News & EventsNewsletterSeptember 2015 Newsletter
PERI In Focus
In this Issue:
Studies Show Global Climate Stability and Expanded Job Opportunities Within Reach
Dodd-Frank at Five: How Much Has Changed?
Economists Call for $15 Minimum Wage by 2020
The Relationship Between Inequality and Human Rights
Domestic Investment in African Countries: Does the Source of Financing Matter?
Additional Recent PERI Research
PERI Commentary and News Coverage
Studies Show Climate Stability and Expanded Job Opportunities Within Reach
In Global Green Growth, Robert Pollin, Heidi Garrett-Peltier, James Heintz, and Shouvik Chakraborty develop a framework through which the global economy can advance a successful climate stabilization agenda through investments in energy efficiency and clean renewable energies. They also show how this agenda will expand job opportunities for countries at all levels of development.
Global Green Growth is a joint publication of United Nations Industrial Development Organization (UNIDO) and the Global Green Growth Institute. In it, the authors argue that the global economy is capable of meeting recommended emissions targets if most countries devote about 1.5 percent per year of their economy’s GDP to investments in energy efficiency and clean renewable energy sources. They conclude that, generally, countries that sustain this level of annual investments will also be able to maintain economic growth at healthy rates, while providing a sufficient supply of energy resources to undergird growth.
Pollin and Chakraborty develop this approach further for the case of India in “An Egalitarian Green Growth Program for India.” Pollin, Garrett-Peltier and Chakraborty also explore this approach for Spain, as one element of a broader anti-austerity agenda, in “An Egalitarian Clean Energy Investment Program for Spain.” The ideas and research methods in these studies are also explored further in interviews with the authors.
> Read Global Green Growth
> Read "An Egalitarian Green Growth Program for India"
> Read "An Egalitarian Clean Energy Investment Program for Spain"
> Read a Q&A with Heidi Garrett-Peltier and Shouvik Chakraborty about the findings
> Watch an interview with Robert Pollin from the Podemos office in Madrid about the current state of economic science, and advancing anti-austerity and green-macro programs
> Watch the press conference at which Robert Pollin outlines the program for Spain (in Spanish)
Dodd-Frank at Five: How Much Has Changed?
July 21, 2015 marked the fifth anniversary of the passage of Dodd-Frank, the main legislative response to the dangerous financial practices that led to the financial crisis of 2007-2008. In a recent report, Gerald Epstein and Juan Montecino survey the trends of the U.S. financial system prior to and since the passage of Dodd-Frank.
In Epstein’s words: “We wanted to see if banking's gotten safer and more resilient, and whether it's started contributing more to the real economy: to Main Street, families, and small businesses.
“We found that in certain ways, it has gotten safer. The amount of risky bets the banks are taking is down somewhat, relative to their cushion of capital, which is higher than it was just prior to the crisis. And the Dodd-Frank Act is somewhat, if not largely, responsible for some of these trends.
“But in other ways, the same trends that led to banking becoming so dangerous have started accelerating again, and there are new concerning trends, in particular the expansion of the ‘shadow banking’ system. We are a bit safer thanks to Dodd-Frank, but not nearly as safe as we should be.”
> Read "Banking from Financial Crisis to Dodd-Frank: Five Years On, How Much Has Changed?"
Economists Call for $15 Minimum Wage by 2020
Over 200 economists signed a petition authored by Robert Pollin and Jeannette Wicks-Lim calling for an increase in the federal minimum wage to $10.50 an hour by 2016, and to $15 by 2020. The arguments and evidence in the petition are based primarily on the January 2015 PERI Working Paper by Pollin and Wicks-Lim, “A $15 U.S. Minimum Wage: How the Fast-Food Industry Could Adjust without Shedding Jobs.”
