The answer depends on what we mean by capital accumulation. The common view of this process is deeply utilitarian. Capitalists, we are told, seek to maximize their so-called ‘real wealth’: they try to accumulate as many machines, structures, inventories and in- tellectual property rights as they can. And the reason, supposedly, is straightforward. Capitalists are hedonic creatures. Like every other ‘economic agent’, their ultimate goal is to maximize their utility from consumption. This hedonic quest is best served by eco- nomic growth: more output enables more consumption; the faster the expansion of the economy, the more rapid the accumulation of ‘real’ capital; and the larger the capital stock, the greater the utility from its eventual consumption. Utility-seeking capitalists should therefore love booms and hate crises.
But that is not how real capitalists operate. Read more…
From feudal barons keeping the land’s rent for themselves to modern corporate profits paid to bondholders, creditors have broken free of tax liability. Banks now receive most of the rental value of land as mortgage interest, mobilizing a populist argument against property taxes so as to leave more rent available to pay bankers. The situation is reminiscent of Babylonian lenders obtaining the land’s crop usufruct while leaving the customary holders liable for the labor duties associated with their land tenure.
Now that land ownership has been democratized – on credit – a majority of most populations (two-thirds in the United States, and over four-fifths in Scandinavia) no longer pay rent to landlords. Instead, homeowners and commercial property investors pay the rental value to bankers as mortgage interest. In the United States, bankers obtain about two-thirds of real estate cash flow, largely by reducing property taxes. The more the financial sector can reduce the government’s tax take, the more rent is available for new buyers to pay interest to banks for loans to buy property. This explains why the financial sector backs anti-tax “Tea Party” protests. Read more…
Elstat has published new population estimates for Greece. And what happened to Portugal, Ireland, Estonia, Spain Latvia, Lithuania, Romania or Bulgaria is happening to Greece, too. People are leaving in droves.and the population is declining as far as I know especially the working age population! Aside: don’t tell to me that international European job markets aren’t flexible. They are. Before 2008, a massive influx of foreign workers enabled Spain to have the second highest job growth in an absolute sense of the entire rich world, only next to the (much larger) US. Housing boom related private demand in Spain was of course fickle – but the supply side of the labour market reacted vigorously. No petrification there.
from David Ruccio
The other day, I expressed my doubts about Paul Mason’s arguments about postcapitalism. But others see his argument in a much more positive light, including some friends of mine, Jenny Cameron, Katherine Gibson, and Stephen Healy [ht: sk].
They, too, however, assert that “technology does not in and of itself guarantee a better future.” What are needed, and which they see emerging in the midst of capitalism today, are “explicit ethical commitments that are developed independent of online apps and cyber networks.”
Technology is augmenting relations of care for others. Technology does not bring these relations into being.
In our research on the diverse economic practices that exist outside the purview of mainstream economics, we find people are forging new types of economies around six ethical concerns:
- What do we need to survive well?
- What happens to surplus, or what is left over after our survival needs have been met?
- How do we act responsibly to those whose inputs help us to survive well (whether other people or the environment)?
- How much and what do we consume in order to survive well?
- How do we care for the commons – the gifts of nature and intellect that we rely on?
- How do we invest so that future generations can also live well?
The economic slump in Greece is even deeper than we thought and austerity played and even larger role in causing this slump. than we assumed, up to now. At least, according to two new serious studies by Elstat, one containing revised trade data and the other containing data on spending on health.
* The trade data show that the goods trade deficit (not the same thing as the current account!) was between 2006 and 2010 even larger than estimated up till now. Which means that (A) the macro economic capital inflow imbalance was even larger while (B) the spending bust after 2010 had even larger consequences than hitherto estimated (as the deficit dwindled even faster, thanks to an unprecedented decline in domestic demand).
* The health data show that health expenditures declined from about 9 to about 8% of GDP while the old data showed that the share of health expenditure was more or less stable at 9 % of GDP (mind that GDP declined with 25%). This means that (largely government financed) health expenditure declined even faster than we thought which i.e. contributed more to the slump.
