Favorite Readings for a New Paradigm – Summer 2020
Every other month Forum New Economy is showcasing a hand full of selected research papers that lead the way towards a new economic paradigm.
PUBLISHED20. AUGUST 2020
READING TIME5 MIN
Dani Rodrik – Why Does Globalization Fuel Populism? Economics, Culture, and the Rise of Right-wing Populism
Harvard economist Dani Rodrik, a leading researcher in the field of the political economy of globalization, came out with a new working paper where he suggests a model to answer five open questions on the link between globalization and populism. What are the mechanisms through which globalization fuels populism? How do the different facets of globalization (trade, finance and migration) work their way through the political system? Why does globalization appear to have an outsized effect on politics compared to, say, technological change or regular business cycles? Why have nativist, ethno-nationalist populists been the ones to take advantage? Could it be that populism is rooted not in economics but in a cultural divide? Read more about this paper – here.
Jens Südekum, Joel Stiebale and Nicole Woessner – Robots and the Rise of European Superstar Firms
Much of the enormous increase in inequality over the past 40 years has to do with the falling aggregate labour share of income. The share of the economic pie that capital received increased alongside an increase of market power of so-called super star firms such as Google, Apple and Facebook. Yet, not much is known about the drivers underlying this increase in market share of just a few firms.
Now, three researchers from Heinrich Heine University in Düsseldorf show that much of it has to do with technology. But the phenomenon of increasing market power falls not only in the IT sector. The authors show that initially highly productive manufacturing firms in the EU were more likely to adopt robots. Industrial robots, a relatively new major labour-saving technology, thereby increased industry concentration. These initially highly productive firms are already characterised by low shares of labour costs in their sales. Robot adoption thereby depresses the industry’s aggregate labour share. This can either lead to an increase in wages for the top earners or benefit capital- and firm owners. Read more about this paper – here.
Harold James – Neoliberalism and its Interlocutors
The article in this great new economic history journal is a profound attempt to rescue the term Neoliberalism from the negative connotation it carries today. It seeks to recover some of its original tenets that “might rather be considered an antidote to multiple distortions and dystopias” in the twenty-first century. Princeton University historian Harold James shows how “Neoliberalism [today] is generally held to explain more or less everything that has gone wrong” while its original idea focused on breaking up large monopolies, taming financial cycles, constraining political lobbying, and focusing on “what it is to be human” rather than on the narrow concept of homo oeconomicus. Read more – here.
Gregori Galofré Vilà, Christopher Meissner, Martin McKee, David Stuckler – Fiscal austerity and the rise of the Nazis
The authors show how fiscal austerity contributed to Nazi electoral success in the early 1930s. Localities that experienced larger spending cuts and higher tax hikes had higher vote shares for the Nazi Party in German federal elections between 1930 and 1933. The authors conclude that „[t]he demise of Weimar Germany and the rise of Nazi fascism reveals that too much harsh austerity can trigger social unrest and unintended political consequences. […] At a time when people needed the most from their government, the government failed them, and they were lured by the siren calls of radical populist parties.“ Read more about this paper – here.
William White – International Financial Regulation: Why It Still Falls Short
Former economic advisor for the Bank of International Settlements, Bill White, argues that the undertaking to reform the international financial system after the 2008 Global Financial Crisis didn’t go far enough. These reforms aimed at ensuring that the financial system does not aggravate economic downturns via credit crunches. But in order to ensure a stable financial system, reforms should also restrict the rapid build-up of debt in upturns. Bill White suggests a monetary policy and macroprudential regulatory policy framework that could ensure future stability. Read more – here.