Author Archive

Comparing income inequality in the United States and France

May 18, 2017 2 comments

The bottom 50 percent of income earners makes more in France than in the United States even though average income per adult is still 35 percent lower in France than in the United States (partly due to differences in standard working hours in the two countries).9 Since the welfare state is more generous in France, the gap between the bottom 50 percent of income earners in France and the United States would be even greater after taxes and transfers.

Read more…

Positional analysis: what it is and why economists need it

May 4, 2017 Leave a comment

from Peter Söderbaum, Judy Brown and Małgorzata Dereniowska and WEA Commentaries

What would an alternative economics and economy look like for a sustainable future? As with any normative vision, such as that of a sustainable economy and society, a variety of responses and perspectives can be legitimately sought. Out of those, for many economists, only the perspectives that result in outcomes that are (potentially) Pareto improvements are economically meaningful. But sustainability and democratic legitimization of sustainability values in some respects displays some inefficiency in terms of utility (e.g., loss of time needed to implement democratic procedures or to collectively develop a shared normative vision of sustainability), or can be judged differently depending on the process employed in arriving at a sustainable outcome. Indeed, the inherent ethical dilemma of sustainable development between economic efficiency, social equity, and environmental conservation are not practically separable. What if we turned around the question to think about an alternative vision of economics, economic analysis, and decision making approaches that makes room for plural normative criteria without predefining their ranking within decision processes, and illuminates social conflicts, instead of obscuring them with value-neutral ‘representational’ claims? This alternative idea underlies positional analysis (PA) that addresses both the outcome and the process, with explicit attention paid to their ethical and political content, at the level of analysis, planning, and decision making.   Read more…

America’s hidden pains

April 28, 2017 3 comments

from William Neil

We begin with some gross numbers from Das’ Age of Stagnation: the loss of wealth from the Great Recession of 2008-2009. Citing the work of three economists at the Federal Reserve Bank of Dallas (Tyler Atkinson, David Luttrell and Harvey Rosenblum), the figures they put on the loss to the U.S. economy come to 6-14 trillion dollars, “equivalent to U.S. $50,000 to U.S. $120,000 for every American household, or 40-90% of one year’s economic output”. We’ve seen figures of family distress ranging from $20,000-$60,000, largely representing losses in the stock market, which seem on target from direct personal experience. The other factor driving towards a more lasting economic pain are those who lost enough in straight financial terms to forestall market re-entry, matched with a psychological aversion to ever trusting it again. Additionally, pension fund retirement viability was affected by the same dynamics. These factors must be considered, as difficult as they are to quantify, to qualify the otherwise impressive performance after 2010 in the financial markets, they being supported by all the permutations known as Quantitative Easing, American and European versions.   Read more…

The market paradigm versus the production paradigm

April 27, 2017 8 comments

from Robert Wade

Why have the large majority of professional economists, especially in the academy and in western-dominated international organizations like the World Bank and IMF, been committed to free trade policy, downplaying theoretical and empirical weaknesses in order to remain so?

The teaching of economics in just about all universities of the western world, and in large parts of the developing world, socializes students into belief in the rightness of the “market” paradigm, and the more “rigorous” the training the more thoroughly socialized they become.[1]  The paradigm focuses on price competitiveness – free labor markets, flexible prices, free international trade – as the key to national competitiveness. It treats the market system as “self-organizing”, firms being essentially passive except for competing in price. It treats technology as external to production, as something which firms can buy on the market. It has no built-in process of innovation, no conception of an “industrial ecosystem” of firms competing and cooperating with each other.[2] With all these things stripped out, the culture of the profession elevates belief in comparative advantage and free trade as the litmus test of competence to be an economist, as the earlier quote from Krugman suggests.  Read more…

Trump is repeating exactly the same script that has guided neoliberal policy for over three decades.

April 26, 2017 8 comments

from Jim Stanford

However it is explained in economic theory, the fundamentally productive, entrepreneurial role of capitalist investment is essential to the political and social legitimacy of the elites who lead the system – and who own and profit from the bulk of its wealth. Indeed, the thriftiness of the early capitalists, and their willingness to plough their savings back into growth, accumulation, and innovation, is precisely what endeared this dynamic new class to the classical economists. Smith, Ricardo, and their colleagues celebrated the productive leadership of capitalists, and developed policy recommendations which consistently favoured that class accordingly: everything from tariff reduction on imported food (to reduce real wage bills) to the expansive enshrinement of property rights. Anything that granted more money and certainty to productive, ambitious investors would be good for the economy, and the rest of society would benefit accordingly. That core idea (albeit perverted by the analytical twists and inconsistencies of neoclassical theory) lives on in the “trickle-down” policy vision which defined neoliberalism from the outset. Neoliberalism was a response to the deceleration of private accumulation after the long postwar boom. That slowdown was due in part to constraints on business imposed by workers, governments, and liberation movements in the former colonies.   Read more…

