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Tony Porter

The literature on the global organization of finance has grown along with the global financial system, but also in response to theoretical innovations that suggested new lines of inquiry. In the 1970s and early 1980s, the emerging field of international political economy began to make valuable contributions to our understanding of global finance, but these focused on monetary politics or the formal intergovernmental organizations such as the IMF. By the 1990s, the literature focused on the greater complexity evident in global finance as traditional bank lending was increasingly displaced by other types of financial instruments, such as bonds, equities, and derivatives, which were also spreading geographically to influence “emerging markets” in the developing world and in countries in transition from communism. Since the mid-1990s, three interconnected changes in theory and practice are evident in international political economy (IPE) literature on the global organization of finance. First, the theoretical changes that characterized the broader fields of international relations and IPE were evident in the study of the global organization of finance as well, including the emergence of a new divide separating rational choice approaches from constructivism and other approaches. Second, the growing prominence of the concepts of globalization and global governance in the study and practice of international affairs inspired new literatures that overlapped and interacted with the IPE literature. Third, criticisms of globalized financial markets and questions of accountability and democracy directed at these markets grew and their role in structural adjustment.


Public Authorities  

Gail Radford

Public authorities are agencies created by governments to engage directly in the economy for public purposes. They differ from standard agencies in that they operate outside the administrative framework of democratically accountable government. Since they generate their own operating income by charging users for goods and services and borrow for capital expenses based on projections of future revenues, they can avoid the input from voters and the regulations that control public agencies funded by tax revenues. Institutions built on the public authority model exist at all levels of government and in every state. A few of these enterprises, such as the Tennessee Valley Authority and the Port Authority of New York and New Jersey, are well known. Thousands more toil in relative obscurity, operating toll roads and bridges, airports, transit systems, cargo ports, entertainment venues, sewer and water systems, and even parking garages. Despite their ubiquity, these agencies are not well understood. Many release little information about their internal operations. It is not even possible to say conclusively how many exist, since experts disagree about how to define them, and states do not systematically track them. One thing we do know about public authorities is that, over the course of the 20th century, these institutions have become a major component of American governance. Immediately following the Second World War, they played a minor role in public finance. But by the early 21st century, borrowing by authorities constituted well over half of all public borrowing at the sub-federal level. This change means that increasingly the leaders of these entities, rather than elected officials, make key decisions about where and how to build public infrastructure and steer economic development in the United States


Islamic Finance in North America  

M. Kabir Hassan, Tahsin Huq, and Aishath Muneeza

Islamic finance is an alternative source of financing to the conventional financing that emerged via institutionalization in the 1960s. It has gained popularity in the world irrespective of faith convictions due to the universal and ethical principles adhered in the practice of it. In this regard, North America is not an exception. In the United States and Canada, Islamic finance has been adopted, and there is an established regulatory environment for the operation of it with political support. There is also a wide range of innovative Islamic finance products structured and used in this part of the world that is conducive to the demand of the population and regulatory environment of Islamic finance found in the respective jurisdictions. These two countries are often described as competitors in the region, but the reality is despite the competitive relationship they are in by default, they are also collaborators in developing Islamic finance in the region. More than one million self-identified Muslims in Canada represents 3.2 percent of the total Canadian population. In comparison, the Muslim population in the United States represents 0.9 percent of the total population. Hence, Canada has been viewed as more suitable to become the hub of Islamic finance in the region simply because the number of Muslims in Canada is greater than that found in the United States in terms of religious representation in each nation’s total population. Furthermore, in terms of the regulatory environment, though the regulatory landscape applicable to financial institutions including Islamic financial institutions in the United States is much more sophisticated, the lack of a regulatory environment in Canada for Islamic finance is viewed as an opportunity for Canada as this provides flexibility required to develop and innovate unique Islamic finance products and increase the number of institutions dealing with Islamic finance. Sharia governance is the backbone of the Islamic finance industry in any jurisdiction. A common weakness found in both countries in the development of Islamic finance is on adopting a uniform Sharia governance framework applicable to all institutions offering Islamic finance products and services. In the early 21st century, the practice of Islamic financial institutions in the region indicates that there is no uniform yardstick to adopt in this regard, leading to confusion as well as lack of confidence—not only among “laypeople” but among Sharia scholars as well—in the Sharia-compliant products offered. In the absence of regulatory backing in this regard, an agreement among the industry stakeholders in the region would be sufficient to standardize this practice and implement procedural requirements that ought to be followed in offering Sharia-compliant products and services.


