The cornerstone of this book’s proposal is a system of environmental taxes, which will serve as price signals for polluting activities. This part of the proposal is so central because prices are the cornerstone of a healthy market economy; without prices, there is no market. With inaccurate prices, markets will function, but they will misallocate resources. That describes how the entire world, including even Sweden, functions: the value of the global environment is almost never accurately priced into day-to-day activities. An environmental tax, if set at the correct level, would reflect the cost of some harm inflicted upon the environment, and therefore act as an appropriate price for that harm. An environmental tax would typically be levied upon some small but measurable unit of pollution: a ton of carbon dioxide, a ton of sulfur dioxide, or a pound of nitrogen oxides.

Will the infrastructure investments of the CPEC have a transformative impact on Pakistan's economy? This chapter introduces the theoretical concept of the ‘leading sector’ and asks whether the expansion of a single economic sector (such as infrastructure) can generate sufficient spillovers to other sectors so as to boost wider economic growth. We should ask whether public investment in infrastructure will crowd in private investment and whether CPEC infrastructure spending will generate employment for local workers and demand for locally produced inputs in construction. The use of economic theory has hitherto been conspicuous only by its absence from existing studies of the CPEC.

EFFICIENT MARKETS AND THE CPEC

The CPEC literature often focuses on the reductions in distance that will be created for China by the CPEC investment. Table 3.1 shows the dramatic savings in travel distance the CPEC will make to trade for China. Instead of goods from central China being transported first to Shanghai, then from Shanghai by sea to the rest of the world, they can travel directly across Western China, down through Pakistan and via Gwadar to the rest of the world. The CPEC infrastructure will reduce the distance from Central China to the Middle East by 7,580 miles and more than 10,000 miles from Western China. This will minimise the fuel and travel time from 45 to 10 days and avoiding security and robbery risks in the sea-bound Malacca route (Ahmad 2017).

There is an assumption in much of the CPEC literature that if infra-structure reduces distance and thereby creates more ‘efficient’ markets, this must be a good thing for Pakistan. This idea does have a solid academic lineage in the writings of neoclassical economists. In such writing, efficient markets contribute to the optimal allocation and reallocation of resources to their most productive uses in response to changing prices and profit opportunities. This creates the necessary conditions for economic growth. The CPEC literature makes this assumption uncritically and ignores the varied impacts that history and the contemporary world demonstrate that efficient markets may have.

Efficient markets can have a devastating impact. More ‘efficient’ markets contributed to the massive famines in railway-era colonial India. The failure of crops in Orissa in 1865–6 occurred in a region without roads and ports which made it harder to import food supplies from outside.

What is it about capitalism that is uniquely capable of reordering society so quickly and profoundly that it can undertake the job of repairing humankind’s relationship with the global environment? This chapter represents an attempt to contextualize this book in a very long and very old literature, drawing upon many of the greatest economic thinkers throughout history, and occurring in several disciplines. Against that backdrop, there is a specialized but considerable literature on the relationship between capitalism and the environment. Necessarily, I have omitted much work that is thoughtful and profound, and might shed light on the relationship between capitalism and the environment. And inevitably, my editorial choices reflect my own unique prioritizations of what is important to understand. This chapter provides some sense of where, in my view, this problem of environmentally destructive capitalism comes from. And again, given the complexities and differences in degree, it is worth taking with a grain of salt black-and-white distinctions between capitalism and socialism, including this book.

A major headline feature of the CPEC are the nine special economic zones (SEZs) that are planned to be established across Pakistan. The SEZs have become a real symbol of the national nature of the CPEC, with one being promised for every province of Pakistan. This is real concrete evidence, claim the CPEC supporters, that the benefits from the CPEC will spread out to encompass all of Pakistan. The problem with these claims is that they are based on a corner of the CPEC that as yet only exists in the dreams of economic planners and politicians. Much of what passes for analysis of the likely impact of the SEZs is simply the economics of aspirational hope, not rigorous thinking rooted in evidence and theory. This chapter outlines the theoretical and empirical benefits of the SEZs as experienced in other countries and in non-CPEC SEZs in Pakistan, what is promised for Pakistan and how scholars have written about SEZs so far, and the lessons we can draw from the experience of both SEZs in China and from Chinese-invested SEZs in Africa.

