The Long View on Epidemics, Disease and Public Health: Research from Economic History, Part C

by Vincent Geloso (King’s University College at Western University Canada), discussing Werner Troesken’s ‘The Pox of Liberty’


 

Geloso Image 3
At the Gates, 1885. Available at NIH.

Shutdowns, quarantines, lockdowns and curfews impose economic costs. Yet, from a public health perspective, shutdowns, quarantines, lockdowns and curfews have benefits in that they limit contagion risks and deaths. There is thus a trade-off to be made. Economists, epidemiologists and others have tried to measure the costs and benefits of the measures presently adopted by governments. The idea is to identify which measures are too extreme in that they increase economic distress [i], might induce behavioral responses that mitigate the effectiveness of public health measures [ii] or that are simply too costly compared to other alternatives.

However, these trade-offs understate the complex web of issues associated with public health measures. At least, that it is the conclusion that emerges after reading Werner Troesken’s The Pox of Liberty:  How the Constitution Left Americans Rich, Free, and Prone to Infection (University of Chicago Press, 2015).

Few economists (none, probably) would dispute that the state has a role in the domain of public health. After all, while self-quarantining exists, it would clearly be “underprovided” if marginally disinclined individuals were not somewhat coerced into quarantining themselves. Thus, there is a role for government. Normally, this is the end of the story – at least from the perspective of welfare economics. “Not so” replies Troesken! Institutions that exert the coercion necessary to produce public health measures are also able to use coercion for other, less beneficial purposes, which also generate a series of trade-offs.

 

Geloso Image
The Cow-Pock—or—the Wonderful Effects of the New Inoculation! By satirist James Gillray, 1802. Available here.

 

The first trade-off

Troesken concentrates on inoculation and vaccines in the  late 19th and early 20th centuries, to argue that the United States was an incredibly rich country by the standard of the time and also exhibited exceptionally high (and probably underestimated) smallpox death rates compared to other countries. To explain the puzzle, Troesken argues that by expanding and securing economic freedoms, the Constitution also constrained the ability of governments to prevent contagion of infectious diseases in the short-run. Under the Equal Protection and Due Process Clauses of the Constitution, numerous public health measures were overturned – including measures to make vaccination compulsory. Consequently, Americans were likelier to die from highly contagious diseases.

Geloso Image 2
The Next To Go: Fight Tuberculosis, 1919. Available at NIH.

Yet, the same constraints also protected property rights and economic freedoms, which allowed Americans to grow exceptionally rich during the late 19th and early 20th centuries.

 

The second trade-off

Certain diseases are easily combatted  thanks to economic prosperity (either directly through improved nutrition or indirectly through the ability to make certain investments). Other diseases are less sensitive to the income of the people they maim or kill. [iii] Thus, it might be conjectured that the Constitution made Americans richer and sicker from smallpox  while simultaneously  reducing the likelihood of their dying from other diseases. This is the basis of  Troesken’s chapter,  “The palliative effects of property rights”. The wealth of America made it easier to invest in capital-intensive projects to deal with waterborne diseases and typhoid fever. Troesken demonstrates how the protections afforded by the Constitution encouraged investments in water treatment infrastructures because it protected private firms from politically opportunistic behavior and   bondholders from default.  These protections made Americans less likely to die from typhoid fever.

One could reply to Troesken that the United States is, in many ways, an oddity. Yet, this strange trade-off can be seen through a global lense as well. If Troesken is correct, institutional regimes that score high with regards to economic freedom are ill-equipped to combat infectious diseases as the latter are better dealt with by strong and capable states. Thus, economic freedom would show a zero, or maybe even a positive, relation with death rates. However, these same regimes would be better able to combat “poverty diseases” as economic freedom promotes growth thereby improving the ability to combat certain diseases. Economic freedom would exhibit a negative relation with death rates from poverty diseases. Leandro Prados de la Escosura who compiled time-series of estimates of “economic liberty”, [iv] showed that this relationship was testable.  His measures are very similar to those used in the modern literature on economic freedom but with some differences. Regressing death rates from smallpox and typhoid fever on economic liberty data allows to test the validity of Troesken’s argument.