The federal minimum wage is currently $7.25, and was last increased in 2009. The real, inflation-adjusted, value of the federal minimum wage has fallen dramatically over time. The real value of the federal minimum wage peaked in 1968 at $10.85 an hour, 50 percent above the current level. Average U.S. labor productivity has risen by roughly 140 percent since 1968. If the federal minimum wage had risen in step with both inflation and average labor productivity, the federal minimum wage today would be $26.00 an hour.
Pollin and Wicks-Lim argue that businesses will be able to absorb cost increases through modest increases in prices (i.e., the price of a Big Mac would go from $4.80 to $5.08 over four years), and small increases in productivity or enabling low-wage workers to receive a slightly larger share of businesses’ total revenues.
The petition was organized at the request of members of Congress, and was introduced along with a bill to raise the minimum wage to $15 an hour by 2020 by Senator Bernard Sanders.
> Read “Economists In Support of a $15 U.S. Minimum Wage as of 2020”
> Read “Technical Appendix and References for $15.00 Minimum Wage Petition
> Working Paper: “A $15 U.S. Minimum Wage: How the Fast-Food Industry Could Adjust without Shedding Jobs”
The Relationship Between Inequality and Human Rights
Current levels of inequality are extreme, and in many countries around the world, they have been rising since the 1980s. Income and wealth inequality could have important implications for the realization of human rights. How much, if any, income and wealth inequality is acceptable within the human rights framework, which has, at its core, the principles of non-discrimination and equality? What limits does growing inequality place on the fulfillment of basic rights?
The neoclassical economics approach, which emphasizes individual rational choice, has been dominant in assessing the impact of inequalities. A recent PERI Working Paper by Radhika Balakrishnan, James Heintz and Diane Elson compares the neoclassical economics and human rights frameworks in how they address issues of inequality. The authors find that there is an implicit obligation within the human rights framework for states to consider the impact of inequality on the ability of their citizens to realize their rights. Moreover, where inequality impedes the realization of rights, they find that the human rights framework obligates states to take steps to move towards a more just distribution of income.
> Read “What Does Inequality Have to Do with Human Rights?”
Investment in African Countries: Does the Source of Financing Matter?
There have been two dominant ideas about the role of foreign capital for domestic investment and growth. It had been long held, following Wassily Leontief, that development strategies should emphasize the role of foreign aid as a means of boosting investment to stimulate growth. But in 1999, Dollar and Easterly challenged these linkages as not being robust in the particular case of African countries.
Growth has accelerated in most African countries in the last 15 years. Domestic investment in these countries is also increasing. As Léonce Ndikumana and Theresa Mannah Blankson write, “The time seems right to revisit the question of the key to unlocking Africa’s growth and sustaining it. Does domestic investment hold the key? Does the source of financing for investment matter?”
The authors find that domestic investment in African countries is driven primarily by domestic sources of financing, namely savings and credit to the private sector. They write: “Overall, the results in this paper have a clear policy message: As African countries design strategies to accelerate domestic investment in their quest to reach and sustain higher growth rates, their primary focus should be to look inward; that is, design strategies to enhance access to low cost credit for the private sector, and incentivize domestic resource mobilization.”
> Read “Financing Domestic Investment in African Countries: Does the Source of Financing Matter?”
Additional Recent Research

Conference Paper: Nancy Folbre
Accounting for Care: A Research and Survey Design Agenda
Like Mother Nature, families make important contributions to economic output. The parallels between accounting for unpriced environmental services and household production are widely recognized. Both intra-family transfers and government transfers are also receiving increased attention. Yet efforts to systematically value non-market services remain intermittent and are seldom combined with efforts to measure intra-family transfers. This paper situates the valuation of non-market transfers of time and money in the larger framework of efforts to move beyond conventional measures of GDP, and explains why levels and trends in non-market work and transfers bear on a number of important public policy issues.
