World Bank Researchers Punch South Africa’s Poor and Coddle the Rich

Subsidized white capitalists and oppressed activists are amongst those who must “not be named”

By Patrick Bond

“South Africa can claim to have one of the world’s most redistributive public purses,” argues Johannesburg Business Day newspaper associate editor Hilary Joffe, drawing upon World Bank research findings. But not only is this nonsense. The Bank’s silences about poverty and inequality speak volumes.

To illustrate this in next-door Lesotho, Stanford University anthropologist James Ferguson’s famous book The Anti-Politics Machine criticized the World Bank’s 1980s understanding of Lesotho as a “traditional subsistence peasant society.” Apartheid’s migrant labor system was explicitly ignored by the Bank, yet remittances from Basotho workers toiling in mines, factories and farms across the Caledon River accounted for 60 percent of rural people’s income.

Ferguson explained: “Acknowledging the extent of Lesotho’s long-standing involvement in the modern capitalist economy of South Africa would not provide a convincing justification for the ‘development’ agencies to ‘introduce’ roads, markets and credit.”

Using Michel Foucault’s discourse theory, Ferguson showed why some things cannot be named. To do so would violate the Bank’s foundational dogma, that the central problems of poverty can be solved by applying market logic. Yet the most important of Lesotho’s market relationships – exploited labor – was what caused so much misery.

Three decades on, not much has changed. Today, the Bank’s main South Africa research team reveals a similar “Voldemort” problem. Like the villain whose name Harry Potter dared not utter, some hard-to-hear facts evaporate into pregnant silences within the Bank’s latest “South African Poverty and Inequality Assessment Discussion Note.” Bank staff and consultants are resorting to extreme evasion tactics worthy of Harry, Ron and Hermione.

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Technology and the Future of Work

Jayati Ghosh

The latest fear factor to hit the world relates to the disappearance of jobs. Everywhere now the buzz is about how technology is going to transform work – and reduce it dramatically. The Davos World Economic Forum CEO Klaus Schwab (whose book The Fourth Industrial Revolution was released this week) is just the latest in a long line of recent predictors of this gloomy possibility. From 3-D printing to robots that will perform not just some basic services but even more skilled activities like those of accountancy and so on, the fear is that human labour will be increasingly displaced by machines, and so there will simply not be enough work to provide employment to all the people who need jobs.

But there is some confusion in all this doomsaying about the future (or lack of it) of work. Let’s distinguish first between two types of technological change: productive and disruptive. The first describes those changes that increase productivity and change the nature of economic activities. They certainly include increasing automation, as well as a host of new developments in biotechnology and other areas, which clearly reflect the “creative destruction” inherent in a lot of technological change.

There is little point fighting against such advance of technology or even trying to slow it down in some way, because that simply would not work and in any case is not really desirable. But that does not mean that we should be in despair simply because it would displace a lot of human work – in fact, where it replaces arduous work full of drudgery, or makes doing things more easily, we should celebrate it.

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Are the Peterson Institute Studies Reliable Guides to Likely TPP Effects?

More on the controversy about the economic effects of the Trans-Pacific Partnership Agreement (TPPA). This commentary by guest blogger Jomo Kwame Sundaram continues the discussion begun by Jeronim Capaldo and Alex Izurieta here. The three are co-authors of the Global Development and Environment Institute (GDAE) working paper, “Trading Down: Unemployment, Inequality and Other Risks  of the Trans-Pacific Partnership Agreement,” available here. –Eds.

Are the Peterson Institute Studies Reliable Guides to Likely TPP effects?[1]

Jomo Kwame Sundaram

Professor Robert Lawrence[2] poses three seemingly reasonable questions to conclude that his colleagues’ trade policy work on the likely consequences of the Trans-Pacific Partnership Agreement (TPPA) is superior to our macroeconomic policy exercise using the United Nations Global Policy Model (GPM). In doing so, he misrepresents the nature of our work as well as the significance of the differences, thus confusing the issues.

