from Ali Kadri
The earliest places to develop into sedentary cultures were to be found in the present-day Mashriq (Ancient Syria and Mesopotamia) pursuant to the early agricultural revolution. The crevice at the end of the Great African rift known as the Fertile Crescent is a natural gathering ground for domesticable animals; it enjoyed regular rainfall and a variety of easily cultivable cereals. Good soil quality circa 2000 B.C. produced about the same tonnage of barley as in early 1970 (Hilou, 2004). The steady development of tools and modes of social organisations required regulation and the pacification of the labouring class. Measures for trade and laws to attenuate repression and limit the appetite of the clergy represent the first set of written rules intended to steady the course of development – the Code of Ur-Nammu, 2100 B.C. The code addresses three vital points: the ruling on weight for trade, a limit to what the clergy could extract in tribute and, a statement ensuring the protection of the vulnerable from the transgression of the powerful. These precepts crown the notion of the ‘Just Man’ of the East (Al-Alawi, 2009). Read more…
The latest ECB Economic Bulletin states: “In Portugal, the 2009-13 reforms have already raised the levels of productivity and potential GDP. According to OECD estimates the reforms will have resulted in a 3.5% increase in these variables by 2020″. This quote, from an article titled “Progress with structural reforms across the euro area and their possible impacts”, reminds one of the 1947 Isaac Asimov story about the endochronic nature of thiotimoline, the compound which “will dissolve before the water is added“. I mean – is it 2020 already?
The article is profoundly researched when it comes to neoclassical models – but lacks a proper diagnosis of the present situation and totally ignores even ECB papers which, when looking at the present day situation in the Eurozone in a serious way, produce results which makes the neoclassical view of events crumble. Read more…
from David Ruccio
1) Do we know how rich we are? One of the problems with the (invaluable) work of Piketty is how to value assets. GDP accounts basically use transaction prices – but many assets are not traded and we have to use other values or prices like book value, assessed market prices, rebuilding value or something like that. Think of the valuation of natural reserves of oil or dikes (the discounted value of assessed future streams of income is not used by statisticians, as this measure is too fickle – if measurable at all, as in the case of dikes). This means that assessed asset values can be quite volatile – as shown by the estimated value of Dutch net international assets (graph) – using another assessment method of the stock value leads to a 100 billion difference - even though estimated current account surpluses (a flow) stayed basically stable. Not that despite decades of current account surpluses in 2008 the Netherlands had a negative international investment position (the ‘Dutch black hole’, caused by bad investments…). The large change in the net position is also caused by the fact that it is… a net position. A relatively small change in total assets or liabilities can show up as a relatively large change in the net position. Even then, 100 billion is a lot…
from Peter Radford
Willford King has written:
“It is easy to find a man in almost any line of employment who is twice as efficient as another employee, but it is very rare to find one who is ten times as efficient. It is common, however, to see one man possessing not ten times but a thousand times the wealth of his neighbor … Is the middle class doomed to extinction and shall we soon find the handful of plutocrats, the modern barons of wealth, lined up squarely in opposition to the propertyless masses with no buffer between to lessen the chances of open battle? With the middle class gone and the laborer condemned to remain a lifelong wage-earner with no hope of attaining wealth of even a competence in his old age, all the conditions are ripe for a crowning class-conflict equaling in intensity and bitterness anything pictured by the most radical follower of Karl Marx. Is this condition soon coming to pass?” [Emphasis in original]
That was in 1915. My how times change.
Well maybe not. That comment about the middle class has a very contemporary ring to it.
A couple of things pop out at me when I read that quote – no doubt you will find your own emphasis. Read more…
Troika economists have a problem. It’s huge: cutting wages clearly did not work as intended, which goes against their deepest convictions. In such a situation people tend to rationalize. To quote Goethe: “intelligent people are sharpest when they are… wrong“. Some recent publications enable us to investigate the rationalization process of among others ECB economists. One of these is a Voxeu piece by Eric Bartelsman (head of the department of economics of the Vrije Universiteit van Amsterdam), Filippo di Mauro (senior advisor in the research department, ECB) and Ettorre Durucci (head of the convergence and competitiveness division, ECB) which clearly shows that cutting wages did not work as intended (see their figure 1). How did they cope with this?
Figure 1. Relative prices and activity in selected Eurozone countries (change between the year of the ULCT-deflated REER peak and 2014 projected)
Figure 1 shows that
* As a consequence of austerity the ‘Real Effective Exchange Rate (REER)’ of countries like Spain, Ireland, Greece, Latvia and the like declined a lot (i.e.: exports became much cheaper). This was totally intended.