THE BENEFITS AND COSTS OF EXPORT PROCESSING ZONES (EPZs) AND SEZs

An export processing zone (EPZ) is a ‘geographically bounded zone in which free trade, including duty free import of intermediate goods is permitted provided all goods produced in the zone are exported’. An EPZ is an isolated and cut-off corner of the global economy. An SEZ is also a geographically bounded zone but lacks this exclusive export orientation. Firms receive various incentives to locate in the zone, often via FDI, and may export or sell their output onto the domestic market. The purpose of an SEZ is to induce the global economy to set up and integrate with the local economy. SEZs first appeared in Puerto Rico (1951) and then Shannon Airport in Ireland (1959) but the main success story was China in the 1980s. By 2008 there were some 3,000 SEZs globally and by 2015 their number reached 4,300 across 130 countries. It has been frequently argued that SEZs played a crucial role in promoting economic growth in 1970s East Asia and in initiating the opening up and marketisation of the Chinese economy after 1979. Inspired by these stories of success, 24 SEZs had been established across Africa by 2009.

The introduction first introduces and explains the China–Pakistan Economic Corridor (CPEC), what it is, how much it will cost and what its geographical contours and timewise evolution are. The introduction then places the CPEC into five important background contexts that will be referenced throughout the rest of this book. These are (a) the economic optimism the CPEC has generated in Pakistan; (b) the long friendship between China and Pakistan; (c) the economic development of Pakistan since 1947; (d) the evolution of China's political economy since the death of Mao in 1976; and (e) the global history of big infrastructure projects. Finally, the introduction summarises some of the key questions and findings of the chapters of the book.

WHAT IS THE CPEC?

The CPEC refers to a massive package of investment that has been promised to Pakistan. The investments are inspired by a bigger Eurasia-wide Chinese vision, that of the New Silk Road. This vision has subsequently become known as the Belt and Road Initiative (BRI). China has promised to provide much of the funding to Pakistan upfront, though controversy remains about whether, how and on what terms that funding will be repaid. The investments are concentrated in energy, transport infrastructure and the construction of special economic zones (SEZs) to promote industry. Map 1.1 shows some of the main projects of the CPEC. The nearly 3,000 kilometres (1,800 miles) of roads and rail from Kashgar in China to Gwadar in southern Pakistan can be clearly visualised. The CPEC includes oil and gas pipelines, railways, highways, SEZs and fibre-optic networks (Sial 2014).

The CPEC was initially projected to cost $46 billion, of which 71 per cent ($32 billion) was to be invested in energy, 8 per cent in rail, 13 per cent in road links and 4 per cent in the Gwadar port (Boyce 2017: 12). By 2017, this total had been raised to $62 billion. These numbers give a false impression of precision about the CPEC. As with the entire BRI project, it is difficult to pin the CPEC down, as Shafqat and Shahid argue, ‘Identifying and explaining the various components of the CPEC is a tedious and complex task because the information is not readily available, is scattered across sources or changes frequently’ (2018: 24).

Human capital is a phrase coined by economists to describe education and training. Generally speaking, the higher the level of education, the more valuable the human capital. Indisputably, human capital is valuable, as it clearly and consistently increases human productivity. So human capital is, like physical capital, something that generates a stream of benefits, in the form of higher earnings that would not be possible without it. While human capital is most easily conceived as formal schooling or on-the-job training, there are clearly many other forms of human capital. Human capital may be the acquired knowledge of some facet of resource extraction, or some operational expertise connected to a specific industrial process. Like physical capital, human capital can be costly to acquire, not only because of direct costs, but because of the opportunity costs of time and of foregone income.

In the existing CPEC literature, there is little sign of careful thinking about how to measure the success or otherwise of the CPEC using any rigorous method. More common is to use a list of descriptive statistics about the promise of the CPEC and combine it with a mix of laudatory claims about the transformative potential of the CPEC.

The official rhetoric about the CPEC from the Government of Pakistan is that it will transform Pakistan's economy. The former Minister of Planning and Reform, Professor Ahsan Iqbal, gave a speech to the Pakistan–China Joint Cooperation Committee in which he claimed that by 2025 the CPEC will help Pakistan achieve 8 per cent annual growth, increase exports from $25 to $150 billion, raise the tax-to-GDP ratio to 16–18 per cent, investment to 22–25 per cent and domestic savings to 18–21 per cent (Ali et al. 2017: 193). Since the CPEC was announced and the early projects were completed, none of these outcomes has yet come to pass. Between 2012–13 and 2017–18, growth of GDP has remained stuck in the 3–5 per cent per annum range, exports have actually declined from 11 per cent to 7.9 per cent of GDP (to around $22 billion), total investment has remained stagnant at 15–16 per cent of GDP (down from 20 per cent in 2005–6) and domestic savings have declined from 14 to 10 per cent of GDP (Government of Pakistan 2019). Figure 4.1 later in the chapter shows that tax revenue has been rising in the last few years in Pakistan, but, at around 12 per cent of GDP, remains a long way below the government aspiration.