Our study does not purport to be a comprehensive analysis of the TPPA and its effects, as his colleagues’ studies claim to be. We have not used the GPM as a trade policy model to substitute for trade projections made by Professor Lawrence’s colleagues. In fact, despite our reservations, we accepted the earlier projections by the Peterson Institute for International Economics (PIIE) on the likely trade outcomes of tariff reductions as our starting point, but proceeded to show that their claims about the TPP’s likely growth and employment effects were problematic and did not necessarily follow.

Our model incorporates macro-financial dynamics as well as distribution and employment variations, which more realistically represent the world economy rather than their self-equilibrating, full employment model. But in line with the limited scope and purpose of our paper, we do not claim to have provided reliable and definitive projections of the TPP’s likely effects.

As is well known, the United States Department of Agriculture’s Economic Research Service (USDA-ERS) computable general equilibrium (CGE) model[3] projections of the TPP are far more pessimistic than the PIIE’s. If the differences between our results and the findings of the PIIE were simply due to using different models, then one would have to explain how the USDA-ERS model came to its very different conclusions. Clearly, CGE models can come to very different findings using different, in this case, more realistic specifications.

Crucially, we noted that by assuming full employment, the PIIE model assumes away important macroeconomic implications of the TPP. We show that using the PIIE trade projections, but with more realistic modelling, assumptions and specifications, the TPP would result in more modest growth, net job losses, greater pressure on wages and a declining labour share of income. These effects may well be eventually offset by other developments having nothing to do with the TPP, but they nevertheless remain the likely effects of the TPP.

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Capital Bleeds from Emerging Asia

C.P. Chandrasekhar and Jayati Ghosh

Everyone knows that 2015 was a terrible year for emerging markets – but exactly how bad it was has become clear only recently. Not only was it an annus horribilis in terms of net exports of goods and services, which declined sharply and even turned negative for some previously buoyant exporters, but it was also a time when capital flows reversed course. The downturns in both indicators have been much more widespread and substantial than they were initially expected to be, and even greater than mid-year assessments suggested.

In a previous edition of MacroScan, we used IMF data to show how net capital flows into developing Asia had declined significantly in 2014. This marked a break from the previous boom period when emerging markets – and especially those in developing Asia – could do no wrong in the eyes of global investors. But 2015 turns out to have been much more devastating for emerging markets across the world, including those in Asia. A new report from the Institute of International Finance (“Capital Flows to Emerging Markets”, IIF Washington D.C., 19 January 2016) indicates just how serious the swings in capital flows have been.

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Modeling TPP: A response to Robert Z. Lawrence

As trade ministers gather in New Zealand to sign the controversial Trans-Pacific Partnership Agreement (TPP) Feb. 4, Global Development and Environment Institute (GDAE) Research Fellow Jeronim Capaldo and coauthor Alex Izurieta published the following GDAE Globalization Commentary as a response to “Studies of TPP: Which is Credible?” by Robert Z. Lawrence for the Peterson Institute for International Economics. Lawrence takes issue with the modeling of TPP recently published by GDAE, “Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement,” which pointed to limitations in the Peterson Institute’s own modeling, notably its assumption of full employment, and offered additional analysis based on more realistic modeling assumptions. The controversy was recently covered by the New York Times.

By Jeronim Capaldo and Alex Izurieta

In a recent blog post Robert Z. Lawrence of the Peterson Institute compares our projections of TPP’s economic effects with those by his colleagues Peter Petri and Michael Plummer. Since the two sets of projections point to opposite GDP and employment outcomes in the United States, understanding the differences between them is important. We are thankful to Lawrence for bringing up, perhaps unintentionally, a few frequent misconceptions.

Lawrence’s comparison is organized around three questions he asks about each model: Is the model appropriate to explain trade policy? Does it sensibly depict TPP? Are the results credible? These are reasonable questions. Unfortunately, Lawrence’s answers contain several incorrect statements about our model while turning a blind eye to the problematic aspects of his colleagues’ work. If compare we must, we should be fair.

