tag:theconversation.com,2011:/global/topics/political-economy-18638/articlespolitical economy – The Conversation2023-04-26T13:02:07Ztag:theconversation.com,2011:article/2043892023-04-26T13:02:07Z2023-04-26T13:02:07ZSudan’s conflict has its roots in three decades of elites fighting over oil and energy<figure><img src="https://images.theconversation.com/files/522736/original/file-20230425-28-iewah3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The opening of a hydro-electric dam on the Nile River at Merowe, north of Khartoum, in 2009.</span> <span class="attribution"><span class="source">Ashraf Shazly/Afp via GettyImages</span></span></figcaption></figure><p>Sudan stands on the brink of yet another civil war sparked by the <a href="https://www.washingtonpost.com/world/2023/04/18/sudan-conflict-military-rsf-paramilitary/">deadly confrontation</a> between the Sudan Armed Forces of General Abdelfatah El-Burhan and the Rapid Support Forces of Mohamed Hamdan Dagalo (“Hemedti”). </p>
<p>Much of the international news coverage has focused on the clashing ambitions of the two generals. Specifically, that differences over the <a href="https://www.reuters.com/world/africa/whats-behind-sudans-crisis-2023-04-17/">integration</a> of the paramilitary Rapid Support Forces into the regular army triggered the current conflict on April 15, 2023.</p>
<p>I am a professor teaching at Columbia University and my research focuses on the political economy of the Horn of Africa. A forthcoming paper of mine in the Journal of Modern African Studies details the strategic calculus of the Sudan Armed Forces in managing revolution and democratisation efforts, today as well as in past transitions. Drawing on this expertise, it is important to underline that three decades of contentious energy politics among rival elites forms a crucial background to today’s conflict.</p>
<p>The current conflict comes after a decade-long recession which has drastically <a href="https://www.worldbank.org/en/country/sudan/overview">lowered</a> the living standards of Sudanese citizens as the state teetered on the brink of insolvency. </p>
<h2>How energy has shaped Sudan’s violent political economy</h2>
<p>Long gone are the heady days when Sudan emerged as <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn6">one of Africa’s top oil producers</a>. Close to 500,000 barrels were pumped every day by 2008. Average daily production in the last year has hovered around <a href="https://tradingeconomics.com/sudan/crude-oil-production">70,000 barrels</a>.</p>
<p>In the late 1990s, amid a devastating civil war, President Omar Al-Bashir’s military-Islamist regime announced that energy would help birth a new economy. It had already paved the way for this reality, <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn7">ethnically cleansing</a> the areas where oil would be extracted. The regime struck <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn%208">partnerships</a> with Chinese, Indian and Malaysian national oil companies. Growing Asian demand was met with Sudanese crude.</p>
<p>Petrodollars poured in. The regime in power between 1989 and 2019 oversaw a boom. This enabled it to weather internal political crises, <a href="https://www.smallarmssurvey.org/sites/default/files/resources/HSBA-WP40-Oil.pdf">increase the budgets</a> of its security agencies and to spend lavishly on infrastructure. Billions of dollars were channelled to the <a href="https://www.jstor.org/stable/44507984">construction and expansion</a> of several hydro-electric dams on the Nile and its tributaries.</p>
<p>These investments intended to enable the irrigation of hundreds of thousands of hectares. Food crops and animal fodder were to be grown for Middle Eastern importers. Electricity consumption in urban centres was <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn9">transformed</a>; production in Sudan was boosted by thousands of megawatts. The regime spent more than US$10 billion on its dam programme. That’s a phenomenal sum and <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn10">testament</a> to its belief that the dams would become the centrepiece of Sudan’s modernised political economy.</p>
<h2>South Sudan secedes</h2>
<p>Then, in 2011, South Sudan seceded – along with <a href="https://www.elibrary.imf.org/view/journals/002/2020/073/article-A003-en.xml">three-quarters</a> of Sudan’s oil reserves. This exposed the illusions on which these dreams of hydro-agricultural transformation rested. The regime <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-onflict-and-energy-in-sudan/#_edn11">lost</a> </p>
<blockquote>
<p>half of its fiscal revenues, and about two-thirds of its international payment capacity.</p>
</blockquote>
<p>The economy shrank by 10%. Sudan was also plagued by power cuts as the dams proved very costly and produced much less than promised. Lavish fuel subsidies were maintained but as evidence shows, these disproportionately <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn12">benefited</a> select constituencies in Khartoum and failed to protect the poor.</p>
<p>As the regime sank ever deeper into economic crisis, its security agencies <a href="https://www.energypolicy.columbia.edu/qaf-conflict-and-energy-in-sudan/#_edn13">concentrated</a> on accumulating the means they deemed essential to survive, and to compete with each other. Both the Sudan Armed Forces and Rapid Support Forces deepened their involvement in Sudan’s political economy. They took control of key commercial activities. These included meat processing, information and communication technology and gold smuggling.</p>
<h2>Soaring fuel, food and fertiliser prices</h2>
<p>This economic crisis fuelled a popular uprising which led to the <a href="https://www.aljazeera.com/news/2019/4/11/omar-al-bashir-deposed-how-the-world-reacted">overthrow</a> of Al-Bashir. After the 2018-2019 revolution, the international community oversaw a <a href="https://press.un.org/en/2021/sc14730.doc.htm">power-sharing arrangement</a>. This brought together Sudan Armed Forces, Rapid Support Forces and a civilian cabinet. Reforms were tabled to reduce spending on fuel imports and address the desperate economic situation.</p>
<p>However, the proposals for economic reform competed for government and international attention with calls to fast-track the “de-Islamisation” of Sudan, and to purge collaborators of the ousted regime from civil service ranks.</p>
<p>Inflationary pressures worsened as food and energy prices rose. It also strengthened a growing <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn14">regional black market</a> in which fuel, wheat, sesame and much else was illicitly traded across borders. At the same time, divisions grew in Sudan’s political establishment and among protesters in its streets. </p>
<p>The government’s efforts to push back against growing control of economic activities by the Sudan Armed Forces and Rapid Support Forces ultimately <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn16">contributed</a> to the October 2021 coup against Prime Minister Abdallah Hamdok.</p>
<h2>Overlapping crises</h2>
<p>The coup only deepened the crisis. So too did <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn17">global supply shocks</a>, such as those caused by the COVID-19 pandemic and the Russia-Ukraine conflict, which sent the prices of fuel, food and fertiliser skyrocketing globally, including in Sudan. Fertiliser prices increased by more than <a href="https://www.youtube.com/watch?v=vXyWFYvp_00">400%</a>. The state’s retreat from subsidising essential inputs for agricultural production, such as diesel and fertiliser, led farmers to <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_edn18">drastically</a> reduce their planting, further exacerbating the food production and affordability crunch.</p>
<p>Amid these overlapping energy, food and political crises, Sudan’s Armed Forces and Rapid Support Forces have been violently competing for control of the political economy’s remaining lucrative niches, such as key import-export channels. Both believe the survival of their respective institutions is essential to preventing the country from descending into total disintegration. </p>
<p>In view of such contradictions and complexity, there are no easy solutions to Sudan’s multiple crises. The political, economic and humanitarian situation is likely to worsen further.</p>
<p><em>A <a href="https://www.energypolicy.columbia.edu/qa-the-political-economy-of-conflict-and-energy-in-sudan/#_ednref13">version</a> of this article was first published by the Center on Global Energy Policy.</em></p><img src="https://counter.theconversation.com/content/204389/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Harry Verhoeven does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Sudanese crisis is the culmination of three decades of contentious energy politics among rival elites.Harry Verhoeven, Senior Research Scholar at the Center on Global Energy Policy, Columbia UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1806862022-04-06T14:51:33Z2022-04-06T14:51:33ZLessons from the global South on how to counter harmful information<figure><img src="https://images.theconversation.com/files/456400/original/file-20220405-21071-zxiwn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Disinformation is particularly rife during elections.</span> <span class="attribution"><span class="source">Pius Utomi Ekpei/AFP/Getty Images</span></span></figcaption></figure><p>The large-scale contamination of the public sphere by rumours, hate speech, dangerous conspiracy theories and orchestrated deception campaigns is causing widespread concern around the world. These ills are collectively referred to as <a href="https://edoc.coe.int/en/media/7495-information-disorder-toward-an-interdisciplinary-framework-for-research-and-policy-making.html">“information disorder” </a>. </p>
<p>The disorder results from a range of factors. They include a rapidly changing media ecology and an increasingly fractious, populist and polarised political environment. The <a href="https://www.who.int/health-topics/infodemic">surge in misleading and false information</a> about the Covid-19 pandemic has increased these concerns.</p>
<p>Despite being a widespread problem in the Global South, the study of information disorder is dominated by examples, case studies and models from the Global North. This applies to the available knowledge about the range of responses and counter-interventions that have been put in place. </p>
<p>Our <a href="https://protect-za.mimecast.com/s/C12FCwjyBrSmpNoktVSahQ">new study</a>, aims to fill this gap. It provides, for the first time, a comprehensive overview of the organisations, activists and movements working across the Global South to counter information disorder. The term <a href="https://journals.sagepub.com/doi/pdf/10.1177/1536504212436479">Global South</a> refers to the regions outside Europe and North America, mostly low-income and often politically or culturally marginalised.</p>
<p>The study was a collaborative effort by research teams from four regions: sub-Saharan Africa, Latin America, Asia as well as the Middle East and North Africa (MENA) region. </p>
<p>It explored the methods people use to meet the challenge of disinformation. Special attention was given to how the Covid-19 pandemic has made the problem worse.</p>
<p>We found that a range of actors are working to fight the problem of information disorder. These include teams of independent fact checkers, policymakers as well as media educators. Organisations and movements in lower and middle-income countries are also rising to combat the problem of “fake news”.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/spotting-hoaxes-how-young-people-in-africa-use-cues-to-spot-misinformation-online-161296">Spotting hoaxes: how young people in Africa use cues to spot misinformation online</a>
</strong>
</em>
</p>
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<p>This study provides useful reference points on how civil society organisations in the Global South are countering information disorder. This includes a focus on what’s being done to support reliable and trustworthy information.</p>
<h2>Information disorder</h2>
<p>The information disorder is being generated by the increasing prevalence of <a href="https://edoc.coe.int/en/media/7495-information-disorder-toward-an-interdisciplinary-framework-for-research-and-policy-making.html">misinformation, disinformation and malinformation</a> in public and on social media.</p>
<ul>
<li><p>Misinformation is false information that is shared, but with no harm intended.</p></li>
<li><p>Disinformation is false information that is knowingly shared to mislead or cause harm.</p></li>
<li><p>Malinformation (malicious information) is when information, factual or false, is shared to cause harm. This is often done by publishing information meant to stay private.</p></li>
</ul>
<p>Meeting the challenges of information disorder is particularly important in fledgling democracies or where democratic rights are in decline or under pressure. Access to quality information is vital to enabling citizens to participate in democratic processes.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/punitive-laws-are-failing-to-curb-misinformation-in-africa-time-for-a-rethink-162961">Punitive laws are failing to curb misinformation in Africa. Time for a rethink</a>
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<p>Many democracies in the global South are <a href="https://www.patrickheller.com/uploads/1/5/3/7/15377686/democratic_deepening_in_brazil_india_and_south_africa_yale_present.pdf">fragile and need deepening</a>. In addition, access to digital resources is <a href="https://www.idrc.ca/en/project/understanding-digital-access-and-use-global-south">unevenly distributed</a> and independent media are <a href="https://rsf.org/en">often under pressure</a>. In these environments, information disorder can further undermine democratic governance and civic agency.</p>
<h2>Responding to harmful information</h2>
<p>The study found various types of responses – similar to those <a href="https://en.unesco.org/sites/default/files/journalism_fake_news_disinformation_print_friendly_0.pdf">identified elsewhere</a> – to information disorder across regions. These included:</p>
<ul>
<li><p>monitoring and fact-checking, </p></li>
<li><p>legislation and regulation, </p></li>
<li><p>production and distribution responses. These included algorithmic and technical processes to root out disinformation online, and </p></li>
<li><p>responses aimed at targets of disinformation – literacy campaigns, for example.</p></li>
</ul>
<p>The work done by organisations in the region often shows a multilayered response to the problem. By linking different issues together, organisations show the importance of approaching information disorder as a complex problem requiring various responses.</p>
<p>Examples of how different imperatives are linked together by organisations across the region include:</p>
<ul>
<li><p>Combining fact-checking with media literacy initiatives. This is done by, for instance, <a href="https://dubawa.org/">Dubawa</a> and <a href="https://africacheck.org/">Africa Check</a> in sub-Saharan Africa. This empowers citizens to establish the veracity of information they come across. They can then become more critical and discerning consumers of media.</p></li>
<li><p>Linking quality of information with right of access to information and digital technologies, policy interventions on cyber-security, surveillance and data protection. This is done by, among others, the <a href="https://adc.org.ar/en/2020/08/03/alsur-consortium-2/">AlSur consortium</a> in Latin America. </p></li>