PERI Working Paper: Deepankar Basu and Debarshi Das
Profitability in India’s Organized Manufacturing Sector: The Role of Technology, Distribution, and Demand
Growth in capitalist economies is tied to profitability. Even though capitalism has not fully taken root in developing economies, the organized manufacturing sector in India is clearly a capitalist one. What has driven profitability in this sector in the last three decades? The authors find that profits have increased modestly, at a rate of 1 percent per year. During this period, they point to a long-run trend of regressive income distribution as a driver of profitability, as well as medium and short run changes determined by technological factors.
PERI Working Paper: Léonce Ndikumana
Integrated Yet Marginalized: Implications of Globalization for African Development
This article discusses Africa’s deepening marginalization in the globalization of production, finance, and labor. It underscores critical development issues that result from, and are exacerbated by, globalization in the context of unequal global distribution of economic and political power. Those include illicit financial flows and tax evasion, the brain drain, an increasing incidence of non-communicable diseases, and the disproportionate burden of environmental degradation that is shouldered by the African continent. The article offers some policy suggestions to address these issues at national and regional levels.
PERI Working Paper: Gerald Epstein
Achieving Coherence Between Macroeconomic and Development Objectives
Developing countries can take lessons--one positive, one negative--from the ambiguous responses of rich countries to the financial crisis, writes PERI Co-Director Gerald Epstein in a recent working paper. These lessons suggest there should be a rethinking of the traditional advocacy of “central bank independence.”
PERI Working Paper: Thomas R. Michel
Capitalists, Workers and Thomas Piketty’s Capital in the 21st Century
This paper interprets Piketty's influential work through the lens of structuralist macroeconomic theory, which is a synthesis of the classical, Marxian, and Keynesian traditions. The paper shows how in the structuralist model the connections Piketty makes between growth and inequality become more transparent and less confusing than they are in the neoclassical theory he resorts to using.
PERI Working Paper: Tomas N. Rotta
Unproductive Accumulation in the United States: A New Analytical Framework
This paper offers a new theoretical and empirical framework to analyze the accumulation of capital in its productive and unproductive forms in the U.S. economy from 1947 to 2011. The author finds that the accumulation pattern from 1947-1979 prioritized productive accumulation. After the 1980s, a contrasting pattern prioritized unproductive accumulation, and the growth of unproductive activity has grown at a fast pace in terms of incomes, fixed assets, and employment ever since. The paper’s approach places special emphasis on the ways in which the production of knowledge and information has constituted a rising share of total unproductive income and capital stock.
PERI Working Paper: Deepankar Basu and Debarshi Das
Service Sector Growth in India: A View from Households
This paper studies the phenomenon of service-led growth in India over the past two decades from the perspective of household expenditure. Using consumption expenditure data, the authors find that the bottom 75 percent of households in terms of per capita expenditure have been the source of between 31 and 54 percent of total expenditure on services, the larger number referring to urban India. For a poor country like India with widespread under-nutrition, this presents an unusual trend. This suggests that poorer households are possibly getting constrained into spending more on services, even when they have inadequate consumption of food, due to larger structural changes beyond their control.
International Labour Office Working Paper: Gerald Epstein
Development Central Banking: A Review of Issues and Experiences
The author finds a strong case for, in general, central banks playing a broader role in helping developing countries meet their key challenges, such as reducing unemployment, generating more decent work, helping to allocate investment to productivity enhancing activities and helping to tackle the challenges of climate change.
PERI Working Paper: Emannuel Carre, Jezabel Couppey-Soubeyran, Dominique Plihon, Marc Pourroy
Central Banking in the Aftermath of the Crisis
Has the financial crisis caused a paradigm shift in central banking, or only a temporary alteration? The authors provide a snapshot of the current state of central banking doctrine after the crisis, using data from a questionnaire produced in 2011 and sent to central bankers and economists for a report by the French Council of Economic Analysis to the Prime Minister. They show that the financial crisis has led to some amendments of pre-crisis central banking. However, they point out that because of central bankers’ conservatism, a return to the status quo ante cannot be excluded.
