Share of wealth held by the bottom 90%

Source: http://politicsthatwork.com/graphs/share-wealth-by-country

Median individual level of wealth by country

Sources: Credit Suisse    Last updated: May 12, 2016

The most unequal regions in the world

Minimum wages around the world

Source: https://gshindi.com/category/national-issues/minimum-wage-proposal-big-risk

Lessons from Polanyi

from Jorge Buzaglo

“Under the gold standard the leaders of the financial market are entrusted, in the nature of things, with the safeguarding of stable exchanges and sound internal credit on which government finance largely depends. The banking organization is thus in the position to obstruct any domestic move in the economic sphere which it happens to dislike, whether its reasons are good or bad. In terms of politics, on currency and credit, governments must take the advice of the bankers, who alone can know whether any financial measure would or would not endanger the capital market and the exchanges … The financial market governs by panic” (Polanyi, 1944, p. 229).

The present globalization wave is a financialization wave. The previous waves described in Karl Polanyi’s The Great Transformation also involved financialization. The financial sector appears as the major and most consistent leader and beneficiary of the general marketization policies of deregulation, liberalization and privatization. One of the main lessons of The Great Transformation is that previous globalization waves radically undermined established systems of social relations, thus provoking, in time, socially and/or nationally “protectionist” reactions, within a “double movement” (for more on Polanyi, see Zaman, 2016).

As Polanyi also observes, political reactions could be extreme:  

Divine belief in Economics at the beginning of the 21st century

from Emil Urhammer

Drinking the strength of life
from men doomed to die,
spitting the crimson blood
on all the lands of gods;
black becomes the sun
in summers to follow,
weather spells disaster –
Need you know more?

With this stanza, I begin my story of the divine belief in Economics at the beginning of the 21st century, when this faith was practised and reached the height of its glory. . . .

The disastrous climate changes that truly came into effect in the second half of the 21st century are mirrored here, and we are sarcastically reminded that extensive knowledge did not serve as sufficient motivation to take the actions necessary to avert subsequent disasters.

Thus many centuries later, it is not easy to give an in-depth explanation as to why countries and governments did so little to avert these self-inflicted disasters, whose nature was known with some certainty and whose arrival was doubted by few. However, there can be no doubt that the divine belief in Economics with its strong anchoring in central authorities and close alliance with society’s elite was of great importance to maintaining the status quo, thus preventing the necessary transitions. Based on this relationship, I find it relevant to direct my searchlight at the divine belief in Economics in the 21st century to highlight certain characteristics of this faith. Hopefully, such an investigation can improve our understanding of the tragic downfall of a civilisation.  read more

Did developing countries really recover from the Global Crisis?

from C. P. Chandrasekhar and Jayati Ghosh

We are nearing the tenth anniversary of the collapse of Lehman Brothers in the United States that sparked a Global Financial Crisis,affecting every economy in significant ways. That crisis generated extraordinary monetary policy responses in the advanced economies, with low interest rates and unprecedented expansion of liquidity, in an effort largely driven by central banks to keep their economies afloat. By contrast, expansionary fiscal policy was barely used after the first initial stimulus. In the event, even with these incredibly loose monetary policies, the advanced economies have generally spluttered along, with periodic hopes of recovery dashed by repeated slowdowns – even as asset market bubbles have emerged once again.

But the developing world was supposed to be different;its economies were supposedly more able to continue expanding because of the “catching up” propensities assumed by mainstream theorists. There was much talk of the “decoupling” of developing and advanced economies, with China and some other countries emerging as alternative growth poles – but this proved to be wrong.

It is certainly true that China, generally following more heterodox policies with substantial state direction of the economy, continued to show rapid (but decelerated) growth; and India also continued to grow reasonably fast, although much of that growth reflected increases in finance and public administration. However, overall the developing world turned out to be much more dependent upon growth in the advanced economies, and over the past decade, their economic expansion also slowed.

Figure 1: Major developing countries had lower growth in the decade after the crisis 

A Tale of Three Classes in the USA

from The Atlantic

Saez / Zucman

The indiscreet aggression of the bourgeoisie

from C. P. Chandrasekhar

Neoliberal economic policy—the framework of measures that preaches market fundamentalism but uses the state to engineer a redistribution of income and assets in favour of finance capital and big business—has lost its legitimacy. A huge financial crisis and a decade of recession or low growth, that have hurt most sections except the elite 1 per cent, have convinced the majority in many countries that neoliberalism is no alternative. That change in mood was revealed by the Brexit vote and the Trump victory among other developments. However, this has not setback but unleashed a new aggression on the part of the neoliberal elite, which fears that the state may be captured by forces that not merely promise but actually implement in idiosyncratic ways a dismantling of its preferred policy framework. Across the world big business is attempting to influence economic decision-making in ways that can save the neoliberal project from collapse.

The political challenge to neoliberalism comes from two directions. One is from the left, weak in most contexts, but still present in others. The other is from the extreme right that senses that the best way to rise to power is to appeal to sections marginalized by the neoliberal wave. If this had been mere rhetoric, there would be no real cause for concern for the elite. But once even Donald Trump, who rose to power by appealing to the alienated majority, chose to rail against globalized capital and implement protectionist policies, it became clear that threat from the right was real. 