Exacerbation of the contradiction between democracy and capitalism

April 24, 2017 25 comments

from Alicia Puyana

While the 2008 crisis called into question the fundamentals of economic theory over which the model of global growth had been sustained for the last three and a half decades, today we witness the crisis of liberal democracy and neo-liberal economics (Bauman, 2016), of the Social Democracy doctrine, the New Labor and waning The Third Way, as well as the fading out of the unrestricted support of globalization (Rodrik, 2017). Some foresee it as the end of the Pax Americana, or US hegemony established since the end of the Second World War and the world order that emerged thereafter (Roubini, 2017). For Trump, the costs of maintaining US imperialism are unacceptable; qualifying NATO as obsolete and its members as free riders and suggesting nuclear proliferation of Japan and Korea while keeping the USA “at the top of the pack” (Trump 2017) would be a sensible strategy, as it would reduce for the US the cost of defending these countries. In reality he is not an isolationist. He aims at controlling word order in his own terms: reinforcing the military power elements of the international security policy and weakening the elements of world peace, that inspired the II WW peace agreements and described in  F.D. Roosevelt 1944  State of  the Union Speech (Roosevelt, 1944), for whom security was not only preventing foreign aggressions but also avoiding any threats to  economic, social and moral security, because a basic element of world peace is  “a decent standard of living for all individual men and women and children in all Nations” (Roosevelt, 1944). Furthermore, for Roosevelt, peace depended on “…freedom from fear which is eternally linked with freedom from want” (Roosevelt, op cit.).   Read more…

Trumponomics: Neocon neoliberalism camouflaged with anti-globalization circus

April 20, 2017 3 comments

from Thomas Palley

A key element of Trump’s political success has been his masquerade of being pro-worker, which includes posturing as anti-globalization. However, his true economic interest is the exact opposite. That creates conflict between Trump’s political and economic interests. Understanding the calculus of that conflict is critical for understanding and predicting Trump’s economic policy, especially his international economic policy.

Read more…

Trumponomics and social prosperity

April 19, 2017 10 comments

from Robert Locke

The management principles Trump evokes in Think Big and Kick Ass are those for self-enrichment reminiscent of robber barons during the Gilded Age. In his election campaign Trump promised to use his knowhow to restore prosperity to the dispossessed white middle class in rust belt communities. Will his management principles, if they served him and other billionaires well, do the same for the white middle class communities? This is a question economists seldom ask since they exclude management systems and methods from their analytical purview. It is also a question that Trump has not asked, inasmuch as he attributes the impoverishment of industrial America’s white middle class to NAFTA and other trade agreements, misguided environment policies that destroy jobs, e.g., in coal-mining regions, and tax provisions that encourage corporations to move manufacturing off shore. If economists and Donald Trump ignore the management question, historians have not, and for good reason.

History involves specificities that differ in time and place. The specific time referred to here in US history is when in the 1980s and 1990s the old staple mass production industries (automobiles, steel, rubber, consumer electronics, and their suppliers) succumbed to Japanese competition. Trump is a great believer in what the Germans call the Führerprinzip (leadership principle), which he thinks is the key to success. A good leader is needed to harness the will and energy of the people in the enterprise and the nation, for “without leadership,” he says, “organizations slowly stagnate and lose their way… Leaders influence behavior, change the course of events and overcome resistance and therefore leadership is regarded as crucial in implementing decisions successfully.”  Read more…

Can we avoid another financial crisis?

April 12, 2017 10 comments

In 2008, conventional economics led us blindfolded into the greatest economic crisis since the Great Depression. Almost a decade later, with the global economy wallowing in low growth that they can’t explain, mainstream economists are reluctantly coming to realise that their models are useless for understanding the real world.

How did mainstream economists not see the crisis coming? Was it unpredictable, as they now assert, or did their theory blind them to the real causes? Will another financial crisis occur?

These questions and others are asked and answered in Steve Keen‘s new book Can we avoid another financial crisis? , a short (25,000 word) explanation for the lay reader of how we got into this economic mess, and why we are unlikely to get out of it.


Read more…

What does Trumponomics mean for developing countries?