Taken together, means that austerity was even more brutal than we thought. Economic history is, to quite an extent, ‘bean counting’. And counting more beans or counting them in a more precise way sometimes changes our view of the past. Which is what Elstat did. This contrary to the endeavours of mr. Jan Strupczewski, Read more…
from Asad Zaman and the WEA Pedagogical Blog
Harvard professor Julie Reuben has documented an important historical transition in the life of US universities over the period 1880-1930 in her book entitled, The Making of the Modern University: Intellectual Transformation and the Marginalization of Morality. Rueben describes a variety of intellectual and historical developments that led universities to abandon their longstanding tradition of building character as well as imparting education, and makes the argument that universities’ abandonment of morality caused great social damage to Western society.
Most colleges in the US started out as religious seminaries. The concept of the unity of knowledge led them to embrace scientific and technological teaching within their curricula. Since all knowledge illuminates the Divine, in teaching physics, astronomy etc., teachers were expected to attend to the beautiful truths to be read in the works of God. Many difficulties arose in the execution of this educational programme. One source of difficulty was the conflicts among different denominations of Protestant Christianity. read more
Greece did not need money to pay pensions. Greece needed money to… roll over its debts and to pay interest. Yawn. And the whole third bail out package is tailored to exactly this: swapping one kind of financial asset for another (tabel) (and oh, banks will receive another 25 billion of free money). The present situation in which the Greek bank system is closed and the creditors do all they can to destroy the Greek economy (again: tripling tourism VAT is a very, very bad idea) might however mean that Greece won’t be able to pay pensions or whatever, too. What Greece needs is, of course, a return to nominal growth ASAP. Graph 1 and 2 show that, in 2014, Greek debts actually declined a little but despite growth of the real economy, debts as a % of GDP increased because of price deflation. Mind that the largest increases of government debt in table 2 are caused by government transfers to banks – with the blessings of Brussels. Save the banks, screw the vulnerable. Last post for some weeks. somewhere in the Vosges, in France, I’ll occupy myself with family matters, cycling and sixteenth century Frisian farmers who were already lending and borrowing quite a lot – without banks (the ledgers with all these data are nowadays, transcribed, on the internet!). But aside from a pawn shop ran by an orphanage in Leeuwarden real banks in Friesland were, despite all this lending and borrowing, only a nineteenth century invention – which leads to the Coasian question: why do banks exist. Clearly not (just) to facilitate lending and borrowing… Read more…
from Yanis Varoufakis
In the next hours and days, I shall be sitting in Parliament to assess the legislation that is part of the recent Euro Summit agreement on Greece. I am also looking forward to hearing in person from my comrades, Alexis Tsipras and Euclid Tsakalotos, who have been through so much over the past few days. Till then, I shall reserve judgment regarding the legislation before us. Meanwhile, here are some first, impressionistic thoughts stirred up by the Euro Summit’s Statement. Read more…
Dr Schäuble’s Plan for Europe: Do Europeans approve? – Article to appear in Die Zeit on Thursday 16th July 2015
from Yanis Varoufakis
Pre-publication summary: Five months of intense negotiations between Greece and the Eurogroup never had a chance of success. Condemned to lead to impasse, their purpose was to pave the ground for what Dr Schäuble had decided was ‘optimal’ well before our government was even elected: That Greece should be eased out of the Eurozone in order to discipline member-states resisting his very specific plan for re-structuring the Eurozone.
- This is no theory.
- How do I know Grexit is an important part of Dr Schäuble’s plan for Europe?
- Because he told me so!
I wrote this article not as a Greek politician critical of the German press’ denigration of our sensible proposals, of Berlin’s refusal seriously to consider our moderate debt re-profiling plan, of the European Central Bank’s highly political decision to asphyxiate our government, of the Eurogroup’s decision to give the ECB the green light to shut down our banks.
