The Debt Delusion – Living Within Our Means and Other Fallacies

JWeeksDebtDelusionJohn Weeks has a new book out, The Debt Delusion, which takes a progressive line in debunking a number of what he terms the myths that surround fiscal policy.

Weeks is an Emeritus Professor of Development Studies at SOAS, and coordinator of the Progressive Economy Forum. He is heavily critical of austerity and proposes an ‘anti-austerity’ agenda on tax and spending for today’s policymakers.

Weeks has long been critical of mainstream economics in general, not least in his previous book for the layman, Economics of the 1%.

Summing up his proposed fiscal policy framework, he writes (p.182-3): Continue reading

On Joan Robinson

Joan Robinson was a brilliant economist at the University of Cambridge and a member of the ‘circus’ of thinkers led by John Maynard Keynes in the 1930s. In the lecture below, John Eatwell, a pupil and co-author of Robinson, and who advised the British Labour Party on economic policy in the 1980s and 90s, gives a very clear and stimulating introduction to her life and work.

Eatwell covers topics in economics addressed by Robinson that remain highly relevant today, such as disguised unemployment and the trade protectionism that tends to result from a deflationary global economic environment.

As the talk makes clear, Robinson published path-breaking work on imperfect competition as distinct from theories of perfect competition and monopoly; she later contributed to the development of Keynes’ magnum opus The General Theory, which put forward an explanation for the persistence of mass unemployment under capitalism and gave birth to the modern discipline of macroeconomics. After the war she attempted to extend Keynes’ theory to deal with problems of economic growth in a number of books and papers, particularly her own magnum opus The Accumulation of Capital.

A strong intellectual personality and something of a zealot, one of Robinson’s most notable quotes regarding economics was: “I never learned mathematics, so I’ve had to think”.

As a liberal socialist, latterly she increasingly favoured central planning to achieve full employment and social justice, as well to promote economic development in the poorest countries. On this, as well as in her enthusiasm for Maoist China, she was perhaps naive and misled and these aspects of her thinking discredited her somewhat in her later years.

Robinson also supervised Amartya Sen who went on to win the Nobel Memorial Prize for his work on welfare economics.

Thanks to the blog The Case For Concerted Action for sharing this video.

An abundance of wealth and a scarcity of capital: resolving the paradox

One of the major economic phenomena of our time seems to be an enormous accumulation of elite wealth amidst rising inequality within nations, even while output and productivity growth, particularly since the Great Recession, have been mediocre across much of the world.

In his book Capitalism without Capital, Alan Shipman draws together a wealth of economic ideas, from the theory of the global savings glut and the Cambridge controversies in the theory of capital to Thomas Piketty’s writings on inequality, to argue that we are living in an era of abundant ‘wealth’ alongside a shortage of real productive capital assets. It is growth in the latter which remains the driver of rising living standards for the majority. Continue reading

The top 1% own 45% of all global personal wealth; 10% own 82%; the bottom 50% own less than 1% — Michael Roberts Blog

The annual Credit Suisse report on global wealth has just been released. This report remains the most comprehensive and explanatory analysis of global wealth (not income) and inequality of wealth. Every year the CS global wealth report analyses the household wealth of 5.1 billion people across the globe. Household wealth is made up of the […]

via The top 1% own 45% of all global personal wealth; 10% own 82%; the bottom 50% own less than 1% — Michael Roberts Blog

Michael Hudson on the Austrian School of Economics

hudson-200x300Another extract, in this occasional series, from Michael Hudson’s iconoclastic dictionary of economics, J is for Junk Economics. Last week’s posted video featured a short lecture by institutional economist Geoffrey Hodgson, in which he quoted selectively from Austrian School economist Friedrich Hayek, and appeared to show Hayek’s one-time support for social democratic policies. Hudson’s brief account below is critical of the School:

“Austrian School of Economics: Emerged in Vienna toward the late 19th century as a reaction against socialist reforms. Opposing public regulation and ownership, the Austrian School created a parallel universe in which governments did not appear except as a burden, not as playing a key role in industrial development as historically has been the case, above all in Germany, the United States and Japan.

Carl Menger developed an anachronistic fable that individuals developed money as an outgrowth of barter, seeking a convenient store of value and means of exchange. The reality is that money was developed by cost accountants in Bronze Age Mesopotamian temples and palaces, mainly as a means of denominating debts. Few transactions during the crop season were paid in money, but took the form of personal debts mounting up to fall due on the threshing floor when the harvest was in. Mercantile trade debts typically doubled the advance of merchandise or money after five years.

Most of these advances were initially made by temple or palace handicraft workshops, or collectors in the palace bureaucracy. Menger’s Austrian theory ignored the fact that weights and measures were developed in the temples and palaces, and that throughout antiquity silver and other metals were produced in standardized purity by temple mints to avoid private-sector fraud. This history has been expurgated, as if enterprise only occurs in the private sector, needing no public role or regulation.

Also not appearing is the exploitation of labor by industrial capitalists. Austrians developed the idea of “time preference.” Profits were attributed to the fact that capital-intensive (“roundabout”) production took time, so profits were simply a form of interest built into nature.”

A low-inflation world and what to do about it

The Economist magazine recently published a special report on the world economy, looking at the ‘problem’ of low inflation. More than ten years have passed since the beginning of the Global Financial Crisis and Great Recession, and inflation is now strikingly low in many rich economies. This is despite unemployment falling to historically low levels in countries such as the US, UK and Germany, although it remains much higher in a number of European countries that have yet to recover from the worst of the eurozone crisis.

Normally economists expect wages to rise faster as unemployment falls below some critical level and the labour market tightens, and at some point this has tended, at least in the past, to lead to higher inflation.

In the US and UK, wage growth has been picking up, but inflation has remained low, and has even undershot central banks’ inflation targets. Wage increases are relatively good news for workers after a decade of sluggish or stagnant earnings growth, but remain weak compared to those seen prior to the recession. Continue reading

Geoffrey Hodgson on Hayek, liberalism and social democracy

Those on the political left are generally not fans of Friedrich Hayek and the Austrian school of economics. So this short lecture by institutional economist Geoffrey Hodgson was something of a surprise. He demonstrates that in many ways, Hayek supported policies which would be described as social democratic, with state provision and regulation of all sorts of aspects of society and the economy, especially as a counter to the possibility of totalitarianism.

Hodgson makes clear where he agrees and disagrees with Hayek, not least on the definition of classical liberalism, and it makes for an interesting argument. He also touches on his own ideas on the role of institutions under capitalism.

The relevant part of the video with Hodgson’s talk starts at 3:15 and finishes at about 31:00.