Announcing the 2012 Albies!!

With 2012 down to its last day, it’s now safe to announce this year’s Albies — named in honor of noted political economist Albert O. Hirschman. The Albies are awarded to the best writing in global political economy over the past calendar year.  The writing can be in a book, journal article, think tank report, blog post, whatever — the key is that the article makes you reconsider the way the world works. 

This time around the bar was rather high, as Hirschman passed away earlier this month.  Still, what with the world supposedly ending this year, there was a lot of really excellent work in this area.  So, in no particular order, here are the ten Albie winners: 

1)  Mario Draghi’s September 6th press conference on ECB policy.  In response to a question about whether there would be a limit to the European Central Bank’s "outright monetary transactions" — i.e. buying distressed sovereign debt in secondary markets, Draghi replied, "there is no ex ante quantitative limit to these interventions because we want this to be perceived as a fully effective backstop that removes tail risk from the euro area."  And, with those words, Draghi effectively put a stop to the immediate financial crisis that was crippling the southern European economies.  From a n IPE perspective, Draghi also did something surprising and interesting:  he signaled that the ECB could take steps independent of what the Bundesbank wanted it to do.   With this one statement, Draghi gave the eurozone area room to breathe, stabilized global financial markets, and may have well given a major assist to Barack Obama’s re-election.  Now that’s a press conference. 

2)  Faisal Ahmed, "The Perils of Unearned Foreign Income:  Aid, Remittances, and Government Survival."  American Political Science Review, February 2012.  Remittances have been the Big Thing in development circles for the past few years, particularly since these flows have been robust even in the face of the Great Recession.  Ahmed’s article shows that remittances are not an unalloyed good, however.  Autocratic governments can use these flows as they have used foreign aid — as a way to divert their own resources away from social programs and towards bolstering the government’s coercice apparatus.  Because families have thjis extra income source, their disconent against the state won’t rise — and the state will be better prepared to crack down if citizens do revolt.  Remittances therefore paradoxically help authoritarian governments persist for longer.  This doesn’t mean that remittances are a bad thing — but Ahmed’s finding does a lovely job of mucking up some policy truisms. 

3)  McKinsey Global Institute, Debt and Deleveraging:  Uneven Progress on the Path to Growth, January 2012.  Very Serious People across the political spectrum agree that the United States desperately needs to get its debt problem under control.  But as this McKinsey report demonstrates, the United States already has gotten its debt problem under control.  Sure, the federal government’s debt-to-GDP ratio has ballooned since the start of the Great Recession, but overall debt levels — including households, the financial sector, and business more generally — have shrunk quite nicely, thank you very much.  Indeed, the U.S. approach of swelling government debt to absorb the slack in aggregate demand repeats the successful policies of the Scandinavian countries during their financial meltdowns in the early nineties.  This — comibined with an energy boom, the insourcing of manufacturing, and even a modicum of sane foreign economic and security policies — augur a revival in America’s economic fortunes. 

4)  Robert J. Gordon, "Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds," NBER Working Paper No. 18315, August 2012.  The doppelgänger to the McKinsey paper, Gordon makes the somewhat speculative argument that the boom times for U.S. economic growth are over.  Arguing that the productivity gains from the Information Revolution are puny compared to the Second Industrial Revolution, Gordon then sketches out a future where the rate of per capita income growth collapses to pre-Industrial levels.  This provoked a lot of pushback — see Brad Plumer’s roundup and Paul Krugman’s recent column.  And for that reason alone, Gordon deserves an Albie — he got people to think seriously about the sources of economic growth, a curiously neglected topic in economics. 

5) Artemis Capital Management, "Volatility of an Impossible Object: Risk, Fear, and Safety in Games of Perception." September 30, 2012. To put it gently, the past few years have not been kind to the financial gurus of the world.  Slowly, they’ve begun to acknowledge that their job isn’t just to deliver the high "alpha" or the "smart beta" anymore — it’s also to recognize where there’s a buildup of systemic risk and general uncertainty and hedge against it.  Since perception is a big driver of asset valuation in a world of uncertainty, that makes life even trickier for financial analysts.  In response, this was the year that they began to embrace post-modernism as an analytical tool.  This Artemis newsletter is simply the most obvious example.  After you read it, you could come away with the firm conviction that the author is either onto something truly fundamental, or he’s just throwing up his hands and crying "Uncle!"  Either way, some enterprising Ph.D. student is gonna produce one hell of a dissertation by analyzing the baroque literature of investment newsletters.  Bill Gross would be a whole chapter unto himself. 

