IN THIS ISSUE

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Green Economics:
An Update on PERI's Activities

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Financial Crisis and
Re-Regulation: The Progressive Perspective

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A Progressive Economists' Program for Economic Recovery

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Resources on the Employee Free Choice Act

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Welcome Jeff Thompson,
PERI’s New Assistant Professor

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Pro-Poor Development in Europe and Africa

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Employment, Growth & Poverty Reduction in Developing Countries: A Festschrift Conference in Honor of Professor Aziz Khan

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Robert Pollin in
New Labor Forum

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Gerald Epstein in Truthout

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PERI Working Papers

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PERI Events

March 13. 2009 | 3:00 PM
Bad Samaritans - The Myth of Free Trade and the Secret History of Capitalism
Ha-Joon Chang, University of Cambridge

March 20. 2009
Environmental Protection and Poverty Reduction
James Boyce

March 23. 2009 | 4:00 PM
Growth and Immiseration in a Prebisch Framework
Bilge Erten

March 24. 2009 | 4:00 PM
Keynes
Stephen Marglin, Harvard University

March 25. 2009 | 4:00 PM
Is Labor Dead?
Gerald Friedman, University of Massachusetts at Amherst

March 30. 2009 | 4:00 PM
The Ethics of Distribution in a Warming Planet
John Roemer, Yale University

April 1. 2009 | 4:00 PM
Imachi Nkwu: How Commercialization of Natural Resources can Create Common Property
James Fenske, Yale University

April 3. 2009 | 1:30 PM
Topic to be announced
Robert Repetto, Yale University

April 9. 2009 | 4:00 PM
Groupthink: Collective Delusions in Organizations and Markets
Roland Benabou, Princeton University

April 13. 2009 | 4:15 PM
Topic to be announced
Jonathan Leonard, University of California, Berkeley

April 14. 2009 | 4:00 PM
The Political Economy of Free Trade Agreements: Energy and National Development Strategy
Mehrene Larudee, Mt. Holyoke College

April 17. 2009 | 1:30 PM
Constructing Consensus: A Comparison of Scientific Community Advocacy in Mexico and Jamaica
Kemi George

April 21. 2009 | 4:00 PM
Topic to be annonced
Thandika Mkandawire, Director, United Nations Research Institute for Social Development:

April 24. 2009 | 1:30 PM
What are the Determinants of Food/Animal Products Availability at the Household Level in Turkey?
Hasan Tekguc

April 27. 2009 | 4:00 PM
Social Democracy and Rational Workers
Roberto Veniziani, Queen Mary University

April 28. 2009 | 4:00 PM
From the Bailout of the Bondholders to the Nationalization of Banks
Fred Moseley, Mt. Holyoke College

May 1. 2009 | 1:30 PM
Power & Environmental Policies: An International Comparison
Paul Newlin

May 4. 2009 | 4:00 PM
Social Choice and Information Squashing: A Note on the Calculus of Mappings
Alex Coram, University of Western Australia

May 5. 2009 | 4:00 PM
The Current Economic Crisis: Inequality, Power, and Ideology
Arthur MacEwan, University of Massachusetts, Boston

May 8. 2009 | 1:30 PM
Topic to be announced
Swati Birla

May 11. 2009 | 4:00 PM
China's Growth Model: Problems and Alternatives
David Kotz, University of Massachusetts, Amherst

PERI IN FOCUS

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Green Recovery and Job Creation

Over the course of the past nine months, we at PERI have become deeply engaged in issues concerning ‘green’ economic policy. Specifically, we have been asking how we might pursue a transition to a clean-energy economy in such a way that optimizes the employment and general economic benefits along with the environmental benefits. As Robert Pollin writes in the February 16, 2009 issue of The Nation:

The transformation to a clean energy economy can. . . become a cornerstone of a long-term full employment program in this country, which in turn will be the most effective tool for moving people out of poverty and into productive working lives. In short, the transition to a clean energy economy has the capacity to merge the aims of environmental protection and social justice to a degree that is unprecedented. It is an opportunity that must not be lost.