</ul>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/journalism-has-changed-education-must-reflect-the-reality-176944">Journalism has changed. Education must reflect the reality</a>
</strong>
</em>
</p>
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<p>The assumption here is that citizens are unable to empower themselves with quality information unless they have better access to digital resources. Similarly, the integrity of the public sphere is compromised if peoples’ data isn’t protected, or if governments use digital platforms as surveillance tools against citizens.</p>
<ul>
<li><p>Linking anti-information disorder work with media freedom and right to protest. An example is <a href="https://artigo19.org/">Artigo 19</a> in Latin America. An example of combating hate speech is by <a href="https://kashif.ps/%D9%85%D9%86-%D9%86%D8%AD%D9%86/">Kashif</a> in Palestine. The linking of these issues is based on the understanding that a democratic public sphere is as much about rooting out bad information as it is about allowing good information to flourish.</p></li>
<li><p>Linking electoral information disorder and internet rights. This was done by, for instance, <a href="https://www.derechosdigitales.org/">Derechos Digitales</a> in Latin America. It uses advocacy campaigns to engage politicians and digital platforms. Linking these issues makes clear that citizens have to be able to take part in online spaces, where political agendas are set and discussed for democratic political processes like elections to succeed.</p></li>
<li><p>Several organisations in the region complement fact checking with their own investigative journalism. Examples include <a href="https://chequeado.com/">Chequeado</a> in Argentina and <a href="https://verificado.com.mx/">Verificado</a> in Mexico. Some also conduct workshops on media ethics, such as <a href="https://falso.ly/en/">Falso</a> in Libya. And, journalism training, as <a href="https://cfi.fr/en/project/desinfox-africa">Desinfox Africa</a> is doing in Western Africa. </p></li>
</ul>
<p>Combining verification skills with journalistic training, and inculcating ethical values recognises that encouraging good, ethical conduct is essential to eliminating false information and harmful from journalism.</p>
<h2>What needs to be done</h2>
<p>Our research shows why there’s a need to take a comprehensive approach to combating information disorder in the Global South. Effective solutions have to extend beyond addressing only digital content, to seeing the problem as a social and political one as well. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/journalism-makes-blunders-but-still-feeds-democracy-an-insiders-view-146364">Journalism makes blunders but still feeds democracy: an insider's view</a>
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</em>
</p>
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<p>However, the global South should not be treated as a monolith. Important differences and variations exist between countries within regions and between different groups within countries. They’re also found between different geographical, economic or social contexts. Future research should, therefore, maintain regional diversity even as it aims to connect the dots across the South.</p><img src="https://counter.theconversation.com/content/180686/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Herman Wasserman received funding from the International Development Research Centre (IDRC), Grant number 109612-001.</span></em></p>By linking different issues together, organisations show the importance of approaching information disorder as a complex problem requiring various responses.Herman Wasserman, Professor of Media Studies in the Centre for Film and Media Studies, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1399952020-06-04T19:58:05Z2020-06-04T19:58:05ZVital signs. Remembering Alberto Alesina, the father of political economy<figure><img src="https://images.theconversation.com/files/339735/original/file-20200604-67372-rnv48h.jpg?ixlib=rb-1.1.0&rect=313%2C161%2C1369%2C873&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Harvard University</span></span></figcaption></figure><p>Harvard University’s <a href="https://scholar.harvard.edu/alesina/home">Alberto Alesina</a> died suddenly of a heart attack on May 23. </p>
<p>He was 63.</p>
<p>His long-time colleague and friend <a href="https://www.washingtonpost.com/opinions/2020/05/24/it-is-hard-imagine-field-political-economy-without-alberto-alesina/">Larry Summers</a> wrote that before him, “there was no academic field of political economy. Today, political economy is an important component of economics and political science.”</p>
<p>That is because of Alberto’s contribution. More distinguished scholars than I – <a href="https://promarket.org/2020/05/26/there-are-few-things-more-exciting-than-learning-something-new-and-important-about-humanity-alesinas-scientific-odyssey/">Ed Glaeser</a>, <a href="https://promarket.org/2020/05/27/how-alberto-alesina-challenged-the-median-voter-theorem/">Howard Rosenthal</a>, <a href="https://scholar.harvard.edu/files/stantcheva/files/alberto_alesina._a_free-spirited_economist_vox_cepr_policy_portal.pdf">Stefanie Stantcheva</a>, <a href="https://promarket.org/2020/05/24/he-always-knew-where-big-ideas-where/">Paola Giuliano</a>, and <a href="https://www.washingtonpost.com/opinions/2020/05/24/it-is-hard-imagine-field-political-economy-without-alberto-alesina/">Summers</a> – have provided wonderful accounts of his work in recent days.</p>
<p>I had the great privilege of having him on my PhD thesis committee, and counting him as a friend.</p>
<h2>The father of political economy</h2>
<p>The modern field of political economy views the political process as a critical determinant of economic outcomes. </p>
<p>It might be that political instability threatens economic growth, or that political programs designed to redistribute income or wealth hinder or help growth, depending on their design.</p>
<p>Whatever they do, political processes and institutions have economic consequences, and they can be examined through an economic lens.</p>
<p>An important institutional question he examined was the best way to control inflation.</p>
<p>In a <a href="http://debis.deu.edu.tr/userweb/yesim.kustepeli/dosyalar/alesinasummers1993.pdf">series of papers</a> with multiple coauthors he identified the advantages of an independent central bank.</p>
<p>The median voter in would like to appoint a central banker that cares a lot about inflation, but might also be tempted to remove that central banker because of the short-run (<a href="https://www.smh.com.au/national/the-sound-economics-behind-australia-s-health-first-covid-response-20200514-p54st7.html">but not long-run</a>) tradeoff between inflation and unemployment. </p>
<p>Central bank independence is the way out. As he and Summers put it</p>
<blockquote>
<p>insulating monetary policy from the political process avoids this problem and helps enforce the low inflation equilibrium</p>
</blockquote>
<p>His 2001 paper with Ed Glaeser and Bruce Sacerdote posed a big question in its title: “<a href="https://www.nber.org/papers/w8524.pdf">Why Doesn’t the US Have a European-Style Welfare System?</a>” </p>
<p>The final two sentences of its abstract seem distressingly apposite in light of the current wrenching events in the United States:</p>
<blockquote>
<p>Racial animosity in the US makes redistribution to the poor, who are disproportionately black, unappealing to many voters. American political institutions limited the growth of a socialist party, and more generally limited the political power of the poor</p>
</blockquote>
<p>Beyond this, his work showed that <a href="https://www.jstor.org/stable/pdf/1811177.pdf?casa_token=mKXOIi9ohLoAAAAA:sBbsd5YPC7qEoobuicW0-NJTglbOU8A8rkotRELRCAtJM7M1mvms4_0k2aHnGLxDZAJ3N9wIj38Krr33WUKoTAP32WFQk_5_8OZq2BP71nExe_g_hDOCvQ">political party platforms</a> need not converge on to the interests of the median voter – something that might seem obvious now, but was revolutionary in the late 1980s. </p>
<p>His insight was that politicians care about more than being elected. They also care (to some degree) about the policies that are implemented when they are elected. His elegant mathematical model turned the <a href="https://en.wikipedia.org/wiki/An_Economic_Theory_of_Democracy">Median Voter Theorem</a> on its head.</p>
<h2>The optimal number of nations</h2>
<p>It is hard to understate the importance of this body of work, one which no doubt the Nobel Committee would have recognised one day. But for me there is one strand that captures the breadth and creativity of his scholarship.</p>
<p>What is the optimal size and number of nations? </p>
<p>This is breathtaking question that one might suspect is reserved for a statesman such as <a href="https://en.wikipedia.org/wiki/German_battleship_Bismarck">Bismark</a> rather than a social scientist.</p>
<p>But in a 1997 <a href="https://www.jstor.org/stable/pdf/2951265.pdf?refreqid=excelsior%3Ac8f4e640474b9b3298af392ba5e04773">Quarterly Journal of Economics</a> paper and later <a href="https://books.google.com/books?hl=en&lr=&id=YFo3ByJl0DkC&oi=fnd&pg=PP11&dq=alberto+alesina&ots=wV4rI4QjcR&sig=D663wnkAKQdByBWwpVRz9cn7efg#v=onepage&q=alberto%20alesina&f=false">a wonderful book</a> with Enrico Spolaore, he provided a politico-economic model of “country formation as a result of a specific trade-off between the benefits of large political jurisdictions and the costs of heterogeneity in large population”.</p>
<p>Larger political entities – the European Union is the prototypical example – are so diverse that it is difficult to reach agreement on any number of matters.</p>
<h2>Democracies give us too many</h2>
<p>On the other hand, larger countries are better at self insuring against shocks and have bigger markets, with less need to worry about neighbours. Put more technically, governments internalise externalities.</p>
<p>The implications are as far reaching as the question. </p>
<p>Alesina and Spolaore showed that the process of democratisation leads to secessions: we should observe “fewer countries in a nondemocratic world than in a democratic one”, that “the democratic process leads to an inefficiently large number of countries”, and that the equilibrium number “is increasing with the amount of international economic integration”. </p>
<h2>He is already missed</h2>
<p>Alberto was the epitome of great scholar. He posed deep and important questions central to both politics and the economy. And he showed how those questions could be answered with the mathematical and statistical tools of social science. </p>
<p>Very few scholars create a field, let alone one that encompasses profound issues.</p>
<p>Those of us whose lives he touched directly found him to be an inspiration, a supporter, a comfort, and a person of seemingly limitless intellectual and emotional generosity. We miss him already.</p><img src="https://counter.theconversation.com/content/139995/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Much of what we now think is obvious about politics and economics was worked out by Alberto Alesina.Richard Holden, Professor of Economics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1123242019-02-25T13:29:45Z2019-02-25T13:29:45ZMaduro has pushed Venezuela to the brink of revolution – sanctions and aid may tip it over the edge<p>Venezuela stands close to the brink of another revolution. Acute shortages of food and medicine, along with quintuple-digit inflation, has led to an <a href="https://theconversation.com/venezuela-us-sanctions-hurt-but-the-economic-crisis-is-home-grown-111280">economic crisis</a>. </p>
<p>With a large amount of <a href="https://theconversation.com/venezuela-a-humanitarian-and-security-crisis-on-the-border-with-colombia-112240">much-needed humanitarian aid</a> being held at Venezuela’s borders with Colombia and Brazil, things could turn very violent (some skirmishes have <a href="https://www.nytimes.com/2019/02/23/world/americas/venezuela-aid-live.html">already taken place</a>). The aid has been sent by the US and other international supporters of opposition leader Juan Guaidó. Together they brand President Nicolás Maduro a dictator, believing that he rigged his election in May 2018, and demand that he now stand down and restore democracy. But the army, so far, remains loyal to Maduro and troops have barricaded the border crossings to prevent aid from entering – something Maduro fears is a prelude to US invasion. </p>
<p>In applying <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3057450">my research</a> to the situation in Venezuela, it’s clear that things could soon come to a head. My research shows how dictators can manipulate their trade policies to bolster their political survival, foreclosing democratisation in this process. Using an economic model, I strip these types of situations down to a few essential ingredients, simplifying an extremely complex set of circumstances to facilitate deeper insight into how they work. Using my model to think about Venezuela’s situation, we can see precisely the role that the world’s powerful countries play through their sanctions and aid in shaping Venezuela’s prospects for democracy.</p>
<h2>Keeping people happy</h2>
<p>The basic logic of my model is that the Maduro regime, even as a dictatorship, has to keep the population happy just like any other political regime. After all, while democratic regimes worry about losing power at the ballot box, dictators fear revolution. </p>
<p>The model assumes that people have a sense of how life will be if they overthrew the Maduro regime, through a revolution, paving the way to democracy. Revolution is of course extremely costly and dangerous. But if life becomes so tough for ordinary people that they ultimately feel revolution is worth the costs, then Maduro has the threat of revolution on his hands.</p>
<p>Maduro’s options in the face of the threat of revolution include repression – something <a href="https://www.npr.org/2019/01/25/688576099/tense-political-standoff-continues-in-crisis-wracked-venezuela">he has already experimented with</a>. But, from his perspective, repressing his own people is extremely costly politically. It is also risky, especially when this entails turning against his own support base. </p>
<p>Plus, many members of the military are unwilling to turn their weapons on their own people. This elevates the danger that military repression will ultimately backfire and lead to Maduro’s downfall. More than 100 soldiers are said to have defected <a href="https://www.bbc.co.uk/news/world-latin-america-47352295">during the clashes over aid deliveries</a>.</p>
<p>A better option for Maduro than military repression would be to try and improve the welfare of ordinary people, making them more prepared to live with the status quo of his rule and less inclined to spark a revolution. Adopting this approach is in line with Maduro’s claims that there isn’t any crisis in the country. This is where Venezuela’s vast oil reserves could help him. </p>
<p>One of the insights one gains from viewing this situation through the lens of my model is that dictators can stay in power by using commodities like oil to import food and hence placate the populace. Venezuela’s ability to produce oil has been <a href="https://www.bbc.co.uk/news/world-latin-america-47239060">badly curtailed</a> by the economic chaos engulfing the country, but the oil it does still produce could help Maduro shore up his survival.</p>
