IN THIS ISSUE:

>>
An Employment-Targeted
Economic Program for Kenya

>>
PERI Announces Research Associates Program

>>
Rebellious Economics: Honoring the Career of James Crotty

>>
Robert Pollin: A Unified U.S. Economic Plan for 2008

>>
National AFL-CIO Leaders Visit PERI

>>
PERI Working Papers

>>
Calendar of Events

>> PERI's on-line calendar of
events can be found here.

>> Directions to Gordon Hall can be found here.

Friday November 9. 2007, 1:30
Kevin Gallagher
The Enclave Economy: Foreign Investment and Sustainable Development in Mexico's Silicon Valley
Environmental Working Group discussion series
Gordon Hall, third floor

Friday November 16. 2007, 1:30
Amit Basole
What Gandhi and Hayek Have in Common: Viewing the Informal Economy through the Knowledge Lens
Environmental Working Group discussion series
Gordon Hall, third floor

Friday November 30. 2007, 1: 30
Fikret Adaman
The Political Economy of the Environment in Turkey
Environmental Working Group discussion series
Gordon Hall, third floor

Friday December 7. 2007, 1:30
Hasan Tekguc
Are the Supply Side Agricultural Policies Counter-Productive? The Case of Animal Husbandry Sector in Turkey
Environmental Working Group discussion series
Gordon Hall, third floor

For more information about any of these events, please email PERI.

November 8-9
PERI Co-Director Gerald Epstein will be in Geneva, participating in the United Nations Conference on Trade and Development's Ad Hoc Expert Meeting on Managing Structural Transformation in the Least Developed Countries.

November 12-13
PERI Co-Director Robert Pollin and Associate Director James Heintz will be launching An Employment-Targeted Economic Program for Kenya at multiple events in Nairobi.

December 5-6
Gerald Epstein and James Heintz will be at the launch of Cambodia’s 2007 Trade Integration Strategy, the culmination of PERI’s work for the United Nations Development Programme in Cambodia on the Human Development Impact Assessment of Trade Policies.

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The government of Kenya has committed itself to generating 500,000 new jobs per year at least through 2007. But a very high proportion of Kenyans who are currently working full-time are nonetheless unable to support themselves and their families above the poverty line.

In this full-length study, commissioned by the United Nations Development Programme, PERI scholars Robert Pollin, James Heintz, and
Mwangi wa Githinji explore various means to create high-quality employment in Kenya. Thse include public investments in roads, irrigation and agricultural support services, large-scale credit subsidies for small businesses, reforming monetary policy and making significant changes to the regulation of Kenya's financial sector.

Alongside this publication is an interview with Robert Pollin, conducted by James Garang, a Ph.D. student in economics at the University of Massachusetts, Amherst who was born in Sudan and spent nine years as a 'Lost Boy of Sudan' living in a Kenyan refugee camp. Garang's questions bring an intensely personal perspective to the realities of poverty in sub-Saharan Africa.

ONLINE RESOURCES
>> Download An Employment-Targeted Economic Program for Kenya
>> Read James Garang's interview with Robert Pollin

PERI has created a new category of affiliated Research Associates. PERI Research Associates are economists and other social scientists who are engaged in innovative and significant research projects related to PERI’s primary areas of concern, including globalization and macro-economics; labor economics and living wages; and development, peacebuilding, and the environment. The Research Associates will connect with PERI activities in numerous ways, including writing working papers, attending PERI-sponsored conferences and other events, and collaborating on PERI research projects. Through our interactions with these Associates, we aim to deepen the national and global network of progressive economists actively involved in political economy research, and to promote the visibility of this research among other academics, policymakers, the media, and the broader public.

The initial group of Research Associates includes thirty-six people. Twenty-seven are living and working in the United States, and the remaining are located throughout the world, including Austria, China, Great Britain, Japan, the Philippines, South Africa, South Korea, and Turkey. 

Pictured above are, clockwise, Ilene Grabel; Arjun Jayadev; Ozgur Orhangazi, and Gary Dymski, who gathered at PERI in October for a conference to honor the work of James Crotty.

