Yanis Varoufakis once described himself as an ‘erratic Marxist’. This heterodox economist became the finance minister in the Syriza-led Greek government during the most intense period of the Greek debt crisis when the Greeks were trying to avoid severe austerity measures being imposed by the Troika of the EU group, the IMF and the ECB […]
Supply-side economics sums up the economic theories that came of age in the 1980s under Margaret Thatcher and Ronald Reagan. They were a reaction against the ‘Keynesian’ consensus that the state should intervene in the economy to promote full employment, and prevent excessive inequality. Taken together, it was thought that these would help to create widespread prosperity.
The policies that SSE promoted were a response to the economic crisis of the 1970s that brought an end to the ‘Golden Age of Capitalism‘ and the Keynesian consensus. Growth in output and productivity were slowing, and inflation and unemployment rose at the same time, an outcome that discredited the Phillips curve which posited an inverse relationship between the two variables.
Although Thatcher and Reagan attacked ‘big government’ as the problem, their policies involved substantial intervention in the economy to weaken labour and restore the profitability of the private sector. So there was still plenty of government ‘meddling’, but the interests it supported changed. The power of trade unions was much reduced and deregulation and privatisation became fashionable. Continue reading
Yesterday’s post mentioned the ‘beggar-thy-neighbour’ policies pursued by Germany, which have supported export-led growth, at the expense of its eurozone neighbours, and more recently the wider global economy. The Trump administration has criticised German trade policies and has vowed to use protectionism to promote US industry. It is possible that this will create employment in the short run in particular industrial sectors, but the effect on the US economy overall will be more complex. Other nations could retaliate and the resultant shrinkage in world trade could ultimately undermine global economic growth, albeit unevenly.
In a world with persistently sluggish growth in demand, such as we are continuing to witness in the wake of the financial crisis, there is thus a greater potential for conflict over international trade. Things have not entirely mirrored the 1930s, when the Great Depression gave rise to substantial protectionism in many nations, but the pressure to adopt nationalist policies in the absence of global cooperation is still strong. Continue reading
Below is a helpful quote from post-Keynesians Wynne Godley and Marc Lavoie on fiscal deficits and full employment. I am sceptical, based on economic history, that full employment can be sustained for lengthy periods under capitalism, which Keynesians claim is possible given the right policies. However it usefully makes a nonsense of the oft-found obsession many governments have with austerity and ‘balancing the books’, as if the public finances are akin to those of a prudent household. Continue reading
This short interview from the Real News Network illustrates the progress of clean energy generation in the US, compared with dirtier sources. The argument is that the cost of renewables is falling fast, such that they are becoming cheaper than coal-fired generation, which Mr Trump has promised to support. Cleaner sources also have positive spillover effects on health, known in economics as a positive externality.
The logic of market forces has probably been helped along by industrial policies, from Obama’s Clean Power Plan to the Chinese government, which has promoted the development of its solar panel industry. But if clean energy becomes cheaper than dirty energy, surely a Republican president looking for a good deal can’t argue with that.
As people across the world are struggling to understand the rise of Trumpism, anti-establishment and anti-free trade movements, Erik Reinert (Tallinn University of Technology), Jayati Ghosh (Jawaharlal Nehru University) and Rainer Kattel (Tallinn University of Technology) have put together an impressive Handbook of Alternative Theories of Economic Development that can help make sense of what’s […]
Nation states borrow to provide public capital: For example, rail networks, road systems, airports and bridges. These are examples of large expenditure items that are more efficiently provided by government than by private companies. The benefits of public capital expenditures are enjoyed not only by the current generation of people, who must sacrifice consumption to pay […]