* But this did not lead to the expected increase in net (!) exports Read more…
1) Simon Wren-Lewis looks at the facts and finds that The UK prime minister lies about Greece. The truth:
“The real travesty however is in the implication that somehow Greece failed to take the ‘difficult decisions’ that the UK took. ‘Difficult decisions’ is code for austerity. A good measure of austerity is the underlying primary balance. According to the OECD, the UK underlying primary balance was -7% in 2009, and it fell to -3.5% in 2014: a fiscal contraction worth 3.5% of GDP. In Greece it was -12.1% in 2009, and was turned into a surplus of 7.6% by 2014: a fiscal contraction worth 19.7% of GDP! So Greece had far more austerity, which is of course why Greek GDP has fallen by 25% over the same period“.
2) Norbert Häring looks at the facts and finds that the ARD (German television) lies about Greece (In German, a whole list of inaccuracies, outright mistakes, wrong data and dishonest reporting)
3) Bill Mitchell goes the additional theoretical and empirical miles to take down a crucial austerity document from Brussels. The truth: lowering wages did not work anymore once everybody started to do this (and not just Germany).
Soon, I’ll write a little about ‘inside the neoliberal mind’. To be able to do this I have to establish my credentials: no, I’m not just an armchair economists but also do know a little about lots of real life companies (largely thanks to the internships of my students) and I will blog about these so now and then. Lots of these companies are truly amazing and worth telling about. Not all companies are amazing – but I tell my students that even crappy ones are survivors which in a competitive economy is quite an accomplishment.
A) Meet Avonturia. Even a pet shop can be an experience. A constructionworker became disabled which made him turn his hobby -birds- into a living. His sons wanted to join this trade – which meant that they had to expand. The options: three large ‘normal’ pet shops at an A location – or ‘Large and Loony’, i.e. Avonturia Their secret: push it to the limit: inside the shop they have a ‘brasserie‘. Which has the best tea bar I’ve seen in my life. In a pet shop… Also: Schulp fruit juices, again the best. Like the whole shop, including this. Read more…
Before the industrial era, was the agrarian era, when the chief type of property whose inheritances determined the aristocracy consisted of land. With the onset of industrialization, after around 1600, corporate stock emerged increasingly to become the chief form of property whose inheritance determined the aristocracy. No longer was the aristocracy the possessor of the landed estates, which collectively constituted the given nation; the aristocracy increasingly became instead the possessor of the vast corporations, which collectively controlled the nation’s economy. Instead of a nation consisting primarily of its land, it came to consist increasingly of its corporations.
However, just as there was an agrarian-era conflict between the masters and their serfs; that is, between the aristocrats and the public; there came now to be an industrial-era conflict between the corporate owners and their hired servers; that is, between the aristocrats and their workers.
In both eras, there has been this same conflict for control of the government, or of the “State” – the body-politic. Dictatorships during the agrarian era were kingdoms, in which the owners of the landed estates chose the king or equivalent monarch as the supreme ruler. Dictatorships during the industrial era are instead nations, in which the owners of the corporations choose the Duce, Fuehrer, Shah, or other supreme ruler.
Both during the agrarian era, and during the industrial era, there have been political movements for the public, or the demos, to control the government, via democracy – no dictatorship at all. Read more…
The most famous Keynes quote is no doubt:
“But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”.
But ECB economists clearly do not grasp the wisdom of these words. I was reading the recent ECB document: “Progress with structural reforms across the Euro Area and their possible impacts“. I’ll write more about this. For now: after seven years of continuous decline and/or deflation of the Greek economy and an about 25% contraction the ECB economists dare to state (based upon a 2013 IMF report):
“A number of structural reforms were implemented in Greece. The IMF estimates that policies which close roughly half the gap in product and labour markets with the rest of the euro area – which seems to be what Greece achieved … according to changes in the OECD’s product market regulation (PMR) and employment protection legislation (EPL) indicators – could raise real GDP by about 4% after five years and by 10% in the long run.”
About these reforms: the article shows that of all Eurozone countries Finland scores about the highest when we look at ‘product market regulation’ and ‘employment protection legislation’ (‘high’ meaning: approved by neoclassical economists). That’s the template for Greece! But it seems that for Finland, too, the tempestuous season still hasn’t ended…. (graph).
I do think – but in this case my opinion is humble, as I did not talk with Greek business owners – that Greece should make doing business and more reforms and changes are welcome, like finally completing the cadastral survey. But this alone won’t solve the problems. Not anytime soon. And not in the long run, either.
A long post from Erwan Mahé – but immensely readable. It shows how ideas from academic scribblers (especially about the nature of money and (un)employment) directly guided central bank discussions and policies in a crucial period (some articles are even explicitly mentioned by Yellen!). Don’t forget, however, the anonimous data produced by economic statisticians, which with their strengths, weaknesses and unavoidable biases guide policy too. In the end it’s about wich theory is, at a central bank, used to understand this data. MK. Read more…
from David Ruccio
The discussion of capital and labor shares puts the issue of class at the top of the agenda. No wonder, then, that mainstream economists are expending so much effort these days attempting to define away the problem.
Let me explain. Read more…
from Dean Baker
Last fall, India’s new Prime Minister, Narendra Modi, met with President Obama in Washington. According to the public accounts, the meeting was friendly with both sides hoping for stronger diplomatic and economic ties. The Obama administration was eager to report that India had agreed to set up a working group to re-examine its patent laws, with the implicit goal of making them stronger.
