News & EventsNewsletterDecember 2015 Newsletter
December 2015
PERI In Focus
In this Issue:
Greening the Global Economy
Quantitative Easing: Political Pressures on the Fed, and the Impact on Income Inequality
Reviving the U.S. Manufacturing Sector Through Procurement Policies
New Perspectives on Foreign Aid
Additional Recent PERI Research
PERI Commentary and News Coverage
Greening the Global Economy
In his new book, Greening the Global Economy (MIT Press), PERI Co-Director Robert Pollin takes on the widely-held belief that protecting the environment and expanding job opportunities are conflicting goals. Pollin shows that reducing greenhouse gas emissions to target goals is achievable through steady, large-scale investments—about 1.5 percent of global GDP per year—in energy efficiency and clean renewable energy sources. Furthermore, he shows how these investments can support healthy rates of economic growth and expand employment opportunities. A global green investment project will also create new opportunities for small-scale and cooperative energy systems to flourish in both advanced and developing economies.
In clear and readable prose, Robert Pollin details how, contrary to the insidious claims of Big Oil, burning fossil fuels at current rates is bad for the economy, bad for the environment, and bad for the poor. Greening the Global Economy powerfully demonstrates that investing in efficiency and renewable energy generates a far better standard of living than the current alternative--abject and massive dependency on fossil fuel.”
--Jerry Brown, Governor of California
Greening the Global Economy by Robert Pollin provides a very clear discussion of a roadmap to carbon reduction that drastically reduces fossil fuel consumption by combining energy efficiency with an increased reliance on renewable energy sources. He makes the case that dramatic reductions do not require great economic hardship or personal discomfort. Many confusions and misapprehensions that have clouded debates over energy policy are convincingly set to rest. The book is an important contribution to our ongoing dialog about the future of energy in the United State and in the world. 
-- Mara Prentiss, Mallinckrodt Professor of Physics, Harvard University and author of Energy Revolution
Purchase Greening the Global Economy
Press coverage
>> C-Span: “How to Fix the Planet with Robert Pollin and Joe Romm”
>> Quartz: "There's a workable plan for lowering global emissions by 40% in 20 years" (Article by Robert Pollin)
>> The Nation: “The New Green Economy: Think We Can’t Stabilize the Climate While Fostering Growth? Think Again” (Article written by Robert Pollin)
>> The American Prospect: "How to Slash Emissions While Creating Jobs" (Interview)
>> The Leonard Lopate Show on WNYC: "How to Clean the Air and Stimulate the Economy Simultaneously"
>> Campaign for America’s Future: “Robert Pollin Shows Us that ‘Greening the Economy’ is Doable” (Video interview and article)
>> Capital & Main: “Robert Pollin Sees a Bit of Rainbow During Paris Climate Talks”
The Political Economy of Quantitative Easing
The Federal Reserve (the Fed), like other major central banks, has taken extraordinary measures to try to counter the destructive economic impacts of the Great Financial Crisis of 2007 - 2008. These unprecedented policies have included maintaining short interest rates at or close to zero, and “quantitative easing” (QE), the purchasing of more than $3 trillion of mortgage-backed securities and longer-dated Treasury securities. The Fed ended its QE policy in March 2015, and is on the verge of starting to reverse its zero rate policy in an attempt to “normalize” monetary policy. This juncture is a good time to analyze the political economy of these extraordinary measures. Why did the Federal Reserve begin and end QE when it did? Who was helped by the policy and who was hurt? What do the answers to these questions imply about the desirability of normalizing monetary policy at this time?
In the first of three papers written as part of a project with the Institute for New Economic Thinking (INET), Juan Antonio Montecino and Gerald Epstein show that the first round of QE significantly helped the largest banks, especially those that owned the types of assets bought by the Federal Reserve. (“Have Large Scale Asset Purchases Increased Bank Profits?”)
