Category: Political Economy

Data Visualization #19—Using panelView in R to produce TSCS (time-series cross-section) plots

As part of a project to assess the influence, or impact, of Canadian provincial government ruling ideologies on provincial economic performance I have created a time-series cross-section summary of my party ideology variable across provinces over time. A time-series cross-section research design is one in which there is variation across space (cross-section) and also over time. The time units can literally be anything although in comparative politics they are often years. The cross-section part can be countries, cities, individuals, states, or (in my case) provinces. Here is the snippet of the data structure in my dataset (data frame in R):

canparty.df[1:20,c(2:4,23)]

Year                    Region                      Pol.Party party.ideology
1981                   Alberta Progressive Conservative Party              1
1981          British Columbia            Social Credit Party              1
1981                  Manitoba Progressive Conservative Party              1
1981             New Brunswick Progressive Conservative Party              1
1981 Newfoundland and Labrador Progressive Conservative Party              1
1981               Nova Scotia Progressive Conservative Party              1
1981                   Ontario Progressive Conservative Party              1
1981      Prince Edward Island Progressive Conservative Party              1
1981                    Quebec                Parti Quebecois              0
1981              Saskatchewan           New Democratic Party             -1
1982                   Alberta Progressive Conservative Party              1
1982          British Columbia            Social Credit Party              1
1982                  Manitoba           New Democratic Party             -1
1982             New Brunswick Progressive Conservative Party              1
1982 Newfoundland and Labrador Progressive Conservative Party              1
1982               Nova Scotia Progressive Conservative Party              1
1982                   Ontario Progressive Conservative Party              1
1982      Prince Edward Island Progressive Conservative Party              1
1982                    Quebec                Parti Quebecois              0
1982              Saskatchewan Progressive Conservative Party              1

To get the plot picture below, we use the R code at the bottom of this post. But a couple of notes: first, the year data are not in true date format. Rather, they are in periods, which I have conveniently labelled years. In other words, what is important for the analysis that I will do (generalized synthetic control method) is to periodize the data. Second, because elections occur at any point during the year, I have had to make a decision as to which party is coded as having been in government that year.

Since my main goal is to assess economic performance, and because economic policies take time to be passed, and to implement, I made the decision to use June 30th as a cutoff point. If a party was elected prior to that date, it is coded as having governed the province in that whole year. If the election was held on July 1st (or after), then the incumbent party is coded as having governed the province the year of the election and the new government is coded as having started its mandate the following year.

Here’s the plot, and the R code below:

library(gsynth)
library(panelView)
library(ggplot2)

ggpanel1 <- panelView(Prop.seats.gov ~ party.ideology + Prov.GDP.Cap, data = canparty.df, 
          index = c("Region", "Year"), main = "Provincial Ruling Party Ideology", 
          legend.labs = c("Left", "Centre", "Right"), col=c("orange", "red", "blue"), 
          axis.lab.gap = c(2,0), xlab="", ylab="")
## I've used Prop.seats.gov and Prov.GDP.Cap b/c they are two 
## of my IVs, but any other IVs could have been used to 
## create the plot. The important part is the party.ideology 
## variable and the two index variables--Region (province)  ## and Year.

## Save the plot as a .png file

ggsave(filename="ProvRulingParty.png", plot=ggpanel1, height=8,width=7)

‘Thick Description’ and Qualitative Research Analysis

In Chapter 8 of Bryman, Beel, and Teevan, the authors discuss qualitative research methods and how to do qualitative research. In a subsection entitled Alternative Criteria for Evaluating Qualitative Research, the authors reference Lincoln and Guba’s thoughts on how to assess the reliability, validity, and objectivity of qualitative research. Lincoln and Guba argue that these well-known criteria (which developed from the need to evaluate quantitative research) do not transfer well to qualitative research. Instead, they argue for evaluative criteria such as credibility, transferability, and objectivity.

Saharan Caravan Routes
Saharan Caravan Routes–The dotted red lines in the above map are caravan routes connecting the various countries of North Africa including Egypt, Libya, Algeria, Morocco, Mali, Niger and Chad. Many of the main desert pistes and tracks of today were originally camel caravan routes. (What do the green, yellow, and brown represent?)

