Although the post is more about politics than economics, from a political economy perspective, the two are more useful when analysed together. In modern capitalist economies, the role of the state is inseparable from other institutions such as the rule of law and the market.
The debate over economic policy should be thoroughly exercised in the public realm of a healthy democracy. This requires well-educated citizens open to engaging critically in such a debate, allowing space for diversity and pluralism without dictating their terms. Intolerance is present in elements of both left and right and is contrary to the liberal perspective. Continue reading →
Economist Hyman Minsky, whose Financial Instability Hypothesis built on the work of Keynes
I am currently writing up an article on what Minsky added to Keynes an onwards to whether this is an up to date theoretical framework ready for use in the 21st century. In a nutshell, Keynes explained that output, inflation and unemployment are driven by changes in investment, which is itself driven by changes in […]
The following quote comes from a speech made to the US Congress in 1938 by Franklin D. Roosevelt. He had in mind the potential danger that can result from the accumulation of economic and political power by elite individuals and groups in society, and was speaking in the aftermath of the Great Depression, which was then followed by the horrors of World War II. His words ring true once again.
Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people. The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to the point where it becomes stronger than their democratic State itself. That, in its essence, is fascism-ownership of government by an individual, by a group or by any other controlling private power. The second truth is that the liberty of a democracy is not safe if its business system does not provide employment and produce and distribute goods in such a way as to sustain an acceptable standard of living. Both lessons hit home. Among us today a concentration of private power without equal in history is growing.
Those wondering at the rise of Bernie Sanders and Donald Trump need look no further. FDR didn’t get it all right, but he made the case for state intervention to protect people against the instability and criminality that unfettered capitalism periodically produces.
Dani Rodrik, a professor at Harvard, discusses globalization and the potential trade-offs involved between globalization, the power of the nation state, and democracy, his ‘trilemma’, in this short video.
Rodrik suggests that we can have too much globalization, and that it can undermine national sovereignty or democracy depending on the choices made by particular countries. This framework helps to explain the political turmoil experienced by many developed nations across the world recently, with shifts towards the populist left and right.
Maybe the term populist is a little unfair, as some of the policies proposed by such parties may benefit the dispossessed. Having said that some of them also propose highly disagreeable policies. But surely economic factors, such as the uneven distribution of the material benefits from globalization, have contributed to a rejection of the mainstream elite. Something had to give.