Latest news with #politicaleconomy
Globe and Mail
6 days ago
- Business
- Globe and Mail
How ideology can trump self-interest
Dani Rodrik is professor of International Political Economy at Harvard Kennedy School, past president of the International Economic Association and the author of the forthcoming Shared Prosperity in a Fractured World: A New Economics for the Middle Class, the Global Poor, and Our Climate. Among the disasters of U.S. President Donald Trump's 'One Big Beautiful Bill,' one is particularly stinging for political economists: it radically phases out the clean-energy subsidies introduced during former president Joe Biden's administration three years ago. These subsidies were considered by many as immune to a change of presidents, because they created new jobs and profit opportunities for firms in traditionally Republican-voting 'red' states. As allergic as the Trump-controlled Republican Party is to green policies, the conventional wisdom was that it would not dare take away these benefits. So where did the conventional wisdom go wrong? Scholars who study how political decisions are made tend to focus on economic costs and benefits. They reason that legislation that creates material gains for organized, well-connected groups at the expense of diffuse losses to the rest of society are more likely to be passed. Many elements of Mr. Trump's bill are indeed well explained by this perspective: in particular, it engineers a dramatic transfer of income to the wealthy at the expense of the poor. By the same token, legislation that creates concentrated losses for powerful economic interests is unlikely to make much headway. This explains, for example, why raising the price of carbon, a requirement for fighting climate change but a big hit to fossil-fuel interests, has been a politically toxic non-starter in the U.S. Opinion: Trump's green-bashing is precisely why it's a good time to buy green Mr. Biden's green-energy program, the Inflation Reduction Act (IRA), was designed to overcome this political obstacle. Instead of wielding a stick – carbon taxation – it offered carrots in the form of subsidies for solar, wind, and other renewables. The idea was that in time, as people benefitted from the subsidies and the green lobbies strengthened, perhaps even a direct push against fossil fuels would become politically feasible. These hopes have been shattered. The green lobbies did try to soften the bill's anti-IRA provisions, and they managed to delay the phasing out of wind and solar tax credits until mid-2026. But while the IRA has not been repealed in full, the Democrats' anticipated green transition now lies in tatters. Those who subscribe to the materialist version of political economy will find ways to rationalize the reversal. The regressive tax cuts for the rich required that revenues be found elsewhere, so perhaps a less influential interest group was sacrificed for a more powerful one. Or maybe three years were not enough for IRA subsidies to create a strong enough lobby in their favour. Ultimately, though, these excuses ring false. We need to accept that ideology sometimes trumps material interests. There can be little doubt that many Republican lawmakers voted against their constituents' economic interests – some because they feared reprisals from Mr. Trump, others because they truly are climate skeptics and, like the President, oppose anything that smacks of green activism. Regardless, ideas about what is important and how the world works prevailed over economic lobbies or vested interests. There is a broader lesson here: Narratives can be as important as interest-group politics in gaining traction for a party's agenda. The ability to shape worldviews and ideologies – of elites as well as ordinary voters – is a powerful weapon. Those who have it can persuade people to make choices that seem to conflict with their economic interests. In fact, interests themselves, economic or otherwise, are shaped by ideas. In order to figure out whether we gain or lose from a particular policy, we need to know how the policy will play out in the real world, and also what would happen in the absence of the policy. Few among us have the ability or inclination to figure it out. Ideologies offer shortcuts to such complicated decision-making processes. Some of these ideologies take the form of stories and narratives about how the world works. A right-wing politician, for example, might say 'government intervention always backfires'; others focus on increasing the salience of various types of identities – ethnic, religious, or political. Depending on context, the message could be 'immigrants are your enemy' or 'Democrats are your enemy.' Importantly, the concept of 'self-interest' itself relies on an implicit idea about who the 'self' is: who we are, distinct from others, and what our purpose is. These ideas are not fixed in nature or at birth. An alternative tradition in political economy views interests as socially constructed rather than determined by material circumstances. Depending on whether we identify as 'white male,' 'working-class,' or 'evangelical,' for example, we will see our interests differently. As constructivists might say, 'interest is an idea.' So for Mr. Trump's opponents to succeed, they must do more than produce well-designed policies that yield material benefits for targeted groups. Whether it is in fighting climate change, promoting America's national security, or creating good jobs, they need to win the larger battle of ideas – particularly the ideas that shape voters' understanding of who they are and where their interests lie. Democrats, in particular, must recognize that the narratives and identities they promoted until recently left many ordinary Americans behind – just like the pre-Biden economic policies that contributed to Mr. Trump's rise. Copyright: Project Syndicate, 2025.