<p>This is where international economic policy becomes critical. The EU and US have levied sanctions on Venezuela’s exports, which means they have committed not to buy Venezuela’s oil. This, in turn, hinders the regime’s ability to use its oil to buy the food that Maduro needs. Having food to offer to his population is what stands between Maduro and the threat of a full-blown revolution. </p>
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Read more:
<a href="https://theconversation.com/venezuela-a-humanitarian-and-security-crisis-on-the-border-with-colombia-112240">Venezuela: a humanitarian and security crisis on the border with Colombia</a>
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<p>Seen through my model, the explicit purpose of sanctions is to deny Maduro that lifeline, pushing Venezuela to the brink of a revolution. Of course, China and Russia’s <a href="https://www.theguardian.com/world/2019/jan/24/juan-guaido-venezuelas-opposition-leader-declares-himself-interim-president">support</a> for Venezuela works in precisely the opposite direction, turning Maduro’s survival into a tug of war between the world’s major powers.</p>
<h2>Uncomfortable truths</h2>
<p>The uncomfortable truth is that, although the purpose of sanctions is to put pressure on the Maduro regime, this glosses over an important aspect of how the pressure works. It works by pushing the Venezuelan people to the point of desperation where they are prepared to risk everything in a revolution rather than live with the status quo. </p>
<p>Yet a second uncomfortable truth arguably outweighs the first. Failing to push the Venezuelan people to the brink of revolution will probably lead to a longer period under the Maduro dictatorship, delaying democratisation in Venezuela and entrenching the current misery.</p>
<p>At first sight, US food aid seems to undermine the above rationale. If food is Maduro’s lifeline, and if the purpose of sanctions is to destabilise the Maduro regime by depriving it of food, why send food aid? </p>
<p>I don’t think there was ever any expectation that the Maduro regime would accept the aid. Its purpose was to draw Venezuelan troops to the Colombian border, away from the capital city Caracas, and that is exactly what it has done. This further reduces Maduro’s ability to use the military to repress an uprising in the capital Caracas, further heightening the risk of revolution. It also increases the Venezuelan people’s temptation to overthrow the Maduro regime, because then they could gain access to the food aid immediately.</p>
<p>Another revolution is neither inevitable nor desirable. But, in my view and following the logic of the model I have developed, Venezuela has to get to the brink of revolution before it has any hope of finding the path back to meaningful democracy.</p><img src="https://counter.theconversation.com/content/112324/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ben Zissimos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Food and medical aid at Venezuela’s borders could spark a revolution.Ben Zissimos, Associate Professor of Economics, University of ExeterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1114682019-02-11T12:33:06Z2019-02-11T12:33:06ZParliamentary systems do better economically than presidential ones<figure><img src="https://images.theconversation.com/files/258309/original/file-20190211-174864-1nl5p3e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/uk_parliament/14811510037/in/album-72157646719760872/">UK Parliament/Stephen Pike</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>Numerous amendments are being <a href="https://theconversation.com/brexit-parliament-sends-may-back-to-brussels-what-latest-amendment-votes-mean-110748">negotiated</a> in the UK parliament in an attempt to break the Brexit stalemate. There does not seem to be a clear majority for any specific way forward with Brexit and the parliamentary arithmetic has so far worked against the government. Meanwhile, the clock is ticking before Britain leaves the EU without a deal in place and reverts to World Trade Organisation (WTO) rules. </p>
<p>The situation <a href="https://theconversation.com/brexit-impasse-where-have-all-the-political-leaders-gone-110405">has been described as</a> “Adrift, rudderless, confused, chaotic. A mess.” This may be true in many ways. But the roots of this current situation lie with the decision to call the referendum in the first place. </p>
<p>The current impasse is actually a signal that the parliamentary system is working. Necessary checks and balances on government are working to try and make the best of this situation. Although it may not seem like a system to celebrate, our <a href="https://link.springer.com/article/10.1007/s11127-018-0552-2">new research</a> shows how it plays an important role in promoting better economic performance for the country in the long run.</p>
<p>The separation of power resulting from checks and balances is among the key factors that make parliamentary regimes superior to presidential ones. Executive power in a parliamentary regime is generated by legislative majorities and depends on these majorities for survival.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/258222/original/file-20190211-174864-1ajm0k4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/258222/original/file-20190211-174864-1ajm0k4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/258222/original/file-20190211-174864-1ajm0k4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/258222/original/file-20190211-174864-1ajm0k4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/258222/original/file-20190211-174864-1ajm0k4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=493&fit=crop&dpr=1 754w, https://images.theconversation.com/files/258222/original/file-20190211-174864-1ajm0k4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=493&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/258222/original/file-20190211-174864-1ajm0k4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=493&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Parliaments keep the executive in check.</span>
<span class="attribution"><a class="source" href="https://de.wikipedia.org/wiki/Datei:Unionsfraktion_mit_Angela_Merkel_(Tobias_Koch).jpg">Wikipedia / Tobias Koch</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>It has long been argued that parliamentary systems are more conducive to stable democracy. In a phenomenon referred to as the “<a href="https://muse.jhu.edu/article/225694/summary">perils of presidentialism</a>”, this type of regime often produces a divided government, due to competing claims for legitimacy by both the president and the assembly. </p>
<p>Our recent <a href="https://link.springer.com/article/10.1007/s11127-018-0552-2">work</a> shows that parliamentary systems also produce superior economic outcomes. By using data from 119 countries across the period 1950 to 2015 and examining an extensive set of macroeconomic data, we find that parliamentary regimes are consistently better for a country’s economy. On average, annual output growth is up to 1.2 percentage points higher, inflation is less volatile and 6 percentage points lower, and income inequality is up to 20% lower in countries governed by parliamentary systems.</p>
<p>When we categorise countries according to growth and income inequality, we find that 91% of the best performers – with above average growth and below average income inequality – are parliamentary regimes. In isolating the impact of the two forms of government, we take into account a large set of other factors that are likely to influence economic performance such as geography, the legacy of colonial rule, religion and how long the country has been a democracy for.</p>
<h2>Institutions and power separation</h2>
<p>To answer this question, it is crucial to understand the wider institutional context within which the government systems operate. It is now <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674030770">widely recognised</a> that the quality of a country’s institutions – the legal and administrative bodies that underpin society – plays a key role in economic performance. Our findings reinforce the significance of the role these play in economic outcomes. </p>
<p>Parliamentary systems consistently feature higher scores of democracy, more extensive media freedoms, a stronger rule of law, greater constraints on the executive and hence greater checks and balances. These are all characteristics that are associated with better economic performance. </p>
<p>You might be wondering how the US bucks this trend. It is the world’s largest economy, but has a presidential system. Our results suggest that the reason why the US still experiences relatively good economic outcomes with a presidential regime is due to the checks and balances its constitution puts in place that ensure a separation of powers between the legislative, executive and judicial arms of government.</p>
<p>There are two good reasons why parliamentary systems are better for the economy. First, greater separation of power combined with greater public deliberation, which underlie parliamentary systems, allow for wider representation and broader participation in decision making. This has significantly positive consequences. </p>
<p>Second, parliamentary systems offer much greater stability across consecutive governments. In contrast, transitions between leaders in presidential regimes are usually stark and volatile due to the single person nature of the office.</p>
<p>So it may be frustrating to observe lengthy debates and extended deliberations – as has been the case in the UK over Brexit – but it is important to remember that these checks and balances are just what is needed for both democratic and economic stability. The fact that there is the impasse now is a signal of the system working as it should, not that it is at fault. Although one may decry <a href="https://theconversation.com/brexit-impasse-where-have-all-the-political-leaders-gone-110405">the lack of political leadership</a> or bipartisan consensus, parliament is acting as it should and holding the government to account.</p><img src="https://counter.theconversation.com/content/111468/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Parliaments might argue more but they make democracy more stable and produce stronger economies.Gulcin Ozkan, Professor of Economics, University of YorkRichard McManus, Senior Lecturer in Economics, Canterbury Christ Church UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1007022018-08-03T17:09:37Z2018-08-03T17:09:37ZHow Trump’s trade war affects working-class Americans<p>President Donald Trump <a href="https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-confronting-chinas-unfair-trade-policies/">justifies tariffs</a> on imports by arguing that “unfair trade policies” have harmed American workers. This has led to a trade war in which the U.S. and China have placed tit-for-tat tariffs on each other’s products.</p>
<p>Most recently, China <a href="https://www.bloomberg.com/news/articles/2018-08-03/china-plans-tariffs-on-60-billion-of-imports-to-counter-trump">said</a> it’s ready to slap tariffs on US$60 billion in U.S. imports if Trump goes ahead with his threat to tax another $200 billion of Chinese goods. </p>
<p>Since the president claims to be acting on behalf of working-class Americans, it’s fair to ask: How do tariffs actually affect them? </p>
<p>Scholars of international political economy, such as <a href="https://sgpp.arizona.edu/user/jeff-kucik">myself</a>, recognize that trade hasn’t always been good for poorer Americans. However, the economic fundamentals are clear: Tariffs make things worse. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">American auto workers demonstrate against trade tariffs they say will negatively affect U.S. auto manufacturing.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Congress-Trade/d638e6a3dbed4a9f86e26cdad0f651ce/49/0">AP Photo/J. Scott Applewhite</a></span>
</figcaption>
</figure>
<h2>Free trade and tariffs</h2>
<p>The erosion of American manufacturing became a hot-button issue during the 2016 election. And for good reason. Total employment in manufacturing <a href="https://fred.stlouisfed.org/series/MANEMP">has fallen by 25 percent</a> since 2001, putting about 4.5 million workers out of a job.</p>
<p>Members of <a href="https://www.nytimes.com/2016/07/30/us/politics/in-time-of-discord-bashing-trade-pacts-appeals-to-both-parties.html">both parties now agree</a> that free trade is largely to blame for this decline. <a href="https://www.reuters.com/article/us-usa-trump-jobs-idUSKBN1612DQ">Off-shoring</a> and <a href="https://www.cnbc.com/video/2017/02/23/trump-all-our-trade-deals-are-unbelievably-bad.html">“bad” trade deals</a> are cited as evidence that trade no longer serves America’s interests. </p>
<p>The Trump administration’s solution is tariffs. In recent months, entry barriers have been erected, first to protect <a href="https://www.reuters.com/article/us-trump-effect-solar-insight/billions-in-u-s-solar-projects-shelved-after-trump-panel-tariff-idUSKCN1J30CT">solar panels</a> and <a href="https://www.nytimes.com/2018/01/22/business/trump-tariffs-washing-machines-solar-panels.html">washing machines</a> in January and then <a href="https://theconversation.com/tariffs-wont-save-american-steel-jobs-but-we-can-still-help-steelworkers-93104">steel and aluminum</a> in March.</p>
<p>Although he’s fighting these trade battles with many partners, including Canada and Europe, most of Trump’s attention is directed toward China. He claims that China <a href="https://www.cbsnews.com/news/trump-accuses-china-eu-of-currency-manipulation-and-dollar-weakens/">manipulates its currency</a>, <a href="https://www.cnbc.com/2018/04/24/the-theft-of-intellectual-property-is-driving-trumps-trade-battle.html">fails to protect</a> intellectual property and <a href="https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-standing-american-innovation/">stunts economic innovation</a>. Sweeping tariffs – beginning with a <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/june/ustr-issues-tariffs-chinese-products">25 percent increase on $34 billion</a> of Chinese imports – are an attempt to combat those issues.</p>
<p>Trump has said <a href="https://www.cnn.com/2018/08/01/politics/us-china-trade-tariff-war/index.html">another $200 billion</a> in tariffs are ready to go – and that he’s even <a href="https://www.cnbc.com/2018/07/19/trump-says-hes-ready-to-put-tariffs-on-all-505-billion-of-chinese-.htm">prepared</a> to tax everything China sends to the U.S.</p>
<p>Unfortunately, there are several reasons to think that tariffs will only harm those Trump wants to protect.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=432&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=432&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=432&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=543&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=543&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=543&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some U.S. manufacturers are feeling the impact of tariffs of up to 25 percent on some foreign imports.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Trade-Tariffs/66c46d1831a34192a7ff853c6f55f89e/133/0">AP Photo/John Raoux</a></span>
</figcaption>
</figure>
<h2>Tariffs raise prices for consumers</h2>
<p>The purpose of a tariff is to help domestic companies. </p>
<p>Tariffs are a tax on imports. As taxes go up, so do the prices of foreign goods. Consider the metal tariffs. Foreign imports of steel and aluminum became more expensive overnight – to the tune of 25 and 10 percent, respectively. Higher prices drive down consumption of foreign goods while bolstering demand for domestic equivalents. </p>