Behavioral and Social Corporate Finance  

Henrik Cronqvist and Désirée-Jessica Pély

Corporate finance is about understanding the determinants and consequences of the investment and financing policies of corporations. In a standard neoclassical profit maximization framework, rational agents, that is, managers, make corporate finance decisions on behalf of rational principals, that is, shareholders. Over the past two decades, there has been a rapidly growing interest in augmenting standard finance frameworks with novel insights from cognitive psychology, and more recently, social psychology and sociology. This emerging subfield in finance research has been dubbed behavioral corporate finance, which differentiates between rational and behavioral agents and principals. The presence of behavioral shareholders, that is, principals, may lead to market timing and catering behavior by rational managers. Such managers will opportunistically time the market and exploit mispricing by investing capital, issuing securities, or borrowing debt when costs of capital are low and shunning equity, divesting assets, repurchasing securities, and paying back debt when costs of capital are high. Rational managers will also incite mispricing, for example, cater to non-standard preferences of shareholders through earnings management or by transitioning their firms into an in-fashion category to boost the stock’s price. The interaction of behavioral managers, that is, agents, with rational shareholders can also lead to distortions in corporate decision making. For example, managers may perceive fundamental values differently and systematically diverge from optimal decisions. Several personal traits, for example, overconfidence or narcissism, and environmental factors, for example, fatal natural disasters, shape behavioral managers’ preferences and beliefs, short or long term. These factors may bias the value perception by managers and thus lead to inferior decision making. An extension of behavioral corporate finance is social corporate finance, where agents and principals do not make decisions in a vacuum but rather are embedded in a dynamic social environment. Since managers and shareholders take a social position within and across markets, social psychology and sociology can be useful to understand how social traits, states, and activities shape corporate decision making if an individual’s psychology is not directly observable.


Economy in Brazil in the 20th Century  

Herbert S. Klein and Francisco Vidal Luna

The 20th century represents a crucial period in Brazil’s economic history, when an agrarian, rural-dominated society became an urban, industrialized country with a complex financial sector and a large service sector. This economic transformation fueled by coffee exports led to profound demographic and social changes as millions of European and Asian immigrants were integrated into Brazilian society, followed by a massive shift of native-born migrants from the northeast to the dynamic southeast of Brazil, particularly for the state of São Paulo, which became the richest, most industrialized, and most populous state of the nation. The second half of the 20th century saw the creation of a modern industrial sector and the modernization of national agriculture, which in the 21st century made Brazil one of the most important producers of grain and animal protein in the world.


Foreign Economic Policy  

Daniel Sargent

Foreign economic policy involves the mediation and management of economic flows across borders. Over two and a half centuries, the context for U.S. foreign economic policy has transformed. Once a fledgling republic on the periphery of the world economy, the United States has become the world’s largest economy, the arbiter of international economic order, and a predominant influence on the global economy. Throughout this transformation, the making of foreign economic policy has entailed delicate tradeoffs between diverse interests—political and material, foreign and domestic, sectional and sectoral, and so on. Ideas and beliefs have also shaped U.S. foreign economic policy—from Enlightenment-era convictions about the pacifying effects of international commerce to late 20th-century convictions about the efficacy of free markets.


Financial Bubbles in History  

William Quinn and John Turner

Financial bubbles constitute some of history’s most significant economic events, but academic research into the phenomenon has often been narrow, with an excessive focus on whether bubble episodes invalidate or confirm the efficient markets hypothesis. The literature on the topic has also been somewhat siloed, with theoretical, experimental, qualitative, and quantitative methods used to develop relatively discrete bodies of research. In order to overcome these deficiencies, future research needs to move beyond the rational/irrational dichotomy and holistically examine the causes and consequences of bubbles. Future research in financial bubbles should thus use a wider range of investigative tools to answer key questions or attempt to synthesize the findings of multiple research programs. There are three areas in particular that future research should focus on: the role of information in a bubble, the aftermath of bubbles, and possible regulatory responses. While bubbles are sometimes seen as an inevitable part of capitalism, there have been long historical eras in which they were extremely rare, and these eras are likely to contain lessons for alleviating the negative effects of bubbles in the 21st century. Finally, the literature on bubbles has tended to neglect certain regions, and future research should hunt for undiscovered episodes outside of Europe and North America.


