Too Big to Judge

Courts dealt a major blow to too-big-to-fail regulations last week. As Andrew Ross Sorkin reports,

MetLife won its case against the government last week, and its position has been vindicated, at least until the decision is appealed.

A judge determined that the government’s process for designating MetLife a systemically important institution was not just “fatally flawed,” but seemingly purposely so. “Every possible effect of MetLife’s imminent insolvency was summarily deemed grave enough to damage the economy,” Judge Rosemary M. Collyer wrote in her opinion.

Not surprisingly, Jacob J. Lew, the Treasury secretary, took great umbrage. “In overturning the conclusions of experienced financial regulators, the court imposed new requirements that Congress never enacted, and contradicted key policy lessons from the financial crisis,” he said.

There’s nothing new in judges reviewing government regulations: it’s a core judicial function. But what may be new is the complexity of 21st century financial rules. As Sorkin adds,

How can any judge with anything short of a doctorate in statistics and economic modeling be tasked with effectively overseeing the decisions of a group like the Financial Stability Oversight Council, which includes the leaders of the Treasury, the Federal Reserve, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and the list goes on.

Judge Collyer smartly chose not to comment on whether MetLife was actually too big to fail, and she left open the possibility that the company could someday merit that designation. In her opinion, she said more narrowly that the process of determining that status in the case of MetLife was problematic…

in certain instances, like the case involving MetLife and the oversight council, should there be a special court, perhaps with an area of expertise?… Joshua D. Wright, a former commissioner of the Federal Trade Commission, co-wrote a 2011 study that determined in antitrust cases, a judge’s expertise had a significant impact on the validity of the ruling. “Decisions of judges trained in basic economics are significantly less likely to be appealed than are decisions by their untrained counterparts,” the study says. “Our analysis supports the hypothesis that some antitrust cases are too complicated for generalist judges.”

More basic competence seems like an unimpeachable recommendation. And it might avoid judges taking a pass on questions that we would all be better off having settled.

But as someone with training in both orthodox and heterodox economics, my immediate reaction to Sorkin’s suggestion is: what type of economics training? There’s at least eight schools of economics, according to the recent book Economics: A User’s Guide. And Steven Teles has gone through the archives, and found that economics boot camps for judges held since the 1970s have tended towards the libertarian. So, the notion of training isn’t value neutral.


As it happens, scholars have attempted to untangle the issue of the effect of specialization and ideology on judicial decision-making. There are many methodological challenges in the inquiry, not least – ideological compared to what? Robert Howard attempted to tackle this question by looking at a case where two types of judges had jurisdiction to determine the same questions. He writes:

The Internal Revenue Service (IRS) is unique among federal agencies in that it is subject to the jurisdiction of both the U.S. District Courts and the U.S. Tax Court, a specialized court of limited jurisdiction and limited independence…

[Howard’s Prediction:] As tax policy, and support or opposition to the Internal Revenue Service, is highly ideological, one would expect judges to exhibit ideological bias in their rulings. Tax court judges are subject to the same nomination and confirmation process as are the judges of the district court, so one should see similar ideologies in rulings for both courts. However, because tax policy is complex, judges of general jurisdiction courts need to rely more on litigants, lawyers, the IRS, and other courts for the meaning and proper construction of the Internal Revenue Code; this reliance on outside interpretation will restrict the use of ideology in the rulings by the district court judges. Tax court judges’ expertise, and the concomitant lack of reliance on others, means that the tax court judges have greater freedom to use their ideology in their rulings…

[Howard’s statistical result:] The tax court, contrary to expectations, seems to be both more expert and more ideological in its decision making than the district court. As expected, the more liberal the judge, the greater the likelihood of support for the Internal Revenue Service, while the more conservative the judge, the greater the likelihood of support for the taxpayer. Tax court judges are more ideological in deciding cases than are district court judges. Finally, the hypothesis that liberal judges would react more negatively, and conservatives more positively, to tax-protestor or tax-fraud issues was confirmed for both courts.

These results suggest that ideology may matter more than expertise in deference to executive branch decision-making. Indeed, if judges know more (or just enough to be dangerous), they may be more willing to substitute their own judgment on complex financial matters for those of elected officials.

