The Unassuming Economist

From a paper by Ted Schrecker:

“‘Polycrisis’ (1) has a good claim to status as the word of the decade, in a world beset by such phenomena as the fallout from the worst pandemic in a century; heightened geopolitical uncertainty and its economic impacts; and human-induced climate change and other disturbing manifestations of the Anthropocene Epoch. Yet another crisis, rising inequality, has drawn relatively less attention, although it compromises or eliminates the chances for large segments of the population to lead healthy lives.

In 2014, the then-managing director (CEO) of the International Monetary Fund (IMF) described the growth in inequality worldwide as ‘staggering’ and warned that ‘[i]f we are not careful, the ghosts of the 19th century will haunt the 21st century’ (2). Although the organization she led had over the decades done much to contribute to that pattern, she was correct, and the subsequent decade provided abundant evidence that the haunting she anticipated is already happening (3, chapter 3; 4).

Health promotion research and practice have yet to adequately take on board the consequences of this pattern. Concepts like health literacy that presume individuals have the material resources needed to lead a healthy life are of limited relevance, to put it politely, to populations like:

- The 2.8 billion of the world’s people who could not afford a healthy diet in 2022, according to the United Nations agency with responsibility for food security (5, p. xix);

- The 3.8 million people in the United Kingdom (UK) who experienced destitution, ‘where people cannot afford to meet their most basic physical needs to stay warm, dry, clean and fed’ (6) in 2022, up from 1.55 million in 2017 (7);

- The estimated 800,000 United States (US) urban residents who lacked a piped water connection between 2013 and 2017 (8), after cost increases associated with a decade of privatization and austerity.”

From the World Bank:

“A new World Bank report highlights Kazakhstan’s progress in reducing poverty and the challenges ahead for inclusive growth, stressing that the pace of poverty reduction has slowed in recent years despite significant advances since the early 2000s. According to the “Kazakhstan Poverty and Equity Assessment 2024” report, making fiscal policy more pro-poor, improving the quality of education, and strengthening climate resilience are critical priorities for policymakers in order to reduce poverty and inequality in Kazakhstan.

Kazakhstan’s economy has grown robustly since 2006, with an average annual growth rate of 4.7 percent. This growth has increased incomes and living standards, transitioning the country to upper-middle-income status. These gains lifted 5.9 million people out of poverty, reducing the poverty rate from 49.5 percent to 8.5 percent in the same period.

“Between 2006 and 2021, economic advancement significantly improved living standards and reduced poverty rates in Kazakhstan. Economic growth has slowed since 2014, and the pace of poverty reduction has fallen. The COVID-19 pandemic exacerbated these challenges, highlighting the need for resilient and inclusive economic strategies presented in this report,” said Andrei Mikhnev, World Bank Country Manager for Kazakhstan.“

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From a paper by Omang Ombolo Messono, Fabrice Assoumou Zambo, and Alexandre Turpin Iroume A. Bouebe:

“While many studies have highlighted the influence of the degree of central bank independence on economic and financial dynamics, less is known about its importance for economic vulnerability. The objective of this paper is to examine, for the first time, the effect of central bank independence on economic vulnerability in Africa. Based on the hypothesis that countries with more independent central banks are less vulnerable to external shocks, we estimate a dynamic panel model using the system generalised method of moments in a sample of 44 African countries between 1990 and 2017. Our results show that an independent central bank can significantly reduce the economic vulnerability of African countries by allowing monetary policy decisions to be made outside political influence, promoting financial stability, and strengthening the credibility of economic policy. These results remain robust to alternative measures of the main variables. Furthermore, the analysis of transmission mechanisms reveals that central bank independence has a negative effect on economic vulnerability in Africa through channels such as GDP growth, financial development, exchange rate misalignments and budget balance. We suggest that policymakers promote central bank independence in the development of public policies to address economic vulnerability in Africa.”

From a paper by Paolo Di Lorenzo, and Eric Anthony Lacey:

“This paper provides an overview of issues related to fiscal consolidation drawing on the literature; it distills some lessons from fiscal consolidation episodes using a new database covering 196 countries from 2000 to 2023. The paper discusses the motives, timing, design, and political economy of fiscal consolidation, as well as its macroeconomic and social impacts. We find that fiscal consolidation is often necessary and successful in restoring fiscal sustainability by stopping debt accumulation, but less successful in lowering debt levels; moreover, it can also entail significant costs and trade-offs in terms of growth, poverty, and inequality. Composition also matters, as expenditure-based consolidations tend to be more successful than revenue-based consolidations and less likely to cause a deterioration in poverty rates or inequality. However, revenue gains usually play an important role starting in the second year of consolidation. Overall, the paper suggests that successful fiscal consolidation requires careful consideration of the economic context, the composition of adjustment, complementary economic policies, and communication and credibility of the strategy. The best way to implement fiscal adjustment is to establish a consolidation strategy in normal/non-crisis times} to ensure that governments do not have to rely on abrupt, pro-cyclical adjustments that may exhaust all buffers in the aftermath of a shock.”

From a paper by Munseob Lee, Claudia Macaluso, and Felipe Schwartzman:

“Our paper addresses the heterogeneous effects of monetary policy on households of different races. The cyclical volatility of real income differs significantly for households of different races and income levels, reflecting differential exposure to fluctuations in employment and consumer prices. All Black households are disproportionately affected by employment fluctuations, whereas price volatility is only particularly pronounced for Black households with income above the national median. The latter face 40 percent higher price volatility than both poorer households of the same race and white households of similar income. To evaluate the effects of policy, we propose a New Keynesian framework with heterogeneous exposure to employment and price volatility. We find that an accommodative monetary stance generates asymmetric outcomes within race groups. Low-income households experience unemployment stabilization benefits, while high income ones incur real income volatility costs. Differences are especially large among Black households. Reducing the volatility of unemployment by 1 percentage point engenders a 1.17 percentage point reduction in overall income volatility for poorer Black households, but an increase of 0.6 percentage points in income volatility for richer Black households.”