We offer different answers to Lawrence’s three questions and suggest considering a fourth, critical one.

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The Greenhouse 100

Regular Triple Crisis contributor James K. Boyce and his colleague Michael Ash, both professors of economics at the University of Massachusetts and researchers at the Political Economy Research Institute (PERI), released the Greenhouse 100 index late last month. The list, including the 100 U.S. companies responsible for the largest total greenhouse gas emissions based on Environmental Protection Agency (EPA) data, shows a stunning concentration of emissions at the very top. “The top ten companies emit 12.5 percent of total U.S. greenhouse gas emissions from all sources, both stationary and mobile,” reports the press release describing the findings. “The Greenhouse 100 together account for 34 percent of emissions nationwide.” The full text of the press release follows, and the full list of the Greenhouse 100 can be found after the jump. In addition, a Real News Network interview, in which Michael Ash discusses the report, is available here. —Eds.

Researchers at the Political Economy Research Institute (PERI) at the University of Massachusetts Amherst today released a new edition of the Greenhouse 100 index, ranking U.S. industrial polluters on the basis of their emissions of the gases responsible for global climate change.

Topping the list are three electrical power companies: Duke Energy, American Electric Power, and Southern Company. Each of the top three released over 100 million metric tons of CO2 equivalent emissions in 2014. Together, these three alone are responsible for more than five percent of greenhouse gas emissions from all sources combined in the United States – as much as the average annual emissions of about 75 million automobiles.

Other companies in the top ten are NRG Energy Inc., Berkshire Hathaway, Dynegy, Xcel Energy, FirstEnergy, and PPL Corporation. The U.S. government ranks sixth on the Greenhouse 100 list, weighing in at almost 75 million metric tons – equivalent to more than 15 million cars. US Steel, ranked number 21, is the top non-energy corporation on the list.

The top ten companies emit 12.5 percent of total U.S. greenhouse gas emissions from all sources, both stationary and mobile. The Greenhouse 100 together account for 34 percent of emissions nationwide.

The data for the Greenhouse 100 rankings come from the U.S. Environmental Protection Agency’s Greenhouse Gas Reporting Program, which reports emissions from large facilities in the United States for the year 2014. PERI researchers matched the individual facilities to their owners to produce the Greenhouse 100 rankings.

Users of the web-based Greenhouse 100 can see the breakdown of emissions for individual companies by facility. PERI researchers also calculated the percentages of low-income and minority populations living within 10 miles of each facility. These provide an indication of the extent to which emissions of the toxic co-pollutants – such as particulate matter, nitrogen oxides and sulfur dioxide – that are produced along with greenhouse gases disproportionately impact these groups.

“The Greenhouse 100 index informs communities, consumers, and investors which large companies release the most climate pollutants into our air,” said Professor James K. Boyce, director of PERI’s Development, Peacebuilding and the Environment program. “People have a right to know about corporate responsibility for global climate change. Legislators need to understand the effects of corporate behavior on their constituents.”

The Greenhouse 100 accompanies PERI’s well-known “Toxic 100” rankings of corporate air and water polluters.

“In making this information available, we are building on the achievements of the right-to-know movement,” explains Professor Michael Ash, co-director of PERI’s Corporate Toxics Information Project. “Our goal is to engender public participation in environmental decision-making, and to help residents translate the right to know into the right to clean air, clean water, and a livable planet.”

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Chinese Slowdown and the World Economy

Matias Vernengo

The Conference Board argues that Chinese official data should be taken with some skepticism. Nothing new there. They have adopted a new measure, which suggests that implies “Chinese economic growth at a more realistic 3.7 percent” for the recent past. In this scenario, interestingly enough, “it’s likely that the bulk of China’s slowdown has already taken place since 2011, even if unapparent in official statistics.” So the picture is probably worse than the official one (from The Economist)

So China will grow at about 4% and has already been growing at that pace for a while, if one believes the Conference Board (in the official data above one might think there is more space for a slowdown, but clearly it has gone already down too). The big questions are whether this will continue, and what would be the impact for the global economy.