We face disasters on every front

from Neva Goodwin and RWER issue #84

The need for reform is huge – seemingly overwhelming. Yet the motives for reform are springing up all over the place. Maybe this is a moment to be a Pollyanna, rather than a Cassandra: Yes, we face disasters on every front – political, environmental, social – but, as was long ago remarked, nothing so concentrates the mind as the prospect of hanging. The public purpose economy is staggering under the need for reform in education and politics, while the core economy is suffering from the lack of decent, secure jobs in a market economy whose inequalities belittle all but the very few who can think of themselves as the winners. No one believed Cassandra, but today there are many who know we face multiple disasters; probably most readers of this article are already suffering from Pre Traumatic Stress Disorder.[1]

Well, you’re not alone; there’s a gathering tide of despair morphing into activism. The time may have come to be, if not exactly cheerful, at least grimly determined, knowing that you are in good company. If we, individually and together – economists, as well as parents, women in general, and all people who care about the future – recognize the deformation of the private business economy as a central piece of dangers facing us, we will be better able to know where to direct our actions. 

By the 1990s, economics was a social scientific discipline fast retreating from a public role

from Michael Bernstein and RWER #84

The transformation of the American political landscape in the wake of Vietnam era had subverted the very foundations of the liberalism that had made sense out of a genuinely public economics. An emphasis on political economic issues that had framed the high tide of activist government since the Great Depression of the 1930s had provided a community of professionals with both the means and the ends to deploy their expertise. As soon as social issues concerning opportunity and equality occupied center stage, most dramatically in the formulation of the 1960s “War on Poverty”, American liberalism ran headlong into the abiding national puzzle of race and ethnicity. A backlash was the inevitable result, one that shifted a dynamic emphasis on productivity and plenty during the 1950s and 1960s to a static refrain concerning the costs and benefits, the winners and losers in market outcomes during the 1980s and 1990s. So dependent had the promise of liberalism been upon sustained growth as a vehicle of redistributive betterment and justice that the first signs of macroeconomic instability robbed it of its voice and its authority. Indeed, by the last years of the century, “New Deal liberalism” was dead, and with it the hopes and achievements of a public economics.[1]

Perhaps it was predictable, given the rightward turn of American politics in the late twentieth century, that professional economics would itself regress and retrench. A kind of naïveté coupled with an unbridled enthusiasm had propelled the discipline’s leading lights to make claims on its behalf it could not redeem. Once events, and the ideological shifts they provoked, overtook the statecraft economists had so painstakingly fashioned, their flanks were wholly exposed to an unrelenting and unparalleled assault. Reversion to classic principles, a rejection of heterodox notions, an insistence on a professional deportment unable and unwilling to join with the ideological issues in dispute, and a contentment with a return to scholarly detachment were understandable if pathetically timid reactions. 

There are no markets without governance and government and regulations.

from James Galbraith and RWER #84

. . . there are no markets without governance and government and regulations. More precisely: just as Adam Smith pointed out that the division of labor depends on the extent of the market, so the extent of the market depends on the reach of the state – on its capacity to provide security, a framework of law and justice, and to regulate effectively in the public interest. Without each of these, many if not most modern markets could not exist in their actual form.

Examples are legion. How well would cars function in cities without streetlights and stop signs? Would passengers fly in commercial aircraft in the absence of air-traffic control? Would homemakers buy and eat fresh raw vegetables if they did not have reasonable confidence of non-contamination by hepatitis and heavy metals? Would appliances and electronic equipment sell so well, if there were no assurance that they would not electrocute their owners, too often? Would banks survive without deposit insurance? Even with insurance, how stable are they when the regulators and the supervisors are taken away? To be sure, nothing is entirely safe. But in each and every instance, some level of public presence alters the economic landscape, permitting businesses and entire industries to flourish that would otherwise be much smaller, if they existed at all.

Since the origin of political economy in the 18^th century, economists have placed the productive unit – the farm, the workshop, the factory – at the center of their worldview. They have treated the rest – the infrastructure, public health, social insurance, schools and universities and the regulators – as a support system, a conceptual periphery to the productive core. In fact, as the experience of strategic bombing in Germany showed, modern factories are largely outgrowths of the infrastructure – social and physical; if they are destroyed but the infrastructure remains – as was the case in post-war Germany – the factories grow back quickly, like puffballs after a rain.

Regulation is the key institutional and political component of infrastructure.

Has Donald Trump already changed US trade?

from C.P. Chandrasekhar and Jayati Ghosh

There is no doubt that President Trump is upending global trade. He has unleashed a trade war with China as well as with some of the US’ s purported allies, using grounds of “threats to national security” to impose tariffs on many US imports. The likely retaliation will obviously affect some US exports in turn. The trajectory of world trade suddenly looks quite uncertain – and this will also depress investment across the trading world.