Their second paper, “The Political Economy of QE and the Fed: Who Gained, Who Lost and Why Did It End?”, shows that other industries such as manufacturing and autos also were expected to benefit from the first two rounds of QE, but by the final round (QEIII), relatively few industries were benefiting from the policy. This can help explain why the policy was ended after QEIII, despite the fact that positive employment impacts from the policy would likely have continued.
Montecino and Epstein’s third paper, “Did Quantitative Easing Increase Income Inequality?” addresses the controversial question of the distributional impacts of the QE policy. They find that though QE helped workers and others from the middle and lower income groups of the income distribution in an absolute sense, the richest households benefited much more. Thus, QE did worsen inequality as some critics have suggested.
This result does not imply, however, that raising interest rates is likely to help those in the middle and lower tiers of the income distribution. For there is a great deal of evidence that higher interest rates worsen income distribution as well. This raises the paradox that both higher and lower interest rates may worsen income distribution. This dynamic means that the Federal Reserve needs to experiment with unconventional policies in order to generate more employment and raise the incomes of those in the middle and lower ends of the income distribution.
>> Read “Have Large Scale Asset Purchases Increased Bank Profits?”
>> Read  “The Political Economy of QE and the Fed: Who Gained, Who Lost and Why Did It End?”
>> Read “Did Quantitative Easing Increase Income Inequality?”
Reviving the U.S. Manufacturing Sector Through Procurement Policies
A new study by Robert Pollin, James Heintz, and Jeannette Wicks-Lim of PERI advances a policy framework capable of supporting a major revival of the U.S. manufacturing sector. The study focuses on one set of policy tools—U.S. public sector procurement of manufactured goods—to promote growth and expanding job opportunities within one manufacturing industry, the production of railcar transportation equipment. The authors find that significant but straightforward reforms of the “Buy America” program of the Department of Transportation are capable of generating major benefits to domestic railcar manufacturers and workers in this sector.
>> Read the full report, “Strengthening U.S. Manufacturing Through Public Procurement Policies: How Procurement Policies Can Promote Innovation and Good Jobs”
>> Read the study’s Policy Highlights and Summary
>> Read coverage of the study on Campaign for America’s Future blog: “Let’s Make Sure Our Tax Dollars Buy Good Manufacturing Jobs”
New Perspectives on Foreign Aid
Léonce Ndikumana, Director of PERI’s African Development Policy program, has studied foreign aid’s effectiveness in two recent papers. In “The Impact of Foreign Aid Allocation on Access to Social Services in sub-Saharan Africa: The Case of Water and Sanitation,” Ndikumana and Lynda Pickbourn address the lack of adequate progress towards providing access to clean water and basic sanitation in the region. “The focus of national policy makers and the development assistance community has been primarily on more prominent goals, such as poverty reduction and the fight against endemic diseases.” says Ndikumana. “What has been forgotten, however, is that adequate access to water and sanitation is a pre-requisite for achieving those more high profile goals.” This study investigates the role that targeted aid allocation to these sectors can play in accelerating access to these services, and progress towards overall social and human development.
In his second paper, “The Role of Foreign Aid in Post‐Conflict Countries,” Ndikumana argues that the success of a post-conflict reconstruction agenda is contingent on the existence of a capable state that is able to deliver on its core functions, including revenue mobilization. “While these countries are in dire need of massive amounts of resources, they also lack the institutional and technical capacity to manage resources while they are also plagued by structural instability,” Ndikumana says. “Administering aid and achieving adequate aid effectiveness in post-conflict countries and fragile states poses daunting challenges to the donor community. There are no blueprints to emulate in aid management, neither is there a model for institution and state building in post-conflict environments. This means that donors and recipient countries must adopt smarter and more flexible approaches to aid allocation and resource management.”
 >> Read “The Impact of Foreign Aid Allocation on Access to Social Services in sub-Saharan Africa: The Case of Water and Sanitation”
>> Read “The Role of Foreign Aid in Post‐Conflict Countries”

>> Watch Léonce Ndikumana on The Real News Network: Did the U.N. Meet Its Water and Sanitation Goals for Sub-Saharan Africa?
