What sort of big government? Corporate welfare versus the common good in the US

For me, the argument is over. Big government is all-pervasive and inevitable in today’s democratic capitalism. Markets and states are or should be complements, not alternatives, in any society which is both wealthy and continuing to develop and improve the lives of its citizens in the widest possible sense.

This is not an argument for socialism, although there are some on the right who see big government as an evil leading inevitably to a totalitarian and repressive state. This remains a possibility, but it was big government that saved a system on the edge of collapse during the financial crisis, however imperfectly. Crises may be inevitable under capitalism, but it remains the job of government to improve economic and social performance by harnessing the dynamic potential of markets so as to serve the common good.

In today’s US, an unlikely president is unashamedly trying to subvert and dominate the system for his own ends. The process may seem incoherent, but perhaps it mostly boils down to serving a thirst for power and attempting to fill what some have called an ’emptiness’ at the heart of the man.

If one takes Trump’s recent State of the Union address as an accurate description of his political achievements and the state of the US, rather than analysing what he has actually done, one could be forgiven for thinking that all is well there. It is not.

This post is not an analysis of Trump’s achievements in office, rather a discussion based on three books which take a critical view of US capitalism and society, reaching beyond the current political cycle. Although each takes a slightly different perspective and more or less covers a different period in US history, the thread which links them is the idea that its economy and society are being held back by an excessive concentration of power. Continue reading

Don’t Be Evil. Rana Foroohar on Big Tech

The FT’s Rana Foroohar discusses the ‘evil’ side of ‘Big Tech’. She is pushing her new book, but it is an interesting interview which touches on a range of issues relevant to the economics, business, politics, finance and culture of this increasingly all-pervasive phenomenon.

Foroohar has also written on the dangerous and distorting power and influence of ‘Big Finance’, which has become known as financialisation and has generated a large and growing literature among political economists, particularly those writing in the Marxist and post-Keynesian traditions.

Globalisation, Brexit and Rodrik’s political trilemma

From Brexit to trade wars, the advance of globalisation has not had a great few years. Hoping for a bit of enlightenment to counter the political rhetoric we are so often exposed to, I thought I would turn to Dani Rodrik’s 2011 book The Globalisation Paradox: why global markets, states and democracy can’t coexist.

At the core of Rodrik’s theoretical contribution in the book is what he calls his ‘political trilemma’ in relation to globalisation and politics: the impossibility of combining hyperglobalisation, democratic politics and the nation state or national sovereignty. In this reading, one country can combine any two of the three, but not all three at once.

Thus, under the postwar Bretton Woods compromise, countries were able to combine democracy and national sovereignty with moderate globalisation. Trade in goods between the richer capitalist nations became gradually more free during the 1950s and 60s, while there were restrictions on global capital flows and fixed but adjustable exchange rates, freeing up monetary policy to target growth in aggregate demand to support full employment. Continue reading

Geoffrey Hodgson on Hayek, liberalism and social democracy

Those on the political left are generally not fans of Friedrich Hayek and the Austrian school of economics. So this short lecture by institutional economist Geoffrey Hodgson was something of a surprise. He demonstrates that in many ways, Hayek supported policies which would be described as social democratic, with state provision and regulation of all sorts of aspects of society and the economy, especially as a counter to the possibility of totalitarianism.

Hodgson makes clear where he agrees and disagrees with Hayek, not least on the definition of classical liberalism, and it makes for an interesting argument. He also touches on his own ideas on the role of institutions under capitalism.

The relevant part of the video with Hodgson’s talk starts at 3:15 and finishes at about 31:00.

Financialisation is a problem for capitalism. Is socialism the solution? (Part 2)

In this recent post I outlined some of the ideas in Grace Blakeley’s new book Stolen – How to Save the World from Financialisation. Her answer to the apparent political, social and economic problems with financialisation under capitalism is a transformation towards democratic socialism, starting in the UK and spreading across the world.

In the book she describes a range of policies that would, she hopes, encourage such a trend: a Public Investment Bank; a People’s Asset Manager to encourage the spread of public ownership; an ambitious Green New Deal; changes to corporate governance so that a much wider range of stakeholders are more closely involved in decision-making, not only in non-financial corporations, but also in banks and including the Bank of England. She also argues for the restoration of trade union power and influence, the refinancing of private debt and much tougher regulation of private banking, to encourage definancialisation domestically and ultimately globally. Continue reading

Financialisation is a problem for capitalism. Is socialism the solution? (Part 1)

GraceBlakeleyStolenThe rise of finance across the world economy in recent decades and its spectacular fall from grace as the crisis of 2008 unfolded has given birth to the notion of financialisation in academic circles, particularly among heterodox economists. Grace Blakeley, economics commentator for the New Statesman magazine, research fellow at the IPPR think tank and a rising star on the radical left here in the UK, has written an accessible book which attempts to make sense of this phenomenon and attempts to overcome it. Stolen – How to Save the World from Financialisation is aimed at the intelligent layman rather than being an academic work.

In the book, Blakeley explores the recent history of financialisation and the increasing power of finance in society and its damaging economic, social and political impact, focusing mainly on the UK. She also proposes a solution: democratic socialism. In two posts, of which this is the first, I explore some of the thinking in the book and elsewhere on financialisation and its consequences, as well as potential solutions which aim to mitigate or remove its deleterious nature. Continue reading

Digits won’t replace states — Emergent Economics

I’m all for new technologies that subvert convention — but i’m cautiously sceptical about this piece on new multilateralism from Anne-Marie Slaughter in the Financial Times. I love the sentence “while antediluvian men strut back and forth on the world stage beating their chests, a different kind of multilateralism may be on the horizon.” Slaughter […]

via Digits won’t replace states — Emergent Economics