April 12, 2017 Leave a comment

from Jayati Ghosh

Mr Trump’s policy stance will, however, mean that the United States – which has been providing less and less of a positive demand stimulus to the rest of the world economy ever since the Global Financial crisis – will continue to shrink its import demand and add to the forces that are making global trade decelerate and even decline.

What does all this mean for developing countries? First, that those who are worried are right to be worried, but perhaps not for the reasons most commonly cited, such as the threat of trade protectionism. Rather, Mr Trump presents a disruptive force in an already febrile and volatile global economic environment, which is weakened not by his election, but because global capitalism had clearly reached the limits of pushing that particular strategy of accumulation. This was increasingly evident in the “secular stagnation” that seemed impervious to massive injections of liquidity and near zero or even negative interest rates, and in economic trajectories that no longer seem to generate stable and regular employment.  In turn, the disruption that Mr Trump generates in turn is only partly because of his actions, and probably even more because of the very impact that his statements and the surrounding chatter have on expectations, both in financial markets and in real economic activities.   Read more…

Trumponomics and the inadequacies of the mainstream neoclassical economics orthodoxy.

April 8, 2017 4 comments

from Julie Nelson

I thought that any reasonable person would be revolted by the narcissistic, juvenile, bullying, lying behavior of the Republican candidate, and realize that he was clearly unfit for office. As an economist, I was taken aback by the variously kleptocratic and fantastical aspects of Trump’s intended economic directions. As a feminist and ecological economist, I was especially appalled by Trump’s braggadocious pussy-grabbing and climate-change-denying. While, according to the popular vote, a majority of voters saw Trump this way, my assumptions clearly did not apply to a substantial and vocal minority.

On further reading, conversing, and reflection, however, I’ve come to think that the causes of this disastrous event are not unrelated to something that I’ve been writing about for a long time: the inadequacies of the mainstream neoclassical economics orthodoxy. Mainstream economics and liberal political philosophy have in common a particular story about human beings and how we relate to each other in society. Both have emphasized individuality, reason, freedom, and a marketplace or public sphere in which agent-citizens interact, at somewhat of a distance, as peers and equals.  Both have, correspondingly, neglected much about what makes us human, and about how we evolved as social beings. My serious mistake was in thinking that we, as a discipline and a society, might be able to move past this one-sided view in a positive direction.  read more


The elite globalization consensus

April 6, 2017 13 comments

from Robert Wade

In this context globalization refers to the opening of domestic markets and the integration of global production via multinational corporations (MNCs). More broadly, it refers to  movement in the world economy towards “one country”, or “deep (not shallow) integration”, where nation states have no more influence over flows of goods, services, capital, finance, ideas and people across borders than South Dakota or the other US states have across theirs. Ever since the 1980s leaders of western states – including shareholders and top executives of MNCs – have agreed that states, on their own and cooperating (in free trade agreements, and in inter-state organizations like the World Bank, IMF, World Trade Organization, European Union), should push for ever more globalization, more “market access” for their corporations, and less state “intervention” or “regulation” in markets.

Here is Martin Wolf of the Financial Times, one of the world’s most influential economic commentators:

“It cannot make sense to fragment the world economy more than it already is but rather to make the world economy work as if it were the United States, or at least the European Union… The failure of our world is not that there is too much globalization, but that there is too little. The potential for greater economic integration is barely tapped… Social democrats, classical liberals and democratic conservatives should unite to preserve and improve the liberal global economy against the enemies mustering both outside and inside the gates” (emphasis added).[1]

Here is Renarto Ruggiero, former head of the WTO:  Read more…

Globalization and The Great Reversal

April 3, 2017 4 comments

from Jacques Sapir

Globalization is not, and never was, “happy” whatever various ideologues said. The idea that “sweet commerce”, was to be substituted for warlike conflicts, was much propagated. But, in truth, it was only a myth. Still, the warship preceded the merchant ship. The dominant powers have constantly used their strength to open up by force markets and modify the terms of trade as they see fit. The globalization that we have witnessed for nearly 40 years has been in combination with financial globalization, which has taken place with the unraveling of the system inherited from the Bretton Woods agreements in 1973. We are seeing today the result: a generalized march to regression, both economic and social, which strikes first the so-called “rich” countries but also those designated as “emerging” countries. It has led to the overexploitation of natural resources, plunging more than one and a half billion human beings into ecological crises that are getting worse every day. It has caused the destruction of social ties in a large number of countries, and there are also countless masses in the specter of the war of all against all, to the shock of an exaggerated individualism that suggests other regressions.[1]