<p>Unfortunately, protecting a few narrow industries can generate much broader costs. Not least, consumers now have to pay more for everyday goods. </p>
<p>Trump’s tariffs on Chinese imports go far beyond steel and aluminum and affect a wide variety of basic products, from consumer electronics to shoes and apparel. </p>
<p>That’s not a problem for higher earners who can absorb the extra costs. But, for those with more limited incomes, who are especially vulnerable to tariff increases, price hikes can quickly gobble up take-home pay.</p>
<p>Basic necessities such as <a href="https://piie.com/blogs/trade-investment-policy-watch/tariffs-hit-poor-americans-hardest">food and clothing</a> make up a <a href="https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/2014-economic-commentaries/ec-201418-income-inequality-and-income-class-consumption-patterns.aspx">larger share</a> of working-class household expenditures when <a href="https://www.marketwatch.com/story/low-income-families-spend-40-of-their-money-on-luxuries-2017-06-28">compared to higher-income families</a>. And most of those products are imported. Foreign producers make up an overwhelming percentage of sales of many basic goods, such as <a href="http://www.mcall.com/business/retail/mc-biz-shoes-imported-tariffs-20180724-story.html">shoes</a>. In fact, one manufacturing industry group <a href="http://www.americanmanufacturing.org/press-releases/entry/fact-sheet-wal-marts-made-in-america-pledge">reports</a> that 80 percent of Walmart’s suppliers are housed across the Pacific. </p>
<p>One <a href="https://voxeu.org/article/us-tariffs-are-arbitrary-and-regressive-tax">2017 paper</a> estimated that a 10 percent across-the-board increase in tariffs on imported goods would cost the poorest 20 percent of earners $300 a year. </p>
<p>That’s a meaningful chunk of the <a href="https://www.taxpolicycenter.org/statistics/household-income-quintiles">less than $13,000 earned</a> by the poorest U.S. households in 2015. Moreover, Trump’s first round of tariffs weren’t the 10 percent used in the study. They are 25 percent. </p>
<p>And the president isn’t stopping there. While the White House initially threatened a 10 percent tariff increase on the next $200 billion of goods he’s targeting, <a href="https://www.bloomberg.com/news/articles/2018-07-31/u-s-said-to-plan-higher-tariff-on-200-billion-of-china-imports">officials are reportedly considering</a> raising that to 25 percent. </p>
<p>Taken together, this means the real impact of tariffs on household incomes could be more than double earlier estimates.</p>
<h2>Tariffs raise prices for companies</h2>
<p>Tariffs also have negative consequences for American producers that rely on foreign inputs. </p>
<p>The metals tariffs, for example, mean that manufacturers of cars, aircraft and tractors all have to pay more to produce their goods. Hence the <a href="https://www.bloomberg.com/news/articles/2018-03-06/will-trump-tariffs-help-steel-in-america-s-rust-belt-quicktake">vocal opposition</a> to Trump from companies such as <a href="https://www.usatoday.com/story/money/cars/2018/07/25/gm-ford-fiat-chrysler-trump-tariffs/827983002/">Ford</a> and <a href="https://www.cnbc.com/2018/07/16/boeings-ceo-muilenberg-worried-about-trump-tariffs-and-trade-restrict.html">Boeing</a>. Their costs are now going up, endangering their competitiveness. </p>
<p>What this also means is that tariffs put jobs at risk – far more than they help protect. </p>
<p>Trump’s recent steel and aluminum tariffs were said to <a href="https://qz.com/1297697/trumps-steel-tariffs-will-cost-the-us-400000-jobs-says-economists-now/">benefit as many as 400,000 workers</a>. But <a href="https://qz.com/1293821/trump-trade-war-146000-us-job-will-be-lost-to-steel-tariffs/">10 times as many workers</a> – 4.6 million – are employed in industries that rely on metals as a core input. </p>
<p>The comparison is even starker for solar panels. About <a href="https://www.seia.org/news/presidents-decision-solar-tariffs-loss-america">2,000 workers</a> directly manufacture solar panels in the United States. However, <a href="https://www.usatoday.com/story/money/business/2018/01/22/trumps-30-tariff-imported-solar-panels-may-cost-jobs/1056440001/">260,000 work in related industries</a> such as installation and maintenance. Those workers depend on a thriving solar market – a market that has <a href="https://thinkprogress.org/solar-prices-are-dropping-so-fast-it-is-muting-the-impact-of-trump-tariffs-ceo-says-b6adb4e04ea0/">stagnated</a> since the tariffs.</p>
<p>If one wants to count jobs, the numbers simply don’t add up to a net benefit for the U.S. economy.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=424&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=424&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=424&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=532&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=532&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=532&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Farmers and agricultural economists worry that Trump’s trade policies will cost farms billions of dollars in lost income and force some out of business.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/US-China-Tariffs-Farming/638ac661218d4416a120930f7029e36f/94/0">AP Photo/Nati Harnik</a></span>
</figcaption>
</figure>
<h2>Tariffs make it harder to do business abroad</h2>
<p>Finally, trade protectionism is a two-way street. </p>
<p>Beijing wasted no time in responding to Trump’s tariffs, announcing duties of 15 percent to 25 percent on <a href="https://piie.com/blogs/trade-investment-policy-watch/chinas-retaliation-trumps-tariffs">nearly $45 billion</a> of U.S. exports to China, mostly agricultural products. And <a href="https://www.bloomberg.com/news/articles/2018-08-03/china-plans-tariffs-on-60-billion-of-imports-to-counter-trump">more will be coming</a> if the war escalates, with some of the highest tariffs being put on food products. </p>
<p>Of course, targeting agrarian goods is a strategic decision. Agriculture is one of the United States’ few remaining export-oriented sectors. And, since China is the <a href="https://www.fas.usda.gov/data/top-markets-us-agricultural-exports-2017">second-largest</a> buyer of U.S. agricultural exports, farmers are <a href="https://theconversation.com/american-farmers-want-trade-partners-not-handouts-an-agricultural-economist-explains-100795">particularly vulnerable</a> to retaliation. If a country wants to hit the U.S. economy where it hurts, target agriculture.</p>
<p>China did exactly that, hitting U.S. producers of soybeans, corn, poultry and beef particularly hard. As a result, agricultural workers will find it more difficult to make a living in a sector where incomes <a href="https://www.bls.gov/opub/mlr/2014/article/agriculture-occupational-employment-and-wages.htm">have historically lagged behind</a> the national average of all industries. </p>
<p>And poorer areas of the country will be harder hit than others. Three of the states that are the <a href="https://www.scmp.com/news/china/diplomacy-defence/article/2154014/us-china-trade-war-begins-beijing-strikes-back-tariffs">most vulnerable to retaliation</a> – Louisiana, Alabama and South Carolina – all have per capita incomes <a href="https://www.bea.gov/iTable/iTable.cfm?reqid=70&step=10&isuri=1&7003=200&7035=-1&7004=sic&7005=1&7006=xx&7036=-1&7001=1200&7002=1&7090=70&7007=-1&7093=levels#reqid=70&step=10&isuri=1&7003=1000&7004=naics&7035=-1&7005=1&7006=xx&7001=11000&7036=-1&7002=1&7090=70&7007=-1&7093=levels">far below</a> the national average.</p>
<p>That means that poorer households, in poorer states, face the greatest threat if export-dependent agricultural companies can’t do business with one of their most important trade partners.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The U.S. could slap tariffs on more than $500 billion in imported Chinese goods. Beijing imported just $130 billion in U.S. goods last year.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/China-US-Beijing-Trade-Options/f8b6f807c6224e29a3e983c7880ff267/183/0">AP Photo/Ng Han Guan</a></span>
</figcaption>
</figure>
<h2>The bigger picture</h2>
<p>This is not to say that removing all trade barriers and opening the U.S. economy to all comers will solve the problems facing working-class and poorer Americans. </p>
<p>No one argues that trade is cost-free. Some industries inevitably contract due to foreign competition. And workers in those industries <a href="https://realmoney.thestreet.com/articles/12/03/2016/no-overstatement-structural-unemployment-biggest-economic-threat">aren’t easily employed</a> in the new jobs that are created. </p>
<p>But there’s something else that costs jobs, too: <a href="http://time.com/money/5344327/donald-trump-tax-cut-jobs-trade-war/">trade wars</a>. </p>
<p>As tensions continue to escalate, poorer households, already <a href="http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/">struggling to keep up</a>, will face additional downward pressure on their incomes. That’s bad news for the workers whom Trump promised to help.</p><img src="https://counter.theconversation.com/content/100702/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeffrey Kucik does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The president says he’s fighting his trade war because a generation of free trade has failed working-class Americans. An economist explains why tariffs will only make things worse.Jeffrey Kucik, Assistant Professor of Political Science, University of ArizonaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/997972018-07-30T13:08:12Z2018-07-30T13:08:12ZWhat the world can learn about equality from the Nordic model<figure><img src="https://images.theconversation.com/files/229814/original/file-20180730-106521-1yk96xp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com">Shutterstock</a></span></figcaption></figure><p>Rising inequality is one of the biggest social and economic issues of our time. It is linked to <a href="https://www.oecd-ilibrary.org/employment/in-it-together-why-less-inequality-benefits-all_9789264235120-en">poorer economic growth</a> and fosters social <a href="https://www.brookings.edu/blog/up-front/2018/02/16/globalization-technology-and-inequality-its-the-policies-stupid/">discontent and unrest</a>. So, given that the five Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – are some of the world’s most equal on a number of measures, it makes sense to look to them for lessons in how to build a more equal society.</p>
<p>The Nordic countries are all social-democratic countries with mixed economies. They are not socialist in the classical sense – they are driven by financial markets rather than by central plans, although the state does play a strategic role in the economy. They have systems of law that protect personal and corporate property and help to enforce contracts. They are democracies with checks, balances and countervailing powers. </p>
<p>Nordic countries show that major egalitarian reforms and substantial welfare states are possible within prosperous capitalist countries that are highly engaged in global markets. But their success undermines the view that the most ideal capitalist economy is one where markets are unrestrained. They also suggest that humane and equal outcomes are possible within capitalism, while full-blooded socialism has always, in practice, <a href="https://www.press.uchicago.edu/ucp/books/book/chicago/W/bo27168809.html">led to disaster</a>.</p>
<p>The Nordic countries are among the most equal in terms of distribution of income. Using the Gini coefficient measure of income inequality (where 1 represents complete inequality and 0 represents complete equality) <a href="http://www.oecd.org/social/income-distribution-database.htm">OECD data</a> gives the US a score of 0.39 and the UK a slightly more equal score of 0.35 – both above the OECD average of 0.31. The five Nordic countries, meanwhile, ranged from 0.25 (Iceland – the most equal) to 0.28 (Sweden).</p>
<p><iframe id="WTnN6" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/WTnN6/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>The relative standing of the Nordic countries in terms of their distributions of wealth is not so egalitarian, however. <a href="http://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=FB790DB0-C175-0E07-787A2B8639253D5A">Data show</a> that Sweden has higher wealth inequality than France, Germany, Japan and the UK, but lower wealth inequality than the US. Norway is more equal, with wealth inequality exceeding Japan but lower than France, Germany, UK and US. </p>
<p>Nonetheless, the Nordic countries score very highly in terms of major welfare and development indicators. Norway and Denmark rank first and fifth in the <a href="http://hdr.undp.org/sites/default/files/2016_human_development_report.pdf">United Nations Human Development Index</a>. Denmark, Finland, Norway and Sweden have been among the six least corrupt countries in the world, according to the corruption perceptions index <a href="https://www.transparency.org/news/feature/corruption_perceptions_index_2016#table">produced by Transparency International</a>. By the same measure, the UK ranks tenth, Iceland 14th and the US 18th. </p>
<p>The four largest Nordic countries have taken up the top four positions in <a href="https://rsf.org/en/ranking_table">global indices of press freedom</a>. Iceland, Norway and Finland took the top three positions in a <a href="https://www.weforum.org/reports/the-global-gender-gap-report-2017">global index of gender equality</a>, with Sweden in fifth place, Denmark in 14th place and the US in 49th.</p>
<p>Suicide rates in Denmark and Norway are <a href="http://apps.who.int/gho/data/node.main.MHSUICIDEASDR?lang=en">lower than the world average</a>. In Denmark, Iceland and Norway the suicide rates are lower than in the US, France and Japan. The suicide rate in Sweden is about the same as in the US, but in Finland it is higher. Norway was ranked as the <a href="http://worldhappiness.report/ed/2017/">happiest country in the world</a> in 2017, followed immediately by Denmark and Iceland. By the same happiness index, Finland ranks sixth, Sweden tenth and the US 15th. </p>
<p>In terms of <a href="https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?view=chart">economic output (GDP) per capita</a>, Norway is 3% above the US, while Iceland, Denmark, Sweden and Finland are respectively 11%, 14%, 14% and 25% below the US. This is a mixed, but still impressive, performance. Every Nordic country’s per capita GDP is higher than the UK, France and Japan.</p>
<h2>Special conditions?</h2>
<p>Clearly, the Nordic countries have achieved very high levels of welfare and wellbeing, alongside levels of economic output that compare well with other highly developed countries. They result from relatively high levels of social solidarity and taxation, alongside a political and economic system that preserves enterprise, economic autonomy and aspiration.</p>
<p>Yet the Nordic countries are small and more ethnically and culturally homogeneous than most developed countries. These special conditions have facilitated high levels of nationwide trust and cooperation – and consequently a willingness to pay higher-than-average levels of tax.</p>
<p>As a result, Nordic policies and institutions cannot be easily exported to other countries. Large developed countries, such as the US, UK, France and Germany, are more diverse in terms of cultures and ethnicities. Exporting the Nordic model would create major challenges of assimilation, integration, trust-enhancement, consensus-building and institution-formation. Nonetheless, it is still important to learn from it and to experiment. </p>