Price of Transparency

The #PanamaPapers debacle reveals odd tensions between a few goals: transparency, tax equity, and sovereignty.

To see why, consider one subplot in the sprawling multinational scandal involves Argentina’s former president. As Australia Financial Review reports,

Mossack Fonseca & Co had a problem in Vegas.

Legal papers filed in US District Court in Las Vegas claimed that the Panama-based law firm had created 123 companies in Nevada that had been used by a crony of Argentina’s former president to steal millions of dollars from government contracts. A subpoena demanded that Mossack Fonseca turn over details about any money that had flowed through the Nevada companies…

The recently settled court action in Las Vegas was begun by a US company, NML Capital, which is controlled by billionaire investor Paul Singer — a hedge fund manager perhaps best known for his massive donations to the US Republican Party.

Mossack Fonseca was not a defendant, but it has been the subject of court orders seeking to obtain information about Nevada companies that the hedge fund claimed had been set up through Mossack Fonseca by Lázaro Báez, a businessman close to former Argentine presidents Néstor Kirchner and his widow Cristina Fernández de Kirchner.

For years, Argentine journalist Jorge Lanata has been tracking possible linkages between the Kirchners and Baez. As Nevada case filings report,
In  April  of  2013,  an   Argentine  journalist   named  Jorge  Lanata  initiated  an  investigation   dubbed   La  Ruta  Del  Dinero  K   (i.e.,  “the  K  Money  Trail”)   into  the   Kirchner s,  Báez ,   and  the  trio’s   financial  dealings. All three allegedly embezzled billions  of pesos from public -infrastructure projects  and laundered  the proceeds and other embezzled funds through various international shell corporations.
The scheme was allegedly executed in two steps. Weeks  before  Nestor Kirchner was elected in  2003,  Báez  founded  Austral Construcciones S.A ., a construction company that was awarded public -works  contracts in Patagonia. In exchange for these lucrative contracts, Báez  allegedly funneled a portion of the  public funds back to the Kirchners through Báez ’s hotel -management company, Valle Mitre S.A.  (“Valle  Mitre”).  Valle Mitre guaranteed that hotels owned by the Kirchners would, on paper, appear at least one – third occupied throughout the year.
These allegations  culminated in an official criminal investigation. The  lead prosecutor, José María  Campagnoli, report ed that Báez laundered $65 million in embezzled state  funds  through Panama and 150  corporations in  Nevada.  Campagnoli’s  report also stated that all 150 Nevada corporations have the same  domicile,  Las  Vegas,  Nevada,  and  the  same  director,  Aldyne,  Ltd.,  a  Seychellois  corporation.  After   submitting  the  report  to  Argentina’s  National  Supreme  Court  of  Justice,  the  Kirchner  government   retaliated and  removed Campagnoli from office.  On  August  13,  2013,  NML  subpoenaed  123  corporations  in  Las  Vegas .  It  argued   that  the re  is   reasonable  suspicion  to  believe  that   the  123  corporations   (“the  Báez   Entities”)   are  the  same  150   corporations referred to in Campagnoli’s report . The court agreed…
Lanata had doggedly tracked the case even as it made its way to Nevada. As NML Capital subpoenaed the Nevada shell companies, Lanata’s attorneys at Randazza Legal Group were fighting for access to the documents as well. When MF’s sole Nevada employee Patricia Amunategui attempted to keep her testimony sealed, Lanata’s lawyers argued that…
Ms. Amunategui argues that the parties agreed to keep this information
out of the public eye, and that should be sufficient to do so. ECF 80 at 5. If this
were a private arbitration, this argument may have some merit. But, with all
respect to Ms. Amunategui’s position, what she and the parties agreed to is
entirely irrelevant. Access to the courts is neither Ms. Amunategui’s, nor NML
Capital’s, nor The Republic of Argentina’s to barter or broker – that access belongs to the people. See Nixon v. Warner Communications, 435 U.S. 589, 597
(1978) (public access is a common law right)…
Ms. Amunategui was the sole employee of MF Nevada for over a decade
and oversaw corporate registration for thousands of companies forming under
the Nevada Secretary of State’s regulations. Ms. Amunategui served as the
Secretary for MF Nevada (not to be confused with merely being a secretary at
MF Nevada). She may be the only one who possesses this information as to how
MF Nevada, and therefore Mossack Fonseca operates. She may be the only
person who has information and supporting documents that demonstrate how
the shell corporations were formed, and at who’s bequest, and therefore, who is
ultimately responsible for laundering away billions of dollars worth of Argentina’s
The people of Argentina have a right to see this information for obvious
reasons. The people of the United States and especially Nevada have a right to
see how their courts and corporate laws have been used, and perhaps abused.