Entrepreneurial Finance and Governance  

Pierluigi Martino, Greg Bell, Abdul A. Rasheed, and Cristiano Bellavitis

Entrepreneurial finance includes a wide array of sources of capital, such as venture capital, angel investors, equity, and debt finance, along with new forms of financing through crowdfunding and initial coin offerings. Providers of funds to entrepreneurial ventures, whether they are venture capitalists, angel investors, debt holders, or participants in crowdfunding face similar agency problems, such as moral hazard and adverse selection. There are considerable differences across investors in terms of their objectives, risk-bearing capacity, and time horizons, as well as in their motivation and ability to monitor the firms in which they invest. These differences give rise to governance challenges associated with each source of entrepreneurial finance.


Behavioral Corporate Finance: The Life Cycle of a CEO Career  

Marius Guenzel and Ulrike Malmendier

One of the fastest-growing areas of finance research is the study of managerial biases and their implications for firm outcomes. Since the mid-2000s, this strand of behavioral corporate finance has provided theoretical and empirical evidence on the influence of biases in the corporate realm, such as overconfidence, experience effects, and the sunk-cost fallacy. The field has been a leading force in dismantling the argument that traditional economic mechanisms—selection, learning, and market discipline—would suffice to uphold the rational-manager paradigm. Instead, the evidence reveals that behavioral forces exert a significant influence at every stage of a chief executive officer’s (CEO’s) career. First, at the appointment stage, selection does not impede the promotion of behavioral managers. Instead, competitive environments oftentimes promote their advancement, even under value-maximizing selection mechanisms. Second, while at the helm of the company, learning opportunities are limited, since many managerial decisions occur at low frequency, and their causal effects are clouded by self-attribution bias and difficult to disentangle from those of concurrent events. Third, at the dismissal stage, market discipline does not ensure the firing of biased decision-makers as board members themselves are subject to biases in their evaluation of CEOs. By documenting how biases affect even the most educated and influential decision-makers, such as CEOs, the field has generated important insights into the hard-wiring of biases. Biases do not simply stem from a lack of education, nor are they restricted to low-ability agents. Instead, biases are significant elements of human decision-making at the highest levels of organizations. An important question for future research is how to limit, in each CEO career phase, the adverse effects of managerial biases. Potential approaches include refining selection mechanisms, designing and implementing corporate repairs, and reshaping corporate governance to account not only for incentive misalignments, but also for biased decision-making.


Household Finance  

Sumit Agarwal, Jian Zhang, and Xin Zou

Households are one of the key participants in the economy. Households provide land, labor, and capital to the external economy, in exchange for incomes including rents, wages, interests, and profits; the incomes are then utilized to buy goods and services from the external economy again, rendering an income flow circular. This suggests that households make complicated decisions in almost all areas of economics and finance, which constitute the scope of household finance studies. Specifically, household finance encompasses the following three topics: (a) how households make financial decisions regarding saving, consumption, investment, housing, and borrowing; (b) how organizations provide goods and services to satisfy these financial functions; and (c) how external interventions (from firms, governments, or other parties) such as financial technology (FinTech) affect these financial activities. Despite the important stake in the financial system, it was not until recent decades that household finance became a prosperous research field. For many years, financial studies mostly focused on financial markets, nonfinancial corporations, and financial institutions and intermediaries, with households being delivered as a simplified representative agent. Classical economic models do consider households in the economic system, but mainly focus on their functions in the income flow circular (i.e., the saving or demand for products). Recently, the household finance field received more attention and has produced a large strand of theoretical and empirical studies due to the incremental participation of households in financial markets, the observed consequences of events such as financial crises, the availability of more detailed high-quality granular data, and the regulations and interventions induced by technology innovation.


maritime loans  

Dominic W. Rathbone

In the ancient Greek and Roman worlds, centred as they were on the Mediterranean, maritime transport was far more practical than land transport for long- and even medium-distance trade. Most ships seem to have been of medium size (around 70 tonnes burden) and to have been owned and run by a shipper who both carried goods as freight and traded on his own account. There were also many individual merchants who hired shipping as needed for their ventures. Then as now, the major expense in trading was the investment in purchasing goods; roughly, one cargo of wheat was worth as much as the ship. Hence a merchant, whether or not also a shipowner, often needed third-party finance, for which, because of the peculiar risks involved, a special type of loan was used. This was the maritime loan—nautikon daneion in Greek, nauticum faenus or mutua pecunia nautica in Latin.The maritime loan is first attested in 4th-century bce Athens, in four speeches attributed to Demosthenes, of which the most informative is the prosecution of the brother of a pair of merchants for fraudulent default on a loan (Dem.