<p>Despite a prevailing global ideology in favour of markets, privatisation and macro-economic austerity, there is considerable enduring <a href="https://www.press.uchicago.edu/ucp/books/book/chicago/C/bo18523749.html">variety among capitalist countries</a>. Furthermore some countries continue to perform much better than others on indicators of welfare and economic equality. We can learn from the Nordic mixed economies with their strong welfare provision that does not diminish the role of business. They show a way forward that is different from both statist socialism and unrestrained markets.</p><img src="https://counter.theconversation.com/content/99797/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Geoffrey M Hodgson is a member of the Liberal Democrats.</span></em></p>The state plays a strategic role, but they are also driven by financial markets – not central plans.Geoffrey M Hodgson, Research Professor, Hertfordshire Business School, University of HertfordshireLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/925282018-05-10T11:07:25Z2018-05-10T11:07:25ZRevealed: how Italian mayors hoard parking penalties ahead of elections<figure><img src="https://images.theconversation.com/files/213396/original/file-20180405-189795-1rqkwml.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Most of the 20m fines issued every year by municipalities in Italy are for illegal parking, speeding, entering bus lanes or skipping congestion charges. They account for about 15% of non-tax revenues for local authorities, bringing in €11 per capita a year.</p>
<p>But I’ve found that Italy’s mayors tend to act with far greater leniency towards unruly drivers when an election approaches.</p>
<p>Elected governments all over the world <a href="https://theconversation.com/german-politicians-invest-in-opera-when-seeking-re-election-heres-why-93767">time policies</a> to maximise their chances of re-election. Raising the pay of civil servants or cutting taxes delivers greater returns for a party if announced just before it faces a public vote. Unpopular reforms, meanwhile, are more likely to be implemented in the first part of a term in government. This is known as the political budget cycle.</p>
<p>I collected data from municipal budgets and elections over the past 20 years, looking in particular at how many parking tickets each mayor issued, and how much money they actually managed to collect. I divided mayors into two groups according to their so-called “electoral incentives” – that is, whether they feel their re-election is at risk.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/213397/original/file-20180405-95689-h7vnea.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/213397/original/file-20180405-95689-h7vnea.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/213397/original/file-20180405-95689-h7vnea.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/213397/original/file-20180405-95689-h7vnea.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/213397/original/file-20180405-95689-h7vnea.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/213397/original/file-20180405-95689-h7vnea.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/213397/original/file-20180405-95689-h7vnea.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">I’ll let this one slide. But you might not be so lucky next week.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>There are a number of ways to measure these “electoral incentives”. The simplest is to consider the margin of victory with which the incumbent won the previous election. Mayors elected with just a few votes more than their challenger are bound to be under stronger pressure in the incoming elections. I also looked at mayors who are at the end of their term and close to facing another election, as opposed to mayors who are freshly elected.</p>
<p>Just like US presidents, Italian mayors are barred from seeking re-election after their second term in office, so I also compared mayors in their first term (and therefore seeking re-election) with mayors in their second term (barred from running).</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/210263/original/file-20180314-113479-1ddz7ef.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/210263/original/file-20180314-113479-1ddz7ef.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/210263/original/file-20180314-113479-1ddz7ef.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/210263/original/file-20180314-113479-1ddz7ef.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/210263/original/file-20180314-113479-1ddz7ef.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/210263/original/file-20180314-113479-1ddz7ef.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/210263/original/file-20180314-113479-1ddz7ef.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Effect of Electoral Incentives on traffic enforcement. Average Euros per capita. Lines are 95% confidence intervals.</span>
</figcaption>
</figure>
<p>Mayors elected with a small margin of victory issue almost one euro per capita less in fines, and cash in about 50 euro cents less than those who won elections with a wide margin. Mayors who barely won their seat don’t seem to want to disappoint those precious marginal voters and put their own re-election at risk.</p>
<p>Mayors in their second (and last) term in office are slightly more strict. By law they cannot run for a third term, so perhaps they feel more free to charge drivers. They know they won’t pay an electoral cost as a result. </p>
<p>Last, we look into the third way to pinpoint political budget cycles, by comparing mayors nearing the end of their term in office with those who have just been elected. The former issue roughly the same amount of fines as colleagues at the beginning of their term, but they cash on average 18 euro cents per capita fewer per year. This may not seem very much, but would account for about 1.5m Euros in a year for municipalities such as Milan or Rome. The closer the elections, the more lenient they get in chasing undisciplined drivers. They seem to be trying not to bother drivers just as they are deciding how to cast their vote.</p>
<p>The moral of the story is that if your mayor fears for their re-election you’re less likely to get a ticket for your parking indiscretions. You’re also less likely to be chased for payment if you do get one. But of course, you’d never park where you shouldn’t anyway, regardless of when the next election is. Would you?</p><img src="https://counter.theconversation.com/content/92528/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Emanuele Bracco does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If you’re going to drive badly in Italy, do it towards the end of the local mayor’s term in office.Emanuele Bracco, Senior Lecturer in Economics, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/886022018-03-11T09:01:45Z2018-03-11T09:01:45ZHow Kinshasa’s markets are captured by powerful private interests<figure><img src="https://images.theconversation.com/files/207465/original/file-20180222-152354-1y2j78f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A vendor at the Sigida Market, in Kinshasa, Democratic Republic of Congo.
</span> <span class="attribution"><span class="source">ReutersS/Robert Carrubba</span></span></figcaption></figure><p>Kinshasa, the capital of the Democratic Republic of the Congo (DRC), is home to 10 million people. With an estimated 400 markets and <a href="http://www.streetnet.org.za/docs/reports/2012/en/CongoReport.pdf">over 1 million traders</a>, markets are an important supplier of goods and source of livelihood. They are also an important source of revenue for the state.</p>
<p>Our ongoing <a href="https://www.uantwerpen.be/en/research-groups/iob/publications/working-papers/wp-2018/wp-201803/">research</a> found that markets are also a major source of private revenue. A wide variety of actors are in constant competition for their share of revenue. These include market administrators, mayors, security officials, provincial ministers, high ranking bureaucrats, family members of the President, Presidential advisors, family members of high ranking civil servants. All are fighting to get their piece of the market income.</p>
<p>On the markets, private revenue is being collected through what are locally called “informal taxes”. These aren’t entered into formal revenue streams, but are directly received by the civil servants and their superiors. A whole <a href="https://www.radiookapi.net/actualite/2014/08/15/kinshasa-une-ong-denonce-la-multiplicite-de-taxes-au-marche-central">variety</a> of those <a href="http://acpcongo.com/acp/fiscalite-lodep-deplore-la-multiplicite-des-taxes-au-marche-central-de-kinshasa/">taxes</a> are been collected on markets. They are referred to by a range of names, from ‘hygiene tax’, to ‘economy tax’, or ‘standard and conventional safety tax’. </p>
<p>On top of this <a href="https://www.uantwerpen.be/en/research-groups/iob/publications/working-papers/wp-2018/wp-201803/">our research</a> also shows how the majority of the “formal” and officially acknowledged taxes aren’t fed into the formal hierarchy and revenue flow as they are supposed to be. Instead they are kept locally. In other words market administrators and civil servants do not pass on collected taxes, but pocket them. </p>
<p>This leads to a situation in which traders feel they are <a href="http://www.google.be/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwj-pLydhtjZAhWnC8AKHZ0DAzIQFgg2MAE&url=http%3A%2F%2Fwww.odeprdc.cd%2Findex.php%2Fdocuments%2Fetudes%3Fdownload%3D11%3Amarche-central-de-kinshasa&usg=AOvVaw08A-81yHDK9KXE_WWIE26y">overburdened by various forms of revenue extraction</a>.</p>
<p>This isn’t surprising, as there is an unwritten understanding among Congolese that civil servants should fend for themselves by extracting revenue from citizens. People in the DRC jokingly refer to this practice as <a href="https://books.google.be/books?id=sj9mDQAAQBAJ&pg=PA76&lpg=PA76&dq=Article+15+Congo&source=bl&ots=zSfvpniv5H&sig=jjRcHjmBeZd_3N-tKq-kdSjMjPg&hl=nl&sa=X&ved=0ahUKEwiFiJKw2dzZAhXhAsAKHQJSA_c4ChDoAQhEMAQ#v=onepage&q=Article%2015%20Congo&f=false">‘Article 15’</a> – parlance for <a href="https://books.google.be/books?id=_5EoYIaHk70C&pg=PA38&lpg=PA38&dq=Article+15+Congo&source=bl&ots=F7MlGZiNMQ&sig=XzQmtELffHeyICR1jlKOod2ZZSU&hl=nl&sa=X&ved=0ahUKEwiFiJKw2dzZAhXhAsAKHQJSA_c4ChDoAQg3MAI#v=onepage&q=Article%2015%20Congo&f=false">an imaginary article</a> in the country’s constitution which gives civil servants licence to ‘fend for themselves.’</p>
<p>This way of doing things <a href="https://books.google.be/books?id=sj9mDQAAQBAJ&pg=PA76&lpg=PA76&dq=Article+15+Congo&source=bl&ots=zSfvpniv5H&sig=jjRcHjmBeZd_3N-tKq-kdSjMjPg&hl=nl&sa=X&ved=0ahUKEwiFiJKw2dzZAhXhAsAKHQJSA_c4ChDoAQhEMAQ#v=onepage&q=Article%2015%20Congo&f=false">emerged in the 1970s</a>. It was (in)famously launched in a <a href="https://books.google.be/books?id=Em05DQAAQBAJ&pg=PA213&lpg=PA213&dq=Mobutu+Yibana+Mayele+1976&source=bl&ots=C-lr_mcA2n&sig=4Fo1jzCKdz1r-uZsgetVZdc8Lik&hl=nl&sa=X&ved=0ahUKEwjtooix0NzZAhXlLMAKHXKnDqAQ6AEIRzAI#v=onepage&q=Mobutu%20Yibana%20Mayele%201976&f=false">speech</a> delivered by President Mobutu Sese Seko in 1976 in which he famously encouraged his civil servants to ‘steal cleverly’: </p>
<blockquote>
<p>If you want to steal, steal a little cleverly, in a nice way. Only if you steal so much as to become rich overnight, you will be caught.</p>
</blockquote>
<p>The speech effectively led to a de-facto privatisation of public services: the state <a href="http://riftvalley.net/news/l%E2%80%99uniforme-du-policier-symbole-de-fiert%C3%A9-cause-de-malheur-et-source-de-revenu#.WqERReSotZV">uniform</a> became a way for civil servants to extract revenue. </p>
<p>More surprising, and less documented, is the degree to which higher-level actors intervene to appropriate these revenue streams.</p>
<h2>Repurposed</h2>
<p>First, higher level political networks play an important role in revenue extraction in the markets. In our <a href="https://www.uantwerpen.be/images/uantwerpen/container2673/files/Publications/WP/2018/wp-201803.pdf">research</a>, we show how important revenue flows are directly controlled by higher level political actors. This can happen in one of two ways. Either through direct control of particular taxes. Or spatially, in which markets are divided in different zones of interest, in which various actors are able to extract revenue in ‘their’ zone.</p>
<p>The high level influence is most explicit in the <a href="https://www.youtube.com/watch?v=BkCxOt2dZw8">Marché de la Liberté</a>. This is the most profitable market in Kinshasa, with high symbolic value. It was constructed by former President Laurent Désiré Kabila as a present to the Kinshasa population. </p>
<p>The Marché de la Liberté has been repurposed as a vehicle for private rent generation through all these measures. Firstly, the market isn’t governed as a state public entity, but by agents who are financially and politically accountable to political elites. Revenues are collected privately and beyond public scrutiny. Staff aren’t employed by the public administration but come from presidential networks. Taxes are not collected by the mandated public servants but by individuals outside the public administration. </p>
<p>Secondly, various actors rely on their personal connections to gain access to the biggest share of (private) revenue – a system which is locally called ‘branchement’. In this system, actors rely on links based on family, ethnicity or regional, political party affiliations, or simply through financial linkages: a common practice is to provide financial or in kind incentives to higher-level authorities. </p>
<p>This practice – which also occurs in other sectors such as the <a href="https://www.tandfonline.com/doi/abs/10.1080/19392206.2011.628629">police</a> –provides protection which enables and strengthens private extraction. For example, market administrators pay a weekly amount to higher-level civil servants and politicians, which allows the administrators to keep most of the collected market revenue.</p>
<h2>Unstable situation</h2>
<p>The situation in markets such as the Marché de la Liberté aren’t stable and prone to conflict. For example, in a number of markets conflicts were encountered between finance officers, market administrators and mayors – all of whom were relying on their respective links such as their political party, the governor or presidential advisors to try and reduce the others’ access to income, or even push them out of the market. </p>
<p>In addition, changes in these power configurations at the higher level in turn create changes at the local level. When patrons lose their position – whether this is a minister, high level civil servant, presidential advisor or other – the clients (such as market administrators) lose their protection and access to revenue.</p>
<p>In sum, the outcome for the market traders themselves is rather grim: they are largely dependent on circumstances beyond their control, which they navigate by continuously looking for better connections (‘branchement), which should help to protect them- now or in the future. At the same time, this makes the traders vulnerable, due to their dependence on these connections, and due to the strong monetisation of these connections.</p><img src="https://counter.theconversation.com/content/88602/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This research is part of the Secure Livelihoods Research Consortium, funded by the UK’s Department for International Development (DFID) as part of the Secure Livelihoods Consortium.
