Category: Financial Research

Bringing the ‘political’ back into the economy: A report from I Workshop in Contemporary Political Economy (UWE Bristol-Paris 1 Sorbonne)

Author UWE Blogs | Posted on

By Danielle Guizzo and Bruno Tinel

 

The 1st Workshop in Contemporary Political Economy recently took place at the Bristol Business School on June 28th, 2018. It was the first event of a recently established partnership between the UWE Economics subject group (AEF) and the Paris 1 Department of Economics (Pantheon Sorbonne University) as a response to the increasing importance of pluralism in economics teaching and research in the post-crisis scenario. A large proportion of attendants were young scholars (early-career researchers or PhD students), who represent a promising generation for promoting the expansion and excellence of research in political economy as the future of the international PE community.

We are very pleased to inform the community that the workshop was a great success in terms of the quality of the presentations, the number of participants, and the pluralism of subjects. The presentations and subsequent discussions explored the recent frontiers in contemporary political economy, aiming at expanding three main areas: critical macroeconomics; financialisation; and ideology, power and the state.

The final session constituted of a roundtable about the future of pluralistic research in economics and the possibility of engagement with the mainstream of the discipline. Participants expressed the importance of institutional support and an active scholarly community to move beyond standardized metrics and diamond lists in research assessment exercises if we seek to achieve an open, equal dialogue in Economics that allows inclusivity.

Thanks to the great enthusiasm of the workshop’s participants, we will continue to organize a yearly workshop with the purpose of further promoting and disseminating teaching and research in political economy and pluralistic economics, expanding the partnership between UWE and Paris 1-Pantheon Sorbonne, and improving communication and academic exchange among scholars. Therefore, the Department of Economics at Paris 1-Pantheon Sorbonne will organize the second edition of the workshop in contemporary political economy.

We would like to thank the Bristol Centre for Economics & Finance (BCEF), as well as the Accounting, Economics and Finance (AEF) for the grants and support they provided, allowing for the organization of this workshop. We also express our gratitude to the presenters, who delivered excellent talks and provided a space for the exchange of ideas that significantly contributes to future partnerships and prospective research projects.

 

Mexico and Trump

Author UWE Blogs | Posted on

By Laura Povoledo

I had the good fortune of visiting Mexico last year on a research visit funded by the British Academy. Mexico is a beautiful country, full of rich history and diverse culture. But it is also a country with huge social problems.

Mexico is the 11th most populated country in the world with around 127 million people. It has been estimated that 42% of Mexico’s total population lives below the national poverty line. Getting millions out of poverty will require enormous effort, but in recent years a growing middle class has emerged, thanks to sustained economic development. The economy of Mexico is now the 11th largest in the world by purchasing power parity, and according to Goldman Sachs, by 2050 Mexico will be the 5th largest economy in the world.

However, recently Mexico has been through some very difficult years. In 2016 the GDP growth rate was below 2% and inflation was 4%. The peso steadily depreciated against the dollar, forcing the government to increase the price of gasoline (half of the fuel consumed by Mexico is imported from the US). Given the country’s poor public transport infrastructure, the cost of private transport is especially important in Mexico, so the increased price of petrol will severely affects households’ living standards. The recent increase in the minimum wages is unlikely to meet the needs of those on low incomes. This deteriorating economic environment has prompted Standard & Poor’s to change their perspective from “stable” to “negative”. And of course, in 2016 Trump was elected.

One of the risks posed by a failing economy is nationalism (and Trump himself is an example). However, Latin America nationalism is different from Trump’s right-wing nationalism. Nationalisms in Latin America have often been associated with left-wing political positions. This is explained by the colonial past and the struggles of national liberation. Mexico will hold its general election on July 1st, and the left’s presidential candidate, Andrés Manuel López Obrador, is as opposed to NAFTA as is Trump.

NAFTA has led to an enormous expansion of US companies in Mexican territory, and several Mexican economists I talked to were often keen to point out that protectionists policies will ultimately damage American interests. It has been estimated that in its 22 years NAFTA has generated 6 million jobs in the US. 40% of the components of Mexican exports are actually produced in the US, in other words, 40 cents of every dollar spent on Mexican exports support jobs in the US. There are now 35 millions of Mexicans living in the United States, of which about 11 million were born in Mexico. Mexican immigrants take the hardest and lowest paid occupations and they provide a source of manpower in many industries, such as agriculture, construction and food processing.

During my visit there I often found a strong rejection of Trump’s rhetoric and a determination to fight against all adversities. A resurgence of national pride may not be totally undesirable if it spurs Mexico to take anti-poverty measures, to support its growing middle class and to dismantle the other wall that is holding it back, that of corruption.

