This nine-minute interview with left-Keynesian economist Dean Baker discusses the wisdom or otherwise of the Federal Reserve’s interest rate hikes and their effect on jobs and wages. He notes that despite a low unemployment rate in the US, other measures of the ‘tightness’ of the labour market indicate that there may be more slack in the system and more room for job creation than allowed for by the Fed.
Yesterday’s post mentioned the ‘beggar-thy-neighbour’ policies pursued by Germany, which have supported export-led growth, at the expense of its eurozone neighbours, and more recently the wider global economy. The Trump administration has criticised German trade policies and has vowed to use protectionism to promote US industry. It is possible that this will create employment in the short run in particular industrial sectors, but the effect on the US economy overall will be more complex. Other nations could retaliate and the resultant shrinkage in world trade could ultimately undermine global economic growth, albeit unevenly.
In a world with persistently sluggish growth in demand, such as we are continuing to witness in the wake of the financial crisis, there is thus a greater potential for conflict over international trade. Things have not entirely mirrored the 1930s, when the Great Depression gave rise to substantial protectionism in many nations, but the pressure to adopt nationalist policies in the absence of global cooperation is still strong. Continue reading →
This paper by Jorg Bibow has a useful take on how an ideology of anti-Keynesianism among German policymakers and its economic outcomes as a popular mythology result from a misreading of economic history. This faulty economic analysis has arguably played a major role in the eurozone crisis, and recent improvements in the eurozone economy are at the expense of the rest of the world. This is a form of ‘beggar-thy-neighbour’ policy, as a weak euro is stimulating demand for eurozone exports from its external trading partners, while domestic demand in the region remains weak. The eurozone economy is therefore improving by making the zone as a whole more like Germany in recent history, which has ‘succeeded’ via a dependence on export-led growth. Continue reading →
In this 12 minute interview, economist Richard Wolff discusses a range of current issues, including Amazon’s threat to jobs, the stock market under Trump, and the repeal of Obamacare. He is definitely informative, as well as somewhat entertaining in his (what I might term) ‘vigorous’ delivery.
Money and Totality by Marxist economist Professor Fred Moseley was published last year and I have recently managed to get hold of a copy of the affordable paperback edition. For those interested in Marxist political economy and how it can contribute to understanding the workings and evolution of capitalism, this work, 20 years in the making, is surely worth some study.
Michael Roberts’ blog, which I often find informative in its alternative perspectives to both mainstream and Keynesian economic thought, can be found here. His review of the book is here, and Roberts is certainly enthusiastic about it, citing it as probably the best book on Marxist economic theory this century.
While I am only a little way through the book, I am finding it both clearly written and thoroughly absorbing. Moseley repeats the same central arguments over and over, presenting his key thesis from different perspectives, using some basic algebra and substantial textual evidence to support his case. While some may find this irritating, I have so far found it helpful in grasping the point of the work. Continue reading →
This quote, by Cambridge Marxist economist Maurice Dobb, writing in the 1970s, is taken from a chapter on economics and ideology. He argues that an ideology or ‘vision’ of society is inseparable from economic theories, even when this is not acknowledged or operates on an unconscious level. This extract describes the importance of the subjective in the formation of new ideas.
“There is always a subjective element in the march of knowledge, not only in the sense that action and experiment play a crucial role, but that these are preceded and shaped by the formation of concepts. Current problems are something created as much by thought-inspired human action upon an existent situation as by the given objective (but changing) situation itself; and in this sense can be said to represent continually, in varying degree, a contradiction between the two. Problems arising in this way then form the starting-point of new thinking, the formation of new concepts and new theories; and to this extent the latter are always relative to a particular historical context. These changing concepts and ideas represent in part a commentary upon or interpretation of – a ‘reflection’ if one cares to use so passive a simile – the objective situation from the particular perspective in which it is seen. But since inherited ideas and concepts, operating as a refractive medium, affect this perspective and the resulting vision of the situation, new ideas are always at the same time a critique of old ideas which form the heritage of thinking; hence these new ideas are necessarily shaped in part by the antithetical relation in which they stand to the old as well as being empirical statements about actuality.”
Maurice Dobb (1973), Theories of value and distribution since Adam Smith, p.17
Donald Trump has claimed that the jobs figures for the US under Barack Obama were ‘phony’. Now with the first set of monthly jobs figures published under his presidency, he has claimed credit for the picture they give of a healthy labour market. In fact, they are the 77th consecutive month of job gains in the US. Now of course, changes in employment are not all down to the White House, but government policy does have an influence.
Unemployment in the US is now down to less than 5%, an apparently good performance. But the employment rate is only at about 60% of the population and has been falling since 2000 when it was about 65%. Growth in average wages has also been weak in recent years. Compare these figures with those for the UK, where unemployment lies at a similar rate, but the employment rate is up at 75%. Wages have been similarly stagnant, while the number of self-employed workers has risen strongly since the recession. Productivity growth in the two economies has also been very weak for a number of years.
What can economics say about these trends, and the potential for policy to improve upon them? Continue reading →