According to court transcripts, Cam Ferenbach (the presiding judge in the case) celebrated the presence of this outside party:

to tell you the truth, this is helpful to me that there will be an advocate advocating for
disclosure in front of me because usually what happens is, you know, the parties all agree to keep it confidential or one party wants it confidential, the other side doesn’t care, and there’s nobody advocating for the public. And so I have to kind of shift a little bit in that direction, instead of being neutral, to do my job about access to the records… with other cases under the discovery rules, you know, I feel obligated to make as much as possible public. The presumption is that it be public, but I do have to balance individual privacy interests and so on… You got here first [Mr. Lanata, ahead of other advocacy groups]. I’m going to let you fight — in fact, I appreciate, as I said, you’re going to fight the fight in front of me and I’ll hear from the other side.

So far, this seems like a pretty open and shut case of U.S. courts helping to promote transparency and clamp down on alleged overseas corruption.

But there’s two other factors that make this story a bit messier. Both relate to the strange route by which Argentina’s tax finances ended up in U.S. courts.

First, the trail led outside of Argentine territory and into Nevada only because Nevada is a secrecy jurisdiction. The upside is that litigants and outside parties benefit from the presumption of U.S. courts towards openness. This wouldn’t be the case in every legal system. The downside is that these procedural rules only apply because tax dodging was incentivized in the first place.

Second, the possibility of attaining discovery only exists because of a very enterprising hedge fund. NML Capital has used U.S. courts as a legal battering ram in their quest to make Argentina pay the full value of its defaulted debt (even while other creditors accepted a renegotiation). NML even got Ghanaian courts to help seize an Argentine naval ship. The Nevada gambit was just the latest in a long fishing expedition to find any assets that the Argentine people might have and appropriate them for itself. U.S. courts have become the forum for these types of disputes, thanks to earlier Argentine governments’ outsourcing of various legal and financial functions to New York.

In short, we’re getting transparency, but only because of (U.S.) tax havens’ existence in the first place, a hedge fund’s efforts to bleed a sovereign treasury, and U.S. courts facilitating of both.

Sanders elaborates on trade

Bernie Sanders has given at least three indications in the last week of how he would manage the U.S. role in the global economy.

First, in last week’s interview with the Daily News, Sanders said that:

yes, I do understand you can make more profits by paying people in Mexico, or China, or Vietnam pennies an hour, I do understand that. But I believe that people have…and, by the way, I’m not anti-trade. We live in a global economy, we need trade. But the trade policies that we have allowed to occur, that were written by corporate America have been disastrous for American workers.

So I think we need trade. But I think it should be based on fair trade policies. No, I don’t think it is appropriate for trade policies to say that you can move to a country where wages are abysmal, where there are no environmental regulations, where workers can’t form unions. That’s not the kind of trade agreement that I will support…

we have some specificity and it isn’t just us going around denouncing bad trade. In other words, I do believe in trade. But it has to be based on principles that are fair. So if you are in Vietnam, where the minimum wage is 65¢ an hour, or you’re in Malaysia, where many of the workers are indentured servants because their passports are taken away when they come into this country and are working in slave-like conditions, no, I’m not going to have American workers “competing” against you under those conditions. So you have to have standards. And what fair trade means to say that it is fair. It is roughly equivalent to the wages and environmental standards in the United States.

Mike Konzcal makes a convincing argument that Sanders’ answers on finance are smarter than some have given him credit for. In contrast, the statement on trade is not as sharp as I would expect from someone who has spent his entire career emphasizing his opposition to trade deals. It wasn’t a trick question or an out of the blue inquiry on the part of the newspaper editors. At face value, it would mean no trade deals with countries at lower levels of development and only deals with countries at the same level of development – essentially the opposite of what we’ve done up until now. But then, Sanders also opposed the U.S.-Australia trade deal. Seems like an undercooked answer, but Paul Adler has taken a deeper dive on Sanders’ record and argues that there’s more than meets the eye.