</span></em></p><p class="fine-print"><em><span>Albert Malukisa Nkuku is a member of Antwerp University team for the project Secure Livelihoods Research Consortium program, coordinated by ODI and financed by DFID, focusing on public services in the Républic Democratic of Congo. He receives funding from DFID via ODI/University of Antwerp.</span></em></p>Graft is common in the way that markets in Kinshasa are run.Kristof Titeca, Lecturer in International Development, University of AntwerpAlbert Malukisa Nkuku, Post-doctoral research fellow at the Institute of Development Policy, University of AntwerpLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/859432017-10-25T10:23:17Z2017-10-25T10:23:17ZHow the Catalan economy benefited under Franco – and what this means for the ongoing stalemate<figure><img src="https://images.theconversation.com/files/191690/original/file-20171024-30605-kc6g7t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Franco_BCN.jpg">Franco visits Barcelona in 1942. Carlos Pérez de Rozas</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>The Spanish central government has temporarily <a href="https://uk.reuters.com/article/uk-spain-politics-catalonia/spain-to-suspend-catalonias-autonomy-in-response-to-independence-threat-idUKKBN1CO0Z8">suspended Catalan autonomy</a> using Article 155. This <a href="https://theconversation.com/spains-hard-line-on-catalonia-is-no-way-to-handle-a-serious-secession-crisis-86243">unprecedented and controversial measure</a> enables the Spanish government to take over running of the region and to trigger regional elections to the Catalan parliament. The outcome of such elections may likely be a balance of power between separatist and anti-separatist forces very similar to the current one. This move, therefore, is little more than a way of buying time – it is by no means a way out of the Catalan stalemate.</p>
<p>Any long-term solution requires a deep understanding of the issues at stake, but the each day the situation is more puzzling to observers at home and around the world. Spaniards living abroad, like me, are often asked by friends and colleagues: what’s going on in Catalonia? Is the imposition of Article 155 a dictatorial move? Was independence declared? Why is there no dialogue? Who started it? And, the most feared of all these questions: what do you think is going to happen? </p>
<p>The easiest way for me to begin responding to these questions is by relating a personal story. I tell my friends that as a Seville-raised son of a proud Catalan who supported the equality of all Spanish citizens through his work on public health, I refuse to imagine a day in which I’ll need a passport to go to Barcelona. Catalonia, I continue to these friends, is among the richest regions of Spain, has participated for centuries in the political and economic life of the rest of the country, and has a diverse population largely made of Castilian last names and immigrants from all over – Andalusia, Extremadura, Murcia, to just mention a few. That is one of the reasons why <a href="https://www.reuters.com/article/us-spain-politics-catalonia/thousands-protest-in-barcelona-against-catalan-independence-idUSKBN1CD0ES">about 50%</a> of Catalans are not for independence. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/191661/original/file-20171024-30561-1aygazp.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/191661/original/file-20171024-30561-1aygazp.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=515&fit=crop&dpr=1 600w, https://images.theconversation.com/files/191661/original/file-20171024-30561-1aygazp.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=515&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/191661/original/file-20171024-30561-1aygazp.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=515&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/191661/original/file-20171024-30561-1aygazp.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=648&fit=crop&dpr=1 754w, https://images.theconversation.com/files/191661/original/file-20171024-30561-1aygazp.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=648&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/191661/original/file-20171024-30561-1aygazp.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=648&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Catalonia.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Cataluna_in_Spain_(plus_Canarias).svg#/media/File:Cataluna_in_Spain_(plus_Canarias).svg">TUBS/Wikimedia.com</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<h2>Past abuses?</h2>
<p>Familiar with the narrative of victimisation that the separatist intelligentsia has crafted for itself, my interlocutor may ask: “Yes, but as a historian of Spain, and of Francoism in particular, you surely admit that Spain has abused its power against the Catalan people many times in the past?” </p>
<p>This is where things get interesting because Catalan nationalists argue that their economic progress <a href="http://fortune.com/2015/01/30/spain-catalonia-independence-taxes-economy/">is</a> and <a href="http://www.sapiens.cat/ca/300-anys-d-espoli.php">has been</a> hampered by the rest of Spain for at least 300 years, and particularly from Francoism onward. But the fact is that Spanish politics has actually benefited the Catalan economy in the past. </p>
<p>There are two oft-cited examples of this from the period before Francoism. First, from the late 18th century to the late 19th century, Catalan owners of plantations in Cuba could use black slave workers even after slavery was official banned. This enabled the accumulation of capital, then <a href="https://www.theguardian.com/travel/2016/apr/13/barcelona-slave-trade-history-new-walking-tour-catalonia-spain-ramblas">reinvested in industries back home</a>. Second, for most of the 19th century and well into the 20th, the Spanish state <a href="https://books.google.de/books/about/Moler_tejer_y_fundir.html?id=1RO4AAAACAAJ&redir_esc=y">imposed protectionist laws</a> against imports of cheaper textiles from England, thereby taxing all Spanish consumers to favour the booming industries that were situated in the Barcelona area.</p>
<p>Then we come to Franco. General Franco rose to power after the civil war (1936-39) that his army had initiated against the Republican state (established in 1931). This was not a war of “Spain against Catalonia”, as separatist propaganda <a href="http://www.telegraph.co.uk/news/2017/10/21/catalan-leader-accuses-spain-worst-attack-since-franco/">reconstructs it</a>. The new dictatorial regime violently repressed political enemies and suppressed political autonomy everywhere, not only in Catalonia. It is true that the regime forbade the use of Catalan in official documents and in education. But from the perspective of the economy, Francoism benefited the development of Catalonia over other Spanish regions.</p>
<h2>Cement and dams</h2>
<p>About ten years ago, when I started my investigations on the role of science and technology in the <a href="https://www.academia.edu/10193593/Engineers_and_the_Making_of_the_Francoist_Regime_MIT_Press_2014">building of the Francoist regime</a>, something caught my eye. I found that for most of the 1940s – a time of scarcity – each year Barcelona received consistently much more cement than the next city on the list, and sometimes twice as much as Madrid or Valencia. As one of Spain’s industrial strongholds, it was key for the regime to keep the factories running and the <a href="http://www.barcelonalowdown.com/francesc-cambo-catalan-nationalist-who-supported-franco/">Catalan economic elite loyal</a>.</p>
<p>Francoist support for industrialisation in Catalonia also showed in plans for hydropower production. The Pyrenees, the mountains dividing Spain from France, had for some decades attracted private investors interested in the potential of its rivers to produce electricity. After the civil war, the National Institute for Industry developed <a href="https://www.academia.edu/6576963/Frankie_the_Frog_the_total_transformation_of_a_river_basin_as_totalitarian_technology_Spain_1946-1961_">12 dams in 15 years</a> designed to maximise energy production as water flowed downstream the Noguera Ribagorzana river. The goal was to feed the national electric grid as well as to fuel heavy industries in the Barcelona area. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/191659/original/file-20171024-30590-12o18xb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/191659/original/file-20171024-30590-12o18xb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/191659/original/file-20171024-30590-12o18xb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/191659/original/file-20171024-30590-12o18xb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/191659/original/file-20171024-30590-12o18xb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/191659/original/file-20171024-30590-12o18xb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/191659/original/file-20171024-30590-12o18xb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Canelles dam on the Noguera Ribagorçana river.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/xaf/1761671147">xaf/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>Catalonia grew richer faster. This was by no means a product of Francoist policies alone. But the regime did provide opportunities, resources and cheap labour that it took from other regions. As thousands of blue collar workers flew in from more depressed parts of Spain <a href="https://www.casadellibro.com/libro-els-altres-catalans/9788499306445/2091543">attracted by booming industrialisation</a>, the Catalan bourgeoisie masked class struggle with nationalism.</p>
<h2>Political economy today</h2>
<p>Catalans for independence argue that they, as a region, <a href="https://theconversation.com/catalonia-spain-and-the-economic-consequences-of-a-split-85557">pay more taxes</a> than poorer parts of the country. This argument misses the fact that in a system of redistributive taxation it is citizens, not regions, who pay taxes. </p>
<p>Catalan riches developed through a shared history of economic interaction, territorial transformations and population movement and exchange. The comparison to California is inevitable: while according to <a href="http://www.latimes.com/politics/la-pol-sac-essential-politics-california-s-economy-maybe-moves-to-1465940673-htmlstory.html">some estimates</a>, its economy is around the fifth largest in the world, it is so only <a href="https://books.google.es/books?id=Tsy_zy8cLckC&printsec=frontcover&dq=federal+landscape&hl=en&sa=X&ved=0ahUKEwjml9j8_ITXAhUQahoKHSNmCbkQ6AEIKDAA#v=onepage&q=federal%20landscape&f=false">within the United States</a>. Californian riches are the product of a <a href="https://books.google.es/books?id=Tsy_zy8cLckC&printsec=frontcover&dq=federal+landscape&hl=en&sa=X&ved=0ahUKEwjml9j8_ITXAhUQahoKHSNmCbkQ6AEIKDAA#v=onepage&q=federal%20landscape&f=false">shared national political economy</a>. While Angelinos may be at times too fond of themselves, they generally admit that fact.</p>
<p>The same is true for Catalonia, which is why in the past two weeks around 1,300 companies <a href="https://elpais.com/elpais/2017/10/16/inenglish/1508139705_469301.html">have moved their legal headquarters out of Catalonia</a> to other parts of Spain. The list includes the most important banks, international companies, and companies indexed in the Spanish stock market. </p>
<p>The economic consequences of this stalemate for Spain’s fragile economy, but particularly for Catalonia, are hard to exaggerate. In a country which is just starting to emerge from economic recession, it is puzzling to see how both the right and the left forget political economy in favour of the politics of regional identity – this is true not only for Catalonia, but for other regions governed by conservative and progressive parties as well. </p>
<p>Spanish politicians and administrators are obsessed with local politics and rarely discuss common plans regarding inequality, growth, industry, or unemployment. Devoting all energies to fight over an imaginary new border between Spaniards curtails urgent discussions about how to find new solutions to old problems in the current era of economic globalisation and climatic challenges. Meanwhile, we can only ask <em>¿Cui bono?</em>: who benefits?</p><img src="https://counter.theconversation.com/content/85943/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lino Camprubí does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Devoting all energies to fight over an imaginary border deflects attention from the real issues.Lino Camprubí, Visiting Postdoctoral Fellow, Max Planck Institute for the History of ScienceLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/809082017-07-31T13:19:40Z2017-07-31T13:19:40ZHow to reshape the financial system? First ditch the idea of the free market<figure><img src="https://images.theconversation.com/files/180357/original/file-20170731-4035-1y35e4j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>Ten years ago the financial system collapsed and governments around the world <a href="https://www.theguardian.com/business/2008/oct/13/creditcrunch-marketturmoil1">intervened</a> to save it. Much of the subsequent legislation, regulation and angst has attempted to make the system less risky so it does not collapse again. But few have asked a more fundamental question: what is the purpose of the financial system and does it do what it’s supposed to do? </p>
<p>Ten years on and the global financial system remains chronically dysfunctional. My concern is not that it collapses again but that it continues on its current course. </p>
<p>Yet an alternative way of doing things <a href="http://www.palgrave.com/us/book/9781137560605">is possible</a>. Over many years the finance industry has developed a set of powerful tools which could be used to improve well-being and solve our environmental problems. For example, to avoid dangerous climate change, the required rapid shift away from fossil fuels requires enormous levels of investment into low carbon infrastructure. </p>
<p>We mostly know how to do this technically, and the funds are available; there is a savings surplus where <a href="http://www.cnbc.com/2016/06/29/there-are-now-117-trillion-dollars-worth-of-bonds-with-negative-yields.html">trillions of dollars</a> are sitting in government bonds earning negative returns that could be mobilised into the low carbon economy. So why is this investment not happening at the scale required?</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/180363/original/file-20170731-15340-ix66eu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/180363/original/file-20170731-15340-ix66eu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/180363/original/file-20170731-15340-ix66eu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/180363/original/file-20170731-15340-ix66eu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/180363/original/file-20170731-15340-ix66eu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/180363/original/file-20170731-15340-ix66eu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/180363/original/file-20170731-15340-ix66eu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A sustainable future requires investment but the payoff is worth it.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>Instead, these powerful financial tools have been co-opted by the finance industry for the purpose of growing its own revenue and importance, with resultant collateral damage to society and the environment. </p>
<p>Blame is commonly attributed to the <a href="https://theconversation.com/how-neoliberalisms-moral-order-feeds-fraud-and-corruption-60946">neoliberal rule of the market</a>, <a href="https://theconversation.com/banking-crisis-signalled-end-of-greed-is-good-time-for-ceos-to-get-in-touch-with-inner-guru-31145">greed</a> and <a href="https://www.theguardian.com/business/2012/may/06/shout-rooftops-bank-deregulation-leads-to-disaster">deregulation</a>. </p>
<p>My diagnosis is different: financial markets are the creation of society, and we have set them up in the wrong way, based on faulty economic theories. Governments have outsourced the management of societies’ assets to the finance industry and set the industry the wrong incentives. So we need to rethink how we want our assets managed and reset the incentives to achieve this.</p>