ONLINE RESOURCES
■ "Doing the Recovery Right" (The Nation, February 2009)
■ "Financing the Green Economy as an Answer to Casino Capitalism" (New Labor Forum, February 2009)
■ “How to End the Recession” (The Nation, November 2008)
■ "Green Investments and the Path to Prosperity" (New Labor Forum, October 2008)
■ "Why Green Jobs Are Our Future" (Boston Globe, October 2008)
■ Robert Pollin’s testimony before the House Committee on Education and Labor
■ “Green Recovery” (September 2008)
■ “Job Opportunities for the Green Economy” (June 2008)

The Corporate Toxics Information Project

The U.S. Environmental Protection Agency has announced an initiative to monitor the levels of toxic air pollution around the nation’s schools, and take steps to reduce airborne toxins at those schools with the highest levels. The effort will particularly focus on urban areas, low-income areas, and schools near located near large industrial facilities. The initiative was spurred in a large part by an extensive investigative article on the issue in USA Today, which built its reporting on PERI’s toxic air pollution database. The new EPA action is the most direct impact that PERI’s Corporate Toxics Information Program has had on the health of families. As James K. Boyce, co-director of the project describes it, “It’s extremely gratifying to see the new administration using the analytic tools we’ve created in collaboration with the EPA to directly help people PERI hopes to serve—children and families who have been exposed to disproportionate pollution burdens. This is a big step in making the public’s right-to-know an effective means to secure the right to a clean and safe environment.”

The boom and bust cyclical nature of our economy can fade from scrutiny during its upswings, so when the cycle hits its nadir, the public and the media can be taken by surprise. But progressive economists have been critiquing our financial and regulatory frameworks for decades, and the work of PERI and our research associates can provide an understanding of the roots of the current crisis and a path toward reform and market stability. Much of this work has been collected on our website on our “Financial Regulation” resource page, and some highlights are offered below.

ONLINE RESOURCES
■ Regulation of Financial Markets: A Review of the PERI Literature
■ Gerald Epstein, "Just Say 'No" to the Credit Rating Agencies" (Truthout,
January 17, 2009)
■ Jane D'Arista, "Setting an Agenda for Monetary Reform" (January 2009)
■ Robert Pollin, "Tools for a New Economy: Proposals for a Financial Regulatory System" (Boston Review, January 2009)
■ Gerald Epstein & James Crotty, " Proposals for Effectively Regulating the U.S. Financial System to Avoid Yet Another Meltdown"
■ Robert Pollin "Ending Casino Capitalism" (The Nation, October 2008)
■ Robert Pollin " "Financing the Green Economy as an Answer to Casino Capitalism"" (New Labor Forum , Winter 2009)
■ Robert Pollin "We're All Minskyites Now " (The Nation, November 2008)

In December 2008, a group of progressive economists met to discuss how we might structure a successful economic program which rejects the extreme free market and neoliberal policies that contributed to the current economic debacle. The group, sponsored by PERI and the New School's Schwartz Center for Economic Policy Analysis, issued two statements: Principles for Economic Recovery and Financial Reconstruction from Progressive Economists, accompanied by a detailed Progressive Program for Economic Recovery and Financial Reconstruction.

These documents support the Obama administration’s call for a massive economic recovery program, but argue that to succeed, this program must focus on raising the incomes and security of the vast majority of Americans who have been sidelined from power in recent decades. They also reject calls to simply ‘hit the re-start button’ which would put the economy back on the destructive path that led to this economic disaster. These economists call for an orderly downsizing and restructuring of the bloated financial system so that it serves the needs of the real economy, rather than fueling speculation and fraud. This means that the recovery program must go beyond an economic stimulus package and must fundamentally restructure a number of basic financial and economic institutions. As of this writing, over seventy economists have added their names to these documents.

ONLINE RESOURCES
■ "A Progressive Program for Economic Recovery and Financial Reconstruction" (full-length statement)
■ "Principles For Economic Recovery And Financial Reconstruction From Progressive Economists" (shorter statement)
■ Add your name to the list of signatories

High unemployment rates, rising wage inequality and declining living standards for working families all result in part from dramatic losses in bargaining power for workers over recent decades. The Employee Free Choice Act, which will protect and expand workers’ rights to form unions and bargain collectively, is a potentially powerful tool to reverse this trend, and faces likely legislative action in the coming months. With this in mind, PERI has added an EFCA resources page to our website, where we will post research, media coverage, and other information which may be useful to scholars, activists, and the public for expressing their support of the legislation.

