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Bankers and Bolsheviks

Hassan Malik

Following an unprecedented economic boom fed by foreign investment, the Russian Revolution triggered the worst sovereign default in history. This book tells the dramatic story of this boom and bust, ... More

Following an unprecedented economic boom fed by foreign investment, the Russian Revolution triggered the worst sovereign default in history. This book tells the dramatic story of this boom and bust, chronicling the forgotten experiences of leading financiers of the age. Shedding critical new light on the decision making of the powerful personalities who acted as the gatekeepers of international finance, the book explains how they channeled foreign capital into Russia in the late nineteenth and early twentieth centuries. While economists have long relied on quantitative analysis to grapple with questions relating to the drivers of cross-border capital flows, this book adopts an historical approach, drawing on banking and government archives in four countries. It provides rare insights into the thinking of influential figures in world finance as they sought to navigate one of the most challenging and lucrative markets of the first modern age of globalization. The book reveals how a complex web of factors—from government interventions to competitive dynamics and cultural influences—drove a large inflow of capital during this tumultuous period in world history. The book demonstrates how the realms of finance and politics—of bankers and Bolsheviks—grew increasingly intertwined, and how investing in Russia became a political act with unforeseen repercussions.Less

China-Africa and an Economic Transformation

Arkebe Oqubay and Justin Yifu Lin (eds)

Progress in Africa’s economic growth in the new millennium has been uneven across countries, and has not translated into structural transformation. The same can be said about the evolving ... More

Progress in Africa’s economic growth in the new millennium has been uneven across countries, and has not translated into structural transformation. The same can be said about the evolving China–Africa economic relations. Although economic ties between China and Africa have made a positive contribution, the impact of this dynamic engagement has been uneven, shaped by variations in strategic approach, policy ownership, and implementation capacity among African governments. As China undergoes major economic rebalancing to upgrade to an innovation-driven economy, this is bound to affect China–Africa relations, offering both opportunities and challenges. Authored by leading scholars on Africa, China, and China–Africa relations, this volume brings together stimulating and thought-provoking perspectives, and deeper analyses on the evolving China–Africa relations. Focusing on Africa’s economic development, the volume looks at core areas of structural transformation: productive investment and industrialization, international trade, infrastructure development, and financing. China–Africa relations are considered in the context of the global division of labour and power, and the particular role of both China and the continent of Africa in the evolving global hierarchy. This volume seeks to fill the gap in the existing literature, steer policy and scholarly debate on the progress and trajectory of China–Africa cooperation, and analyse China’s development path as a source of learning for Africa.Less

Crony Capitalism in the Middle East: Business and Politics from Liberalization to the Arab Spring

Ishac Diwan, Adeel Malik, and Izak Atiyas (eds)

The popular uprisings in 2011 that overthrew Arab dictators were also a rebuke to crony capitalism, targeted against both rulers and their allied businessmen who had monopolized profitable economic ... More

The popular uprisings in 2011 that overthrew Arab dictators were also a rebuke to crony capitalism, targeted against both rulers and their allied businessmen who had monopolized profitable economic opportunities. While the Middle East has witnessed a growing nexus between business and politics in the wake of economic liberalization, little is known about the nature of business cronies, the sectors in which they operate, the mechanisms used to favor them, and the possible impact of such crony relations on the region’s development. Combining inputs from leading scholars in the field, this volume presents a wealth of empirical evidence on the form and function of crony capitalism in the Middle East. The volume is unique in both its empirical focus and comparative scale. Analysis in individual chapters is empirically grounded, based on fine-grained data on the business activities of politically connected actors—furnishing, for the first time, information on the presence, numerical strength, and activities of politically connected entrepreneurs. This volume also substantially enhances our understanding of the mechanisms used to privilege connected businesses, and their possible impact on undermining growth and job creation of firms in the Middle East. It offers a major advance on our prior knowledge of Middle Eastern political economy, and constitutes a distinct contribution to the global literature on crony capitalism and the politics of development. The book will be an essential resource for students, researchers, and policymakers alike.Less

The Economics of Poverty Traps

Christopher B. Barrett, Michael R. Carter, and Jean-Paul Chavas (eds)

While the world has seen much progress in economic growth and poverty reduction over the last few decades, the persistence of extreme poverty and its increased concentration in specific places has ... More