The result of such a test can be seen in Table 1 below. The relationship  is bivariate and plagued by the problem of a relatively small number of countries providing cause-specific death rates. Thus, it ought to be taken lightly; it is presented  only to suggest new directions of enquiry. Nonetheless, it is supportive of Troesken’s core idea: Economic liberty has no statistically significant effect on the log of smallpox death rates. However, it does have a strong significant effect on death rates from typhoid fever.

This complex trade-off can be summarized: one set of institutions makes us healthier and poorer now while making us less healthy than we could be in the future; the other set of institutions make us sicker and richer now while making us healthier than we could be in the future. Simplified in this manner, we can see the value of the points made by economists such as James Buchanan and Ronald Coase – institutions are not “all you can eat buffets”.

Geloso table

­­In the current crisis, this insight about the roles, advantages, limitations and consequences of public health measures is too often set aside. But this does not make it irrelevant. Unfortunately,  terms of explaining this powerful and crucial insight,  I am a poor substitute for Werner Troesken, [v] who died in 2018.  Nevertheless, his writing ought to be on all our minds when we consider the proper response to the current crisis.

 

[i] W. Kerr et al. 2017. “Economic recession, alcohol, and suicide rates: comparative effects of poverty, foreclosure, and job loss.” American Journal of Preventive Medicine, Vol. 54, n. 4, pp. 469-475.

[ii] A, Mesnard and P. Seabright. 2009. “Escaping epidemics through migration? Quarantine measures under incomplete information about infection risks.” Journal of Public Economics, Vol. 93, no. 7-8, pp. 931-938.

[iii] See notably the works of B. Harris, (2004). “Public Health, Nutrition, and the Decline of Mortality: The McKeown Thesis Revisited.” Social History of Medicine, Vol. 17, no. 3, pp. 379-407 and D. Bloom and D. Canning, (2007). “Commentary: The Preston Curve 30 years on: Still sparking fires.” International Journal of Epidemiology, Vol. 36, no. 3, pp. 489-499 for a summary of the complex relation between prosperity and health.

[iv] L. Prados de la Escosura, (2016). “Economic freedom in the long run: evidence from OECD countries, 1850-2007”. Economic History Review, Vol. 69, no.2, pp. 435-468

[v] I have applied his insights to the case of the Cuban health care system: see V. Geloso, G. Berdine and B. Powell,  “Making Sense of Dictatorships and Health Outcomes”, British Medical Journal: Global Health,  (forthcoming); G. Berdine, V. Geloso and B. Powell,  (2018). “Cuban Infant Mortality and Longevity: Health Care or Repression?” Health Policy & Planning, Vol. 33, no. 6, pp. 755-57.
A longer review of “The Pox of Liberty” by Vincent Geloso is available here: https://notesonliberty.com/2017/01/19/the-pox-of-liberty-dixit-the-political-economy-of-public-health/

See also, Clay, K.; Schmick, E. and Troesken, W. (2019) “The Rise and Fall of Pellagra in the American South”, Journal of Economic History 79(1):32-62, DOI: https://doi.org/10.1017/S0022050718000700

and reviews by Kenneth F. Kiple in  The American Historical Review, https://doi.org/10.1086/ahr/110.2.501 , and a review by Alan M. Kraut in Bulletin of the History of Medicine:https://doi.org/10.1353/bhm.2006.0062


Vincent Geloso

www.vincentgeloso.com 
vincentgeloso@hotmail.com

 

The Long View on Epidemics, Disease and Public Health: Research from Economic History Part B*

This piece is the result of a collaboration between the Economic History Review, the Journal of Economic History, Explorations in Economic History and the European Review of Economic History. More details and special thanks below. Part A is available at this link 

Bubonic plague cases are on the rise in the US. Yes, really. - Vox
Man and women with the bubonic plague with its characteristic buboes on their bodies — a medieval painting from 1411.
 Everett Historical/Shutterstock

As the world grapples with a pandemic, informed views based on facts and evidence have become all the more important. Economic history is a uniquely well-suited discipline to provide insights into the costs and consequences of rare events, such as pandemics, as it combines the tools of an economist with the long perspective and attention to context of historians. The editors of the main journals in economic history have thus gathered a selection of the recently-published articles on epidemics, disease and public health, generously made available by publishers to the public, free of access, so that we may continue to learn from the decisions of humans and policy makers confronting earlier episodes of widespread disease and pandemics.