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Let Them Drink Pollution?

The tragic crisis in Flint, Michigan, where residents have been poisoned by lead contamination, is not just about drinking water. And it’s not just about Flint. It’s about race and class, and the stark contradiction between the American dream of equal rights and opportunity for all and the American nightmare of metastasizing inequality of wealth and power.

James K. Boyce

The link between environmental quality and economic inequality was spelled out more than two decades ago in a memorandum signed by Lawrence Summers, then chief economist of the World Bank, excerpts of which appeared inThe Economist under the provocative title, “Let them eat pollution.” Starting from the premise that the costs of pollution depend on “the forgone earnings from increased morbidity and mortality,” Summers concluded that “the economic logic of dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.”

A different logic is supposed to underpin U.S. environmental policies. The Federal Water Pollution Control Act mandates that water quality standards should “protect the public health” – period. Its aim, as former EPA administrator Douglas Costle once put it, is “protection of the health of all Americans.” Under the law, clean water is a right, not something to be provided only insofar as justified by the purchasing power of the community in question.

Even when cost-benefit calculations are brought to bear on environmental policy, the EPA uses a single “value of a statistical life” – currently around $8.7 million – for every person in the country, rather than differentiating across individuals on the basis of income or other attributes.

In practice, however, the role of costs and benefits in shaping public policies often depends on the power of those to whom they accrue. When those on the receiving end are poor, their interests – and their lives – often count for less, much as the Summers memo recommended. And when they are racial and ethnic minorities, the political process often discounts their well-being even more.

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The Paris Climate Change Agreement: Beginning of “The Economics of the Coming Spaceship Earth”?

Edward B. Barbier

Edward B. Barbier is the John S. Bugas Professor of Economics at the University of Wyoming

Fifty years ago, in March 1966, Kenneth Boulding presented his landmark essay, “The Economics of the Coming Spaceship Earth” at a workshop in Washington, D.C.  With its vision of the “spaceship earth,” this short treatise has had a profound influence on thinking about the global economy and sustainability over the past half century.

In the most famous passage, Boulding describes the open economy of the past with its seemingly unlimited resources and contrasted it with the closed economy of the future.  He wrote:

“I am tempted to call the open economy the ‘cowboy economy,’ the cowboy being symbolic of the illimitable plains and also associated with reckless, exploitative, romantic, and violent behavior, which is characteristic of open societies. The closed economy of the future might similarly be called the ‘spaceman’ economy, in which the earth has become a single spaceship, without unlimited reservoirs of anything, either for extraction or for pollution, and in which, therefore, man must find his place in a cyclical ecological system which is capable of continuous reproduction of material form even though it cannot escape having inputs of energy.”

The essay was influential for two reasons.

First, as Boulding emphasized in his opening sentence, creating a more sustainable economy requires humankind rethinking its relationship with nature: “We are now in the middle of a long process of transition in the nature of the image which man has of himself and his environment.”  Boulding recognized that this change in worldview would be difficult, as “the image of the frontier is probably one of the oldest images of mankind, and it is not surprising that we find it hard to get rid of.”

Second, as an economist, Boulding recognized that the main impetus for change must occur in the basic production and consumption relationships of modern economies: “The closed earth of the future requires economic principles which are somewhat different from those of the open earth of the past.”

These central messages of Boulding’s essay are still relevant to contemporary debates over how best to reconcile global economic development with environmental sustainability.

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What We’re Writing, What We’re Reading

What We’re Writing

Sunita Narain, Wheels Are Turning

Matias Vernengo, A Comment on Dean Baker’s Comment on Paul Krugman’s Comment on Bernie Sanders’ Health Plan

What We’re Reading

Michael Ash, ‘Greenhouse 100 Index’ Names Top Polluters

Prabhat Patnaik, Growth Through Redistribution

Nicholas Shaxson, New Paper Makes Powerful Case Against Tax Treaties

Transnational Institute, Financialisation: A Primer

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