Transferability is the extent to which qualitative research ‘holds in some other context’ (the quants reading this will immediately realize that this is analogous to the concept of the ‘generalizability of results’ in the quantitative realm). The authors argue that whether qualitative research fulfills this criterion is not a theoretical, but an empirical issue. Moreover, they argue that rather than worrying about transferability, qualitative researchers should produce ‘thick descriptions’ of phenomena. The term thick description is most closely associated with the anthropologist Clifford Geertz (and his work in Bali). Thick description can be defined as:

the detailed accounts of a social setting or people’s experiences that can form the basis for general statements about a culture and its significance (meaning) in people’s lives.

Compare this account (thick description) by Geertz of the caravan trades in Morocco at the turn of the 20th century to how a quantitative researcher may explain the same institution:

In the narrow sense, a zettata (from the Berber TAZETTAT, ‘a small piece of cloth’) is a passage toll, a sum paid to a local power…for protection when crossing localities where he is such a power. But in fact it is, or more properly was, rather more than a mere payment. It was part of a whole complex of moral rituals, customs with the force of law and the weight of sanctity—centering around the guest-host, client-patron, petitioner-petitioned, exile-protector, suppliant-divinity relations—all of which are somehow of a package in rural Morocco. Entering the tribal world physically, the outreaching trader (or at least his agents) had also to enter it culturally.

Despite the vast variety of particular forms through which they manifest themselves, the characteristics of protection in tbe Berber societies of the High and Middle Atlas are clear and constant. Protection is personal, unqualified, explicit, and conceived of as the dressing of one man in the reputation of another. The reputation may be political, moral, spiritual, or even idiosyncratic, or, often enough, all four at once. But the essential transaction is that a man who counts ‘stands up and says’ (quam wa qal, as the classical tag bas it) to those to whom he counts: ‘this man is mine; harm him and you insult me; insult me and you will answer for it.’ Benediction (the famous baraka),hospitality, sanctuary, and safe passage are alike in this: they rest on the perhaps somewhat paradoxical notion that though personal identity is radically individual in both its roots and its expressions, it is not incapable of being stamped onto tbe self of someone else. (Quoted in North (1991) Journal of Economic Perspectives, 5:1 p. 104.

The Trilemma of International Finance

In IS210, we will be reading about domestic political economy next week. Understanding the role of state and market, politics and economics, we can learn about what causes some countries’s economies to grow quite rapidly and other countries’ economies to grow more slowly. We’ll look at the role of domestic institutions and policy choices as key root causes in economic development. [How does this contrast with Inglehart’s arguments, or Weber’s idea of the ‘Protestant work ethic?’] Increasingly, though, our ever more globalized and interdependent world economy provides domestic economies with opportunities and threats that didn’t exist to nearly this extent even 50 years ago. We’ll look at economist N. Gregory Mankiw’s New York Times editorial piece on the “trilemma of international finance.”

Have a look at this Frontline excerpt on the Asian financial crisis of 1997 and the role that fixed exchange rates played:

Global Debt Crisis and Relief

The issue of the global debt crisis–and particularly the onerous debt levels of developing world (“Southern”) countries–was a topic that we covered in POLI 1100 today. It will allow me to combine two class topics–issues pertaining development and underdevelopment, and interest groups (NGOs)–into one blog post. The interest group, Global Issues, is dedicated to analyzing “social, political, economic, and environmental issues that affect us all” and has a section on debt relief for the developing world. Here are some facts and figures related to the scale of the debt crisis in the developing world:

Consider the following:

  • In 1970, the world’s poorest countries (roughly 60 countries classified as low-income by the World Bank), owed $25 billion in debt.
  • By 2002, this was $523 billion
  • For Africa,
    • In 1970, it was just under $11 billion
    • By 2002, that was over half, to $295 billion
  • Debts owed to the multilateral institutions such as the IMF and World Bank is currently around $153 billion
  • For the poorest countries debts to multilateral institutions is around $70 billion.

$550 billion has been paid in both principal and interest over the last three decades, on $540bn of loans, and yet there is still a $523 billion dollar debt burden.

Here are some remarks by Professor Susan George on how to tackle the debt crisis. Money quote:

…there is no level of human suffering, which in and of itself, is going to change policy. The only way policy changes is because people demand it, and in this case, it has to be the people of the North, because the people of the South have very little political clout.

What is the link between Globalization and Poverty?

In my previous post, I noted that the narrator of the Globalization is Good documentary claimed that there was a strong correlation between how globalized a country is and poverty. Specifically, those countries that are globalized are likely to have less poverty. How does this claim stand up to empirical scrutiny? Well, one answer comes from the National Bureau of Economic Research (NBER) in Cambridge, Massachusetts.