I wrote this article as a European observing the unfolding of a particular Plan for Europe – Dr Schäuble’s Plan.
And I am asking a simple question of Die Zeit’s informed readers:
- Is this a Plan that you approve of?
- Do you consider this Plan good for Europe?
Are dependable statistics one of Greece’s best friends? But are the Greek at the same time messing up the independence of Elstat, the Greek statistical office, as indicated by the recent ‘Diktat’? For those who care to look, statistics always convey a meta message. Recently, the German Statistisches Bundesamt published, based upon Eurostat data, a graph showing prices of hotels in the different countries of the EU. This is, of course, not a coincidence. At the same time people in Brussels were trying to quadruple Greece tourism VAT from 6,5 to 23% which, as the German graph clearly shows, would wipe out any kind of price competitiveness gained by the brutal Greek wage cuts. The Bundesamt is fully entitled to, next to their scheduled publications, publish any statistics as they see fit, according to UN treaties. And to criticize Merkel or Schauble, if they misuse official statistics (or me, of course, when I state that publication of the hotel prices is a subtle political statement). Also, official Greek and Eurozone statistics do map the unprecedented depth and length of the Greek crisis or the (for a western country) unprecedented level of unemployment and the tens of billions given away by the Greek government to the Greek banks. One of the elements in the
European deal with Greece ‘Diktat’ (German, ‘Befehl‘) from Brussels is however the safeguarding independence of Elstat, the Greek statistical office. What is the matter? Among other things, the present Greek chief statistician has been prosecuted for recalculating and overstating (!) the budget deficit during the Karamanlis years…The situation is according to the European Statistical Governance Assistance Board (ESGAB), March 24 2015, not caused by the Syriza government: Read more…
In case you missed it: Greece has to accept all the measures, which will increase unemployment to at least 30% and possibly 35%, lead to unprecedented amounts of dirt poor old people while 50 billion worth of assets is stacked away in a fund which is mainly meant to recapitalize the banks (surprise!) to be able to negotiate about a deal. This is not yet the deal itself (personal: as I see it there is literally a sadistic element to these measures). Mind that Greece knows next to no unemployment benefits while the number of elderly is rising rapidly. Austerity is of course supposed, by some, to be some kind of miracle cure. But is it? No. None of the Eurozone austerity countries did well, when we look at employment. And neither did Denmark or the Netherlands which before 2008 did everything right, aqccording to the neoliberal rulebook. Private debt fuelled growth, government surpluses, flexible labour markets etc. etc. At this moment, the Netherlands even have something like a 13% of GDP surplus on the current account (Q1, 2015). Despite this employment growth disappointed…. Read more…
In January during the ASSA conference William Waller held a speech titled:”Policy in an area of unreason’. Remarks upon receiving the Veblen commons award‘. Recommended.
And the dying European project reminded me of this:
Jessye Morgan sings Erlkönig (Goethe-Schubert) Read more…
I’m increasingly lost about the whole Euro/Grexit/European Union project.
- How could something which is basically about something as basic as rolling over debts get so out of hand?
- Why do the Greek want to keep the Euro so badly?
- And why are politicians like Schauble and Guy Verhofstadt (who according to this blogpost has quite some ties with banks like Eurobank in Switzerland, owned by Spiros Latsis, the richest man in Greece) so hysterical about Greece?
The first two questions leave me at odds. The third seems to be answerable. It is the oldest trick in the book. Create a common enemy to be able to gain power and lead the Eurozone to your destination. And according to Varoufakis, it might indeed be something which could be called the ‘Schauble-Schrecken': “Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.”. Though Verhofstadt, who did not even understood that Greece reformed more than any other country, might just serve the needs of the richest man in Greece. Read more…
The foundation of the design of the Euro system is the idea of ‘financial discipline’. Democratic governments, according to this idea irresponsible by nature, had to be reigned in by rational private lenders active on a newly created international capital market (no, not just the banks, also and often more important our pension funds). Part of this design was a decline of international financial transfers in the EU while a central fiscal authority was absent, too. Again: by design! Financial markets had to do the job, away with these democratic governments!
