Brazil is falling under an evil political spell. The leading candidate in the presidential election is Jair Bolsonaro, an extreme right-wing politician. It is as if voters are sleepwalking their way to destruction of Brazilian democracy. Under the spell’s influence, they have become blind to the truth about Brazilian politics and blind to their better nature. (more…)
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Brazil is Falling Under an Evil Political Spell
Friday, October 12th, 2018Job Guarantee Programs: Careful What You Wish For
Friday, September 14th, 2018Some progressive economists are now arguing for the idea of a Job Guarantee Program (JGP), and their advocacy has begun to gain political traction. For instance, in the US, Bernie Sanders and some other leading Democrats have recently signaled a willingness to embrace the idea.
In a recent research paper I have examined the macroeconomics of such a program. Whereas a JGP would deliver real macroeconomic benefits, it also raises some significant troubling economic and political economy concerns. Those concerns should be fully digested before a JGP is politically embraced.
Government Spending in the Income-Expenditure Model: Spending Composition, the Multiplier, and Job Guarantee Programs
Friday, September 14th, 2018This paper reconstructs the income – expenditure (IE) model to include a distinction between government purchases of output versus government production. The distinction has important consequences for output and employment multipliers. The paper also extends the IE model to incorporate a government job guarantee program (JGP), and the extended model illuminates the automatic stabilizer properties of a JGP. The model is then extended to include Kaleckian income distribution effects. That generates a novel Kaleckian balanced budget multiplier driven by changed composition of government spending. The paper concludes with some economic and political economy concerns about a JGP that are flagged by the model.
Negative interest rate policy (NIRP) and the fallacy of the natural rate of interest: Why NIRP may worsen Keynesian unemployment
Wednesday, May 16th, 2018NIRP has quickly become a consensus policy within the economics establishment. This paper argues that consensus is dangerously wrong, resting on flawed theory and flawed policy assessment. Regarding theory, NIRP draws on fallacious pre-Keynesian classical economic logic that asserts there is a natural rate of interest which can ensure full employment. That pre-Keynesian logic has been augmented by ZLB economics which claims the natural rate may be negative in times of severe demand shortage, so that policy must deliver it since the market cannot. In contrast, Keynes argued investment could become saturated so lower interest rates cannot increase aggregate demand (AD) and no natural interest rate exists. Regarding policy assessment, NIRP turns a blind eye to the possibility that negative interest rates may reduce AD, cause financial fragility, create a macroeconomics of whiplash owing to contradictions between policy today and tomorrow, promote currency wars that undermine the international economy, and foster a political economy that spawns toxic politics. Worst of all, NIRP maintains and encourages the flawed model of growth, based on debt and asset price inflation, which has already done such harm.
Modern Money Theory (MMT) vs. Structural Keynesianism
Friday, April 6th, 2018A journalist sent me some questions about MMT. My answers are below.
1. What are the major flaws you see within Modern Monetary Theory?
(A) I like to say that MMT is a mix of “old” and “new” ideas. The old ideas are well known among Keynesian economists and are correct, but the new ideas are either misleading or wrong.
The essential old idea, which everybody knows, is government has the power to issue money. We used to talk of “printing” money. In today’s electronic world we talk about “keystroke” money created by electronic credit entries.
Everyone knows that because government has the capacity to create money, it can always pay its bills and debts by printing money. But having the capacity is not the same thing as saying it should, which is the beginning of where MMT goes astray. (more…)
Re-theorizing the Welfare State and the Political Economy of Neoliberalism’s War Against It
Monday, February 26th, 2018This paper seeks to frame neoliberalism’s relation to the welfare state. At issue are competing views regarding the size and organization of the welfare state. The paper presents a new theoretical framework that distinguishes between modes of production and financing of the welfare estate. The framework helps understand both comparative country welfare states and the goals of the neoliberal attempt to refashion the welfare state. The paper then explores the political economy strategy behind the neoliberal campaign. It argues neoliberalism seeks to politically discredit the traditional welfare state and change the economic structure so that the latter becomes unviable. READ MORE
A Theory of Economic Policy Lock-in and Lock-out via Hysteresis: Rethinking Economists’ Approach to Economic Policy
Tuesday, July 4th, 2017This paper uses hysteresis to develop the concept of policy lock-in and lock-out. Policy changes may near-irrevocably change the economy’s structure, thereby changing the distribution of wealth, income and power. That may lock-in policy by changing the political equilibrium. Exit costs that block policy reversals also cause lock-in. Conventional thinking treats policy as a dial which is adjusted according to the economy’s state. Policy lock-in questions the dial formulation and raises new issues for optimal policy design. It also offers insights into economic and political crisis theory. Policy lock-in is illustrated with examples that include tax policy, government spending, the euro, globalization, and the neoliberal policy experiment. READ MORE
Trump and the Neocons: Doing the Unilateralist Waltz
Monday, May 29th, 2017The neocon factor dramatically changes the interpretation of the Trump administration’s unilateralist international economic policy chatter.
Donald Trump’s first one hundred days have revealed his inclination for unilateralism in international relations. That inclination reflects his opportunistic and bullying disposition, and it also fits well with his anti-globalization pose.
Trump’s unilateralism has also spawned a dangerous waltz with Washington’s neocon establishment. The opportunistic Trump looks to gain establishment support, while the neocon establishment looks to the opportunist-in-chief to implement its own unilateralist view of the world.
The waltz is clearly visible in recent military actions, but it also extends to international economic policy which is an area of budding neocon concern. A further twist is that neocon unilateralism can be exercised against both rivals and allies. Power is at the core of the neocon project, and power can be used to block rivals or bend allies. READ MORE.
The Real Reasons for Trump’s Anti-Globalization Circus
Wednesday, May 24th, 2017Trumponomics: How Trump skillfully used anti-globalization as bait to cover up his extremely neoliberal switch.
A key element of Trump’s political success has been his masquerade of being pro-worker, which includes posturing as being anti-globalization.
However, his true economic interests are the exact opposite. That creates conflict between Trump’s political and economic interests.
For political leaders around the world, understanding the calculus of that conflict is critical for understanding and predicting Trump’s economic policy, especially his international economic policy. [READ MORE]
Fixing the Euro’s Original Sins: The Monetary – Fiscal Architecture and Monetary Policy Conduct
Wednesday, April 5th, 2017The euro zone (EZ) was created in January 1999. Its weak economic performance is significantly due to the euro’s neoliberal monetary architecture and the design of monetary policy. Those features undermine national political sovereignty and consign the EZ to severe economic under-performance, which in turn fosters political demands for exit from the euro. Escaping this dynamic requires restoring fiscal space to EZ countries, and also changing the design of EZ monetary policy. The paper shows how this can be done. It decomposes the challenge of reform into generic problems related to the neoliberal construction of monetary policy, and specific problems concerning the euro as a currency union. The currency union problems are further decomposed into “money – fiscal policy” architecture problems and specific monetary policy conduct problems. [READ MORE]