<h2>Government power</h2>
<p>The tools of finance are powerful because they are used to allocate society’s capital, and this determines the future direction of the economy. So, <a href="https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp030706">the Chinese government</a>, for example, has decided to direct finance, in co-ordination with other policies, towards manufacturing-export industries, and these sectors have rapidly grown. </p>
<p>In the UK economy, this decision has been given to the finance sector, which invests people’s savings, for example via pension funds and bank accounts. The justification is that free markets will make the best decision on where to allocate resources. The most efficient users of capital will be able to pay the best return so everyone will be better off. </p>
<p>Yet, the reality is that we don’t have free financial markets. People mostly save via capital markets because they are induced to do so by the government. The most important financial variable is the interest rate, which is set by a government agency, the largest asset class are government bonds, only a restricted group of government-mandated banks can accept deposits, and government regulation shapes the way markets work. For example there are over 100,000 pages of pension regulations alone. Plus, the whole system owes <a href="http://couragetoactbook.com/">its existence to the 2008 bail out</a>. So, seeing that financial markets are not free, the theory that free markets are efficient and reflect peoples’ social preferences is not applicable.</p>
<p>It is evident that the financial system does not efficiently allocate people’s money. The finance sector has grown to an enormous size and looks anything but efficient: half of all savings are ultimately <a href="https://www.thersa.org/discover/publications-and-articles/reports/seeing-through-the-british-pension-system">eaten up by charges</a>, less than 4% of savings <a href="http://www.palgrave.com/us/book/9781137560605">are actually invested at all</a> (the rest spends its life as perpetually traded abstract financial assets), the system is <a href="https://www.penguin.co.uk/books/187623/the-shifts-and-the-shocks/">prone to asset bubbles and crashes</a>, returns have been driven down to close to zero <a href="http://www.palgrave.com/us/book/9781137560605">making a pension unaffordable</a>, the level of debt in the economy <a href="http://press.princeton.edu/titles/10546.html">has increased unsustainably</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/180362/original/file-20170731-15340-ygv9yl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/180362/original/file-20170731-15340-ygv9yl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/180362/original/file-20170731-15340-ygv9yl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/180362/original/file-20170731-15340-ygv9yl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/180362/original/file-20170731-15340-ygv9yl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/180362/original/file-20170731-15340-ygv9yl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/180362/original/file-20170731-15340-ygv9yl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Only a small percentage of savings are invested in the real economy.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>Instead of stewarding the corporates they oversee, investment managers encourage corporates to make short-term decisions <a href="https://www.ft.com/content/d583baa2-823f-11e5-8095-ed1a37d1e096?mhq5j=e1">to boost their share price</a>. The example of banks’ behaviour in the run up to the financial crisis was a dramatic manifestation. More pernicious are incentives for companies to return money to shareholders rather than invest in staff or infrastructure, undermining social cohesion (through inequality) and the long-term prospects of the economy.</p>
<h2>Deciding what we want</h2>
<p>So how could we achieve a better system? The government currently supports, promotes and sets incentives for finance based on an inapplicable economic theory to perpetuate a system that doesn’t work. Instead, we need to decide on what we want finance to do and set incentives to achieve the outcomes we want. </p>
<p>For example, in return for the continued support of the finance system, the finance industry should have to demonstrate that it is socially useful. Banks that have the right to create money and are guaranteed by governments should preference lending to create jobs and other social benefits (the proportion of lending to the “real” economy by banks is negligible). </p>
<p>To benefit from a tax rebate, pensions and savings products should have to demonstrate a positive social benefit or invest in sustainable infrastructure and R&D. The sustainable finance tools <a href="http://wedocs.unep.org/bitstream/handle/20.500.11822/20716/The_Financial_System_We_Need_From_Momentum_to_Transformation.pdf?sequence=1&isAllowed=y">to do this exist</a> and have been tried and tested over an extended period.</p>
<p>Defining what is socially useful is problematic, but it is not a problem that we can duck. Currently the government support for finance has an ethical basis – theoretically efficient free markets to ensure that the economy runs at maximum potential. This may be a worthy value, but it does not apply to our current non-free financial markets. We need to decide what values we want finance to embody, and then set the rules to achieve these.</p><img src="https://counter.theconversation.com/content/80908/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nick Silver is author of "Finance, Society and Sustainability: How to Make the Financial System Work for the Economy, People and Planet" and a director of Radix, the think tank of the radical centre, and of Climate Bonds Initiative.</span></em></p>The finance industry has developed a powerful set of tools over the years, which could be used to improve well-being and solve our environmental problems.Nick Silver, Honorary Senior Visiting Fellow at CASS, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/669112016-10-12T04:47:16Z2016-10-12T04:47:16ZAfter Trump 2016, will liberals listen?<figure><img src="https://images.theconversation.com/files/141363/original/image-20161012-8389-1so2bg6.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Thomas Frank: wit and author of Listen Liberal</span> <span class="attribution"><span class="source">Vimeo</span></span></figcaption></figure><h2>Beyond culture wars</h2>
<p>Donald Trump, we know, has promised to “Make America Great Again”. (#MAGA) It is almost the one message he has consistently held to.</p>
<p>The problem is that Trump is almost completely unlike the charming heroes portrayed on film by Jimmy Stewart or Cary Grant in America’s post-war boom. This tycoon-come-Reality TV-star-come-populist is more like a garish parody of the villains in the golden age’s <em>noir</em> classics: their fortunes bound up with fast money and <a href="http://www.abc.net.au/news/2016-08-21/donald-trumps-companies-owe-650-million-reports/7769774">underhand business</a>, with strong hints of <a href="http://www.rollingstone.com/politics/features/the-violence-of-donald-trump-w444012">thuggish violence</a> and <a href="https://www.washingtonpost.com/politics/trump-recorded-having-extremely-lewd-conversation-about-women-in-2005/2016/10/07/3b9ce776-8cb4-11e6-bf8a-3d26847eeed4_story.html">sexual scandal</a>.</p>
<p>It is little wonder then that the 2016 US election campaign has taken our commercial media’s fixation on the politics of personality to a whole new level. </p>
<p>In any other campaign, Hilary Clinton’s historic run to be the first female American President would have been the story. Yet watching Trump fulminate and free associate has all the unnerving fascination of witnessing a moral car crash. </p>
<p>Mr Trump sometimes seems intent on “outing” completely the darker underside of the <a href="http://ethicalpolitics.org/seminars/matt-sharpe.htm">culture wars</a> against “political correctness” that neoconservative forces have waged around the world for three decades. </p>
<p>He embodies in technicolor daylight that ugly point wherein fraught appeals to traditional values give way to unregenerate chauvinism; high-strung invocations of “Western civilization” fold into xenophobia, a <a href="https://www.washingtonpost.com/news/morning-mix/wp/2015/08/21/trump-says-fans-are-very-passionate-after-hearing-one-of-them-allegedly-assaulted-hispanic-man/">courting of the far Right</a>, and simplistic misrepresentations of history and <a href="http://www.huffingtonpost.com.au/entry/9-outrageous-things-donald-trump-has-said-about-latinos_us_55e483a1e4b0c818f618904b">other cultures</a>; where warrantless wealth feeds <a href="http://www.huffingtonpost.com/daniel-wagner/trump-and-narcissistic-pe_b_11289332.html">the crassest sensationalism</a>; and where protecting ‘our way of life’ turns into open scorn for constitutionalism and <a href="https://www.theguardian.com/us-news/2016/jun/28/donald-trump-ohio-rally-isis-torture-tpp-rape">the rule of law</a>.</p>
<p>Trump is, in short, the living embodiment of the worst fears of anyone with the least sympathy for the cultural changes that have transformed societies like Australia and the US since the Second World War.</p>
<p>Yet the near-wall-to-wall media coverage of Trump the man, his viral tweets and virulent soundbites has often crowded out analyses of the substantial economic and political, domestic and foreign policy issues of election 2016. </p>
<p>Thankfully, as I write this, Trumpism looks like a political phenomenon with more like four <em>weeks</em> than four <em>years</em> to run its course. Leading Republicans <a href="http://www.alternet.org/election-2016/even-more-republicans-jump-ship-trump-after-debate-now-paul-ryan-signals-total">are again jumping ship</a>. The <a href="http://www.brisbanetimes.com.au/world/us-election/new-poll-shows-donald-trump-trailing-hillary-clinton-by-eight-points-20161011-gs06ks.html?deviceType=text">polls are going under</a>. Yet no amount of outrage at Trump’s odium can address the questions the popular success of such a figure raises about the “State of the Union” in the second decade of the new millennium.</p>
<p>What social and economic realities, after all, could have so polarised the American electorate? Why have <a href="http://www.newyorker.com/magazine/2016/05/16/how-donald-trump-appeals-to-the-white-working-class">millions of ordinary Americans deserted more moderate, mainstream candidates</a>? Why do they seem attracted (precisely) to Mr Trump’s willingness to outrageously flaunt “establishment” conventions and bait the mainstream media?</p>
<p>And to what extent do continuing depictions of Trump supporters in much of this media as uneducated troglodytes, if not immoral bigots, reflect and ratchet up – rather than register and respond to – the profound social divisions that made the man a Presidential possibility in the first place?</p>
<h2>Being (Tom) Frank</h2>
<p>There are nearly as many opinions on the crisis of the Republic as there are pundits who have tried their hands at writing on it.</p>
<p>Arguably one of the most consistently insightful, independent commentators on American life over the last few decades, however, is <a href="http://www.tcfrank.com/">Thomas Frank</a>. Frank has an uncanny sense for the key issues of the day. He has a razor sharp wit which consistently pits an outraged common sense against a sometimes uncommonly counter-sensical political universe. He almost always contests and reframes staid opinions in ways that make you think. </p>
<p>1997’s <a href="https://www.goodreads.com/book/show/174711.The_Conquest_of_Cool">Conquest of Cool</a> already undercuts many of the dug-in trenchlines of our culture warriors. Frank documents here, <em>ad hilarium</em>, how the leading motifs of the postmodern counterculture (individuality, difference, change, cynical reflexivity …), far from challenging the New Economy, have since the 1960s been seamlessly integrated into marketing, the engine room of consumerist capitalism.</p>
<p>2000 brought <a href="http://www.goodreads.com/book/show/189114.One_Market_Under_God">One Market Under God</a>. This longer work is a comparably comic journey into the hyperbolic world of the nineties’ managerial discourses committed to bringing competition—hitherto a game played between companies—<em>inside</em> organisations, animated by the dazzling conviction that “markets are a far more democratic form of organization than democratically elected governments.”</p>
<p>In the Bush era, works led by <a href="https://www.goodreads.com/book/show/54666.What_s_the_Matter_with_Kansas_How_Conservatives_Won_the_Heart_of_America">What’s the Matter with Kansas?</a> (2004) saw this postmodern <a href="http://www.biography.com/people/voltaire-9520178">Voltaire</a> turning his attention to the (veritably) theological mysteries explaining why many of the same middle Americans rendered redundant, literally, in the Clinton-era “booms” were turning in droves <em>against</em> the Democrats, America’s traditional “party of the people”, and towards the GOP.</p>
<p>The answer, <a href="https://en.wikipedia.org/wiki/What%27s_the_Matter_with_Kansas%3F">as Frank phrases things</a>, is “backlash”. This involves “a crusade in which one’s material interests are suspended in favour of vague cultural grievances that are all-important and yet incapable of ever being assuaged”. The crusade is stoked and steered by an outraged conservative commentariat in unending holy war on “liberal” (as against economic) elites. </p>
<p>And, to return to our subject, it is this same “backlash” that Frank sees underlying the unheralded successes of one Donald J. Trump in 2015-2016. Nevertheless, in the bitter irony at the heart of his latest book <a href="https://www.goodreads.com/book/show/25666062-listen-liberal">Listen, Liberal! Or Whatever Happened to the Party of the People</a>, Frank argues that it is the Clintons’-era Democrats, alongside the presently-Trumped Republicans, who are responsible for making something like Trumpism inevitable.</p>
<p>In such a perspective, the present Republican candidate’s brazen brutishness withdraws from the limelight. Mercifully. But the larger stakes of election 2016 are thrown into very different relief.</p>
<h2>It really is the economy</h2>
<p>So, why does Frank, this self-confessed Left liberal, blame the Democrats, of all people, and at such a time? </p>
<p>The first thing Frank will insist upon, like Bernie Sanders’ supporters, is that there are Democrats and Democrats. In a <a href="http://www.democracynow.org/2016/6/22/thomas_frank_on_clinton_democratic_establishment">recent interview</a>, Frank has commented on the significance of the “almost allergic reaction” against Sanders from within his own Party:</p>
<blockquote>
<p>What he was saying was just so utterly unacceptable to them. And when you think about it, what he’s saying is very deep in the Democratic tradition. It’s not radical. It’s not strange. It’s straight out of the New Deal. I mean, he sounds like—he sounds like, you know, a New Dealer … The things that he was proposing are right out of… the Democratic platform when Roosevelt …, when Harry Truman was president …</p>
</blockquote>
<p>Frank knows very well that a newer brand of Democrats, ascendant since the 1990s, will reply <em>that this is just the point</em>. The Party of the People has gone “metro” for a new millennium. Sanders was stuck in “retro” dreams of the redistributive amelioration of inequality, the refurbishing of the safety net, a viable manufacturing sector, and reregulating the financial elites.</p>
<p>But it is just this Democrats’ abandonment of social democracy, and its unintended consequences, that Frank wonders about. <em>Listen Liberal!</em> does little else than wonder about it. </p>
<p>How could it have been that Bill Clinton, that celebrated (if <em>very</em> personally flawed) Democrat, was the President who, having come to power promising relief for middle Americans, <a href="https://www.salon.com/2016/03/14/bill_clintons_odious_presidency_thomas_frank_on_the_real_history_of_the_90s/">instead heroically prioritised reducing the deficit</a> to placate the big end of town?</p>