Generations of economic historians have studied disease and its impact on societies across history. However, as the discipline has continued to evolve with improvements in both data and methods, researchers have uncovered new evidence about episodes from the distant past, such as the Black Death, as well as more recent global pandemics, such as the Spanish Influenza of 1918. In this second instalment of The Long View on Epidemics, Disease and Public Health: Research from Economic History, the editors present a review of two major themes that have featured in the analysis of disease. The first  includes articles that discuss the economic impacts of historical epidemics and the official responses they prompted.  The second  turns to the more optimistic story of the impact of public health regulation and interventions, and the benefits thereby generated.

 

S T R A V A G A N Z A: ECONOMIC EFFECTS OF PLAGUE IN EUROPE
Pieter Bruegel the Elder, The Triumph of Death (1562 ca.)

Epidemics and the Economy

 The ways in which societies  and economies are affected by repeated epidemics is a question that historians have struggled to understand. Paolo Malanima provides a detailed analysis of how Renaissance Italy was shaped by the impact of plague: ‘Italy in the Renaissance: A Leading Economy in the European Context, 1350–1550’. Economic History Review 71, no. 1 (2018): 3-30. The consequences of plague for Italy are explored in even more detail by Guido Alfani who demonstrates that the peninsula struggled to recover after experiencing pervasive mortality during the seventeenth century: ‘Plague in Seventeenth-century Europe and the Decline of Italy: An Epidemiological Hypothesis’. European Review of Economic History 17, no. 4 (2013): 408-30.  Epidemics cause multiple changes to the economic environment which necessitates a multifaceted response by government.  Samuel Cohn examines the  oppressive nature of these  reactions in his luminous study of the way European governments sought to prevent workers benefiting from the increased demand for their labour following the Black Death: ‘After the Black Death: Labour Legislation and Attitudes Towards Labour in Late-Medieval Western Europe’. The Economic History Review, 60, no. 3 (2007): 457-85.  

 

The Black Death Actually Improved Public Health | Smart News ...
Josse Lieferinxe, Saint Sebastian Interceding for the Plague Stricken (1497 ca)

 

Public Health

Richard Easterlin’s  panoramic overview of mortality  shows that government policy was critical  in reducing levels of mortality from the early nineteenth century. Economic growth by itself did not lift life expectancy. This major  paper illuminates the essential contribution of public intervention to health in modern societies:  “How Beneficent Is the Market? A Look at the Modern History of Mortality.” European Review of Economic History 3, no. 3 (1999): 257-94. .  Does strict health regulation save lives?  Alan Olmstead and Paul Rhode respond to this question in the affirmative by explaining how the US federal government succeeded in lowering the spread of tuberculosis by establishing controls on cattle in the early part of the twentieth century. Their analysis has considerable contemporary relevance:  only robust and universal controls saved lives: ‘The ‘Tuberculous Cattle Trust’: Disease Contagion in an Era of Regulatory Uncertainty’.  The Journal of Economic History 64, no. 4 (2004): 929–63.

Human society has achieved enormous gains in life expectancy over the last two centuries. Part of the explanation for this improvement  was improvements in key infrastructure.  However, as Daniel Gallardo‐Albarrán demonstrates, this was not simply a  question of ‘dig and save lives’, because  it was the combination  of types of structure  — water and sewers – that mattered: ‘Sanitary infrastructures and the decline of mortality in Germany, 1877–1913’, The Economic History Review (2020). One of the big goals of economic historians has been to measure the multiple benefits of public health interventions. Brian Beach,  Joseph Ferrie, Martin Saavedra, and Werner Troesken,  provide a  brilliant example of how novel statistical techniques  allow us to determine the gains from one such intervention – water purification. They demonstrate that the long-term impacts of reducing levels of disease by improving water quality were large when measured in education and income, and not just lives saved: ‘Typhoid Fever, Water Quality, and Human Capital Formation’.  The Journal of Economic History 76, no. 1 (2016): 41–75. What was it that allowed European societies to largely defeat tuberculosis (TB) in the second half of the twentieth century? In an ambitious  paper, Sue Bowden, João Tovar Jalles, Álvaro Santos Pereira, and Alex Sadler, show that a mix of factors explains the decline in TB: nutrition, living conditions, and the supply of healthcare: ‘Respiratory Tuberculosis and Standards of Living in Postwar Europe’.  European Review of Economic History 18, no. 1 (2014): 57-81.