Latinx Business and Entrepreneurship  

Pedro A. Regalado

Entrepreneurship has been a basic element of Latinx life in the United States since long before the nation’s founding, varying in scale and cutting across race, class, and gender to different degrees. Indigenous forms of commerce pre-dated Spanish contact in the Americas and continued thereafter. Beginning in the 16th century, the raising, trading, and production of cattle and cattle-related products became foundational to Spanish, Mexican, and later American Southwest society and culture. By the 19th century, Latinxs in US metropolitan areas began to establish enterprises in the form of storefronts, warehouses, factories, as well as smaller ventures including peddling. At times, they succeeded previous ethnic owners; in other moments, they established new businesses that shaped everyday life and politics of their respective communities. Whatever the scale of their ventures, Latinx business owners continued to capitalize on the migration of Latinx people to the United States from Latin America and the Caribbean during the 20th century. These entrepreneurs entered business for different reasons, often responding to restricted or constrained labor options, though many sought the flexibility that entrepreneurship offered. Despite an increasing association between Latinx people and entrepreneurship, profits from Latinx ventures produced uneven results during the second half of the 20th century. For some, finance and business ownership has generated immense wealth and political influence. For others at the margins of society, it has remained a tool for achieving sustenance amid the variability of a racially stratified labor market. No monolithic account can wholly capture the vastness and complexity of Latinx economic activity. Latinx business and entrepreneurship remains a vital piece of the place-making and politics of the US Latinx population. This article provides an overview of major trends and pivotal moments in its rich history.


United States Financial History  

Christy Ford Chapin

The history of US finance—spanning from the republic’s founding through the 2007–2008 financial crisis—exhibits two primary themes. The first theme is that Americans have frequently expressed suspicion of financiers and bankers. This abiding distrust has generated ferocious political debates through which voters either have opposed government policies that empower financial interests or have advocated proposals to steer financial institutions toward serving the public. A second, related theme that emerges from this history is that government policy—both state and federal—has shaped and reshaped financial markets. This feature follows the pattern of American capitalism, which rather than appearing as laissez-faire market competition, instead materializes as interactions between government and private enterprise structuring each economic sector in a distinctive manner. International comparison illustrates this premise. Because state and federal policies produced a highly splintered commercial banking sector that discouraged the development of large, consolidated banks, American big business has frequently had to rely on securities financing. This shareholder model creates a different corporate form than a commercial-bank model. In Germany, for example, large banks often provide firms with financing as well as business consulting and management strategy services. In this commercial-bank model, German business executives cede some autonomy to bankers but also have more ability to engage in long-term planning than do American executives who tend to cater to short-term stock market demands. Under the banner of the public–private financial system two subthemes appear: fragmented institutional arrangements and welfare programming. Because of government policy, the United States, compared to other western nations, has an unusually fragmented financial system. Adding to this complexity, some of these institutions can be either state or federally chartered; meanwhile, the commercial banking sector has traditionally hosted thousands of banks, ranging from urban, money-center institutions to small unit banks. Space constraints exclude examination of numerous additional organizations, such as venture capital firms, hedge funds, securities brokers, mutual funds, real estate investment trusts, and mortgage brokers. The US regulatory framework reflects this fragmentation, as a bevy of federal and state agencies supervise the financial sector. Since policymakers passed deregulatory measures during the 1980s and 1990s, the sector has moved toward consolidation and universal banking, which permits a large assortment of financial services to coexist under one institutional umbrella. Nevertheless, the US financial sector continues to be more fragmented than other industrialized countries. The public–private financial system has also delivered many government benefits, revealing that the American welfare state is perhaps more robust than scholars often claim. Welfare programming through financial policy tends be “hidden,” frequently because significant portions of benefits provision reside “off the books,” either as government-sponsored enterprises that are nominally private or as government guarantees in the place of direct spending. Yet these programs have heavily affected both their beneficiaries and the nation’s economy. The government, for example, has directed significant resources toward the construction and maintenance of a massive farm credit system. Moreover, policymakers established mortgage insurance and residential financing programs, creating an economy and consumer culture that revolve around home ownership. While both agricultural and mortgage programs have helped low-income beneficiaries, they have dispensed more aid to middle-class and corporate recipients. These programs, along with the institutional configuration of the banking and credit system, demonstrate just how important US financial policy has been to the nation’s unfolding history.