While the world has seen much progress in economic growth and poverty reduction over the last few decades, the persistence of extreme poverty and its increased concentration in specific places has stimulated renewed interest in the processes of economic development and the possibility of poverty traps. This volume, based on papers first presented at an NBER conference in June 2016, draws together an outstanding collection of new studies of the dynamic, stochastic processes by which households accumulate assets and increase their productivity and earnings potential, as well as the conditions under which some individuals, groups, and economies struggle to escape poverty, and when and why adverse shocks have persistent welfare consequences. Poverty traps may arise when poverty becomes self-reinforcing because the poor's equilibrium behaviors perpetuate low standards of living. The poverty traps hypothesis carries especially important implications for the design and evaluation of policies and projects intended to reduce poverty. The chapters in this volume extend and integrate the range of the mechanisms hypothesized to generate poverty traps, including feedback loops between poverty and mental health, aspirations and preferences. The chapters link the relevant theory to empirics, and offer new empirical evidence that highlights both the insights and the limits of a poverty traps lens on the contemporary policy commitment to achieve zero extreme poverty worldwide by 2030.Less

The European Guilds

Sheilagh Ogilvie

Guilds ruled many crafts and trades from the Middle Ages to the Industrial Revolution, and have always attracted debate and controversy. They were sometimes viewed as efficient institutions that ... More

Guilds ruled many crafts and trades from the Middle Ages to the Industrial Revolution, and have always attracted debate and controversy. They were sometimes viewed as efficient institutions that guaranteed quality and skills. But they also excluded competitors, manipulated markets, and blocked innovations. Did the benefits of guilds outweigh their costs? Analyzing thousands of guilds that dominated European economies from 1000 to 1880, this book uses vivid examples and clear economic reasoning to answer that question. The book features the voices of honourable guild masters, underpaid journeymen, exploited apprentices, shady officials, and outraged customers, and follows the stories of the “vile encroachers”—women, migrants, Jews, gypsies, bastards, and many others—desperate to work but hunted down by the guilds as illicit competitors. It investigates the benefits of guilds but also shines a light on their dark side. Guilds sometimes provided important services, but they also manipulated markets to profit their members. They regulated quality but prevented poor consumers from buying goods cheaply. They fostered work skills but denied apprenticeships to outsiders. They transmitted useful techniques but blocked innovations that posed a threat. Guilds existed widely not because they corrected market failures or served the common good, but because they benefited two powerful groups—guild members and political elites. The book shows how privileged institutions and exclusive networks shape the wider economy—for good or ill.Less

Fighting Financial Crises: Learning from the Past

Gary B. Gorton and Ellis W. Tallman

Financial crises, banking panics, have plagued all market economies and have throughout history. This book is about fighting financial crises. Lessons and rules are derived from history, in ... More

Financial crises, banking panics, have plagued all market economies and have throughout history. This book is about fighting financial crises. Lessons and rules are derived from history, in particular from the experience of the US National Banking Era, 1963-1914. In this era, private bank clearing houses were at the forefront of fighting crises. The key lesson concerns managing information during the crisis. Information was withheld by the clearing house so that individual banks did not experience runs. The lessons are applied to modern crises, which are more complicated because of expectations about government and central bank possible future actions. Nevertheless, the rules apply.Less

Finance and Financial Intermediation: A Modern Treatment of Money, Credit, and Banking

Harold L. Cole

Finance and financial intermediation are central to modern economies. This book covers all of the material a sophisticated economist needs to know about this area. It begins with an overview of ... More

Finance and financial intermediation are central to modern economies. This book covers all of the material a sophisticated economist needs to know about this area. It begins with an overview of financial markets and their operation. It then covers asset pricing for standard assets and derivatives, and analyses what modern finance says about firm behaviour and capital structure. The book covers money, exchange rates, electronic payments methods, and cryptocurrencies. The book then covers financial intermediation. The book then examines the role played by finance and financial intermediation in the Great Recession of the 2000s. After this, the book switches to public finance and government borrowing which is central to major economic events. It examines the incentives to monetize the public debt and its consequences. The book closes with an examination of sovereign debt crises and an analysis of their various forms.Less

Fiscal Therapy: Balancing Today's Needs with Tomorrow's Obligations

William G. Gale

America faces two distinct but related economic challenges. Steadily rising federal debt—largely fueled by rising healthcare costs and an aging population that will boost spending on Social Security, ... More