What We Can Learn (and Should Unlearn) From Albert Camus's The ...
Thomas Rowlandson, The English Dance of Death (1815 ca)

This article was compiled by: 

 

If you wish to read further, other papers on this topic are available on the journal websites:

 

*  Special thanks to Leigh Shaw-Taylor, Cambridge University Press, Elsevier, Oxford University Press, and Wiley for their advice and support.

Global trade imbalances in the classical and post-classical world

by Jamus Jerome Lim (ESSEC Business School and Center for Analytical Finance)

 

Global_trade_visualization_map,_2014
A Global trade visualization map, with data is derived from Trade Map database of International Trade Center. Available on Wikipedia.

In 2017, the bilateral trade deficit between China and the United States amounted to $375 billion, a staggering amount just shy of what the latter incurred against the rest of the world combined. And not only is this deficit large, it has been remarkably persistent: the chronic imbalance emerged in earnest in 1989, and has persisted for the better part of three decades. Some have even pointed to such imbalances as a contributing factor to the global financial crisis of 2008.

While such massive, chronic imbalances may strike one as artefacts of a modern, hyperglobalised world economy, nothing could be further from the truth. For example, recent economic history records large, persistent imbalances between the United States and Britain during the former’s earlier stages of development. Such imbalances also characterised the rise of Japan following the Second World War.

In recent research, we show that external imbalances between two major economic powers – an established leader, and a rising follower – were also observed over three earlier periods in economic history. These were the deficits borne by the Roman empire vis-à-vis pre-Gupta India circa 1CE; the borrowing by the Abbasid caliphate from Carolingian Frankia in the early ninth century; and the imbalances between West European kingdoms and the Byzantine empire that emerged around the 1300s.

Although data paucity implies that definitive claims on current account deficits are all but impossible, it is possible to rely on indirect sources of evidence to infer the likely presence of imbalances. One such source consists of trade-related documents from the time as well as pottery finds, which ascertain not just the existence but also the size of exchange relationships.

For example, using such records, we demonstrate that Baghdad – the capital of the Abbasid Caliphate – received furs and slaves from the comparative economic backwater that was the Carolingian empire, in exchange for goods such as spices, dates and olive oil. This imbalance may have lasted as long as several centuries.

A second source of evidence comes from numismatic records, especially coin hoards. Hoards of Roman gold aurei and silver dinarii have been discovered, for example, in India, with coinage dating from as early as the reign of Augustus through until at least that of Marcus Aurelius, well over half a century. Rome relied on such specie exports to fund, among other expenditures, continued military adventurism during the second century.

Our final source of evidence relies on fiscal records. Given the close relationship between external and fiscal balances – all else equal, greater government borrowing gives rise to a larger external deficit – chronic budgetary shortfalls generally give rise to rising imbalances.

This was very much the case in Byzantium prior to its decline: around the turn of the previous millennium, the Empire’s saving and reserves were in significant surplus, lending credence to the notion that the flow of products went from East to West. The recipients of such goods? The kingdoms of Western Europe, paid for with silver.

Economic exploitation: a comparative case study of the cost of human smuggling

by Alicia Kidd (Wilberforce Institute, University of Hull)

This paper was presented at the EHS Annual Conference 2019 in Belfast.

 

Border_crossing_at_Gibraltar,_Gibraltar_side_2005
Border crossing at Gibraltar. Available at Wikimedia Commons.

The terms human smuggling and human trafficking are often confused and used interchangeably. While there is a terminological distinction between the two, it is possible for the lines to be blurred when an individual’s relationship with a smuggler becomes exploitative. My study, to be presented at the Economic History Society’s 2019 annual conference, uses information gathered from face-to-face interviews to argue that individuals’ economic circumstances play a role in blurring those lines.

My research considers two qualitative case studies of individuals who hired agents to assist them in illegitimately escaping their home countries in the hope of reaching safer living conditions abroad. Both respondents were confronted with dangerous situations in which they faced limited options of either staying in their home countries where they were at risk of death or unfair arrest, or finding a way to escape.

Both chose the latter, but there was no possibility of leaving their countries legally without attracting the attention of the authorities looking for each of them. This led both respondents to employ the assistance of smugglers to assist them out of their home countries.

