April 3, 2011

Widening Spatial Inequality and What to Do About It

Wealth and income inequality have been getting a lot of attention in recent months--at least in the New York Times. Op-Ed columnist Bob Herbert has been especially persistent about keeping the topic on readers' radar screens; read some of his columns here, here, here, and here. Paul Krugman, Frank Rich, and Robert Frank have had a say, too. Wealth inequality was also the subject of a "Room for Debate" feature a few weeks ago.

But geographic analysis of inequality has been little examined in the mainstream media until The Economist Magazine ran a couple of stories about uneven development and spatial inequality in the March 10, 2011 issue. The first "Internal affairs: The gap between rich and poor regions widened because of the recession," analyzes various nations' spatial inequality as measured by income and GDP. This analysis shows that Britain is the nation with the widest geography-based income gap: the per capita GDP is nine times greater in central London than it is in some Welsh regions. The smallest regional spreads, on the other hand, were in Italy and Germany, where "incomes in their most affluent areas are [nevertheless] almost three times those of the poorest." The United States falls at the British end of the spectrum, coming in second for inequality across regions among the nations studied. The District of Columbia, for example, is five times as rich as Mississippi. Further, the situation has worsened in the past few years.

Between 2007 and 2009 real GDP per head in the five richest states actually rose by an average of 2%, but fell by 3% in the five poorest. Both groups outperformed the national average, a fall of more than 4%. (The biggest slumps, both by more than 10%, were in Michigan, the eighth-poorest state, and in Nevada, site of the biggest house-price crash.)

The Economist notes that this is merely a continuation of a long-standing trend, and it attributes the phenomenon, in part, to the "dependence of poorer states on manufacturing, which has suffered big job cuts over the past decade." The feature concludes that "the income gap between richer and poorer areas is likely to widen further as government-spending cuts disproportionately hurt less prosperous parts."

One of the story's big attention getters is its comparison of GDP among regions and cities of different nations.

[O]ver a quarter of regions in Britain and Italy and one-tenth of those in Germany will this year have a lower GDP per head than the municipality of Shanghai. All the American states remain richer, but Shanghai looks set to overtake Mississippi by 2015; within ten years half of all the states, including Florida, Michigan and Ohio, could have a GDP per head lower than Shanghai and Beijing.

If the comparison were at the scale of the county rather than that of the state, these Chinese cities would no doubt be shown well out-pacing our nation's persistent poverty counties.

The second Economist feature on spatial inequality, "Gaponomics," takes up the question of what should be done to respond to this problem, particularly in the context of Britain. Instead of investing in particular regions or giving tax breaks to "enterprise zones" in these downtrodden areas, The Economist offers this proposal:

[M]ake it easier for people to move. Given inherent gaps in regional productivity prospects, there is a case for boosting mobility from declining regions to prospering ones. In Britain the main problem is the fetish for home-ownership and high house prices in the south-east, partly the result of severe shortages of supply. Easing planning restrictions below the Watford Gap would be a better way of helping Britons than propping up the north.

As a ruralist, I am immediately suspicious of policies that would aggravate uneven development. Among other things, they ignore those who will remain immobile and inevitably left behind. They also ignore attachment to place as an aspect of the political economy of rural areas in particular.

This story's second proposal is far more palatable: invest in education because it results in "the single biggest reward" for the nation--even if northerners then move south with their enhanced human capital. (Regarding the latter, I am reminded of this book on the rural brain drain).

Back in the United States, a recent New York Times editorial echoes the second of these ideas in relation to New York's funding scheme for education. In "Rich District, Poor District," the editorial staff consider how two of the state's school districts will fare under the Cuomo budget: "Ilion in the economically depressed Mohawk Valley, and Syosset, a wealthy town in Long Island’s Nassau County." Needless to say, it's not a pretty picture. Here' a summary:

The cuts would scarcely affect wealthy districts that rely primarily on local taxes to support lavishly appointed schools. But they would be catastrophic for impoverished rural districts that have been starved of state aid for decades and are still reeling from cuts levied last year .... Already struggling to furnish even basic course offerings, the poorest districts would need to cannibalize themselves to keep the doors open and the lights on.