Although the CPEC aspirations have not yet been achieved, it is too early to make any kind of definitive judgement. The CPEC is not even due for completion until 2030. The method in this chapter is to evaluate the CPEC against both this speech and also the more formal claims of the Government of Pakistan. The official government planning document states that ‘The CPEC is a growth axis and development belt featuring complementary advantage, collaboration, mutual benefits and common prosperity’ (Government of Pakistan 2017: 4, emphasis mine).

In the previous chapter, we familiarized ourselves with some introductory methodological issues that will help us in understanding Marx's economic theory. We understood how Marx came to the study of political economy via his engagement, as a journalist, with issues of what he called ‘material interest’. We saw how his lifelong study of economics could be divided into two phases: 1843–47 and 1850–83. In the first phase of his studies, he engaged not only with political economy but also with classical German philosophy and French socialist ideas. From this engagement emerged a coherent and integral worldview – a critical synthesis of British political economy, classical German philosophy and French socialism – that later came to be called Marxism. Two key ideas developed by Marx during the first phase of his studies were the dialectical method and historical materialism. When Marx was able to resume his studies in 1850, these two ideas remained his guiding posts. But during this second phase of his studies, the focus was almost singular – his intellectual energies were devoted to the study of only political economy.

By the late 1850s, Marx had more or less completed his studies of political economy and his mature ideas about economics had taken concrete shape. In the backdrop of the economic crisis of 1857, Marx started experimenting with the best form to present his ideas to the wider public. It would take him almost another decade to finalize the structure and content of his work on economics in terms of the three volumes of Capital, as we have seen in the previous chapter. While Marx managed to finalize and publish the first volume – not one but several editions – he only left notes for the other two volumes. It was left to his lifelong friend and comrade, Frederich Engels, to work through the notes and publish them. It is the body of work available in the three volumes of Capital which will be the object of study in this and the following two chapters.

In this chapter, we begin the study of Marx's political economy of capitalism by working through the details of the argument in Volume 1 of Capital (Marx, 1992).

Chapter 5 further probes the substantively and statistically robust relationship between national structures and foreign aid delivery at the level of the individual decision-maker. Because the book`s theory puts the aid official front and center, the empirical analyses of this chapter require tests to be conducted at the level of the aid official. The theory expects aid officials from different political economy types to state different preferences for foreign aid delivery under similar conditions of high risk in recipient-countries. To that end, I collected original survey data for 65 aid officials from six different donor countries who vary in their political economy type, including, on the neoliberal end, the United States, the United Kingdom, Sweden, as well as, on the traditional public sector end, France, Germany, and Japan. In addition to quantitative analyses of the survey, I leverage extensive qualitative interview evidence to demonstrate that my central claims, as well as additional empirical implications of my argument, find robust empirical support. This chapter also provides further qualitative support for the causal mechanism spelled out in Chapter 3.

The COVID-19 pandemic that struck the United States in early 2020 amplified already-stark economic and political divisions and revealed a nation unprepared to launch an immediate public health and economic response. Whether it was the fragmentation of the American federal system, the glaring racial and class disparities in economic and health outcomes, or the weaknesses of America’s tattered safety net, the crisis brought America’s distinctive mix of multi-venue governance, limited social protections, weak labor power, and loosely regulated markets prominently – and often tragically – into display.

On the same day that the White House announced the nomination of Brett Kavanaugh to the US Supreme Court, it turned to business groups to aid in the public relations campaign to secure his confirmation (Goldstein 2018). Once seated, Kavanaugh solidified a strong pro-business orientation on the nation’s highest court, an orientation further consolidated with the eleventh-hour appointment of Amy Coney Barrett in the run-up to the November 2020 election. Meanwhile, the entire federal bench was also being transformed through the confirmations – at an unprecedented pace – of a string of young conservative jurists in the Trump administration (Ruiz et al. 2020). Most of the newest additions are drawn from the membership lists of the Federalist Society, a powerful organization composed of lawyers and legal scholars committed to an originalist reading of the American constitution and a radical free market economic ideology.