South China Morning Post
10-07-2025
- Business
- South China Morning Post
How US climate advocates lost the narrative battle over clean energy
Among the disasters of US President Donald Trump's ' One Big Beautiful Bill ', one is particularly stinging for political economists. The bill radically phases out the clean-energy subsidies introduced during president Joe Biden's administration three years ago. Advertisement These subsidies were considered by many as immune to a change of presidents since they created new jobs and profit opportunities for firms in traditionally Republican-voting 'red' states. As allergic as the Trump-controlled Republican Party is to green policies, conventional wisdom went, it would not dare take away these benefits. But then it did. Where did the conventional wisdom go wrong? Scholars who study how political decisions are made tend to focus on economic costs and benefits. They reason that legislation that creates material gains for organised, well-connected groups at the expense of diffuse losses to the rest of society is more likely to be passed. Many elements of Trump's bill are indeed well explained by this perspective: in particular, it engineers a dramatic transfer of income to the wealthy at the expense of the poor. By the same token, legislation that creates concentrated losses for powerful economic interests is unlikely to make much headway. This explains, for example, why raising the price of carbon, a requirement for fighting climate change but a big hit to fossil-fuel interests, has been a politically toxic non-starter in the US. Biden's green energy programme, the Inflation Reduction Act (IRA), was designed to overcome this political obstacle. Instead of wielding a stick – carbon taxation – it offered carrots in the form of subsidies for solar, wind and other renewables. These incentives not only made the IRA possible; they were expected to prove durable. Even if Republicans regained power, the subsidies' beneficiaries would resist their removal. In time, as the green lobbies strengthened, perhaps even a direct push against fossil fuels would become politically feasible. Advertisement These hopes have been shattered. The green lobbies did try to soften the bill's anti-IRA provisions, and the phasing out of wind and solar tax credits was delayed until mid-2026. But while the IRA has not been repealed in full, the Democrats' anticipated green transition now lies in tatters.
The Guardian
11-06-2025
- Business
- The Guardian
Has Rachel Reeves made the right choices? Our panel responds to the spending review
Sahil Dutta Sahil Jai Dutta is a lecturer in political economy By the raw numbers alone, Labour can say this is no return to austerity. The government, after all, will dole out billions for capital projects, and day-to-day NHS spending will rise. But for many, it won't feel that way. Because the lived reality of austerity was never just about spending in the aggregate. It was about who and what we prioritised as a society. Money was stripped from the young, the sick, the poor, the arts, education and local government. Workers and regions of 'low productivity' sectors decayed, while riches were showered on the already wealthy. In its fixation on the fantasy of high economic growth, Labour is unable to fully break from that. Instead, it has concentrated fiscal largesse on high-productivity sectors in the hope that this amounts to an industrial strategy. Investing in tech, R&D and AI will always sound impressive. But the sector is awash with cash already – what it lacks is a useful purpose and proper regulation. Likewise, whatever the geopolitical context, there is little evidence that military-industrial spending is an efficient way to boost employment and growth, or improve people's lives. More promising is the extra funding for affordable housing. Yet under-resourced councils could struggle to contain the predatory costs of private building contractors. There was once a time when Rachel Reeves spoke about the importance of the everyday economy, but from the military to tech to construction companies, it is the commanding heights of the private sector who should be happiest today. Kirsty Major Kirsty Major is a deputy Opinion editor for the Guardian Rachel Reeves's headline-grabbing pledge of £39bn for affordable and social housing is based on one big assumption: that the housing crisis is caused by a lack of supply. By increasing the number of homes, the logic goes, prices will be pushed down, and the crisis of affordability will be solved. The funding comes in addition to changes to planning regulations aimed at boosting housebuilding across the country. By putting shovels in the ground, the chancellor hopes to solve two problems at once – putting keys in hands and boosting economic growth. A neat solution, right? Well, it would be if Britain's housing crisis was a supply-side problem. But it is not. If you don't believe me, just ask the OBR. This spring the body predicted that these changes to planning policy could bring house prices down by only 0.8% by 2029. The average UK house price is £271,415 – this means it would drop to £269,243. It's not nothing, but it's far from something. Demand in the UK has been artificially inflated since the 1980s by a mix of lending rules relaxation and pressure from buy-to-let landlords and foreign investors. There is no point in affordable housing – housing sold at a percentage of the market rate – if the market rate goes up. Yes, families will be able to leave emergency accommodation and have roofs over their heads, and some private renters might be able move into housing association accommodation. This is to be celebrated in the short term. But there is no point in more council housing if waiting lists keep going up because rents in the private sector continue to rise. There is no point in more houses if people can't afford to buy them. Labour's renters' rights bill may go some way to easing some of this demand. Proposals being floated to loosen mortgage lending will not. We will have to wait and see how these policies play out in the housing market. As things stand, the new funding is a step in the right direction, but by no means the solution. Dhananjayan Sriskandarajah Dhananjayan Sriskandarajah is chief executive of the New Economics Foundation Capital spending alone won't improve people's living standards. The extra investment may mean we can build more homes, renewable energy, public transport and other vital infrastructure. Despite her hopes that this will rejuvenate our economy in the years to come, we also need urgent action to improve people's lives today. There was lots of talk of security – 17 mentions in the speech, no less – but I fear with the diversion of funds to defence spending, the chancellor is overlooking household economic security as a lever for growth. Unless we also boost day-to-day spending in key departments, living standards will continue to decline. Indeed, keeping the two-child benefit cap and slashing support for disabled people is making millions of people feel less secure. Investing in social infrastructure will improve lives almost immediately and have just as great long-term effects. On days like this, it is clear that the government has fallen victim to 'Treasury brain', clouded by outdated and arbitrary fiscal rules that it has set itself. Instead it should find better ways to assess safe borrowing levels, and tax wealth in line with other forms of income so we can tackle poverty, reduce inequality and protect our planet.