The respondents were from significantly different backgrounds and their economic standing influenced the path that lay ahead for them. The first had a relatively wealthy upbringing, had received a good education and was working in a lucrative job.

He was able to pay a smuggler upfront to assist him in leaving the country to avoid the death penalty he was facing. This was a simple financial exchange in which he paid a set fee in return for a service. His relationship with the smuggler ended after he had crossed the border out of his home country.

The second respondent’s experience was quite different. She was from a poor background and did not have the money to pay the smuggler prior to travel. Instead, she agreed with the agent that, in return for safely removing her from the country, she would work for him on arrival to pay off her debt. But while an agreement had been made that this would be care work, after arriving in the UK she was locked in a basement and sexually exploited as a means to pay off her debt.

My research uses these two case studies to explore the hugely diverse outcomes of an exchange with a smuggler. By assessing the divergent economic positions of the two individuals, the research addresses how the difference between a payment and a debt can lead to the difference between safety and extreme exploitation.

The Greek public debt restructuring of 2018 through the lens of history

by Olga Christodoulaki

 

Bank_of_Greece_Thessaloniki_3
The Residence of the Bank of Greece at the corner of the Streets Ionos Dragoumi and Tsimiski, Thessaloniki. Available at Wikimedia Commons.

In June 2018, relief was granted to Greece for the official sovereign debt by its Eurozone counterparts. But in spite of this recent agreement and a reduction by more than 50% in the face value of the debt held privately in March 2012, the sustainability of Greek public debt is still questioned and the uncertainty associated with this might easily impair economic growth.

This is not the first episode of Greek public debt restructuring, as I will discuss in research to be presented at the Economic History Society’s 2019 annual conference. In 1898, five years after a Greek government default, a debt compromise was achieved, providing for the restructuring of both internal and external sovereign debt. The cornerstone of this readjustment plan was the creation of a viable long-term plan for the servicing of public debt, which had reached nearly 230% of GDP by then.

Interest rate payments to bondholders of Greek external loans issued before the 1893 default were linked to specific public revenue streams earmarked exclusively for the service of these loans. These revenues assigned for the repayment of public debt were administered by the International Financial Commission and represented, in 1903 for example, approximately 46% of the total revenue of the Greek government.

Consequently, as Figure 1 shows, the yield paid to bondholders fluctuated from year to year within a band depending on the volume of those revenues; its floor being the minimum rate defined by the debt restructuring agreement and its ceiling the original coupon rate of the loan.

In addition, special attention was paid during the preparation of this debt readjustment plan to protect and indeed strengthen the National Bank, the central bank in Greece at the time. Domestic public debt denominated both in gold and drachmae and mainly held by the National Bank, was also restructured so as to strengthen its financial position.

Christodoulaki

My study argues that the provisions of the debt readjustment plan of 1898 – which it should be stressed have been completely ignored by research until now – should be taken into account in order to comprehend fully the improvement in the creditworthiness of the Greek government and consequently the terms of borrowing before the outbreak of the First World War.

The public debt readjustment arrangement of 1898 marked the beginning of a period of high capital inflows to the country including Greek diaspora capital and remittances. Moreover, it facilitated a carefully orchestrated return of the Greek government to the private markets in 1902. It is worth noting, however, that Greece did not avoid a further default in the early 1930s when the world economy collapsed.

The recent public debt relief granted to Greece by its Eurozone counterparts echoes the late nineteenth century restructuring of public debt agreement but lacks the credibility that the latter engendered. This time, the long-term sustainability of public debt depends on the commitment of the Greek government to achieve constant primary surpluses, every year, beginning from 2018 for two generations and also on privatisation proceeds.

This is a commitment that has been received with caution since it is neither a serious policy goal nor particularly realistic if history is anything to go by.

Britain’s post-Brexit trade: learning from the Edwardian origins of imperial preference

by Brian Varian (Swansea University)

798px-Imperial_Federation,_map_of_the_world_showing_the_extent_of_the_British_Empire_in_1886
Imperial Federation, map of the world showing the extent of the British Empire in 1886. Wikimedia Commons

In December 2017, Liam Fox, the Secretary of State for International Trade, stated that ‘as the United Kingdom negotiates its exit from the European Union, we have the opportunity to reinvigorate our Commonwealth partnerships, and usher in a new era where expertise, talent, goods, and capital can move unhindered between our nations in a way that they have not for a generation or more’.

