With a proper strategy, industrial change can deliver better jobs for all

Tim Page of the Trades Union Congress, in this short post summarising a recent TUC report, examines how a comprehensive industrial strategy led and coordinated by the state can help the regions of the UK successfully manage economic change. The report draws on case studies from Spain, Iceland and the Netherlands to illustrate how policies which bring together government, businesses, and unions can significantly improve outcomes in a changing economy.

A successful capitalist economy with growing output and productivity will generate a changing composition of that output and the associated employment over time, as new more productive industries expand and old less productive ones decline. This tends to create an uneven distribution of costs and benefits across the economy, so that in the absence of the right policies, particular regions can be left behind.

Emigration from declining regional economies to expanding ones tends to worsen outcomes in the former, as the more skilled and ambitious seek new opportunities. The declining region will lose their spending power, weakening local demand, as well as their potential skills. Those left behind are therefore likely to doubly suffer, as their local economy becomes locked into a spiral of decline, with reduced job opportunities and growing relative poverty.

While policy cannot totally prevent workers moving to find new work, it can encourage new industries to locate or emerge in declining areas with support for business, infrastructure and retraining, as well as reducing insecurity with a strong social safety net. In this way, regional and industrial policies which involve genuine social partnership can combine to increase new employment opportunities in poorer areas and prevent ever-widening regional inequality, which has proven to be a major problem for the UK in recent decades, compared with much of the rest of Northern Europe.

The state doing nothing, and leaving it all up to the individual, has failed the poorest regions of the UK. Similarly, the state doing everything, and replacing private employment with public sector employment, as happened under the last Labour administration, has proved all too vulnerable to a change of government. A more inclusive approach is now called for.

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A world out of balance

599px-The_Blue_MarbleWhen rich speculators prosper

while farmers lose their land;

when government officials spend money

on weapons instead of cures;

when the upper class is extravagant and irresponsible

while the poor have nowhere to turn –

all this is robbery and chaos.

It is not in keeping with the Tao.

Taken from: Lao Tzu, Tao Te Ching, verse 53 (Translated by Stephen Mitchell, copyright 1988)

 

Tax, redistribution and economic performance: the micro and the macro

Alexandria Ocasio-Cortez, the youngest woman ever to be elected to the US Congress, has made headlines recently with her arguments for much greater marginal rates of tax on the highest earners. Oxford University’s Simon Wren-Lewis yesterday posted this helpful piece on some of the economics and politics of such a policy. He is broadly in favour, and makes a good case for it.

Wren-Lewis is something of a New Keynesian, coming from the centre-left of mainstream thinking. The post covers plenty of ground, but tends to only focus on the microeconomics, while neglecting the macroeconomics, of higher taxes and redistribution. Continue reading

Michael Hudson on Quantitative Easing

Plenty of economists, investors and others have been wondering what will happen to financial markets and the real economy as monetary stimulus in the form of Quantitative Easing is wound down by central banks from the US to the Eurozone in the face of stronger growth.

I will be writing more about it next week, considering the perspectives of critic Richard Koo among others, but here is Michael Hudson from, as ever, his iconoclastic and insightful ‘dictionary’ J is for Junk Economics (p.189-91): Continue reading

Finance, inequality, ecology – an interview with Steve Keen

A nice interview with post-Keynesian Professor Steve Keen, in which he discusses what are (or should be) some of the most important issues in modern economics.

He covers the role of finance and private debt in generating inequality and what can be done to reduce it; the idea and feasibility of a universal basic income; economics and planetary ecology; and the incorporation of energy into economic models.

Top ten posts of 2017

It is always interesting to see what topics attract the most interest here. So from one to ten, here are the most viewed posts on this blog in 2017, from those published during the last twelve months:

  1. Modern Monetary Theory and inflation – Anwar Shaikh’s critique
  2. Michael Hudson on Modern Monetary Theory
  3. Karl Marx on utility
  4. Free-market policies rarely make poor countries rich (Ha-Joon Chang’s Thing 7)
  5. Minsky on stagflation and the limits to state intervention
  6. Anwar Shaikh’s Classical theory of wages and unemployment
  7. Stiglitz on inequality and growth
  8. Ha-Joon Chang on inequality and capabilities
  9. Investment-savings, global imbalances and crisis: the economics of Michael Pettis
  10. Moseley’s macro-monetary Marx – a review and partial critique

All of the above were posted in 2017. However, the four most viewed posts of the year were published in previous years and the top two far outstripped the others. Here are the links:

  1. Some macroeconomic paradoxes: part 1
  2. Marx’s labour theory of value and exploitation under capitalism
  3. Keynes on inequality
  4. Holistic theory and political economy

Thanks to all my readers for your interest last year. Wishing you a happy 2018.

Robert Reich on 3 economic myths

Robert Reich is an influential commentator, professor and author, who served under US Presidents Ford, Carter and Clinton, in the latter case as Labor Secretary. YouTube features plenty of his short, useful videos on economics and politics. Here is one of them. Thanks to Lars P. Syll for drawing my attention to it on his blog.

As an aside, I like Reich’s use of illustrative cartoons!