America faces two distinct but related economic challenges. Steadily rising federal debt—largely fueled by rising healthcare costs and an aging population that will boost spending on Social Security, Medicare, and Medicaid—will make it harder to grow the nation’s economy, boost living standards, respond to wars or recessions, address social needs, and maintain the US role as a global leader. At the same time, an increasingly fractured society has left many people behind and let critical investments lag, even as overall prosperity has grown. How and when US citizens address these challenges will help determine the future they build for themselves and their children. This book proposes a remedy with three core elements: controlling entitlement spending in ways that preserve and enhance the programs’ anti-poverty and social insurance roles; betting on the future by stipulating major new public investments in human and physical capital; and raising and reforming taxes to pay for government services fairly and efficiently. Together, these changes would control federal borrowing, strengthen the economy, increase opportunity, reduce inequality, and build better lives for current and future generations. There is no need to kill popular programs or starve government. Indeed, a primary goal of fiscal reform is to maintain and enhance the vital functions that government provides. The country needs to act responsibly, pay for the government it wants, and shape that government in ways that serve it best.Less

Foundations of Migration Economics

George J. Borjas and Barry R. Chiswick

Benjamin Elsner (ed.)

Migration these days is as topical as ever. A substantial and even increasing percentage of the world population live outside their country of birth. Climate change, conflicts, but also better ... More

Migration these days is as topical as ever. A substantial and even increasing percentage of the world population live outside their country of birth. Climate change, conflicts, but also better education in developing countries will lead to more international migration, and will present new challenges to the societies in the sending and receiving countries. This volume offers insights into core topics of migration economics that have been pioneered by 2011 IZA Prize Laureates George Borjas and Barry Chiswick. The book shows migration economics at its best and underscores its high relevance for shaping the future of modern societies and labor markets.Less

Human Development in an Unequal World

K. Seeta Prabhu and Sandhya S. Iyer

This book is about the human development paradigm that is assuming renewed importance at a time when global dialogue is preoccupied with discussing pathways for achieving the 2030 agenda of the ... More

This book is about the human development paradigm that is assuming renewed importance at a time when global dialogue is preoccupied with discussing pathways for achieving the 2030 agenda of the Sustainable Development Goals (SDGs). It deals with the knowledge of human development in an unequal world and examines a range of issues of contemporary relevance, such as social sectors, poverty, gender inequality, social exclusion, and sustainability. Arguments in favour of human freedoms and flourishing are pertinent as societies in contemporary times are getting increasing broken into multiple identities and social categories. The ‘Unequal World’ represents the conjunction of human unfreedoms due to deprivations and inequalities in multiple realms. It argues for a paradigmatic shift in analysis, policy, and methodology towards a people-centered approach rooted in human flourishing and freedoms. This book seeks to bring back people to the forefront, and refocus on the centrality of peoples’ choices and freedoms. It is anchored in the human development paradigm and examines a range of issues that reflect the dimensions of an unequal world. Set within the broader framework that includes processes, institutions, and actors, the book explores both analytical and empirical realms. The ten chapters of the book weave together the numerous concepts, methods, and evidence. The comprehensive coverage and the integrated framework presented will enable readers across the globe to arrive at a thorough understanding of the human development approach and apply these frameworks in development practice with a fresh and more relevant perspective.Less

Inclusive Dualism: Labour-intensive Development, Decent Work, and Surplus Labour in Southern Africa

Nicoli Nattrass and Jeremy Seekings

W. Arthur Lewis, the founding father of development economics, saw developing economies as dualist, that is, characterised by differences in earnings and productivity between and within economic ... More