Something unexpected happened, however. Up to 2008 governments were not reigned in by the FIRE sector, as interest rates in the periphery of the Euro Area declined much more than anticipated by economists while the private sector could, until 2008, borrow at lib and often became severely indebted. Which meant that after the Lehman moment, which made capital flows reverse, governments and the ECB somehow had to step in. The way this happened led in Greece to one of the largest peacetime declines in GDP in developed countries ever (graph).
Graph slightly adapted from: source. Hat tip: Jesse Frederik.
I guess I have to speak out – not as and advise to the Greek but because it’s too easy to easy and comfortable to stay silent.
NO is the answer.
In the end, it is a question of trust. And I do not trust you, mister Dijsselbloem:
A) Proposing a quadrupling of VAT rates in (large parts of) the main economic and export sector of a country (tourism) in a deeply depressed country is the dumbest micro and macro economic idea of the year. Even taxing deposits is a better idea.
B) Willfully letting a deal explode over a little bit of money which is used to top up income of the poorest pensioners (who increasingly need this money as their health is deteriorating) is the dumbest social idea of the year and shows the explicit cruel intent of the Institutions (hey, mister Dijsselbloem, didn’t mister Drees, your proverbial prudent and teetotaler social democratic predecessor, in 1953 sign the debt relief program for Germany while he also introduced state pensions, especially for the poorest in Dutch society, in 1956, albeit with the caveat that the pension age might have to be raised in the future?). A higher profit tax or a land tax on privatized harbours or whatever are much better ideas.
C) Wasting the once in a generation chance to, together with Syriza, crush corruption and instead sucking up to Schauble will be on your record for ever. Nothing was a better idea.
NO won’t solve the Greek economic and social problems. I’m not aware of any plan B, the banks will stay closed, emergency money will have to be issued and the economy is already nosediving. To me, it’s all incomprehensible, even after reading interfluidity about the stupidity of this all and this zerohedge post about the super seniority of IMF debts (will the ECB have to tolerate a haircut on Greek debts when Greece defaults on IMF debts…?) about it and taking account of the fact that Malta, Cyprus, Italy, Spain and Portugal of course love to see much higher VAT rates in the competitive Greek tourist industry. Greece already had the worst economic crisis of any rich world economy post 1945 – and it is becoming much worse. Because we make it so. Whatever the answer. A YES will reopen the banks – but Schauble will not like that and he will continue to burn Greece – you can trust that guy!
Creditors might have burned something like 40 to 60 billion Euro of their wealth by “maintaining ELA (Emergency Liquidity Assistance) to Greek banks at the current level”. Greek banks need ELA to be able to buy Euronotes to put in the ATP machines and to enable Greek to wire money abroad. Greek are not able to do anymore, or only to a very limited extent and turning off the ELA tap has sent the Greek economy into a downspin. Again. GDP might decline with another 5 to 10% (even when we reopen the ELA tap today), the grey and black economy will increase, taxes will dwindle and unemployment might top 30 or even 35%. While, using the creditor logic, Greece did not do worse than other indebted countries (graph). To he contrary. As I see it, Greece has become a failed state already Read more…
After 2008, GDP growth in almost all Eastern European countries disappointed. Greece is in a class of its own, Poland and Slovakia did well (graph).
Between 2007 and 2014, economies like those of China and India were spurting ahead – but in countries like Lithuania and Romania production was barely at the 2008 level while in countries like Latvia, Croatia and Slovenia (austerity darlings, by the way) it was below the post crisis peak… Not all growth is good – but Read more…
Why all tis attention for Greece and not for Croatia or Slovenia? Because Greece is where the main battle is fought. But on this blog more attention will be paid to other countries. Anyway: a Greek referendum about the euro is a very good idea – but this might be the worst time to hold one. You can do this when you still have a lot of cash somewhere. Or when you’re already in default. But announcing a referendum when you’re on ELA – it’s not a good idea. Surely when the creditors have one overriding goal: they want you out of government. And they play to win. Which means that you have to kill them. Or lose. Inflicting a wound and crippling them (which surely happened) is not enough.