Second, earlier this week, we got another Sanders intervention on trade, this time about Panama:

As president, I will use my authority to terminate the Panama Free Trade Agreement within six months. My administration will conduct an immediate investigation into U.S. banks, corporations and wealthy individuals who have been stashing their cash in Panama to avoid taxes. If any of them have violated U.S. law, my administration will prosecute them to the fullest extent of the law.

This is clear and totally doable. Under Article 22.5.2 of the FTA, “Either Party may terminate this Agreement by written notification to the other Party. This Agreement shall terminate 180 days after the date of such notification.” And unlike some of Sanders’ broader promises to terminate old treaties, this would require no real bargaining or trade offs. There’s not much Panama can demand of the U.S., and the U.S. economy would not feel much adverse impact. It also wouldn’t send much of a signal one way or another to other countries: Canada is not going to worry about how the U.S. treats Panama.

While he’s at it, he could consider terminating the U.S.-Panama bilateral investment treaty, signed by Reagan and updated by the Clinton administration. That’s a little trickier, because of this provision: “If the 1982 Treaty is terminated, the Protocol will continue to be effective (as will the other Articles of the 1982 Treaty) for an additional 10 years as provided in Article XIII(4) of the 1982 Treaty.”

Finally, today, he told the Philly Inquirer a few more nuggets, mostly reiterating his first statement. But he also conceded that trade agreements have positive and negatives, and they do create jobs. As Zach Carter notes, he said he would re-negotiate – not violate the deals: “They should be renegotiated. We have an agreement, legally we have agreement. But they should be renegotiated.”


He also returned to the issue of Panama, saying that the Panama FTA “has given corporations and very wealthy people the opportunity to dodge taxes throughout the world.”

This isn’t quite the issue. The opportunity existed before. And I’m not quite sure what he means by “throughout the world.” Panamanian law firms do help rich people throughout the world dodge taxes both in Panama and other countries. So maybe that’s what Sanders is getting at.

The issue, as I explain here, is whether the U.S. used its political capital effectively enough to get Panama to change its practices in the lead-up to the FTA. The answer is probably “no,” or that the U.S. had no credibility on the issue since we’re a banking secrecy jurisdiction too. This was a failure to link the issues in an effective manner..As Emilie Hafner-Burton, David Victor, and Yonatan Lupu write, linkage is  a tried and true strategy in many international negotiations:

the boundaries around a problem  are often malleable, allowing  entrepreneurial countries and other actors to link issues in ways that alter the strategic  context of a negotiation by changing the scope of bargaining…  For example, the boundaries around the topic of “international trade” have  greatly expanded over time… studies note that powerful states have put on  the international trade agenda topics of great interest to some of their well – organized  interest groups — such as rules on intellectual property (of value to western pharmaceutical  and entertainment companies) or limits on the ability to use trade rules to undercut  environmental standards (of keen interest to environmental groups)… international legal institutions on the protection of biological  diversity were expanded to include complicated schemes to protect developing countries  against “biopiracy” of their natural assets. The role of issue – linkage as a way to set the  agenda and alter the prospects for successful bargaining is long familiar in the formal study  of  negotiations, and some scholars with that background have looked in depth at the  negotiations leading to major international legal agreements.

Then there’s a related matter, which is quite frankly so complicated that I would advise any candidate against trying to explain it. This is whether U.S. anti-tax haven initiatives could be challenged under the FTA’s dispute settlement provisions. The answer there is “yes, but it hasn’t happened yet.”

Here’s my take at a better one-liner: “The U.S. should eliminate its tax haven, use all tools at its disposal to pressure for the elimination of those in Panama and elsewhere, and make sure that trade deals don’t make any of these efforts any harder than they already are.”


Yesterday, the Panama Papers blew the lid off the planet. The disclosure of many high profile international connections to offshore banking secrecy is creating headaches for leaders like in Argentina‘s Mauricio Macri and the UK’s David Cameron, and has led to government collapse in Iceland.

A few years back, I made a major stink about Panama’s banking practices. I told the  U.S. Congress and Canadian Parliament that U.S. and Canadian trade negotiations with Panama represented a key moment of leverage to clean up bank secrecy.

