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11. Losing Control? Sovereignty in the Age of Globalization

Author:
Saskia Sassen
Publication Date:
02-2015
Content Type:
Course Pack
Institution:
Columbia University Press
Abstract:
What determines the flow of labor and capital in this new global information economy? Who has the capacity to coordinate this new system, to create some measure of order? What happens to territoriality and sovereignty, two fundamental principles of the modern state? And who gains rights and who loses rights? Losing Control? examines the rise of private transnational legal codes and supranational institutions, such as the World Trade Organization and universal human rights covenants, and shows that though sovereignty remains an important feature of the international system, it is no longer confined to the nation-state. Other actors gain rights and a kind of sovereignty by setting some of the rules that used to be within the exclusive domain of states. Saskia Sassen tracks the emergence and the making of the transformations that mark our world today, among which is the partial denationalizing of national territory. Two arenas in particular stand out in the new spatial and economic order by their capacity to set their own rules: the global capital market and the series of codes and institutions that have mushroomed into an international human rights regime. As Sassen shows, these two quasi-legal realms now have the power and legitimacy to demand action and accountability from national governments, with the ironic twist that both depend upon the state to enforce their goals. From the economic policy shifts forced by the Mexico debt crisis to the recurring battles over immigration and refugees around the world, Losing Control? incisively analyzes the events that have radically altered the landscape of governance in an era of increasing globalization.
Topic:
Debt, Globalization, International Political Economy, Sovereignty, World Trade Organization, Labor Issues, and Governance
Political Geography:
Global Focus
Publication Identifier:
9780231106092
Publication Identifier Type:
ISBN

12. Fiscal Tightening and Economic Growth: Exploring Cross-Country Correlations

Author:
Paolo Mauro and Jan Zilinsky
Publication Date:
09-2015
Content Type:
Policy Brief
Abstract:
The global financial and economic crisis that began in 2008 has rekindled the debate on the impact of fiscal policy on economic growth. At the outset of the crisis the focus—particularly in the United States—was on whether fiscal stimulus (an expansion in the fiscal deficit) boosts economic growth. Since 2011 or so, with the depth of the crisis becoming more severe in some European countries and Greece in particular, the emphasis of the debate has shifted to whether fiscal adjustment (a reduction in the fiscal deficit) curtails economic growth. Public discourse has been heavily influenced by simple charts analyzing the correlations between measures of fiscal "austerity" and economic growth for small samples of countries over limited time periods. Mauro and Zilinsky analyze the correlations in the data starting from the simplest and gradually building up, in a step-by-step, transparent manner, to multivariate regressions based on various samples of countries for different periods. The results show that simple correlations are no longer significant when considering slightly longer sample periods and omitting outliers, like Greece, from the sample. In multivariate regressions using broader samples, a tightening of fiscal policy is significantly associated with lower economic growth only in some specifications and estimation samples. On the whole, the data offer partial support to the notion that fiscal choices and output growth are correlated.
Topic:
Debt, Economics, and Financial Crisis
Political Geography:
Global Focus

13. Just Enough, Just in Time: Improving Sovereign Debt Restructuring for Creditors, Debtors and Citizens

Author:
Richard Gitlin and Brett House
Publication Date:
07-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Recent international financial turmoil — most notably in Greece — has refocused attention on the risks posed by severe sovereign debt crises and weaknesses in our approaches to restructuring sovereign debt. Since early 2010, these risks have driven a range of debt-related policy proposals and actions in individual economies, across regions and at the international financial institutions. While some incremental first reform steps have been taken, these have not yet produced a more efficient, effective or resilient international framework for handling severe sovereign debt crises and effecting sovereign debt workouts. In contrast, some institutional and policy changes made in the heat of the euro-zone crisis have raised as many questions as they have resolved. Old policy ideas are also being resurrected and configured in new ways for current challenges. After years of substantial fiscal stimulus and exceptional monetary policies, high debt burdens across the advanced economies, fears of secular stagnation, signs of an imminent increase in US borrowing costs and deteriorating demographics together make a compelling case for concerted action to improve international arrangements for dealing with distressed sovereign debt.
Topic:
Debt, Economics, Monetary Policy, Financial Crisis, and Global Markets
Political Geography:
Global Focus

14. Corporate Debt in Emerging Economies: A Threat to Financial Stability?

Author:
Barry Eichengreen, Domenico Lombardi, Malcolm D. Knight, Yu Yongding, Stephen G. Cecchetti, Diane De Gramont, Şebnem Kalemli-Özcan, Phillip R. Lane, Ugo Panizza, and Viral V. Acharya
Publication Date:
09-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
During 1999-2007, the international balance sheets of emerging economies grew stronger through a combination of current account surpluses, a shift from debt funding to equity funding, and the stockpiling of liquid foreign reserves. This risk-mitigating strategy improved the international financial standing of many emerging economies and helped these economies withstand the 2008-2009 global financial crisis. However, a combination of domestic and external factors has led to a partial reversal of this strategy, with some emerging economies accumulating significant external debt since 2010. Previewed by the May 2013 “taper tantrum,” there has been considerable speculation that a tightening of dollar-funding conditions and a macroeconomic slowdown in emerging economies may result in financial instability in some emerging economies.
Topic:
Debt, Economics, Emerging Markets, International Trade and Finance, Financial Crisis, and Global Markets
Political Geography:
Global Focus