W. Arthur Lewis, the founding father of development economics, saw developing economies as dualist, that is, characterised by differences in earnings and productivity between and within economic sectors. His famous model of development, in which ‘surplus’ (unemployed and underemployed) labour was drawn out of subsistence activities and into manufacturing, was reflected in the subsequent East Asian development trajectory in which labour was drawn into low-wage, labour-intensive manufacturing, including in clothing production, before shifting into higher-wage work once the supply of surplus labour had dried up. This development strategy has become unfashionable, the concern being that in a globalized world, labour-intensive industry promises little more than an impoverishing ‘race to the bottom’. A strong strand in contemporary development discourse favours the promotion of decent work irrespective of whether surplus labour exists or not. We argue that ‘better work’ policies to ensure health and safety, minimum wages and worker representation are important. Decent work fundamentalism—that is, the promotion of higher wages and labour productivity at the cost of lower-wage job destruction—is a utopian vision with dystopic consequences for countries with high open unemployment, including most of Southern Africa. We show, using the South African clothing industry as a case study, that decent work fundamentalism ignores the benefits of dualism (the co-existence of high- and low-wage firms), resulting in the unnecessary destruction of labour-intensive jobs and the bifurcation of society into highly-paid, high-productivity insiders and unemployed outsiders. The South African case has broader relevance because of the growth in surplus labour—including in its extreme form, open unemployment—across a growing number of African countries. Inclusive dualism, as a development strategy, takes the trade-off between wages and employment seriously, prioritizes labour-intensive job creation and facilitates increased productivity where appropriate, so that jobs are created, not destroyed.Less

Institutions and Macroeconomic Policies in Resource-Rich Arab Economies

Kamiar Mohaddes, Jeffrey B. Nugent, and Hoda Selim (eds)

This volume contributes to the literature on the Arab World in two main ways. First, the regional focus on the role of institutions and macroeconomic policies fills an enormous research gap as this ... More

This volume contributes to the literature on the Arab World in two main ways. First, the regional focus on the role of institutions and macroeconomic policies fills an enormous research gap as this has been largely understudied, mainly due to the insufficiency of informational disclosure by governments in general and especially fiscal institutions. Hence, an important contribution of this volume is to reveal more detailed information concerning problems and policies of the region’s oil exporters. Second, given the constraints hindering macroeconomic reforms in Arab oil-exporting countries, it offers a novel political economy analysis that examines the ways in which resource endowments affect political regimes and the choice of macroeconomic institutions and policies in oil-rich Arab economies. The four main questions addressed in this volume are: (i) Do institutions (both political and economic) matter for macroeconomic policies in Arab oil exporters, and if so how? (ii) What are the main features of the macroeconomic institutions (fiscal, monetary, and exchange rate regimes) that are most effective in mitigating commodity price volatility, growth volatility, inefficiency in expenditure allocations, and corruption? (iii) How well are existing fiscal institutions performing in terms of fiscal policies and outcomes? (iv) When fiscal institutions are not performing well, what should be done about this?Less

Jumpstarting South Asia: Revisiting Economic Reforms and Look East Policies

Pradumna B. Rana and Wai-Mun Chia

As is well-known, the seminal work of the late Angus Maddison has established that 2,000 years ago the Indian subcontinent (modern day, South Asia) and China were by far the richest regions of the ... More

As is well-known, the seminal work of the late Angus Maddison has established that 2,000 years ago the Indian subcontinent (modern day, South Asia) and China were by far the richest regions of the world. Since the Industrial Revolution of the nineteenth century, the share of world GDP of the Indian subcontinent had started to decline. This trend reversed somewhat after the economic reforms of the 1980s and 1990s. More recently, however, economic growth in South Asia has softened yet once again for several reasons. This book focuses on the slowing pace of economic reforms and outlines a two-pronged strategy to jumpstart South Asian economies. First, South Asian countries should complete the economic reform process that they had begun in the 1980s and 1990s and implement the more microeconomic reforms, namely, the sectoral, and governance and institutional reforms to enhance competition and improve the operation of markets. Second, they should implement the second round of ‘Look East’ policies or LEP2 to (i) link themselves to production networks in East Asia, their fastest-growing markets, and (ii) develop production networks in manufacturing and services within their region. The book argues that the proposed strategy will lead to a win-win situation for all countries in South Asia and East Asia and reinvigorate economic integration within South Asia, one of the least integrated regions of the world. The book also identifies the unfinished policy reform agenda for each South Asian country and the components of the LEP2 that they should implement.Less

Openness to Creative Destruction: Sustaining Innovative Dynamism

Arthur M., Jr. Diamond

Openness to Creative Destruction: Sustaining Innovative Dynamism shows how life improves under the economic system often called “entrepreneurial capitalism” or “creative destruction,” but more ... More