Risk and Finance  

Horacio Ortiz

To study risk in the financial industry, rather than using the concept as an analytic category, anthropological research should instead examine the multiple technical and political meanings it has in the highly standardized procedures used by financial professionals worldwide. One important definition of risk concerns the concept of risk-free, used to qualify the bonds of the most powerful states worldwide, which are expected not to default because of their capacity to find money to pay creditors and their willingness to prioritize them against the rest of the polity. Financial professionals use risk-free bonds as a standard to assess any other activity vying for the funds of the financial industry. If professionals consider the activities riskier according to the risk-free criteria, they will demand these activities pay higher returns, a differential designated as a risk premium. The notion of risk-free thus tends to reproduce a geopolitical order where the most powerful states set the standard of financial value for other financial assets. Another definition of risk includes the mathematical concept of standard deviation, often called volatility, established by considering that prices, returns, or other such financial information have a mathematically “normal” distribution, and hence it makes sense to use probabilistic thinking and tools, such as the calculation of averages and correlations. These methods are combined with a political imaginary of market efficiency established in neoclassical economics, according to which, in efficient markets, maximizing investors seek all available information about assets, so that prices reflect this information and thus function as signals for a socially optimal allocation of resources. In this case, investors should not try to “beat” the market, but accept its prices as signals, and the investment strategy should only seek to minimize volatility. By mathematical construction, the standard deviation of a bundle of series that is not completely correlated is lower than that of one series. According to this view, investment should diversify into as many assets as possible, buying the “whole market.” This is the conceptual foundation of indexed investment, which tends to produce investment portfolios that replicate the market, so that the proportion of each asset in the portfolio supposedly matches its proportion in the “investment universe” of all available assets that pay the risk-free rate of return or a risk premium. This leads to a reproduction of the distribution of money among existing assets and thereby to the reproduction of the social hierarchies that include and exclude social activities from financial industry funding, instituting a small group of powerful states as the global foundation of financial value. In everyday practice, financial professionals thus mobilize standardized definitions of risk, with various ontologies and political meanings, in a way that tends to reproduce current monetary distribution and the global hierarchies that result from it.


Financing Higher Education  

Bruce Chapman and Lorraine Dearden

The rapid worldwide growth in higher education undergraduate enrollments since around 1990 has meant that governments have had to rethink provision and funding arrangements to help ensure both cost-effective and equitable outcomes. It is important to understand in detail the fundamental financial conceptual building blocks that are necessary for an efficacious and socially just higher education financing system. In response to the critical question of who should pay for higher education and student income support, the case for the sharing of the costs between students, graduates, and taxpayers is overwhelming from the perspectives of both efficiency and equity. Further, there is a consensus that governments should intervene with respect to the underwriting of student loans, but there are very important and quite different implications for borrowers with respect to loan collection arrangements. The most equitable and effective higher education financing instrument involves loans that are repaid only when and if debtors can afford to do so, known as income-contingent loans. The less desirable form of student loans, defined by time-based collection, is internationally still the most common approach, but recent advances in economic theory and econometric methodology provide both conceptual bases and exciting and innovative ways for governments to understand why traditional student loan approaches are inferior to income-contingent collection. When the effects of student loans on access and welfare become more properly understood, the case for targeted assistance for all disadvantaged prospective students for reasons of social justice remains compelling. The importance of the attainment of the right financing system was highlighted by the economic trauma associated with the COVID-19 pandemic, an ordeal that caused many universities to experience an entirely unexpected financial crisis and led millions of students to struggle with unanticipated loan repayment difficulties.