I highlighted a few problems:

  1. Failure to get Panama to sign an agreement to automatically exchange tax information – much as the U.S. and Canada do between themselves. The U.S instead signed a non-automatic tax treaty, which allows Panama ample grounds to refuse to cooperate.
  2. No elimination of bearer shares, a key device for laundering money. Instead, Panama passed Know Your Client legislation, which had only limited suspension periods for lawyers that didn’t comply, contained weak identify verification requirements, and penalized lawyers more for identifying clients that it did for not abiding by the disclosure rules.

A few things have happened since then, and a few lessons to be learned:

  1. Just having tax treaties does not eliminate all questionable practices. Panama did not used to have any agreements, and now it has them with 25 countries – although none are automatic.
  2. Just passing some transparency laws does not fix the whole problem. According to the OECD’s most recent assessment of Panama (para. 21), there are still gaps in requirements to know the beneficial owner of bearer shares. While there have been some improvements, the OECD still finds significant opacity in Panama’s banking practices.
  3. Panama has used aggressive and novel tools like previously untested WTO rules to go after countries’ anti-tax haven policies. While winning some arguments, it is now appealing its legal case because it didn’t win all of them.

There’s a lot to follow, and I haven’t followed the story as closely in recent years as I would have liked. Here are some questions I am asking myself (and policymakers should be asking themselves):

  1. Panama has made a number of legal changes in recent years. Were they enough? Or were they just the best that the U.S. and other countries could reasonably expect to force a sovereign country to do? We’re still learning how much impropriety was involved in the Panama Papers, so it’s unclear to me whether anything would have been avoided with a different set of policy measures. For example, is it reasonable to expect a better U.S.-Panama deal to hinder Russian oligarchs putting their money in Panamanian banks?
  2. Do we have enough tools to systematically assess whether trade deals are living up to their promises, both economically and in terms of regulatory conduct? Are all our policy oars rowing in the same direction? I had warned back in the day that the U.S.’ anti-tax haven policies could be targeted in investor-state dispute settlement under the pact. That has not happened, although it certainly could in the future. Panama is not above encouraging such a move, as the WTO case shows. Moreover, the U.S. now has both an investment treaty and the trade deal (which contains ISDS). Arbitration claims have been brought under both the older (but not the newer) model, even though the newer model arguably has more protections for policymakers. When we say we are upgrading a treaty regime, shouldn’t we actually upgrade it? Finally, should Panama’s pursuit of the WTO case be factored into any assessment of its sincerity on financial transparency?

I’m on some other deadlines, but I’ll try to post more as I learn more.

New book: Alternative Visions

I have a chapter with Kyla Tienhaara in a new book honoring M. Sornarajah, the esteemed legal scholar.

The book is called “Alternative Visions of the International Law on Foreign Investment: Essays in Honour of Muthucumaraswamy Sornarajah.” Here’s the publisher description:

This book is about the forces that are reshaping the international law on foreign investment today. It begins by explaining the liberal origins of contemporary investment treaties before addressing a current backlash against these treaties and the device of investment arbitration. The book describes a long-standing legal-intellectual resistance to a neo-liberal global economic agenda, and how tribunals have interpreted various treaty standards instead. It introduces our reader to the changes now taking place in the design of a range of familiar treaty clauses, and it describes how some of these changes are now driven not only by developing and emerging economies but also by the capital-exporting nations. Finally, it explores the life, career and writings of Muthucumaraswamy Sornarajah, a scholar whose work has been dedicated to the realisation of many of these changes, and his views about the hold global capital has over legal practice.

The chapter written by Kyla and me (“Regulating foreign investment: Methanex revisited”) focuses on the legacy of a particular pro-state case (Methanex v. USA) and Sornarajah’s interpretation of it in a 2005 article. From our introduction:

The modest aim of this chapter is to track the impact of the Methanex decision on expropriation since it was promulgated a decade ago. In doing so, we endeavour to assess whether Sornarajah’s optimism about the revival of a regulatory exemption from expropriation was well founded. … We seek to establish whether Methanex was a one-off ‘easy’ case or instead has helped to establish a pattern of decision-making in investment arbitration that is deferential to states and thereby acts to preserve policy space.

