What You Exported Matters: Persistence in Productive Capabilities across Two Eras of Globalization

May 25, 2021May 18, 2021 isabellamweber2 Comments

*This blog was first published on the Rebuilding Macroeconomics website.*

By Isabella Weber, Tom Westland and Maya McCollum

“The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep…” This was how John Maynard Keynes described the globalisation of the Belle Epoque before the First World War. London, and by extension Britain, was at the centre of the world economy: not just a global manufacturing powerhouse, but also the ruler of a vast colonial domain upon which the sun famously never set. The global division of labour was stark: Britain and other Western nations largely produced manufactured goods. But they also exported a whole range of temperate agricultural goods like wheat, beef and barley. Elsewhere in the European colonial empires, products like cotton, cocoa and coffee were exported, often at very low prices and sometimes with forced labour, to sate a growing demand in the global economic core for tropical luxuries.

More than a century has passed since World War I heralded the collapse of this world order. Today, another globalization wave that has shaped the world since the 1980s is ebbing. The question we ask in our ESRC Rebuilding Macroeconomics project What Drives Specialisation? A Century of Global Export Patterns is simple: what is the legacy of the First Globalization of the late nineteenth and early twentieth centuries on the economic fortunes of countries during the Second Globalization? Or in other words, to what extent have countries’ positions in the international economic order been persistent across the two globalizations with some trapped at the bottom and others floating on top?

To answer this question, we have assembled a large new database of global commodity exports from 1897-1906. We exploit the fact that this period was the high point of colonial trade statistics and use a large variety of primary sources in five languages. To the best of our knowledge, ours is the most ambitious census of world trade for the previous globalization to date. This allows us to investigate the long-term wealth of nations in ways that aren’t possible with GDP data. The latter is sparse and unreliable for large parts of the world before the Second World War.

For a new macroeconomic policy in Colombia

May 21, 2021 Developing EconomicsLeave a comment

In April 2021, Ivan Duque’s administration presented a tax reform bill labeled “Law of Sustainable Solidarity” to Congress. The bill contemplated an increment of the VAT on basic goods in conjunction with an increase in the marginal tax rates on the income of the so-called Colombian middle class. The vast majority of whom earns monthly less than 4,000,000 Colombian pesos (around 1,065 U.S. dollars). Although the bill put on the table contained some crucial elements for discussion, such as implementing a “basic monthly income” of 21 U.S. dollars (by far less than the current minimum wage). It contained little or nothing to effectively tackle Colombia’s high social and income inequality (with an official GINI of 0.526 for 2019).

The tax reform bill was presented in the mid of a severe economic and social crisis that had worsened due to the pandemic and against which the Colombian government has done hitherto little beyond the orthodox recipes. This triggered a general strike and nationwide social mobilizations that have already lasted over more than two weeks without any clarity as to their resolution as yet. The current social protest can be considered a continuation of a general strike that erupted at the end of 2019 and got into a rest due to the pandemic.

Yet, many elements behind the social movement go beyond dissatisfaction with the tax reform bill. Since 2016 after the peace deal between the Colombian government and the FARC, which used to be the oldest and biggest guerrilla in Colombia, the government hasn’t implemented most of the elements contemplated in the peace agreement. Also, although Colombia has had macroeconomic stability for more than 20 years, an indicator such as the official unemployment rate has consistently been above 10%. The level of poverty before the COVID-19 shock was near 32%.

Thus, the following question arises, what does it mean to have macroeconomic stability to the population? A call to think outside the box on what the government can or can’t do must be considered under other lenses. In view of the worsening of the social, political, and economic crisis in Colombia and the need to develop economic policy alternatives to the government’s orthodox position, a group of citizens and academicians wrote the open letter below to respond to those who argue the TINA mantra and believe that there’s a consensus in economics to support tax reforms amidst the COVID-19 epidemic.

Land, property, technology: interrogating an infrastructural promise

May 20, 2021May 14, 2021 daivirtLeave a comment

Land has served as a central means of sustenance, but also as a nexus of wealth and power for people throughout the ages. The World Bank has estimated that more than seventy percent of the world’s population lack access to legally registered land titles. Existing land registries are centralized databases, vulnerable to corruption and destruction. There is an increasing turn towards emerging technologies such as blockchain for recording the relationships between people and land, coordinating and synchronizing that data for efficient governance, and making the information publicly available.

