidades iniciales La tesis central es que la ruta para encontrar una compatibilidad de incentivos entre la justicia distributiva, de una parte, y la eficiencia económica, de otra, es a través de asegurar igualdad de oportunidades iniciales por medio de un gasto publico social efectivamente redistributivo. La garantía de oportunidades iniciales es la que da legitimidad política a los resaltados finales. No hay dicotomía excluyente entre desarrollo y equidad. Lo que hay es incompatibilidad entre incentivos individuales e incentivos colectivos o políticos.

Ecological Innovation in an Age of Bureaucratic Closure: The Case of the Global Forest

This paper has its roots in both activism and the academy. Through it, we hope to illuminate a shared challenge to political economy and environmental action-the challenge of taking seriously the nexus between nature and power. The abject failure of the August 2002 World Summit on Sustainable Development in Johannesburg exemplifies this pressing challenge.

Employment: the political economic challenges

There are three interconnected forces having dramatic effects on employment in the current era – globalisation, downsizing and technological change. These forces are affecting the availability of jobs, the sectoral composition of employment, the nature of working life and patterns of remuneration. The general tendency is for these changes to accentuate the underlying tendencies in the economic system to instability, insecurity and inequality. Alternative strategic responses are to go for growth, emphasise investment in human capital, and to link employment to equity and environment objectives. Examination of these three scenarios indicates the major political economic challenges facing policy–makers.

Banks, Regions, and Nation in Brazil, 1889-1930

Forging a national unit from regionally autonomous groups was a challenge for nineteenthand early-twentieth-century Brazil. Regional autonomy had resulted in a hierarchical system of local oligarchies and hindered political cohesion. Oligarchies were woven into a fluid, contentious, and often weak national system, with constantly changing powers that often depended on personal relationships.' Economically, regional autonomy had equally profound effects. Some researchers have pointed out that the absence of economic integration among regions resulted in small, localized markets and slow overall growth (Prado, 1991; Leff, 1982). Traditional Brazilian historiography has portrayed the economy as composed of very weakly connected autonomous regions and the state as economically liberal and noninterventionist prior to the mid-twentieth century (Prado, 1993; Furtado, 1993). Recent research in political economy challenges this characterization, finding evidence of an actively interventionist state (Topik, 1987; Fritsch, 1988). This article offers support to this latter view by exploring the participation of banks in the consolidation of a Brazilian economy that became national in scope during the First Republic (1889-1930). It contends that the banking system played an important role in connecting regions, different areas of production, and private and public sectors. It focuses on the institutional aspects of the formation of early national money markets in Brazil to explore their impact on the development of a national economy. The process of this consolidation significantly affected the nature of subsequent economic development. It concludes that the development of the banking system during the First Republic created the framework for the large and centralizing role in the economy that the state eventually assumed. Viewing the banking system within the conceptual framework of market formation highlights its ability to link previously unconnected markets for goods and services and to serve as an agent of growth.

The gendered (Di)‐vision of the rebellion: The public and the private in life histories of female and male union leaders, Salvador‐Bahia‐Brazil

In the 1990s in Brazil a singular type of feminism was being engendered by women in dass‐based labor unions, one that combined a feminist platform with a class project. Drawing on a 1993 case study of male and female leaders of the Bank Employees Labor Union in the city of Salvador, this article examines how these organized labor and feminist agendas were combined and explores the political and labor life histories of those involved in the labor union leadership. The gender and class analysis of labor dynamics in a country emerging from a military dictatorship to adopt a neoliberal model of political economy (both of which had severe effects on workers’ lives) challenges common models of gender based on a sharp dichotomization of the public and the private. The article also highlights ambiguities in union leaders’ discourses concerning the household worker and signals how the globalization of economies jeopardizes the project of a global feminist social movement if working class women are to be included.

The evolution of political-economic challenges in the active zone

Some trade frictions are more important than others because they represent changes or possible changes in systemic economic leadership. Based on several strong assumptions about the nature of international political economy, a multivariate model that differentiates between political-economic challenges that lead to intense, militarized conflicts and those that do not is constructed. Ten iterations of challenges over the past millennium provide empirical support for the applicability of the model. Provided that the model's assumptions continue to hold, it also has clear implications for evaluating the long-term conflict potential of the ongoing US-Japanese commercial competition. While an intense challenge is quite possible, a militarized conflict between Japan and the United States over economic leadership some time in the twenty-first century is not the most probable scenario.

Class Compromise and the International Economy: The Rise and Fall of Swedish Social Democracy

The recent crisis of the Swedish model raises key issues about the future development of democratic socialism. In this article, Wilks argues that the changing interests and increased power-resources of capital brought about by globalization have enabled the large Swedish corporations to destroy the class compromise on which the Swedish model was based. He argues that if social democracy is to survive it must be redefined for an era characterized by a profoundly new set of political-economic challenges.

Four theories of public policy making and fast breeder reactor development

The recent revival of the discipline of political economy challenges purely economic explanations of economic growth, technological innovation, and sectoral change. This approach recognizes that political actors, institutions, and strategies to organize the economic process together shape the economic development of industrial societies. Whereas economists have emphasized determinants of growth such as savings and investment rates, degrees of domestic and international competition in an industry, or the supply of labor, the new political economists view the political definition of property rights, the nature of state intervention in the economy, the resources of politically mobilized groups, and political actors' belief systems as critical determinants of economic transformations. Both economists and political economists, however, share the assumption that actors are rational; they pursue their interests in a calculated manner within a given system of institutional constraints.