As policy-makers and the public contemplate a return to the halcyon days of the British Empire, there is much to be learned from those past policies that attempted to cultivate trade along imperial lines. Let us consider the effect of the earliest policies of imperial preference: policies enacted during the Edwardian era.

In the late nineteenth century, Britain was the bastion of free trade, imposing tariffs on only a very narrow range of commodities. Consequently, Britain’s free trade policy afforded barely any scope for applying lower or ‘preferential’ duties to imports from the Empire.

The self-governing colonies of the Empire possessed autonomy in tariff-setting and, with the notable exception of New South Wales, did not emulate the mother country’s free trade policy. In the 1890s and 1900s, when the emergent industrial nations of Germany and the United States reduced Britain’s market share in these self-governing colonies, there was indeed scope for applying preferential duties to imports from Britain, in the hope of diverting trade back toward the Empire.

Trade policies of imperial preference were implemented in succession by Canada (1897), the South African Customs Union (1903), New Zealand (1903) and Australia (1907). By the close of the first era of globalisation in 1914, Britain enjoyed some margin of preference in all of the Dominions. Yet my research, a case study of New Zealand, casts doubt on the effectiveness of these polices at raising Britain’s share in the imports of the Dominions.

Unlike the policies of the other Dominions, New Zealand’s policy applied preferential duties to only selected commodity imports (44 out of 543). This cross-commodity variation in the application of preference is useful for estimating the effect of preference. I find that New Zealand’s Preferential and Reciprocal Trade Act of 1903 had no effect on the share of the Empire, or of Britain specifically, in New Zealand’s imports.

Why was the policy ineffective at raising Britain’s share of New Zealand’s imports? There are several likely reasons: that Britain’s share was already quite large; that some imported commodities were highly differentiated and certain varieties were only produced in other industrial countries; and, most importantly, that the margin of preference – the extent to which duties were lower for imports from Britain – was too small to effect any trade diversion.

As Britain considers future trade agreements, perhaps with Commonwealth countries, it should be remembered that a trade agreement does not necessarily entail a great, or even any, increase in trade. The original policies of imperial preference were rather symbolic measures and, at least in the case of New Zealand, economically inconsequential.

Brexit might well present an ‘opportunity to reinvigorate our Commonwealth partnerships’, but would that be a reinvigoration in substance or in appearance?

Could fiscal policy still stimulate the economy?

by James Cloyne (University of California, Davis), Nicholas Dimsdale (University of Oxford), Natacha Postel-Vinay (London School of Economics)

 

(Anti)_Jubilee_Souvenir
No means test for these ‘unemployed’! by Maro.
1935 was the Silver Jubilee of King George V. There were celebrations and street parties across Britain. However with the country in a financial depression not everyone approved of the public expense associated with the Royal Family. Available at Wikimedia Commons

There has been a longstanding and unresolved debate over the fiscal multiplier, which is the change in economic growth resulting from a change in government spending or change in taxation. The issue became acute in the world recession of 2008-2010, when the International Monetary Fund led a spirited discussion about the contribution that fiscal policy could make to recovery.

In our research, fiscal policy is shown to have had positive impacts on growth, at least during the period surrounding the Great Depression in Britain. The implications for the potential benefits of fiscal policy in a high-debt, low-interest rate environment – and over a turbulent business cycle – may be significant.

The recent controversy follows the debate over the use of fiscal policy to counter the high level of unemployment in interwar Britain. Keynes argued that increased government spending would raise economic activity and reduce unemployment. In the General Theory (1936), he claimed that the multiplier for government expenditure was greater than unity.

A few more recent studies have confirmed that the multiplier effect is greater than unity for both the interwar and post-war period. But these results may be spurious since a rise in government expenditure that raises income may also result from a rise in income. Thus, changes in taxes and changes in income may not be independent. What we observe is a strong co-movement of GDP and fiscal measures in which it is hard to isolate the direction of causation.

What is needed is a source of exogenous variation, so that the impact of fiscal changes on GDP can be observed. Fiscal policy may take the form of changes in taxes or expenditure. The problems of endogeneity are generally greater for expenditure than for taxes, since it should be possible to find changes in taxes that are truly exogenous.