To achieve this aim we first revisit the facts of the Methanex case (Section II) and highlight how the tribunal’s interpretation of indirect expropriation diverged from the case law up to that point. Then, with Sornarajah’s concern that the “writings of ‘highly qualified’ publicists” have been overly influential in international investment law in mind, we assess the reaction to the Methanex decision in the academic literature (Section III).

In Section IV, we ask whether there has been “less fervour in basing claims on expropriation” post-Methanex.  Related to this, we also address whether there has been a “shift to the other heads of liability under the investment treaties, namely treatment standards”.  We further examine whether the Methanex decision has had a strong (informal) precedent effect by tracing references to it in subsequent awards. We disaggregate the data based on the development status of the country to address Sornarajah’s concern that the benefits of the Methanex decision might be confined to powerful states like the US…

we conclude that the Methanex case has not had the impact hoped for by Sornarajah and others. The enthusiasm of investors to claim indirect expropriation has not been dulled. While it is true that expropriation claims often fail, this is not attributable to an acceptance of the Methanex approach, which has actually been followed in very few subsequent cases.

This analysis casts doubt on the ability of ISDS litigants to invest in test cases and strategic precedent creation – a common way that governments and other social actors have used to channel development of the law in desired directions.

Political Isolation in EU #ISDS Proposal

National level law and politics is further removed from investor-state dispute settlement under the EU’s new reform plan, other aspects of which I explored here and here.

Among the ways that the draft TTIP text diverge from the US Model Bilateral Investment Treaty:

  • It replaces a system of partial respondent state control over arbitrators with a more  insulated standing court (Sec 3, Art 9-10), as I mentioned in the earlier posts. States’ appointment power has been justified as enhancing their confidence that their views will be heard.
  • It forbids government officials from any country serving as adjudicators (Sec 3, Art 11). This deprives investment tribunals of a potential source of political wisdom. More on this below.
  • Domestic courts will lose what little power they now have to review the substance of awards (Sec 3, Art 30). This removes an opportunity for national courts to buy into and legitimize ISDS outputs, a feature that has bolstered the effectiveness of European human rights courts.

And some features of existing ISDS that separate it from national control and influence are retained:


  • Investors of a given country will be able to bypass domestic legal and political processes and use foreign subsidiaries to sue over their home state regulations (Sec 2 Article 9, Sec 1 definitions).
  • Legal standards on expropriation and other matters are still treaty defined, rather than based in national law (Sec 2, Articles 3-6). Indeed, it explicitly states that “domestic law” is not part of applicable treaty law (Sec 3, Art 13).
  • It obliges countries to engage in special consultations and ultimately arbitration with foreign investors that would not be the required (or common) practice under domestic politics and law (Sec 3).
  • It does not require respondent states to consent to ISDS on a case by case basis (Sec 3, Art 7). This removes an opportunity to make sure that the arbitration is seen as useful and legitimate by both parties.*

What’s the risk with further de-nationalizing ISDS?

Continue reading “Political Isolation in EU #ISDS Proposal”

Review: Finding Time

It’s not often someone writes a book for you, but I feel that’s the case with Heather Boushey’s Finding Time: The Economics of Work-Life Conflict.

I’ve had the good fortune to be married to Heather for nine years today. We met while working at the Center for Economic and Policy Research in 2003, and I’ve seen her grow from a research economist into a top policy advisor and director of Equitable Growth.

Heather started the book in Cambridge, UK, when she joined me in the first year of a PhD program. I’ve been lucky enough to hear about the book’s development on a near daily basis for the last four years, and to have been able to read several drafts.

The book is the written version of debates we’ve had over the dinner table. I’ve long worked on obscure legal issues in the global economy, while Heather’s research interests in recent years have focused on work-life policies like childcare. We’ve used each other as sounding boards  for our work. The idea being, if we can’t make our ideas interesting to one another (with such divergent topical interests), we’ll find it difficult to speak to a broader audience.

And I’ve been a very difficult audience. My interests tend towards the abstract. And we don’t have kids, so I don’t have a lot of immediate self-interest in social policies like childcare.

“Finding Time” aims to convince me and people like me that work-life conflict is both interesting and politically important. It succeeds on both levels, for several reasons.

