Economist Richard Wolff discusses in the video below Trump’s budget proposal, which aims to dramatically slash various benefits for many of the poorest Americans, cut taxes for the richest and ramp up military spending. It is unlikely to pass through Congress unaltered, and it is apparently somewhat fantastical in its economics, but it remains disgraceful.
I am not a socialist. In my view, social democracy, the mixed economy and a reformed capitalism which deliver widespread prosperity is surely an effective bulwark against revolutionary socialism. Indeed, in the early decades after World War II, this was more widely accepted in the West as part of the ‘soft’ fight against communism. If capitalism does not deliver the goods to the majority, it will lose legitimacy.
In a number of European countries, relatively strong unions which act as social partners with government and business, rather than as shock troops of the revolution, have helped to achieve both prosperity and a degree of social justice alongside individual liberty. There may sometimes be trade-offs between these goals, but they are worth shooting for together.
The UK, in common with all rich nations and some poorer ones too, faces an ageing population. The health and social care needed to support this needs to be well-funded, which requires sufficient wealth creation across the country.
At the moment, the UK’s productivity lags significantly behind other rich countries and needs to be seriously addressed by whichever government takes office after the upcoming election. The growth of productivity, or how much output is produced from given inputs (land, labour, capital, entrepreneurship etc), is the key to a rising standard of living. It makes possible choices between, for example, more work for a higher income, or more leisure for the same income.
The Guardian’s economics editor Larry Elliott here discusses these issues and makes a strong case for an ambitious industrial and regional policy to boost productivity growth. As he says, the average productivity in the UK’s Greater South-East, including London, is higher than that in Germany. If the average productivity of the UK as a whole is well behind that in Germany, as well as France and the US, this means that there is a strong regional dimension to the problem. The rest of the UK lags well behind the Greater South-East, and this is a major reason for the country’s high level of regional income inequality. Continue reading →
Supply-side economics sums up the economic theories that came of age in the 1980s under Margaret Thatcher and Ronald Reagan. They were a reaction against the ‘Keynesian’ consensus that the state should intervene in the economy to promote full employment, and prevent excessive inequality. Taken together, it was thought that these would help to create widespread prosperity.
The policies that SSE promoted were a response to the economic crisis of the 1970s that brought an end to the ‘Golden Age of Capitalism‘ and the Keynesian consensus. Growth in output and productivity were slowing, and inflation and unemployment rose at the same time, an outcome that discredited the Phillips curve which posited an inverse relationship between the two variables.
Although Thatcher and Reagan attacked ‘big government’ as the problem, their policies involved substantial intervention in the economy to weaken labour and restore the profitability of the private sector. So there was still plenty of government ‘meddling’, but the interests it supported changed. The power of trade unions was much reduced and deregulation and privatisation became fashionable. Continue reading →
An interesting recent paper here from the Levy Economics Institute of Bard College on the prospects for the US economy in the coming years. The authors use their model, which was developed with the late post-Keynesian economist Wynne Godley (one of the few to have predicted the Great Recession), to take stock of the current situation and to discuss alternative future scenarios.
Nikiforos and Zezza argue that the US economy has performed relatively poorly since the Great Recession, and growth outcomes continue to disappoint. Although headline unemployment is relatively low, there remains substantial labour underutilization in the form of ‘marginally attached workers’ and involuntary part-time workers, which when added to the headline rate is known as the U6 measure. The latter is nearly double the headline rate, and helps to explain the continued weakness in wage growth.
The US economy faces three headwinds which continue to constrain growth: income inequality, fiscal conservatism, and the weak performance of net exports (exports minus imports). Continue reading →
William Lazonick, professor at University of Massachusetts Lowell, explains how rationalization, marketization, and globalization characterize the U.S. economy during the past 50 years, and how the behavior of companies and fate of American workers have changed during this process.
“Equality of opportunity is the starting point for a fair society. But it’s not enough. Of course, individuals should be rewarded for better performance, but the question is whether they are actually competing under the same conditions as their competitors. If a child does not perform well in school because he is hungry and cannot concentrate in class, it cannot be said that the child does not do well because he is inherently less capable. Fair competition can be achieved only when the child is given enough food – at home through family income support and at school through a free school meals programme. Unless there is some equality of outcome (ie., the incomes of all the parents are above a certain minimum threshold, allowing their children not to go hungry), equal opportunities (ie., free schooling) are not truly meaningful.
…We cannot, and should not, explain someone’s performance only by the environment in which he has grown up. Individuals do have responsibilities for what they have made out of their lives.
However, while correct, this argument is only part of the story. Individuals are not born into a vacuum. The socio-economic environment they operate in put serious restrictions on what they can do. Or even on what they want to do. Your environment can make you give up certain things even without trying. For example, many academically talented British working-class children do not even try to go to universities because universities are ‘not for them’. This attitude is slowly changing, but I still remember seeing a BBC documentary in the late 1980s in which an old miner and his wife were criticizing one of their sons, who had gone to a university and become a teacher, as a ‘class traitor’.
While it is silly to blame everything on the socio-economic environment, it is equally unacceptable to believe that people can achieve anything if they only ‘believe in themselves’ and try hard enough, as Hollywood movies love to tell you. Equality of opportunity is meaningless for those who do not have the capabilities to take advantage of it.”
Ha-Joon Chang (2010), 23 Things They Don’t Tell You About Capitalism, p.210-211, 217.