Quote of the week: Ha-Joon Chang on the welfare state and economic dynamism

EdibleEconomics“The welfare state has become the most effective way of dealing with the inevitable insecurity that capitalism creates in its pursuit of economic dynamism. Moreover, if designed well, the welfare state can make capitalist economies even more dynamic, as it reduces people’s resistance to new technologies and new working practices – the Nordic countries are the best examples of this. No wonder that the welfare state has been spreading and growing, despite the continuous attack on it by neo-liberal ideology since the 1980s.”

Ha-Joon Chang (2022), Edible Economics: A Hungry Economist Explains the World, UK: Allen Lane, p.104.

A plan from the radical left to escape the cost-of-living crisis

CostofLivingCrisisAcross the world, households are to varying degrees suffering from today’s cost-of-living crisis. As so often, the poorest and most vulnerable have been hit hardest. The current solution is for independent central banks to use monetary policy to bear down on inflation in the hope that once it comes down, higher rates of economic growth will resume, to the benefit of the majority. But is that really the case, and are there alternatives? A new book by Costas Lapavitsas, James Meadway and Doug Nicholls takes a radical leftist approach to the crisis and its resolution. The Cost of Living Crisis (and how to get out of it) is a pithy read, targeted at the general reader, and aims to debunk the mainstream explanations of the crisis while proposing policy solutions. It focuses more on the UK than elsewhere, but is applicable to other advanced countries.

Explaining the crisis

In short, the authors explain the persistence of the current inflationary crisis as a product of inadequate growth on the supply-side of the economy, particularly in the UK. Many of the largest firms have responded to government efforts to stimulate aggregate demand in the form of spending during the pandemic, alongside global supply shocks, by sharply raising prices. These increases have then spilled over into many other industrial sectors. The cost-of-living has risen rapidly, and continues to do so, while wages have failed to keep pace, meaning that real wages have fallen and profits have risen strongly though unevenly. The majority of the population, especially those on lower earnings, are dependent on income from wages rather than other sources, and are therefore suffering the most. Continue reading

Quote of the week: Steve Keen’s vision for a new economics

Keen-Interview“I’ll start from the basics – it has to include energy. Theories of production that leave energy out are theories of fantasy, and both neoclassicals and Post-Keynesians have been guilty of that over the past two hundred years. The last school that got it right was actually the physiocrats. I’d go right back to the physiocratic foundation and see industry as being unproductive, sterile, if you can’t create energy and then convert energy into work, you’re working with a fantasy of economics, not a theory of economics. So currently virtually everything is fantasy.

Secondly, it’s got to be monetary. Capitalism is a monetary system. Thirdly, it has to be social, class-based. Bankers, workers and capitalists is usually the minimum of the social classes to consider. And it has to understand the economy as a complex evolutionary system. Those are my essentials.

If I think about the extent to which I find other economists aware of it, it tends to just be the evolutionary economists and the ecological economists – so even the Post-Keynesians tend not to be focusing on that overall – what I’d see as a – unifying framework.”

From an interview with Steve Keen, in Armstrong, P. (2020), Can Heterodox Economics Make a Difference? Conversations With Key Thinkers, Cheltenham: Edward Elgar, p.366-7.

Quote of the week: Ha-Joon Chang on the failures of neoliberalism

ha-joon-chang“Neo-liberal policies have not worked well even in the rich countries. During the neo-liberal period since the 1980s, these countries have had slower growth, higher inequality and more frequent financial crises than they had in the preceding decades of the ‘mixed economy’, in which the government played a more active – that is, more intrusive, from the neo-liberal point of view – role in restraining and regulating market forces.

However, neo-liberal policies have been positively disastrous for developing countries because they were particularly unsuited to their needs. Above all, the neo-liberal orthodoxy denied the fact that developing countries can develop their economies only if they can create the ‘space’ for their producers to ‘grow up’ and acquire the capabilities to engage in higher-productivity industries through trade protection, subsidies, regulation of foreign investors and other supportive government measures. To make it worse, especially in the 1980s and 1990s, the Washington institutions’ policy recommendations took what came to be derogatorily known as a ‘cookie cutter’ approach, in which the same set of policies was recommended to all countries, regardless of the differences in their economic conditions and socio-political environments.”

Ha-Joon Chang (2022), Edible Economics: A Hungry Economist Explains the World, UK: Allen Lane, p.94.

Book review: a progressive call to arms for the developing world in light of climate change

ProgPoliciesAlfredo Saad-Filho is a Professor of Political Economy and International Development at King’s College, London, and was formerly Professor of Political Economy at SOAS. He has written extensively on Marxist political economy and development. His latest book, Progressive Policies for Economic Development (2022), is a succinct call to arms for policymakers, academics and activists concerned with the developing world, in the wake of ongoing and potentially catastrophic climate change and other harmful processes generated in part by neoliberal capitalism.

