Some links, 4/4/2014. Worried banks, What is capital, World Bank made killing mistake, Slave labour, L’amour (not?)

Straight from the financial world (and they do not even mention Greece…):

2015 will not be the year when Spain, Italy and Portugal return to normal. When we look at the dynamics of unemployment, public and private debt, household and corporate solvency, and industrial production capacity, we see that it will take from 5 to more than 20 years to really return to normal. During this very long period, their economies will remain fragile; the Southern euro-zone countries will remain under the threat of a return of investor pessimism.

I love good writing about the relation between the concept of an economic variable and its measurement. Jamie Galbraith does an outstanding job when he discusses the concept ‘capital’. A taste, from his review of Piketty, ‘Capital in the Twenty-First century‘:

What is “capital”? To Karl Marx, it was a social, political, and legal category—the means of control of the means of production by the dominant class. Capital could be money, it could be machines; it could be fixed and it could be variable. But the essence of capital was neither physical nor financial. It was the power that capital gave to capitalists, namely the authority to make decisions and to extract surplus from the worker.

Early in the last century, neoclassical economics dumped this social and political analysis for a mechanical one. Capital was reframed as a physical item, which paired with labor to produce output. This notion of capital permitted mathematical expression of the “production function,” so that wages and profits could be linked to the respective “marginal products” of each factor. The new vision thus raised the uses of machinery over the social role of its owners and legitimated profit as the just return to an indispensable contribution.

Symbolic mathematics begets quantification. For instance, if one is going to claim that one economy uses more capital (in relation to labor) than another, there must be some common unit for each factor. For labor it could be an hour of work time. But for capital? Once one leaves behind the “corn model” in which capital (seed) and output (flour) are the same thing, one must somehow make commensurate all the diverse bits of equipment and inventory that make up the actual “capital stock.” But how?

Although Thomas Piketty, a professor at the Paris School of Economics, has written a massive book entitled Capital in the Twenty-First Century, he explicitly (and rather caustically) rejects the Marxist view. He is in some respects a skeptic of modern mainstream economics, but he sees capital (in principle) as an agglomeration of physical objects, in line with the neoclassical theory. And so he must face the question of how to count up capital-as-a-quantity.

His approach is in two parts. First, he conflates physical capital equipment with all forms of money-valued wealth, including land and housing, whether that wealth is in productive use or not. He excludes only what neoclassical economists call “human capital,” presumably because it can’t be bought and sold. Then he estimates the market value of that wealth. His measure of capital is not physical but financial.

This, I fear, is a source of terrible confusion

 

More ‘terrible confusion’ (and this time, it killed), from the Worldbank (link to a tweet by @benphillips76):

The ILO about slave labour:

* Almost 21 million people are victims of forced labour – 11.4 million women and girls and 9.5 million men and boys.

* Almost 19 million victims are exploited by private individuals or enterprises and over 2 million by the state or rebel groups.

* Of those exploited by individuals or enterprises, 4.5 million are victims of forced sexual exploitation.

* Those who exact forced labour generate vast illegal profits.

* Domestic work, agriculture, construction, manufacturing and entertainment are among the sectors most concerned.

* Migrant workers and indigenous people are particularly vulnerable to forced labour.

Source: Summary of the ILO 2012 Global Estimate of Forced Labour

From France and pour le weekend: ‘Parlez-nous de l’amour… (ne pas?)‘ (watch the whole thing, even when you’re not francophone).