A) Breaking (and I can’t stress enough how important this is): the wound is really deep, as the ECB changed its mind in a fundamental way. Up till now the ECB has been adamant. THE EURO IS IRREVERSIBLE, adopting it is irrevocable. But they changed their mind (and historians of course knew better all the time). Yesterday, an interview with Benoît Cœuré, one of the highest ranking civil servants of the ECB, started with this sentence: La sortie de la Grèce de la zone euro, qui était un objet théorique, ne peut malheureusement plus être exclue. Translation: Grexit can’t be excluded, anymore. Read more…
Update: Yannis Varoufakis about the Syriza mandate (and Grexit is not a legal option). Too bad that Jeroen Dijsselbloem doesn’t even try to be his intellectual opponent.
Mario Draghi, president of the European Central Bank and a natural born winner, lost.
It is a bitter loss.The Euro project as it was supposed to be is in tatters. The Euro turns out to be reversible. Since the introduction of the Euro macro economic volatility in the Eurozone increased, growth declined, unemployment reached levels not seen for seventy years and banks have still not been properly regulated. Also, Eurozone wide income transfers (pensions, unemployment benefits, deposit guarantees), which are needed for social reasons as well as to stabilize the Euro and the economy, are a more distant dream than ever. Reckless private money creation of the Irish/Dutch/Baltic type still can happen anywhere at any moment. And grotesque imbalances persist: the Dutch current account surplus is, at the moment of writing, supposed to be 13% of GDP. or 21 billion Euro in the first quarter of 2015.The Euro was designed to decrease national differences and to curtail governments by invoking market discipline. The opposite happened (but democracy was curtailed). Read all about it: Wynne Godley, in 1992 (!):
I am driven to the conclusion that such a view – that economies are self-righting organisms which never under any circumstances need management at all – did indeed determine the way in which the Maastricht Treaty was framed. It is a crude and extreme version of the view which for some time now has constituted Europe’s conventional wisdom (though not that of the US or Japan) that governments are unable, and therefore should not try, to achieve any of the traditional goals of economic policy, such as growth and full employment. All that can legitimately be done, according to this view, is to control the money supply and balance the budget. It took a group largely composed of bankers (the Delors Committee) to reach the conclusion that an independent central bank was the only supra-national institution necessary to run an integrated, supra-national Europe. Read more…
On Voxeu Arvind Subramanian, India’s chief economic advisor, argues that: “for monetary transmission to work, both consumer prices and producer prices are relevant, but for different sets of agents.” while consumer prices show, in India, a much higher increase than producer prices.”. Which means that the central bank should not just look at consumer price inflation but also at producer price inflation. In the June issue of The Journal of Economic Issues I stress a similar point in “Metrics Meta About a Meta Metric: The Consumer Price Level as a Flawed Target for Central Bank Policy”, though going one step further (fifty free downloads here). From the abstract:
Inflation targeting is currently the policy of choice for central banks. This policy invariably targets consumer price inflation, which is only one of many available price level indices (such as prices of new investments and house prices). As there is no stable relationship between these price levels, and as differences in developments between the different price levels might induce destabilizing behavior, there is no reason why “low and stable” consumer price inflation should guarantee monetary and financial stability. Following John Maynard Keynes, a “low and stable” increase of average nominal wages might do a better job. As price levels are designed to estimate the purchasing power of spending power and as income, and spending power are used to not just consume or invest but also to pay down many kinds of (gross) debt, it is advisable to use a joint definition of monetary and financial stability, which combines stable purchasing power of monetary income with a stable ability of households and companies to pay off debts.