Additional Recent Research
PERI Working Paper: Juan Antonio Montecino
Capital Controls and the Real Exchange Rate: Do Controls Promote Disequilibria?
The consensus view is that capital controls can effectively lengthen the maturity composition of capital inflows and increase the independence of monetary policy, but are not generally effective at reducing net inflows and influencing the real exchange rate. This paper presents empirical evidence that although capital controls may not directly affect the long-run equilibrium level of the real exchange rate, they may enable disequilibria to persist for an extended period of time relative to the absence of controls.
PERI Working Paper: Leila E. David, Charalampos Konstaninidis, and Yorghos Tripodis
A Proposal for a Federalized Unemployment Insurance Mechanism for Europe
This article investigates the prospects for an unemployment insurance system that would span the entire European Monetary Union as one measure that could substantially contribute to effective crisis management in the Eurozone. The authors estimate the costs of the proposed system under different financing and eligibility scenarios and find that under a variety of reasonable institutional parameters, such a system is fiscally feasible. They conclude that fiscal transfers extended via automatic stabilizers are a productive avenue towards a more stable Eurozone architecture.
PERI Working Paper: Nina Eichacker
German Financialization, the Global Financial Crisis, and the Eurozone Crisis
Much of the work examining the Eurozone crisis focuses on either the role of peripheral European states’ current account deficits, or German neo-mercantilist policies that promoted its export surplus. This paper considers how German financialization and input on the Eurozone’s financial architecture promoted those deficits, increased European systemic risk, and facilitated the onset of Europe’s subsequent crises. It argues that the increase in German financial sector competition encouraged those banks’ increase in securitization and participation in global capital markets, as well as German policy-makers’ support for financial liberalization embedded in the Maastricht Treaty.
PERI Working Paper: Nina Eichacker
Too Good to be True: What the Icelandic Crisis Revealed about Global Finance
What did the Icelandic financial crisis reveal about international financial markets prior to 2008? Global financial markets’ failure to recognize the familiar signs of an oncoming crisis reflects either an ignorance of developing economies’ antecedents to Iceland’s financial liberalization and crisis, or an overriding belief that Iceland was somehow different. They also illustrate Keynesian and Minskyian theories about the instability of finance and its tendency toward crisis. This paper briefly reviews theories of the linkage between financial liberalization and crisis, empirical evidence of that connection, and analyses of Iceland’s financial crisis.
PERI Working Paper: Janvier D. Nkurunziza
Timing and Sequencing of Post-Conflict Reconstrution and Peacebuilding in Burundi
In Burundi, post-conflict reconstruction and peacebuilding policies have not led to sustainable peace. In all five episodes of civil war, state institutions and representatives were the main actors of the conflict. Timing and sequencing of reconstruction and peacebuilding policies tended to prioritize the measures that could offer immediate benefits to the political elite.
PERI Research Brief: Brandon M. Taylor and James K. Boyce
Air Pollution Co-Benefits Associated with the Healthy Climate and Family Security Act of 2014
Curbing the burning of fossil fuels reduces emissions of hazardous air pollutants as well as carbon dioxide emissions. This means that climate policies can bring about significant public health benefits. This PERI Research Brief estimates the air quality benefits of the Healthy Climate and Family Security Act of 2014. Estimates show that by 2050, the Act would prevent 700 thousand premature deaths, 90 million lost work days, and 89 million lost school days, and save an estimated $56-$160 billion per year.
Insight: Peter S. Arno and Jeannette Wicks-Lim
The Earned Income Tax Credit’s Impact on Health
In this article, the authors examine the effect of changes in EITC benefits and their relation to health outcomes, in order to deepen the understanding of how income impacts health. These policy changes can provide a source of income variation that is relatively exogenous to individual or household characteristics. Perhaps more importantly, it provides an opportunity to broaden views of both health and economic policy by exploring the relationship between them.