As the editors express it, the $1.1 million cut Ilion is being asked to take to its $25 million budget "would not even come to a rounding error in the state's richest districts," like Syosset, which is being asked to absorb only a $1.4 million cut to its $188 million budget. But the New York Times editors aren't just arguing that school funding should be more equitable because "it's the right thing to do," they make an argument grounded in economics: Depressed regions like that around Illion "stand[ ] little chance of attracting high-skill jobs if [their] schools are allowed to deteriorate."

Going back to The Economist articles for a moment, I noted that enhanced investment in education is one reason for the income convergence across Germany, even as spatial inequalities become more acute in other nations. The story describes "huge national and European Union funds for infrastructure, R&D and education, as well as the transfer of some manufacturing jobs from factories in the western states to the east." For some reason, Germany sees reasons to take care of its citizens where they are--not to create incentives for residents of the less affluent East to move West. I'd like to know more about those reasons because I suspect they go beyond a sentimental desire to permit people to stay where they are and the attractive orderliness of a more evenly populated. I am guessing these policies are based in part on economic calculations about the value of existing infrastructure and human capital in the historically deprived East. Better understanding those reasons might inform debates in the United States about why regional development and reducing spatial inequalities--not fueling them--makes good sense from myriad perspectives.

Some of my writings mapping the sociogeographic concept of spatial inequality onto legal conceptions of (in)equality are here, here, and here.

Cross-posted to SALTLaw.blog, ClassCrits, and Legal Ruralism.

July 27, 2010

Report from the XVIIIth International Congress of Comparative Law in Washington

Congress 2010

I am here in Washington, D.C., at the XVIIIth International Congress of Comparative Law.

The congress is taking place all of this week, presented by the International Academy of Comparative Law and the American Society of Comparative Law, and hosted by three local law schools, American University Washington College of Law, George Washington University Law School, and Georgetown University Law Center. It is a pleasure to be among such a diverse group of jurists, lawyers, and scholars from around the world. The Academy, which is composed of academics and jurists from around the world, organizes every 4 years in different parts of the world an international congress of comparative law. From my understanding, this is the first time that an international congress has been held in the United States.

The conference got off to a great start today with an opening plenary addressing the "Role of Comparative Law in Courts and International Tribunals." The panel was chaired by the Secretary-General of the International Academy of Comparative Law and Director of the Max Planck Institute for Comparative and International Private Law in Hamburg, Dr. Jürgen Basedow. Representing views from both domestic and international courts, as well as a viewpoint from practice, the distinguished panelists discussed the role of both international and comparative law in their own courts:

Judge Rosemary Barkett

Judge Rosemary Barkett (right), U.S. Court of Appeals for the Eleventh Circuit (for whom I had the privilege of clerking), began by remarking that to some extent comparing laws has some role in all jurisdictions. She presented a historical perspective from the United States to demonstrate that the practice of considering foreign sources is rooted in the legal history and tradition of the United States, citing to the Declaration of Independence, the U.S. Constitution, and the Federalist papers, as well as to numerous opinions from the U.S. Supreme Court. One of Judge Barkett’s most important points was that, as international and comparative scholars, we need to address the definitional problems in comparative law. For example, many jurisdictions espouse allegiance to the rule of law, but what exactly does rule of law entail?

Justice Sabino Cassesse

Justice Sabino Cassese (left), of the Constitutional Court of Italy, next provided three distinct examples of courts looking beyond their own nation’s borders for insights. He emphasized that recourse to comparison by high courts is widespread, and that increasingly supreme courts are acting as comparatists. Justice Cassese emphasized two tasks for comparative lawyers and scholars: one, to examine and evaluate how judges and courts use foreign law; and two, to develop methods and procedures for comparison.