Corporate Political Strategies  

Rodrigo B. DeMello

Firms deploy value-based strategies to achieve competitive advantage in the marketplace. However, processes of value creation and appropriation do not happen in a vacuum but are structured by a set of formal market institutions that define, among other things, policies and regulations on standards, privacy, safety, trade, and access to resources. Corporate political strategies are the ways firms use to shape these policies and regulations in favorable ways that help them achieve competitive advantage. The political activities include lobbying, participation in hearings, campaign contributions, the use of revolving-door personnel, advocacy, grass-roots mobilization, and nurturing and exploiting political ties. Firms interact with government officeholders in different government arenas, such as national and local legislatures, government agencies, and the judiciary branch. For most corporations, being able to deploy effective political strategies is, therefore, necessary for achieving sustainable competitive advantage. The research into corporate political strategies has tried to explain why firms engage in political strategy, when, and which political activity would yield the best results. The usual theoretical framings draw from Resource Dependence Theory, Institutional Theory, Resource-Based View, Agency Theory, and Stakeholder Theory. While the strategic logic underlying each theoretical approach varies, they are better seen as complementary to each other. The fact that the phenomenon of political strategies is complex, dynamic, and an important part of daily business of several corporations favors the integration of different theoretical approaches. Although the literature on corporate political strategies has considerably advanced, there are still areas that could benefit from future research: the integration of market and political strategies, especially the use of market actions as political influence; the integration of social and political strategies; the role that individual and managerial aspects play in choice of political strategies; and multicountry comparative studies, especially focusing on ideological turnarounds and state capitalism.


Funding Flows: Transboundary Considerations of Disaster Recovery  

Anuradha Mukherji

Scholars agree that the impact of a disaster in a globalized world increasingly extends beyond political and geographical boundaries, creating transboundary disaster events. Though not all disasters fit the description of a transboundary event, many embody transboundary characteristics. For instance, national and transnational financing and other resources directed toward postdisaster humanitarian relief and long-term reconstruction efforts can also create transboundary flows that cross political and geographical lines. Rebuilding after physical damage and economic losses during a disaster, the impacts of which are disproportionately higher in the poorest countries, is a costly endeavor that requires multiple sources of finance. Depending on the scale and visibility of the disaster and local capacities, financial arrangements, resources, and assistance can come from a variety of sources including the government, international institutions, and private-sector, and nongovernmental, and civil society organizations. In particular, transnational financing from bilateral donors and international financial institutions, which constitute multilateral and bilateral streams of financing for postdisaster recovery, comprise a significant percentage of recovery funding globally. Such flows, although inherently transboundary, are not well understood as a phenomenon within the transboundary disasters literature. Three major types of agencies provide funding for postdisaster reconstruction including multilateral development banks (MDBs), also referred to as international financial institutions (IFIs); bilateral development agencies within donor countries; and United Nations (UN) development agencies. MDBs such as the World Bank are created by a group of countries that utilizes pooled contributions from national governments and additional resources, such as interest collected from loans, to finance development projects. Bilateral development agencies such as the United States Agency for International Development are institutions established by individual countries to provide development funding to nation-states; they work closely with IFIs. Numerous questions about transnational financing for postdisaster recovery as an important component of the transboundary disaster literature remain unanswered and need further insights. What are the links among transnational stakeholders (i.e., MDBs, bilateral donors, UN agencies, and international nongovernmental organizations) and transboundary financial arrangements for postdisaster recovery? What are the aggregate impacts of transboundary financing on postdisaster reconstruction? How do transboundary financing flows occur among bilateral donors, MDBs, and local and international nongovernmental organizations? Where can scholars find data sets on postdisaster transnational financing? How does transboundary financing impact postdisaster recovery governance in recipient countries? The current state of knowledge on transboundary financing of postdisaster recovery provides some guidance on best practices and the challenges with coordinating and monitoring.


