Prime Economics

Time 2020-10-01 15:05:22

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EREP Reports:Remain for Change: Building European solidarity for a democratic economic alternativeby Economists for Rational Economic PoliciesRead More → Prime Book Reviews:Turner's monetary economics: theoretically radical, but ultimately conservativeby Geoff TilyRead More → Till now, I have supported much of what Chancellor Rishi Sunak has put in place, as measures to help the economy through the pandemic. The furlough scheme has proved its worth.But today’s measures are inadequate and disappointing. The new Job Support Scheme, under which the government will pay some 22% of the wages of employees who work at least one third of their usual hours. This compares with the 60% of wages to be paid by the government in October, the last month of the furlough scheme. The government wants us to return to our office workplaces in the cities. The concerns expressed are that a whole ecology of city centre businesses may be killed off. But the deeper fear of government and its financial supporters is not just about the survival of the urban service business ecology, but about commercial property, largely debt-financed. “Financial Assets = Liabilities.” It’s one of the great accounting-identity truisms of economic understanding — both among traditional, mainstream economists, and even (especially) among many heterodox, “accounting based” practitioners. It seems obvious: When a company issues and sells bonds, it posts a liability to its balance sheet; the bond buyers hold financial assets on theirs.The problem is, that truism isn’t even close to true. Late last month, pioneering socialist economist John Weeks passed away. Ann Pettifor remembers her colleague and friend – and his contributions to left-wing politics. This piece first appeared in Tribune magazine on 08 August, 2020. Please note correction at the end of this piece.John Weeks, brilliant Left economist and public intellectual, would have been well pleased that three days after his death the Financial Times published a letter he had signed attacking the Office for Budget Responsibility (OBR). Everyday life has been upended by the pandemic, but the Arctic heatwave is a reminder that the climate crisis still poses an urgent threat to humanity. We will need resolve, ambition and optimism as we emerge from lockdown, so we can forge the green recovery that is so crucial. Obscene levels of inequality are but one of the outcomes of the current global economic order or architecture. Addressing inequality is, therefore, not just about individual policy focus, it is about international system change.Inequality is not the only outcome of the system. Other worldwide outcomes include: immense, and unaccountable corporate power; high levels of costly private and public debt; sky high levels of rent (wealth) extraction by the owners of both financial and physical assets; weak or non-existent public health infrastructure; low levels of investment; high levels of fraud, illiteracy, homelessness. The coronavirus pandemic is a moment of reckoning for globalisation and our international financial system. The pandemic has shown how unjust the international system is towards low income countries; given us the opportunity to imagine another economy; and served as a warning. If we do not fix the system to prepare for the coming, graver crisis of earth systems breakdown, the survival of humanity is at risk. Riddled with comorbidities, the current global monetary and financial set-up precipitates crises with increasing frequency. At first, these were on the fringes of the global economy; in 2007–09 they moved to its very core.Since 1971, national economies, and all our lives, have been shaped by this ‘system’, which can be described only as ramshackle. In that year, US president Richard Nixon unilaterally dismantled the Bretton Woods international financial architecture, built at the end of the Second World War. No sound replacement was constructed. Largely privatized, what governs the global economy today is mostly deregulated and made up of an ad hoc set of legal arrangements. The following are my notes for a contribution to the debate on the post-Coronavirus economy held in the European Union’s parliament on 15 June, 2020. (The Parliament was largely empty as many MEPs were still shielding or self-solating from the pandemic. ) Other contributors included: Pierre-Olivier Gourinchas, Professor of Global Management, University of California, Berkeley, Daniela Gabor, Professor of Economics and Macro-Finance, Lex Hoogduin, Professor at the University of Groningen; Gita Gopinath, IMF Chief Economist; Laurence Boone, Chief Economist OECD. Vladimiro Giacché, Chairman of the Centro Europa Ricerche, Romaand yours truly: Ann Pettifor, Political economist, author and public speaker. The Chair was Irene Tinagli MEP Rentier capitalists make capital gains more or less effortlessly, at the expense of others. They do so by exploiting an existing asset – think of a London or New York property – and make money from ‘renters’ using that asset, or from re-selling the asset at a higher price.We should never forget the lesson of the French Revolution: rentiers need the state more than the state needs rentiers. Economists are beginning to worry over what comes after Covid-19. The pandemic is having a devastating impact on the global economy, and many expect a prolonged period of depression. Will economies recover? And if so, how will they recover? Richard Davies’s Extreme Economies offers timely and revealing insights into how markets recover from catastrophic events. This post sums up the results of a collective research [1] and aim at providing the fundamental elements of a feasible European Debt Agency (DA). The DA is meant to be charged with financing sovereign debts with advantages both for the Eurozone Member States (MS) and for the system as a whole. The proposal has a structural character, but the DA is designed in such a way as to enable its application even at the present emergency juncture. Things are falling apart. Mere anarchy is loosed upon the world. Globalisation cannot hold. We know that because Henry Paulson, once CEO of Goldman Sachs, and then US Treasury Secretary during the last crisis, is rallying the world’s capitalists to defend globalisation from reshoring, protectionism and immigration controls. Paulson understands that this is a war of ideas. He warned in the columns of the Financial Times that “the impending battle will pit forces of openness rooted in market principles against those of closure across four dimensions: trade, capital flows, innovation and global institutions.” It is clear that some commentators and think-tanks have not woken up to the severity of the debt-deflationary depression we are heading into. Delusional Tory austerity enthusiasts have not given this threat much thought. Nor it seems, has the Resolution Foundation which called on the Treasury to maintain fiscal rules and “to keep inflation expectations firmly anchored around the 2 per cent target.” If we want our future monetary system to serve the interests of the whole of society and the ecosystem – not just the 1% - then we must take back control, assert democratic public authority over the system, and make finance, the servant, not the master of national and regional economies. Subscribe to Prime Sign up with your email address to receive news and updates from Prime. The goal of economists and their profession is to promote the general welfare of the community. Sound and active fiscal and monetary policies are essential for promoting general welfare and stability – economic, environmental, and social - through investment, full employment, and broadly based economic activity.A sound and active fiscal policy:1.Does not seek a continuously balanced overall public budget2.Compensates for inadequate or excessive private sector demand by a countercyclical management of current expenditure to maintain the economy near full potential3.Expands the role of automatic stabilizers including support for the unemployed and a counter-cyclical tax structure4.Incorporates public investment to increase the potential growth rate and "crowd in" private investment in areas of priority5. Addresses the challenges of climate change and environmental protection, in particular the need to prepare for the post-carbon societyFind out more → V Chick, A Pettifor, G Tily,July 2010Fiscal consolidation does not ‘slash’ the debt, but contributes to it. Prof.Chick and Pettifor examine a century’s worth of macroeconomic evidence to argue that, contrary to conventional wisdom, we need to ‘spend away the debt’.Read Publication → PRIME provides readers with regular short briefings on newly available data concerning the UK, European or international economy. These updates cover issues such as GDP, employment, debt and credit, and inflation.We aim to focus on developments that are significant from a macroeconomic perspective.See more Data Updates → G Tily,October 2010In this revised edition, Geoff Tily argues that the economics profession has distorted and betrayed Keynes's legacy. In virtually all interpretations – especially that taught to students – Keynes is portrayed as concerned only with government expenditure as a means to cure economic crisis. Yet his prescription concerned monetary not fiscal policy.Read More Prime Books →

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