ONLINE RESOURCES
>> Go to the full list of PERI Research Associates and their Working Papers

On October 19-20, PERI hosted a conference entitled “Rebellious Macroeconomics: Keynes, Marx and Crotty,” honoring the life work of Professor James Crotty of the University of Massachusetts, Amherst Economics Department, and a close PERI associate. The conference was organized by Jonathan Goldstein of Bowdoin College and Michael Hillard of the University of Southern Maine. Eighteen conference papers were presented by a panel of distinguished heterodox macroeconomists. The papers celebrated Jim Crotty’s contributions to political economy over the past 35 years. Consistent with the major themes in Crotty’s research, the conference focused on the virtues of an integrated Keynesian, Marxian and institutionalist macroeconomic framework and applications of that framework to an analysis of the macrodynamics of the neoliberal regime.

The various sessions considered the nature of, advantages of, and Crotty’s contributions to an integrated heterodox macro framework, the theory of accumulation and crisis in that approach, the macrodynamics of the neoliberal regime and heterodox macroeconomic policy. A dinner celebrating the career of Jim Crotty and his contributions to the university community was held on Saturday evening after the conference with about 100 people in attendance.

ONLINE RESOURCES
>> See a full list of papers presented at the conference
>> See a full list of Jim Crotty's PERI Working Papers

In this piece for New Labor Forum, Robert Pollin argues that the expansion of decent jobs as well as social investments—for health care, education, and environmental protection—need to become the cornerstone of economic policy in the United States as the 2008 election approaches. There are certainly major challenges to making any such program workable. But this article shows that none of the strictly economic challenges are insurmountable. Enough money can be found, as we certainly saw when Bush wanted to invade Iraq; the fiscal deficit need not explode; destructive inflation need not emerge; and financial markets can be effectively stabilized through regulation. The most daunting barriers remain political. But, as the article concludes, perhaps having workable policy proposals on the table can themselves help weaken this political resistance. 

ONLINE RESOURCES
>> Download "A People's Economy is Possible"
>> Go to the New Labor Forum home page

On November 2, Richard Trumka, Secretary/Treasurer of AFL-CIO, and Ron Blackwell, Chief Economist, paid an all-day visit to PERI, sharing their vision of economic progress with PERI's staff and students. PERI researchers presented their current work, much of which is directly tied to the objectives of the labor movement. Economics Ph.D. students had the opportunity to discuss their dissertations, and Trumka and Blackwell were able to encourage them to pursue careers grappling with issues of economic equity in the U.S.

Michael Ash & Viola Ferjentsik
An EU Sky Trust: Distributional Analysis for Hungary
This paper analyzes the effects of EU adoption of a cap-and-rebate (or ‘SkyTrust’) system on the income distribution of Hungary, using plausible parameters for an EU carbon charge and revenue recycling system and household consumption survey data to examine the effect on expenditure by decile.
We find that the carbon-charge revenue collection is nearly flat with respect to income. Combined with rebate income, the net effect on income distribution is moderately progressive. Given parameters that would significantly increase the likelihood of the EU meeting Stern Review and IPCC greenhouse gas reduction targets, households in the top decile of the Hungarian income distribution would see incomes fall by 859 USD, or 4.4 percent. Households in the lowest decile of the Hungarian income distribution would see household budgets rise by 498 USD, or 11.4 percent. At the median household income, the effect is small but positive.

Edsel L. Beja Jr.
Unchained Melody: East Asia in Performance  
Indonesia, Malaysia, South Korea, and Thailand continue to perform unsatisfactorily today, ten years after 1997 Asian Crisis. As of 2007, these crisis-affected economies have not fully recouped their losses from the lost opportunities from the Crisis. Unless economic performances return to past trends, another type of economic miracle story may be needed to reclaim their past economic standings. Unless GDP per capita expands faster than present trends, they will continue to face the costs of the lost opportunities. A positive combination of policies is needed: taking up the useful components of the past arrangements and putting in the missing instruments for sound macroeconomic management and international cooperation.

