Leaving the EU and Dani Rodrik’s ‘inescapable trilemma’

Rodrik-Unholy-Trinity-Political-Trilemma-World-EconomyThe deed is done. I have not posted much on the UK’s EU referendum in this blog, as despite casting my vote for us to remain in the EU, I feel that the latter is a deeply imperfect set of institutions and, within that, the structure and evolution of the eurozone have been very damaging to many of its members, not least economically, and in ways that have yet to be resolved.

I am posting a link here to a blog post from Professor Dani Rodrik of Harvard on what he calls the Political Trilemma of the World Economy. Although the post is from 2007, it offers a useful way to think about the relationships between globalization, democracy and the nation state. This of course applies to EU member states, who have pooled sovereignty upon the altar of deeper economic and political integration. It is worth a read.

To sum up, Rodrik says that we can choose two of three from (1) deep economic integration, (2) democratic politics and (3) national sovereignty. In the case of EU membership, we have (1) and (2) but have given up (3) to some degree. Continue reading

The tragedy of poverty in the US

screen_shot_2015-03-20_at_5.37.29_pmThe largest economy in the world. A technological leader in many industries. Land of the free. Despite all this, poverty in the US remains widespread, affecting about one in seven people, according to the International Monetary Fund (IMF) and as reported by the BBC here.

Growth by itself is not enough. If it is not more equitable and accompanied by rising productivity, then there is no scope for wages to rise even as profits are maintained. Without rising wages for the majority alongside continued strong employment growth, the most vulnerable will continue to face exclusion. No wonder populism and the rejection of some of the elements of globalization (free movement of goods, services, capital and labour) have been on the increase.

Reflections on ethics and the good society

599px-The_Blue_MarbleTony Lawson, a professor of economics and philosophy at Cambridge University, has researched and championed the role of social ontology, that is, the study of the basic subject matter and constitution of social reality, in economics. From a paper of his discussing the role of ethics, in which I found much of interest and inspiration, here are a few choice quotes, which are implicitly critical of mainstream economics and supportive of a different approach to economics as a truly social science:

“Generalised flourishing is…the basis of ethical thinking, the referent of the ethically good.”

“Human interests, the bases of our conditions for flourishing, that allow each to flourish, do not reduce to our preferences. Rather, each human being is a bundle of needs including those of realising various capacities, capabilities and so forth, where flourishing depends on the fulfilment of those needs…[these are] developed in specific historical and socio-cultural contexts. And all are in some ways subject to continuous transformation.”

“Human beings have evolved in communities where the survival and flourishing of each depends on the survival and flourishing of the community, and so ultimately of all others. Thus we are essentially, as a result of evolutionary development, beings whose ability to flourish is bound up with the ability of all others to do so. It is in the interests of each of us that others around us, and ultimately everyone, flourishes; this is so regardless of similarities and differences, so long as the necessary conditions of flourishing of any one is not necessarily undermining of the flourishing of others.”

“The ultimate ethical good is generalised human flourishing…the ethical goal of generalised flourishing will be of a form in which we flourish in our own very different ways; a situation in which the flourishing of each and any of us is a condition of the flourishing of all others…this…can be called the good society or eudemonia.”

“Given that there are obstacles blocking the achievement of any such good society…then action that can be considered derivatively as morally good or right is action oriented to removing such obstacles.”

“In the context of modern economics specifically, it seems especially urgent that we more clearly recognise and embrace the insight that rationality itself is not about adopting a narrow self-oriented individualism of the sort that populates modern texts but about acting as far as possible in ways that facilitate the flourishing of us all.”

Some limits to Keynesian policy

9780199390632Can Keynesian policies create full employment under capitalism? And what are the limits to such policies? Many economists in the Keynesian tradition, from Paul Krugman on the mainstream wing, to Wynne Godley and Marc Lavoie on the more left-wing heterodox one, have persistently argued that some mixture of monetary and fiscal policy should be used to manage aggregate demand and achieve and maintain full employment under capitalism. What this means in practice is subject to some debate: full employment is a more abstract idea than simply arguing over whether 3% or 5% unemployment represents what is ‘full’.

There have been periods during the history of capitalism across different countries and at different times when full employment has been achieved. The so-called Golden Age of Capitalism in the 1950s and 60s saw very low unemployment in much of Western Europe. Continue reading

The IMF changes its tune on neoliberalism (a little)

International_Monetary_Fund_logo.svgHere is a link to a recent article by IMF researchers which backtracks on some of the tenets of that institution’s policy during what could be called the neoliberal era. It makes for interesting reading.

In particular, they make the case for capital controls to stabilize financial flows in certain circumstances; for reductions in inequality through ‘predistribution’ or redistribution in order to promote more sustainable economic growth; and they cast doubt on the wisdom of austerity which aims to reduce public debt as a share of GDP through tax rises and spending reductions instead of simply through policies to promote growth.

The piece does not wholeheartedly reject neoliberalism. In fact the authors praise certain aspects of it, such as the role of the expansion of international trade in reducing poverty. But this seems like a small step in the right direction.

Paul Mason’s ‘postcapitalist’ future?

A short video of Paul Mason sharing some of his thoughts on the future of capitalism or what he calls in his 2015 book Postcapitalism. Mason was formerly economics editor for the UK’s Channel 4 News and before that the BBC’s Newsnight and now works freelance. He styles himself as a ‘radical social democrat’ and is definitely anti-neoliberalism. He predicts (or hopes) that the abundance of information in the modern world is unleashing a ‘third industrial revolution’. I have just started reading the book, and will share my thoughts on it soon.