Arab News
03-06-2025
- Business
- Arab News
Mongolia PM resigns after anti-corruption protests
ULAANBAATAR: Mongolian Prime Minister Luvsannamsrain Oyun-Erdene resigned on Tuesday following weeks of anti-corruption protests in the country's capital. The landlocked democracy in northern Asia has battled deep-seated corruption for decades, with many arguing that wealthy elites are hoarding the profits of a years-long coal mining boom at the expense of the general population. Frustrations have flared since last month as public suspicions over the supposedly lavish lifestyles of the prime minister's family have fueled persistent demonstrations in the capital Ulaanbaatar. Oyun-Erdene announced his resignation on Tuesday after losing a confidence vote among lawmakers, according to a parliamentary statement. 'It was an honor to serve my country and people in times of difficulties, including pandemics, wars, and tariffs,' he said after the result of the secret ballot was announced to parliament. He will remain as caretaker prime minister until his successor is appointed within 30 days. Dozens of young people gathered on the square outside the parliament building on Tuesday, holding white placards reading 'Resignation is easy' — a popular slogan at recent protests. Several voiced pride that they had taken a stand against what they described as deeply embedded corruption and social injustice. 'The youth protest has achieved great results. I'm so proud of the future of Mongolia,' participant Unur Sukhbaatar, a 37-year-old political economy researcher, told AFP. 'The public wants more stable governance with ethical politicians... protesting and unifying our voice for systemic change (shows) that Mongolian democracy is alive,' he told AFP. Some counter-protesters — overwhelmingly older than their pro-opposition counterparts — have also turned out to support Oyun-Erdene in recent weeks. Julian Dierkes, a Mongolia expert at Germany's University of Mannheim, said he '(didn't) expect any successor to adopt substantially different policies' from Oyun-Erdene, including on corruption. His ouster 'may mean the resurgence of factional politics in his party' after years of comparative stability at the top of Mongolian politics, Dierkes told AFP. Oyun-Erdene has denied the corruption allegations, and in an address to parliament before the vote, blamed 'major, visible and hidden interests' for waging an 'organized campaign' to bring down the government. He had also warned of political instability and economic chaos if forced out of power. But it was not enough as only 44 lawmakers voted to retain confidence in him, with 38 against. That did not reach the 64-vote threshold required from the 126-seat parliament, prompting Oyun-Erdene to stand down. The move pushed the country's fractious political scene into further uncertainty. Mongolia had been ruled by a three-way coalition government since elections last year resulted in a significantly reduced majority for Oyun-Erdene's Mongolian People's Party (MPP). But the MPP evicted the second-largest member, the Democratic Party (DP), from the coalition last month after some younger DP lawmakers backed calls for Oyun-Erdene's resignation. DP lawmakers walked out of the parliamentary chamber during the confidence ballot. Munkhnaran Bayarlkhagva, a political analyst and former adviser on Mongolia's National Security Council, said protesters had effectively helped force a vote on 'the legitimacy of the (country's) political system.' 'The Mongolian Generation Z showed they are willing and able to be a politically engaged, mature and active electorate,' he told AFP. 'The Mongolian political establishment had no choice but to comply to retain popular support.' Sandwiched between regional giants China and Russia, Mongolia was a communist state during the Cold War, but has transformed into a democracy since the collapse of the Soviet Union. Since Oyun-Erdene took power in 2021, Mongolia's ranking in Transparency International's Corruption Perceptions Index has dropped. Concerns over the economy and rising living costs have also stoked unrest. The protests against Oyun-Erdene began in May following accusations of lavish spending by his son, whose fiancee was reportedly seen with expensive gifts on social media. 'Parliament showed they can put the public interest above party needs,' small business owner Erchissaran Ganbold, 28, told AFP at Tuesday's protest. 'This demonstration is a strong reminder for politicians to be accountable and transparent in the future.'