15. The Rise of the European Consolidation State

Author:
Wolfgang Streeck
Publication Date:
02-2015
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The rise of the consolidation state follows the displacement of the classical tax state, or Steuerstaat, by what I have called the debt state, a process that began in the 1980s in all rich capitalist democracies. Consolidation is the contemporary response to the “fiscal crisis of the state” envisaged as early as the late 1960s, when postwar growth had come to an end. Both the long-term increase in public debt and the current global attempts to bring it under control were intertwined with the “financialization” of advanced capitalism and its complex functions and dysfunctions. The ongoing shift towards a consolidation state involves a deep rebuilding of the political institutions of postwar democratic capitalism and its international order. This is the case in particular in Europe where consolidation coincides with an unprecedented increase in the scale of political rule under European Monetary Union and with the transformation of the latter into an asymmetric fiscal stabilization regime. The paper focuses on the developing structure of the new consolidation regime and its consequences for the relationship between capitalism and democracy.
Topic:
Debt, Monetary Policy, Democracy, Capitalism, and Financial Markets
Political Geography:
Global Focus

16. Corporate Liquidity and Financial Fragility: The Role of Investment, Debt and Interest

Author:
Jan Toporowski
Publication Date:
03-2012
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The paper addresses the issue of how debt deflation may arise in a capitalist economy with a sophisticated credit system. It argues that the standard argument of debt deflationists, that debt-financed investment causes a build-up of unsustainable investment, fails to recognise that debt is back by credit. A corollary of this is that the rate of interest is not a factor in investment decisions. Financial fragility is caused by heterogeneity of balance sheets, debt financed operations in financial markets and insufficient debt-financed investment, rather than too much such investment.
Topic:
Debt, Markets, Investment, and Credit
Political Geography:
Global Focus

17. Neologism as Theoretical Innovation in Economics: The case of 'Financialisation

Author:
Jan Toporowski
Publication Date:
03-2012
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The term „financialisation‟ is a recognition that finance has come to play a key role on the modern capitalist economy. But users of the term do not agree on its meaning and recognition of the growing scale of finance has not brought about an increased understanding of financial processes. The paper examines the reasons for increased turnover in financial markets. The main themes in the literature on financialisation are examined and shown to lack a coherent account of financial processes that goes beyond the evidence of financial activity.
Topic:
Debt, Finance, Credit, and Financialisation
Political Geography:
Global Focus

18. A Theory of Capital Rationing

Author:
Jan Toporowski
Publication Date:
09-2010
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
This paper revisits some of the issues originally put forward by the author as the theory of capital market inflation, in the book The End of Finance (Toporowski 2000). The paper makes much clearer the key assumptions and relationships between the operations of the capital market dominated by institutional investors, and the balance sheets of companies. In this way, it presents a theory of how macroeconomic dynamics may be affected by disequilibrium in the capital market. The first part of the paper examines the demand for new equity issues by institutional investors, namely insurance companies and pension funds. In the second part of the paper it is argued that the tendency of pension funds to mature may be a factor in forcing companies into debt and thus discouraging their investment and restricting their cash flow. The tendency towards forced indebtedness may be reinforced by an inelastic demand for capital by banks. The third part of the paper argues that the inelastic supply of capital in the capital market gives rise to processes of capital market inflation or deflation. The first of these may make banks more fragile. The second may contribute to deflationary processes in the macroeconomy. A fourth section argues that further instability is added by international capital market integration.
Topic:
Debt, Markets, Banks, and Investment
Political Geography:
Global Focus

19. On the Solvency of Nations: Are Global Imbalances Consistent with Intertemporal Budget Constraints?

Author:
Ceyhun Bora Durdu
Publication Date:
06-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Theory predicts that a nation's stochastic intertemporal budget constraint is satisfied if net foreign assets (NFA) are integrated of any finite order, or if net exports (NX) and NFA satisfy an error- correction specification with a residual integrated of any finite order. We test these conditions using data for 21 industrial and 29 emerging economies for the 1970-2004 period. The results show that, despite the large global imbalances of recent years, NFA and NX positions are consistent with external solvency. Country-specific unit root tests on NFA-GDP ratios suggest that nearly all of them are integrated of order 1. Pooled Mean Group error-correction estimation yields evidence of a statistically significant, negative response of the NX-GDP ratio to the NFA-GDP ratio that is largely homogeneous across countries.
Topic:
Debt, Budget, Global Financial Crisis, and Economic Inequality
Political Geography:
Global Focus