James Boyce & Matthew Riddle
Cap and Dividend: How to Curb Global Warming while Protecting the Incomes of American Families
While there is an active debate about the use of carbon permits to combat global warming, it is generally assumed that corporate emitters—in particular the power industry—would pass these costs on to consumers, in effect creating a regressive tax. This PERI working paper presents a variation that reduces U.S. emissions of carbon dioxide while at the same time protecting the incomes of middle-income and lower-income American families. By returning the revenue generated from carbon permits to U.S. households as a dividend, this policy could instead have a strongly progressive net effect. The majority of U.S. households would be net winners in purely monetary terms: their real incomes, after paying higher fuel prices and receiving their dividends, would rise. From the standpoints of both distributional equity and political feasibility, a cap-and-dividend policy is therefore an attractive way to curb carbon emissions.

Michael Carnahan
Options for Revenue Generation in Post-Conflict Environments
In the wake of violent conflict, a key element of building a durable peace is building a state with the ability to collect and manage public resources. To implement peace accords and to provide public services, the government must be able to collect revenue, allocate resources, and manage expenditure in a manner that is regarded by its citizens as effective and equitable. In this new PERI Working Paper, Michael Carnahan of the Australian National University grapples with the impact of conflict on policy, administrative systems, and overall activity, as well as the impact of pressures from the international community. The author makes five specific recommendations, including a link between revenue collections and donor aid, a reassessment of U.N. policies, changes in tax policies for foreign workers and donors' contractors, and establishing urban land taxation systems.

Jane D'Arista
U.S. Debt and Global Imbalances
Many analysts assume that global imbalances have arisen as a result of developments and policies within national economies. This paper argues that imbalances also result from interactions at the global level and are at least partially shaped by pressures generated by current international monetary systems on the direction and volume of international capital flows.
This paper discusses the ways in which a fiat currency and privatized international payments system under the guardianship of a few wealthy developed countries and their multinational financial institutions have contributed to the problem. It examines the U.S. international investment position, noting the links between changes in net capital flows and credit expansion and between foreign exchange reserves held in the U.S. and liquidity creation. It discusses the risks in failing to address the U.S. foreign debt problem and offers proposals to address the monetary aspects of global imbalances.

Aziz Khan
Employment and Millennium Development Goals: Analytics of the Linkage in the Context of an Accelerated Effort to Achieve the MDGs
Khan divides the eight U.N. Millennium Development Goals into three categories: those that can best be achieved by increasing personal income; those that have positive externalities and depend up on public expenditure combined with private investment; and those that are non-excludable public goods and are thus matters of public action. This paper analyzes policies to achieve the promotion of employment-intensive growth and the investments in public goods such as gender empowerment, control of epidemic diseases and environmental protection. It takes a close look at the performance of four countries – Armenia, Cambodia, Ethiopia and Mongolia – in attaining MDGs. It also looks at a more limited set of aspects of performance in attaining MDGs for a larger set of so-called poor Integrated Package Service countries.

Minqi Li
U.S., China, and the Unraveling of Global Imbalances
Since 2003, world economic growth has accelerated and there has been strong improvement in corporate profitability. The U.S. current account deficits and China’s dramatic economic rise have been the two pillars underpinning the current global economic expansion. The coming years are likely to see the unraveling of the external and internal imbalances of the U.S. economy and the Chinese economy has been characterized by excessive dependence on investment and exports. Whether global economic expansion can be sustained to a large extent depends on whether the Chinese economy can be successfully restructured to be led by domestic consumption and to effectively address the question of long-term ecological sustainability.

Arthur MacEwan
The Meaning of Poverty: Questions of Distribution and Power
What people generally mean by poverty cannot be adequately captured by a single, absolute measure such as income level or a more complex aggregate such as the Human Development Index. These measures fail to account for the complexity of human material needs, and fail to recognize the importance of distributional issues. These failures creates serious problems for campaigns against poverty, at best limiting their impact and at worst dooming them to failure. If poverty is viewed in absolute terms rather than including a consideration of distributional issues, the social structures that generate poverty tend to be ignored. Policy then often focuses on particular programs that are directed to helping the poor improve their absolute situation. These sorts of policies can have positive impacts. Yet they leave unexamined and unaddressed the social structures and power relations that have generated and continue to generate poverty.