First, the book isn’t just for traditional families. it is foremost a book about economic boushey_finding_timeideas. While work-life advocates and parents will find their struggles validated in its pages, “Finding Time” reaches well past them to engage economic generalists. For the childless among us, work-life issues have historically been something that affected other people – that coworker that had to leave early to pick up a kid, or that sibling that took maternity leave. Heather makes a compelling case that the management of time is a pressing problem for the health and productivity of the economy as a whole.

Second, it isn’t just “for the ladies.” As Heather shows, men benefit from sane scheduling practices, child-care, and other policies just as much as women.

Third, it provides an intellectual basis for a new kind of social mobilization. Early feminism  called out unequal citizenship, second wave feminism called out patriarchy and men, third wave feminism called out other feminists, and fourth wave feminism called out the Internet. These efforts emphasized difference and demanded solidarity. But as the success of populist efforts this year shows,* there is also a role for efforts that emphasize shared concerns. Heather’s work provides a framework for accomplishing many traditional feminist goals through making demands of the state and business as much as of family members, fellow feminists, and Internet trolls. Indeed, the book speaks directly to the broad debate on inequality, by showing how the power of the top 1% affects our daily life both while at work and back at home.

Finally, there’s lots of pictures and humor in the book. Good for short attention spans!

Go buy the book! I need to take Heather somewhere nice for dinner!

Populism and Bernie

When candidates as different on policy as Bernie Sanders and Donald Trump are labeled “populist,” does the term mean anything?

It’s one of the most porous designations in politics, and scholars have struggled to define it more precisely. As Michael Kazin writes in the NYT Magazine,

There was a time when “populist” meant something more specific. The word originated with the decidedly left-wing People’s Party that emerged in the Midwest and the South amid the economic turmoil and rampant inequality of the 1890s. Journalists who knew some Latin started calling them “Populists” as a shorthand, and the name stuck. Those uppercase Populists championed small farmers and wage-earners who thought “the money power” — banks and industrial corporations — had seized control of both America’s economy and its government. The party called for nationalizing the railroads, breaking up the trusts and strengthening labor unions. At times, their leftism toppled over into paranoia; to explain society’s ills, they invoked “a vast conspiracy against mankind,” engineered by a plutocratic cabal. The Populists joined forces with the Democrats for the 1896 election and collapsed soon afterward. The word “populist” mostly disappeared into academic studies until the 1950s…

Looking beyond just the U.S. to foreign cases like Argentina’s Juan Peron and the Russian narodniki, Margaret Canovan offers the following definitions:*

  1. Socialism in backward peasant countries facing modernization
  2. The ideology of small rural people threatened by encroaching industrial and financial capital
  3. A rural movement pursuing traditional values in a changing society
  4. Belief that the majority opinion of the people is checked by an elitist minority
  5. Any movement based on the premise that virtue resides in the simple people (who are the majority) and their collective traditions
  6. The notion that the will of the people is/should be supreme over every other standard
  7. A political movement which enjoys the support of the mass of the urban working class and/or peasantry but which does not result from the autonomous organizational power of either of those two sectors

Ruth Grant and Robert Keohane describe populism as one of four types of accountability frameworks, whereby…

the people entrust a leader or a party to speak for the interests of the people as a whole against groups in society that are understood to be “special interests.” Direct participation of the people in governing institutions is not seen as a primary goal. But the legitimacy of the party and its leader depends on the extent to which they can credibly speak for the people. Thus, the populist leader and party are held accountable to the public through frequent appeals to mobilized public opinion and through elections that serve as referenda on the leader’s or the party’s performance in office
And political theorist Ernesto Laclau has argued for an even more abstract notion of populism as a social logic that allows disparate social demands to be grouped under the umbrella of “the people” against current wielders of power. (It’s worded considerably less accessibly than that.)**
Where does Bernie Sanders’ campaign fit in, against these definitions? It’s certainly not rural based. And it’s not as personalistic as other types of populism. As Franco Palazzi notes, he rarely talks about himself and encourages deliberation within the movement (i.e. ceding stage to Black Lives Matter activists). And while he offers little in the way of specifics in some areas, there’s a defined content around the power of finance. It would be difficult for him to backtrack on that on the power of his personality alone. Finally, Bernie Sanders’ campaign comes at a moment of historic weakness of unions. If it is successful at mobilizing workers’ economic grievances through a non-union based vehicle, it might fit in with the seventh type identified by Canovan above.
Does Sanders represent a new breed of populism-by-humble-leader? For students of populism, it’s a lot of fun to watch.
* As paraphrased by Laclau and me.
** Full disclosure: I wrote this post after Googling “What does Slavoj Zizek think about Bernie?” Because I wanted to know, that’s why. This apparently makes me some sort of pre-adult, permanent collegiate class, according to Vice. In any case, it was a good excuse to re-read Laclau and Zizek’s debates on populism. Second full disclosure: these books make a lot less sense after you have not thought about Lacan in many years.