Romer and Romer (2010) have developed the so-called ‘narrative technique,’ which has been designed to overcome the problem of endogeneity of tax changes. This involves carefully distilling the historical record in order to infer Chancellors’ motivations behind each fiscal policy move, and isolate those that may be seen as more independent from the contemporaneous fluctuations of the economy.

One may thus be able to distinguish, for example, between taxes that arise from a direct will to stimulate the economy, as compared with changes that are more motivated by a Chancellor’s longstanding ideology. The latter may include, for example, a will to improve transport efficiency within the country, or a desire to make society less unequal.

Interwar Britain is a particularly appropriate period to apply this approach, since the potential for fiscal policy was great on account of the high level of unemployment. In addition, this was a period in which Keynesian countercyclical policies were generally not used, in contrast to the use of demand management policies in the post-war period.

By examining changes in taxes in interwar budgets, we have been able to produce a sample of 300 tax changes. These have been classified into changes in taxes that are endogenous or exogenous. We have been able to test the backward validity of our classification.

The outcome of this work has been to show that changes in taxes that are exogenous had a major impact on changes in GDP. The estimated value of the multiplier for these tax changes is greater than unity and as much as two to three. This is in accordance with results reported in post-war studies of the United States and a study of tax changes in post-war Britain (Cloyne, 2013).

In contrast to earlier work on measuring the multiplier, we concentrate on changes in taxes rather than changes in government expenditure. This is done to reduce problems of endogeneity.

While Keynes argued for using government spending to stimulate the economy, it was only when post-war fiscal policies were being formulated that the potential benefits of fiscal policies via changes in taxes were recognised. While this research does not argue in favour of tax changes over spending policies, it provides evidence that tax policy is a relevant part of the policy toolkit, especially in times of economic difficulty.

The Deindustrialized World

by Andrew Perchard (University of Stirling), Lachlan MacKinnon (St Mary’s University – Nova Scotia), and Steven High (Concordia University – Montreal)

 

9780774834957fc-71269-800x600Deindustrialisation has ruptured the lives of tens of millions of working class lives in the latter half of the twentieth century and into the twenty first from the Rustbelt of North America to the coal and steel towns of north eastern China. Between 1969 and 1976, an estimated 22.3m jobs were lost in the US alone, with some 100,000 manufacturing plants closed between 1963 and 1982 (Bluestone and Harrison, 1982: 7; High, 2003: 93). In the 1990s, an estimated 30m workers were left unemployed by the collapse of industry in north eastern China, with the country’s steel province, Hebei, expected to lose 60 per cent of its steel companies by 2020 (Financial Times, 28 March 2016). These job losses represent a significant disruption in the lives of workers and in the fabric of communities from which capital vacates, but they are not the whole story. Industrial work, the social relationships to which it has contributed, and the cultures that emerge alongside are profoundly world-making. Plant closures, and the associated lost jobs, shatter all of these types of connections – not simply the economical.

These, arguably more intangible legacies of industrial closures, are often lost in layoff numbers or within a literature that talks about the transformation of economies or Schumpeterian waves of creative destruction. In the globalized world, with corporations shifting production to non-union, low-paying areas of the global South, displaced workers are sometimes framed as greedy or uncompetitive. What right do workers in Canada, the United States, or Western Europe have to these jobs or their spin-offs, especially when they contribute to the development of deeply impoverished areas goes the neoliberal line. In this progressive economic narrative, these casualities are a necessary corollary of growth; as the authors of an International Monetary Fund paper put in 1997 (Rowthorn and Ramaswamy): “Deindustrialization is not a negative phenomenon, but a natural consequence of further growth in advanced economies.” It is commonly supported by reified figures on employment transitions.  Besides, industries are polluting and dehumanizing and so have no place in our post-industrial and gentrifying cities. Those areas that have failed to make the transition have frequently been  peripherialised, with residents then demonised in the media and subjected to further punitive policy measures.