PERI Working Paper: Andrew J. Barenberg, Deepankar Basu, and Ceren Soylu
The Effect of Public Health Expenditure on Infant Mortality: Evidence from a Panel of Indian States, 1983-84 to 2011-12
This paper studies the impact of public health expenditure on the infant mortality rate (IMR). The authors find that public expenditure on health care reduces IMR. Their baseline specification shows that an increase in public health expenditure by 1 percent of state-level GDP is associated with a reduction in the IMR by about 8 infant deaths per 1000 live births. They also find that female literacy and urbanization reduces the IMR.
Agrarian South: Journal of Political Economy: Shouvik Chakraborty
Explaining the Rise in Agricultural Prices: Impact of Neoliberal Policies on the Agrarian Economy
The international prices of agricultural commodities have exhibited a rising trend since the mid-2000s. This article explains the phenomenon using demand-supply framework from a macroeconomic perspective. It does not find any evidence in favor of the mainstream argument of increased demand from India and China being responsible for this price rise. It argues that the pursuit of neoliberal policies have squeezed the earnings of the peasantry and made agriculture an unviable occupation, adversely affecting its supply.
PERI Working Paper: James K. Boyce, Klara Zwickl, and Michael Ash
Measuring Environmental Inequality
This study presents alternative measures of environmental inequality in the 50 U.S. states for exposure to industrial air pollution. The authors examine to what extent are environmental inequality measures sensitive to spatial scale and population weighting; how do sensitivities to different segments of the overall distribution affect rankings by these measures; and how do vertical and horizontal (inter-group) inequality measures relate to each other? They find substantive differences in rankings by different measures and conclude that no single indicator is sufficient for addressing the entire range of equity concerns that are relevant to environmental policy; instead multiple measures are needed.
PERI Commentary and News Coverage 

Gerald Epstein in NakedCapitalism: The Fed’s New “Operation Twist”: Twisted Logic for Bank Profits at the Expense of the Real Economy
Gerald Epstein on The Real News: The Fed’s Interest Rate Hike and Why You Should Be Concerned
Robert Pollin on Radio Boston: Is a $15 Minimum Wage Sustainable?
James Heintz on a United Nations and OHCHR panel: Towards an enabling macroeconomic environment, of the workshop “Substantive Equality for Women: Connecting Human Rights and Public Policy”
James Boyce on The Real News: What’s Behind Global Emissions Decline, GDP Increase
James Boyce in TripleCrisis: Present-Day Benefits of Climate Policy
James Boyce on The Real News: Phasing Out Fossil Fuels Could Save Tens of Thousands from Dying Each Year in the U.S.
James Heintz in The Washington Blade: U.N. Highlights Economic Cost of anti-LGBT Discrimination
Robert Pollin in Grist: 4 reasons why we can and must fight terrorism and poverty through climate action
Nancy Folbre in The New York Times Book Review: “’How the Other Half Banks,’ by Mehrsa Baradaran’”
James Boyce in Harper’s Magazine: Rethinking Exinction: Toward a Less Gloomy Environmentalism
Gerald Epstein on The Real News: New Research Says Income Inequality Worsened Under Fed’s Quantitative Easing Policy
Paul Krugman on research by Gerald Epstein and Thomas Ferguson: Rate Rage in 1932
Timothy A. Wise in The Wire: Dumping Responsibility on Third World Farmers Yet Again
James Boyce on No Jargon podcast: The Price for Parking Your Car(bon) [Episode 12 of the podcast]
Jeannette Wicks-Lim on The Real News: $15 Minimum Wage Without Job Loss
Timothy A. Wise on The Real News: GMO Anti-Labeling Law Heads to Senate
Shouvik Chakraborty on The Real News: India’s Economy Can Grow While Curbing Emissions
Robert Pollin on The Real News: How the Fed Can Stimulate the Economy
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