This summer, PERI welcomes Jeff Thompson to our full-time research staff as Assistant Research Professor. Jeff will be focusing primarily on domestic economic policy, with particular emphasis on the New England region and public finance at the state and local government levels. Jeff comes to PERI from Syracuse University, where he is currently completing his Ph.D. in economics with a dissertation on how migration influences the ability of states to use their tax codes to redistribute income. Prior to his Ph.D. work, Jeff was a labor analyst at the Oregon Center for Public Policy for six years and received his Master's degree from the New School for Social Research.

Jeff’s expertise in labor and public economics prepares him well for a position in which he will be working closely with the five New England state fiscal analysis initiative centers. These SFAI centers, which provide analysis of budget and fiscal policy in each of their states, will be working with PERI to explore innovative economic policies that can improve quality of life and conditions for low and moderate income people throughout New England. We also look forward to working with Jeff to increase PERI’s capacity to tackle domestic economic policy and public finance issues more broadly.

ONLINE RESOURCES
■ Learn more about the State Fiscal Analysis Initiative network

Over the past few months, PERI's Associate Director James Heintz has extended PERI’s research on international development economics into new regions. His most recent collaborations with the International Labour Organization and the United Nations Economic Commission for Europe has taken him to Serbia and Macedonia to produce new estimates of informal employment for those countries as well as Kazakhstan, and to make recommendations for how they might measure this sector in the future. He has also extended PERI's work on employment and poverty in sub-Saharan Africa with a survey of informal labor markets in the region, and a global overview of employment, growth, and poverty issues, forthcoming with the United Nations Research Institute on Social Development. Watch the PERI website for the final reports from these research collaborations.

ONLINE RESOURCES
■ Read James Heintz's international development studies

M arch 27-28, 2009
In conjunction with the United Nations Development Programme, PERI has the privilege of hosting a conference in honor of Aziz Khan, Professor Emeritus at the University of California, Riverside. For forty years Professor Khan has made path-breaking contributions to development economics, particularly through his original approaches to the analysis of labor conditions and poverty reduction. Conference participants include: Diana Alarcon, Lopamudra Banerjee, James Boyce, Mark Brenner, Achin Chakraborty, Anirban Dasgupta, Gary Dymski, Mwangi wa Githinji, Keith Griffin, James Heintz, Mahabub Hossain, Amy Iskowitz,Nurul Islam, Rizwanul Islam, Salim Jahan, Victor Lippit, Arthur MacEwan, Wahiduddin Mahmud, Prasanta Pattanaik, Robert Pollin, Rushidan Islam Rahman, Mohan Rao, Arslan Razmi, Carl Riskin, Binayak Sen, and Eduardo Zepeda.

ONLINE RESOURCES
■ Go to the PERI calendar listing for this event

PERI WORKING PAPERS

Michael Ash & James Boyce
Measuring Corporate Environmental Justice Performance
This paper develops a measure of corporate environmental justice performance based on the extent to which toxic air emissions from industrial facilities disproportionately impact racial and ethnic minorities and low-income people. Applying the measure to 100 major corporate air polluters in the United States, the authors find wide variation in the extent of disproportional exposures.
 
James Boyce & Matthew Riddle
Keeping the Government Whole: The Impact of a Cap-and-Dividend Policy for Curbing Global Warming on Government Revenue and Expenditure
The authors consider policy options to ensure that revenues to government compensate adequately for the costs to government as a result of a carbon cap. They compare the distributional impacts of two policy alternatives: setting aside a portion of the revenue from carbon permit auctions for government, and distributing the remainder of the revenue to the publics; or distributing all of the carbon revenue to households as taxable dividends.