Most recently this anger, after decades of neglect, has been manipulated and misrepresented in debates around the election of Donald Trump to the US presidency and the Brexit vote, with the irony that both movements have been dominated by elite populists. In all of this, complacency to the plight of post-industrial working class communities has been marked. The Deindustrialized World (eds. High, MacKinnon and Perchard, UBC Press, 2017) responds to this historical moment by excavating the profound impact of deindustrialization on the lives of working people but also the wider ramifications of these structural economic, political, and cultural changes. Many will argue that total manufacturing numbers do not bear out the thesis of precipitous decline; but, for all of the increases in productive capacity, the types of jobs that are now available are oftentimes more precarious and require less skill than did those of yesteryear. In the words of one Scottish steelworker coming to terms with his redundancy:  ‘How do you tell fifty year old steelworkers to sell tartan scarves to Americans?’ Such arguments also miss the often-profound regional, local, and personal impact of these changes. The book demands that we go beyond national aggregation. In some cases, it has been accompanied by further capital flight and the collapse of civic infrastructure, leaving communities to deal with the legacies of multiple deprivation, ill-health and contaminated air and water, such as in Flint, Michigan.

Arising out of the ‘Deindustrialization and Its Aftermath’ conference in Montreal in 2014, this collection – scaling up our analysis from deindustrializing bodies to concerns of political economy – seeks to capture the complex cultural, environmental and social legacy of deindustrialisation (and industrialisation) for communities and individuals in Australia, Canada, France, the UK and US.  The fifteen essays demonstrate the different experiences and responses of those affected by industrial closures.  Chapters by Jackie Clarke and Sylvie Contrepois (France), Cathy Stanton (US), and Lucy Taksa (Australia) explore questions over the contested memory of industrial identities, places and spaces.   While Arthur McIvor (UK), Lachlan MacKinnon and Robert Storey (Canada) consider the environmental and health legacies of such industries.  In their urban studies of Australia, Canada and the US, Tracy Neumann, Andrew Hurley and Seamus O’ Hanlon discuss the tensions around regeneration and gentrification with urban studies.  While chapters by Steven High (Canada) and Andrew Perchard (Scotland), include discussions around deindustrialisation in association with geographical peripheralization, racial exclusion, and regional policy failures.  Andy Clark (Scotland), and Jackie Clarke (France), explore the role of female workers in resisting closures and maintaining an industrial legacy.  There is a confluence between many of these issues and discussions across the collection. The editors and Jim Phillips (Scotland) consider these questions within the context of the notion of ‘moral economy’ and the viewing of plants as collective resources.  Crucially, in amongst these voices seeking to make sense of what has happened to their lives and communities, are those of children living with the aftermath of deindustrialisation, alongside those of the adults shaped by an industrial culture and now left without it.

 

To contact the authors:

Andrew Perchard:  a.c.perchard@stir.ac.uk, @Aluminiumville

Lachlan MacKinnon: lachlan.f.mackinnon@gmail.com, @LachlanMacKinn

Steven High: Steven.High@concordia.ca

From The NEP-HIS Blog: Fifty Years of Growth in American Consumption, Income, and Wages

Fifty Years of Growth in American Consumption, Income, and Wages By Bruce Sacerdote (Darmouth) Abstract: Despite the large increase in U.S. income inequality, consumption for families at the 25th and 50th percentiles of income has grown steadily over the time period 1960-2015. The number of cars per household with below median income has doubled since […]

via Is the Glass Half Full?: Positivist Views on American Consumption — The NEP-HIS Blog

From History&Policy – What does British imperial economic history tell us about the future of UK-EU trading relations?

by David Clayton, originally published on 25 April 2017 on History & Policy

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Post-Brexit UK-European Union (EU) trading relations will take one of three forms:

(1) The UK will remain part of the EU customs union

(2) UK-EU trade will be governed by World Trade Organisation (WTO) rules

(3) The UK and EU will enter a free trade pact.

Option (1) is economically optimal but has been declared politically unfeasible because it requires the UK to commit to the free movement of labour between the EU and the UK. Such conditionality is essential because economies grow unevenly and, in the absence of independent currencies across Europe and/or a central European state to pool the risk of unemployment, free movement of labour is the mechanism for redistributing the gains from EU growth.

Economics (not history) is the best guide here.

Most parties agree that option (2) is the solution of last resort. Much has been made of its impact on complex cross-border trade in manufactured goods, but trade in services may be more problematic. The General Agreement on Trade in Services governs international trade, but can these rules handle disputes regarding trade in services across highly integrated economies subject to disintegration post-Brexit?

The law (not history) is the best guide here.

Britain’s economic history however is key to analysis of option (3).

Full article here: http://www.historyandpolicy.org/opinion-articles/articles/what-does-british-imperial-economic-history-tell-us-about-the-future-of-uk