At the root of this reversal we see the decline in incomes of the lower middle classes and the working class. And this drop is largely due to globalization.[2] The gap between the highest 1% and the lowest 90% has greatly increased since the 1980s as shown in Thomas Piketty’s work.[3] This discontinuation was confirmed by another study dating from 2015.[4] This discrepancy is also reflected in the drop-off between the rate of increase in labor productivity and the rate of hourly wages. While the two curves appear almost parallel between 1946 and 1973, which implies that productivity gains have also benefited wage earners and capitalists alike, it is no longer the case after 1973.  Read more…

America’s hidden pains

April 1, 2017 12 comments

from William Neil

We begin with some gross numbers from Das’ Age of Stagnation: the loss of wealth from the Great Recession of 2008-2009. Citing the work of three economists at the Federal Reserve Bank of Dallas (Tyler Atkinson, David Luttrell and Harvey Rosenblum), the figures they put on the loss to the U.S. economy come to 6-14 trillion dollars, “equivalent to U.S. $50,000 to U.S. $120,000 for every American household, or 40-90% of one year’s economic output”. We’ve seen figures of family distress ranging from $20,000-$60,000, largely representing losses in the stock market, which seem on target from direct personal experience. The other factor driving towards a more lasting economic pain are those who lost enough in straight financial terms to forestall market re-entry, matched with a psychological aversion to ever trusting it again. Additionally, pension fund retirement viability was affected by the same dynamics. These factors must be considered, as difficult as they are to quantify, to qualify the otherwise impressive performance after 2010 in the financial markets, they being supported by all the permutations known as Quantitative Easing, American and European versions.    Read more…

Trumponomics: causes and consequences – Part II – RWER issue no. 79

March 31, 2017 Leave a comment

download whole issue

Economic policy in the Trump Era          2
Dean Baker          download pdf

Major miscalculations: globalization, economic pain, social dislocation and the rise of Trump      13
William Neil          download pdf

Trumponomics and the developing world          29
Jayati Ghosh          download pdf

Nature abhors a vacuum: sex, emotion, loyalty and the rise of illiberal economics          35
Julie A. Nelson          download pdf

Is Trump wrong on trade? A partial defense based on production and employment          43
Robert H. Wade          download pdf

President Trump and free-trade          64
Jacques Sapir          download pdf

U.S. private capital accumulation and Trump’s economic program          74
Jim Stanford          download pdf

Trumponomics and the “post-hegemonic” world          91
Barry K Gills and Heikki Patomäki          download pdf

Pussynomics: regression to mean          108
Susan Feiner          download pdf

Trump’s contradictions and the future of the Left          115
Boris Kagarlitsky          download pdf

Trumponomics, firm governance and US prosperity          120
Robert R Locke          download pdf

Donald Trump, American political economy, and the “terrible simplificateurs”          136
Kurt Jacobsen and Alba Alexander          download pdf

Mexico, the weak link in Trump’s campaign promises          142
Alicia Puyana          download pdf

“Unemployment”: misinformation in public discourse          158
Edward Fullbrook          download pdf

Board of Editors, past contributors, submissions and etc.          163          

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Will Trump’s victory break up the Democratic Party?

March 30, 2017 7 comments

from Michael Hudson

At the time this volume is going to press, there is no way of knowing how successful these international reversals will be. What is more clear is what Trump’s political impact will have at home. His victory – or more accurately, Hillary’s resounding loss and the way she lost – has encouraged enormous pressure for a realignment of both parties. Regardless of what President Trump may achieve vis-à-vis Europe, his actions as celebrity chaos agent may break up U.S. politics across the political spectrum.

The Democratic Party has lost its ability to pose as the party of labor and the middle class. Firmly controlled by Wall Street and California billionaires, the Democratic National Committee (DNC) strategy of identity politics encourages any identity except that of wage earners. The candidates backed by the Donor Class have been Blue Dogs pledged to promote Wall Street and neocons urging a New Cold War with Russia.

They preferred to lose with Hillary than to win behind Bernie Sanders. So Trump’s electoral victory is their legacy as well as Obama’s. Instead of Trump’s victory dispelling that strategy, the Democrats are doubling down. It is as if identity politics is all they have.

Trying to ride on Barack Obama’s coattails didn’t work. Promising “hope and change”, he won by posing as a transformational president, leading the Democrats to control of the White House, Senate and Congress in 2008. Swept into office by a national reaction against George Bush’s Oil War in Iraq and the junk-mortgage crisis that left the economy debt-ridden, they had free rein to pass whatever new laws they chose – even a Public Option in health care if they had wanted, or make Wall Street banks absorb the losses from their bad and often fraudulent loans.   Read more…

As the rich received a bigger piece of the pie, everyone else got relatively less.