Carolyn Lamm

The presentations of Judge Barkett and Justice Cassese were followed by the practitioner’s perspective, Carolyn Lamm (right), a partner at White & Case in Washington and President of the American Bar Association. She emphasized the importance of looking to other systems for persuasive, not precedential, value. Lamm reminded us of the speech from former U.S. Chief Justice William H. Rehnquist, in a 1989 talk titled "Constitutional Courts—Comparative Remarks," in which he remarked:

For nearly a century and a half, courts in the United States exercising the power of judicial review had no precedents to look to save their own, because our courts alone exercised this sort of authority. . . . But now that constitutional law is solidly grounded in so many countries, it is time that the United States courts begin looking to the decisions of other constitutional courts to aid in their own deliberative process.
Reprinted in Germany and Its Basic Law: Past, Present and Future, A German-American Symposium 411, 412 (Paul Kirchhof & Donald P. Kommers eds., 1993).

Lamm also cited to the “Obama-Clinton Doctrine” speech that State Department Legal Adviser Harold Hongju Koh delivered to the American Society of International Law annual meeting. (additional coverage) The speech is definitely worth a read.

Judge Diego García Sayán

Judge Diego García Sayán (right), President of the Inter-American Court of Human Rights, spoke of the role of his regional court with respect to national courts in the Americas. He explained that most Latin American national courts openly and explicitly use judgments of the Inter-American court in their decisions, and that the Inter-American court also has used local and national criteria used by national courts. Judge García Sayán also remarked on the use of international law by the Inter-American court, particularly noting the influence of the jurisprudence of the European Court of Human Rights. While this influence used to be primarily a one-way street, recently the European Court of Human Rights has also looked to the jurisprudence of the Inter-American court for persuasive value.

Judge Bruno Simma

Judge Bruno Simma (left) followed by describing his experience on the International Court of Justice and his use of comparative law in an early opinion on the Oil Platforms dispute between Iran and the United States. Judge Simma warned both of the dangers that could befall a comparatist and of comparative law accidents.

The presentations were followed by a dynamic discussion among the panelists on a variety of issues, including the weight to be given to comparative law in judicial opinions and the relationship between international and comparative law.

The opening plenary was followed the rest of the day with various breakout sessions, including the delivery and discussion of general and national reports prepared for the conference. For those of you interested in comparative surveys of various legal issues, the reports should not be missed.

The conference got off to a great start yesterday. Today’s program, which will be held at the George Washington University Law School, promises to be as dynamic as this first day.

Cross-posted at IntLawGrrls.

July 15, 2010

Corporate Governance Reforms in India


Bombay Stock Exchange, by Appaiah

So I've been away for a while with a research trip to India and then madly trying to finish a couple of papers related to the trip. Before I left, I blogged about some of Vice Chancellor Strine's comments during his lecture at Stanford's Rock Center for Corporate Governance. I think that some of Chancellor Strine's comments on the efficacy of independent directors should be a warning for those pushing for corporate governance reforms in other countries. I have written previously about the potential pitfalls of importing US-style corporate governance rules with respect to India. I've now posted another paper entitled "The Promise and Challenges of India's Corporate Governance Reforms" which addresses some of the recent reform efforts following the Satyam scandal and the continuing barriers for effective corporate governance. The paper is forthcoming in the inaugural issue of the Indian Journal of Law and Economics.

Recently, there has been some very interesting work on independent directors in India, particularly arising out of unprecedented independent director resignations following the Satyam scandal. The Indian corporate law blog has a very useful post about recent academic literature on corporate governance norms, including the value of independent directors, in India. For those interested in India, all of the papers are worth a careful read.

I think that while the independent director model has much to recommend, there are serious constraints to the model for the Indian context. There is a danger that simply pushing for independent directors will not fully address some important corporate governance concerns in India, particularly the pervasive influence of promoters and controlling stockholders. Others, in particular Umakanth Varottil, have also written on this issue. I highly recommend Umakanth's recent paper entitled "Evolution and Effectiveness of Independent Directors in Indian Corporate Governance" for anyone who is interested in corporate governance reforms around the globe.

I'll soon be posting more on other projects related to this trip to India, including a paper on outbound M&A by Indian firms. Stay tuned…

Cross-posted at M&A Law Prof Blog.