This item got little attention in the United States, but it was big news in India. India has the world’s leading generic drug industry. It not only supplies the billion-plus population of India; it also provides high-quality, low-cost generic drugs to much of the developing world.
A large part of the reason for the success of India’s generic industry is its treatment of patents. It had eliminated patents on drugs back in the 1970s in order to promote the development of the generic industry. As required by the TRIPS accord, India reintroduced patent protection in 2005, however it typically applies much stricter standards than in the United States and Europe. Read more…
The Greek ‘accomodation and food service’ sector last tuesday intentionally insulted the Troika by showing the highest rate of job growth of this sector of the entire Eurozone. Flabbergasted economists in Brussels and Frankfurt were heared shouting “:we’ve never experienced anything like this” and “this ruins our reputation as serious economists”! According to anonimous sources they even stated: “this has to stop, these cheaters do not play according to our rules and are giving us the finger!” as well as “don’t you understand it, a demand led recovery in Greece flies in the face of our models, that just can’t be”.
from David Ruccio
Yesterday during my office hours, on the eve of the 2015 NCAA tournaments, I spent some time with a student discussing the “unmistakable whiff of the plantation” associated with major-college athletic programs. I then sent them to read Taylor Branch’s 2011 article in The Atlantic.
It just happens that, today, George Yancy published his conversation with Noam Chomsky about the unmistakable legacy of slavery and “slavery by another name” in the United States. I reproduce the first part of that conversation below.
Here are a few charts to put the current situation (with respect to racial disparities in poverty, unemployment, wealth, and incarceration) in perspective: Read more…
Is the Greek economy inflexible and unable to create jobs? Not really. The rebound (and more) of tourism led, in 2014, to one of the highest job growth rates of Europe, demand led of course. Despite this, unemployment did not really come down… talk about flexibility of labour supply! A case can even be made that the Greek labour market, with its unusual high percentage of self-employed (look here, El is Greece), is one of the most ‘flexible’ of Europe. Unemployment benefits are for instance also quite low, not available for the self-employed and for a short time only, a libertarian dream. One of the reasons for the sheer depth of the Greek crisis may exactly be this flexibility and the lack of automatic stabilizers: the paradox of flexibility. Income of employees declined with about 32% during the crisis (graph 1), much more than in other program countries (and mind that disposable income declined even more!). But, even more unusual and contrary to the situation in other program countries, ‘operating surplus (gross profits of companies) and mixed income (of the self-employed)’ declined about as much (28%) as total income of employees, while aside from a temporary dip in Ireland it stayed about level in other program countries (graph 2). Read more…
from Lars Syll
To many conservative and neoliberal politicians and economists there seems to be a spectre haunting the United States and Europe today — Keynesian ideas on governments pursuing policies raising effective demand and supporting employment. And some of the favourite arguments used among these Keynesophobics to fight it are the confidence argument and the doctrine of ‘sound finance.’
Is this witless crusade against economic reason new? Not at all. In 1943 a famous Polish economist wrote the following in a classic essay on ‘sound finance': Read more…
In the four quarters 2013-IV to 2014-III (more recent data are not yet available on Eurostat) the Greek government deficit was smaller than the Dutch and Finnish deficit and about half as large the Irish and Portuguese size. Mind that the Dutch and the Finnish governments love to lecture the Greek. As, in 2014, the Greek real economy grew with about 0.5% but the country also experienced, in line with the austerity plan, 2.6% deflation, nominal GDP contracted with 2%. Which means that the country needed a government surplus of about 4% just to keep the debt to GDP ratio stable… Despite this, it still is the case that Greece decreased its government deficit (excluding transfer incomes to banks) more and faster than Spain, Portugal and Ireland. It seems that, to obtain Troika funding, it does not matter what you do. Just tell them they are right.
from Dean Baker
One of the greatest scenes in movie history occurs at the end of Casablanca. Humphrey Bogart is standing over the gestapo major’s body with a smoking gun. When the police drive up, the French colonel announces that the major has been shot and orders his men to “round up the usual suspects.”
Nearly all Democrats, and even many Republicans, now agree that inequality is a serious problem. They are desperately struggling to find ways to address the problem. Meanwhile, they will likely stand by and watch as the Fed raises interest rates. They will mostly like jump on board of the Trans-Pacific Partnership (TPP) and other trade deals that may come before Congress. While these policies go into effect, which are designed to redistribute income upward, we can count on our political leaders rounding up the usual suspects: looking for reasons why most workers are not sharing in the gains from economic growth.
Starting with the Fed, the purpose of raising interest rates is to slow economic growth and to keep workers from getting jobs. The ostensible rationale is that if the unemployment rate gets too low, then wages will start rising more rapidly and then we could have a problem with inflation. In order to ensure that inflation doesn’t become a problem, the Fed raises rates and keeps the unemployment rate from falling further. Read more…