Özgür Orhangazi
Financialization and Capital Accumulation in the Non-Financial Corporate Sector
Recent research has explored the growing ‘financialization’ process in the U.S. and other advanced economies. The term is a catch-all phrase used to denote important changes in the structure of non-financial corporations’ balance sheets, including the growth of income from financial subsidiaries and investment as well as growth in the transfer of earnings to financial markets in the forms of interest payments, dividend payments and stock buybacks. This paper explores the relationship between financialization in the U.S economy and real investment at the firm level, finding a negative relationship between real investment and financialization. Increased financial investment and increased financial profit opportunities may have crowded out real investment by changing the incentives of firm managers and directing funds away from real investment. In addition, increased payments to the financial markets may have impeded real investment by decreasing available internal funds, shortening the planning horizons of the firm management, and increasing uncertainty.

Carlo Panico & Marta Vàzquez Suàrez
A Scheme to Coordinate Monetary and Fiscal Policies in the Euro Area
The paper deals with the problems of coordination between monetary and fiscal policies in the Euro area. It examines how the existing institutions handle these problems and presents a proposal to reorganize them. The paper points out that, contrary to what is often stated by the literature, there is a need for coordination between monetary and fiscal policies when both cyclical (short-run) and structural (long-run) problems are dealt with. Then it assesses how coordination is carried out under the existing institutional arrangements, summarizes the main literature that has dealt, in recent years, with the need to modify them and proposes a new scheme, which intends to make them work effectively.

Robert Pollin
Is Full Employment Possible Under Globalization?
To honor the life work of Professor Sumner Rosen, this lecture examines approaches to promoting full employment at decent jobs within our contemporary era of globalization. The lecture briefly summarizes the theories of unemployment of Marx, Friedman, Keynes and Kalecki. It then addresses the meaning of full employment within the alternative theories and under different historical and country settings.  It next considers the issue of the inflation/unemployment trade-off, and the Meidner-Rehn Swedish approach to inflation control under full employment.  It concludes by presenting a sketch of something approximating a full employment program for the contemporary U.S. economy, focusing on ending the Iraq war and reallocation public spending toward health care, education, and green growth.

Robert Pollin and Heidi Garrett-Peltier
The U.S. Employment Effects of Military and Domestic Spending Priorities
The war in Iraq is a strategic and moral disaster. But one issue relating to the war that hasn’t been addressed in depth is its impact on the U.S. economy. In the first of a series of research papers that will consider this issue, Robert Pollin and Heidi Garrett-Peltier consider the impact of military spending versus spending on a series of peaceful priorities -- including health care, education, and energy conservation -- on job creation in the U.S. The study finds, for example, that while investing a billion dollars of tax revenue in the military creates 8,500 jobs, investing the same amount in education or mass transit yields more than twice that number of jobs.

Engelbert Stockhammer
Some Stylized Facts on the Finance-Dominated Accumulation Regime
If the Fordist regime (standardization and intensification of labor to maximize production for mass markets) came to an end in the 1970s, what characterizes what came after? In this PERI Working Paper, Engelbert Stockhammer explores the impact of a finance-dominated accumulation regime in Western Europe, in which financialization, in the broadest sense of the word, has had substantial impacts on investment, consumption and government expenditures. The author finds that the finance-dominated accumulation regime has led to moderate growth in aggregate demand and marked instability in international and domestic financial markets. He goes on to explore the potential for a significant European depression in this macroeconomic context.

Christian E. Weller
Have Differences in Credit Access Diminished in an Era of Financial Market Deregulation?
Over the past few decades, financial markets have become increasingly deregulated and household debt has expanded, sometimes rapidly. It is possible that greater deregulation led to improved credit access--measured by loan denials, discouraged applications, and costs of credit-- for typically underserved groups, such as minorities and low-income families, relative to their counterparts. Data from the Federal Reserve’s Survey of Consumer Finances however, shows no clear trend towards equalization of credit access from 1989 to 2004. While there were some gains by specific groups by certain measures (for example, the gaps in loan denials and discouraged applications improved for Hispanics, relative to Whites), the results indicate that differences in credit access did not decrease on a broad basis during a period of large scale financial deregulation.

ONLINE RESOURCES:
>> PERI publications database