March 28, 2017 2 comments

from Steven Pressman

According to Thomas Piketty (2014), between 1980 and 2010 the share of total US income going to the top 10% of earners rose from around 30-35%, where it stood for several decades, to nearly 50%. These are very conservative estimates. Piketty’s figures come from the distribution of adjusted gross income (AGI), reported by the US Internal Revenue Service. AGI subtracts from income things like investment losses, retirement account contributions and their returns (see Pressman 2015, Chapter 2). With large adjustments, someone can make a lot of money but have little AGI; or, as in the case of Donald Trump, you can report a negative AGI of nearly $1 billion. In addition, tax-free income (such as unrealized capital gains and interest on municipal bonds), as well as returns on money hidden in tax havens, are not reported to the IRS and do not appear in AGI. Like the adjustments helping Trump avoid taxes, this income mainly goes to the wealthy and has been growing for several decades (Zucman, 2015).

As the rich received a bigger piece of the pie, everyone else got relatively less. We can see this in the falling share of income going to the middle-three income quintiles (Figure 1).   Read more…

Trumponomics: End globalization and bring the jobs home

March 27, 2017 2 comments

from L. Randall Wray

Trump has put forward a number of proposals related to the theme of ending globalization – including renegotiating NAFTA and pulling out of the TPP – many of which were directed at China and other exporters. Like many American politicians, Trump has claimed that China is a “currency manipulator” and promises to pursue an investigation. He’s proposed large tariffs to be slapped on imports (variously suggested as 45% on Chinese exports to the US, 20% on all imports, and 35% on Mexican imports)[1], and particularly on American firms that move jobs overseas (proposing a 15% tax on firms that do so). As mentioned, he promised to create 25 million good jobs over the next decade, many of those by bringing the jobs home. One of his first acts was to “save” jobs at Carrier that had been destined to go to Mexico – supposedly proof of his touted negotiation skills – and suggests he will continue to put pressure on individual firms to stay put.   Read more…

Can Trump overcome secular stagnation?

March 25, 2017 13 comments

from James K. Galbraith and RWER no. 78

Could the economic program of President Donald Trump, if enacted, overcome secular stagnation? This essay addresses part of that question, focusing on the effects of a changing macroeconomic policy mix and thrust in the present US national and global context. A separate essay will address considerations on the supply side.

The phrase “secular stagnation” is usually attributed to the early post-war Harvard economist Alvin Hansen, one of the first American disciples of John Maynard Keynes, who used it to argue that the American economy would return to the Great Depression once the Second World War ended. Today, secular stagnation is defined by Lawrence Summers, who defines it as the condition of a “low real neutral rate of interest”, or in Fed-speak a “low R* world”. A neutral rate of interest (“R*”) is said to be the one that neither increases nor restrains the economic growth rate. If such a rate exists and if it is close to zero, then monetary policy cannot spur growth, and a big-deficit fiscal policy is required.

For this reason, it is argued, the great recession-cure of “Quantitative Easing”, so highly touted a few years back, proved to be mostly a dud. But fiscal policy would have better luck, whether through increased public spending or tax cuts, although only so long as the fiscal push is not offset by higher interest rates. If interest rates rise, in a “low R* world” then the fiscal expansion will fail. This tension between fiscal and monetary forces is of great importance just now, as Donald Trump assumes the presidency on a program of infrastructure spending and tax cuts, while interest rates are starting to rise.   Read more…

The capital-mobilising deal maker

March 23, 2017 19 comments

from Jamie Morgan and RWER no. 78

As a brand, Trump is also a particular kind of contemporary businessman. He positions himself as a maker of “deals” rather than a maker of things, though his wealth is rooted in construction and property. He is an owner of portfolio assets, who uses these to leverage new ventures where he is able to conjure personal gain from situations where material benefits to the many may be lacking. His skill set is one of concentration and extraction of returns, and the externalisation of costs and losses. Based on that skill set profits can artfully appear and equally disappear (with tax consequences) in ways that have little to do with the simplistic concepts of theory of the firm. The solution to any problem is an additional incorporation, a

transfer of assets, a lawsuit that deters others, a no fault out-of-court settlement that protects oneself, a debt restructure or perhaps a timely Chapter 11 bankruptcy declaration. Being proficient along these lines can make one a billionaire, particularly if one starts with a core of inherited wealth for collateral and has access to a network.[1]

Read more…