An interesting interview with Robert Pollin on the Real News Network, in which he discusses the possibility of achieving full employment under capitalism. He considers the ideas on this subject of Marx, Keynes, Kalecki and Friedman.
For me, the historical record seems to support the ideas of Kalecki and Marx, in that achieving full employment may be possible, but sustaining it is much more difficult. This is because it tends to change the balance of power in society in favour of the workers, which the employers don’t like. If high inflation or a squeeze on profits is to be avoided, a new bargain between employers and workers is necessary.
The solution is thus a political one, and leads to a different kind of capitalism. It may be possible for a while but, once again, history suggests that this is hard to sustain, and that a squeeze on profits will result, leading to a slowdown in investment and growth and subsequently to a rise in unemployment once again. This also lends support to the ‘classical’ ideas of Anwar Shaikh on wages and unemployment, which I discuss here.
A series of interesting short videos featuring Anwar Shaikh of the New School, an economist I greatly admire, where he discusses his influences and aspects of his life’s work.
His magnum opus, Capitalism, was published last year, and I have written on parts of it several times on this blog.
For those who don’t want to go through them all, I can recommend as a taster video number nine (of eleven), ‘Keynes and Classical Economics’, where he discusses the links he makes between the ideas of Keynes on aggregate demand, and competition and profitability in the work of Marx and the Classical economists. To reach this, press play, then skip forward between videos using the player controls.
The passage below is taken from the concluding pages of John Maynard Keynes’ famous General Theory, where he speculates on the benefits to international relations from avoiding conflict over international trade. If full employment can be achieved domestically through judicious government policies this would, he hoped, lessen the need for countries to come into conflict with each other over the balance of payments of trade, investment and capital flows.
Given the historical record, I am actually skeptical about the possibilities for achieving and sustaining full employment, however that might be defined. I am therefore not a perennially optimistic Keynesian. Sooner or later, growing economic imbalances will give rise to crisis and recession, and rising unemployment. However, I do think the world economy could be more wisely managed than it is now, with the US the (still?) reluctant hegemon and a rising China among other potentially destabilising trends. Continue reading →
Anwar Shaikh is a Professor of economics at the New School for Social Research in New York. His ideas, in his own words, draw mainly but not exclusively on the ‘Classical tradition’ of Smith, Ricardo and Marx. Marx himself was a critic of classical political economy, so in some ways Marxist political economy could be considered as a separate school of thought.
In Shaikh’s 2016 magnum opus, Capitalism, he also draws on Keynes and Kalecki, two economists who greatly inspired the post-Keynesian school. For Shaikh, the Keynesian/Kaleckian emphasis on aggregate demand remains important, but so too does aggregate supply, which is emphasised in mainstream neo-classical economics. According to Shaikh, the classical tradition is not so much demand-side, or supply-side, but ‘profit-side’. The rate of profit is central to his work, and it affects both demand and supply in the capitalist economy.
In this post I want to outline Shaikh’s theory of wages and unemployment, which is covered in Chapter 14 of Capitalism. He covers a great deal of theoretical and empirical ground in the book, not least in this chapter, and it makes for stimulating reading. To avoid making this post too long, I will focus on Shaikh’s own particular theory, rather than spending much time comparing it to alternative theories, which Shaikh does in the book. 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.
Many of my European friends ask me about Martin Schulz and the success of social-democrats at the polls. Since they are progressive, they hope for reforms in the eurozone to curb mass unemployment, stellar youth unemployment and social problems that exist in many crisis countries. I always had my doubts if Martin Schulz was the […]