So the Trump effect on world trade is clearly just beginning. But the naked self-interest of Trump’s moves, the “America first” orientation declared by the US President should not be interpreted only in the doom saying tones of much of the mainstream media. The truth is that this orientation is not new: US trade policy always put the US first – or at the very least, privileged the interests of US capital vis-à-vis all other players. The US strongly influenced the Uruguay Round of the GATT that introduced many new elements into trade negotiations (such as services, intellectual property provisions and trade-related investment measures) to benefit US multinationals.  

RWER no. 84 – special issue

Special issue on the public economy and a new public economics

download whole issue

edited by Michael Bernstein and June Sekera

Reconstructing a public economics: markets, states and societies          2
Michael A. Bernstein          download pdf

There is more than one economy          16
Neva Goodwin         download pdf

The public economy: understanding government as a producer.          36
A reformation of public economics
June Sekera         download pdf

Economic benefits of public services          100
David Hall and Tue Anh Nguyen          download pdf

Bureaucracy shouldn’t be a dirty word:
the role of people-responsive bureaucracy in a robust public economy          154
Janine R. Wedel          download pdf

The need for a new public administration          170
James K. Galbraith          download pdf

Industrial policy, then and now          178
Victoria Chick         download pdf

Putting the nation-state back in: public economics and the global economy          189
Michael Lind          download pdf

The entrepreneurial state: socializing both risks and rewards          201
Mariana Mazzucato          download pdf

Board of Editors, past contributors, submissions, etc.          218

Long-term trends in U.S. income distribution – 2 graphs

 

“Health expenditure”

Source: https://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_per_capita#/media/File:OECD_health_expenditure_per_capita_by_country.svg

Walmart’s gamble and what it means for India

from C. P. Chandrasekhar

Much of the writing on Walmart’s purchase of a dominant 77 per cent stake in Flipkart, touted for long as India’s answer to Amazon, is focused on its size. At $16 billion, of which $14 billion goes to buy up the stakes of investors such as SoftBank from Japan and Naspers from South Africa, it is reportedly the biggest acquisition in the global e-commerce area, and way larger than $3.3 billion that Walmart paid for US web retailer Jet.com in a deal considered the largest purchase of a US e-commerce startup. With some existing shareholders exiting, Walmart now shares ownership with co-founder Binny Bansal, Tencent, Tiger Global and Microsoft. The size of the acquisition, and Walmart’s keenness to acquire Flipkart it reflected, is seen as indicative of India’s importance to the world economy, and not just to international capital. What is missed in this perspective is the impact that this kind of transition has for Indian-owned business, which is the instrument through which India can be seen as participating meaningfully in the global capitalist economy.

The reason why Walmart is interested in the acquisition of Flipkart, at a price which most observers feel implies an unwarranted premium and valuation, is clear. The company that had dominated the brick-and-mortar retailing business in the United States for long has, as in the case of many other players from the ‘old economy’, not been able to keep pace with the disruption that technology has caused. As the share of aggregate sales through online retail creeps up in the US, the company has lost market share to Amazon since its foray into the e-commerce realm has not been too successful. 

Is CORE a pluralist economics curriculum?

from Ioana Negru

Core (the acronym for Curriculum Open Access Resources in Economics) is a project led by professor Wendy Carlin from UCL, UK, that aims to improve the content and delivery of the economics curriculum around the world. Other remarkable economists have been and are part of this project such as Diane Coyle and Samuel Bowles.

According to the website of the project, www.core-econ.org CORE is:

“a) a global community of learners, teachers and researchers;

1. b) a problem- motivated and interactive way to learn economics;
2. c) bringing recent developments into the classroom;
3. d) giving everyone the tools to understand the economics of the world around   them”.

As Mearman et al (2016: 5) explain: “CORE is a large undergraduate year one course called ‘The Economy’, which itself comprises nineteen modules on a range of topics. CORE is neither a Massive Online Course (MOOC) nor a course in the traditional sense, but an online resource, a frame to be elaborated”. According to the same authors, CORE represents both an ‘improvement’ and a ‘missed opportunity’. On the one hand, CORE employs historical and experimental data and draws on the history of economics or new branches of economics such as theory of games, covering thus a variety of topics. On the other hand, the course is rife with concepts and elements unsupported by evidence, such as utility maximization that constitute fundamental components of CORE (Mearman et al 2016).

The reactions to CORE, both from the media and the academic world, have been mixed.  Read more

US student loan debt explosion

Once again, the Oil Price Scare

from C. P. Chandrasekhar and Jayati Ghosh

The news last week that prices of Brent Crude oil (which is used as a global benchmark) had crossed $80 a barrel in some markets must have created shock waves in policy circles of many countries, especially India. Many oil-importing countries had grown comfortable with – and even complacent about – the relatively low oil prices that persisted after their precipitous drop in the middle of 2014.

As Chart 1 shows, average oil prices feel very sharply after June 2014, falling by 56 per cent just in the months until January 2015, and by more than 70 per cent from their earlier peak in 2012. Thereafter, they mostly remained at relatively low levels until January this year. This reflected the general deflationary atmosphere prevailing in the global economy, as well as subdued demand in the face of significantly increased supply because of the shale boom in the US as well as more production in countries like Iran as sanctions were lifted.