This essay explores the abstraction of blockchain as employed for formalizing land rights in emerging economies. Behind the seemingly neutral façade of the technology, diverse aspirational claims and narratives guide its implementation in different societies, shaped by particular histories and socio-political contexts. This highlights the need to explore blockchain-based land registries as distributed knowledge infrastructures, uncovering their broader embeddedness in older, non-digital modalities, and the “peopled infrastructures” of informal networks with their histories and cultural repertoires. As digital technologies can facilitate an illusion of enhanced visibility of some elements while obscuring others, I argue that more attention is needed to the role of broader colonial legacies and enduring North-South inequalities that frequently remain backgrounded in the adoption of such technologies.

An increasing number of governments are investigating the prospects of transferring their land registries to blockchain (Graglia and Mellon 2018). Blockchain applications are explored as enabling the formalization of property rights in the countries of the Global South, as well as providing more efficient coordination of real property markets in the Global North. Blockchain registries have several advantages as compared to centralized digital or paper-based databases. Records on blockchain are distributed and verified by a multitude of nodes in a peer-to-peer digital network, affording them more transparency and resilience. As new additions to the chain of blocks are cryptographically time-stamped, this makes tampering or accidental data loss less likely. Auto-executing “smart contracts” that transform legal agreements into code could mediate contracts (De Filippi and Wright, 2018).

Debunking the ‘Free Market Miracle’: How industrial policy enabled Chile’s export diversification

May 17, 2021May 14, 2021 amirlebdioui4 Comments

Assessing industrial policies in Chile remains a rather contentious and divisive topic. Chile has long been held up as an almost‐textbook example of the success of ‘letting the market work’, as there was a broad agreement among mainstream economists that Chile has largely succeeded in promoting strong and stable growth because it has embraced free market policies. At first glance, this may seem believable. Afterall, Chile has one of the fastest growth rates in Latin America since its neoliberal turn in the 1970s. Despite the continuing significance of copper, it has also managed to diversify into other sectors and acquire new competitive advantages between the 1960s and 1990s. The dominant view sustains that the successful emergence of new competitive sectors in Chile’s export basket are the result of four decades of commitment to liberalization and free market policies. However, this post, which is based a recent study, shows that Chile’s export diversification was not the result of free market policies, but of carefully crafted government interventions. The idea of Chile as a ‘free-market miracle’, as first described by Milton Friedman, is therefore one of the most enduring myths associated with recent economic development history.

The power of private philanthropy in international development

May 10, 2021June 16, 2021 Arun KumarLeave a comment

By Arun Kumar and Sally Brooks

In 1959, the Ford and Rockefeller Foundations pledged seven million US$ to establish the International Rice Research Institute (IRRI) at Los Baños in the Philippines. They planted technologies originating in the US into the Philippines landscape, along with new institutions, infrastructures, and attitudes. Yet this intervention was far from unique, nor was it spectacular relative to other philanthropic ‘missions’ from the 20^th century.

How did philanthropic foundations come to wield such influence over how we think about and do development, despite being so far removed from the poor and their poverty in the Global South?

In a recent paper published in the journal Economy and Society, we suggest that metaphors – bridge, leapfrog, platform, satellite, interdigitate – are useful for thinking about the machinations of philanthropic foundations. In the Philippines, for example, the Ford and Rockefeller foundations were trying to bridge what they saw as a developmental lag. In endowing new scientific institutions such as IRRI that juxtaposed spaces of modernity and underdevelopment, they saw themselves bringing so-called third world countries into present–day modernity from elsewhere by leapfrogging historical time. In so doing, they purposively bypassed actors that might otherwise have been central: such as post–colonial governments, trade unions, and peasantry, along with their respective interests and demands, while providing platforms for other – preferred – ideas, institutions, and interests to dominate.

Center-periphery relationships of pharmaceutical value chains

May 4, 2021April 15, 2021 Cristina ReisLeave a comment

By Cristina Fróes de Borja Reis and José Paulo Guedes Pinto

It is well known that, during the 20^th century, the pharmaceutical industry became extremely powerful at the international level, alongside financial, energy, technology, and manufacturing companies (Wells, 1984). The internationalization of the pharmaceutical industry only rose after the internationalization of patent protection in the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs Agreement) (Haakonsson, 2009). This industry is highly concentrated around a small number of very large transnational groups (65% of global sales are made by the 20 largest players – the ‘big pharma’) that operate worldwide through subsidiaries in 150 countries, on average. Revenue in the worldwide pharmaceutical market increased at a considerable rate, even during the global slump of 2008, and was estimated at an astounding USD1.143 trillion in 2017 (Statista, 2019). Recently, we published an article on pharmaceutical value chains, which investigates how they are embedded in an international division of labor, from a new-structuralist theoretical perspective. We ask: how global are the pharmaceuticals value chains? Are there centers and peripheries in pharmaceuticals value chains, and if so, which countries are in each pole?