Amid today’s multiple and actually or potentially devastating crises, from the pandemic and war to the environment and the energy shock, and the economic, social and political responses, I have found it somewhat therapeutic to turn away, at least for a moment, from the increasingly depressing daily diet of multimedia news and towards a more historical perspective. Stanford Professor of Classics and History Walter Scheidel penned his 2017 book The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century (hereafter TGL) to make the argument that only major war, revolution, state collapse and pandemics have been able to substantially reduce inequality within countries. If he is right, this hardly seems to offer the prospect of a less worrying take on today’s events.
But maybe taking the long view and stepping out of the 24 hour news cycle provides cause for some optimism, even if the path is proving exceptionally difficult. This is not to ignore the essential need for action from policymakers and citizens. But Scheidel’s book suggests that, given we are living through at least two of his ‘Four Horsemen’ (of the apocalypse), major war and a pandemic, it is possible that we might see major reductions in inequality some way down the road. His work could be seen to be pessimistic in itself, in that historically this seems to often require violent change in society and the economy in order for it to occur, and one would not wish any of this on any society and its members. But perhaps it is also a realistic view: we are being hit to varying degrees by crises from all sides, and could eventually emerge from the other side with something positive. Continue reading →
Plus ça change…in the midst of multiple crises, the following quote on the role of the market in a modern economy seems as relevant as ever. But it is taken from an article in the Financial Times in 1989, penned by the late John Smith, then Shadow Chancellor of the British Labour Party. As he says, markets ‘can be good servants but bad masters’. When the market is left to itself, it will not:
“…produce adequate investment in education and training, in science and technology, in new products and new capacity. The market will not reverse the short-term bias to favour productive strength in the long-term. It will not secure equal rights for disadvantaged groups, regional balance or a safe and healthy environment. It is the misplaced belief that the market can do things for which it is not suited which has handicapped our economic performance for so long – and particularly under the present Government…If we are to compete in a world where the new currencies are information, knowledge and skill, we must fully mobilise the talents and skills of all our citizens in a way that the market alone cannot do.”
The quote itself, although originally from the FT, was lifted from the following chapter:
Philip Arestis (1991), Supply-side socialism in the UK: a post-Keynesian perspective, in Jonathan Michie (ed), The Economics of Restructuring and Intervention, Aldershot, UK: Edward Elgar, p.199.
In my last post, I described how Western capital is planning to take over and control Ukraine’s resources and exploit its labour force to the maximum in order to boost the profitability of both Ukraine’s domestic capitalists (oligarchs) and foreign multi-nationals. However, there is a problem for Western capital and Ukraine’s oligarchs: it’s Russia. The […]
Heterodox economist Lance Taylor sadly passed away last week. He was a professor at the New School for Social Research in New York, which was founded to provide a home for progressive thinkers. His work focussed on structuralist macroeconomics and development, drawing on the radical Keynesian tradition, and the role of institutions and different sectors in the economy, particularly in the study of growth and distribution.
This interview from 2015 with the Institute for New Economic Thinking briefly covers some of his research topics.
The Progressive Economy Forum (PEF) recently published a report recommending that the UK’s minimum wage, now called the National Living Wage, should be substantially raised in order to help tackle inequality and poverty. They argue that this should form part of a broad package of policies to encourage a more egalitarian and dynamic economy and society, with higher wages and productivity. The report, by James Meadway and Howard Reed, can be downloaded here. It focuses on the UK case, but has lessons for progressive policymaking in any capitalist economy.
As elsewhere, the UK currently faces a serious cost of living crisis in which real wages are now falling, and in fact have on average barely risen for more than ten years, creating a ‘lost decade’ for millions. Calls for wages to keep up with inflation have been criticised by the government and the Bank of England as threatening a ‘wage-price spiral’, in which wages and prices follow each other upwards, embedding high rates of inflation and ultimately creating little real terms wage gains for workers. That has not happened yet. At the moment, average wage rises are falling well behind price rises. This is in stark contrast to the 1970s, when many firms faced a profit squeeze as wages at times rose faster than prices. Today many large firms are experiencing soaring profits. The PEF report therefore argues that there is a need for policy to shift the balance of power in the labour market away from capital and back towards labour, by increasing trade union membership and the coverage of collective bargaining. Continue reading →
I just read this NYT column by Bryan Stryker, on how Democrats can win back the working class. I have no idea how its proposals poll, but as an economic matter, they will do little to help the working class. The big problem with Stryker’s argument is that it assumes that the working class […]
The Levy Economics Institute has published their annual Strategic Analysis paper on the current state of, and prospects for, the US economy, which is always an interesting read. The Institute is non-partisan, but much of its research and output takes its inspiration from two great post-Keynesian economists of the past: Hyman Minsky and Wynne Godley, who both emphasised the importance of aggregate demand to the state of the economy, in the short run and the long run, and the interaction of real and financial factors.
A summary of this short paper can be found here, and the pdf can be downloaded here.
As the paper notes, the US recovery from the pandemic-triggered recession has been swift, with GDP now above its pre-pandemic level, and the employment rate almost there, thanks in large part to the extraordinary scale of the fiscal stimulus enacted by the government. However, it has also been associated with a deteriorating current account deficit and a rise in inflation. Continue reading →
In the video below, self-styled ‘erratic Marxist’ economist and Greek politician Yanis Varoufakis discusses the flaws in the practice of mainstream economics, including the irrelevance of its mathematical modelling. He argues that this methodology cannot be used to solve genuine economic problems as they exist in the real world, despite the elegance and beauty which these often complex models can display. In fact they can be used to legitimise policies and ideologies which merely serve vested interests and the status quo. Economics has claims to be a science akin to physics, but as a study of part of society involving thinking, reflexive human beings, perhaps it should abandon these lofty ambitions. It should be as much or more social than it is a kind of science.
Having said all that, I do think there is room for mathematical modelling in economics, but Varoufakis’ arguments point to a vital conclusion, that there is a need for a genuine political economy in order to understand the economic system in which we live, and therefore to change it for the better.
This week’s quote is particularly short, and comes from the financial investor Warren Buffett. Rather than simply let it speak for itself, I thought I would briefly consider its implications for economics and political economy.
“Someone is sitting in the shade today because someone planted a tree a long time ago.”
Buffett is saying that it is important to take the long view in any venture worth pursuing. It can be seen to be intended for investors but for me it speaks to a far broader set of issues, particularly the notion that we all benefit from the past actions of others and so should be humble and socially and historically aware when it comes to individual success, not least in the field of wealth. Continue reading →
It’s pretty funny that we continually debate the causes of inequality when we routinely pass bills that redistribute income upward. The semiconductor bill about to be approved by Congress is the latest episode in this absurd charade. To be clear, the bill does some good things. It has funding both to subsidize manufacturing capacity […]