 

Measuring non-compliance with minimum wages

Author UWE Blogs | Posted on

By Professor Felix Ritchie

When a minimum wage is set, ensuring that employees do get at least that minimum is a basic requirement of regulators. Compliance with the minimum wage can vary wildly: amongst richer countries, around 1%-3% of wages appear to fall below the minimum but in developing countries non-compliance rates can be well over 50%.

As might be expected, much non-compliance exists in the ‘informal’ economy: family businesses using relatives on an ad hoc basis, cash-only payments for casual work, agricultural labouring, or simply the use of illegal workers. However, there is also non-compliance in the formal economy. This is analysed by regulators using large surveys of employers and employees which collect detailed information on hours and earnings. This analysis allows them to identify broad characteristics and the overall scale of non-compliance in the economy.

In the UK, enforcement of the minimum wage is carried out by HM Revenue and Customs, supported by the Low Pay Commission. With 30 million jobs in the UK, and 99% of them paying at or above the minimum wage, effective enforcement means knowing where to look for infringements (for example, retail and hospitality businesses tend to pay low, but compliant, wages; personal services are more likely to pay low wages below the minimum; small firms are more likely to be non-compliant than large ones, and so on). Ironically, the high rate of compliance in the UK can bring problems, as measurement becomes sensitive to the way it is calculated.

A new paper by researchers at UWE and the University of Southampton looks at how non-compliance with minimum wages can be accurately measured, particularly in high-income countries. It shows how the quantitative measurement of non-compliance can be affected by definitions, data quality, data collection methods, processing and the choice of non-compliance measure.

The paper shows that small variations in these can have disproportionate effects on estimates of the amount of non-compliance. As a case study, it analyses the earnings of UK apprentices to show, for example, that even something as simple as the number of decimal places allowed on a survey form can have a significant effect on the non-compliance rates.

The study also throws light on the wider topic of data quality. Much research is focused on marginal analyses: looking at the relative relationships between different factors. These don’t tend to be obviously sensitive to very small variations in data quality, but that is partly because it is can be harder to identify sensitive values.

In contrast, non-compliance with the minimum wage is a binary outcome: a wage is either compliant or it is not. This makes tiny variations (just above or just below the line) easier to spot, compared to marginal analysis. Whilst this study focuses on compliance with the minimum wage, it highlights how an understanding of all aspects of the data collection process, including operational factors such as limiting the number of significant digits, can help to improve confidence in results.

Ritchie F., Veliziotis M., Drew H., and Whittard D. (2018) “Measuring compliance with minimum wages”. Journal of Economic and Social Measurement, vol. 42, no. 3-4, pp. 249-270. https://content.iospress.com/articles/journal-of-economic-and-social-measurement/jem448

Are we heading for another economic crash?

Author Alison Coleman-Smith | Posted on

Dr Susan Newman, Senior Lecturer in Economics, is interviewed by State of Nature

State of Nature, the blog dedicated to interviews with leading thinkers in social and political theory, interviewed Dr Newman in January. Here she responds to the question: “Are we heading for another economic crash?”

I was approached by the editors of State of Nature to contribute to their monthly series “One Question”. I was asked to join thinkers such as Wolfgang Streeck, David Kotz, Mary Mellor and Richard Murphy amongst others to contribute a 300word response to the question, “Are we heading for another economic crash?”. In doing so, I was able to highlight some of the excellent work conducted by my colleagues at UWE as part of my contribution which is reproduced below. The full set of responses by international thinkers can be found here.

We are heading for another economic crash because the underlying conditions that brought about the financial crisis of 2007-8 remain. The post crisis slump saw the restructuring of capital, aided by government and central bank policies, in order to restore profitability and the incomes and wealth of the 1% premised upon fictitious accumulation.

Speculative finance continues to dominate economic activities in the advanced capitalist economies. Corporate profits, personal wealth, pension provision and food prices, continue to be tied to the vagaries of finance. The IMF’s growth projections for 2018 recognise that modest growth will be driven by financial markets with little impact on real investment, job creation, productivity or wages. Stock market capitalisation to GDP ratio is higher than at any time except for the eve of the dot.com bust in 2000 indicating the disconnection between financial investment and productive activities. In spite of Basel III, the financial system continues to be characterised by high leveraging and global interconnectedness owing to the rise of the shadow banking system.

Austerity in the UK since 2010 has created new trigger points for crises. Personal debt in the UK has reached alarming and unsustainable levels in excess of £200bn. Welfare cuts, stagnant wages and the deterioration of employment contracts has meant that low income families in the UK have had to borrow for basic day to day expenditures. One can expect many more cracks in the system in which the next crisis will emerge. However, rather than trying to predict the timing or origins of impending crises, efforts would be more productively oriented towards radical change of the economic system. Reforms such as those that supported the Golden Age could help temper some of the deadliest side effects of capitalist growth. But in the long run we need to treat those side effects as the main goals for society: for each of us to reach our full potential and live in material comfort free from alienation from each other and our environment.

 

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