6) Daron Acemoglu and James Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, Crown Publishing.  What explains why some countries prosper and some don’t?  When Mitt Romney credited the gap between Palestinians and Israelis as a matter of "culture," he stumbled into every social scientist’s personal nightmare.  The argument de l’année was Acemoglu and Robinson’s observation about the power of political institutions to shape immediate economic incentives as well as long-term cultural patterns.  Why Nations Fail is the popular capstone to a decade of Acemoglu and Robinson’s research.  It doesn’t settle the argument by any means, but it’s a powerful brief against those who argue that the sources of prosperity are either geographical or cultural.   

7)  Chrystia Freeland, Plutocrats, Penguin. As income and wealth inequality has increased both globally and in the United States, the political implications of this trend have slowly moved into the forefront of political debates.  Freeland’s Plutocrats is the perfect jumping off point for this debate. Freeland paints a complex portrait of the rich, demonstrating their worldview while avoiding both condescension and caricature.  This is one of those rare books that actually improves upon the Atlantic cover story that kicked it off.  The final third of the book in particular raises some profoundly troubling questions about the relationship between the uber-wealthy, the state and the rest of us. 

8)  David Barstow, "Vast Mexico Bribery Case Hushed Up After Top-Level Struggle," New York Times, April 21, 2012; Barstow and Alexandra Xanic von Bertrab, "The Bribery Aisle:  How Wal-Mart Got It’s Way in Mexico," New York Times, December 17, 2012.  Social scientists often disdain journalists for not paying attention to macro trends and failing to understand statistics.  These are valid concerns, but scholars also need to acknowledge when journalists actually generate data rather than merely report on it.  In these two stories Barstow and his co-authors took a beacon and revealed the extent and methods of corruption in Mexico — and the ways in which corrupt practices in one country can infect the culture of a multinational corporation.  Outstanding reportage.  This story gets bonus points for being an article about Mexicco but not about either immigration or narcotics. 

9)  FT Reporters, "Chinese Infighting:  Secrets of a succession war," Financial Times, March 4, 2012/John Garnault, "Rotting From Within," Foreign Policy, April 16, 2012/David Barboza, "Billions in Hidden Riches for Family of Chinese Leader," New York Times, October 25, 2012 and "Family of Chinese Regulator Profits in Insurance Firm’s Rise," December 30, 2012/Bloomberg News, "Heirs of Mao’s Comrades Rise as New Capitalist Nobility," December 26, 2012.   As China underwent its own leadership transition, the lack of a free press in that country did not prevent some crackerjack reporting on the corruption issues that plague the People’s Republic.  From the FT’s harrowing story of how Bo Xilai used torture to amass his fortune to Garnault’s examination of how corruption has ensnared the Chinese military to Barboza’s and Bloomberg’s explications of how political connections lead to wealth in China, western reporters did an outstanding job in 2012 of demonstrating the inner working’s of China’s political economy.  If your newspaper or magazine gets blocked by the Great Firewall after a story, that should be taken as a sign of respect. 

10)   Matt Ferchen, "Whose China Model is it anyway?  The contentious search for consensus." Review of International Political Economy, April 2012.  This was a curious year for China-watching. On the one hand, the trend was for analysts to shift from bullish to bearish. On the other hand, some Chinese and a lot of Americans are now feeling pretty confident about the superiority of the Chinese system.  But what exactly is the China Model?  Ferchen does an excellent job dissecting what we’re talking about when we’re talking about the Beijing Consensus.  He further dives into the internal Chinese debate on the existing model, revealing serious qualms about the stats quo.  Ferchen shows that one of the interesting things about the "Beijing Consensus" is not its content per se, but how policymakers and pundits on both sides of the Pacific deploy the term. 

Honorable Mentions:  Lauren Greenfield’s The Queen of Versailles; Angus Burgin, The Great Persuasion: Reinventing Free Markets since the Depression, Harvard University Press; Christopher Hayes’ Twilight of the Elites; Annie Lowrey, "Dire Poverty Falls Despite Global Slump," New York Times; Peyer Doyle’s letter of resignation to the IMF, June 16, 2012; and — just under the wire – the automated Thomas Friedman Op-ed Generator. 

So, to sum up:    two books, to peer-reviewd journal articles, two investment reports, a passle of journalism, one draft paper, and one press conference.   And yet I still feel like I nonly scratched the surface. 

May 2013 be as rich a year for global political economy as this past one!!