PERI Working Paper: Howard Stein
Africa, Growth Sustainability and the Great Recession
The author argues that Sub-Saharan Africa as a whole did notably well during the Great Recession, exceeding global growth by 4.7% in 2008, and 6.2% in 2009. Though there was some variation, overall growth was 2.9 % higher than the world as a whole over the period 2018-13. A number of factors are examined to understand this outcome.
PERI Working Paper: Nathaniel Cline and Matias Vernengo
Interest rates, terms of trade and currency crises: Are we on the verge of a new crisis in the periphery?
The authors develop a simple model of currency crises, which emphasizes the role of currency mismatches and the balance of payments constraint. In their model, crises are driven by external shocks, particularly foreign interest rate and terms of trade shocks, which drive payments imbalances. In a reversal of conventional causality, they show how a currency crisis can then produce a domestic fiscal crisis. They argue that concerns of a renewed wave of currency crises may be overstated.
PERI Working Paper: Thomas I. Palley
The Theory of Endogenous Money: Mechanics and Implications for Macroeconomic Analysis and Monetary Policy
This paper presents the Post-Keynesian theory of endogenous money supply and shows how it is fundamentally different from the conventional money supply theory. The paper emphasizes the structuralist version of Post Keynesian theory as it retains Keynes’ liquidity preference theory of long term interest rates and also recognizes banks are subject to financial constraints that limit their lending activities. The paper also shows how an endogenous money perspective has important implications for monetary policy.
PERI Working Paper: Gerald Epstein
Financialization: There’s Something Happening Here
“Financialization” is the latest term used by analysts trying to understand the contemporary rise of finance and its powerful role. This paper reviews the literature on the topic of financialization, and finds it ranging from theoretical to empirical questions, including issues of policy, historical context, and the impact on phenomena such as financial crises, productive investment, productivity growth, wages and income distribution.
PERI Working Paper: Ahmet Benlialper and Hasan Cömert
Central banking in developing countries after the crisis: What has changed?
This paper gives a brief account of the course of monetary policy in developing countries after the Great Financial Crisis of 2008, with emphasis on the advantages and disadvantages of notable monetary policy shifts. It argues that the core of the previous consensus is preserved. In the absence of a rethinking of the international financial architecture, developing countries are still heavily exposed to external shocks, restraining independent monetary policy.
PERI Working Paper: Deepankar Basu and Debarshi Das
Profitability and Investment: Evidence from India’s Organized Manufacturing Sector
In a follow-up to an earlier paper, the authors estimate investment functions using  a large state-industry panel data set covering the period 1983 to 2008. Their results show that the rate of profit has both short and long run positive impacts on investment; the profit share and capacity-capital ratio have only long run positive impacts; and the capacity utilization rate has only a contemporaneous positive impact on investment.

PERI Working Paper: Tomás N. Rotta
Productive Stagnation and Unproductive Accumulation: An Econometric Analysis of the United States
Using time series econometrics, the author evaluates the dynamic interactions between productive and unproductive forms of capital accumulation in the U.S. economy from 1947 to 2011. The paper seeks to answer the questions: Does unproductive accumulation hinder or foster productive accumulation? Does productive stagnation lead to faster unproductive accumulation?

PERI Working Paper: Suranjana Nabar-Bhaduri
Not sustainable: India’s trade and current account deficits
India’s trade balance and current account have shown persistent deficits for a major part of its post-independence period. Since the mid-2000s, trade deficits have increased perilously, with a sharp rise in both oil and non-oil imports. This has increased the magnitude of the current account deficit, as net earnings from services and remittances have been insufficient to offset the trade deficits. India has relied on remittances, services exports and capital inflows to finance these deficits. This paper argues that all three sources entail elements of fragility.