“The evidence strongly suggests that export growth and incoming foreign investment have reduced poverty everywhere from Mexico to India to Poland. Yet at the same time currency crises can cripple the poor.”

Does globalization, as its advocates maintain, help spread the wealth? Or, as its critics charge, does globalization hurt the poor? In a new book titled Globalization and Poverty, edited by NBER Research Associate Ann Harrison, 15 economists consider these and other questions. In Globalization and Poverty (NBER Working Paper No. 12347), Harrison summarizes many of the findings in the book. Her central conclusion is that the poor will indeed benefit from globalization if the appropriate complementary policies and institutions are in place.

Harrison first notes that most of the evidence on the links between globalization and poverty is indirect. To be sure, as developing countries have become increasingly integrated into the world trading system over the past 20 years, world poverty rates have steadily fallen. Yet little evidence exists to show a clear-cut cause-and-effect relationship between these two phenomena.

Many of the studies in Globalization and Poverty in fact suggest that globalization has been associated with rising inequality, and that the poor do not always share in the gains from trade. Other themes emerge from the book. One is that the poor in countries with an abundance of unskilled labor do not always gain from trade reform. Another is that the poor are more likely to share in the gains from globalization when workers enjoy maximum mobility, especially from contracting economic sectors into expanding sectors (India and Colombia). Gains likewise arise when poor farmers have access to credit and technical know-how (Zambia), when poor farmers have such social safety nets as income support (Mexico) and when food aid is well targeted (Ethiopia).

The evidence strongly suggests that export growth and incoming foreign investment have reduced poverty everywhere from Mexico to India to Poland. Yet at the same time currency crises can cripple the poor. In Indonesia, poverty rates increased by at least 50 percent after the 1997 currency crisis in that country, and the poor in Mexico have yet to recover from the pummeling of the peso in 1995.

Without doubt, Harrison asserts, globalization produces both winners and losers among the poor. In Mexico, for example, small and medium corn growers saw their incomes halved in the 1990s, while larger corn growers prospered. In other countries, poor workers in exporting sectors or in sectors with foreign investment gained from trade and investment reforms, while poverty rates increased in previously protected areas that were exposed to import competition. Even within a country, a trade reform may hurt rural agricultural producers and benefit rural or urban consumers of those farmers’ products.

The relationship between globalization and poverty is complex, Harrison acknowledges, yet she says that a number of persuasive conclusions may be drawn from the studies in Globalization and Poverty. One conclusion is that the relationship depends not just on trade or financial globalization but on the interaction of globalization with the rest of the economic environment: investments in human capital and infrastructure, promotion of credit and technical assistance to farmers, worthy institutions and governance, and macroeconomic stability, including flexible exchange rates. The existence of such conditions, Harrison writes, is emerging as a critical theme for multilateral institutions like the World Bank.

The Political Economy of Revolution–Egypt

In our last session of IS 210 we looked at the topic, political economy. O’Neil defines political economy as “the study of the role of economic processes in shaping society and history.” The recent overthrow of the Mubarak regime in Egypt is a good case study with which to highlight some of the links between political revolution and political economy. Anybody who has taken a political economy course in political science at the graduate level in the last 15 years or so has almost certainly read Stephen Haggard and Robert R. Kaufman’s influential work, The Political Economy of Democratic Transitions. The authors attempt to answer a series of inter-related questions related to the politics/economics nexus as it appeared to them in the early 1990s:

“What role have economic crises played in the near-global wave of political liberalization and democratization? Can new democracies manage the daunting political challenges posed by economic crises and reform efforts? Under what economic and institutional conditions is democracy most likely to be consolidated?”

Haggard and Kaufman ultimately eschew both liberal theories of modernization and (neo)-Marxist theories of dependency and turn to a rational choice framework that focuses on the strategic actions of political elites–especially presidents and military leaders–under conditions of economic and institutional constraint. In addition, the authors make a few key assumptions, one of which I will highlight here: “…the 0pportunities for political elites to mobilize political support or opposition will depend on how economic policy and performance affect the income of different social groups.” (6) The empirical evidence draws from countries such as Uruguay, Brazil, Argentina, Philippines, Peru, and Bolivia. There argument certainly has relevance for the situation in Egypt today and for the potential for the Egyptian polity to make a successful transition toward consolidated democracy.

