James Heintz

An employment-targeted economic program for South Africa

This report outlines a pro-poor, employment-focused economic policy framework for South Africa. Its specific focus is the severe problem of mass unemployment in South Africa today. Unemployment was between 26.5 and 40.5 per cent as of March 2005, depending on whether one uses the ‘official’ or ‘expanded’ definition of unemployment (with the expanded definition including so-called discouraged workers). The paper’s concentration on the problem of mass unemployment is fully consistent with the stated goals of the current African National Congress (ANC) government. At the Growth and Development Summit in 2003, President Thabo Mbeki singled out ‘more jobs, better jobs, and decent work for all’ as one of the country’s four key economic challenges. Currently, the preliminary presentations of the Government’s new economic policy framework, the ‘Accelerated and Shared Growth Initiative for South Africa (ASGISA)’, indicate that it affirms its commitment to cutting the unemployment rate by half by 2014.

Global Apparel Production and Sweatshop Labor: Can Raising Retail Prices Finance Living Wages?

This paper provides some empirical evidence on issues raised by the global antisweatshop movement. We first consider the relationship between wage and employment growth, finding no consistent trade-off between them. We then measure the share of labour costs in the production of garments in the US and Mexico. We find that the retail price increases necessary to absorb the costs of raising wages substantially are small, well within the range of price increases that polls suggest US consumers are willing to pay. We close by considering some implications of these results. Copyright 2004, Oxford University Press.

Gender bias and central bank policy: employment and inflation reduction

This article considers the employment costs of inflation reduction in developing countries from a gender perspective. We explore two broad empirical questions: (1) what is the impact of inflation reduction on employment, and is the impact different for women and men, and (2) how are monetary policy indicators (e.g. real interest rates) connected to deflationary episodes and gender‐specific employment effects? We find a common pattern among countries undergoing what we term contractionary inflation reduction, or periods of declining inflation that are accompanied by a loss of formal employment. After controlling for long‐term employment trends, we find that the ratio of women’s to men’s employment tends to decline during these periods in the majority of countries examined. During the fewer periods of expansionary inflation reduction, however, there are no clear patterns to the relative changes in women’s and men’s employment. Maintaining competitive exchange rates seems to counterbalance the gender‐biased effects of contractionary inflation reduction episodes, however.

Informalization, Economic Growth and the Challenge of Creating Viable Labor Standards in Developing Countries

Over recent decades, there has been the substantial rise in the proportion of people engaged in what is termed informal employment, generating a broad trend toward “informalization” of labor market conditions in developing countries, even when economic growth is proceeding. We consider the relationship between the rise of informalization and the corresponding ascendancy of neoliberal policies in developing countries, focusing in particular on how the decline in average per capita GDP growth associated with neoliberalism has fostered informalization. We then explore policy measures for raising the proportion of decent jobs with core social protections in developing countries—which means, as we argue, reversing the process of informalization. We examine policy measures in two areas: raising the rate of economic growth and improving the regulation of labor markets.

Is There a Case for Formal Inflation Targeting in Sub-Saharan Africa?

This working paper examines the question of whether inflation targeting monetary policy is an appropriate framework for sub-Saharan African countries. The paper presents an overview of inflation targeting, reviews the justification for the regime, and summarizes some major critiques. Monetary policy responses to inflation depend on the source of inflationary pressures. Therefore, the determinants of inflation in African countries areinvestigated, using dynamic panel data, and the implications for inflation targeting are discussed. These issues are examined in greater detail for the two African countries which have formally adopted inflation targeting, South Africa and Ghana. The analysis is placed in the context of the global economic crisis. The paper concludes with a discussion of alternative approaches to monetary policies and the institutional constraints that would need to be addressed to allow central banks to play a stronger developmental role in sub-Saharan African countries.

Speculation on Commodities Futures Markets and Destabilization Of Global Food Prices: Exploring the Connections

In December 2010, the United Nations Food and Agriculture Organizations Food Price Index surpassed its previous peak of June 2008, and prices remained at this level through September 2011. This pattern is creating justified fears of a renewal or intensification of the global food crisis. This paper reviews arguments and evidence to inform debates on how to regulate commodity futures markets in the face of such price volatility and sustained high prices. We focus on the relationship between market liquidity and price patterns in asset markets in general and in commodities futures markets in particular, as well as the relationship between spot and futures market prices for food. We find strong evidence supporting the need to limit huge increases in trading volume on futures markets through regulations. We find that arguments opposing regulation are not supported. We find no support for the claim that liquidity in futures markets stabilizes prices at “fundamental” values or that spot market prices are free of any significant influence from futures markets. Given these results, the most appropriate position for regulators is precautionary: they should enact and enforce policies capable of effectively dampening excessive speculative trading on the commodities markets for food.

The New Face of Unequal Exchange: Low-Wage Manufacturing, Commodity Chains, and Global Inequality

The institutional structure of global commodity chains and cross-border production networks has a profound impact on how the benefits of globalized production are distributed. This paper engages with this issue by developing a model that combines the insights of earlier unequal exchange theorists and new work on global commodity chains to clarify the distributive dynamics of the expansion of low-wage manufacturing in the developing world. In this framework, the ability of productivity-led development to raise employment incomes in low-wage manufacturing is constrained and depends on how the benefits of productivity improvements are captured – as lower prices for consumers or higher rents for brandname multinationals. In contrast, consumption-led growth in relatively affluent consumer markets will contribute to income convergence when demand for manufactured consumer imports is sufficiently income elastic. However, in the long-run, labor market, macroeconomic, and environmental constraints will likely compromise this form of export-led employment growth.

Pro-Growth Alternatives for Monetary and Financial Policies in Sub-Saharan Africa

In their IPC Policy Research Brief #4 (Paper #1 in this volume), John Weeks and Terry McKinley propose major departures from the prevailing neoliberal macroeconomic framework that has dominated policymaking in sub-Saharan Africa. The neoliberal model favours fiscal policy that is preoccupied with maintaining small deficits, monetary policy that is fixated on low inflation targets, and exchange-rate policy that is committed to full flexibility.

Why U.S. Financial Markets Need a Public Credit Rating Agency

The financial crisis reveals a need for a public credit rating agency that is not in the pay of issuers, according to M. Ahmed Diomande, James Heintz, and Robert Pollin.

The impact of public capital on the US private economy: new evidence and analysis

This paper presents new evidence on the impact of public capital on the productivity of the US private sector. Using a production function approach, we estimate the impact of public investment on private capital productivity, specifically addressing the empirical critiques of earlier studies. We find evidence of a cointegrating relationship in a dynamic specification of an empirical model that includes public infrastructure as a factor of production, indicating the existence of a long‐run relationship between the US public capital stock and the productivity of the private capital stock. The results are used to explore how the decline in the growth rate of the public capital stock would have affected the performance of the private sector.