J is for Junk Economics – Michael Hudson on the Real News Network

This year I have been regularly posting excerpts from Michael Hudson’s new book J is for Junk Economics. Below is Part One of his interview with The Real News Network, in which he discusses his reasons for writing this iconoclastic ‘dictionary’ of economic thought. In his words, it is a guide to how the economy really works and seeks to overturn a misleading orthodoxy propagated by the media and many academics, not least economists!


Michael Hudson on Class Consciousness

Here is another extract from Michael Hudson‘s excellent J is for Junk Economics (p.57-8):

Class Consciousness: This term has been associated mainly with the working class, but the elites may have an even stronger feeling of solidarity as a cohesive class. Their view of their place in the economy is much like that of England’s Norman conquerors, who extracted rental and tax tribute. The medieval Arab historian Ibn Khaldun attributed the conquests by pastoral nomads such as Genghis Kahn and Turkish tribes moving into Europe to the binding force of asabiyyah (asabiya), or social cohesiveness. His Muqaddimah, an introduction to a history of the world published in 1377, explained the rise and fall of nations and empires as reflecting the degree to which marauding tribes held together as an ethnic unit, whose mutual aid and shared goals spanned economic classes. Today’s financial class is cosmopolitan rather than ethnic or nationalist, absorbing client oligarchies into its ranks.

What is needed for economic success as a class is self-consciousness of common interests. Labor has won concessions from industry, but has not deterred finance from exploiting wage earners via mortgage lending, personal debt and pension-fund capitalism. Wealth is concentrated at the top of the economic pyramid as banks and bondholders gain control of industry and move to take over governments. Their political aim is to shift taxes off finance and its major clients, and to force taxpayers to pay interest to private bondholders. It seems as if today’s working class (the 99 percent) does not realize that a class war is being waged against them – or that as Warren Buffett said of his own One Percent, “we are winning it.”

The financial strategy in this class war is to popularize “identity politics” prompting voters to think of themselves as women, ethnic or racial minorities, or sexual categories (LBGTQ) instead of economic categories such as wage earners, debtors and/or renters. True identity politics should begin with economic class consciousness, solidarity and mutual aid. There can be little promotion of group self-interest without this.”

Trumponomics Part 1: Causes of the phenomenon

TrumponomicsAs promised, here is a review of some of the ideas covered in the fairly weighty tome Trumponomics – Causes and Consequences, recently published by the World Economics Association.

The book consists of 30 chapters, each one written by a different author. They are wide-ranging, but all come from a left perspective on economics and politics.

I am not going to review it chapter by chapter, but thought I would discuss some of the main ideas. As there is plenty to get through, I have divided it into three posts to be published this week: part 1 – causes, part 2 – consequences, and part 3 – alternatives.

Part 1 – Causes

A number of the chapters discuss the reasons for the electoral success of Donald Trump. The book is written by economists, so inevitably many of them have an economic basis. However, since their sympathies are with left wing heterodox thinking, much of it could be classed as political economy, which often incorporates political, historical and sociological ideas to an interdisciplinary analysis.

Broadly speaking, the rise of Trump can be explained by patterns of socio-economic change in recent decades which have left many behind; by the perception that particular elites, including the Democrats, have become disconnected from the concerns of ordinary people and have been captured by Wall Street and the ideology of neoliberalism; and by a campaign whose rhetoric successfully appealed to raw emotion rather than to rationality alone. Continue reading

Ha-Joon Chang: Financial markets need to become less – not more – efficient

In this video Cambridge University’s Ha-Joon Chang argues that financial markets need to become less efficient in order to serve the real economy and fund productive investment, rather than fueling financial asset-price bubbles and speculation.

He also makes the case that society needs more ‘active economic citizens’, who can press politicians and other elites to fashion better economic policies, and more effectively hold them to account.

Michael Hudson on Balance Sheets

JisforJunkEconThe evolution of balance sheets are key to the economics of Hyman Minsky, who described an economy with a financial system as one of ‘interlocking balance sheets’. Similarly, Richard Koo, originator of the concept of a Balance Sheet Recession, has written much on its implications for government deficits during the crisis of 2008 and, before that, during Japan’s Great Recession, which led to two decades of economic stagnation.

Until recently, balance sheets tended to be ignored by the mainstream majority of economists. The revival of Minsky’s ideas, alongside the ideas of Koo and post-Keynesians such as Steve Keen and Wynne Godley, have perhaps begun to shift the tide. The work of Michael Pettis, another economist influenced by Minsky, also deserves to be more widely influential. Continue reading

In brief: the economics of Hyman Minsky

MinskyAs the 2008 financial crisis broke, the term ‘Minsky moment’ became widely used by commentators and financiers (it was originally coined in 1998), as the work of this relatively obscure economist came into fashion. Since then, his major works have been reprinted, and his ideas widely cited, especially among those critical of the financialization of recent decades.

Once again, from Michael Hudson‘s heterodox ‘dictionary’ of economics J is for Junk Economics (p.154-5): Continue reading