Jake Caldwell, Director of Policy for Agriculture, Trade, and Energy at American Progress, and coauthor of The Coming Food Crisis, has written recently about the daunting economic challenges facing any new government with respect to food security. In the midst of rapidly increasing global commodity prices–especially foodstuffs–the government must find a way to continue to feed its people, many of whom live on less than $2/day in income. Caldwell writes:

“Egypt has spent $4 billion a year, or 1.8% of GDP, on its bread subsidization program in an attempt to insulate the 40% of Egyptians living on less than $2 a day from inflation. But prices continue to rise…

…Egypt faces daunting challenges as it prepares for broad presidential and parliamentary elections within a year. Ongoing volatility in global food prices will strain resources during this critical transitional period.

As the world’s largest importer of wheat, Egypt is acutely vulnerable to any surge in food prices. Wheat prices have risen 47 percent over the last year and other staples are rapidly approaching dangerously high levels.

Food price inflation and volatility strike hard at the household budgets of average Egyptian families. Many of them spend 40 percent of their monthly income on food. As prices rise, purchasing power is eroded, and the recovery of Egypt’s fragile economy during the transition is slowed.”

How much time will the new Egyptian government have to provide food security for the Egyptian people before the polity’s patience with democracy is compromised? Or is the public yearning for democracy and liberty so strong that economic crisis will have little effect on democratization in Egypt going forward?

China and Civil Society

This week in IS 210 we addressed the concept of civil society–its institutions, and the relationships thereof with the state and market sectors. As part of today’s lecture, we viewed an excerpt of a video recording of a roundtable discussion about China and civil society. In a highly informative presentation, George Mason University (Fairfax, VA) research professor, Carol Lee Hamrin, assessed the changes in Chinese civil society over the last few decades. As the power and reach of the Chinese party-state recedes it has opened up room for the increasing independence of civil society institutions and (especially) the commercialisation of the Chinese economy.

You can view the whole video here.

ICG Report–Diamonds and the Central African Republic (CAR)

The International Crisis Group (ICG) has just released a new report on the influence of diamonds on the political situation in the Central African Republic (CAR). We’ve read various papers on the link between resource wealth (“lootable resources”) and political outcomes, such as regime type and economic outcomes. This report analyses the link between the presence of large stores of diamond wealth in CAR, the level of political instability (it’s essentially a failing state) and the existence of endemic conflict.  From the executive summary of the report:

In the diamond mines of the Central African Republic (CAR), extreme poverty and armed conflict put thousands of lives in danger. President François Bozizé keeps tight control of the diamond sector to enrich and empower his own ethnic group but does little to alleviate the poverty that drives informal miners to dig in perilous conditions. Stringent export taxes incentivise smuggling that the mining authorities are too few and too corrupt to stop. These factors combined – a parasitic state, poverty and largely unchecked crime – move jealous factions to launch rebellions and enable armed groups to collect new recruits and profit from mining and selling diamonds illegally. To ensure diamonds fuel development not bloodshed, root and branch reform of the sector must become a core priority of the country’s peacebuilding strategy.

Nature scattered diamonds liberally over the CAR, but since colonial times foreign entrepreneurs and grasping regimes have benefited from the precious stones more than the Central African people. Mining companies have repeatedly tried to extract diamonds on an industrial scale and largely failed because the deposits are alluvial, spread thinly across two large river systems. Instead, an estimated 80,000-100,000 mostly unlicensed miners dig with picks and shovels for daily rations and the chance of striking it lucky. Middlemen, mostly West Africans, buy at meagre prices and sell at a profit to exporting companies. The government lacks both the institutional capacity to govern this dispersed, transient production chain and the will to invest diamond revenues in the long-term growth of mining communities.

Chronic state fragility has ingrained in the political elite a winner-takes-all political culture and a preference for short-term gain. The French ransacked their colony of its natural resources, and successive rulers have treated power as licence to loot. Jean-Bédel Bokassa, the CAR’s one-time “emperor”, created a monopoly on diamond exports, and his personal gifts to French President Giscard d’Estaing, intended to seal their friendship, became symbols of imperial excess. Ange-Félix Patassé saw nothing wrong in using his presidency to pursue business interests and openly ran his own diamond mining company. Bozizé is more circumspect. His regime maintains tight control of mining revenues by means of a strict legal and fiscal framework and centralised, opaque management.

The full report can be accessed here. Here is a Al-Jazeera English news report on the situation in CAR.