Trade in the Japanese Empire  

Timothy Yang

Insecurity and inequality (both real and perceived) have defined the Japanese Empire as an entity of trade. If one the primary goals of Japan’s leaders during the Meiji period (1868–1912) was to revise the so-called unequal treaties, then having an empire was seen as a necessary means towards achieving this end. From the very beginning, strategic concerns proved inseperable from economic considerations. Imperial expansion into neighboring territories occurred simutaneously and worked hand in hand with forging an industrial nation-state. The empire began with the so-called internal colonization of Hokkaidō and then the Ryūkyū Islands (Okinawa), followed by Taiwan and Korea, spoils of victory after the Sino-Japanese and Russo-Japanese Wars, respectively. Taiwan and Korea represented Japan’s formal empire, and Japan developed these territories primarily as agricultural appendages—unequal and exclusive trading partners to provide foodstuffs for a growing, industrializing population in the home islands. As Japan developed its formal colonies toward a goal of agricultural self-sufficiency, it also pursued informal empire in China, which took shape as a competitive yet cooperative effort with other Western imperial powers under the treaty port system. World War I represented a turning point for imperial trade: At this time, Japan took advantage of a Europe preoccupied with internecine battles to ramp up the scope and scale of industrial production, which made Japan increasingly reliant on China—and particularly Manchuria—for raw materials necessary for heavy industry such as coal and iron. Japanese efforts to tighten its grip on China brought it into conflict with the Western imperialist powers and with a strengthening Chinese nation. Another major turning point was Japan’s 1931 takeover of Manchuria and the establishment of the puppet state of Manchukuo; these actions ended the treaty port system and sparked conflicts between China and Japan that broke out into full-out war by 1937. Although Japan was largely able to achieve agricultural self-sufficiency by the 1930s, it was unable to be fully self-reliant in essential resources for industry (and war) such as oil, tin, and iron. Resource self-sufficiency was a major goal for the construction of the Greater East Asia Co-Prosperity Sphere in the early 1940s. The Japanese Empire officially ended with defeat in 1945.


Latin America’s Socioeconomic Relationship With China: Is Development Still Possible?  

Enrique Dussel Peters

The socioeconomic and political relationship between Latin America and the Caribbean (LAC) with China has become increasingly significant for both since the beginning of the 21st century. This article analyzes proposals by the United States and China in their bilateral relationship and the political effects of their increasing tensions on LAC. Consistent with the proposed framework of analysis of the socioeconomic LAC–China relationship—at least in terms of trade, financing, overseas foreign direct investments, and infrastructure projects—the article examines in detail these conditions, as well as providing an in-depth example of trade. The final part of the article discusses the important potential and challenges of China for LAC’s development and concludes that so far, and based on the in-depth analysis of the trade relationship, the LAC–China relation is closer to a core-periphery than to a South–South or win–win strategy. The document proposes to understand that the political economy within the United States, particularly of its private sector, have shifted substantially against China. In addition, the structure for analysis of the LAC-China relationship in the 21st century with a concrete structure of analysis in terns of trade, financing, Chinese overseas foreign direct investments (OFDI) and infrastructure projects. In light of current discussions, the analysis suggests for the inclusion of a group of new concepts –such as the “the new triangular relationships” and the “globalization process with Chinese characteristics” with a group of effects in LAC. The impact of the increasing China-United States tensions, from this perspective, generates massive challenges in LAC, independently of their diplomatic relationships to China.


Party Finance in Latin America  

Kathleen Bruhn

Modern representative democracy cannot function without political parties, however rudimentary. Parties in turn cannot function without money. The subject of party finance is therefore central to the construction of contemporary democracies. Latin American countries have attempted to meet the challenges of preserving democracy while providing for political parties across three main areas of financial regulation: provision of public finance, regulation of private finance, and limiting campaign spending. In all three areas, transparency (reporting), oversight, and enforcement of existing legal regulations remain important problems for the health of the political system. In the late 20th century, Latin American countries increasingly turned to public finance as a way of supplementing existing systems of private contributions. This trend seems to have been inspired both by a desire to reduce the inequalities inherent in Latin America’s socioeconomic structure and by efforts to contain and prevent episodes of scandal and undue influence generated by private contributors. Public finance particularly benefits small parties and parties with fewer connections to the wealthy sectors that tend to dominate private contributions. Public finance may contribute to the institutionalization of both party organizations and party systems, but it may also weaken the dependence of parties on their members and supporters in ways that undermine representation. Private finance in Latin America remains largely obscure. We know that relatively few private donors account for the lion’s share of party donations, but it is unclear in many cases exactly who donates, or what their money buys. It is therefore difficult for voters (and analysts) to determine the structure of party obligations to donors and to hold parties accountable. Partly as a result, drug money is believed to have penetrated the political systems of many Latin American countries, especially but not exclusively at the local level. Campaign spending limits, including limits on the duration of campaigns and campaign advertising, have been employed in some cases to try to contain costs and thus reduce the incentives of parties to seek out private donations, especially of questionable origin. Lax enforcement, however, limits the impact of these initiatives.