“Neoliberalism is inimical to economic democracy and it hollows out political democracy. The neoliberal discourse and practice of TINA (There Is No Alternative) blocks the political expression of dissent and feeds apathy, populism and the far right. This is the outcome of a neoliberal political project including a modality of democracy that isolates the political from the socio-economic sphere, restricts democracy to the former, and limits democracy to voting in elections while, simultaneously, imposing a strongly illiberal agenda towards civil liberties and collective action. The crisis of this modality of democracy has become evident through increasing global instability and the proliferation of ‘pseudo-‘ or ‘illiberal’ democracies and ‘electoral authoritarian’ regimes, ‘failed states’, civil wars and ‘terrorism’, especially in the post-colonial world. The limitations of conventional democracy have also raised concerns in the ‘advanced’ West, where large numbers of people now reject ritualistic elections leading to power scarcely distinguishable political parties as a means of addressing their economic and political concerns. Despite their limitations, the ‘Arab Spring’ and the emerging popular movements in crisis-hit Western economies have reiterated their aspiration for a substantive form of democracy, encompassing the ‘economic’ domain that has been insulated by neoliberalism – that is, including substantive choices about the nature of social provision, the structure of employment, and the distribution of income.”
Alfredo Saad-Filho (2019), Value and Crisis, Ch.10, p.217
In the wake of Donald Trump’s call for lower US interest rates in the midst of solid economic growth and low unemployment, The Economist magazine ran a couple of articles on the threat of populist leaders to central bank independence (CBI) and low inflation.
It is more than 40 years since the publication of the intellectual justification for CBI of Finn Kydland and Edward Prescott, propounding the idea of time inconsistency. Based on the concept of the natural rate of unemployment (NRU), political control of interest rates will give rise to the temptation for politicians to boost aggregate demand and lower unemployment in the short run, below the NRU. This will prove unsustainable over the longer run, merely producing higher inflation, with inevitable costs to economic efficiency and growth.
This was apparently what caused the stagflation of the 1970s, when unemployment and inflation rose together, undermining the putatively Keynesian Phillips curve. The upshot is that politicians and voters are better off with CBI, with the central bank given a fixed mandate of low inflation and autonomy in how it achieves this.
But what is the reality of CBI and monetary policy? Here are some quotes from heterodox economists critiquing the mainstream consensus. Continue reading
Thomas Palley, a post-Keynesian economist, here provides a critique of recent policy proposals by US Democratic politicians employing some ideas from Modern Monetary Theory. They variously want to fund programmes such as universal healthcare and a ‘Green New Deal’, financed to a large degree by increased government borrowing.
MMT, as a set of ideas, is an offshoot of post-Keynesianism, but is perhaps more straightforward to grasp when it comes to budget deficits and its opposition to austerity; hence its current popular appeal. Continue reading
I do have time for Marx and Marxist thought, its interdisciplinarity, its breadth and depth of vision and its desire to uncover the workings of capitalism. However it remains flawed, and the historical record of state socialism, where attempts have been made to put it into practice, have resulted in a great deal of oppression and suffering.
That is not to say that all is well with capitalism, and we certainly should not avoid addressing arguments for both its radical reform, and the prospect of its evolution into something else.
Here is institutionalist economist Geoffrey Hodgson, who blogs here, from his recent, excellent, book Wrong Turnings – How the Left Got Lost (p.100):
“The dominant Marxist historical picture of rising and falling social classes meant that socialists did not have to think about how their proposed future would work. This was part of its appeal. It pointed to the growth of the proletariat and proclaimed it as the agent of socialist revolution. The tricky problem of explaining in messy detail how socialism could work in complex, large-scale societies could be postponed and addressed later when the working class has ’emancipated itself’. It was part of its historic destiny, and who could argue with destiny?
This left a gaping hole in the Marxist argument. Theoretical debates over the feasibility of socialism have shown convincingly that such as system – where most private property and trade are abolished – would face huge problems and it would slide towards totalitarianism. Twentieth-century experiences have amply confirmed these arguments.
With its wholesale abolition of non-state property and markets, Marxism blocked the road towards an alternative collectivist system involving worker cooperatives trading on markets. Marxism not only failed; it also ruled out more viable alternatives to capitalism.”
Following last week’s brief introduction to Keynes, here is one for Karl Marx, along the same lines. This year is the 200th anniversary of Marx’s birth and his work remains important to an understanding of the modern world.
I found this video interesting as it contains some ideas and perspectives on Marx that I hadn’t come across before, so it is well worth viewing.
As the narrator explains, much of Marx’s writing was on capitalism rather than what should replace it, at least in any detail. His magnum opus, Capital, is hard-going but remains an extraordinary achievement, while his and Engels’ earlier work, The Communist Manifesto, is pretty short but also very much a fiery and passionate diatribe.
Marx praised capitalism’s productive powers and, remarkably, predicted that it would sweep the world. He was also its foremost critic, and the video does a good job of outlining many of the flaws he identified.
Zimbabwe is in political turmoil. Now that Robert Mugabe has gone, many are wondering what will come next. Given my interest in development economics and my own ignorance of the political economy of this troubled nation, beyond the reporting of the mainstream media, I thought it would be helpful to draw on some of the ‘literature’ to further my understanding and, hopefully, that of the readers of this blog. I can’t pretend to have expertise in this area, but one of the aims here is to share useful knowledge, so here goes.
I have included a brief summary of Zimbabwe’s economic performance since the War and follow that with some quotes from political economists who have studied the country, as well as the historical emergence of capitalism through what Marx called ‘primitive accumulation’. Continue reading
Recently, mainstream economists have been debating yet again why ‘economics’ was unable to see the global financial crash coming and/or provide effective policies to end what I have described as the Long Depression that has endured since the end of the Great Recession in 2009. Mainstream economists John Quiggin and Henry Farrell summed up the […]