James Crotty
Structural Causes of the Global Financial Crisis: A Critical Assessment of the ‘New Financial Architecture’
This paper argues that the ultimate cause of the current global financial crisis is to be found in the deeply flawed institutions and practices of what is often referred to as the New Financial Architecture  – a globally integrated system of giant bank conglomerates and the so-called ‘shadow banking system’ of investment banks, hedge funds and bank-created Special Investment Vehicles.

James Crotty & Gerald Epstein
Proposals for Effectively Regulating the U.S. Financial System to Avoid Yet Another Meltdown
Our current economic crisis is a result of cycles in which deregulation accompanied by rapid financial innovation stimulates powerful financial booms. In this paper the authors analyze a series of structural flaws in the current financial system that helped bring on the current crisis, and then propose a nine point regulation policy designed to end this destructive dynamic.

Jane D'Arista
Setting an Agenda for Monetary Reform
D’Arista argues that the link between excess liquidity, buildup in debt, asset bubbles that debt created and the financial crisis that followed are outcomes of monetary as well as regulatory policy failures; that they reflect a substantial weakening in the Fed’s ability to implement countercyclical initiatives. She proposes a new system of reserve management that assesses reserves against assets rather than deposits and applies reserve requirements to all segments of the financial sector.

Kevin Gallagher & Roberto Porzecanski
China and the Latin America Commodities Boom: A Critical Assessment
It has been argued that China’s rise was a blessing for Latin America, because Chinese demand boosted exports and in part caused a hike in commodities prices worldwide. The author finds that the direct impact on the Latin American exports was much smaller than what was touted. He goes on to address concerns over a Chinese-demand-led 'resource curse' and deindustrialization in Latin America.

Ilene Grabel
The Political Economy of Remittances: What Do We Know? What Do We Need to Know?
Private remittances are becoming an increasingly important part of the financial landscape of many developing countries. This paper draws together findings from the rapidly growing multi-disciplinary study of remittances; identifies what we know, what we do not yet know, and what we still need to know about their economic, political and social consequences; and argues that there are a range of important political economy concerns raised by these flows.

Florian Kaufmann
Attracting Undocumented Immigrants: The Perverse Effects of U.S. Border Enforcement
The author examines how U.S. migration management techniques affect the flow of undocumented migrants from Mexico and Mexican migrants’ degree of socio-economic reorientation. The findings support the hypothesis that stricter U.S. border enforcement increases migrants’ detachment from their place of origin, and that this in turn leads to a net increase in the volume of illegal Mexican migration.

John King
Social Democratic and Socialist Policies
John King offers a discussion of the meaning of ‘socialism’ and ‘social democracy’ from their nineteenth-century origins down to the present. He discusses six socialist economic policies: public ownership; macroeconomic stability; social justice; tax reform; environmental sustainability; and international responsibility.

Minqi Li
Peak Energy and the Limits to China’s Economic Growth: Prospect of Energy Supply and Economic Growth from Now to 2050
After considering China’s domestic potential of coal, oil, and gas production, the potential of energy imports from the rest of the world, as well as potential developments of renewable and nuclear energy, the author finds that China is likely to face an insurmountable energy crisis beyond 2020. Even with optimistic assumptions, drastic declines in the economic growth rate and the eventual end of economic growth cannot be avoided.

Thomas I. Palley
Rethinking the Economics of Capital Mobility and Capital Controls
Economic orthodoxy  represents capital mobility as having equal significance with sovereign monetary policy and control over exchange rates. It also distorts discussion by ignoring possibilities for coordinated monetary policy and exchange rates, and for managed capital flows. Close examination shows the case for capital mobility to be flimsy, underscoring the ideological dimension behind today’s policy orthodoxy.

Thomas I. Palley
Macroeconomics without the LM: A Post-Keynesian Perspective
Palley presents a Post Keynesian construction of macroeconomics without an LM schedule. Rather than describing the financial sector in terms of an exogenously determined interest rate set by the central bank, the model unpacks financial markets by fully specifying a banking sector. The key analytic feature of the Post Keynesian approach is to replace the money market with the loan market. That illuminates the macroeconomic significance of the loan market and bank behavior, and generates an endogenous money supply driven by bank lending.