The book assesses the current economic, social and environmental context before outlining a broad set of policies for developing and poor, fossil-fuel dependant economies. Given the accelerating threat from climate change, and the inadequate response by the rich economies of the Global North, it argues that poorer nations need to take action in spite of this, and, as far as possible, cooperate internationally. It puts forward an agenda of progressive economic development which aims to ‘overthrow’ neoliberal capitalism in order to tackle the problems of poverty, inequality, economic instability, the environment (particularly climate change), and social and political exclusion. The policies centre around economic diversification, distribution and sustainability, driven by a ‘democratic economic strategy’. The agenda is fairly radical, but hopefully achievable, and is anchored firmly in heterodox or non-mainstream economics, prioritising power, structures, relations and the role of the state, in contradistinction to the market-centred mainstream neoclassical economics. Continue reading

Quote of the week: Steve Keen’s concerns about a Job Guarantee, Part 2

Keen-Interview“One other problem I see with the job guarantee is because I’ve got this focus on energy and the role of energy in production: what I see over time is that you need less and less labour to harness free energy. We can harness free energy more and more by increasing the complexity of the machines we use to turn that free energy into work. Now, we face a serious ecological crisis, possibly in the next decade, which is going to challenge all the certainties of how we think about production today. If we get through that crisis and survive all that, then with the trajectory we’re on, keeping with low-level artificial intelligence – I don’t believe high-level’s feasible, I could be proven wrong on that, but I’m not expecting Terminator any time soon! – but low-level AI, which is just using neural networks and other computer technologies to replace human thought in a wide range of things (for instance, medical diagnosis can be done better by neural networks than doctors) you can replace a wide range of human activity that way. Then with mechanisation going further, and particularly additive manufacturing – but it ultimately means that the people you need to control the machines that cut the metal won’t be there because you won’t be cutting the metal anymore. So, the end target is ultimately almost zero labour input to produce output.

Now in that case, the only jobs you could get are what David Graeber calls ‘bullshit jobs’, and I’d rather get away from that, and say that given we’ve managed to generate the capacity to produce relatively unlimited amounts of output, let’s allow people do something creative rather than waste their time in a bullshit job. The other thing is that in a planetary sense, to survive the amount of energy we consume to produce output, ultimately the only way to do that – and I’m talking the timespan of millennia – is to take production off-planet. Now, if we managed to do that, you can forget about talking about going to work each day. It’ll be a minority of people working in space with highly complicated technology, dropping the stuff back on the planet, however that’s done. We won’t need labour to produce anything, and after degrading the planet, the whole idea would be to try and turn it back to a form of what it was before we hit it with the Industrial Revolution. So, in that sort of world, a job guarantee doesn’t make much sense. What makes sense is society organising collective labour to some extent, but people making a creative use of their time, rather than being bored out of their brains – either not working, being on welfare, which is one way that job guarantee people look at UBI [universal basic income], or working in a bullshit job.”

An interview with Steve Keen in P. Armstrong (2020), Can Heterodox Economics Make a Difference? Conversations With Key Thinkers, Cheltenham: Edward Elgar, p.362-3.

Inspiring or misguided? Progressive musings on Marxist versus Keynesian economics

Marx-and-KeynesRegular readers of this blog will know that I am in part inspired by generally progressive economic thinking that draws on the Marxist and Keynesian traditions. More accurately, I find work in the spirit of Marxist political economy, and the more radical or leftist post-Keynesian interpretation of Keynes and his contemporaries and followers to offer much that is richly rewarding when trying to understand contemporary capitalism.

While I have written along a similar vein and covered many of the topics in separate posts previously, today’s contribution is intended to be relatively fresh in terms of the ideas that it compares in considering the two schools of thought. Continue reading

Quote of the week: Steve Keen’s concerns about a Job Guarantee, Part 1

Keen-Interview“On the job guarantee, I can see the desire to lower the rate of unemployment, of course, which is one of my desires as well. But I have two reservations about the overall area – one is that part of what gives capitalism its creative thrust is what Janos Kornai calls being demand-constrained. If you look at a typical capitalist economy, he points to the desire to keep wages as low as possible, profits as high as possible, and notes that you have your usual corporations competing for market share. As part of that they produce more capacity and, in the aggregate, they have the capacity to produce more than can be bought by the demand. So, they’re fighting over market share all the time, but the only way they can fight over market share effectively is to innovate .You get all the innovation we’ve seen in every form of technology for the last fifty or sixty years – that’s an essential part of what gives capitalism its strengths. If you end up having full employment through a government policy, what do you do to the impact of demand-deficient behaviour on corporations? Do you loosen it, or do you strengthen it? My worry is that you weaken that. So, you might achieve full employment but have a lower rate of economic innovation, and that is something that I’m concerned about. I don’t think it’s been properly considered by MMT. I might be wrong, but I doubt it.”

An interview with Steve Keen in P. Armstrong (2020), Can Heterodox Economics Make a Difference? Conversations with Key Thinkers, Cheltenham: Edward Elgar, p.361-2.

Trade Unions and Amazon – the case for a ‘high wage’ economy

keep-calm-and-join-a-trade-unionWorkers at Amazon in the US and UK have for some time been struggling to establish trade union representation in order to secure improved wages and working conditions. The retail behemoth has been resisting. Clearly management is worried that this will threaten its ability to keep prices low and ensure rapid delivery to customers. Any firm will have more customers than employees and can make the argument that the former comes first. But this falls down when one applies it to all firms, and the economy as a whole. The majority of consumers at the national level are in work and are therefore also producers in a workplace. Low wages and poor working conditions eventually impact on health and well-being and, I will argue, on productivity and workplace efficiency. There is therefore a progressive case for an economy which boasts ‘high wages’ and high quality working conditions. But this is unlikely to happen in the absence of sufficiently strong trade unions and other supportive labour market institutions and government policies. Workplace ‘culture’ is not produced naturally, and can be changed through particular policies and institutions in ways which enhance economic performance. There is thus a potential progressive win-win for society and the economy. Continue reading