In this short video, Cambridge University’s Ha-Joon Chang, a particularly thoughtful economist whose work I find both interesting and inspiring, discusses the boundaries of the market and the state in modern economies.
He also argues that economic change is inevitably political and makes a strong case against the imposition of ostensibly scientifically derived economic policies on democratic states by unelected technocrats. This happened in nation-states from Greece to Italy in the wake of the eurozone crisis.
“Self-restraint, as the philosophers know, is a rare and bewildering virtue. It is also a virtue that tends to come unstuck the more powerful we become. In this it resembles the relationship between trust and success: the stronger the bonds of trust between us, the greater our collective and individual success. But success breeds greed, and greed is a solvent of trust. Similarly with self-restraint: having it can help one succeed. But then success poses a threat to one’s self-restraint.”
Yanis Varoufakis (2015), The Global Minotaur – America, Europe and the Future of the Global Economy (p.249)
This thought-provoking quote is taken from the postscript of Varoufakis‘s enlightening book on the roots and evolution of the Global Financial Crisis, originally published in 2011.
The author describes how post-war US hegemony produced a ‘Global Plan’ which helped to underpin a successful capitalism for twenty years; its ‘finest hour’, according to Varoufakis, and what has often been called the Golden Age. This gave way to his ‘Global Minotaur’ in the 1970s, which ultimately led us to the crisis of 2008 and its collapse.
The key that links these systemic ideas, and the possibility of a successful global capitalist future is what he calls the ‘global surplus recycling mechanism’ (GSRM). The evolution of the GSRM is the unifying theme which unites the book, which I will discuss in a future post.
Some of The Global Minotaur‘s ideas overlap with those of Michael Pettis, particularly in the latter’s book The Great Rebalancing. In fact the two are largely complementary, as Pettis describes the domestic policies in countries such as China and Germany, which helped to create the financial imbalances that caused the crisis.
Some inspiring words from Nobel prize-winning economist Edmund Phelps, as quoted in Will Hutton‘s How Good Can We Be (p.172):
“[Flourishing is] the heart of prospering – engagement, meeting challenges, self-expression and personal growth…a person’s flourishing comes from the experience of the new: new situations, new problems, new insights and new ideas to develop and share. Similarly, prosperity on a national scale – mass flourishing – comes from broad involvement of people in the processes of innovation; the conception, development and spread of new methods and products – indigenous innovation down to the grass roots.”
Hutton follows with his own take on the mass flourishing which he sees as an essential outcome of the good economy and society:
“…the smart economy, resting on innovation, is coterminous with a society that ceaselessly and restlessly sponsors mass flourishing: they are indispensable and interdependent concepts. This was the heart of the Enlightenment – makers, inventors and philosophers all interconnected, daring to think, to understand and to challenge old boundaries, infecting each other with the enthusiasm for the new while being part of a greater social awakening that affected everyone. This spirit imbued every branch of British economic and social life in the late eighteenth century; it was this as much as cheap labour, water mills and Europe’s first single national market that triggered the Industrial Revolution. Every age is different, but what is not different are the interdependencies between the economic and social that animate and lift the human spirit.”
Michael Hudson, the heterodox economics Professor whose work I have featured on this blog quite a bit this year, wrote a history and critique of theories of trade and development back in 1992. It was reissued in 2009 and I have just finished reading it.
His central thesis is that, to quote the subtitle, “trade and development concentrate economic power in the hands of dominant nations”. I will not be reviewing the book here, but here is an extract, the gist of which I have agreed with since I was a graduate student (p.169-70): Continue reading →
Marxist Professor Fred Moseley’s recent work Money and Totality was 20 years in the making. A couple of weeks ago, in the midst of reading it, I remarked on this blog that it was thoroughly engaging, at least for those interested in Marxist economic theory and its application to the analysis of capitalism. I also promised further comment, once I had finished it, so here goes.
Moseley’s interpretation of Marx’s theory is ‘macro’ ie macroeconomic, in that it begins logically with the operation of the economy as a whole, and then proceeds to the ‘micro’ or the operation of the individual parts of the economy in question.
The interpretation is ‘monetary’ in that it argues that Marx’s theory uses values or prices quantified in terms of money. Capitalism is a money-using system, and in fact Marx defines capital itself as money which is used to make more money, or ‘self-expanding value’.
The title of the book is thus explained: ‘money and totality’, the latter as describing the importance of the macroeconomic system as a whole. Continue reading →
The concept of utility is paramount in determining consumer demand in mainstream economics. Here Marx offers a brief but lively critique of Bentham’s utilitarianism from his own perspective on political economy, in which the social and the historical are vital to the analysis:
“To know what is useful for a dog, one must investigate the nature of dogs. This nature is not itself deducible from the principle of utility. Applying this to man, he that would judge all human acts, movements, relations, etc. according to the principle of utility would first have to deal with human nature in general, and then with human nature as historically modified in each epoch. Bentham does not trouble himself with this. With the driest naiveté he assumes that the modern petty bourgeois, especially the English petty bourgeois, is the normal man. Whatever is useful to this particular kind of normal man, and to his world, is useful in and for itself. He applies this yardstick to the past, the present and the future.”
Karl Marx, Capital, Volume I, footnote 51 to Ch. 24, p. 758
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 →