Thomas I. Palley
Endogenous Money: Implications for the Money Supply Process, Interest Rates, and Macroeconomics
Palley reviews the history of endogenous money as a mainstay of Post Keynesian macroeconomics, and discusses the division between ‘horizontalist’ and ‘structuralist’ approaches to the money supply. He points out that while the PK debate has been useful in articulating the mechanics of the money supply process, inadequate attention has been paid to the implications of endogenous money for interest rate determination, the business cycle, and economic growth.

Nacho Álvarez Peralta & Bibiana Medialdea García
Financial Globalization and Labor: Employee Shareholding or Labor Regression?
The authors review the ‘patrimonial capitalism’ approach, as well as its analysis of wage-labor transformations in developed economies during the last thirty years. For this purpose, they take the economies of France and the United States as study cases. According to this approach, patrimonial financialization of working households has involved a radical transformation of the wage-labor nexus, paradigmatically exemplified by the concept of employee shareholding.

Robert Pollin
Considerations on Interest Rate Exogeneity
To what extent are interest rates set exogenously by central banks? To address this issue, this paper presents evidence regarding the movement of market interest rates in U.S. financial markets relative to the Federal Reserve-controlled Federal Funds rate. Concluding that market interest rates are primarily set through market forces—i.e. are largely endogenous—the paper then discusses the primary source of interest rate endogeneity.

Robert Pollin, James Heintz &
Heidi Garrett-Peltier
How Infrastructure Investments Support the U.S. Economy
With the deterioration of economic conditions in recent months, public investment is back on the policy agenda, as a job-creation program linked to the need to revitalize the nation’s crumbling infrastructure. This report examines the employment impacts of an expanded infrastructure investment program and what it would take to create millions of jobs. It assesses the long-run impacts of such a program on productivity and economic growth, and offers brief observations on U.S. competitiveness and environmental sustainability that emerge from the findings.

Christian E. Weller
Credit Access, the Costs of Credit and Credit Market Discrimination
Since the early 1990s, credit expanded relative to income, especially after 2001. It is hypothesized that traditionally uneven credit access and gaps in the costs of credit by demographic characteristics shrank during this period. Relying on data from the Federal Reserve’s Survey of Consumer Finance, this study finds that gaps in credit access and costs of credit have widened by race, remained high by income, but shrank by ethnicity.  

Christian E. Weller, Amanda Logan & Bernard Morzuch
Desperate vs. Deadbeat: Can We Quantify the Effect of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005?
The authors establish a benchmark level for U.S. bankruptcy rates after 2005 that likely would have been observed if the Bankruptcy Abuse Prevention and Consumer Prevention Act of 2005 had not been passed. They then compare the actual U.S. bankruptcy rate to the benchmark for 2007 to provide a sense of the effectiveness of BAPCPA.

Christian E. Weller & Manita Rao
Can Progressive Taxation Contribute to Economic Development?
The authors combine several macroeconomic data sources to test the link between progressive taxation and economic stability, economic growth, inequality and fiscal policy. Based on data from 1981 to 2002, they find that progressive taxation provides policymakers with the ability to conduct countercyclical fiscal policies, which in turn contributes significantly to economic stability.

Christian E. Weller & Jeffrey Wenger
Prudent Investors: The Asset Allocation of Public Pension Plans
After 2000, the vast majority of defined benefit pension plans encountered a decrease in their funding ratios, largely due to a drop in asset prices. The authors assess whether public sector pension plans may have acted imprudently by chasing returns, once they encountered underfunding. The results suggest no evidence that public sector plans systematically engaged in imprudent investment behavior and that this did not systematically differ after 2000 from the earlier period.

Erinc Yeldan & Hasan Cömert
Interest Rate Smoothing and Macroeconomic Instability under Post-Capital Account Liberalization Turkey
The authors examine the interest rate policy of the Central Bank of the Republic of Turkey (CBRT) under the post-financial liberalization and deregulation era. They search for a variety of determinants of monetary policy with different objectives over 1994-2007, finding that while significant shifts in the macroeconomic environment occurred, the CBRT’s focus on “interest rate smoothing” did not changed; and that the CBRT has not heeded developments in national income.