<p>How could it have been a Democratic government, over the protests of their traditional base in organised labour, that locked down the <a href="https://en.wikipedia.org/wiki/North_American_Free_Trade_Agreement">North American Trade Agreement</a> in 1993? </p>
<p>(NAFTA after all put American workers in direct, unwinnable competition with lower-paid labour from the US’s less developed (and less regulated) Southern neighbours. It has led to <a href="http://www.epi.org/blog/naftas-impact-workers/">700,000 American job losses</a> within two decades.)</p>
<p>How could it have been this same Democratic President that in 1994 introduced mass incarceration, built masses of new prisons, proposed the three-strikes rule and the 100:1 sentencing disparity between crack-and-powdered cocaine, leading to mass incarceration of black addicts with no other criminal record?</p>
<p>How could it have been a Democrat President who got tough on welfare moms and repealed the New Deal era Aid to Families with Dependent Children (AFDC) Act in 1996? And who deregulated Interstate banking in 1994, telecommunications in 1996, and cut capital gains tax in 1997? And who was negotiating with Newt Gingrich for significant further privatisations of Social Security before the Lewinky scandal bit …? </p>
<p>By what political alchemy could it have been, finally, this same Democratic President who <a href="http://www.davemanuel.com/fact-check-did-bill-clinton-repeal-the-glass-steagall-act-120/">repealed the 1933 Glass-Steagall Act</a> that separated commercial from investment banking since the Great Depression? </p>
<p>This action, the world knows, paved the way to the proliferation of funny finance and mass indebtedness that by 2008 had landed America and the world in a new-style <a href="http://www.investopedia.com/terms/g/great-recession.asp">Great Recession</a> that it has yet to completely emerge from.</p>
<p>What could a “Party of the People” who by 2000 had thus courted, and begun to <a href="https://www.theguardian.com/global/2016/feb/16/the-issue-is-not-hillary-clintons-wall-st-links-but-her-partys-core-dogmas">successfully win over Wall Street</a>, think that Main Street would make of all this, when life and statistics continue to confirm that the promised “trickle down” has failed to do more than <a href="http://inequality.org/income-inequality/"><em>eke away</em> the American middle classes</a>? </p>
<p>And what did the “POP” think that millions of middle Americans would make of the Obama administration’s failure to deliver on its promises to <a href="http://www.nytimes.com/2014/05/04/magazine/only-one-top-banker-jail-financial-crisis.html">significantly reign in and prosecute those responsible for the GFC</a>, after handing the banks <a href="http://www.forbes.com/sites/mikecollins/2015/07/14/the-big-bank-bailout/#1a05cc53723f">a US$16.8 trillion dollar bailout</a> in a period in which income inequality continues to <a href="http://inequality.org/income-inequality/">zero-in on 1930s-style numbers</a>?</p>
<p>To ask these questions, Frank proposes, is to have come a long way to understanding how millions of American blue collar workers—the traditional constituency of the Democrats—could have flocked to a Donald Trump in 2015-‘16. </p>
<p>To focus exclusively on the horrors of the man is to miss this bigger, perhaps even more unsettling picture.</p>
<h2>Beyond Trump 2016?</h2>
<p>Such thoughts, in any case, explain why Frank was left confessing after the Republican Convention in late July that Trump <em>et al</em>’s speeches were almost <a href="https://www.theguardian.com/commentisfree/2016/jul/28/hillary-clinton-donald-trump-voters-republicans-democrats">more than his simple liberal brain could handle</a>. </p>
<p>For, beyond Trump’s own <em>noir</em>-style depictions of civilizational decay, Frank—unlike most other commentators, predictably—noticed that Trump was making clear overtures to the <a href="https://www.theguardian.com/us-news/2016/sep/29/hillary-clinton-millennial-voters-bernie-sanders-election">the young and working class voters</a> Bernie Sanders had assembled against Hillary. </p>
<p>Indeed:</p>
<blockquote>
<p>Donald Trump’s many overtures to supporters of Senator Bernie Sanders were just the beginning. He also deliberately echoed the language of Franklin Roosevelt, he denounced “big business” (not once but several times), and certain of his less bloodthirsty foreign policy proposals almost remind one of George McGovern’s campaign theme: “Come home, America.” Ivanka Trump promised something that sounded like universal day care. Peter Thiel denounced the culture wars as a fraud and a distraction. </p>
<p>The Republican platform was altered to include a plank calling for the breakup of big banks via the reinstatement of Glass-Steagall. I didn’t hear anyone talk about the need to bring “entitlements” under control. And most crucially, the party’s maximum leader has adopted the left critique of “free trade” almost in its entirety, a critique that I have spent much of my adult life making.</p>
</blockquote>
<p>How real Trump’s pseudo-social democratic promises could be, given his <a href="http://graphics.wsj.com/elections/2016/donald-trump-hillary-clinton-on-the-economy/">tax proposals</a>, and how compelling attacks on the big end of town could be in the mouth of a billionaire is not the issue. </p>
<p>The issue is that such proposals could be pitched at <em>all</em> in 2016 by a Republican candidate, alongside the most belligerent and regressive cultural politics imaginable, as a means to win the one-time base of the Democrats.</p>
<p>Frank himself, only two weeks after the Republican convention, had <a href="https://www.theguardian.com/commentisfree/2016/aug/13/trump-clinton-election-chances-moderate-policies-economy">changed his tune</a>. During that time, Trump had insulted the family of an American-Moslem war veteran, dropped hints that gun enthusiasts might take things into their own hands when it came to defeating Hillary Clinton, and taken a dive in the polls. </p>
<p>Frank’s fear that Trump might actually win in 2016, also, had morphed into something different. With Clinton likely to win in a landslide, and the Republicans looking set to implode, Frank now worried that the new-style Democrats would have no <em>need</em> any time soon to address their Trump-breeding abandonment of American workers, outside of the urban, high-tech-savvy professional classes.</p>
<p>Worse:</p>
<blockquote>
<p>My friends and I like to wonder about who will be the “next Bernie Sanders”, but what I am suggesting here is that whoever emerges to lead the populist left will simply be depicted as the next Trump. The billionaire’s scowling country-club face will become the image of populist reform, whether genuine populists had anything to do with him or not. This is the real potential disaster of 2016: that legitimate economic discontent is going to be dismissed as bigotry and xenophobia for years to come.</p>
</blockquote>
<p>And meanwhile, the deep economic and social causes that have fuelled so much alienation, anger and hatred in the “City on the Hill” will not go away, when Donald Trump leaves its centre stage.</p><img src="https://counter.theconversation.com/content/66911/count.gif" alt="The Conversation" width="1" height="1" />
<h4 class="border">Disclosure</h4><p class="fine-print"><em><span>Matthew Sharpe works at Deakin University. He is coauthor of *The Times Will Suit Them: Postmodern Conservatism in Australia* and the author of journal and magazine articles on political and cultural affairs.</span></em></p>Trump’s noxiousness aside, it remains the economy, and the Democrats’ abandonment of their traditional base that explains Trump’s ascent, according to American commentator Thomas Frank.Matthew Sharpe, Associate Professor in Philosophy, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/444432015-07-14T04:31:01Z2015-07-14T04:31:01ZBRICS herald new era in international political economy<figure><img src="https://images.theconversation.com/files/88207/original/image-20150713-11836-p942dc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The rise of the BRICS countries is a case of political life imitating economic art.</span> <span class="attribution"><span class="source">Reuters</span></span></figcaption></figure><p>The global recognition of the economic prowess of the BRICS – Brazil, Russia, India, China and South Africa – has led to the group gaining greater global political influence. But it has also reinforced the regional leadership standing of these nations.</p>
<p>The rise of the BRICS is a story of regional economic powers becoming increasingly important global political actors. With the promise of new global financial institutions to rival the <a href="http://www.economist.com/blogs/economist-explains/2014/06/economist-explains-20">Bretton Woods</a> institutions, we stand on the cusp of a new era of multilateral economic and development politics. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/88049/original/image-20150710-17439-11achej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/88049/original/image-20150710-17439-11achej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=409&fit=crop&dpr=1 600w, https://images.theconversation.com/files/88049/original/image-20150710-17439-11achej.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=409&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/88049/original/image-20150710-17439-11achej.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=409&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/88049/original/image-20150710-17439-11achej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=514&fit=crop&dpr=1 754w, https://images.theconversation.com/files/88049/original/image-20150710-17439-11achej.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=514&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/88049/original/image-20150710-17439-11achej.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=514&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">New global financial institutions promise to rival the Bretton Woods institutions, the World Bank and the IMF.</span>
<span class="attribution"><span class="source">Reuters/Gary Cameron</span></span>
</figcaption>
</figure>
<p>This global political ascendancy has generally reinforced the standing of BRICS countries as both economic and political leaders in their regions. It was precisely on the political grounds of regional leadership that South Africa was included in BRICS in the first place.</p>
<h2>Erosion of north/south divide</h2>
<p>Coined as an investment meme by a <a href="http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/build-better-brics.pdf">Goldman Sachs</a> bank to help western capitalists make money, the BRICS countries are an interesting case of political life imitating economic art. </p>
<p>The construct worked in the sense that foreign investment flowed into the BRICS. But it also revealed deeper processes of global economic integration reflected by emerging market growth. These are upending traditional patterns of manufacturing, consumption, wealth and financing and beginning to undercut simple north-south divides.</p>
<p>Hence the debate on whether it is the BRICS or <a href="http://www.npr.org/sections/parallels/2014/05/13/311852601/the-global-economy-will-mint-countries-be-the-new-brics">MINT</a> or the <a href="https://www.bbvaresearch.com/wp-content/uploads/2014/05/2014_EAGLEs_Economic_Outllok-Annual.pdf">EAGLES</a> or just India and China that will dominate the world economy must be set against the re-arranging of wealth and poverty in ways that coincide less with national boundaries. </p>
<p>Perhaps one day all billionaires will live in Singapore with the cities of the globe fragmented into sub cities framed along socioeconomic and identity lines. Thus the north–south divide may not so much disappear as be decentralised to sub-national and sub-city level.</p>
<p>In addition, global recognition has clearly reinforced the regional standing of most, if not all, of the BRICS. But the mutually reinforcing logic of global recognition and regional leadership for BRICS does not necessarily mean that the rise of the BRICS is good for the wider regions.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/87918/original/image-20150709-10879-fsidss.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/87918/original/image-20150709-10879-fsidss.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/87918/original/image-20150709-10879-fsidss.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/87918/original/image-20150709-10879-fsidss.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/87918/original/image-20150709-10879-fsidss.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/87918/original/image-20150709-10879-fsidss.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/87918/original/image-20150709-10879-fsidss.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">South Africa’s influence seems mostly limited to southern Africa with other BRICS nations more influential to the north of the continent.</span>
<span class="attribution"><span class="source">Reuters/Ivan Sekretarev</span></span>
</figcaption>
</figure>
<p>Much seems to hang on the nature of economic and political architecture within regions. For example, the ascent of Brazil may arguably harm Argentina while the ascent of China helps South Korea. South Africa’s ascent seems mostly limited to southern Africa with other BRICS nations more influential to the north.</p>
<h2>Wider economic choice?</h2>
<p>There is a closely related debate about where this will lead. Are the BRICS effective serving as sub-imperialists by better integrating the regions into global neoliberal capitalism? Or are they empowering emerging economies by offering a wider range of economic choice? </p>
<p>For example, the BRICS <a href="http://brics6.itamaraty.gov.br/media2/press-releases/219-agreement-on-the-new-development-bank-fortaleza-july-15">bank</a> and <a href="http://brics6.itamaraty.gov.br/media2/press-releases/220-treaty-for-the-establishment-of-a-brics-contingent-reserve-arrangement-fortaleza-july-15">Contingent Reserve Arrangement</a> may introduce greater choice for emerging countries in terms of loans and their conditionalities. This would allow countries to choose policies that are not rigidly neoliberal and more statist. </p>
<p>It also implies that we can expect greater variation in macroeconomic policy with different states and regions making these choices in different ways. However, what constitutes a significant difference from the neoliberal norm is a matter of vigorous debate.</p>
<p>The rise of the BRICS can also be read as symbolising the rise of global capitalism, but not necessarily the neoliberal version embedded in the Washington consensus. This is because at both home and abroad the models of business and development embraced by the BRICs have strong statist elements. They are also informed by an anti-Western identity politics that is important for global political dynamics. </p>
<p>Given the elite bias of most policies, this politics does not necessarily lead to democratic political outcomes such as greater democracy at home. It is better understood in terms of greater pluralism in elite forums of international politics and economics.</p>
<hr>
<p><em>This article is based on the BRICS Initiative for Critical Agrarian Studies (BICAS) <a href="http://www.iss.nl/fileadmin/ASSETS/iss/Research_and_projects/Research_networks/BICAS/BICAS_WP_3-Piper.pdf">working paper</a> by the author.</em></p><img src="https://counter.theconversation.com/content/44443/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The working paper on which this article is based was published with support from the Ford Foundation and the National Research Foundation of South Africa</span></em></p>The global recognition of BRICS – Brazil, Russia, India, China and South Africa – has not only led to their greater global political influence, but also reinforced their regional leadership.Laurence Piper, Professor of Political Studies, University of the Western CapeLicensed as Creative Commons – attribution, no derivatives.