Openness to Creative Destruction: Sustaining Innovative Dynamism shows how life improves under the economic system often called “entrepreneurial capitalism” or “creative destruction,” but more accurately called “innovative dynamism.” The book describes how, in such a system, innovation occurs through the efforts of inventors and innovative entrepreneurs, how workers on balance benefit, and how good policies can encourage innovation. The inventors and innovative entrepreneurs are often cognitively diverse outsiders with the courage and perseverance to see and pursue serendipitous discoveries or slow hunches. Economies grow where innovative dynamism flourishes through leapfrog competition, as in the United States from roughly 1830 to 1930. Consumers vote with their feet for innovative new goods and for process innovations that reduce prices, benefiting ordinary citizens more than the privileged elites. Some labor-market fears are unjustified, since more and better new jobs are created than are destroyed; other fears can be mitigated by better policies. Since breakthrough inventions are costly and difficult, patents can be fair rewards for invention and can provide funding to enable future inventions. At the key early stage of most breakthrough innovations, when innovative ideas are hardest to communicate and most widely doubted, the innovations are largely self-funded. The steady growth in regulations, often defended on the basis of the precautionary principle, increases the costs of innovation for the entrepreneur. Secular (long-term) stagnation is due to bad policies, not to having picked the low-hanging fruit, as illustrated by innovative medical entrepreneurs who are constrained from bringing us quicker and better cures for cancer.Less

Productivity and the Bonus Culture

Andrew Smithers

Living standards in the UK and the US are in danger of falling. In the past change has brought disruption with the offsetting reward of higher living standards from growth. Today we have disruption ... More

Living standards in the UK and the US are in danger of falling. In the past change has brought disruption with the offsetting reward of higher living standards from growth. Today we have disruption without reward. The resulting voter dissatisfaction encourages populist policies which threaten even worse outcomes. The decline in growth has weakened the standing of liberal democracy both at home and internationally. The decline is entirely due to poor productivity combined with an unfavourable change in demography. The UK and the US have changed from having a demographic surplus in which the working population grew faster than the total population to a demographic deficit. Before living standards grew faster than productivity they now grow more slowly. Faster immigration could change demography, but voters are likely to press for less. To avoid falling living standards we must increase the rate at which productivity improves. Faster productivity does not only depend on technology. We can improve it by encouraging more investment. Growth depends on Total Factor Productivity (“TFP”), for which current consensus estimates are based on a faulty model which has induced pessimism about our ability to encourage more growth. The book sets out a revised and superior model of TFP which demonstrates that the weakness in productivity is the result of the bonus culture and suggests ways by which this can be changed so that investment is encouraged and growth returns.Less

Public Governance and the Classical-Liberal Perspective: Political Economy Foundations

Paul Dragos Aligica, Peter J. Boettke, and Vlad Tarko

Classical liberalism entails not only a view about the proper scope of government and its relationship with the market but also a distinct theory about how government should operate within its proper ... More

Classical liberalism entails not only a view about the proper scope of government and its relationship with the market but also a distinct theory about how government should operate within its proper area. This book presents the basic governance theory and political economy principles underpinning this vision. Building upon the works of diverse authors such as Friedrich Hayek, James Buchanan, and Vincent and Elinor Ostrom, the book offers a profound challenge to how public governance is commonly understood, by shifting the focus along several dimensions. First, it challenges the technocratic-epistocratic perspective in which social goals are set and experts simply provide the means to attain them. Instead, the focus is on the diversity of opinions in any society regarding “what should be done,” and on the design of democratic and polycentric institutions capable of limiting social conflicts and satisfying the preferences of as many people as possible. Second, the book explains the knowledge and incentive problems associated with technocratic-epistocratic governance. This has deep implications for how public governance itself should be construed. The book’s three parts reconstruct the theoretical foundations of the position, then explore its nature and development at the interface between public choice and public administration, and finally illustrate via a set of concrete governance issues how it operates at the applied level. The book thus fills a large gap in the academic literature, as well as the public discourse, about the ways decision makers understand the nature and administration of the public sector.Less

Rethinking America's Highways: A 21st-Century Vision for Better Infrastructure

Robert W. Poole Jr.

This book examines how the model of state-owned highways came about and why it is failing. It argues for a new model that treats highways as public utilities, such as electricity and water supply. ... More

This book examines how the model of state-owned highways came about and why it is failing. It argues for a new model that treats highways as public utilities, such as electricity and water supply. Customers would pay based on how much they drive, and companies would issue revenue bonds to invest in facilities. This would lead to key decisions about highways being made on economic rather than political grounds.Less