An Alternative to GDP as a Measure of Welfare

Over the course of the semester, we’ll address the issue of economic growth and economic well-being. We’ll ask–and attempt to answer–question such as “why are most African countries still so poor?”, “why has there been an economic miracle in many parts of east Asia?”, etc. As we’ll see, the most widely used measure of economic welfare (or well-being) is gross domestic product (GDP), which is a measure of the total goods and services produced in a country in a given year.

Evidence suggests that the higher a country’s GDP, the better that country’s residents live; that is, they are better off. Recently, there has been increasing criticism of the focus on GDP as a measure of societal welfare. Think of the recent oil spill of the US coast in the Gulf of Mexico. The money spent to (attempt to) clean the waters and beaches served to increase the GDP in this area during the clean-up. It doesn’t take too much imagination to understand that this increase in GDP was probably not a boost in the general welfare of the individuals living in the region.

Robert Kennedy, at the start of his ill-fated run for the US presidency in 1968, remarked about GDP:

“The GDP* measures everything except that which makes life worthwhile.”

In a recent TED talk, statistician Nic Marks tackles some of the issues of using the GDP as a measure of a society’s “success.” From the abstract:

Statistician Nic Marks asks why we measure a nation’s success by its productivity — instead of by the happiness and well-being of its people. He introduces the Happy Planet Index, which tracks national well-being against resource use (because a happy life doesn’t have to cost the earth). Which countries rank highest in the HPI? You might be surprised.

Washington Post Reports that China no longer as Attractive an “Outsourcing” Target

The average person may not know the difference between “offshoring” and “outsourcing”, but one would think that it would be a condition of employment for someone who writes for the business section of the Washington Post. In an otherwise informative story on the decreasing attractiveness of China as an “outsourcing” location for US companies, we are witness to another example of a member of the traditional media seemingly uninformed of basic facts.

Outsourcing is simply the idea that a company chooses to have another company produce a good or service rather than produce that same good or service in-house.  Outsourcing has been happening for a long time, and an example is when the Ford Motor Company decided that it would be better to use their productive capacity to produce engines, and outsource the task of making tires to a different company rather than make tires itself.  This helped increase productivity by allowing Ford to concentrate on the making of engines, and have the other company (Goodyear, Bridgestone) focus on making better tires.

Offshoring simply means sending work beyond one’s national boundaries.  Notice that not all offshoring is also outsourcing.  In fact, I have previously read (but I can’t find the source) that most offshoring is, in fact, not also outsourcing.  How can this be?  Well, what happens when General Motors decides to close down a car factory in Flint and make begin producing vehicles in Windsor, Ontario instead?  That production (and the jobs accopanying it) has been offshored (moved to a different country–Canada) but it hasn’t been outsourced, since GM is still producing the vehicles.  Here’s a little chart that will help you understand the difference.

As for the article itself, it demonstrates that rising fuel costs have increased the cost of shipping to such an extent that the potential savings for a US company of producing in China are completely eliminated.  One such company has repatriated production to the US from China (I suppose that’s called “onshoring”?)   We read:

SHANGHAI — Harry Kazazian built his business on sleeping bags that are made in China and shipped across the ocean to the United States, but he realized recently that the math doesn’t work anymore.

With fuel prices at record highs, the cost of sending a standard 40-foot container of goods has gone from $3,000 in 2000 to about $8,000 today, squeezing profit.

So this summer Kazazian, chief executive of Exxel Outdoors, a Los Angeles-based maker of recreational equipment, did something radical: He moved the manufacturing back to Haleyville, Ala.

Soaring energy costs, the falling dollar and inflation are cutting into what U.S. manufacturers call the “China price”– the 40 to 50 percent cost advantage once offered by Chinese producers.

The export model that has powered China and other Asian countries for three decades will be compromised if fuel prices continue to rise, said Stephen Jen, a managing director for Morgan Stanley.

“Globalization has gone a little bit too far. It has overshot,” Jen said. “We’re not saying Asia is going to crumble, but we are saying Asia enjoyed extraordinary conditions in the past. Now the conditions are changing very quickly because of the energy shock, and Asia is coming under pressure.”

The ripple effects have been far-reaching. The trade imbalance between the United States and China — a source of political tension for years — is beginning to right itself as Chinese exports fall and U.S. exports rise. Global trade routes are being transformed, suggesting a possible return to a less integrated world economy.