Inequality, global imbalances and crisis

Tracing a connection between rising inequality and the Great Recession of 2008 is appealing to leftist economists. It suggests that what they see as two of the potential downsides of capitalism and in particular the neoliberal economic order can perhaps be mitigated via appropriate policies. Thus, a more egalitarian capitalism can become less prone to crisis or recession.

Of course, what is appealing as social and economic outcomes is not a good enough reason to investigate linkages between them, though I suspect that I am far from the only one who is drawn to particular ideas as a matter of bias.

Perhaps there is nothing wrong with that as a starting point, followed by economic analysis of the chosen object of study.

An article in the latest issue of the heterodox Cambridge Journal of Economics explores the potential linkages between the distribution of income and current account imbalances in a simplified model of the global economy consisting of the US, Germany and China, prior to the 2008 recession.

These three countries had the largest current account imbalances in absolute terms in the run-up to the recession. The US ran a deficit, and Germany and China were running surpluses. Since these imbalances have been pinpointed by some economists as a cause of the recession itself, analysing them is important. Continue reading

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Trump’s robber baron presidency – via Lars P. Syll

 

In Trump’s world, ​the rich in the US obviously are not rich enough. So he has set out to lower the corporate tax rate to 20 percent and abolish the estate tax. The working and middle classes are, of course, überjoyed …

via Trump’s robber baron presidency — LARS P. SYLL

John Weeks on the Economics of the 1%

Below is a useful excerpt from the book launch of Professor John Weeks‘ Economics of the 1%. It came out in 2014, and I can wholeheartedly recommend it. The book is aimed at the intelligent general reader, and contains plenty of ‘debunking’ of myths in economics from a left perspective, as well as the author’s ideas for economic reform.

Weeks has written other more technical books for those who are interested, most recently Capital, Exploitation and Economic Crisis and The Irreconcilable Inconsistencies of Neoclassical Macroeconomics. The first is Weeks’ constructive take on Marx’s theory of capitalism and crisis, while the second is a thorough critique of neoclassical macroeconomics, as the title suggests.

J is for Junk Economics – Michael Hudson on the Real News Network

This year I have been regularly posting excerpts from Michael Hudson’s new book J is for Junk Economics. Below is Part One of his interview with The Real News Network, in which he discusses his reasons for writing this iconoclastic ‘dictionary’ of economic thought. In his words, it is a guide to how the economy really works and seeks to overturn a misleading orthodoxy propagated by the media and many academics, not least economists!

The US does not have the highest living standard in the world (Ha-Joon Chang’s Thing 10)

23-things-they-don-t-tell-you-about-capitalismAnother telling extract from Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism (p.102-3, 111):

“The average US citizen does have greater command over goods and services than his counterpart in any other country in the world except Luxembourg. However, given the country’s high inequality, this average is less accurate in representing how people live than the averages for other countries with a more equal income distribution. Higher inequality is also behind the poorer health indicators and worse crime statistics of the US. Moreover, the same dollar buys more things in the US than in most other rich countries mainly because it has cheaper services than in other comparable countries, thanks to higher immigration and poorer employment conditions. Furthermore, Americans work considerably longer than Europeans. Per hour worked, their command over goods and services is smaller than that of several European countries. While we can debate which is a better lifestyle – more material goods with less leisure time (as in the US) or fewer material goods with more leisure time (as in Europe) – this suggests that the US does not have an unambiguously higher living standard than comparable countries.

…There is no simple way to compare living standards across countries…by focusing just on how many goods and services our income can buy, we miss out a lot of other things that constitute elements of the ‘good life’, such as the amount of quality leisure time, job security, freedom from crime, access to healthcare, social welfare provisions, and so on. While different individuals and countries will definitely have different views on how to weigh these indicators against each other and against income figures, non-income dimensions should not be ignored, if we are to build societies where people genuinely ‘live well’.”

Trumponomics Part 1: Causes of the phenomenon

TrumponomicsAs promised, here is a review of some of the ideas covered in the fairly weighty tome Trumponomics – Causes and Consequences, recently published by the World Economics Association.

The book consists of 30 chapters, each one written by a different author. They are wide-ranging, but all come from a left perspective on economics and politics.

I am not going to review it chapter by chapter, but thought I would discuss some of the main ideas. As there is plenty to get through, I have divided it into three posts to be published this week: part 1 – causes, part 2 – consequences, and part 3 – alternatives.

Part 1 – Causes

A number of the chapters discuss the reasons for the electoral success of Donald Trump. The book is written by economists, so inevitably many of them have an economic basis. However, since their sympathies are with left wing heterodox thinking, much of it could be classed as political economy, which often incorporates political, historical and sociological ideas to an interdisciplinary analysis.

Broadly speaking, the rise of Trump can be explained by patterns of socio-economic change in recent decades which have left many behind; by the perception that particular elites, including the Democrats, have become disconnected from the concerns of ordinary people and have been captured by Wall Street and the ideology of neoliberalism; and by a campaign whose rhetoric successfully appealed to raw emotion rather than to rationality alone. Continue reading

Instability: poverty and low skill push Britain to Brexit — via INCOMESCO blog

A report on the causes of BREXIT has been published. According to this report, Brexit was the reason of ‘Poverty, Low Skills and Lack of Opportunities’. The research was accomplished by Goodwin, M, and Heath, O (2016) for the JRF Organisation. ‘This report provides unprecedented insight into the dynamics of the 2016 vote to leave […]

via Instability: Poverty and low skill push Britain to Brexit — INCOMESCO