PERI Working Paper: Özgür Orhangazi | Gökçer Özgür
Capital flows, finance-led growth and fragility in the age of global liquidity and quantitative easing: The case of Turkey
Capital flows to the “developing and emerging economies” (DEEs) have surged in the 2000s. In the past, DEEs such as Turkey have had difficulties due to three issues: high government borrowing requirements, fixed exchange rate systems, and/or weak banking sectors. In Turkey, after capital account liberalization in 1989, it ran into crises in 1994, 1998 and 2001. Since then, the government borrowing requirement has gone down, the banking sector has been reformed and a more flexible exchange rate system adopted. However, the authors argue that a capital-inflows-dependent, finance-led growth model emerged in the 2000s. They also show that this model led to an accumulation of fragilities both in the external accounts and within the domestic economy. 
PERI Commentary and News Coverage 

Gerald Epstein in The Huffington Post: The motivations behind and impacts of Federal Reserve policies
Gerald Epstein in NakedCapitalism: Quantitative Easing and the Great Recession: Who Wins? Who Loses?
Robert Pollin on The Real News Network: Fast Food Workers’ Movement Prompting Raises
Robert Pollin on The New Economy: U.S. Minimum Wage Movement Could Spread Internationally
Patrick Mason on The Real News Network: Black Immigrants Face Racism in Earnings, Hiring
Gerald Epstein in TripleCrisis: From Boring Banking to Roaring Banking: How the Financial Sector Grew Out of Control, and How We Can Change It (a three-part interview) Léonce Ndikumana on The Real News Network: Signs of Progress in Fragile African States; How Fragile African States Can Find Stability
Robert Pollin in The Springfield Republican: UMass Professor Pollin understands why Democrats skeptical of new trade proposal
Heidi Garrett-Peltier on The Real News Network: Job Opportunities Are One Cost of War
James Boyce in The Hindu: Green Goals for the Delhi Aam Aadmi
James Boyce on The Real News Network: Solutions to Air Pollution in Delhi
Robert Pollin on Green Growth as a Component in Spain’s Anti-Austerity Agenda Deepankar Basu on the Calorie Consumption Puzzle in India PERI in The Huffington Post: How Did the United States Really Perform in the United Nations Human Rights Review? By the Numbers, the News is Not Good
Robert Pollin on The Real News Network: Greece Needs a Positive Economic Agenda Beyond Reducing Debt Burden
Gerald Epstein on The Real News Network: The Federal Research Raising Interest Rates Won’t Ease Inequality
Gerald Epstein in TripleCrisis: What’s Wrong with Inflation Targeting?
Gerald Epstein in TripleCrisis: Answering Questions about Development Central Banking
Klara Zwickl, James Boyce, and Michael Ash in TripleCrisis: Mapping Environmental Injustice in the U.S.
James Boyce in Grist: Inequality Isn’t Just Bad for the Economy—It’s Toxic for the Environment
Gerald Epstein in Dollars & Sense: From Boring Banking to Roaring Banking: How the financial sector grew out of control, and how we can change it
Gerald Epstein on The Real News Network: Dodd-Frank Has Had a Positive Effect, But More Needs to be Done
Léonce Ndikumana in The Conversation: How Africa Can Overcome Being Marginalized in the Global Economy
James Boyce in TripleCrisis: Reports from the World’s Worst Polluted City
Robert Pollin on The Real News Network: Economists Join the Call for $15 Minimum Wage by 2020
James Boyce on RIFuture: Air Quality Benefits Outweigh Fracked Gas Facility
Léonce Ndikumana in Counterpunch: Why the Retreat of Foreign Investment from Africa Means Less Looting
Léonce Ndikumana in The Huffington Post on global corporations and international tax evasion
Léonce Ndikumana in Mail & Guardian Africa on development aid with strings attached
Gerald Epstein on The Real News Network: Clinton Proposals Don’t Go Far Enough to Combat “Short-Termism”
Shouvik Chakraborty on The Real News Network: India’s Economy Can Grow While Curbing Emissions
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