Trade Deficit Isn’t a Scorecard, It’s a Game

Neil Irwin had the most accessible trade deficit explainer I’ve seen in today’s New York Times, to which Dean Baker offered some useful additional context on policy and historical context.

I’ve attempted to distill what both Neil and Dean write into a game-like flowchart. In it, I reduce the world to two countries – the US and China – and explore the possible outcomes and decision-points facing each. Other than the top right bubble (which was my added point), everything else comes from Neil and Dean’s pieces.


This is of course a considerable simplification, but I think it captures the main points pretty accurately.


Is #WTO a Good Model for #ISDS Reform?

Whoa, acronym city!

Earlier this week, I mentioned how the European Union partly modeled its new investment court proposal on the World Trade Organization. We can draw on the vast literature on the WTO to begin to assess how effective, legitimate, authoritative, and independent this new body could be.

How WTO Disputes Work, in Brief

While newspaper coverage of the WTO for the last 15+ years has focused on negotiators’ inability to complete a ninth round of trade talks (i.e. the Doha Round), the 1994 Uruguay Round set up a powerful infrastructure that has conducted business every day since. The Dispute Settlement Understanding is one of the multilateral deals under the WTO umbrella.* It lays out procedures for countries to challenge one another’s alleged violations of the substantive rules of the other 17 pacts.

If countries cannot amicably resolve a dispute, the complainant can ask the WTO Secretariat to appoint a three-member panel to hear their case. These individuals can (but needn’t) come from a list of available panelists maintained by the Secretariat. While the countries can object to the individual nominees, the Secretariat has the default authority to go ahead with the panel in the case of gridlock. The panel then proceeds to rule on the merits of the case.

Countries can appeal panel decisions. The WTO’s Appellate Body is composed of seven geographically diverse adjudicators, who are appointed to a four year term (once renewable). Three of the seven are selected to hear each appeal, which are limited to reviewing legal issues (not facts). After the panel and/or Appellate Body issue their decisions, the Dispute Settlement Body (which has a representative from each WTO member country) votes to adopt them. The bar to non-adoption is high: every country must agree to do so, including the country that “won.” As a result, non-adoption has never happened.

If there is disagreement about whether a “guilty” respondent country has sufficiently changed their policies after a “reasonable” amount of time (which is set between the countries or by an arbitrator), then the original panel can be reconvened to assess compliance. Their determination can be appealed to the Appellate Body. In the event of any dispute about the amount/sector of permissible retaliation, the original panel or an arbitrator(s) decides. The amount of retaliation cannot exceed the amount of damage the complaining country incurred, although it needn’t be in the same industry or sector. For example, if Country A harms Country B’s steel exports in a way that violates WTO rules, then Country B could raise tariffs on Country A’s bananas, or violate their copyrights.

Which Is Best?

Is the WTO, ISDS Status Quo, or ISDS Tribunal preferable? I’ll follow Tamar Gutner and Alexander Thompson’s three metrics for evaluating international organizations: policy outcomes (real world benefits and costs), policy outputs (did decisions contribute to those benefits and costs), and policy operations (are internal procedures efficient, fair, etc.).

At the outset, I should say that there are conceptual difficulties in linking operations and outputs of courts to real world outcomes. As explained here and here, courts may be most effective when they don’t rule, and more influential when cases are never brought. It’s hard to say that non-cases “caused” more trade, or that a case “caused” trade that might have happened. Accordingly, I’ll be briefest on the outcomes component. Continue reading “Is #WTO a Good Model for #ISDS Reform?”